What is SPG.TO's Intrinsic value?

Spark Power Group Inc (SPG.TO) Intrinsic Value Analysis

Executive Summary

As of June 12, 2025, Spark Power Group Inc's estimated intrinsic value ranges from $0.15 to $1.32 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $0.15 -81.8%
Dividend Discount Model (Stable) $1.32 +60.9%
Earnings Power Value $0.82 -0.6%

Is Spark Power Group Inc (SPG.TO) undervalued or overvalued?

With the current market price at $0.82, the stock appears to be moderately 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 Spark Power Group Inc's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  2. 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 0.58 0.8
Cost of equity 6.1% 9.0%
Cost of debt 4.6% 23.2%
Tax rate 20.8% 34.5%
Debt/Equity ratio 1.28 1.28
After-tax WACC 4.7% 12.5%

Valuation Methods

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: 7.6%
  • Long-term growth rate: 2.0%
  • Fair value: $0.15 (-81.8% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.0% (Low) to 6.1% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $1 to $2
  • Selected fair value: $1.32 (60.9% 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 $12M
Discount Rate (WACC) 12.5% - 4.7%
Enterprise Value $93M - $245M
Net Debt $94M
Equity Value $(2)M - $151M
Outstanding Shares 91M
Fair Value $(0) - $2
Selected Fair Value $0.82

Key Financial Metrics

Metric Value
Market Capitalization $75M
Enterprise Value $169M
Trailing P/E 11.70
Forward P/E 11.70
Trailing EV/EBITDA 13.70
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 1.28

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
Dividend Discount Model (Multi-Stage) 44% $0.03
Dividend Discount Model (Stable) 33% $0.20
Earnings Power Value 22% $0.08
Weighted Average 100% $0.69

Investment Conclusion

Based on our comprehensive valuation analysis, Spark Power Group Inc's weighted average intrinsic value is $0.69, which is approximately 16.2% below the current market price of $0.82.

Key investment considerations:

  • Strong projected earnings growth (-4% to 1% margin)
  • Consistent cash flow generation

Given these factors, we believe Spark Power Group Inc is currently moderately overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.