What is UFI's Intrinsic value?

Unifi Inc (UFI) Intrinsic Value Analysis

Executive Summary

As of June 13, 2025, Unifi Inc's estimated intrinsic value ranges from $1.42 to $1.42 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $1.42 -72.5%

Is Unifi Inc (UFI) undervalued or overvalued?

With the current market price at $5.16, the stock appears to be significantly overvalued.

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 Unifi Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows

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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.93 1.53
Cost of equity 8.1% 13.4%
Cost of debt 4.6% 7.0%
Tax rate 3.2% 17.4%
Debt/Equity ratio 1.41 1.41
After-tax WACC 6.0% 9.0%

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: 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $582 (FY06-2024) to $836 (FY06-2034)
  • Net profit margin expansion from -8% to 1%
  • Capital expenditures maintained at approximately 4% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $(1,234) $10M 516.6%
10-Year Growth $1 $150M 95.1%
5-Year EBITDA $(1,234) $62M 164.8%
10-Year EBITDA $0 $124M 94.1%

Key Financial Metrics

Metric Value
Market Capitalization $95M
Enterprise Value $218M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 4.25
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 1.41

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) 100% $0.43
Weighted Average 100% $1.42

Investment Conclusion

Based on our comprehensive valuation analysis, Unifi Inc's weighted average intrinsic value is $1.42, which is approximately 72.5% below the current market price of $5.16.

Key investment considerations:

  • Strong projected earnings growth (-8% to 1% margin)
  • Consistent cash flow generation

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