What is TCS.L's Intrinsic value?

TCS Group Holding PLC (TCS.L) Intrinsic Value Analysis

Executive Summary

As of May 29, 2025, TCS Group Holding PLC's estimated intrinsic value ranges from $25.57 to $36.46 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $25.57 +0.3%
Dividend Discount Model (Stable) $36.46 +43.0%

Is TCS Group Holding PLC (TCS.L) undervalued or overvalued?

With the current market price at $25.50, the stock appears to be moderately 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 TCS Group Holding PLC's intrinsic value, including:

  1. 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 4.0% 4.5%
Equity market risk premium 5.5% 6.5%
Adjusted beta 0.73 0.94
Cost of equity 8.0% 11.1%
Cost of debt 5.0% 5.0%
Tax rate 21.6% 22.3%
Debt/Equity ratio 0.17 0.17
After-tax WACC 7.4% 10.0%

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: 9.5%
  • Long-term growth rate: 0.5%
  • Fair value: $25.57 (0.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.1% (Low) to 8.0% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $1,913 to $3,887
  • Selected fair value: $36.46 (43.0% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $5067M
Enterprise Value $6195M
Trailing P/E 6.71
Forward P/E 15.53
Trailing EV/EBITDA 0.00
Current Dividend Yield 7160.18%
Dividend Growth Rate (5Y) -100.00%
Debt-to-Equity Ratio 0.17

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) 57% $5.11
Dividend Discount Model (Stable) 43% $5.47
Weighted Average 100% $30.23

Investment Conclusion

Based on our comprehensive valuation analysis, TCS Group Holding PLC's weighted average intrinsic value is $30.23, which is approximately 18.6% above the current market price of $25.50.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.17)

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