What is SESG.PA's Intrinsic value?

SES SA (SESG.PA) Intrinsic Value Analysis

Executive Summary

As of June 16, 2025, SES SA's estimated intrinsic value ranges from $0.30 to $101.07 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $10.69 +107.1%
Discounted Cash Flow (5Y) $0.30 -94.1%
Dividend Discount Model (Multi-Stage) $9.94 +92.7%
Dividend Discount Model (Stable) $3.04 -41.2%
Earnings Power Value $101.07 +1858.6%

Is SES SA (SESG.PA) undervalued or overvalued?

With the current market price at $5.16, 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 SES 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 0.54 0.66
Cost of equity 6.1% 8.5%
Cost of debt 4.0% 6.6%
Tax rate 19.4% 41.3%
Debt/Equity ratio 1.99 1.99
After-tax WACC 4.2% 5.4%

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: 4.8% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $2,001 (FY12-2024) to $2,754 (FY12-2034)
  • Net profit margin expansion from 1% to 8%
  • Capital expenditures maintained at approximately 26% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $0 $1,185M 91.0%
10-Year Growth $11 $5,814M 92.2%
5-Year EBITDA $2 $2,042M 94.8%
10-Year EBITDA $3 $2,442M 81.3%

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: 640.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.3%
  • Long-term growth rate: 3.5%
  • Fair value: $9.94 (92.7% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.5% (Low) to 6.1% (High)
  • Long-term growth rate: 3.0% (Low) to 3.9% (High)
  • Fair value range: $1 to $5
  • Selected fair value: $3.04 (-41.2% 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 $2,179M
Discount Rate (WACC) 5.4% - 4.2%
Enterprise Value $40,213M - $51,987M
Net Debt $1,050M
Equity Value $39,163M - $50,937M
Outstanding Shares 446M
Fair Value $88 - $114
Selected Fair Value $101.07

Key Financial Metrics

Metric Value
Market Capitalization $2300M
Enterprise Value $3350M
Trailing P/E 46.00
Forward P/E 27.29
Trailing EV/EBITDA 3.50
Current Dividend Yield 1391.26%
Dividend Growth Rate (5Y) 15.15%
Debt-to-Equity Ratio 1.99

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% $3.21
Discounted Cash Flow (5Y) 25% $0.08
Dividend Discount Model (Multi-Stage) 20% $1.99
Dividend Discount Model (Stable) 15% $0.46
Earnings Power Value 10% $10.11
Weighted Average 100% $15.83

Investment Conclusion

Based on our comprehensive valuation analysis, SES SA's weighted average intrinsic value is $15.83, which is approximately 206.8% above the current market price of $5.16.

Key investment considerations:

  • Strong projected earnings growth (1% to 8% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 15.15%

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