What is WBT's Intrinsic value?

Welbilt Inc (WBT) Intrinsic Value Analysis

Executive Summary

As of June 3, 2025, Welbilt Inc's estimated intrinsic value ranges from $5.49 to $29.92 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $29.92 +24.6%
Discounted Cash Flow (5Y) $26.93 +12.1%
Dividend Discount Model (Multi-Stage) $14.99 -37.6%
Dividend Discount Model (Stable) $6.12 -74.5%
Earnings Power Value $5.49 -77.2%

Is Welbilt Inc (WBT) undervalued or overvalued?

With the current market price at $24.01, the stock appears to be moderately overvalued.

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 Welbilt 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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.26 1.34
Cost of equity 9.6% 12.4%
Cost of debt 6.0% 7.0%
Tax rate 25.0% 27.3%
Debt/Equity ratio 0.4 0.4
After-tax WACC 8.2% 10.3%

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: 9.2% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $1,547 (FY12-2021) to $2,023 (FY12-2031)
  • Net profit margin expansion from 5% to 17%
  • Capital expenditures maintained at approximately 2% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $27 $5,207M 79.6%
10-Year Growth $30 $5,635M 62.3%
5-Year EBITDA $23 $4,625M 77.0%
10-Year EBITDA $27 $5,177M 59.0%

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: 11.0%
  • Long-term growth rate: 4.0%
  • Fair value: $14.99 (-37.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 12.4% (Low) to 9.6% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $3 to $9
  • Selected fair value: $6.12 (-74.5% 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 $194M
Discount Rate (WACC) 10.3% - 8.2%
Enterprise Value $1,892M - $2,382M
Net Debt $1,351M
Equity Value $540M - $1,030M
Outstanding Shares 143M
Fair Value $4 - $7
Selected Fair Value $5.49

Key Financial Metrics

Metric Value
Market Capitalization $3438M
Enterprise Value $4789M
Trailing P/E 52.65
Forward P/E 30.21
Trailing EV/EBITDA 12.50
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.40

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% $8.98
Discounted Cash Flow (5Y) 25% $6.73
Dividend Discount Model (Multi-Stage) 20% $3.00
Dividend Discount Model (Stable) 15% $0.92
Earnings Power Value 10% $0.55
Weighted Average 100% $20.17

Investment Conclusion

Based on our comprehensive valuation analysis, Welbilt Inc's weighted average intrinsic value is $20.17, which is approximately 16.0% below the current market price of $24.01.

Key investment considerations:

  • Strong projected earnings growth (5% to 17% margin)
  • Consistent cash flow generation

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