What is NBS.L's Intrinsic value?

Nationwide Building Society (NBS.L) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, Nationwide Building Society's estimated intrinsic value ranges from $22.40 to $319.83 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $22.40 -83.0%
Dividend Discount Model (Stable) $319.83 +143.2%

Is Nationwide Building Society (NBS.L) undervalued or overvalued?

With the current market price at $131.50, the stock appears to be moderately 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 Nationwide Building Society's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

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 3.47 37.05
Cost of equity 24.7% 263.6%
Cost of debt 5.0% 5.0%
Tax rate 22.9% 24.2%
Debt/Equity ratio 159.65 159.65
After-tax WACC 4.0% 5.4%

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: 144.2%
  • Long-term growth rate: 0.5%
  • Fair value: $22.40 (-83.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 263.6% (Low) to 24.7% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $42 to $598
  • Selected fair value: $319.83 (143.2% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $1389M
Enterprise Value $223086M
Trailing P/E 0.83
Forward P/E 0.81
Trailing EV/EBITDA 0.00
Current Dividend Yield 62.96%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 159.65

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) 57% $4.48
Dividend Discount Model (Stable) 43% $47.98
Weighted Average 100% $149.87

Investment Conclusion

Based on our comprehensive valuation analysis, Nationwide Building Society's weighted average intrinsic value is $149.87, which is approximately 14.0% above the current market price of $131.50.

Key investment considerations:

  • Overall financial health and market position

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