What is IBST.L's Intrinsic value?

Ibstock PLC (IBST.L) Intrinsic Value Analysis

Executive Summary

As of May 31, 2025, Ibstock PLC's estimated intrinsic value ranges from $66.36 to $116.08 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $104.50 -46.8%
Discounted Cash Flow (5Y) $116.08 -40.9%
Dividend Discount Model (Multi-Stage) $85.84 -56.3%
Dividend Discount Model (Stable) $75.94 -61.3%
Earnings Power Value $66.36 -66.2%

Is Ibstock PLC (IBST.L) undervalued or overvalued?

With the current market price at $196.40, the stock appears to be significantly 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 Ibstock PLC'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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.91 0.98
Cost of equity 9.4% 11.8%
Cost of debt 4.1% 5.1%
Tax rate 23.0% 28.2%
Debt/Equity ratio 0.22 0.22
After-tax WACC 8.3% 10.4%

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 $366 (FY12-2024) to $509 (FY12-2034)
  • Net profit margin expansion from 4% to 9%
  • Capital expenditures maintained at approximately 11% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $116 $623M 70.1%
10-Year Growth $104 $576M 49.6%
5-Year EBITDA $156 $782M 76.2%
10-Year EBITDA $148 $752M 61.4%

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: 84.6%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 10.6%
  • Long-term growth rate: 3.5%
  • Fair value: $85.84 (-56.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.8% (Low) to 9.4% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $44 to $108
  • Selected fair value: $75.94 (-61.3% 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 $39M
Discount Rate (WACC) 10.4% - 8.3%
Enterprise Value $376M - $470M
Net Debt $157M
Equity Value $220M - $313M
Outstanding Shares 4M
Fair Value $55 - $78
Selected Fair Value $66.36

Key Financial Metrics

Metric Value
Market Capitalization $789M
Enterprise Value $945M
Trailing P/E 33.30
Forward P/E 39.88
Trailing EV/EBITDA 9.40
Current Dividend Yield 261.49%
Dividend Growth Rate (5Y) -19.15%
Debt-to-Equity Ratio 0.22

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) 30% $31.35
Discounted Cash Flow (5Y) 25% $29.02
Dividend Discount Model (Multi-Stage) 20% $17.17
Dividend Discount Model (Stable) 15% $11.39
Earnings Power Value 10% $6.64
Weighted Average 100% $95.56

Investment Conclusion

Based on our comprehensive valuation analysis, Ibstock PLC's weighted average intrinsic value is $95.56, which is approximately 51.3% below the current market price of $196.40.

Key investment considerations:

  • Strong projected earnings growth (4% to 9% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.22)

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