What is TEK.L's Intrinsic value?

Tekcapital PLC (TEK.L) Intrinsic Value Analysis

Executive Summary

As of June 18, 2025, Tekcapital PLC's estimated intrinsic value ranges from $17.76 to $182.61 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Stable) $182.61 +2259.3%
Earnings Power Value $17.76 +129.4%

Is Tekcapital PLC (TEK.L) undervalued or overvalued?

With the current market price at $7.74, 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 Tekcapital PLC'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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.38 0.65
Cost of equity 6.3% 9.5%
Cost of debt 5.0% 5.0%
Tax rate 0.0% 0.0%
Debt/Equity ratio 1 1
After-tax WACC 5.6% 7.3%

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: 7.9%
  • Long-term growth rate: 4.0%
  • Fair value: $-91.41 (-1281.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.5% (Low) to 6.3% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $65 to $431
  • Selected fair value: $182.61 (2259.3% 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 $3M
Discount Rate (WACC) 7.3% - 5.6%
Enterprise Value $48M - $62M
Net Debt $(0)M
Equity Value $48M - $62M
Outstanding Shares 2M
Fair Value $21 - $27
Selected Fair Value $17.76

Key Financial Metrics

Metric Value
Market Capitalization $18M
Enterprise Value $17M
Trailing P/E 1.73
Forward P/E 1.73
Trailing EV/EBITDA 6.05
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.91

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 (Stable) 60% $27.39
Earnings Power Value 40% $1.78
Weighted Average 100% $116.67

Investment Conclusion

Based on our comprehensive valuation analysis, Tekcapital PLC's weighted average intrinsic value is $116.67, which is approximately 1407.3% above the current market price of $7.74.

Key investment considerations:

  • Strong projected earnings growth (-2134% to -2111% margin)
  • Consistent cash flow generation

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