What is MCRO.L's Intrinsic value?

Micro Focus International PLC (MCRO.L) Intrinsic Value Analysis

Executive Summary

As of June 18, 2025, Micro Focus International PLC's estimated intrinsic value ranges from $1784.46 to $1784.46 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Earnings Power Value $1784.46 +235.4%

Is Micro Focus International PLC (MCRO.L) undervalued or overvalued?

With the current market price at $532.00, 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 Micro Focus International PLC's intrinsic value, including:

  1. 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 0.96 1.53
Cost of equity 9.7% 15.7%
Cost of debt 10.1% 24.0%
Tax rate 15.5% 32.0%
Debt/Equity ratio 1.94 1.94
After-tax WACC 8.9% 16.1%

Valuation Methods

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 $1,366M
Discount Rate (WACC) 16.1% - 8.9%
Enterprise Value $8,490M - $15,288M
Net Debt $3,668M
Equity Value $4,822M - $11,620M
Outstanding Shares 3M
Fair Value $1,420 - $3,423
Selected Fair Value $1784.46

Key Financial Metrics

Metric Value
Market Capitalization $1806M
Enterprise Value $4509M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 4.45
Current Dividend Yield 385.56%
Dividend Growth Rate (5Y) -17.79%
Debt-to-Equity Ratio 1.94

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
Earnings Power Value 100% $178.45
Weighted Average 100% $1784.46

Investment Conclusion

Based on our comprehensive valuation analysis, Micro Focus International PLC's weighted average intrinsic value is $1784.46, which is approximately 235.4% above the current market price of $532.00.

Key investment considerations:

  • Strong projected earnings growth (-14% to -8% margin)
  • Consistent cash flow generation

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