What is TKO.TO's Intrinsic value?

Taseko Mines Ltd (TKO.TO) Intrinsic Value Analysis

Executive Summary

As of June 18, 2025, Taseko Mines Ltd's estimated intrinsic value ranges from $2.18 to $9.83 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $9.83 +148.2%
Discounted Cash Flow (5Y) $4.47 +12.8%
Dividend Discount Model (Multi-Stage) $2.18 -45.1%

Is Taseko Mines Ltd (TKO.TO) undervalued or overvalued?

With the current market price at $3.96, 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 Taseko Mines Ltd'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 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 1.19 1.46
Cost of equity 9.2% 13.1%
Cost of debt 8.4% 14.9%
Tax rate 36.9% 42.0%
Debt/Equity ratio 0.62 0.62
After-tax WACC 7.7% 11.4%

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: 9.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $608 (FY12-2024) to $2,418 (FY12-2034)
  • Net profit margin expansion from -2% to 7%
  • Capital expenditures maintained at approximately 19% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $4 $2,084M 80.7%
10-Year Growth $10 $3,777M 67.3%
5-Year EBITDA $7 $2,758M 85.4%
10-Year EBITDA $10 $3,941M 68.7%

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: 11.2%
  • Long-term growth rate: 3.5%
  • Fair value: $2.18 (-45.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 13.1% (Low) to 9.2% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $(1) to $(4)
  • Selected fair value: $-2.47 (-162.3% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $1251M
Enterprise Value $1924M
Trailing P/E 0.00
Forward P/E 59.10
Trailing EV/EBITDA 7.30
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.62

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% $2.95
Discounted Cash Flow (5Y) 33% $1.12
Dividend Discount Model (Multi-Stage) 27% $0.44
Weighted Average 100% $6.00

Investment Conclusion

Based on our comprehensive valuation analysis, Taseko Mines Ltd's weighted average intrinsic value is $6.00, which is approximately 51.5% above the current market price of $3.96.

Key investment considerations:

  • Strong projected earnings growth (-2% to 7% margin)
  • Consistent cash flow generation

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