What is POWW's Intrinsic value?

Ammo Munitions Inc (POWW) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Ammo Munitions Inc's estimated intrinsic value ranges from $0.92 to $2.42 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $0.92 -44.6%
Earnings Power Value $2.42 +46.0%

Is Ammo Munitions Inc (POWW) undervalued or overvalued?

With the current market price at $1.66, 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 Ammo Munitions 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 0.61 0.66
Cost of equity 6.7% 8.6%
Cost of debt 7.0% 17.2%
Tax rate 5.4% 12.6%
Debt/Equity ratio 0.05 0.05
After-tax WACC 6.7% 8.9%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.6%
  • Long-term growth rate: 4.0%
  • Fair value: $0.92 (-44.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.6% (Low) to 6.7% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(2) to $(10)
  • Selected fair value: $-6.00 (-461.6% 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 $19M
Discount Rate (WACC) 8.9% - 6.7%
Enterprise Value $213M - $283M
Net Debt $(40)M
Equity Value $253M - $323M
Outstanding Shares 119M
Fair Value $2 - $3
Selected Fair Value $2.42

Key Financial Metrics

Metric Value
Market Capitalization $197M
Enterprise Value $157M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 10.10
Current Dividend Yield 130.12%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.05

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) 67% $0.18
Earnings Power Value 33% $0.24
Weighted Average 100% $1.42

Investment Conclusion

Based on our comprehensive valuation analysis, Ammo Munitions Inc's weighted average intrinsic value is $1.42, which is approximately 14.4% below the current market price of $1.66.

Key investment considerations:

  • Strong projected earnings growth (-11% to 5% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.05)

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