What is NWRN.SW's Intrinsic value?

Newron Pharmaceuticals SpA (NWRN.SW) Intrinsic Value Analysis

Executive Summary

As of May 25, 2025, Newron Pharmaceuticals SpA's estimated intrinsic value ranges from $10.29 to $47.34 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $47.34 +541.4%
Discounted Cash Flow (5Y) $27.00 +265.8%
Dividend Discount Model (Multi-Stage) $23.39 +216.9%
Dividend Discount Model (Stable) $10.29 +39.5%

Is Newron Pharmaceuticals SpA (NWRN.SW) undervalued or overvalued?

With the current market price at $7.38, 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 Newron Pharmaceuticals SpA'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 1.0% 1.5%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.85 1.37
Cost of equity 5.3% 10.3%
Cost of debt 4.0% 4.5%
Tax rate 0.1% 2.9%
Debt/Equity ratio 0.32 0.32
After-tax WACC 5.0% 8.9%

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: 6.9% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $51 (FY12-2024) to $192 (FY12-2034)
  • Net profit margin expansion from 31% to 42%
  • Capital expenditures maintained at approximately 0% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $29 $621M 76.9%
10-Year Growth $51 $1,056M 64.0%
5-Year EBITDA $22 $485M 70.5%
10-Year EBITDA $35 $739M 48.6%

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: 7.8%
  • Long-term growth rate: 0.5%
  • Fair value: $23.39 (216.9% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.3% (Low) to 5.3% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $5 to $17
  • Selected fair value: $10.29 (39.5% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $147M
Enterprise Value $188M
Trailing P/E 9.96
Forward P/E 31.16
Trailing EV/EBITDA 7.70
Current Dividend Yield 62.96%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.32

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% $14.20
Discounted Cash Flow (5Y) 28% $6.75
Dividend Discount Model (Multi-Stage) 22% $4.68
Dividend Discount Model (Stable) 17% $1.54
Weighted Average 100% $30.19

Investment Conclusion

Based on our comprehensive valuation analysis, Newron Pharmaceuticals SpA's weighted average intrinsic value is $30.19, which is approximately 309.1% above the current market price of $7.38.

Key investment considerations:

  • Strong projected earnings growth (31% to 42% margin)
  • Consistent cash flow generation

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