What is KU2.DE's Intrinsic value?

Kuka AG (KU2.DE) Intrinsic Value Analysis

Executive Summary

As of June 21, 2025, Kuka AG's estimated intrinsic value ranges from $1.56 to $57.95 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $57.95 -31.0%
Discounted Cash Flow (5Y) $46.79 -44.3%
Dividend Discount Model (Multi-Stage) $45.18 -46.2%
Dividend Discount Model (Stable) $24.59 -70.7%
Earnings Power Value $1.56 -98.1%

Is Kuka AG (KU2.DE) undervalued or overvalued?

With the current market price at $84.00, 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 Kuka AG'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 2.8% 3.3%
Equity market risk premium 5.1% 6.1%
Adjusted beta 1.09 1.14
Cost of equity 8.4% 10.8%
Cost of debt 4.0% 4.5%
Tax rate 26.3% 41.6%
Debt/Equity ratio 0.19 0.19
After-tax WACC 7.5% 9.4%

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: 8.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $3,286 (FY12-2021) to $3,997 (FY12-2031)
  • Net profit margin expansion from 2% to 7%
  • Capital expenditures maintained at approximately 5% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $47 $1,955M 80.3%
10-Year Growth $58 $2,399M 60.3%
5-Year EBITDA $54 $2,231M 82.7%
10-Year EBITDA $62 $2,553M 62.7%

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: 5.4%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.6%
  • Long-term growth rate: 2.0%
  • Fair value: $45.18 (-46.2% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.8% (Low) to 8.4% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $15 to $34
  • Selected fair value: $24.59 (-70.7% 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 $13M
Discount Rate (WACC) 9.4% - 7.5%
Enterprise Value $138M - $174M
Net Debt $94M
Equity Value $44M - $80M
Outstanding Shares 40M
Fair Value $1 - $2
Selected Fair Value $1.56

Key Financial Metrics

Metric Value
Market Capitalization $3341M
Enterprise Value $3435M
Trailing P/E 40.90
Forward P/E 43.13
Trailing EV/EBITDA 6.25
Current Dividend Yield 13.17%
Dividend Growth Rate (5Y) -31.43%
Debt-to-Equity Ratio 0.19

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% $17.39
Discounted Cash Flow (5Y) 25% $11.70
Dividend Discount Model (Multi-Stage) 20% $9.04
Dividend Discount Model (Stable) 15% $3.69
Earnings Power Value 10% $0.16
Weighted Average 100% $41.96

Investment Conclusion

Based on our comprehensive valuation analysis, Kuka AG's weighted average intrinsic value is $41.96, which is approximately 50.0% below the current market price of $84.00.

Key investment considerations:

  • Strong projected earnings growth (2% to 7% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.19)

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