Is There An Opportunity With Jubilee Metals Group PLC's (LON:JLP) 44% Undervaluation?
Jubilee Metals Group's UK£0.037 share price signals that it might be 44% undervalued
Our fair value estimate is 22% lower than Jubilee Metals Group's analyst price target of US$0.084
Today we will run through one way of estimating the intrinsic value of Jubilee Metals Group PLC (LON:JLP) by taking the expected future cash flows and discounting them to their present value. This will be done using the Discounted Cash Flow (DCF) model. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine.
Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.
This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today's value:
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Levered FCF ($, Millions)
-US$19.2m
US$21.7m
US$20.0m
US$19.2m
US$18.7m
US$18.5m
US$18.6m
US$18.7m
US$19.0m
US$19.3m
Growth Rate Estimate Source
Analyst x2
Analyst x2
Analyst x1
Est @ -4.41%
Est @ -2.33%
Est @ -0.87%
Est @ 0.16%
Est @ 0.87%
Est @ 1.37%
Est @ 1.72%
Present Value ($, Millions) Discounted @ 7.8%
-US$17.8
US$18.7
US$16.0
US$14.2
US$12.8
US$11.8
US$11.0
US$10.3
US$9.7
US$9.1
("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$96m
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 2.5%. We discount the terminal cash flows to today's value at a cost of equity of 7.8%.
Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$19m× (1 + 2.5%) ÷ (7.8%– 2.5%) = US$376m
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$376m÷ ( 1 + 7.8%)10= US$177m
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$273m. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of UK£0.04, the company appears quite undervalued at a 44% discount to where the stock price trades currently. 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.
Now 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 Jubilee Metals Group 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 7.8%, which is based on a levered beta of 1.028. 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.
Check out our latest analysis for Jubilee Metals Group
Strength
Debt is well covered by cash flow.
Weakness
Earnings declined over the past year.
Interest payments on debt are not well covered.
Opportunity
Annual earnings are forecast to grow faster than the British market.
Good value based on P/E ratio and estimated fair value.
Threat
Revenue is forecast to grow slower than 20% per year.
Valuation is only one side of the coin in terms of building your investment thesis, and it is only one of many factors that you need to assess for a company. DCF models are not the be-all and end-all of investment valuation. 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 instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. What is the reason for the share price sitting below the intrinsic value? For Jubilee Metals Group, we've put together three further factors you should consider:
Risks: To that end, you should be aware of the 2 warning signs we've spotted with Jubilee Metals Group .
Future Earnings: How does JLP's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
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!
PS. Simply Wall St updates its DCF calculation for every British stock every day, so if you want to find the intrinsic value of any other stock just search here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
9 minutes ago
- Yahoo
Minimize Your Apple Stock Risk Before Earnings on July 31 with This 1 Options Strategy
Apple (AAPL) is certainly a familiar name for investors. But it has been acting strangely this year, especially for a stock that was the first to cross the $3 trillion market cap level. As we see here, it is still above that perch. However, questions about the firm's ability to continue to deserve its lofty multiple, currently around 30x trailing earnings, and its ability to compete in the artificial intelligence business have dogged AAPL this year. The stock is off more than 14% year to date, well behind the broader market. More News from Barchart Low IV Alert: Stocks that Could be Ready to Pop Unusual Volume in Las Vegas Sands Call Options - Investors Bullish on Macao Gambling Alpha From Ashes: 'Big Loser' Comstock Resources (CRK) is Flashing a Statistically Significant Reversal Signal Tired of missing midday reversals? The FREE Barchart Brief newsletter keeps you in the know. Sign up now! That makes next week's earnings report even more of an 'event' than usual. So if you look at investing first as an exercise in risk management, and not as a sport or a casino game, an option collar might be a way to get exposure to AAPL while reducing the risk associated with a post-earnings decline. Show Me the Chart First! That's what I say to myself, as well as the folks I coach on using collars. Sure, you can technically collar any stock or ETF with a liquid options market. However, 'throwing good money after bad' is not a great habit. So as a 40-year chartist, and one who has seen a ton of manic markets, I only want to move forward if the stock chart indicates to me that there's a fighting chance the stock will go higher. That said, we're seeing again this earnings season that any company can be 'taken out back and shot,' to use a phrase from old Western movies. So with AAPL, I look at the daily chart below with my eyes wide open. I see a stock that is trying to mount a comeback. That 20-day moving average in yellow is trending well. But the PPO below is a