What is PPR.TO's Intrinsic value?

Prairie Provident Resources Inc (PPR.TO) Intrinsic Value Analysis

Executive Summary

As of June 12, 2025, Prairie Provident Resources Inc's estimated intrinsic value ranges from $0.05 to $0.18 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $0.05 +73.2%
Discounted Cash Flow (5Y) $0.05 +51.5%
Earnings Power Value $0.18 +506.2%

Is Prairie Provident Resources Inc (PPR.TO) undervalued or overvalued?

With the current market price at $0.03, 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 Prairie Provident Resources Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  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 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 1.6 1.83
Cost of equity 11.3% 15.3%
Cost of debt 4.2% 4.5%
Tax rate 25.9% 26.5%
Debt/Equity ratio 1.38 1.38
After-tax WACC 6.6% 8.4%

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: 7.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $38 (FY12-2024) to $41 (FY12-2034)
  • Net profit margin expansion from -45% to -19%
  • Capital expenditures maintained at approximately 15% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $0 $122M 81.6%
10-Year Growth $0 $131M 69.6%
5-Year EBITDA $(1,234) $37M 38.7%
10-Year EBITDA $(1,234) $53M 24.9%

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 $23M
Discount Rate (WACC) 8.4% - 6.6%
Enterprise Value $276M - $350M
Net Debt $58M
Equity Value $217M - $292M
Outstanding Shares 1,401M
Fair Value $0 - $0
Selected Fair Value $0.18

Key Financial Metrics

Metric Value
Market Capitalization $42M
Enterprise Value $100M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 2.75
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 1.38

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) 46% $0.02
Discounted Cash Flow (5Y) 38% $0.01
Earnings Power Value 15% $0.02
Weighted Average 100% $0.07

Investment Conclusion

Based on our comprehensive valuation analysis, Prairie Provident Resources Inc's weighted average intrinsic value is $0.07, which is approximately 131.5% above the current market price of $0.03.

Key investment considerations:

  • Strong projected earnings growth (-45% to -19% margin)
  • Consistent cash flow generation

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