Nabaltec AG's (ETR:NTG) Intrinsic Value Is Potentially 81% Above Its Share Price

In This Article:

Key Insights

  • The projected fair value for Nabaltec is €27.81 based on 2 Stage Free Cash Flow to Equity

  • Nabaltec is estimated to be 45% undervalued based on current share price of €15.40

  • Industry average discount to fair value of 37% suggests Nabaltec's peers are currently trading at a lower discount

In this article we are going to estimate the intrinsic value of Nabaltec AG (ETR:NTG) by projecting its future cash flows and then discounting them to today's value. This will be done using the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.

We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.

Check out our latest analysis for Nabaltec

The Method

We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today's dollars:

10-year free cash flow (FCF) estimate

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

Levered FCF (€, Millions)

-€3.70m

€11.0m

€10.7m

€10.6m

€10.5m

€10.5m

€10.5m

€10.5m

€10.6m

€10.6m

Growth Rate Estimate Source

Analyst x1

Analyst x1

Est @ -2.36%

Est @ -1.41%

Est @ -0.74%

Est @ -0.28%

Est @ 0.05%

Est @ 0.28%

Est @ 0.44%

Est @ 0.55%

Present Value (€, Millions) Discounted @ 4.7%

-€3.5

€10.0

€9.4

€8.8

€8.4

€8.0

€7.6

€7.3

€7.0

€6.7

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = €70m

We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (0.8%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 4.7%.