Latest news with #IPDGroup
Yahoo
3 days ago
- Business
- Yahoo
Is There An Opportunity With IPD Group Limited's (ASX:IPG) 38% Undervaluation?
IPD Group's estimated fair value is AU$4.90 based on 2 Stage Free Cash Flow to Equity Current share price of AU$3.06 suggests IPD Group is potentially 38% undervalued The AU$4.24 analyst price target for IPG is 13% less than our estimate of fair value Today we'll do a simple run through of a valuation method used to estimate the attractiveness of IPD Group Limited (ASX:IPG) as an investment opportunity by projecting its future cash flows and then discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. There's really not all that much to it, even though it might appear quite complex. Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today's value: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (A$, Millions) AU$30.0m AU$23.0m AU$31.7m AU$30.2m AU$29.4m AU$29.2m AU$29.3m AU$29.6m AU$30.1m AU$30.7m Growth Rate Estimate Source Analyst x4 Analyst x4 Analyst x3 Est @ -4.75% Est @ -2.44% Est @ -0.82% Est @ 0.31% Est @ 1.10% Est @ 1.66% Est @ 2.04% Present Value (A$, Millions) Discounted @ 7.8% AU$27.8 AU$19.8 AU$25.3 AU$22.4 AU$20.2 AU$18.6 AU$17.3 AU$16.3 AU$15.3 AU$14.5 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = AU$198m We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.9%. We discount the terminal cash flows to today's value at a cost of equity of 7.8%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = AU$31m× (1 + 2.9%) ÷ (7.8%– 2.9%) = AU$656m Present Value of Terminal Value (PVTV)= TV / (1 + r)10= AU$656m÷ ( 1 + 7.8%)10= AU$311m The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is AU$508m. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of AU$3.1, the company appears quite undervalued at a 38% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. 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 IPD Group 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 1.112. 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 IPD Group Strength Earnings growth over the past year exceeded the industry. Debt is not viewed as a risk. Dividends are covered by earnings and cash flows. Weakness Dividend is low compared to the top 25% of dividend payers in the Trade Distributors market. Opportunity Annual revenue is forecast to grow faster than the Australian market. Trading below our estimate of fair value by more than 20%. Threat Annual earnings are forecast to grow slower than the Australian market. Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. DCF models are not the be-all and end-all of investment valuation. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. Why is the intrinsic value higher than the current share price? For IPD Group, there are three pertinent elements you should further examine: Financial Health: Does IPG have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk. Future Earnings: How does IPG's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the ASX every day. If you want to find the calculation for other stocks 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
3 days ago
- Business
- Yahoo
Is There An Opportunity With IPD Group Limited's (ASX:IPG) 38% Undervaluation?
IPD Group's estimated fair value is AU$4.90 based on 2 Stage Free Cash Flow to Equity Current share price of AU$3.06 suggests IPD Group is potentially 38% undervalued The AU$4.24 analyst price target for IPG is 13% less than our estimate of fair value Today we'll do a simple run through of a valuation method used to estimate the attractiveness of IPD Group Limited (ASX:IPG) as an investment opportunity by projecting its future cash flows and then discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. There's really not all that much to it, even though it might appear quite complex. Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today's value: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (A$, Millions) AU$30.0m AU$23.0m AU$31.7m AU$30.2m AU$29.4m AU$29.2m AU$29.3m AU$29.6m AU$30.1m AU$30.7m Growth Rate Estimate Source Analyst x4 Analyst x4 Analyst x3 Est @ -4.75% Est @ -2.44% Est @ -0.82% Est @ 0.31% Est @ 1.10% Est @ 1.66% Est @ 2.04% Present Value (A$, Millions) Discounted @ 7.8% AU$27.8 AU$19.8 AU$25.3 AU$22.4 AU$20.2 AU$18.6 AU$17.3 AU$16.3 AU$15.3 AU$14.5 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = AU$198m We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.9%. We discount the terminal cash flows to today's value at a cost of equity of 7.8%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = AU$31m× (1 + 2.9%) ÷ (7.8%– 2.9%) = AU$656m Present Value of Terminal Value (PVTV)= TV / (1 + r)10= AU$656m÷ ( 1 + 7.8%)10= AU$311m The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is AU$508m. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of AU$3.1, the company appears quite undervalued at a 38% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. 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 IPD Group 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 1.112. 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 IPD Group Strength Earnings growth over the past year exceeded the industry. Debt is not viewed as a risk. Dividends are covered by earnings and cash flows. Weakness Dividend is low compared to the top 25% of dividend payers in the Trade Distributors market. Opportunity Annual revenue is forecast to grow faster than the Australian market. Trading below our estimate of fair value by more than 20%. Threat Annual earnings are forecast to grow slower than the Australian market. Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. DCF models are not the be-all and end-all of investment valuation. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. Why is the intrinsic value higher than the current share price? For IPD Group, there are three pertinent elements you should further examine: Financial Health: Does IPG have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk. Future Earnings: How does IPG's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the ASX every day. If you want to find the calculation for other stocks 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.
