What is SAP.TO's Intrinsic value?

Saputo Inc (SAP.TO) Intrinsic Value Analysis

Executive Summary

As of August 3, 2025, Saputo Inc's estimated intrinsic value ranges from $30.16 to $43.12 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $40.32 +41.2%
Discounted Cash Flow (5Y) $30.27 +6.0%
Dividend Discount Model (Multi-Stage) $30.16 +5.6%
Earnings Power Value $43.12 +51.0%

Is Saputo Inc (SAP.TO) undervalued or overvalued?

With the current market price at $28.55, 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 Saputo 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
  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 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.37 0.41
Cost of equity 5.0% 6.7%
Cost of debt 4.0% 4.6%
Tax rate 29.8% 33.2%
Debt/Equity ratio 0.3 0.3
After-tax WACC 4.5% 5.8%

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: 5.2% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $19,061 (FY03-2025) to $28,279 (FY03-2035)
  • Net profit margin expansion from -1% to 4%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $30 $15,861M 87.1%
10-Year Growth $40 $20,018M 72.8%
5-Year EBITDA $31 $15,967M 87.2%
10-Year EBITDA $41 $20,470M 73.4%

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: 5.9%
  • Long-term growth rate: 1.0%
  • Fair value: $30.16 (5.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 6.7% (Low) to 5.0% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $(5) to $(11)
  • Selected fair value: $-7.83 (-127.4% 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 $1,078M
Discount Rate (WACC) 5.8% - 4.5%
Enterprise Value $18,487M - $23,869M
Net Debt $3,337M
Equity Value $15,150M - $20,532M
Outstanding Shares 414M
Fair Value $37 - $50
Selected Fair Value $43.12

Key Financial Metrics

Metric Value
Market Capitalization $11813M
Enterprise Value $15150M
Trailing P/E 0.00
Forward P/E 67.38
Trailing EV/EBITDA 9.20
Current Dividend Yield 270.89%
Dividend Growth Rate (5Y) 11.83%
Debt-to-Equity Ratio 0.30

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) 35% $12.09
Discounted Cash Flow (5Y) 29% $7.57
Dividend Discount Model (Multi-Stage) 24% $6.03
Earnings Power Value 12% $4.31
Weighted Average 100% $35.30

Investment Conclusion

Based on our comprehensive valuation analysis, Saputo Inc's intrinsic value is $35.30, which is approximately 23.6% above the current market price of $28.55.

Key investment considerations:

  • Strong projected earnings growth (-1% to 4% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 11.83%

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