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A Look At The Intrinsic Value Of Corbion N.V. (AMS:CRBN)

In This Article:

Key Insights

  • Corbion's estimated fair value is €19.04 based on 2 Stage Free Cash Flow to Equity

  • Corbion's €22.82 share price indicates it is trading at similar levels as its fair value estimate

  • The €26.17 analyst price target for CRBN is 37% more than our estimate of fair value

Does the February share price for Corbion N.V. (AMS:CRBN) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by taking the expected future cash flows and discounting them to their present value. Our analysis will employ the Discounted Cash Flow (DCF) model. It may sound complicated, but actually it is quite simple!

We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.

Check out our latest analysis for Corbion

The Model

We're using 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 a stable growth rate. 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.

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)

€59.1m

€57.5m

€56.7m

€56.4m

€56.5m

€56.7m

€57.1m

€57.6m

€58.2m

€58.8m

Growth Rate Estimate Source

Analyst x2

Analyst x2

Est @ -1.32%

Est @ -0.53%

Est @ 0.03%

Est @ 0.42%

Est @ 0.69%

Est @ 0.88%

Est @ 1.01%

Est @ 1.10%

Present Value (€, Millions) Discounted @ 6.1%

€55.6

€51.0

€47.5

€44.5

€41.9

€39.6

€37.6

€35.7

€34.0

€32.4

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = €420m

After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. 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 1.3%. We discount the terminal cash flows to today's value at a cost of equity of 6.1%.