As of May 23, 2025, HomeServe PLC's estimated intrinsic value ranges from $646.20 to $2249.94 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $876.38 | -26.8% |
| Discounted Cash Flow (5Y) | $646.20 | -46.1% |
| Dividend Discount Model (Multi-Stage) | $712.12 | -40.6% |
| Dividend Discount Model (Stable) | $824.25 | -31.2% |
| Earnings Power Value | $2249.94 | +87.8% |
Is HomeServe PLC (HSV.L) undervalued or overvalued?
With the current market price at $1198.00, the stock appears to be significantly overvalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate HomeServe PLC's intrinsic value, including:
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 | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.64 | 0.81 |
| Cost of equity | 7.8% | 10.6% |
| Cost of debt | 4.0% | 4.9% |
| Tax rate | 22.9% | 23.5% |
| Debt/Equity ratio | 0.2 | 0.2 |
| After-tax WACC | 7.0% | 9.5% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $646 | $2,879M | 82.9% |
| 10-Year Growth | $876 | $3,657M | 70.2% |
| 5-Year EBITDA | $426 | $2,132M | 76.9% |
| 10-Year EBITDA | $607 | $2,745M | 60.3% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $669M |
| Discount Rate (WACC) | 9.5% - 7.0% |
| Enterprise Value | $7,058M - $9,545M |
| Net Debt | $693M |
| Equity Value | $6,365M - $8,852M |
| Outstanding Shares | 3M |
| Fair Value | $1,882 - $2,618 |
| Selected Fair Value | $2249.94 |
| Metric | Value |
|---|---|
| Market Capitalization | $4051M |
| Enterprise Value | $4744M |
| Trailing P/E | 30.01 |
| Forward P/E | 28.80 |
| Trailing EV/EBITDA | 5.85 |
| Current Dividend Yield | 56.28% |
| Dividend Growth Rate (5Y) | 15.37% |
| Debt-to-Equity Ratio | 0.20 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $262.91 |
| Discounted Cash Flow (5Y) | 25% | $161.55 |
| Dividend Discount Model (Multi-Stage) | 20% | $142.42 |
| Dividend Discount Model (Stable) | 15% | $123.64 |
| Earnings Power Value | 10% | $224.99 |
| Weighted Average | 100% | $915.52 |
Based on our comprehensive valuation analysis, HomeServe PLC's weighted average intrinsic value is $915.52, which is approximately 23.6% below the current market price of $1198.00.
Key investment considerations:
Given these factors, we believe HomeServe PLC is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.