What is R's Intrinsic value?

Ryder System Inc (R) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, Ryder System Inc's estimated intrinsic value ranges from $206.24 to $355.36 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $355.36 +138.0%
Discounted Cash Flow (5Y) $206.24 +38.2%
Dividend Discount Model (Multi-Stage) $206.50 +38.3%
Dividend Discount Model (Stable) $224.87 +50.6%

Is Ryder System Inc (R) undervalued or overvalued?

With the current market price at $149.28, 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 Ryder System Inc'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

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 0.48 0.71
Cost of equity 6.1% 8.8%
Cost of debt 4.0% 7.0%
Tax rate 27.8% 29.8%
Debt/Equity ratio 1.26 1.26
After-tax WACC 4.3% 6.6%

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: 5.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $12,636 (FY12-2024) to $25,072 (FY12-2034)
  • Net profit margin expansion from 4% to 4%
  • Capital expenditures maintained at approximately 21% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $206 $16,151M 81.6%
10-Year Growth $355 $22,316M 74.0%
5-Year EBITDA $459 $26,618M 88.9%
10-Year EBITDA $575 $31,397M 81.5%

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: 27.6%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.5%
  • Long-term growth rate: 2.0%
  • Fair value: $206.50 (38.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.8% (Low) to 6.1% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $106 to $344
  • Selected fair value: $224.87 (50.6% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $6171M
Enterprise Value $13796M
Trailing P/E 12.62
Forward P/E 12.44
Trailing EV/EBITDA 6.85
Current Dividend Yield 218.76%
Dividend Growth Rate (5Y) 3.20%
Debt-to-Equity Ratio 1.26

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) 33% $106.61
Discounted Cash Flow (5Y) 28% $51.56
Dividend Discount Model (Multi-Stage) 22% $41.30
Dividend Discount Model (Stable) 17% $33.73
Weighted Average 100% $259.11

Investment Conclusion

Based on our comprehensive valuation analysis, Ryder System Inc's weighted average intrinsic value is $259.11, which is approximately 73.6% above the current market price of $149.28.

Key investment considerations:

  • Strong projected earnings growth (4% to 4% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 3.20%

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