What is SHB.L's Intrinsic value?

Shaftesbury PLC (SHB.L) Intrinsic Value Analysis

Executive Summary

As of May 31, 2025, Shaftesbury PLC's estimated intrinsic value ranges from $47.50 to $1104.99 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $62.41 -85.2%
Discounted Cash Flow (5Y) $47.50 -88.7%
Dividend Discount Model (Multi-Stage) $501.58 +19.0%
Dividend Discount Model (Stable) $1104.99 +162.1%

Is Shaftesbury PLC (SHB.L) undervalued or overvalued?

With the current market price at $421.60, 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 Shaftesbury PLC'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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.42 0.61
Cost of equity 6.5% 9.3%
Cost of debt 4.0% 7.6%
Tax rate 19.0% 19.0%
Debt/Equity ratio 0.6 0.6
After-tax WACC 5.3% 8.1%

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: 6.7% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $123 (FY09-2022) to $155 (FY09-2032)
  • Net profit margin expansion from 97% to 85%
  • Capital expenditures maintained at approximately 0% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $48 $978M 86.8%
10-Year Growth $62 $1,034M 76.3%
5-Year EBITDA $(1,234) $582M 77.9%
10-Year EBITDA $(1,234) $652M 62.5%

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: 28.4%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.9%
  • Long-term growth rate: 4.0%
  • Fair value: $501.58 (19.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.3% (Low) to 6.5% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $353 to $1,857
  • Selected fair value: $1104.99 (162.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $1593M
Enterprise Value $2391M
Trailing P/E 13.37
Forward P/E 16.90
Trailing EV/EBITDA 11.10
Current Dividend Yield 212.20%
Dividend Growth Rate (5Y) -9.60%
Debt-to-Equity Ratio 0.60

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) 33% $18.72
Discounted Cash Flow (5Y) 28% $11.88
Dividend Discount Model (Multi-Stage) 22% $100.32
Dividend Discount Model (Stable) 17% $165.75
Weighted Average 100% $329.63

Investment Conclusion

Based on our comprehensive valuation analysis, Shaftesbury PLC's weighted average intrinsic value is $329.63, which is approximately 21.8% below the current market price of $421.60.

Key investment considerations:

  • Strong projected earnings growth (97% to 85% margin)
  • Consistent cash flow generation

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