As of May 22, 2025, Nuance Communications Inc's estimated intrinsic value ranges from $4.39 to $11.07 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $11.07 | -80.2% |
| Discounted Cash Flow (5Y) | $8.94 | -84.0% |
| Dividend Discount Model (Multi-Stage) | $4.39 | -92.2% |
| Earnings Power Value | $7.03 | -87.5% |
Is Nuance Communications Inc (NUAN) undervalued or overvalued?
With the current market price at $55.99, the stock appears to be significantly overvalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Nuance Communications Inc's intrinsic value, including:
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 | 0.84 | 0.99 |
| Cost of equity | 6.7% | 9.3% |
| Cost of debt | 4.0% | 12.6% |
| Tax rate | 27.0% | 27.0% |
| Debt/Equity ratio | 0.05 | 0.05 |
| After-tax WACC | 6.6% | 9.3% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $9 | $3,607M | 85.4% |
| 10-Year Growth | $11 | $4,286M | 72.0% |
| 5-Year EBITDA | $16 | $5,764M | 90.9% |
| 10-Year EBITDA | $17 | $6,165M | 80.5% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $231M |
| Discount Rate (WACC) | 9.3% - 6.6% |
| Enterprise Value | $2,475M - $3,516M |
| Net Debt | $752M |
| Equity Value | $1,723M - $2,764M |
| Outstanding Shares | 319M |
| Fair Value | $5 - $9 |
| Selected Fair Value | $7.03 |
| Metric | Value |
|---|---|
| Market Capitalization | $17883M |
| Enterprise Value | $18635M |
| Trailing P/E | 0.00 |
| Forward P/E | 1548.32 |
| Trailing EV/EBITDA | 27.30 |
| Current Dividend Yield | 0.00% |
| Dividend Growth Rate (5Y) | 0.00% |
| Debt-to-Equity Ratio | 0.05 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 35% | $3.32 |
| Discounted Cash Flow (5Y) | 29% | $2.24 |
| Dividend Discount Model (Multi-Stage) | 24% | $0.88 |
| Earnings Power Value | 12% | $0.70 |
| Weighted Average | 100% | $8.39 |
Based on our comprehensive valuation analysis, Nuance Communications Inc's weighted average intrinsic value is $8.39, which is approximately 85.0% below the current market price of $55.99.
Key investment considerations:
Given these factors, we believe Nuance Communications Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.