What is MIME's Intrinsic value?

Mimecast Ltd (MIME) Intrinsic Value Analysis

Executive Summary

As of June 15, 2025, Mimecast Ltd's estimated intrinsic value ranges from $5.12 to $25.03 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $25.03 -68.7%
Discounted Cash Flow (5Y) $9.00 -88.7%
Dividend Discount Model (Multi-Stage) $20.60 -74.2%
Dividend Discount Model (Stable) $20.52 -74.3%
Earnings Power Value $5.12 -93.6%

Is Mimecast Ltd (MIME) undervalued or overvalued?

With the current market price at $79.92, 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 Mimecast Ltd'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 3.2% 3.7%
Equity market risk premium 4.2% 5.2%
Adjusted beta 0.89 0.92
Cost of equity 6.9% 9.0%
Cost of debt 4.0% 9.8%
Tax rate 27.0% 27.0%
Debt/Equity ratio 0.02 0.02
After-tax WACC 6.9% 9.0%

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: 7.9% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $501 (FY03-2021) to $2,155 (FY03-2031)
  • Net profit margin expansion from 6% to 9%
  • Capital expenditures maintained at approximately 10% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $9 $266M 89.4%
10-Year Growth $25 $1,339M 83.5%
5-Year EBITDA $20 $1,330M 97.9%
10-Year EBITDA $33 $2,218M 90.0%

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: 8.0%
  • Long-term growth rate: 4.0%
  • Fair value: $20.60 (-74.2% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.0% (Low) to 6.9% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $8 to $33
  • Selected fair value: $20.52 (-74.3% 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 $1M
Discount Rate (WACC) 9.0% - 6.9%
Enterprise Value $6M - $8M
Net Debt $(336)M
Equity Value $342M - $344M
Outstanding Shares 67M
Fair Value $5 - $5
Selected Fair Value $5.12

Key Financial Metrics

Metric Value
Market Capitalization $5351M
Enterprise Value $5351M
Trailing P/E 0.00
Forward P/E 166.53
Trailing EV/EBITDA 10.05
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.02

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% $7.51
Discounted Cash Flow (5Y) 25% $2.25
Dividend Discount Model (Multi-Stage) 20% $4.12
Dividend Discount Model (Stable) 15% $3.08
Earnings Power Value 10% $0.51
Weighted Average 100% $17.47

Investment Conclusion

Based on our comprehensive valuation analysis, Mimecast Ltd's weighted average intrinsic value is $17.47, which is approximately 78.1% below the current market price of $79.92.

Key investment considerations:

  • Strong projected earnings growth (6% to 9% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.02)

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