bit choppy. And while many technicians wax poetic about this or that indicator, I'm a bit more visual, and less jargony. The weekly chart below is more encouraging, and also less. What? Allow me to explain. This is a market characterized by stocks that have been down on their luck suddenly surging in price. That makes traditional technicians happy, because it is positive momentum. However, like a sprinter in a horse race, if the speed can't be maintained long enough, the finish will not be as successful as the start. I see that risk with AAPL's weekly chart here. The 20-week moving average is still in a downtrend, and the PPO just crossed up. That latter aspect of the chart is good, but when that occurs so far below zero, it is less reliable. This all paints a picture for me of a stock that has a chance to move higher, but that an event like the forthcoming earnings report on Thursday, July 31 could easily blow that out of the water. But for those who like AAPL, collaring it can allow you to have your cake and eat it too. Here's one collar combination I zeroed in on. The table below shows four different combos, so you can see a small fraction of the variety of strike prices, expiration dates, break-evens and upside/downside combinations one can explore using Barchart's tools. How to Collar Apple Before Earnings: An Example The combination I'll focus on is the top one above. It goes out 5 months to Dec. 19, the last AAPL expiration date this year. So there's some time. The stock was trading near $214 on Friday morning, and the collar involves buying 100 shares of AAPL, buying a put option with a strike price of $205, and selling a call option struck at $260. This means I can sell AAPL at $205 if it declines below that level between now and Dec. 19. And if it rises to $260, roughly its all-time high reached at the end of last year, I could be forced to sell it. Talk about a high-class problem! That range is not the 'final' range for this collar setup, however. There's the net cost of the options. The puts cost $8.85 a share and the calls bring in $1.83, for the downside protection and for giving up profits, respectively. That nets out to about $7 a share. So if we take that $205 to $260 range and drop both levels by the net cost of $7, viola! We have an 'effective range' for this collar of $253 to $198. Recall that AAPL trades at $214 in this example. That produces upside potential of 18% and downside risk of 7.5%, for about a 2.5-to-1 reward/risk ratio. Option Collars Are Just 1 Way to Manage Risk To me, that ratio is as important a factor in investing as anything, whether you achieve it through an option collar or another strategy. So whether it is collaring popular stocks like AAPL, tactically managing assets, other options strategies, or simply using the strategy of 'position-sizing,' there are more ways than ever to manage risk in these modern markets. Earnings season is a great reminder of that. On the date of publication, Rob Isbitts did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
9 minutes ago
- Yahoo
Real Madrid ready to admit DEFEAT over Ibrahima Konate
Bubbling away in the background of a landmark Liverpool summer transfer window has been the saga of . The Reds under sporting director have been busy adding quality all over the pitch - with Florian Wirtz, Hugo Ekitike, Milos Kerkez, Jeremie Frimpong and Giorgi Mamardashvili all arriving. LFC x New Era Shop Now LFC Signed Merch Shop Now LFC x Titleist Shop Now But centre-back has been suggested as an area potentially in need of attention considering the contract situation revolving around Konate. The 26-year-old has got less than 12 months left on his current deal - expiring in June 2026. So far there has been no breakthrough over a new deal - with it earlier reported that the France defender would be seeking £200k per week to renew. Konate a priority Madrid target However those reports were superseded by ones stating that Konate had made up his mind and would DECLINE a renewal from the Reds. Liverpool, it was mooted, would be powerless to prevent Konate from running down his deal and joining Real Madrid for free in 2026. Only things are not working out that way. Madrid have got reason to believe that adding Konate as a new free transfer is not going to be as easy as they first thought. First came the reports from France declaring that Liverpool had made a new contract offer to Konate. Madrid plot Konate Plan B And while that offer has not been answered as yet, it was enough to scare the Madrid media into reporting that adding Konate was now tougher than ever. That's been followed up with a report in Defensa Central which states that Xabi Alonso is now activating Plan B as Konate slips from their grasp. 'Xabi Alonso is seriously considering the possibility of counting on Joan Martínez,' the report reads, adding that the Madrid academy graduate is now due a promotion. © IMAGO Madrid rolling back from Konate claims The reason for the 17-year-old being drafted into the first-team picture is increasing uncertainty over the fate of Konate. Madrid media are now rowing back from their previous claims that the Konate deal was all but done. That should give us an indication of how they feel Liverpool contract talks are going to go. Konate should take a look around at what Liverpool have added this summer and provided the club can match his demands he needs to commit his future long-term to the reigning Premier League title holders.
