What is NEW's Intrinsic value?

Puxin Ltd (NEW) Intrinsic Value Analysis

Executive Summary

As of June 21, 2025, Puxin Ltd's estimated intrinsic value ranges from $18.03 to $49.55 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $39.61 +2812.4%
Discounted Cash Flow (5Y) $27.31 +1908.5%
Dividend Discount Model (Multi-Stage) $18.03 +1225.4%
Dividend Discount Model (Stable) $49.55 +3543.4%

Is Puxin Ltd (NEW) undervalued or overvalued?

With the current market price at $1.36, 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 Puxin Ltd'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

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 4.2% 5.2%
Adjusted beta 0.45 1.43
Cost of equity 5.1% 11.7%
Cost of debt 7.0% 7.0%
Tax rate 0.6% 1.3%
Debt/Equity ratio 11.42 11.42
After-tax WACC 6.8% 7.3%

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: 7.0% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $2,904 (FY12-2020) to $3,998 (FY12-2030)
  • Net profit margin expansion from -1% to 4%
  • Capital expenditures maintained at approximately 4% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $184 $3,463M 87.4%
10-Year Growth $267 $4,390M 75.4%
5-Year EBITDA $(1,234) $1,248M 64.9%
10-Year EBITDA $44 $1,896M 43.0%

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: 8.4%
  • Long-term growth rate: 3.5%
  • Fair value: $18.03 (1225.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.7% (Low) to 5.1% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $31 to $638
  • Selected fair value: $49.55 (3543.4% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $15M
Enterprise Value $210M
Trailing P/E 2.22
Forward P/E 32.75
Trailing EV/EBITDA 4.25
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 11.42

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) 33% $11.88
Discounted Cash Flow (5Y) 28% $6.83
Dividend Discount Model (Multi-Stage) 22% $3.61
Dividend Discount Model (Stable) 17% $7.43
Weighted Average 100% $33.05

Investment Conclusion

Based on our comprehensive valuation analysis, Puxin Ltd's weighted average intrinsic value is $33.05, which is approximately 2330.5% above the current market price of $1.36.

Key investment considerations:

  • Strong projected earnings growth (-1% to 4% margin)
  • Consistent cash flow generation

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