What is HEAR's Intrinsic value?

Turtle Beach Corp (HEAR) Intrinsic Value Analysis

Executive Summary

As of June 21, 2025, Turtle Beach Corp's estimated intrinsic value ranges from $2.43 to $29.20 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $29.20 +67.1%
Discounted Cash Flow (5Y) $10.72 -38.6%
Dividend Discount Model (Multi-Stage) $10.65 -39.0%
Dividend Discount Model (Stable) $2.43 -86.1%

Is Turtle Beach Corp (HEAR) undervalued or overvalued?

With the current market price at $17.47, the stock appears to be moderately overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Turtle Beach Corp's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.54 1.71
Cost of equity 10.9% 14.4%
Cost of debt 7.0% 7.0%
Tax rate 10.9% 17.6%
Debt/Equity ratio 1 1
After-tax WACC 8.6% 10.1%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 9.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $258 (FY12-2023) to $764 (FY12-2033)
  • Net profit margin expansion from -7% to 11%
  • Capital expenditures maintained at approximately 1% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $11 $306M 93.3%
10-Year Growth $29 $677M 75.7%
5-Year EBITDA $8 $247M 91.7%
10-Year EBITDA $21 $507M 67.6%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 12.7%
  • Long-term growth rate: 4.0%
  • Fair value: $10.65 (-39.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 14.4% (Low) to 10.9% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $1 to $3
  • Selected fair value: $2.43 (-86.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $351M
Enterprise Value $441M
Trailing P/E 76.33
Forward P/E 76.33
Trailing EV/EBITDA 8.60
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.30

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $8.76
Discounted Cash Flow (5Y) 28% $2.68
Dividend Discount Model (Multi-Stage) 22% $2.13
Dividend Discount Model (Stable) 17% $0.37
Weighted Average 100% $15.48

Investment Conclusion

Based on our comprehensive valuation analysis, Turtle Beach Corp's weighted average intrinsic value is $15.48, which is approximately 11.4% below the current market price of $17.47.

Key investment considerations:

  • Strong projected earnings growth (-7% to 11% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.30)

Given these factors, we believe Turtle Beach Corp is currently moderately overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.