What is VCAP.L's Intrinsic value?

Vector Capital PLC (VCAP.L) Intrinsic Value Analysis

Executive Summary

As of June 16, 2025, Vector Capital PLC's estimated intrinsic value ranges from $62.92 to $103.74 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $103.74 +937.4%
Dividend Discount Model (Stable) $96.77 +867.7%
Earnings Power Value $62.92 +529.2%

Is Vector Capital PLC (VCAP.L) undervalued or overvalued?

With the current market price at $10.00, 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 Vector Capital PLC's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.39 0.47
Cost of equity 6.3% 8.3%
Cost of debt 9.2% 9.2%
Tax rate 19.1% 19.1%
Debt/Equity ratio 1 1
After-tax WACC 6.9% 7.9%

Valuation Methods

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: 100.4%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.3%
  • Long-term growth rate: 4.0%
  • Fair value: $103.74 (937.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.3% (Low) to 6.3% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $31 to $162
  • Selected fair value: $96.77 (867.7% 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 $3M
Discount Rate (WACC) 7.9% - 6.9%
Enterprise Value $43M - $49M
Net Debt $15M
Equity Value $28M - $34M
Outstanding Shares 0M
Fair Value $57 - $69
Selected Fair Value $62.92

Key Financial Metrics

Metric Value
Market Capitalization $5M
Enterprise Value $20M
Trailing P/E 4.27
Forward P/E 2.89
Trailing EV/EBITDA 5.60
Current Dividend Yield 2351.27%
Dividend Growth Rate (5Y) 13.09%
Debt-to-Equity Ratio 3.45

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
Dividend Discount Model (Multi-Stage) 44% $20.75
Dividend Discount Model (Stable) 33% $14.52
Earnings Power Value 22% $6.29
Weighted Average 100% $92.35

Investment Conclusion

Based on our comprehensive valuation analysis, Vector Capital PLC's weighted average intrinsic value is $92.35, which is approximately 823.5% above the current market price of $10.00.

Key investment considerations:

  • Strong projected earnings growth (28% to 31% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 13.09%

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