Constellium SE's (NYSE:CSTM) Intrinsic Value Is Potentially 86% Above Its Share Price

In This Article:

Key Insights

  • Constellium's estimated fair value is US$21.52 based on 2 Stage Free Cash Flow to Equity

  • Current share price of US$11.58 suggests Constellium is potentially 46% undervalued

  • Our fair value estimate is 17% higher than Constellium's analyst price target of €18.45

In this article we are going to estimate the intrinsic value of Constellium SE (NYSE:CSTM) by estimating the company's future cash flows and discounting them to their present value. Our analysis will employ 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.

We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. 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.

View our latest analysis for Constellium

Step By Step Through The Calculation

We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of 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, and so the sum of these future cash flows is then discounted to today's value:

10-year free cash flow (FCF) estimate

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

Levered FCF (€, Millions)

€150.0m

€230.0m

€247.0m

€261.7m

€274.7m

€286.4m

€297.1m

€307.3m

€317.1m

€326.6m

Growth Rate Estimate Source

Analyst x2

Analyst x1

Est @ 7.39%

Est @ 5.96%

Est @ 4.96%

Est @ 4.26%

Est @ 3.76%

Est @ 3.42%

Est @ 3.18%

Est @ 3.01%

Present Value (€, Millions) Discounted @ 11%

€135

€187

€181

€173

€164

€154

€144

€135

€125

€117

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = €1.5b

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