What is TEDU's Intrinsic value?

Tarena International Inc (TEDU) Intrinsic Value Analysis

Executive Summary

As of June 20, 2025, Tarena International Inc's estimated intrinsic value ranges from $16.90 to $26.64 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $26.64 +2257.9%
Discounted Cash Flow (5Y) $20.48 +1712.6%
Dividend Discount Model (Multi-Stage) $16.90 +1395.8%

Is Tarena International Inc (TEDU) undervalued or overvalued?

With the current market price at $1.13, 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 Tarena International Inc'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

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 4.2% 4.7%
Equity market risk premium 5.0% 6.0%
Adjusted beta 0.31 0.55
Cost of equity 5.7% 8.5%
Cost of debt 5.0% 5.0%
Tax rate 4.1% 10.4%
Debt/Equity ratio 0.58 0.58
After-tax WACC 5.4% 7.0%

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: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 6.2% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $2,468 (FY12-2022) to $3,721 (FY12-2032)
  • Net profit margin expansion from 3% to 4%
  • Capital expenditures maintained at approximately 6% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $147 $1,345M 80.1%
10-Year Growth $191 $1,833M 64.8%
5-Year EBITDA $113 $970M 72.5%
10-Year EBITDA $146 $1,330M 51.4%

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: 7.1%
  • Long-term growth rate: 0.5%
  • Fair value: $16.90 (1395.8% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.5% (Low) to 5.7% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $(25) to $(58)
  • Selected fair value: $-5.77 (-610.3% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $13M
Enterprise Value $-26M
Trailing P/E 0.00
Forward P/E 0.93
Trailing EV/EBITDA 3.60
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.58

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) 40% $7.99
Discounted Cash Flow (5Y) 33% $5.12
Dividend Discount Model (Multi-Stage) 27% $3.38
Weighted Average 100% $21.99

Investment Conclusion

Based on our comprehensive valuation analysis, Tarena International Inc's weighted average intrinsic value is $21.99, which is approximately 1846.2% above the current market price of $1.13.

Key investment considerations:

  • Strong projected earnings growth (3% to 4% margin)
  • Consistent cash flow generation

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