What is RKH.L's Intrinsic value?

Rockhopper Exploration PLC (RKH.L) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, Rockhopper Exploration PLC's estimated intrinsic value ranges from $48.90 to $48.90 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Stable) $48.90 -9.8%

Is Rockhopper Exploration PLC (RKH.L) undervalued or overvalued?

With the current market price at $54.20, 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 Rockhopper Exploration 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 0.47 0.9
Cost of equity 6.8% 11.3%
Cost of debt 5.0% 5.0%
Tax rate 0.0% 0.8%
Debt/Equity ratio 0 0
After-tax WACC 6.8% 11.3%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.0%
  • Long-term growth rate: 4.0%
  • Fair value: $-0.46 (-100.9% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.3% (Low) to 6.8% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $19 to $113
  • Selected fair value: $48.90 (-9.8% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $349M
Enterprise Value $334M
Trailing P/E 32.46
Forward P/E 32.46
Trailing EV/EBITDA 1.35
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.00

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 (Stable) 100% $7.34
Weighted Average 100% $48.90

Investment Conclusion

Based on our comprehensive valuation analysis, Rockhopper Exploration PLC's weighted average intrinsic value is $48.90, which is approximately 9.8% below the current market price of $54.20.

Key investment considerations:

  • Strong projected earnings growth (5452% to -174% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.00)

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