What is RXL.PA's Intrinsic value?

Rexel SA (RXL.PA) Intrinsic Value Analysis

Executive Summary

As of May 25, 2025, Rexel SA's estimated intrinsic value ranges from $20.08 to $242.33 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $37.61 +53.0%
Discounted Cash Flow (5Y) $28.45 +15.8%
Dividend Discount Model (Multi-Stage) $20.08 -18.3%
Dividend Discount Model (Stable) $242.33 +885.9%
Earnings Power Value $60.79 +147.3%

Is Rexel SA (RXL.PA) undervalued or overvalued?

With the current market price at $24.58, 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 Rexel 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 0.91 1.05
Cost of equity 8.3% 11.1%
Cost of debt 4.0% 4.5%
Tax rate 25.5% 34.3%
Debt/Equity ratio 0.64 0.64
After-tax WACC 6.2% 7.9%

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: 7.1% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $19,285 (FY12-2024) to $32,907 (FY12-2034)
  • Net profit margin expansion from 2% to 2%
  • Capital expenditures maintained at approximately 1% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $28 $12,352M 80.4%
10-Year Growth $38 $15,092M 68.0%
5-Year EBITDA $16 $8,641M 72.0%
10-Year EBITDA $22 $10,402M 53.6%

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: 7.1%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.7%
  • Long-term growth rate: 3.0%
  • Fair value: $20.08 (-18.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.1% (Low) to 8.3% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $129 to $355
  • Selected fair value: $242.33 (885.9% 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 $1,533M
Discount Rate (WACC) 7.9% - 6.2%
Enterprise Value $19,336M - $24,707M
Net Debt $3,844M
Equity Value $15,492M - $20,863M
Outstanding Shares 299M
Fair Value $52 - $70
Selected Fair Value $60.79

Key Financial Metrics

Metric Value
Market Capitalization $7350M
Enterprise Value $11194M
Trailing P/E 1.46
Forward P/E 14.82
Trailing EV/EBITDA 7.20
Current Dividend Yield 485.96%
Dividend Growth Rate (5Y) 22.29%
Debt-to-Equity Ratio 0.64

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% $11.28
Discounted Cash Flow (5Y) 25% $7.11
Dividend Discount Model (Multi-Stage) 20% $4.02
Dividend Discount Model (Stable) 15% $36.35
Earnings Power Value 10% $6.08
Weighted Average 100% $64.84

Investment Conclusion

Based on our comprehensive valuation analysis, Rexel SA's weighted average intrinsic value is $64.84, which is approximately 163.8% above the current market price of $24.58.

Key investment considerations:

  • Strong projected earnings growth (2% to 2% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 22.29%

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