What is YELL's Intrinsic value?

Yellow Corp (YELL) Intrinsic Value Analysis

Executive Summary

As of June 12, 2025, Yellow Corp's estimated intrinsic value ranges from $0.20 to $17.94 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $1.68 +52.3%
Discounted Cash Flow (5Y) $2.57 +133.8%
Dividend Discount Model (Multi-Stage) $0.20 -81.7%
Dividend Discount Model (Stable) $0.48 -56.1%
Earnings Power Value $17.94 +1531.1%

Is Yellow Corp (YELL) undervalued or overvalued?

With the current market price at $1.10, 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 Yellow Corp'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 4.2% 4.7%
Equity market risk premium 5.0% 6.0%
Adjusted beta 6.83 7.26
Cost of equity 38.3% 48.7%
Cost of debt 8.9% 17.0%
Tax rate 14.8% 19.6%
Debt/Equity ratio 15.91 15.91
After-tax WACC 9.4% 15.7%

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: 12.6% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $5,245 (FY12-2022) to $5,908 (FY12-2032)
  • Net profit margin expansion from 0% to 0%
  • Capital expenditures maintained at approximately 4% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $3 $1,591M 54.3%
10-Year Growth $2 $1,512M 29.7%
5-Year EBITDA $11 $2,292M 68.3%
10-Year EBITDA $7 $2,017M 47.3%

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: 43.5%
  • Long-term growth rate: 1.0%
  • Fair value: $0.20 (-81.7% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 48.7% (Low) to 38.3% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $0 to $1
  • Selected fair value: $0.48 (-56.1% 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 $346M
Discount Rate (WACC) 15.7% - 9.4%
Enterprise Value $2,196M - $3,687M
Net Debt $1,365M
Equity Value $832M - $2,322M
Outstanding Shares 88M
Fair Value $9 - $26
Selected Fair Value $17.94

Key Financial Metrics

Metric Value
Market Capitalization $97M
Enterprise Value $1461M
Trailing P/E 4.44
Forward P/E 5.07
Trailing EV/EBITDA 7.35
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 15.91

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% $0.50
Discounted Cash Flow (5Y) 25% $0.64
Dividend Discount Model (Multi-Stage) 20% $0.04
Dividend Discount Model (Stable) 15% $0.07
Earnings Power Value 10% $1.79
Weighted Average 100% $3.05

Investment Conclusion

Based on our comprehensive valuation analysis, Yellow Corp's weighted average intrinsic value is $3.05, which is approximately 177.5% above the current market price of $1.10.

Key investment considerations:

  • Strong projected earnings growth (0% to 0% margin)
  • Consistent cash flow generation

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