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Investors Are Undervaluing Pihlajalinna Oyj (HEL:PIHLIS) By 25%

How far off is Pihlajalinna Oyj (HLSE:PIHLIS) from its intrinsic value? Using the most recent financial data, I am going to take a look at whether the stock is fairly priced using the discounted cash flows (DCF) model. If you want to learn more about this method, the basis for my calculations can be found in detail in the Simply Wall St analysis model. Also note that this article was written in June 2018 so be sure check the latest calculation for Pihlajalinna Oyj here.

Crunching the numbers

I’ve used 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 perpetual stable growth rate. Firstly, I use the analyst consensus forecast of PIHLIS’s levered free cash flow (FCF) over the next five years and discounted these figures at the cost of equity of 8.15%. This resulted in a present value of 5-year cash flow of €50.67M. Want to understand how I calculated this value? Read our detailed analysis here.

HLSE:PIHLIS Future Profit Jun 4th 18
HLSE:PIHLIS Future Profit Jun 4th 18

The graph above shows how PIHLIS’s earnings are expected to move in the future, which should give you some color on PIHLIS’s outlook. Then, I determine the terminal value, which accounts for all the future cash flows after the five years. I’ve decided to use the 10-year government bond rate of 2.8% as the steady growth rate, which is rightly below GDP growth, but more towards the conservative side. Discounting the terminal value back five years gives us a present value of €305.88M.

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The total value, or equity value, is then the sum of the present value of the cash flows, which in this case is €356.55M. In the final step we divide the equity value by the number of shares outstanding. This results in an intrinsic value of €15.76, which, compared to the current share price of €11.86, we see that Pihlajalinna Oyj is about right, perhaps slightly undervalued at a 24.76% discount to what it is available for right now.

Next Steps:

Valuation is only one side of the coin in terms of building your investment thesis, and it shouldn’t be the only metric you look at when researching a company. What is the reason for the share price to differ from the intrinsic value? For PIHLIS, I’ve compiled three key factors you should further research:

  1. Financial Health: Does PIHLIS 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.

  2. Future Earnings: How does PIHLIS’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.

  3. Other High Quality Alternatives: Are there other high quality stocks you could be holding instead of PIHLIS? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

PS. Simply Wall St does a DCF calculation for every FI stock every 6 hours, so if you want to find the intrinsic value of any other stock just search here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.