Part 6/9:
Valuation Assessment
Despite the solid fundamentals, determining the intrinsic value of Evolution AB is paramount. The current price-to-earnings (P/E) ratio sits at 12.7, a reasonable figure amid an extraordinary growth rate. Utilizing a discounted cash flow (DCF) analysis, potential growth scenarios for the next decade can be analyzed:
Low Scenario: 8% growth for the first five years, then 6%
Expected Intrinsic Value: $119 (after margin of safety: $83)
Medium Scenario: 12% for the first five years, then 10%
Expected Intrinsic Value: $158 (after margin of safety: $111)
High Scenario: 20% for the first five years, then 15%
Expected Intrinsic Value: $254 (after margin of safety: $178)