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Yahoo
27-05-2025
- Business
- Yahoo
Undervalued Asian Small Caps With Insider Buying In May 2025
As global markets face volatility amid renewed tariff threats and fluctuating economic indicators, small-cap stocks in Asia present intriguing opportunities for investors seeking diversification. In this environment, identifying companies with strong fundamentals and insider buying can offer valuable insights into potential growth prospects despite broader market challenges. Name PE PS Discount to Fair Value Value Rating Security Bank 4.1x 0.9x 42.32% ★★★★★★ Puregold Price Club 8.1x 0.4x 26.02% ★★★★★☆ East West Banking 3.1x 0.7x 34.64% ★★★★★☆ Atturra 29.4x 1.2x 34.64% ★★★★★☆ Viva Energy Group NA 0.1x 46.17% ★★★★★☆ Lion Rock Group 4.9x 0.4x 49.52% ★★★★☆☆ Dicker Data 18.9x 0.7x -14.46% ★★★★☆☆ Smart Parking 68.0x 6.0x 49.01% ★★★☆☆☆ PWR Holdings 35.5x 4.9x 23.38% ★★★☆☆☆ Integral Diagnostics 156.5x 1.8x 43.69% ★★★☆☆☆ Click here to see the full list of 67 stocks from our Undervalued Asian Small Caps With Insider Buying screener. We're going to check out a few of the best picks from our screener tool. Simply Wall St Value Rating: ★★★★☆☆ Overview: Dicker Data is a wholesale distributor specializing in computer peripherals, with a market capitalization of A$2.57 billion. Operations: The company generates revenue primarily through wholesale distribution of computer peripherals, with a recent quarterly revenue of A$2.28 billion. Cost of Goods Sold (COGS) significantly impacts the financials, amounting to A$1.95 billion in the latest period. Operating expenses and non-operating expenses further influence net income, which stands at A$78.69 million for the same period. Notably, the gross profit margin has shown an upward trend, reaching 14.56% in recent quarters. PE: 18.9x Dicker Data, a small-cap in the tech distribution sector, is gaining attention for its strategic moves and insider confidence. Recent insider purchases signal belief in its potential. The company recently partnered with CrowdStrike to enhance cybersecurity offerings across Australia and New Zealand, tapping into rising demand. Despite high debt levels from external borrowing, earnings are forecasted to grow by 9% annually. This growth potential positions Dicker Data as an intriguing option among undervalued stocks in Asia. Take a closer look at Dicker Data's potential here in our valuation report. Learn about Dicker Data's historical performance. Simply Wall St Value Rating: ★★★☆☆☆ Overview: Mader Group specializes in providing staffing and outsourcing services, with a focus on the mining and civil industries, and has a market cap of A$1.16 billion. Operations: Mader Group's primary revenue stream is from Staffing & Outsourcing Services, generating A$811.54 million. The company's gross profit margin has recently shown a decline to 19.11%. Operating expenses stand at A$81.25 million, with non-operating expenses recorded at A$21.68 million as of the latest period ending December 31, 2024. PE: 23.6x Mader Group, a prominent player in its industry, demonstrates potential for growth with earnings expected to rise by 13.48% annually. The company's reliance on external borrowing presents a higher risk profile, yet insider confidence is evident as they purchased 83,500 shares worth A$498,495 recently. This purchase indicates trust in the company's future prospects despite the funding risks. Mader's position in Asia's market highlights its potential for investors seeking opportunities within this segment. Unlock comprehensive insights into our analysis of Mader Group stock in this valuation report. Understand Mader Group's track record by examining our Past report. Simply Wall St Value Rating: ★★★★★★ Overview: Riverstone Holdings is a company primarily engaged in the manufacturing of gloves, with additional operations in other sectors, and has a market capitalization of S$1.07 billion. Operations: The primary revenue stream is derived from gloves, which accounts for MYR 1.06 billion. The gross profit margin has shown fluctuations, with a notable increase to 65.01% in June 2021 before declining to 34.84% by March 2025. Operating expenses have varied over the periods, impacting net income margins as they range from approximately 13% to nearly 48%. PE: 12.3x Riverstone Holdings, a smaller company in Asia's market