Yahoo
9 minutes ago
- Yahoo
Dave Ramsey lays into guest for asking why even invest if he might not live long enough to enjoy his riches
Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. Sometimes you can get the best advice by poking the bear. One write-in guest on The Ramsey Show found out the hard way after trying to 'make sense' of Dave Ramsey's investment advice. 'You keep saying to invest $100 a month beginning at age 30 and you'll be worth $5 million at 70 years old,' wrote a man named Isaiah. 'That's the most ridiculous thing I've ever heard.' Don't miss Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) You don't have to be a millionaire to gain access to this $1B private real estate fund. In fact, you can get started with as little as $10 — here's how Isaiah pointed out that the life expectancy of a white American male is 72 years old, while for a Black male it's 68, meaning 'most people will never live to see $5 million.' He asked Ramsey to help him 'make sense of this advice.' Ramsey, who called Isaiah 'entitled' and 'belligerent,' said the real issue is the idea 'you're supposed to get rich in 10 minutes.' Here's why investing still makes sense — even if America's lifespan stats suggest many men won't live long enough to enjoy all their savings. Crunching the numbers Ramsey admitted that Isaiah isn't completely wrong about life expectancy, but said he was putting words in his mouth. Ramsey said that saving $100 a month was an example — the idea is to save something every month and start building a 'money mindset.' 'We have never said $100 a month from [ages] 30 to 70 is $5 million — it's not,' Ramsey said, in a recent episode. 'It's $1,176,000, and that would be true of … any 40-year period of time you wanted to pick.' But getting started on that investment journey can be overwhelming, especially if $100 a month isn't possible for you quite yet. The important thing is to start saving with Ramsey's 40-year horizon in mind. With Wealthfront Automated Investing, you can start investing in the stock market with as little as $1. Depending on your risk profile and tax bracket, Wealthfront will create a customized portfolio with low-cost index funds that combines up to 17 global asset classes. You can also opt for automated index investing — helping you build wealth without worrying about short-term market fluctuations. Wealthfront automatically rebalances your portfolio, diversifies your deposits and can help reduce your tax liability by tax-loss harvesting. Even better, up to $500,000 of your deposits with Wealthfront Invest are protected by the Securities Investor Protection Corporation. This means that in the event of a brokerage failure your cash and securities are protected. Get started today and snag a $50 deposit bonus when you open your first investing account and fund it with $500 or more. Once you've established your investment base, that's when you can start ramping up your contributions to move the needle to $100 a month or beyond. Read more: Rich, young Americans are ditching the stormy stock market — What is a money mindset? A money mindset is 'your unique set of beliefs and your attitude about money,' explained co-host Rachel Cruze in a blog for Ramsey Solutions. That mindset 'drives the decisions you make about saving, spending and handling money' and 'shapes the way you feel about debt.' Cruze pointed to a Ramsey Solutions study of more than 10,000 millionaires, which found that 97% believed they could become millionaires in the first place. 'And having that mindset — not an inheritance, fancy education or wealthy parents — is exactly what caused them to succeed,' she wrote. Some people have an 'abundance mindset,' a belief that there are plenty of opportunities for everyone to grow wealth. Others have a 'scarcity mindset,' the belief that resources are limited and wealth is hard to come by. An abundance mindset focuses on possibilities and potential. A scarcity mindset focuses on limitations and fear, which can lead to unhealthy financial behaviors, such as overspending or hoarding. If you want to begin your wealth creation journey but are worried about market uncertainty, consider opting for assets like gold that can be resistant to market shocks. Investing in gold — often regarded as a safe haven asset — can not only help you grow your nest egg but also offer a buffer against market