What is PMO.L's Intrinsic value?

Premier Oil PLC (PMO.L) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, Premier Oil PLC's estimated intrinsic value ranges from $476.72 to $476.72 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Earnings Power Value $476.72 +2322.3%

Is Premier Oil PLC (PMO.L) undervalued or overvalued?

With the current market price at $19.68, 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 Premier Oil PLC'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 2.9% 3.4%
Equity market risk premium 5.3% 6.3%
Adjusted beta 2.47 5.87
Cost of equity 16.1% 41.1%
Cost of debt 8.2% 16.0%
Tax rate 19.0% 19.0%
Debt/Equity ratio 10.37 10.37
After-tax WACC 7.5% 15.5%

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 $926M
Discount Rate (WACC) 15.5% - 7.5%
Enterprise Value $5,990M - $12,341M
Net Debt $2,672M
Equity Value $3,318M - $9,669M
Outstanding Shares 11M
Fair Value $297 - $864
Selected Fair Value $476.72

Key Financial Metrics

Metric Value
Market Capitalization $220M
Enterprise Value $2232M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 1.70
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 10.37

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% $47.67
Weighted Average 100% $476.72

Investment Conclusion

Based on our comprehensive valuation analysis, Premier Oil PLC's weighted average intrinsic value is $476.72, which is approximately 2322.3% above the current market price of $19.68.

Key investment considerations:

  • Strong projected earnings growth (-137% to -44% margin)
  • Consistent cash flow generation

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