Estimating The Intrinsic Value Of MeVis Medical Solutions AG (ETR:M3V)

editorial-team@simplywallst.com (Simply Wall St)

Sun, Mar 30, 2025, 11:10 PM 6 min read

The projected fair value for MeVis Medical Solutions is €24.95 based on 2 Stage Free Cash Flow to Equity
With €26.60 share price, MeVis Medical Solutions appears to be trading close to its estimated fair value
MeVis Medical Solutions' peers seem to be trading at a higher premium to fair value based onthe industry average of -25%

Today we'll do a simple run through of a valuation method used to estimate the attractiveness of MeVis Medical Solutions AG (ETR:M3V) as an investment opportunity by taking the expected future cash flows and discounting them to their present value. This will be done using the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.

Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.

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Is MeVis Medical Solutions Fairly Valued?

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. Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company's last 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.

A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate:

10-year free cash flow (FCF) forecast

	2025	2026	2027	2028	2029	2030	2031	2032	2033	2034
Levered FCF (€, Millions)	€2.59m	€2.37m	€2.23m	€2.15m	€2.10m	€2.07m	€2.06m	€2.06m	€2.06m	€2.07m
Growth Rate Estimate Source	Est @ -13.01%	Est @ -8.78%	Est @ -5.82%	Est @ -3.74%	Est @ -2.29%	Est @ -1.28%	Est @ -0.57%	Est @ -0.07%	Est @ 0.28%	Est @ 0.52%
Present Value (€, Millions) Discounted @ 5.4%	€2.5	€2.1	€1.9	€1.7	€1.6	€1.5	€1.4	€1.4	€1.3	€1.2

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = €17m

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 1.1%. We discount the terminal cash flows to today's value at a cost of equity of 5.4%.

Terminal Value (TV)= FCF₂₀₃₄ × (1 + g) ÷ (r – g) = €2.1m× (1 + 1.1%) ÷ (5.4%– 1.1%) = €49m

Present Value of Terminal Value (PVTV)= TV / (1 + r)¹⁰= €49m÷ ( 1 + 5.4%)¹⁰= €29m

The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is €45m. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of €26.6, the company appears around fair value at the time of writing. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent.

dcf — XTRA:M3V Discounted Cash Flow March 31st 2025

The Assumptions

We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. 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 MeVis Medical Solutions 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 5.4%, which is based on a levered beta of 0.994. 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.

See our latest analysis for MeVis Medical Solutions

Next Steps:

Whilst important, the DCF calculation shouldn't be the only metric you look at when researching a company. It's not possible to obtain a foolproof valuation with a DCF model. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For MeVis Medical Solutions, we've put together three important factors you should look at:

Risks: For example, we've discovered 3 warning signs for MeVis Medical Solutions (1 doesn't sit too well with us!) that you should be aware of before investing here.
Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
Other Top Analyst Picks: Interested to see what the analysts are thinking? Take a look at our interactive list of analysts' top stock picks to find out what they feel might have an attractive future outlook!

PS. Simply Wall St updates its DCF calculation for every German stock every day, so if you want to find the intrinsic value of any other stock 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.