Is There An Opportunity With RHI Magnesita N.V.'s (LON:RHIM) 39% Undervaluation?

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

Wed, May 14, 2025, 5:23 AM 6 min read

• The projected just worth for RHI Magnesita is UK£51.81 based connected 2 Stage Free Cash Flow to Equity

• RHI Magnesita's UK£31.70 stock terms signals that it mightiness beryllium 39% undervalued

• Our just worth estimation is 36% higher than RHI Magnesita's expert terms people of €38.10

Does the May stock terms for RHI Magnesita N.V. (LON:RHIM) bespeak what it's truly worth? Today, we volition estimation the stock's intrinsic worth by projecting its aboriginal currency flows and past discounting them to today's value. One mode to execute this is by employing the Discounted Cash Flow (DCF) model. It whitethorn dependable complicated, but really it is rather simple!

Remember though, that determination are galore ways to estimation a company's value, and a DCF is conscionable 1 method. If you inactive person immoderate burning questions astir this benignant of valuation, instrumentality a look astatine the Simply Wall St investigation model.

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We usage what is known arsenic a 2-stage model, which simply means we person 2 antithetic periods of maturation rates for the company's currency flows. Generally the archetypal signifier is higher growth, and the 2nd signifier is simply a little maturation phase. In the archetypal signifier we request to estimation the currency flows to the concern implicit the adjacent 10 years. Where imaginable we usage expert estimates, but erstwhile these aren't disposable we extrapolate the erstwhile escaped currency travel (FCF) from the past estimation oregon reported value. We presume companies with shrinking escaped currency travel volition dilatory their complaint of shrinkage, and that companies with increasing escaped currency travel volition spot their maturation complaint slow, implicit this period. We bash this to bespeak that maturation tends to dilatory much successful the aboriginal years than it does successful aboriginal years.

Generally we presume that a dollar contiguous is much invaluable than a dollar successful the future, truthful we request to discount the sum of these aboriginal currency flows to get astatine a contiguous worth estimate:

("Est" = FCF maturation complaint estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = €1.4b

The 2nd signifier is besides known arsenic Terminal Value, this is the business's currency travel aft the archetypal stage. The Gordon Growth look is utilized to cipher Terminal Value astatine a aboriginal yearly maturation complaint adjacent to the 5-year mean of the 10-year authorities enslaved output of 2.3%. We discount the terminal currency flows to today's worth astatine a outgo of equity of 9.2%.