What is NWG.L's Intrinsic value?

Natwest Group PLC (NWG.L) Intrinsic Value Analysis

Executive Summary

As of June 17, 2025, Natwest Group PLC's estimated intrinsic value ranges from $521.43 to $590.65 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $590.65 +12.8%
Dividend Discount Model (Stable) $521.43 -0.4%

Is Natwest Group PLC (NWG.L) undervalued or overvalued?

With the current market price at $523.40, the stock appears to be fairly valued.

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 Natwest Group PLC'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 0.92 1.22
Cost of equity 9.5% 13.5%
Cost of debt 5.0% 5.0%
Tax rate 23.5% 24.1%
Debt/Equity ratio 2.59 2.59
After-tax WACC 5.4% 6.5%

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: 11.5%
  • Long-term growth rate: 1.0%
  • Fair value: $590.65 (12.8% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 13.5% (Low) to 9.5% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $337 to $705
  • Selected fair value: $521.43 (-0.4% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $43006M
Enterprise Value $111915M
Trailing P/E 8.32
Forward P/E 7.98
Trailing EV/EBITDA 0.00
Current Dividend Yield 908.16%
Dividend Growth Rate (5Y) 47.43%
Debt-to-Equity Ratio 2.59

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% $118.13
Dividend Discount Model (Stable) 43% $78.21
Weighted Average 100% $560.98

Investment Conclusion

Based on our comprehensive valuation analysis, Natwest Group PLC's weighted average intrinsic value is $560.98, which is approximately 7.2% above the current market price of $523.40.

Key investment considerations:

  • Historical dividend growth of 47.43%

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