What is RZZ.V's Intrinsic value?

Abitibi Royalties Inc (RZZ.V) Intrinsic Value Analysis

Executive Summary

As of June 18, 2025, Abitibi Royalties Inc's estimated intrinsic value ranges from $20.63 to $20.63 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $20.63 -23.6%

Is Abitibi Royalties Inc (RZZ.V) undervalued or overvalued?

With the current market price at $27.00, 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 Abitibi Royalties 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 3.2% 3.7%
Equity market risk premium 4.7% 5.7%
Adjusted beta 0.84 0.94
Cost of equity 7.1% 9.6%
Cost of debt 5.0% 5.0%
Tax rate 12.9% 20.3%
Debt/Equity ratio 0 0
After-tax WACC 7.1% 9.6%

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: 8.4%
  • Long-term growth rate: 4.0%
  • Fair value: $20.63 (-23.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.6% (Low) to 7.1% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(2) to $(7)
  • Selected fair value: $-4.18 (-115.5% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $336M
Enterprise Value $322M
Trailing P/E 0.00
Forward P/E 22.42
Trailing EV/EBITDA 4.70
Current Dividend Yield 61.17%
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 (Multi-Stage) 100% $4.13
Weighted Average 100% $20.63

Investment Conclusion

Based on our comprehensive valuation analysis, Abitibi Royalties Inc's weighted average intrinsic value is $20.63, which is approximately 23.6% below the current market price of $27.00.

Key investment considerations:

  • Strong projected earnings growth (1068% to 1040% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.00)

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