What is RTON's Intrinsic value?

Right On Brands Inc (RTON) Intrinsic Value Analysis

Executive Summary

As of May 31, 2025, Right On Brands Inc's estimated intrinsic value ranges from $0.01 to $0.02 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $0.01 -62.8%
Discounted Cash Flow (5Y) $0.01 -75.0%
Dividend Discount Model (Multi-Stage) $0.02 -11.9%

Is Right On Brands Inc (RTON) undervalued or overvalued?

With the current market price at $0.03, the stock appears to be significantly overvalued.

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 Right On Brands Inc'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

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 0.32 0.51
Cost of equity 5.3% 7.7%
Cost of debt 5.0% 5.0%
Tax rate 26.2% 27.0%
Debt/Equity ratio 0.46 0.46
After-tax WACC 4.8% 6.4%

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: 5.6% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $1 (FY03-2023) to $2 (FY03-2033)
  • Net profit margin expansion from 1% to 4%
  • Capital expenditures maintained at approximately 0% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $0 $1M 100.3%
10-Year Growth $0 $1M 82.5%
5-Year EBITDA $(1,234) $0M 100.7%
10-Year EBITDA $(1,234) $0M 68.6%

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: 6.5%
  • Long-term growth rate: 2.0%
  • Fair value: $0.02 (-11.9% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 7.7% (Low) to 5.3% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $(0) to $(1)
  • Selected fair value: $-0.35 (-1342.0% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $1M
Enterprise Value $1M
Trailing P/E 0.00
Forward P/E 53.84
Trailing EV/EBITDA 7.60
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.46

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) 40% $0.00
Discounted Cash Flow (5Y) 33% $0.00
Dividend Discount Model (Multi-Stage) 27% $0.00
Weighted Average 100% $0.01

Investment Conclusion

Based on our comprehensive valuation analysis, Right On Brands Inc's weighted average intrinsic value is $0.01, which is approximately 53.3% below the current market price of $0.03.

Key investment considerations:

  • Strong projected earnings growth (1% to 4% margin)

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