Naked Wines PLC (WINE.L) Intrinsic Value Analysis

Executive Summary

As of June 12, 2025, Naked Wines PLC's estimated intrinsic value ranges from $24.39 to $102.13 per share, depending on the valuation methodology applied.

Valuation Method	Fair Value (USD)	Implied Upside/Downside
Discounted Cash Flow (10Y)	$24.39	-72.7%
Discounted Cash Flow (5Y)	$31.38	-64.8%
Earnings Power Value	$102.13	+14.5%

Is Naked Wines PLC (WINE.L) undervalued or overvalued?

With the current market price at $89.20, the stock appears to be significantly 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 Naked Wines PLC's intrinsic value, including:

1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
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	0.63	0.88
Cost of equity	7.8%	11.1%
Cost of debt	7.0%	17.0%
Tax rate	16.6%	20.0%
Debt/Equity ratio	0.24	0.24
After-tax WACC	7.4%	11.6%

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: 9.5% (range: 0.0% - 9.3%)

Key Projections:

• Revenue growth from $290 (FY04-2024) to $305 (FY04-2034)
• Net profit margin expansion from -7% to 0%
• Capital expenditures maintained at approximately 1% of revenue

DCF Model	Fair Value	Enterprise Value	% from Terminal Value
5-Year Growth	$31	$2M	274.8%
10-Year Growth	$24	$(3)M	354.6%
5-Year EBITDA	$46	$13M	30.4%
10-Year EBITDA	$52	$17M	61.8%

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	$5M
Discount Rate (WACC)	11.6% - 7.4%
Enterprise Value	$41M - $65M
Net Debt	$(20)M
Equity Value	$61M - $85M
Outstanding Shares	1M
Fair Value	$86 - $119
Selected Fair Value	$102.13

Key Financial Metrics

Metric	Value
Market Capitalization	$64M
Enterprise Value	$44M
Trailing P/E	0.00
Forward P/E	0.00
Trailing EV/EBITDA	5.70
Current Dividend Yield	0.00%
Dividend Growth Rate (5Y)	-100.00%
Debt-to-Equity Ratio	0.24

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)	46%	$7.32
Discounted Cash Flow (5Y)	38%	$7.84
Earnings Power Value	15%	$10.21
Weighted Average	100%	$39.04

Investment Conclusion

Based on our comprehensive valuation analysis, Naked Wines PLC's weighted average intrinsic value is $39.04, which is approximately 56.2% below the current market price of $89.20.

Key investment considerations:

• Strong projected earnings growth (-7% to 0% margin)
• Conservative capital structure (Debt/Equity of 0.24)

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