Yahoo
16-04-2025
- Business
- Yahoo
Is Now The Time To Look At Buying IPD Group Limited (ASX:IPG)?
IPD Group Limited (ASX:IPG), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the ASX. While good news for shareholders, the company has traded much higher in the past year. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let's take a look at IPD Group's outlook and value based on the most recent financial data to see if the opportunity still exists. We check all companies for important risks. See what we found for IPD Group in our free report. Good news, investors! IPD Group is still a bargain right now. According to our valuation, the intrinsic value for the stock is A$5.42, but it is currently trading at AU$3.89 on the share market, meaning that there is still an opportunity to buy now. What's more interesting is that, IPD Group's share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta. Check out our latest analysis for IPD Group Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. IPD Group's earnings over the next few years are expected to increase by 25%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value. Are you a shareholder? Since IPG is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation. Are you a potential investor? If you've been keeping an eye on IPG for a while, now might be the time to enter the stock. Its prosperous future outlook isn't fully reflected in the current share price yet, which means it's not too late to buy IPG. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision. Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. Luckily, you can check out what analysts are forecasting by clicking here. If you are no longer interested in IPD Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential. 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.
Yahoo
16-03-2025
- Business
- Yahoo
Is Now The Time To Put IPD Group (ASX:IPG) On Your Watchlist?
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up. So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like IPD Group (ASX:IPG). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it. Check out our latest analysis for IPD Group Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that IPD Group's EPS has grown 27% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about. Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. IPD Group maintained stable EBIT margins over the last year, all while growing revenue 46% to AU$347m. That's encouraging news for the company! You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart. You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for IPD Group's future profits. It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own IPD Group shares worth a considerable sum. Holding AU$104m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That holding amounts to 26% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders. It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations between AU$158m and AU$632m, like IPD Group, the median CEO pay is around AU$1.1m. IPD Group offered total compensation worth AU$929k to its CEO in the year to June 2024. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally. You can't deny that IPD Group has grown its earnings per share at a very impressive rate. That's attractive. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. The overarching message here is that IPD Group has underlying strengths that make it worth a look at. Now, you could try to make up your mind on IPD Group by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry. While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in AU with promising growth potential and insider confidence. Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction. 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.