volatility. Opening a gold IRA with the help of Priority Gold can help you combine the inflation and recession-resistant properties of the precious metal along with the tax advantages of an IRA. Priority Gold offers free account set up and storage as well as free insured shipping for up to five years on their platinum package. Plus, Priority Gold offers guaranteed buyback assurance, ensuring you can sell your precious metals without any fees or added headaches. The best part? You can receive up to $20,000 in free silver on qualifying purchases and a complimentary 2025 Precious Metals Guide when you sign up. Shifting your money mindset Changing your mindset is easier said than done. It often means identifying where your limiting beliefs come from — maybe your upbringing or past money mistakes. Then it takes time and self-reflection to overcome them. An abundance mindset means looking at how to build wealth over time. It's not just about saving $100 a month — it's about how you use that money, whether through growing assets, investing or developing passive income streams. 'Millionaires focus on wealth creation, not just income generation,' wrote business strategist and CPA Melissa Houston in an article for Forbes. She added that they 'don't chase quick wins or get-rich-quick schemes.' Instead, millionaires build sustainable wealth 'through investments that appreciate over time' and make sure their money works for them through stocks, real estate and scalable business models. If you want to start investing now, Brokerages like Robinhood allow you to invest in stocks, options and ETFs 24 hours a day, five days a week, without paying any commission on trades. You can also opt for expert-managed portfolios that are proactively rebalanced depending on changing market conditions. When you sign up and open an account on Robinhood using this link, you can get a free stock from a selection of top American companies. For those looking to diversify beyond the stock market, the real estate sector might be worth considering. Real estate often acts as a hedge against inflation, and it can be used to diversify your portfolio against market shifts. Accredited investors seeking to invest in real estate without the hassles of buying, owning or managing properties can tap into the $34.9 trillion U.S. home equity market through the Homeshares U.S. Equity Fund. With a minimum investment of $25,000, accredited investors can gain direct exposure to hundreds of owner-occupied properties in top cities across the U.S. The fund is designed with a 45% downside protection, providing a bit of safety in the event of defaults. With risk-adjusted target returns ranging from 14% to 17%, this approach can provide an effective, hands-off way to invest in owner-occupied residential properties across regional markets. If you're not an accredited investor, or are not willing to invest large sums, crowdfunding platforms like Arrived allow you to invest in real estate with just $100. Arrived offers you access to shares of SEC-qualified investments in rental homes and vacation rentals, curated and vetted for their appreciation and income potential. Backed by world-class investors like Jeff Bezos, Arrived handles all the paperwork and management throughout the lifecycle of the investment, allowing you to sit back and become a landlord without any midnight maintenance calls to fix broken air conditioners or burst pipes. Plus, Arrived distributes any rental income from properties as monthly dividend checks, helping you set up a passive income source from the comfort of your home. What to read next Robert Kiyosaki warns of a 'Greater Depression' coming to the US — with millions of Americans going poor. But he says these 2 'easy-money' assets will bring in 'great wealth'. How to get in now Accredited investors can now buy into this $22 trillion asset class once reserved for elites – and become the landlord of Walmart, Whole Foods or Kroger without lifting a finger. Here's how Car insurance in America now costs a stunning $2,329/year on average — but here's how 2 minutes can save you more than $600 in 2025 Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? Stay in the know. Join 200,000+ readers and get the best of Moneywise sent straight to your inbox every week for free. This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Sign in to access your portfolio
