Key Insights Dr. Martens' estimated fair value is UK£1.30 based on 2 Stage Free Cash Flow to Equity Dr.
Martens is estimated to be 47% undervalued based on current share price of UK£0.68 Our fair value estimate is 68% higher than In this article we are going to estimate the intrinsic value of Dr. Martens plc ( ) by estimating the company's future cash flows and discounting them to their present value.
We will use the Discounted Cash Flow (DCF) model on this occasion. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method.
Anyone interested in learning a bit more about intrinsic value should have a read of the . 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.