What is OLN's Intrinsic value?

Olin Corp (OLN) Intrinsic Value Analysis

Executive Summary

As of June 6, 2025, Olin Corp's estimated intrinsic value ranges from $6.46 to $86.22 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $86.22 +330.4%
Discounted Cash Flow (5Y) $78.58 +292.3%
Dividend Discount Model (Multi-Stage) $48.51 +142.2%
Dividend Discount Model (Stable) $6.46 -67.8%
Earnings Power Value $84.82 +323.4%

Is Olin Corp (OLN) undervalued or overvalued?

With the current market price at $20.03, 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 Olin Corp'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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.24 1.51
Cost of equity 9.6% 13.3%
Cost of debt 6.9% 9.1%
Tax rate 17.8% 19.8%
Debt/Equity ratio 1.27 1.27
After-tax WACC 7.4% 10.0%

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: 8.7% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $6,540 (FY12-2024) to $8,576 (FY12-2034)
  • Net profit margin expansion from 2% to 9%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $79 $11,909M 80.4%
10-Year Growth $86 $12,789M 62.8%
5-Year EBITDA $34 $6,801M 65.7%
10-Year EBITDA $48 $8,439M 43.6%

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: 152.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 11.5%
  • Long-term growth rate: 3.5%
  • Fair value: $48.51 (142.2% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 13.3% (Low) to 9.6% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $3 to $9
  • Selected fair value: $6.46 (-67.8% 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 $1,071M
Discount Rate (WACC) 10.0% - 7.4%
Enterprise Value $10,765M - $14,490M
Net Debt $2,862M
Equity Value $7,903M - $11,628M
Outstanding Shares 115M
Fair Value $69 - $101
Selected Fair Value $84.82

Key Financial Metrics

Metric Value
Market Capitalization $2306M
Enterprise Value $5168M
Trailing P/E 37.56
Forward P/E 10.76
Trailing EV/EBITDA 6.00
Current Dividend Yield 417.47%
Dividend Growth Rate (5Y) -7.07%
Debt-to-Equity Ratio 1.27

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% $25.87
Discounted Cash Flow (5Y) 25% $19.64
Dividend Discount Model (Multi-Stage) 20% $9.70
Dividend Discount Model (Stable) 15% $0.97
Earnings Power Value 10% $8.48
Weighted Average 100% $64.66

Investment Conclusion

Based on our comprehensive valuation analysis, Olin Corp's weighted average intrinsic value is $64.66, which is approximately 222.8% above the current market price of $20.03.

Key investment considerations:

  • Strong projected earnings growth (2% to 9% margin)
  • Consistent cash flow generation

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