What is PDL.L's Intrinsic value?

Petra Diamonds Ltd (PDL.L) Intrinsic Value Analysis

Executive Summary

As of June 12, 2025, Petra Diamonds Ltd's estimated intrinsic value ranges from $389.20 to $389.20 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Earnings Power Value $389.20 +2092.7%

Is Petra Diamonds Ltd (PDL.L) undervalued or overvalued?

With the current market price at $17.75, 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 Petra Diamonds Ltd's intrinsic value, including:

  1. 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 0.49 0.57
Cost of equity 6.9% 9.0%
Cost of debt 4.0% 7.0%
Tax rate 23.9% 25.3%
Debt/Equity ratio 5.56 5.56
After-tax WACC 3.6% 5.8%

Valuation Methods

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 $57M
Discount Rate (WACC) 5.8% - 3.6%
Enterprise Value $979M - $1,562M
Net Debt $218M
Equity Value $761M - $1,344M
Outstanding Shares 2M
Fair Value $381 - $672
Selected Fair Value $389.20

Key Financial Metrics

Metric Value
Market Capitalization $35M
Enterprise Value $197M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 6.70
Current Dividend Yield 18.30%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 5.56

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
Earnings Power Value 100% $38.92
Weighted Average 100% $389.20

Investment Conclusion

Based on our comprehensive valuation analysis, Petra Diamonds Ltd's weighted average intrinsic value is $389.20, which is approximately 2092.7% above the current market price of $17.75.

Key investment considerations:

  • Strong projected earnings growth (-28% to -7% margin)
  • Consistent cash flow generation

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