What is NXR.L's Intrinsic value?

Norcros PLC (NXR.L) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Norcros PLC's estimated intrinsic value ranges from $87.93 to $4173.68 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $414.69 +65.2%
Discounted Cash Flow (5Y) $387.76 +54.5%
Dividend Discount Model (Multi-Stage) $275.10 +9.6%
Dividend Discount Model (Stable) $87.93 -65.0%
Earnings Power Value $4173.68 +1562.8%

Is Norcros PLC (NXR.L) undervalued or overvalued?

With the current market price at $251.00, 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 Norcros PLC'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
  3. 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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.79 1.01
Cost of equity 8.7% 12.0%
Cost of debt 5.2% 7.1%
Tax rate 20.8% 22.3%
Debt/Equity ratio 0.38 0.38
After-tax WACC 7.4% 10.2%

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: 8.8% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $392 (FY03-2024) to $461 (FY03-2034)
  • Net profit margin expansion from 7% to 6%
  • Capital expenditures maintained at approximately 1% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $388 $411M 64.6%
10-Year Growth $415 $435M 44.4%
5-Year EBITDA $318 $350M 58.4%
10-Year EBITDA $364 $391M 38.0%

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: 102.2%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 10.4%
  • Long-term growth rate: 0.5%
  • Fair value: $275.10 (9.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 12.0% (Low) to 8.7% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $59 to $117
  • Selected fair value: $87.93 (-65.0% 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 $324M
Discount Rate (WACC) 10.2% - 7.4%
Enterprise Value $3,169M - $4,352M
Net Debt $68M
Equity Value $3,101M - $4,284M
Outstanding Shares 1M
Fair Value $3,505 - $4,842
Selected Fair Value $4173.68

Key Financial Metrics

Metric Value
Market Capitalization $222M
Enterprise Value $290M
Trailing P/E 24.95
Forward P/E 9.04
Trailing EV/EBITDA 6.40
Current Dividend Yield 386.70%
Dividend Growth Rate (5Y) 6.78%
Debt-to-Equity Ratio 0.38

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) 30% $124.41
Discounted Cash Flow (5Y) 25% $96.94
Dividend Discount Model (Multi-Stage) 20% $55.02
Dividend Discount Model (Stable) 15% $13.19
Earnings Power Value 10% $417.37
Weighted Average 100% $706.93

Investment Conclusion

Based on our comprehensive valuation analysis, Norcros PLC's weighted average intrinsic value is $706.93, which is approximately 181.6% above the current market price of $251.00.

Key investment considerations:

  • Strong projected earnings growth (7% to 6% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 6.78%

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