What is RNO.PA's Intrinsic value?

Renault SA (RNO.PA) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, Renault SA's estimated intrinsic value ranges from $17.89 to $107.11 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $107.11 +122.8%
Discounted Cash Flow (5Y) $66.11 +37.5%
Dividend Discount Model (Multi-Stage) $74.11 +54.1%
Dividend Discount Model (Stable) $17.89 -62.8%
Earnings Power Value $88.73 +84.5%

Is Renault SA (RNO.PA) undervalued or overvalued?

With the current market price at $48.08, 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 Renault 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 3.0% 3.5%
Equity market risk premium 5.8% 6.8%
Adjusted beta 1.46 2.5
Cost of equity 11.5% 21.0%
Cost of debt 4.0% 4.5%
Tax rate 22.2% 31.7%
Debt/Equity ratio 5.04 5.04
After-tax WACC 4.5% 6.0%

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: 5.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $56,232 (FY12-2024) to $81,263 (FY12-2034)
  • Net profit margin expansion from 2% to 8%
  • Capital expenditures maintained at approximately 6% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $66 $67,937M 91.3%
10-Year Growth $107 $80,060M 79.3%
5-Year EBITDA $(1,234) $41,313M 85.8%
10-Year EBITDA $15 $52,778M 68.5%

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: 71.3%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 16.3%
  • Long-term growth rate: 2.0%
  • Fair value: $74.11 (54.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 21.0% (Low) to 11.5% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $9 to $27
  • Selected fair value: $17.89 (-62.8% 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 $3,851M
Discount Rate (WACC) 6.0% - 4.5%
Enterprise Value $63,687M - $85,566M
Net Debt $48,387M
Equity Value $15,300M - $37,179M
Outstanding Shares 296M
Fair Value $52 - $126
Selected Fair Value $88.73

Key Financial Metrics

Metric Value
Market Capitalization $14218M
Enterprise Value $62605M
Trailing P/E 18.91
Forward P/E 7.45
Trailing EV/EBITDA 4.65
Current Dividend Yield 381.10%
Dividend Growth Rate (5Y) -12.21%
Debt-to-Equity Ratio 5.04

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% $32.13
Discounted Cash Flow (5Y) 25% $16.53
Dividend Discount Model (Multi-Stage) 20% $14.82
Dividend Discount Model (Stable) 15% $2.68
Earnings Power Value 10% $8.87
Weighted Average 100% $75.04

Investment Conclusion

Based on our comprehensive valuation analysis, Renault SA's weighted average intrinsic value is $75.04, which is approximately 56.1% above the current market price of $48.08.

Key investment considerations:

  • Strong projected earnings growth (2% to 8% margin)
  • Consistent cash flow generation

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