What is NCMI's Intrinsic value?

National Cinemedia Inc (NCMI) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, National Cinemedia Inc's estimated intrinsic value ranges from $0.43 to $7.54 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $0.43 -91.3%
Earnings Power Value $7.54 +54.0%

Is National Cinemedia Inc (NCMI) undervalued or overvalued?

With the current market price at $4.90, 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 National Cinemedia Inc'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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.47 0.59
Cost of equity 6.0% 8.2%
Cost of debt 5.4% 7.0%
Tax rate 26.2% 27.0%
Debt/Equity ratio 0.02 0.02
After-tax WACC 6.0% 8.1%

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: 7.1%
  • Long-term growth rate: 4.0%
  • Fair value: $0.43 (-91.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.2% (Low) to 6.0% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(3) to $(17)
  • Selected fair value: $-9.71 (-298.2% 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 $45M
Discount Rate (WACC) 8.1% - 6.0%
Enterprise Value $559M - $758M
Net Debt $(60)M
Equity Value $618M - $818M
Outstanding Shares 95M
Fair Value $6 - $9
Selected Fair Value $7.54

Key Financial Metrics

Metric Value
Market Capitalization $466M
Enterprise Value $407M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 5.10
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) -74.30%
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
Dividend Discount Model (Multi-Stage) 67% $0.09
Earnings Power Value 33% $0.75
Weighted Average 100% $2.80

Investment Conclusion

Based on our comprehensive valuation analysis, National Cinemedia Inc's weighted average intrinsic value is $2.80, which is approximately 42.9% below the current market price of $4.90.

Key investment considerations:

  • Strong projected earnings growth (-9% to 3% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.02)

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