Frequentis AG (ETR:FQT) Estimated Fair Value at €81.33, 42% Undervalued

Frequentis AG's estimated fair value is €81.33 based on a 2-stage free cash flow to equity model. The company is estimated to be 42% undervalued at its current share price of €47.10. Analysts have a price target of €45.55, which is 44% below the estimated fair value.

Frequentis AG (ETR:FQT), a provider of software solutions for the aviation industry, has been subject to an in-depth valuation analysis using the two-stage free cash flow to equity (FCFE) model. The analysis reveals that Frequentis AG's estimated fair value is €81.33, indicating that the company is significantly undervalued at its current share price of €47.10. This valuation suggests that Frequentis AG is trading at a 42% discount to its intrinsic value.

The valuation process employed a two-stage DCF model, which accounts for two distinct periods of growth. The first stage, comprising the next ten years, assumes a higher growth rate, while the second stage reflects a steady growth phase. The analysis extrapolated historical free cash flow (FCF) data to estimate future cash flows, discounting these to their present value using a cost of equity of 5.9%.

The key assumptions and calculations behind the valuation include:
- 10-year Free Cash Flow Estimates: The estimates for the next ten years were derived from historical data, with the growth rates slowing over time to reflect typical growth patterns.
- Terminal Value: The terminal value was calculated using a conservative growth rate of 5.9%, discounting future cash flows to their present value.
- Present Value of Future Cash Flows: The present value of the ten-year cash flows was calculated using the discount rate of 5.9%.

The analysis also highlights that analysts have a price target of €45.55 for Frequentis AG, which is 44% below the estimated fair value of €81.33. This discrepancy underscores the potential for significant undervaluation, presenting an opportunity for investors seeking undervalued stocks.

In conclusion, Frequentis AG appears to be undervalued based on the two-stage free cash flow to equity model. Investors should consider this valuation when evaluating the company's investment potential. However, it is essential to conduct further due diligence and consider other valuation methods and risk factors before making any investment decisions.

References:
[1] https://uk.finance.yahoo.com/news/intrinsic-calculation-frequentis-ag-etr-064327539.html