What is LITH.V's Intrinsic value?

Lithium Chile Inc (LITH.V) Intrinsic Value Analysis

Executive Summary

As of June 16, 2025, Lithium Chile Inc's estimated intrinsic value ranges from $0.86 to $1.70 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $1.70 +183.7%
Discounted Cash Flow (5Y) $0.86 +43.5%
Dividend Discount Model (Multi-Stage) $1.05 +75.1%
Dividend Discount Model (Stable) $1.55 +158.8%

Is Lithium Chile Inc (LITH.V) undervalued or overvalued?

With the current market price at $0.60, 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 Lithium Chile 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 5.1% 6.1%
Adjusted beta 0.41 0.7
Cost of equity 6.0% 9.1%
Cost of debt 4.5% 4.5%
Tax rate 6.8% 13.9%
Debt/Equity ratio 1 1
After-tax WACC 5.1% 6.5%

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 $0 (FY12-2024) to $1 (FY12-2034)
  • Net profit margin expansion from 2041% to 1389%
  • Capital expenditures maintained at approximately 8735% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $1 $176M 104.2%
10-Year Growth $2 $350M 92.7%
5-Year EBITDA $1 $178M 104.2%
10-Year EBITDA $1 $200M 87.2%

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: 7.5%
  • Long-term growth rate: 3.9%
  • Fair value: $1.05 (75.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.1% (Low) to 6.0% (High)
  • Long-term growth rate: 3.0% (Low) to 4.8% (High)
  • Fair value range: $0 to $3
  • Selected fair value: $1.55 (158.8% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $124M
Enterprise Value $122M
Trailing P/E 17.29
Forward P/E 11.78
Trailing EV/EBITDA 4.70
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 1.09

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) 33% $0.51
Discounted Cash Flow (5Y) 28% $0.22
Dividend Discount Model (Multi-Stage) 22% $0.21
Dividend Discount Model (Stable) 17% $0.23
Weighted Average 100% $1.30

Investment Conclusion

Based on our comprehensive valuation analysis, Lithium Chile Inc's weighted average intrinsic value is $1.30, which is approximately 116.5% above the current market price of $0.60.

Key investment considerations:

  • Strong projected earnings growth (2041% to 1389% margin)
  • Consistent cash flow generation

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