What is TTG.L's Intrinsic value?

TT electronics PLC (TTG.L) Intrinsic Value Analysis

Executive Summary

As of May 24, 2025, TT electronics PLC's estimated intrinsic value ranges from $184.76 to $255.92 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $255.92 +177.9%
Discounted Cash Flow (5Y) $208.43 +126.3%
Dividend Discount Model (Multi-Stage) $184.76 +100.6%

Is TT electronics PLC (TTG.L) undervalued or overvalued?

With the current market price at $92.10, 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 TT electronics PLC'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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.53 0.68
Cost of equity 7.2% 9.7%
Cost of debt 4.0% 24.0%
Tax rate 26.4% 40.5%
Debt/Equity ratio 1.3 1.3
After-tax WACC 4.8% 12.3%

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: 8.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $614 (FY12-2023) to $816 (FY12-2033)
  • Net profit margin expansion from -1% to 5%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $208 $489M 80.8%
10-Year Growth $256 $572M 63.6%
5-Year EBITDA $149 $386M 75.7%
10-Year EBITDA $204 $481M 56.7%

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: 8.5%
  • Long-term growth rate: 3.0%
  • Fair value: $184.76 (100.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.7% (Low) to 7.2% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $(66) to $(209)
  • Selected fair value: $-137.29 (-249.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $158M
Enterprise Value $287M
Trailing P/E 0.00
Forward P/E 30.44
Trailing EV/EBITDA 6.25
Current Dividend Yield 751.08%
Dividend Growth Rate (5Y) 1.44%
Debt-to-Equity Ratio 1.30

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% $76.78
Discounted Cash Flow (5Y) 33% $52.11
Dividend Discount Model (Multi-Stage) 27% $36.95
Weighted Average 100% $221.11

Investment Conclusion

Based on our comprehensive valuation analysis, TT electronics PLC's weighted average intrinsic value is $221.11, which is approximately 140.1% above the current market price of $92.10.

Key investment considerations:

  • Strong projected earnings growth (-1% to 5% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 1.44%

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