landscape, has shown insider confidence with recent share purchases. Despite a dip in net income to MYR 56.43 million from MYR 72.19 million year-on-year for Q1 2025, sales rose slightly to MYR 252.27 million. The company declared an increased final dividend of RM0.08 per share for FY2024, reflecting a commitment to shareholder returns amidst steady revenue growth forecasts of 4.49% annually. Get an in-depth perspective on Riverstone Holdings' performance by reading our valuation report here. Review our historical performance report to gain insights into Riverstone Holdings''s past performance. Discover the full array of 67 Undervalued Asian Small Caps With Insider Buying right here. Are you invested in these stocks already? Keep abreast of every twist and turn by setting up a portfolio with Simply Wall St, where we make it simple for investors like you to stay informed and proactive. Streamline your investment strategy with Simply Wall St's app for free and benefit from extensive research on stocks across all corners of the world. Explore high-performing small cap companies that haven't yet garnered significant analyst attention. Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management. Find companies with promising cash flow potential yet trading below their fair value. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include ASX:DDR ASX:MAD and SGX:AP4. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@
Yahoo
27-05-2025
- Business
- Yahoo
Undervalued Asian Small Caps With Insider Buying In May 2025
As global markets face volatility amid renewed tariff threats and fluctuating economic indicators, small-cap stocks in Asia present intriguing opportunities for investors seeking diversification. In this environment, identifying companies with strong fundamentals and insider buying can offer valuable insights into potential growth prospects despite broader market challenges. Name PE PS Discount to Fair Value Value Rating Security Bank 4.1x 0.9x 42.32% ★★★★★★ Puregold Price Club 8.1x 0.4x 26.02% ★★★★★☆ East West Banking 3.1x 0.7x 34.64% ★★★★★☆ Atturra 29.4x 1.2x 34.64% ★★★★★☆ Viva Energy Group NA 0.1x 46.17% ★★★★★☆ Lion Rock Group 4.9x 0.4x 49.52% ★★★★☆☆ Dicker Data 18.9x 0.7x -14.46% ★★★★☆☆ Smart Parking 68.0x 6.0x 49.01% ★★★☆☆☆ PWR Holdings 35.5x 4.9x 23.38% ★★★☆☆☆ Integral Diagnostics 156.5x 1.8x 43.69% ★★★☆☆☆ Click here to see the full list of 67 stocks from our Undervalued Asian Small Caps With Insider Buying screener. We're going to check out a few of the best picks from our screener tool. Simply Wall St Value Rating: ★★★★☆☆ Overview: Dicker Data is a wholesale distributor specializing in computer peripherals, with a market capitalization of A$2.57 billion. Operations: The company generates revenue primarily through wholesale distribution of computer peripherals, with a recent quarterly revenue of A$2.28 billion. Cost of Goods Sold (COGS) significantly impacts the financials, amounting to A$1.95 billion in the latest period. Operating expenses and non-operating expenses further influence net income, which stands at A$78.69 million for the same period. Notably, the gross profit margin has shown an upward trend, reaching 14.56% in recent quarters. PE: 18.9x Dicker Data, a small-cap in the tech distribution sector, is gaining attention for its strategic moves and insider confidence. Recent insider purchases signal belief in its potential. The company recently partnered with CrowdStrike to enhance cybersecurity offerings across Australia and New Zealand, tapping into rising demand. Despite high debt levels from external borrowing, earnings are forecasted to grow by 9% annually. This growth potential positions Dicker Data as an intriguing option among undervalued stocks in Asia. Take a closer look at Dicker Data's potential here in our valuation report. Learn about Dicker Data's historical performance. Simply Wall St Value Rating: ★★★☆☆☆ Overview: Mader Group specializes in providing staffing and outsourcing services, with a focus on the mining and civil industries, and has a market cap of A$1.16 billion. Operations: Mader Group's primary revenue stream is from Staffing & Outsourcing Services, generating A$811.54 million. The company's gross profit margin has recently shown a decline to 19.11%. Operating expenses stand at A$81.25 million, with non-operating expenses recorded at A$21.68 million as of the