What is LUCE.L's Intrinsic value?

Luceco PLC (LUCE.L) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, Luceco PLC's estimated intrinsic value ranges from $134.63 to $168.74 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $168.74 +9.6%
Discounted Cash Flow (5Y) $154.69 +0.4%
Dividend Discount Model (Multi-Stage) $148.94 -3.3%
Dividend Discount Model (Stable) $145.48 -5.5%
Earnings Power Value $134.63 -12.6%

Is Luceco PLC (LUCE.L) undervalued or overvalued?

With the current market price at $154.00, the stock appears to be fairly valued.

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 Luceco 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 0.51 0.77
Cost of equity 7.0% 10.4%
Cost of debt 5.1% 9.4%
Tax rate 14.8% 17.6%
Debt/Equity ratio 0.33 0.33
After-tax WACC 6.4% 9.7%

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: 8.0% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $242 (FY12-2024) to $398 (FY12-2034)
  • Net profit margin expansion from 6% to 6%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $155 $302M 73.1%
10-Year Growth $169 $323M 55.6%
5-Year EBITDA $121 $251M 67.7%
10-Year EBITDA $145 $288M 50.2%

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: 51.4%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.7%
  • Long-term growth rate: 2.0%
  • Fair value: $148.94 (-3.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.4% (Low) to 7.0% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $73 to $218
  • Selected fair value: $145.48 (-5.5% 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 $21M
Discount Rate (WACC) 9.7% - 6.4%
Enterprise Value $215M - $329M
Net Debt $71M
Equity Value $144M - $258M
Outstanding Shares 1M
Fair Value $97 - $173
Selected Fair Value $134.63

Key Financial Metrics

Metric Value
Market Capitalization $230M
Enterprise Value $301M
Trailing P/E 15.76
Forward P/E 13.35
Trailing EV/EBITDA 6.70
Current Dividend Yield 331.94%
Dividend Growth Rate (5Y) 11.23%
Debt-to-Equity Ratio 0.33

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% $50.62
Discounted Cash Flow (5Y) 25% $38.67
Dividend Discount Model (Multi-Stage) 20% $29.79
Dividend Discount Model (Stable) 15% $21.82
Earnings Power Value 10% $13.46
Weighted Average 100% $154.36

Investment Conclusion

Based on our comprehensive valuation analysis, Luceco PLC's weighted average intrinsic value is $154.36, which is approximately 0.2% above the current market price of $154.00.

Key investment considerations:

  • Strong projected earnings growth (6% to 6% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 11.23%

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