What is MPVD.TO's Intrinsic value?

Mountain Province Diamonds Inc (MPVD.TO) Intrinsic Value Analysis

Executive Summary

As of June 21, 2025, Mountain Province Diamonds Inc's estimated intrinsic value ranges from $0.34 to $2.64 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (5Y) $0.34 +517.9%
Earnings Power Value $2.64 +4693.3%

Is Mountain Province Diamonds Inc (MPVD.TO) undervalued or overvalued?

With the current market price at $0.06, 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 Mountain Province Diamonds Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. 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 5.1% 6.1%
Adjusted beta 11.63 17.92
Cost of equity 62.5% 113.5%
Cost of debt 5.0% 5.0%
Tax rate 5.0% 7.3%
Debt/Equity ratio 27.67 27.67
After-tax WACC 6.8% 8.4%

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
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.6% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $268 (FY12-2024) to $177 (FY12-2034)
  • Net profit margin expansion from -30% to -19%
  • Capital expenditures maintained at approximately 20% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $0 $442M 56.9%
10-Year Growth $(1,234) $314M 28.2%
5-Year EBITDA $1 $551M 65.3%
10-Year EBITDA $0 $466M 51.7%

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 $70M
Discount Rate (WACC) 8.4% - 6.8%
Enterprise Value $828M - $1,032M
Net Debt $370M
Equity Value $458M - $661M
Outstanding Shares 212M
Fair Value $2 - $3
Selected Fair Value $2.64

Key Financial Metrics

Metric Value
Market Capitalization $12M
Enterprise Value $382M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 10.20
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 27.67

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 (5Y) 71% $0.08
Earnings Power Value 29% $0.26
Weighted Average 100% $1.00

Investment Conclusion

Based on our comprehensive valuation analysis, Mountain Province Diamonds Inc's weighted average intrinsic value is $1.00, which is approximately 1710.9% above the current market price of $0.06.

Key investment considerations:

  • Strong projected earnings growth (-30% to -19% margin)
  • Consistent cash flow generation

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