What is OMF's Intrinsic value?

OneMain Holdings Inc (OMF) Intrinsic Value Analysis

Executive Summary

As of June 12, 2025, OneMain Holdings Inc's estimated intrinsic value ranges from $85.19 to $169.64 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $85.19 +59.1%
Dividend Discount Model (Stable) $105.28 +96.7%
Earnings Power Value $169.64 +216.9%

Is OneMain Holdings Inc (OMF) undervalued or overvalued?

With the current market price at $53.53, 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 OneMain Holdings Inc's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  2. 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 0.69 0.91
Cost of equity 7.1% 9.9%
Cost of debt 5.2% 20.9%
Tax rate 24.2% 24.5%
Debt/Equity ratio 3.38 3.38
After-tax WACC 4.7% 14.4%

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: 88.5%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.5%
  • Long-term growth rate: 3.7%
  • Fair value: $85.19 (59.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.9% (Low) to 7.1% (High)
  • Long-term growth rate: 3.0% (Low) to 4.4% (High)
  • Fair value range: $48 to $163
  • Selected fair value: $105.28 (96.7% 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 $2,896M
Discount Rate (WACC) 14.4% - 4.7%
Enterprise Value $20,079M - $62,019M
Net Debt $20,867M
Equity Value $(788)M - $41,152M
Outstanding Shares 119M
Fair Value $(7) - $346
Selected Fair Value $169.64

Key Financial Metrics

Metric Value
Market Capitalization $6368M
Enterprise Value $27235M
Trailing P/E 11.23
Forward P/E 15.23
Trailing EV/EBITDA 10.15
Current Dividend Yield 790.92%
Dividend Growth Rate (5Y) -11.34%
Debt-to-Equity Ratio 3.38

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
Dividend Discount Model (Multi-Stage) 44% $17.04
Dividend Discount Model (Stable) 33% $15.79
Earnings Power Value 22% $16.96
Weighted Average 100% $110.65

Investment Conclusion

Based on our comprehensive valuation analysis, OneMain Holdings Inc's weighted average intrinsic value is $110.65, which is approximately 106.7% above the current market price of $53.53.

Key investment considerations:

  • Strong projected earnings growth (9% to 13% margin)
  • Consistent cash flow generation

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