What is SOS.L's Intrinsic value?

Sosandar PLC (SOS.L) Intrinsic Value Analysis

Executive Summary

As of June 7, 2025, Sosandar PLC's estimated intrinsic value ranges from $1.59 to $5.56 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $5.12 -41.5%
Discounted Cash Flow (5Y) $1.86 -78.8%
Dividend Discount Model (Multi-Stage) $5.56 -36.4%
Dividend Discount Model (Stable) $1.59 -81.9%
Earnings Power Value $3.07 -64.9%

Is Sosandar PLC (SOS.L) undervalued or overvalued?

With the current market price at $8.75, 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 Sosandar 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
  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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.78 0.8
Cost of equity 8.6% 10.6%
Cost of debt 4.0% 4.5%
Tax rate 10.7% 21.6%
Debt/Equity ratio 0.03 0.03
After-tax WACC 8.5% 10.4%

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: 9.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $46 (FY03-2024) to $89 (FY03-2034)
  • Net profit margin expansion from -1% to 3%
  • Capital expenditures maintained at approximately 1% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $2 $(0)M 87.0%
10-Year Growth $5 $8M 76.2%
5-Year EBITDA $7 $13M 103.2%
10-Year EBITDA $9 $17M 88.5%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.6%
  • Long-term growth rate: 3.5%
  • Fair value: $5.56 (-36.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.6% (Low) to 8.6% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $1 to $2
  • Selected fair value: $1.59 (-81.9% 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 $0M
Discount Rate (WACC) 10.4% - 8.5%
Enterprise Value $3M - $3M
Net Debt $(5)M
Equity Value $8M - $8M
Outstanding Shares 3M
Fair Value $3 - $3
Selected Fair Value $3.07

Key Financial Metrics

Metric Value
Market Capitalization $22M
Enterprise Value $17M
Trailing P/E 83.67
Forward P/E 523.79
Trailing EV/EBITDA 10.45
Current Dividend Yield 62.96%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.03

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% $1.54
Discounted Cash Flow (5Y) 25% $0.46
Dividend Discount Model (Multi-Stage) 20% $1.11
Dividend Discount Model (Stable) 15% $0.24
Earnings Power Value 10% $0.31
Weighted Average 100% $3.66

Investment Conclusion

Based on our comprehensive valuation analysis, Sosandar PLC's weighted average intrinsic value is $3.66, which is approximately 58.2% below the current market price of $8.75.

Key investment considerations:

  • Strong projected earnings growth (-1% to 3% margin)
  • Conservative capital structure (Debt/Equity of 0.03)

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