What is PL.TO's Intrinsic value?

Pinnacle Renewable Energy Inc (PL.TO) Intrinsic Value Analysis

Executive Summary

As of June 21, 2025, Pinnacle Renewable Energy Inc's estimated intrinsic value ranges from $2.54 to $15.09 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $15.09 +33.6%
Discounted Cash Flow (5Y) $2.54 -77.5%
Dividend Discount Model (Multi-Stage) $8.57 -24.1%

Is Pinnacle Renewable Energy Inc (PL.TO) undervalued or overvalued?

With the current market price at $11.29, the stock appears to be moderately overvalued.

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 Pinnacle Renewable Energy Inc'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 3.4% 3.9%
Equity market risk premium 4.7% 5.7%
Adjusted beta 0.51 0.86
Cost of equity 5.7% 9.3%
Cost of debt 4.2% 13.3%
Tax rate 20.9% 33.9%
Debt/Equity ratio 1.28 1.28
After-tax WACC 4.4% 9.0%

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: 6.7% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $491 (FY12-2020) to $1,125 (FY12-2030)
  • Net profit margin expansion from -1% to 4%
  • Capital expenditures maintained at approximately 19% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $3 $557M 82.0%
10-Year Growth $15 $975M 69.3%
5-Year EBITDA $21 $1,177M 91.5%
10-Year EBITDA $31 $1,512M 80.2%

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: 7.5%
  • Long-term growth rate: 1.0%
  • Fair value: $8.57 (-24.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.3% (Low) to 5.7% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $(1) to $(2)
  • Selected fair value: $-1.69 (-115.0% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $377M
Enterprise Value $849M
Trailing P/E 0.00
Forward P/E 237.60
Trailing EV/EBITDA 7.90
Current Dividend Yield 232.40%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 1.28

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) 40% $4.53
Discounted Cash Flow (5Y) 33% $0.64
Dividend Discount Model (Multi-Stage) 27% $1.71
Weighted Average 100% $9.17

Investment Conclusion

Based on our comprehensive valuation analysis, Pinnacle Renewable Energy Inc's weighted average intrinsic value is $9.17, which is approximately 18.8% below the current market price of $11.29.

Key investment considerations:

  • Strong projected earnings growth (-1% to 4% margin)
  • Consistent cash flow generation

Given these factors, we believe Pinnacle Renewable Energy Inc is currently moderately overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.