Yahoo
11-02-2025
- Business
- Yahoo
Undiscovered Gems in Australia To Explore This February 2025
The Australian market has seen mixed movements recently, with the ASX200 closing flat at 8,484 points as gains in certain sectors were balanced by a sell-off in major players like CSL. Amidst these fluctuations, gold's rise to an all-time high reflects investors' search for stability, while industrials and IT sectors show resilience. In this dynamic environment, identifying promising small-cap stocks involves looking for companies with strong growth potential and innovative strategies that can thrive despite broader market challenges. Name Debt To Equity Revenue Growth Earnings Growth Health Rating Fiducian Group NA 9.94% 6.48% ★★★★★★ Schaffer 24.98% 2.97% -6.23% ★★★★★★ Sugar Terminals NA 3.14% 3.53% ★★★★★★ Bailador Technology Investments NA 11.17% 10.16% ★★★★★★ Lycopodium NA 17.22% 33.85% ★★★★★★ Djerriwarrh Investments 1.14% 8.17% 7.54% ★★★★★★ Red Hill Minerals NA 75.05% 36.74% ★★★★★★ Steamships Trading 33.60% 4.17% 3.90% ★★★★★☆ K&S 16.07% 0.09% 33.40% ★★★★☆☆ Hearts and Minds Investments 1.00% 18.81% 20.95% ★★★★☆☆ Click here to see the full list of 49 stocks from our ASX Undiscovered Gems With Strong Fundamentals screener. We'll examine a selection from our screener results. Simply Wall St Value Rating: ★★★★★☆ Overview: Emerald Resources NL is involved in the exploration and development of mineral reserves in Cambodia and Australia, with a market capitalization of A$2.92 billion. Operations: Emerald Resources primarily generates revenue from mine operations, amounting to A$366.04 million. The company's financial focus is on this segment, contributing the majority of its income stream. Emerald Resources, a promising player in the mining sector, has shown impressive growth with earnings surging 41.9% over the past year, outpacing the industry average of 0.7%. The company trades at a substantial discount of 56.5% below its estimated fair value, making it an attractive proposition for value seekers. Recent operational enhancements at Okvau Gold Mine have led to record gold production of 31,888 ounces in Q4 2024, surpassing guidance and boosting cash and bullion reserves to A$243 million (US$151 million). With debt well-covered by EBIT at 18.6x interest payments and more cash than total debt, Emerald's financial health appears robust. Dive into the specifics of Emerald Resources here with our thorough health report. Examine Emerald Resources' past performance report to understand how it has performed in the past. Simply Wall St Value Rating: ★★★★★☆ Overview: IPD Group Limited is an Australian company that specializes in the distribution of electrical infrastructure and has a market capitalization of A$451.07 million. Operations: IPD Group generates revenue primarily through its Products Division, which accounts for A$270.68 million, while the Services Division contributes A$19.74 million. The company's cost structure and financial performance are reflected in its net profit margin, providing insights into profitability trends over time. IPD Group, a relatively small player in the trade distributors sector, has demonstrated impressive earnings growth of 39% over the past year, outpacing its industry peers. The company's net debt to equity ratio stands at a satisfactory 5.8%, indicating prudent financial management. With interest payments well-covered by EBIT at 46.8 times, IPD's financial health seems robust. The price-to-earnings ratio of 20.2x suggests it is valued attractively compared to the industry average of 24.8x. Looking ahead, IPD forecasts EBIT between A$19 million and A$19.8 million for the upcoming half-year, with revenue expected to surpass previous periods significantly. Take a closer look at IPD Group's potential here in our health report. Learn about IPD Group's historical performance. Simply Wall St Value Rating: ★★★★★★ Overview: Tasmea Limited offers shutdown, maintenance, emergency breakdown, and capital upgrade services in Australia with a market capitalization of A$763.41 million. Operations: Tasmea generates revenue primarily from Mechanical Services (A$141.42 million) and Electrical Services (A$129.44 million), followed by Water & Fluid, Civil, and Corporate Services. Tasmea, a nimble player in the construction sector, has been making waves with its robust earnings growth of 57.1% over the past year, outpacing industry averages. This performance is bolstered by a significant reduction in its debt to equity ratio from 168.5% to 44.4% over five years, indicating prudent financial management and satisfactory net debt levels at 25.3%. With EBIT covering interest payments twelve times over, Tasmea demonstrates strong operational efficiency. The recent addition of Trent Northover as Executive Director is likely to enhance strategic direction and support ongoing organic growth initiatives for this promising company. Click to explore a detailed breakdown of our findings in Tasmea's health report. Explore historical data to track Tasmea's performance over time in our Past section. Unlock our comprehensive list of 49 ASX Undiscovered Gems With Strong Fundamentals by clicking here. Already own these companies? Link your portfolio to Simply Wall St and get alerts on any new warning signs to your stocks. Maximize your investment potential with Simply Wall St, the comprehensive app that offers global market insights for free. 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:EMR ASX:IPG and ASX:TEA. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@ Sign in to access your portfolio
