What is RGS's Intrinsic value?

Regis Corp (RGS) Intrinsic Value Analysis

Executive Summary

As of June 3, 2025, Regis Corp's estimated intrinsic value ranges from $69.48 to $447.67 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $447.67 +1910.2%
Discounted Cash Flow (5Y) $402.61 +1707.9%
Dividend Discount Model (Multi-Stage) $248.11 +1014.1%
Dividend Discount Model (Stable) $334.61 +1402.5%
Earnings Power Value $69.48 +212.0%

Is Regis Corp (RGS) undervalued or overvalued?

With the current market price at $22.27, 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 Regis Corp'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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.08 1.56
Cost of equity 8.8% 13.6%
Cost of debt 7.9% 15.6%
Tax rate 3.8% 4.7%
Debt/Equity ratio 1.87 1.87
After-tax WACC 8.0% 14.5%

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: 11.2% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $203 (FY06-2024) to $256 (FY06-2034)
  • Net profit margin expansion from 44% to 42%
  • Capital expenditures maintained at approximately 2% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $403 $1,081M 64.1%
10-Year Growth $448 $1,191M 40.2%
5-Year EBITDA $478 $1,265M 69.3%
10-Year EBITDA $500 $1,319M 46.0%

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: 11.2%
  • Long-term growth rate: 0.5%
  • Fair value: $248.11 (1014.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 13.6% (Low) to 8.8% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $207 to $462
  • Selected fair value: $334.61 (1402.5% 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 $28M
Discount Rate (WACC) 14.5% - 8.0%
Enterprise Value $191M - $345M
Net Debt $99M
Equity Value $93M - $247M
Outstanding Shares 2M
Fair Value $38 - $101
Selected Fair Value $69.48

Key Financial Metrics

Metric Value
Market Capitalization $54M
Enterprise Value $153M
Trailing P/E 0.55
Forward P/E 0.65
Trailing EV/EBITDA 11.00
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) -5.43%
Debt-to-Equity Ratio 1.87

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% $134.30
Discounted Cash Flow (5Y) 25% $100.65
Dividend Discount Model (Multi-Stage) 20% $49.62
Dividend Discount Model (Stable) 15% $50.19
Earnings Power Value 10% $6.95
Weighted Average 100% $341.72

Investment Conclusion

Based on our comprehensive valuation analysis, Regis Corp's weighted average intrinsic value is $341.72, which is approximately 1434.4% above the current market price of $22.27.

Key investment considerations:

  • Strong projected earnings growth (44% to 42% margin)
  • Consistent cash flow generation

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