What is RMO's Intrinsic value?

Romeo Power Inc (RMO) Intrinsic Value Analysis

Executive Summary

As of June 10, 2025, Romeo Power Inc's estimated intrinsic value ranges from $583.41 to $583.41 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $583.41 +166588.3%

Is Romeo Power Inc (RMO) undervalued or overvalued?

With the current market price at $0.35, 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 Romeo Power Inc'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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.52 0.76
Cost of equity 6.2% 9.1%
Cost of debt 7.0% 7.0%
Tax rate 0.1% 5.6%
Debt/Equity ratio 0.05 0.05
After-tax WACC 6.3% 9.0%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.7%
  • Long-term growth rate: 4.0%
  • Fair value: $583.41 (166588.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.1% (Low) to 6.2% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(11) to $(69)
  • Selected fair value: $-40.14 (-11568.6% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $65M
Enterprise Value $30M
Trailing P/E 0.00
Forward P/E 0.88
Trailing EV/EBITDA 10.55
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.05

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) 100% $116.68
Weighted Average 100% $583.41

Investment Conclusion

Based on our comprehensive valuation analysis, Romeo Power Inc's weighted average intrinsic value is $583.41, which is approximately 166588.3% above the current market price of $0.35.

Key investment considerations:

  • Strong projected earnings growth (60% to 120% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.05)

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