latest period ending December 31, 2024. PE: 23.6x Mader Group, a prominent player in its industry, demonstrates potential for growth with earnings expected to rise by 13.48% annually. The company's reliance on external borrowing presents a higher risk profile, yet insider confidence is evident as they purchased 83,500 shares worth A$498,495 recently. This purchase indicates trust in the company's future prospects despite the funding risks. Mader's position in Asia's market highlights its potential for investors seeking opportunities within this segment. Unlock comprehensive insights into our analysis of Mader Group stock in this valuation report. Understand Mader Group's track record by examining our Past report. Simply Wall St Value Rating: ★★★★★★ Overview: Riverstone Holdings is a company primarily engaged in the manufacturing of gloves, with additional operations in other sectors, and has a market capitalization of S$1.07 billion. Operations: The primary revenue stream is derived from gloves, which accounts for MYR 1.06 billion. The gross profit margin has shown fluctuations, with a notable increase to 65.01% in June 2021 before declining to 34.84% by March 2025. Operating expenses have varied over the periods, impacting net income margins as they range from approximately 13% to nearly 48%. PE: 12.3x Riverstone Holdings, a smaller company in Asia's market landscape, has shown insider confidence with recent share purchases. Despite a dip in net income to MYR 56.43 million from MYR 72.19 million year-on-year for Q1 2025, sales rose slightly to MYR 252.27 million. The company declared an increased final dividend of RM0.08 per share for FY2024, reflecting a commitment to shareholder returns amidst steady revenue growth forecasts of 4.49% annually. Get an in-depth perspective on Riverstone Holdings' performance by reading our valuation report here. Review our historical performance report to gain insights into Riverstone Holdings''s past performance. Discover the full array of 67 Undervalued Asian Small Caps With Insider Buying right here. Are you invested in these stocks already? Keep abreast of every twist and turn by setting up a portfolio with Simply Wall St, where we make it simple for investors like you to stay informed and proactive. Streamline your investment strategy with Simply Wall St's app for free and benefit from extensive research on stocks across all corners of the world. Explore high-performing small cap companies that haven't yet garnered significant analyst attention. Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management. Find companies with promising cash flow potential yet trading below their fair value. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include ASX:DDR ASX:MAD and SGX:AP4. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@ Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
11-05-2025
- Business
- Yahoo
Exploring 3 Undervalued Small Caps In Asian Markets With Insider Buying
In recent weeks, Asian markets have experienced a positive shift, buoyed by optimism surrounding trade negotiations between the U.S. and China and supportive monetary policies in key regions like China. As small-cap indexes continue to gain traction, investors are increasingly focusing on stocks with strong fundamentals and significant insider buying activity, which can indicate confidence from those closest to the company's operations. Name PE PS Discount to Fair Value Value Rating Security Bank 4.7x 1.1x 36.34% ★★★★★★ Atturra 29.4x 1.2x 35.91% ★★★★★☆ Hansen Technologies 290.0x 2.8x 23.31% ★★★★★☆ Viva Energy Group NA 0.1x 47.83% ★★★★★☆ Puregold Price Club 9.3x 0.4x 26.77% ★★★★☆☆ Dicker Data 19.8x 0.7x -39.95% ★★★★☆☆ Sing Investments & Finance 7.0x 3.5x 43.93% ★★★★☆☆ PWR Holdings 36.4x 5.0x 22.80% ★★★☆☆☆ Integral Diagnostics 168.3x 1.9x 40.68% ★★★☆☆☆ Charter Hall Long WALE REIT NA 11.7x 21.20% ★★★☆☆☆ Click here to see the full list of 60 stocks from our Undervalued Asian Small Caps With Insider Buying screener. Let's review some notable picks from our screened stocks. Simply Wall St Value Rating: ★★★☆☆☆ Overview: Iluka Resources is a leading mineral sands company engaged in the exploration, project development, operations, and marketing of zircon and titanium dioxide products with a market cap of A$5.82 billion. Operations: Iluka Resources generates revenue primarily from its Mineral Sands