What is SGY.TO's Intrinsic value?

Surge Energy Inc (SGY.TO) Intrinsic Value Analysis

Executive Summary

As of June 17, 2025, Surge Energy Inc's estimated intrinsic value ranges from $32.95 to $32.95 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Earnings Power Value $32.95 +444.6%

Is Surge Energy Inc (SGY.TO) undervalued or overvalued?

With the current market price at $6.05, 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 Surge Energy Inc's intrinsic value, including:

  1. 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 0.79 1.06
Cost of equity 7.2% 10.6%
Cost of debt 5.0% 5.0%
Tax rate 16.5% 23.6%
Debt/Equity ratio 0.39 0.39
After-tax WACC 6.4% 8.7%

Valuation Methods

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 $258M
Discount Rate (WACC) 8.7% - 6.4%
Enterprise Value $2,953M - $4,068M
Net Debt $231M
Equity Value $2,721M - $3,836M
Outstanding Shares 100M
Fair Value $27 - $39
Selected Fair Value $32.95

Key Financial Metrics

Metric Value
Market Capitalization $602M
Enterprise Value $833M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 3.05
Current Dividend Yield 846.36%
Dividend Growth Rate (5Y) 55.30%
Debt-to-Equity Ratio 0.39

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
Earnings Power Value 100% $3.29
Weighted Average 100% $32.95

Investment Conclusion

Based on our comprehensive valuation analysis, Surge Energy Inc's weighted average intrinsic value is $32.95, which is approximately 444.6% above the current market price of $6.05.

Key investment considerations:

  • Strong projected earnings growth (-10% to -3% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 55.30%

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