What is SELB's Intrinsic value?

Selecta Biosciences Inc (SELB) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Selecta Biosciences Inc's estimated intrinsic value ranges from $1.21 to $23.32 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $23.32 +2546.4%
Discounted Cash Flow (5Y) $1.21 +36.8%
Dividend Discount Model (Multi-Stage) $4.58 +420.3%

Is Selecta Biosciences Inc (SELB) undervalued or overvalued?

With the current market price at $0.88, 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 Selecta Biosciences 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 4.2% 4.7%
Equity market risk premium 5.0% 6.0%
Adjusted beta 1.13 1.29
Cost of equity 9.8% 12.9%
Cost of debt 7.0% 7.0%
Tax rate 26.2% 27.0%
Debt/Equity ratio 0.19 0.19
After-tax WACC 9.1% 11.6%

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: 10.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $111 (FY12-2022) to $7,450 (FY12-2032)
  • Net profit margin expansion from 32% to 23%
  • Capital expenditures maintained at approximately 21% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $1 $97M 80.1%
10-Year Growth $23 $3,490M 80.4%
5-Year EBITDA $7 $962M 98.0%
10-Year EBITDA $67 $10,183M 93.3%

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: 11.4%
  • Long-term growth rate: 4.0%
  • Fair value: $4.58 (420.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 12.9% (Low) to 9.8% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(2) to $(4)
  • Selected fair value: $-2.94 (-434.2% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $135M
Enterprise Value $47M
Trailing P/E 0.00
Forward P/E 34.77
Trailing EV/EBITDA 10.70
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.19

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% $7.00
Discounted Cash Flow (5Y) 33% $0.30
Dividend Discount Model (Multi-Stage) 27% $0.92
Weighted Average 100% $10.95

Investment Conclusion

Based on our comprehensive valuation analysis, Selecta Biosciences Inc's weighted average intrinsic value is $10.95, which is approximately 1142.9% above the current market price of $0.88.

Key investment considerations:

  • Strong projected earnings growth (32% to 23% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.19)

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