What is SSON.L's Intrinsic value?

Smithson Investment Trust PLC (SSON.L) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, Smithson Investment Trust PLC's estimated intrinsic value ranges from $9.49 to $9.49 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $9.49 -99.4%

Is Smithson Investment Trust PLC (SSON.L) undervalued or overvalued?

With the current market price at $1464.00, 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 Smithson Investment Trust PLC's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows

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 1.03 1.16
Cost of equity 10.2% 13.1%
Cost of debt 5.0% 5.0%
Tax rate 0.5% 1.1%
Debt/Equity ratio 1 1
After-tax WACC 7.6% 9.0%

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: 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 8.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $17 (FY12-2024) to $23 (FY12-2034)
  • Net profit margin expansion from -48% to 6%
  • Capital expenditures maintained at approximately 0% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $(1,234) $(16)M 59.9%
10-Year Growth $9 $8M 147.6%
5-Year EBITDA $(1,234) $(9)M 28.6%
10-Year EBITDA $2 $(1)M 587.4%

Key Financial Metrics

Metric Value
Market Capitalization $1721M
Enterprise Value $1718M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 6.60
Current Dividend Yield 62.96%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 1.11

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) 100% $2.85
Weighted Average 100% $9.49

Investment Conclusion

Based on our comprehensive valuation analysis, Smithson Investment Trust PLC's weighted average intrinsic value is $9.49, which is approximately 99.4% below the current market price of $1464.00.

Key investment considerations:

  • Strong projected earnings growth (-48% to 6% margin)

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