What is NANO.L's Intrinsic value?

Nanoco Group PLC (NANO.L) Intrinsic Value Analysis

Executive Summary

As of May 29, 2025, Nanoco Group PLC's estimated intrinsic value ranges from $1.26 to $66.92 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $66.92 +449.6%
Earnings Power Value $1.26 -89.6%

Is Nanoco Group PLC (NANO.L) undervalued or overvalued?

With the current market price at $12.18, 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 Nanoco Group PLC's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.36 0.46
Cost of equity 6.2% 8.2%
Cost of debt 7.0% 31.1%
Tax rate 14.4% 15.3%
Debt/Equity ratio 0.08 0.08
After-tax WACC 6.2% 9.5%

Valuation Methods

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: 7.2%
  • Long-term growth rate: 4.0%
  • Fair value: $66.92 (449.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.2% (Low) to 6.2% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(9) to $(50)
  • Selected fair value: $-29.39 (-341.4% 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 $(1)M
Discount Rate (WACC) 9.5% - 6.2%
Enterprise Value $(13)M - $(19)M
Net Debt $(18)M
Equity Value $6M - $(1)M
Outstanding Shares 2M
Fair Value $3 - $(1)
Selected Fair Value $1.26

Key Financial Metrics

Metric Value
Market Capitalization $24M
Enterprise Value $5M
Trailing P/E 0.00
Forward P/E 16.70
Trailing EV/EBITDA 5.50
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.08

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
Dividend Discount Model (Multi-Stage) 67% $13.38
Earnings Power Value 33% $0.13
Weighted Average 100% $45.03

Investment Conclusion

Based on our comprehensive valuation analysis, Nanoco Group PLC's weighted average intrinsic value is $45.03, which is approximately 269.9% above the current market price of $12.18.

Key investment considerations:

  • Strong projected earnings growth (-16% to 24% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.08)

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