What is REP.MC's Intrinsic value?

Repsol SA (REP.MC) Intrinsic Value Analysis

Executive Summary

As of May 28, 2025, Repsol SA's estimated intrinsic value ranges from $5.06 to $83.63 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $5.06 -57.2%
Discounted Cash Flow (5Y) $7.67 -35.0%
Dividend Discount Model (Multi-Stage) $12.13 +2.7%
Dividend Discount Model (Stable) $8.77 -25.7%
Earnings Power Value $83.63 +608.4%

Is Repsol SA (REP.MC) undervalued or overvalued?

With the current market price at $11.80, 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 Repsol SA'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 3.1% 3.6%
Equity market risk premium 7.4% 8.4%
Adjusted beta 0.97 1.22
Cost of equity 10.3% 14.4%
Cost of debt 4.0% 4.5%
Tax rate 25.4% 31.3%
Debt/Equity ratio 0.92 0.92
After-tax WACC 6.8% 9.0%

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: 7.9% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $57,122 (FY12-2024) to $68,996 (FY12-2034)
  • Net profit margin expansion from 3% to 3%
  • Capital expenditures maintained at approximately 6% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $8 $17,851M 71.9%
10-Year Growth $5 $14,824M 49.4%
5-Year EBITDA $7 $16,653M 69.9%
10-Year EBITDA $6 $16,126M 53.4%

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: 105.6%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 12.3%
  • Long-term growth rate: 2.0%
  • Fair value: $12.13 (2.7% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 14.4% (Low) to 10.3% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $5 to $12
  • Selected fair value: $8.77 (-25.7% 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 $8,175M
Discount Rate (WACC) 9.0% - 6.8%
Enterprise Value $91,156M - $120,374M
Net Debt $8,972M
Equity Value $82,184M - $111,402M
Outstanding Shares 1,157M
Fair Value $71 - $96
Selected Fair Value $83.63

Key Financial Metrics

Metric Value
Market Capitalization $13663M
Enterprise Value $22635M
Trailing P/E 11.85
Forward P/E 8.77
Trailing EV/EBITDA 3.15
Current Dividend Yield 914.74%
Dividend Growth Rate (5Y) 35.11%
Debt-to-Equity Ratio 0.92

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% $1.52
Discounted Cash Flow (5Y) 25% $1.92
Dividend Discount Model (Multi-Stage) 20% $2.43
Dividend Discount Model (Stable) 15% $1.32
Earnings Power Value 10% $8.36
Weighted Average 100% $15.54

Investment Conclusion

Based on our comprehensive valuation analysis, Repsol SA's weighted average intrinsic value is $15.54, which is approximately 31.6% above the current market price of $11.80.

Key investment considerations:

  • Strong projected earnings growth (3% to 3% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 35.11%

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