What is URB.TO's Intrinsic value?

Urbana Corp (URB.TO) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Urbana Corp's estimated intrinsic value ranges from $23.40 to $56.97 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $56.97 +818.9%
Discounted Cash Flow (5Y) $48.91 +688.8%
Dividend Discount Model (Multi-Stage) $25.98 +319.0%
Dividend Discount Model (Stable) $26.08 +320.6%
Earnings Power Value $23.40 +277.4%

Is Urbana Corp (URB.TO) undervalued or overvalued?

With the current market price at $6.20, 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 Urbana Corp'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
  3. 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 0.79 1.03
Cost of equity 7.2% 10.4%
Cost of debt 4.0% 5.9%
Tax rate 10.6% 11.3%
Debt/Equity ratio 1 1
After-tax WACC 5.4% 7.8%

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: 6.6% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $131 (FY12-2024) to $210 (FY12-2034)
  • Net profit margin expansion from 78% to 78%
  • Capital expenditures maintained at approximately 0% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $49 $2,006M 74.9%
10-Year Growth $57 $2,340M 58.7%
5-Year EBITDA $30 $1,211M 58.4%
10-Year EBITDA $39 $1,614M 40.1%

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: 4.9%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.8%
  • Long-term growth rate: 0.5%
  • Fair value: $25.98 (319.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.4% (Low) to 7.2% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $17 to $36
  • Selected fair value: $26.08 (320.6% from current price)

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 $61M
Discount Rate (WACC) 7.8% - 5.4%
Enterprise Value $775M - $1,125M
Net Debt $(19)M
Equity Value $794M - $1,143M
Outstanding Shares 41M
Fair Value $19 - $28
Selected Fair Value $23.40

Key Financial Metrics

Metric Value
Market Capitalization $257M
Enterprise Value $238M
Trailing P/E 2.52
Forward P/E 2.41
Trailing EV/EBITDA 6.90
Current Dividend Yield 198.00%
Dividend Growth Rate (5Y) 5.83%
Debt-to-Equity Ratio 1.19

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) 30% $17.09
Discounted Cash Flow (5Y) 25% $12.23
Dividend Discount Model (Multi-Stage) 20% $5.20
Dividend Discount Model (Stable) 15% $3.91
Earnings Power Value 10% $2.34
Weighted Average 100% $40.76

Investment Conclusion

Based on our comprehensive valuation analysis, Urbana Corp's weighted average intrinsic value is $40.76, which is approximately 557.5% above the current market price of $6.20.

Key investment considerations:

  • Strong projected earnings growth (78% to 78% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 5.83%

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