What is TVK.TO's Intrinsic value?

TerraVest Industries Inc (TVK.TO) Intrinsic Value Analysis

Executive Summary

As of June 7, 2025, TerraVest Industries Inc's estimated intrinsic value ranges from $80.74 to $408.02 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $408.02 +141.2%
Discounted Cash Flow (5Y) $170.56 +0.8%
Dividend Discount Model (Multi-Stage) $254.44 +50.4%
Dividend Discount Model (Stable) $80.74 -52.3%

Is TerraVest Industries Inc (TVK.TO) undervalued or overvalued?

With the current market price at $169.13, 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 TerraVest Industries Inc'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 0.86 0.93
Cost of equity 7.5% 9.9%
Cost of debt 4.4% 5.5%
Tax rate 22.9% 24.6%
Debt/Equity ratio 0.09 0.09
After-tax WACC 7.2% 9.4%

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: 8.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $912 (FY09-2024) to $5,724 (FY09-2034)
  • Net profit margin expansion from 8% to 13%
  • Capital expenditures maintained at approximately 5% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $171 $4,433M 86.9%
10-Year Growth $408 $9,068M 75.3%
5-Year EBITDA $124 $3,520M 83.6%
10-Year EBITDA $255 $6,077M 63.1%

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: 14.8%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.7%
  • Long-term growth rate: 3.5%
  • Fair value: $254.44 (50.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.9% (Low) to 7.5% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $39 to $122
  • Selected fair value: $80.74 (-52.3% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $3301M
Enterprise Value $4405M
Trailing P/E 40.88
Forward P/E 23.69
Trailing EV/EBITDA 6.15
Current Dividend Yield 36.28%
Dividend Growth Rate (5Y) 9.63%
Debt-to-Equity Ratio 0.09

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) 33% $122.41
Discounted Cash Flow (5Y) 28% $42.64
Dividend Discount Model (Multi-Stage) 22% $50.89
Dividend Discount Model (Stable) 17% $12.11
Weighted Average 100% $253.39

Investment Conclusion

Based on our comprehensive valuation analysis, TerraVest Industries Inc's weighted average intrinsic value is $253.39, which is approximately 49.8% above the current market price of $169.13.

Key investment considerations:

  • Strong projected earnings growth (8% to 13% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.09)
  • Historical dividend growth of 9.63%

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