What is IOG.L's Intrinsic value?

Independent Oil and Gas PLC (IOG.L) Intrinsic Value Analysis

Executive Summary

As of December 15, 2025, Independent Oil and Gas PLC's estimated intrinsic value ranges from $3.21 to $17.65 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (5Y) $3.21 +237.5%
Earnings Power Value $17.65 +1757.9%

Is Independent Oil and Gas PLC (IOG.L) undervalued or overvalued?

With the current market price at $0.95, 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 Independent Oil and Gas PLC's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. 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 5.39 11.05
Cost of equity 36.2% 82.1%
Cost of debt 5.2% 8.4%
Tax rate 19.0% 19.0%
Debt/Equity ratio 22.72 22.72
After-tax WACC 5.6% 10.0%

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
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.8% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $75 (FY12-2022) to $84 (FY12-2032)
  • Net profit margin expansion from -38% to -18%
  • Capital expenditures maintained at approximately 63% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $3 $103M 104.3%
10-Year Growth $(1,234) $(56)M 72.9%
5-Year EBITDA $11 $144M 103.1%
10-Year EBITDA $(1,234) $77M 119.4%

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 $13M
Discount Rate (WACC) 10.0% - 5.6%
Enterprise Value $128M - $230M
Net Debt $87M
Equity Value $42M - $144M
Outstanding Shares 5M
Fair Value $8 - $27
Selected Fair Value $17.65

Key Financial Metrics

Metric Value
Market Capitalization $5M
Enterprise Value $92M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 4.95
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 22.72

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 (5Y) 71% $0.80
Earnings Power Value 29% $1.77
Weighted Average 100% $7.33

Investment Conclusion

Based on our comprehensive valuation analysis, Independent Oil and Gas PLC's intrinsic value is $7.33, which is approximately 671.9% above the current market price of $0.95.

Key investment considerations:

  • Strong projected earnings growth (-38% to -18% margin)
  • Consistent cash flow generation

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