What is HGGGQ's Intrinsic value?

hhgregg Inc (HGGGQ) Intrinsic Value Analysis

Executive Summary

As of June 13, 2025, hhgregg Inc's estimated intrinsic value ranges from $0.08 to $87.53 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $87.53 +4376615.5%
Discounted Cash Flow (5Y) $56.36 +2817781.4%
Dividend Discount Model (Multi-Stage) $0.08 +3890.1%
Earnings Power Value $6.95 +347164.0%

Is hhgregg Inc (HGGGQ) undervalued or overvalued?

With the current market price at $0.00, the stock appears to be significantly undervalued.

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 hhgregg Inc'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
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

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 4.2% 4.7%
Equity market risk premium 5.0% 6.0%
Adjusted beta 17.68 55.18
Cost of equity 92.6% 336.2%
Cost of debt 7.0% 7.0%
Tax rate 15.5% 26.5%
Debt/Equity ratio 709.92 709.92
After-tax WACC 6.0% 5.6%

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: 5.8% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $1,960 (FY03-2017) to $2,599 (FY03-2027)
  • Net profit margin expansion from -3% to 3%
  • Capital expenditures maintained at approximately 2% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $14 $962M 93.8%
10-Year Growth $22 $1,483M 79.5%
5-Year EBITDA $27 $469M 87.2%
10-Year EBITDA $45 $778M 61.0%

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: 214.4%
  • Long-term growth rate: 2.0%
  • Fair value: $0.08 (3890.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 336.2% (Low) to 92.6% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $(0) to $(1)
  • Selected fair value: $-3.38 (-169133.9% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $8M
Discount Rate (WACC) 5.6% - 6.0%
Enterprise Value $143M - $133M
Net Debt $22M
Equity Value $121M - $111M
Outstanding Shares 67M
Fair Value $2 - $2
Selected Fair Value $6.95

Key Financial Metrics

Metric Value
Market Capitalization $0M
Enterprise Value $22M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 5.65
Current Dividend Yield 62.96%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 709.92

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) 35% $26.26
Discounted Cash Flow (5Y) 29% $14.09
Dividend Discount Model (Multi-Stage) 24% $0.02
Earnings Power Value 12% $0.69
Weighted Average 100% $48.31

Investment Conclusion

Based on our comprehensive valuation analysis, hhgregg Inc's weighted average intrinsic value is $48.31, which is approximately 2415205.2% above the current market price of $0.00.

Key investment considerations:

  • Strong projected earnings growth (-3% to 3% margin)
  • Consistent cash flow generation

Given these factors, we believe hhgregg Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.