What is KRUS's Intrinsic value?

Kura Sushi USA Inc (KRUS) Intrinsic Value Analysis

Executive Summary

As of June 7, 2025, Kura Sushi USA Inc's estimated intrinsic value ranges from $59.00 to $238.24 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $238.24 +202.4%
Discounted Cash Flow (5Y) $59.00 -25.1%
Dividend Discount Model (Multi-Stage) $72.76 -7.6%

Is Kura Sushi USA Inc (KRUS) undervalued or overvalued?

With the current market price at $78.79, 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 Kura Sushi USA 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

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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.47 0.81
Cost of equity 6.0% 9.4%
Cost of debt 4.0% 4.5%
Tax rate 5.2% 9.2%
Debt/Equity ratio 1 1
After-tax WACC 4.9% 6.7%

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 $238 (FY08-2024) to $765 (FY08-2034)
  • Net profit margin expansion from -4% to 16%
  • Capital expenditures maintained at approximately 23% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $59 $628M 98.5%
10-Year Growth $238 $2,795M 91.2%
5-Year EBITDA $93 $1,033M 99.1%
10-Year EBITDA $160 $1,855M 86.8%

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: 7.7%
  • Long-term growth rate: 3.8%
  • Fair value: $72.76 (-7.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.4% (Low) to 6.0% (High)
  • Long-term growth rate: 3.0% (Low) to 4.7% (High)
  • Fair value range: $(10) to $(57)
  • Selected fair value: $-33.35 (-142.3% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $953M
Enterprise Value $867M
Trailing P/E 0.00
Forward P/E 1093.08
Trailing EV/EBITDA 10.70
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.98

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) 40% $71.47
Discounted Cash Flow (5Y) 33% $14.75
Dividend Discount Model (Multi-Stage) 27% $14.55
Weighted Average 100% $134.37

Investment Conclusion

Based on our comprehensive valuation analysis, Kura Sushi USA Inc's weighted average intrinsic value is $134.37, which is approximately 70.5% above the current market price of $78.79.

Key investment considerations:

  • Strong projected earnings growth (-4% to 16% margin)
  • Consistent cash flow generation

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