What is PRU.L's Intrinsic value?

Prudential PLC (PRU.L) Intrinsic Value Analysis

Executive Summary

As of June 8, 2025, Prudential PLC's estimated intrinsic value ranges from $888.33 to $1004.61 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $1004.61 +14.6%
Dividend Discount Model (Stable) $888.33 +1.3%

Is Prudential PLC (PRU.L) undervalued or overvalued?

With the current market price at $877.00, the stock appears to be fairly valued.

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 Prudential PLC's intrinsic value, including:

  1. 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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.98 1.02
Cost of equity 9.8% 12.1%
Cost of debt 5.0% 5.0%
Tax rate 17.8% 18.3%
Debt/Equity ratio 0.16 0.16
After-tax WACC 9.1% 11.0%

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: 24.2%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 11.0%
  • Long-term growth rate: 4.0%
  • Fair value: $1004.61 (14.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 12.1% (Low) to 9.8% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $702 to $1,702
  • Selected fair value: $888.33 (1.3% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $21861M
Enterprise Value $21084M
Trailing P/E 12.94
Forward P/E 11.55
Trailing EV/EBITDA 0.00
Current Dividend Yield 186.68%
Dividend Growth Rate (5Y) -9.25%
Debt-to-Equity Ratio 0.16

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) 57% $200.92
Dividend Discount Model (Stable) 43% $133.25
Weighted Average 100% $954.78

Investment Conclusion

Based on our comprehensive valuation analysis, Prudential PLC's weighted average intrinsic value is $954.78, which is approximately 8.9% above the current market price of $877.00.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.16)

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