What is POG.L's Intrinsic value?

Petropavlovsk PLC (POG.L) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, Petropavlovsk PLC's estimated intrinsic value ranges from $3.63 to $72.73 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $18.97 +1480.6%
Discounted Cash Flow (5Y) $11.48 +856.8%
Dividend Discount Model (Multi-Stage) $9.04 +653.0%
Dividend Discount Model (Stable) $3.63 +202.4%
Earnings Power Value $72.73 +5960.7%

Is Petropavlovsk PLC (POG.L) undervalued or overvalued?

With the current market price at $1.20, 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 Petropavlovsk PLC'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 2.9% 3.4%
Equity market risk premium 5.3% 6.3%
Adjusted beta 1.13 2.45
Cost of equity 9.0% 19.5%
Cost of debt 7.0% 9.7%
Tax rate 19.0% 19.0%
Debt/Equity ratio 11.14 11.14
After-tax WACC 5.9% 8.8%

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: 7.4% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $989 (FY12-2020) to $1,773 (FY12-2030)
  • Net profit margin expansion from -5% to 6%
  • Capital expenditures maintained at approximately 16% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $14 $1,023M 90.9%
10-Year Growth $23 $1,325M 77.8%
5-Year EBITDA $15 $1,061M 91.2%
10-Year EBITDA $22 $1,295M 77.3%

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: 14.2%
  • Long-term growth rate: 3.5%
  • Fair value: $9.04 (653.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 19.5% (Low) to 9.0% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $2 to $7
  • Selected fair value: $3.63 (202.4% 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 $248M
Discount Rate (WACC) 8.8% - 5.9%
Enterprise Value $2,815M - $4,180M
Net Debt $559M
Equity Value $2,256M - $3,622M
Outstanding Shares 33M
Fair Value $68 - $109
Selected Fair Value $72.73

Key Financial Metrics

Metric Value
Market Capitalization $40M
Enterprise Value $460M
Trailing P/E 4.60
Forward P/E 2.08
Trailing EV/EBITDA 4.95
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 11.14

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% $5.69
Discounted Cash Flow (5Y) 25% $2.87
Dividend Discount Model (Multi-Stage) 20% $1.81
Dividend Discount Model (Stable) 15% $0.54
Earnings Power Value 10% $7.27
Weighted Average 100% $18.19

Investment Conclusion

Based on our comprehensive valuation analysis, Petropavlovsk PLC's weighted average intrinsic value is $18.19, which is approximately 1415.4% above the current market price of $1.20.

Key investment considerations:

  • Strong projected earnings growth (-5% to 6% margin)
  • Consistent cash flow generation

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