What is TKTT.PA's Intrinsic value?

Tarkett SA (TKTT.PA) Intrinsic Value Analysis

Executive Summary

As of June 20, 2025, Tarkett SA's estimated intrinsic value ranges from $35.94 to $105.90 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $105.90 +522.9%
Discounted Cash Flow (5Y) $95.21 +460.1%
Dividend Discount Model (Multi-Stage) $35.94 +111.4%
Earnings Power Value $47.51 +179.5%

Is Tarkett SA (TKTT.PA) undervalued or overvalued?

With the current market price at $17.00, 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 Tarkett 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 0.51 0.62
Cost of equity 5.9% 8.2%
Cost of debt 4.3% 4.5%
Tax rate 25.9% 27.1%
Debt/Equity ratio 0.71 0.71
After-tax WACC 4.8% 6.2%

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: 5.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $3,332 (FY12-2024) to $3,768 (FY12-2034)
  • Net profit margin expansion from -2% to 5%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $95 $6,676M 92.5%
10-Year Growth $106 $7,376M 84.1%
5-Year EBITDA $30 $2,376M 78.8%
10-Year EBITDA $39 $3,022M 61.1%

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: 3.5%
  • Fair value: $35.94 (111.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.2% (Low) to 5.9% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $(12) to $(60)
  • Selected fair value: $-35.76 (-310.3% 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 $192M
Discount Rate (WACC) 6.2% - 4.8%
Enterprise Value $3,105M - $3,993M
Net Debt $434M
Equity Value $2,671M - $3,558M
Outstanding Shares 66M
Fair Value $41 - $54
Selected Fair Value $47.51

Key Financial Metrics

Metric Value
Market Capitalization $1114M
Enterprise Value $1549M
Trailing P/E 0.00
Forward P/E 66.59
Trailing EV/EBITDA 8.30
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) -100.00%
Debt-to-Equity Ratio 0.71

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% $31.77
Discounted Cash Flow (5Y) 29% $23.80
Dividend Discount Model (Multi-Stage) 24% $7.19
Earnings Power Value 12% $4.75
Weighted Average 100% $79.43

Investment Conclusion

Based on our comprehensive valuation analysis, Tarkett SA's weighted average intrinsic value is $79.43, which is approximately 367.2% above the current market price of $17.00.

Key investment considerations:

  • Strong projected earnings growth (-2% to 5% margin)
  • Consistent cash flow generation

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