Vossloh AG Undervalued by 23%, Fair Value at €112

Vossloh AG's projected fair value is estimated to be €112 based on a 2-stage free cash flow to equity model. The company is estimated to be 23% undervalued based on its current share price of €85.90, and the analyst price target for VOS is €85.64, which is 23% below the fair value estimate. The 2-stage growth model takes into account two stages of company growth, with the first stage having a higher growth rate and the second stage having a stable growth rate. The model estimates the cash flows to the business over the next ten years and then discounts the sum of these future cash flows to arrive at a present value estimate.

Vossloh AG (ETR: VOS) has recently been the subject of a valuation analysis by Simply Wall St, which projects a fair value of €112 based on a 2-stage free cash flow to equity model. The company is currently trading at €85.90, indicating a 23% undervaluation according to the analysis [1].

The 2-stage growth model used in the valuation estimates cash flows to the business over the next ten years. The first stage assumes a higher growth rate, while the second stage assumes a stable growth rate. The model then discounts these future cash flows to arrive at a present value estimate.

The analysis also considers the Terminal Value, which accounts for all future cash flows beyond the first stage. This is calculated using the Gordon Growth formula and discounted back to today's value. The total equity value is then divided by the number of shares outstanding to arrive at the intrinsic value of the company.

The analyst price target for VOS is €85.64, which is 23% below the fair value estimate. This discrepancy suggests that the market may be undervaluing Vossloh AG.

While the DCF model is a useful tool for valuation, it is not without its limitations. It relies on several assumptions, such as the discount rate and the cash flows, which can significantly impact the outcome. Additionally, the model does not consider the possible cyclicality of the industry or a company's future capital requirements.

For investors considering Vossloh AG, it is important to consider other factors beyond valuation, such as financial health, future earnings growth, and the availability of high-quality alternatives. Simply Wall St offers a free balance sheet analysis and analyst growth expectation chart for further insights.

References:
[1] https://finance.yahoo.com/news/investors-undervaluing-vossloh-ag-etr-053550887.html