Calculating The Intrinsic Value Of Asbestos Corporation Limited (CVE:AB.H)
Tuesday, Dec 24, 2024 6:12 am ET
4min read Asbestos Corporation Limited (CVE:AB.H) has been making waves in the mineral resources sector, with its stock price and financial performance catching the attention of investors. To determine if the current market price reflects the company's true value, we'll delve into key financial metrics, earnings growth rates, and valuation methods.
First, let's examine Asbestos Corporation Limited's debt-to-equity ratio, which stands at -126.82. This unusual negative value suggests that the company's equity is worth more than its total debt, indicating a strong financial position. However, it's crucial to consider other factors when calculating the intrinsic value.
Earnings growth rates play a significant role in determining a company's intrinsic value. Asbestos Corporation Limited's 1-year growth rates for EBITDA, EBITA, and EBIT are 280.42%, 293.99%, and 293.99%, respectively, suggesting strong earnings momentum. However, the 2-year and 3-year CAGR for these metrics are lower, at 77.59%, 80.22%, and 23.15%, respectively, which may indicate a potential slowdown in earnings growth. To calculate the intrinsic value, consider the present value of these earnings growth rates, discounted at an appropriate rate.
Key financial metrics such as the P/E ratio, EV/EBITDA, and FCF yield also contribute to the intrinsic value calculation. Asbestos Corporation Limited's P/E ratio of 2.96x suggests undervaluation compared to the sector average of 13.09x. The EV/EBITDA of 12.1x indicates a fair valuation, while the FCF yield of 5.34% signals healthy cash flow generation. Considering these metrics, Asbestos Corporation Limited's intrinsic value appears to be around CAD 4.256 million, representing a potential undervaluation opportunity.
Analysts' price targets and consensus estimates can also factor into the intrinsic value calculation. As of December 2024, the average price target for Asbestos Corporation Limited is CAD 1.05, with a high of CAD 1.20 and a low of CAD 0.85. The consensus estimate for the next 12 months is CAD 1.03, indicating a potential upside of 10.3% from the current price of CAD 0.93. Using the Gordon Growth Model, which assumes a constant growth rate in dividends, and an average dividend yield of 5.34% and a growth rate of 10% (based on the consensus estimate), the intrinsic value is approximately CAD 1.13. This suggests that Asbestos Corporation Limited is currently undervalued, presenting an attractive investment opportunity.
In conclusion, Asbestos Corporation Limited's intrinsic value can be approximated using key financial metrics, earnings growth rates, and valuation methods. Considering the company's strong financial position, earnings momentum, and analysts' price targets, Asbestos Corporation Limited appears to be undervalued at its current market price. Investors should carefully evaluate the company's fundamentals and consider the potential upside in its stock price.
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.
