What is VCP.L's Intrinsic value?

Victoria PLC (VCP.L) Intrinsic Value Analysis

Executive Summary

As of May 25, 2025, Victoria PLC's estimated intrinsic value ranges from $30.94 to $660.09 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $660.09 +996.5%
Discounted Cash Flow (5Y) $30.94 -48.6%
Dividend Discount Model (Multi-Stage) $48.41 -19.6%
Earnings Power Value $642.55 +967.4%

Is Victoria PLC (VCP.L) undervalued or overvalued?

With the current market price at $60.20, 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 Victoria PLC'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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 2.48 2.96
Cost of equity 18.8% 25.7%
Cost of debt 4.1% 12.5%
Tax rate 12.8% 17.2%
Debt/Equity ratio 15.71 15.71
After-tax WACC 4.5% 11.3%

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: 7.9% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $1,256 (FY03-2024) to $1,792 (FY03-2034)
  • Net profit margin expansion from -9% to 6%
  • Capital expenditures maintained at approximately 5% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $31 $1,087M 86.9%
10-Year Growth $660 $1,899M 73.3%
5-Year EBITDA $(1,234) $721M 80.3%
10-Year EBITDA $121 $1,203M 57.8%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 22.2%
  • Long-term growth rate: 3.0%
  • Fair value: $48.41 (-19.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 25.7% (Low) to 18.8% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $(592) to $(1,215)
  • Selected fair value: $-903.06 (-1600.1% 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 $121M
Discount Rate (WACC) 11.3% - 4.5%
Enterprise Value $1,070M - $2,684M
Net Debt $1,047M
Equity Value $23M - $1,637M
Outstanding Shares 1M
Fair Value $18 - $1,268
Selected Fair Value $642.55

Key Financial Metrics

Metric Value
Market Capitalization $78M
Enterprise Value $1125M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 5.40
Current Dividend Yield 1919.66%
Dividend Growth Rate (5Y) 95.76%
Debt-to-Equity Ratio 15.71

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) 35% $198.03
Discounted Cash Flow (5Y) 29% $7.74
Dividend Discount Model (Multi-Stage) 24% $9.68
Earnings Power Value 12% $64.26
Weighted Average 100% $329.06

Investment Conclusion

Based on our comprehensive valuation analysis, Victoria PLC's weighted average intrinsic value is $329.06, which is approximately 446.6% above the current market price of $60.20.

Key investment considerations:

  • Strong projected earnings growth (-9% to 6% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 95.76%

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