What is VNP.TO's Intrinsic value?

5N Plus Inc (VNP.TO) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, 5N Plus Inc's estimated intrinsic value ranges from $0.45 to $15.08 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $15.08 +85.7%
Discounted Cash Flow (5Y) $9.89 +21.8%
Dividend Discount Model (Multi-Stage) $7.52 -7.4%
Dividend Discount Model (Stable) $6.92 -14.8%
Earnings Power Value $0.45 -94.5%

Is 5N Plus Inc (VNP.TO) undervalued or overvalued?

With the current market price at $8.12, the stock appears to be moderately 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 5N Plus Inc'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 0.82 0.94
Cost of equity 7.3% 9.9%
Cost of debt 4.4% 4.9%
Tax rate 33.0% 48.5%
Debt/Equity ratio 0.29 0.29
After-tax WACC 6.3% 8.2%

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: 7.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $289 (FY12-2024) to $641 (FY12-2034)
  • Net profit margin expansion from 5% to 9%
  • Capital expenditures maintained at approximately 6% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $7 $763M 84.2%
10-Year Growth $11 $1,100M 74.3%
5-Year EBITDA $9 $880M 86.3%
10-Year EBITDA $11 $1,092M 74.1%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.6%
  • Long-term growth rate: 3.5%
  • Fair value: $7.52 (-7.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.9% (Low) to 7.3% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $2 to $8
  • Selected fair value: $6.92 (-14.8% 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 $11M
Discount Rate (WACC) 8.2% - 6.3%
Enterprise Value $131M - $171M
Net Debt $122M
Equity Value $10M - $49M
Outstanding Shares 89M
Fair Value $0 - $1
Selected Fair Value $0.45

Key Financial Metrics

Metric Value
Market Capitalization $723M
Enterprise Value $890M
Trailing P/E 24.22
Forward P/E 26.48
Trailing EV/EBITDA 11.20
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.29

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% $4.52
Discounted Cash Flow (5Y) 25% $2.47
Dividend Discount Model (Multi-Stage) 20% $1.50
Dividend Discount Model (Stable) 15% $1.04
Earnings Power Value 10% $0.04
Weighted Average 100% $9.58

Investment Conclusion

Based on our comprehensive valuation analysis, 5N Plus Inc's weighted average intrinsic value is $9.58, which is approximately 18.0% above the current market price of $8.12.

Key investment considerations:

  • Strong projected earnings growth (5% to 9% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.29)

Given these factors, we believe 5N Plus Inc is currently moderately undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.