Calculating The Intrinsic Value Of Mobimo Holding AG (VTX:MOBN)

Key Insights

• The projected fair value for Mobimo Holding is CHF300 based on 2 Stage Free Cash Flow to Equity

• Mobimo Holding's CHF264 share price indicates it is trading at similar levels as its fair value estimate

• Peers of Mobimo Holding are currently trading on average at a 70% premium

How far off is Mobimo Holding AG (VTX:MOBN) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by projecting its future cash flows and then discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. 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 Simply Wall St analysis model.

See our latest analysis for Mobimo Holding

The Method

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 start off with, we need to estimate 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 growth tends to slow more in the early years than it does in later years.

Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars:

10-year free cash flow (FCF) forecast

	2024	2025	2026	2027	2028	2029	2030	2031	2032	2033
Levered FCF (CHF, Millions)	CHF78.3m	CHF62.9m	CHF146.5m	CHF155.1m	CHF161.5m	CHF166.2m	CHF169.7m	CHF172.2m	CHF174.1m	CHF175.5m
Growth Rate Estimate Source	Analyst x2	Analyst x2	Analyst x1	Est @ 5.84%	Est @ 4.13%	Est @ 2.93%	Est @ 2.09%	Est @ 1.50%	Est @ 1.09%	Est @ 0.80%
Present Value (CHF, Millions) Discounted @ 7.3%	CHF72.9	CHF54.6	CHF119	CHF117	CHF113	CHF109	CHF104	CHF97.9	CHF92.2	CHF86.6

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = CHF965m

We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 0.1%. We discount the terminal cash flows to today's value at a cost of equity of 7.3%.

Terminal Value (TV)= FCF₂₀₃₃ × (1 + g) ÷ (r – g) = CHF175m× (1 + 0.1%) ÷ (7.3%– 0.1%) = CHF2.4b

Present Value of Terminal Value (PVTV)= TV / (1 + r)¹⁰= CHF2.4b÷ ( 1 + 7.3%)¹⁰= CHF1.2b

The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is CHF2.2b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Compared to the current share price of CHF264, the company appears about fair value at a 12% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.

dcf

Important Assumptions

The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Mobimo Holding as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.3%, which is based on a levered beta of 1.562. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.

SWOT Analysis for Mobimo Holding

Strength

• Debt is well covered by earnings.

Weakness

• Earnings declined over the past year.

• Dividend is low compared to the top 25% of dividend payers in the Real Estate market.

Opportunity

• Annual earnings are forecast to grow faster than the Swiss market.

• Current share price is below our estimate of fair value.

Threat

• Debt is not well covered by operating cash flow.

• Dividends are not covered by earnings.

Next Steps:

Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For Mobimo Holding, we've compiled three essential factors you should look at:

1. Risks: For example, we've discovered 4 warning signs for Mobimo Holding (1 is a bit unpleasant!) that you should be aware of before investing here.

2. Future Earnings: How does MOBN'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: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the SWX every day. If you want to find the calculation for other stocks just search here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.