segment, with a recent gross profit margin of 56.64%. Operating expenses are significant, including general and administrative costs of A$83.9 million and sales & marketing expenses of A$74.3 million, impacting the net income margin which stands at 19.76%. PE: 7.6x Iluka Resources, a notable player in the mineral sands industry, is currently trading as part of the S&P/ASX Small Ordinaries Index. Despite a drop in annual sales to A$1.17 billion and net income to A$231 million for 2024, insider confidence remains strong with recent share purchases. The appointment of James Mactier as Chair brings extensive experience from Macquarie's Metals and Energy Capital division, potentially steering future growth amidst low-risk funding concerns tied to external borrowing. Click to explore a detailed breakdown of our findings in Iluka Resources' valuation report. Examine Iluka Resources' past performance report to understand how it has performed in the past. Simply Wall St Value Rating: ★★★★☆☆ Overview: MFF Capital Investments is a company focused on equity investments with a market capitalization of A$1.89 billion. Operations: The company generates revenue primarily through equity investments, with a reported revenue of A$1.01 billion as of the latest period. It consistently achieves a gross profit margin of 100%, indicating no cost of goods sold is recorded against its revenue streams. Operating expenses are relatively low compared to total revenue, contributing to a net income margin that has varied over time but was last noted at 67.44%. PE: 3.5x MFF Capital Investments, a small player in Asia's market, has caught attention due to insider confidence. Christopher MacKay recently purchased 1,299,779 shares for A$5.03 million between January and March 2025, indicating belief in the company's potential despite its reliance on external borrowing. This financial structure might pose higher risks compared to customer deposits but also suggests strategic positioning for growth opportunities within the region's dynamic investment landscape. Click here and access our complete valuation analysis report to understand the dynamics of MFF Capital Investments. Assess MFF Capital Investments' past performance with our detailed historical performance reports. Simply Wall St Value Rating: ★★★☆☆☆ Overview: HRnetGroup is a company specializing in flexible staffing and professional recruitment services with a market capitalization of approximately SGD 1.15 billion. Operations: Flexible Staffing is the primary revenue stream, generating SGD 507.96 million, while Professional Recruitment contributes SGD 54.94 million. The company's gross profit margin has shown a declining trend from 39.64% in December 2014 to 21.55% in December 2024, indicating changes in cost structures or pricing strategies over time. PE: 15.0x HRnetGroup, a small cap in Asia, has shown insider confidence with recent share purchases. Despite a dip in net income to S$44.52 million for 2024 from S$63.56 million the previous year, earnings are projected to grow annually by 12.53%. The company declared a final dividend of S$0.0213 per share for 2024, reflecting its commitment to shareholder returns amidst leadership changes and ongoing strategic shifts within its board and management team. Navigate through the intricacies of HRnetGroup with our comprehensive valuation report here. Evaluate HRnetGroup's historical performance by accessing our past performance report. Delve into our full catalog of 60 Undervalued Asian Small Caps With Insider Buying here. Are any of these part of your asset mix? Tap into the analytical power of Simply Wall St's portfolio to get a 360-degree view on how they're shaping up. Discover a world of investment opportunities with Simply Wall St's free app and access unparalleled stock analysis across all markets. Explore high-performing small cap companies that haven't yet garnered significant analyst attention. Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management. Find companies with promising cash flow potential yet trading below their fair value. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include ASX:ILU ASX:MFF and SGX:CHZ. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@ Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
21-04-2025
- Business
- Yahoo
Is Dicker Data Limited (ASX:DDR) Worth AU$8.1 Based On Its Intrinsic Value?
