What is VG's Intrinsic value?

Vonage Holdings Corp (VG) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Vonage Holdings Corp's estimated intrinsic value ranges from $14.66 to $98.83 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $98.83 +850.3%
Dividend Discount Model (Stable) $14.66 +40.9%

Is Vonage Holdings Corp (VG) undervalued or overvalued?

With the current market price at $10.40, 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 Vonage Holdings Corp's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

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 0.37 0.77
Cost of equity 5.6% 9.2%
Cost of debt 5.0% 5.0%
Tax rate 13.8% 17.3%
Debt/Equity ratio 1.25 1.25
After-tax WACC 4.9% 6.4%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.4%
  • Long-term growth rate: 3.8%
  • Fair value: $98.83 (850.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.2% (Low) to 5.6% (High)
  • Long-term growth rate: 3.0% (Low) to 4.6% (High)
  • Fair value range: $3 to $26
  • Selected fair value: $14.66 (40.9% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $25164M
Enterprise Value $51090M
Trailing P/E 37.78
Forward P/E 4.12
Trailing EV/EBITDA 20.75
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 1.25

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) 57% $19.77
Dividend Discount Model (Stable) 43% $2.20
Weighted Average 100% $62.75

Investment Conclusion

Based on our comprehensive valuation analysis, Vonage Holdings Corp's weighted average intrinsic value is $62.75, which is approximately 503.4% above the current market price of $10.40.

Key investment considerations:

  • Strong projected earnings growth (35% to 43% margin)
  • Consistent cash flow generation

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