What is TRZ.TO's Intrinsic value?

Transat AT Inc (TRZ.TO) Intrinsic Value Analysis

Executive Summary

As of May 31, 2025, Transat AT Inc's estimated intrinsic value ranges from $89.80 to $89.80 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Earnings Power Value $89.80 +5409.5%

Is Transat AT Inc (TRZ.TO) undervalued or overvalued?

With the current market price at $1.63, 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 Transat AT Inc's intrinsic value, including:

  1. 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 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 15.55 21.22
Cost of equity 82.4% 133.6%
Cost of debt 4.0% 23.2%
Tax rate 1.3% 2.0%
Debt/Equity ratio 31.78 31.78
After-tax WACC 6.3% 26.1%

Valuation Methods

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 $547M
Discount Rate (WACC) 26.1% - 6.3%
Enterprise Value $2,096M - $8,625M
Net Debt $1,790M
Equity Value $307M - $6,835M
Outstanding Shares 40M
Fair Value $8 - $172
Selected Fair Value $89.80

Key Financial Metrics

Metric Value
Market Capitalization $65M
Enterprise Value $1855M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 6.70
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 31.78

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
Earnings Power Value 100% $8.98
Weighted Average 100% $89.80

Investment Conclusion

Based on our comprehensive valuation analysis, Transat AT Inc's weighted average intrinsic value is $89.80, which is approximately 5409.5% above the current market price of $1.63.

Key investment considerations:

  • Strong projected earnings growth (-3% to 2% margin)
  • Consistent cash flow generation

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