What is SHLDQ's Intrinsic value?

Sears Holdings Corp (SHLDQ) Intrinsic Value Analysis

Executive Summary

As of June 7, 2025, Sears Holdings Corp's estimated intrinsic value ranges from $0.01 to $134.08 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $134.08 +133984.4%
Discounted Cash Flow (5Y) $90.44 +90335.2%
Dividend Discount Model (Multi-Stage) $0.01 -94.5%

Is Sears Holdings Corp (SHLDQ) undervalued or overvalued?

With the current market price at $0.10, 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 Sears Holdings Corp'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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 5.37 66.32
Cost of equity 28.6% 376.2%
Cost of debt 7.0% 7.8%
Tax rate 10.8% 13.8%
Debt/Equity ratio 547.02 547.02
After-tax WACC 6.3% 7.4%

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: 6.8% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $16,702 (FY02-2018) to $15,137 (FY02-2028)
  • Net profit margin expansion from -5% to 1%
  • Capital expenditures maintained at approximately 1% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $43 $8,152M 83.3%
10-Year Growth $78 $10,764M 68.6%

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: 202.4%
  • Long-term growth rate: 2.0%
  • Fair value: $0.01 (-94.5% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 376.2% (Low) to 28.6% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $(4) to $(79)
  • Selected fair value: $0.00 (-100.0% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $8M
Enterprise Value $4898M
Trailing P/E 0.00
Forward P/E -0.00
Trailing EV/EBITDA 3.85
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 547.02

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% $40.23
Discounted Cash Flow (5Y) 33% $22.61
Dividend Discount Model (Multi-Stage) 27% $0.00
Weighted Average 100% $83.78

Investment Conclusion

Based on our comprehensive valuation analysis, Sears Holdings Corp's weighted average intrinsic value is $83.78, which is approximately 83680.3% above the current market price of $0.10.

Key investment considerations:

  • Strong projected earnings growth (-5% to 1% margin)
  • Consistent cash flow generation

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