Using the 2 Stage Free Cash Flow to Equity, Dicker Data fair value estimate is AU$6.10 Dicker Data is estimated to be 33% overvalued based on current share price of AU$8.12 The AU$10.61 analyst price target for DDR is 74% more than our estimate of fair value Today we will run through one way of estimating the intrinsic value of Dicker Data Limited (ASX:DDR) by taking the expected future cash flows and discounting them to today's value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. Don't get put off by the jargon, the math behind it is actually quite straightforward. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (A$, Millions) AU$89.0m AU$83.5m AU$73.4m AU$67.8m AU$64.8m AU$63.3m AU$62.8m AU$63.0m AU$63.6m AU$64.6m Growth Rate Estimate Source Analyst x2 Analyst x2 Analyst x1 Est @ -7.53% Est @ -4.45% Est @ -2.29% Est @ -0.78% Est @ 0.27% Est @ 1.01% Est @ 1.53% Present Value (A$, Millions) Discounted @ 7.8% AU$82.5 AU$71.9 AU$58.6 AU$50.2 AU$44.5 AU$40.4 AU$37.2 AU$34.6 AU$32.4 AU$30.5 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = AU$483m After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. 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 (2.7%) 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 7.8%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = AU$65m× (1 + 2.7%) ÷ (7.8%– 2.7%) = AU$1.3b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= AU$1.3b÷ ( 1 + 7.8%)10= AU$620m The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is AU$1.1b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of AU$8.1, the company appears potentially overvalued at the time of writing. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Dicker Data as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.8%, which is based on a levered beta of 1.167. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. See our latest analysis for Dicker Data Strength Debt is well covered by earnings and cashflows. Weakness Earnings declined over the past year. Dividend is low compared to the top 25% of dividend payers in the Electronic market. Opportunity Annual revenue is forecast to grow faster than the Australian market. Good value based on P/E ratio compared to estimated Fair P/E ratio. Threat Dividends are not covered by earnings and cashflows. Annual earnings are forecast to grow slower than the Australian market. Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. It's not possible to obtain a foolproof valuation with a DCF model. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. What is the reason for the share price exceeding the intrinsic value? For Dicker Data, there are three further items you should assess: Risks: For example, we've discovered 2 warning signs for Dicker Data (1 is a bit unpleasant!) that you should be aware of before investing here. Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for DDR's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! PS. Simply Wall St updates its DCF calculation for every Australian stock every day, so if you want to find the intrinsic value of any other stock just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
Yahoo
21-04-2025
- Business
- Yahoo
Is Dicker Data Limited (ASX:DDR) Worth AU$8.1 Based On Its Intrinsic Value?
Using the 2 Stage Free Cash Flow to Equity, Dicker Data fair value estimate is AU$6.10 Dicker Data is estimated to be 33% overvalued based on current share price of AU$8.12 The AU$10.61 analyst price target for DDR is 74% more than our estimate of fair value Today we will run through one way of estimating the intrinsic value of Dicker Data Limited (ASX:DDR) by taking the expected future cash flows and discounting them to today's value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. Don't get put off by the jargon, the math behind it is actually quite straightforward. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (A$, Millions) AU$89.0m AU$83.5m AU$73.4m AU$67.8m AU$64.8m AU$63.3m AU$62.8m AU$63.0m AU$63.6m AU$64.6m Growth Rate Estimate Source Analyst x2 Analyst x2 Analyst x1 Est @ -7.53% Est @ -4.45% Est @ -2.29% Est @ -0.78% Est @ 0.27% Est @ 1.01% Est @ 1.53% Present Value (A$, Millions) Discounted @ 7.8% AU$82.5 AU$71.9 AU$58.6 AU$50.2 AU$44.5 AU$40.4 AU$37.2 AU$34.6 AU$32.4 AU$30.5 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = AU$483m After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. 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 (2.7%) 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 7.8%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = AU$65m× (1 + 2.7%) ÷ (7.8%– 2.7%) = AU$1.3b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= AU$1.3b÷ ( 1 + 7.8%)10= AU$620m The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is AU$1.1b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of AU$8.1, the company appears potentially overvalued at the time of writing. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Dicker Data as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.8%, which is based on a levered beta of 1.167. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. See our latest analysis for Dicker Data Strength Debt is well covered by earnings and cashflows. Weakness Earnings declined over the past year. Dividend is low compared to the top 25% of dividend payers in the Electronic market. Opportunity Annual revenue is forecast to grow faster than the Australian market. Good value based on P/E ratio compared to estimated Fair P/E ratio. Threat Dividends are not covered by earnings and cashflows. Annual earnings are forecast to grow slower than the Australian market. Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. It's not possible to obtain a foolproof valuation with a DCF model. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. What is the reason for the share price exceeding the intrinsic value? For Dicker Data, there are three further items you should assess: Risks: For example, we've discovered 2 warning signs for Dicker Data (1 is a bit unpleasant!) that you should be aware of before investing here. Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for DDR's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! PS. Simply Wall St updates its DCF calculation for every Australian stock every day, so if you want to find the intrinsic value of any other stock just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
