What is MTBC's Intrinsic value?

MTBC Inc (MTBC) Intrinsic Value Analysis

Executive Summary

As of June 17, 2025, MTBC Inc's estimated intrinsic value ranges from $4.23 to $40.73 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $40.73 +1201.4%
Discounted Cash Flow (5Y) $17.49 +458.7%
Dividend Discount Model (Multi-Stage) $29.92 +855.9%
Dividend Discount Model (Stable) $4.23 +35.1%
Earnings Power Value $11.36 +263.0%

Is MTBC Inc (MTBC) undervalued or overvalued?

With the current market price at $3.13, 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 MTBC 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
  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 4.2% 4.7%
Equity market risk premium 5.0% 6.0%
Adjusted beta 0.82 1.06
Cost of equity 8.3% 11.5%
Cost of debt 4.9% 12.6%
Tax rate 2.8% 3.6%
Debt/Equity ratio 0.17 0.17
After-tax WACC 7.8% 11.6%

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: 9.7% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $139 (FY12-2022) to $982 (FY12-2032)
  • Net profit margin expansion from 4% to 10%
  • Capital expenditures maintained at approximately 4% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $17 $269M 76.3%
10-Year Growth $41 $622M 63.9%
5-Year EBITDA $33 $511M 87.5%
10-Year EBITDA $57 $873M 74.2%

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: 281.9%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.9%
  • Long-term growth rate: 2.0%
  • Fair value: $29.92 (855.9% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.5% (Low) to 8.3% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $2 to $6
  • Selected fair value: $4.23 (35.1% 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 $16M
Discount Rate (WACC) 11.6% - 7.8%
Enterprise Value $140M - $210M
Net Debt $2M
Equity Value $138M - $208M
Outstanding Shares 15M
Fair Value $9 - $14
Selected Fair Value $11.36

Key Financial Metrics

Metric Value
Market Capitalization $48M
Enterprise Value $50M
Trailing P/E 8.77
Forward P/E 4.88
Trailing EV/EBITDA 12.85
Current Dividend Yield 3214.58%
Dividend Growth Rate (5Y) 39.00%
Debt-to-Equity Ratio 0.17

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% $12.22
Discounted Cash Flow (5Y) 25% $4.37
Dividend Discount Model (Multi-Stage) 20% $5.98
Dividend Discount Model (Stable) 15% $0.63
Earnings Power Value 10% $1.14
Weighted Average 100% $24.35

Investment Conclusion

Based on our comprehensive valuation analysis, MTBC Inc's weighted average intrinsic value is $24.35, which is approximately 677.8% above the current market price of $3.13.

Key investment considerations:

  • Strong projected earnings growth (4% to 10% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.17)
  • Historical dividend growth of 39.00%

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