What is SX.PA's Intrinsic value?

CS Group SA (SX.PA) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, CS Group SA's estimated intrinsic value ranges from $6.74 to $43.90 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $43.90 +281.7%
Discounted Cash Flow (5Y) $6.74 -41.4%
Dividend Discount Model (Multi-Stage) $21.15 +83.9%
Earnings Power Value $10.54 -8.4%

Is CS Group SA (SX.PA) undervalued or overvalued?

With the current market price at $11.50, 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 CS Group SA'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 3.0% 3.5%
Equity market risk premium 5.8% 6.8%
Adjusted beta 0.38 0.61
Cost of equity 5.2% 8.2%
Cost of debt 5.0% 5.0%
Tax rate 25.9% 27.1%
Debt/Equity ratio 0.5 0.5
After-tax WACC 4.7% 6.7%

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: 5.7% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $273 (FY12-2022) to $740 (FY12-2032)
  • Net profit margin expansion from -1% to 7%
  • Capital expenditures maintained at approximately 2% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $7 $226M 107.3%
10-Year Growth $44 $1,137M 92.6%
5-Year EBITDA $8 $265M 106.2%
10-Year EBITDA $17 $483M 82.7%

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: 6.7%
  • Long-term growth rate: 3.7%
  • Fair value: $21.15 (83.9% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.2% (Low) to 5.2% (High)
  • Long-term growth rate: 3.0% (Low) to 4.5% (High)
  • Fair value range: $(1) to $(11)
  • Selected fair value: $-6.22 (-154.1% 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 $18M
Discount Rate (WACC) 6.7% - 4.7%
Enterprise Value $265M - $373M
Net Debt $61M
Equity Value $204M - $313M
Outstanding Shares 25M
Fair Value $8 - $13
Selected Fair Value $10.54

Key Financial Metrics

Metric Value
Market Capitalization $282M
Enterprise Value $343M
Trailing P/E 0.00
Forward P/E 73.68
Trailing EV/EBITDA 8.35
Current Dividend Yield 34.80%
Dividend Growth Rate (5Y) -30.50%
Debt-to-Equity Ratio 0.50

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) 35% $13.17
Discounted Cash Flow (5Y) 29% $1.68
Dividend Discount Model (Multi-Stage) 24% $4.23
Earnings Power Value 12% $1.05
Weighted Average 100% $23.69

Investment Conclusion

Based on our comprehensive valuation analysis, CS Group SA's weighted average intrinsic value is $23.69, which is approximately 106.0% above the current market price of $11.50.

Key investment considerations:

  • Strong projected earnings growth (-1% to 7% margin)

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