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Highlights:
Made Tech Group’s fair value estimate is £0.17 based on the 2 Stage Free Cash Flow to Equity model.
The current share price of £0.23 suggests that the company may be overvalued by approximately 29%.
A two-stage Discounted Cash Flow (DCF) analysis indicates the intrinsic value of Made Tech Group shares.
Valuation Analysis of Made Tech Group Plc (LSE:MTEC) In estimating the intrinsic value of Made Tech Group Plc, a Discounted Cash Flow (DCF) model has been applied, which provides a detailed approach for valuing companies based on their projected future cash flows. This method accounts for the time value of money, recognizing that future cash flows are worth less than their equivalent in today’s terms. The model applied in this analysis is a two-stage DCF, which takes into consideration a higher growth phase initially, followed by a steady growth period.
The first stage of the DCF model focuses on forecasting the free cash flows (FCF) over a ten-year period, where the business is expected to see gradual growth or, in some cases, a reduction in its cash flows. This period is key to setting the base for the long-term value, with growth rates starting higher and then slowing down over time. Analyst estimates were used for the initial years, and extrapolation was done based on the last available free cash flow data. For companies with growing free cash flow, the growth rate is projected to decelerate gradually.
For the period from 2025 to 2034, the company’s forecasted levered free cash flow (FCF) ranges from £1.55 million in 2025 to £1.66 million in 2034, reflecting modest growth rates. The present value (PV) of these cash flows, when discounted at 7.6%, totals £11 million.
In the second stage, the company’s terminal value is estimated using the Gordon Growth formula, which assumes a long-term growth rate based on the average 5-year government bond yield. The terminal value is also discounted to the present value using the same cost of equity rate of 7.6%.
Based on the DCF model, Made Tech Group’s fair value per share is estimated at £0.17. The current market price of £0.23 implies that the shares may be overvalued by approximately 29%, suggesting potential market correction. This type of valuation offers insights into the financial health of the company and its future prospects, providing a clearer understanding of its current market position.
