What is IAG.TO's Intrinsic value?

iA Financial Corporation Inc (IAG.TO) Intrinsic Value Analysis

Executive Summary

As of June 3, 2025, iA Financial Corporation Inc's estimated intrinsic value ranges from $111.69 to $162.41 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $162.41 +16.2%
Dividend Discount Model (Stable) $111.69 -20.1%

Is iA Financial Corporation Inc (IAG.TO) undervalued or overvalued?

With the current market price at $139.72, the stock appears to be fairly valued.

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 iA Financial Corporation Inc's intrinsic value, including:

  1. 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 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.81 1.05
Cost of equity 7.3% 10.6%
Cost of debt 5.0% 5.0%
Tax rate 19.5% 21.4%
Debt/Equity ratio 0.15 0.15
After-tax WACC 6.8% 9.7%

Valuation Methods

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: 39.2%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.9%
  • Long-term growth rate: 1.0%
  • Fair value: $162.41 (16.2% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.6% (Low) to 7.3% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $69 to $155
  • Selected fair value: $111.69 (-20.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $13005M
Enterprise Value $13273M
Trailing P/E 14.09
Forward P/E 11.99
Trailing EV/EBITDA 0.00
Current Dividend Yield 278.35%
Dividend Growth Rate (5Y) 10.91%
Debt-to-Equity Ratio 0.15

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
Dividend Discount Model (Multi-Stage) 57% $32.48
Dividend Discount Model (Stable) 43% $16.75
Weighted Average 100% $140.68

Investment Conclusion

Based on our comprehensive valuation analysis, iA Financial Corporation Inc's weighted average intrinsic value is $140.68, which is approximately 0.7% above the current market price of $139.72.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.15)
  • Historical dividend growth of 10.91%

Given these factors, we believe iA Financial Corporation Inc is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.