ULS Technology PLC (ULS.L) Intrinsic Value Analysis

Executive Summary

As of June 19, 2025, ULS Technology PLC's estimated intrinsic value ranges from $17.77 to $95.66 per share, depending on the valuation methodology applied.

Valuation Method	Fair Value (USD)	Implied Upside/Downside
Discounted Cash Flow (10Y)	$32.76	-48.6%
Discounted Cash Flow (5Y)	$17.77	-72.1%
Earnings Power Value	$95.66	+50.2%

Is ULS Technology PLC (ULS.L) undervalued or overvalued?

With the current market price at $63.70, 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 ULS Technology PLC's intrinsic value, including:

1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
2. 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	2.9%	3.4%
Equity market risk premium	5.3%	6.3%
Adjusted beta	0.69	1.15
Cost of equity	6.6%	11.3%
Cost of debt	4.0%	7.0%
Tax rate	18.8%	21.5%
Debt/Equity ratio	0.03	0.03
After-tax WACC	6.5%	11.1%

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: 8.8% (range: 0.0% - 9.3%)

Key Projections:

• Revenue growth from $17 (FY03-2021) to $23 (FY03-2031)
• Net profit margin expansion from -11% to 1%
• Capital expenditures maintained at approximately 4% of revenue

DCF Model	Fair Value	Enterprise Value	% from Terminal Value
5-Year Growth	$18	$(11)M	70.7%
10-Year Growth	$33	$(1)M	113.2%
5-Year EBITDA	$32	$(2)M	50.9%
10-Year EBITDA	$35	$0M	4904.1%

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	$3M
Discount Rate (WACC)	11.1% - 6.5%
Enterprise Value	$28M - $48M
Net Debt	$(22)M
Equity Value	$50M - $69M
Outstanding Shares	1M
Fair Value	$80 - $111
Selected Fair Value	$95.66

Key Financial Metrics

Metric	Value
Market Capitalization	$40M
Enterprise Value	$18M
Trailing P/E	2.31
Forward P/E	0.00
Trailing EV/EBITDA	5.70
Current Dividend Yield	0.00%
Dividend Growth Rate (5Y)	-100.00%
Debt-to-Equity Ratio	0.03

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)	46%	$9.83
Discounted Cash Flow (5Y)	38%	$4.44
Earnings Power Value	15%	$9.57
Weighted Average	100%	$36.67

Investment Conclusion

Based on our comprehensive valuation analysis, ULS Technology PLC's weighted average intrinsic value is $36.67, which is approximately 42.4% below the current market price of $63.70.

Key investment considerations:

• Strong projected earnings growth (-11% to 1% margin)
• Conservative capital structure (Debt/Equity of 0.03)

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