STRNY
Severn Trent PLC
$41.19
Stable Earnings Power
85%
P/Adj-EPS × Normalized Multiple
Strong
·
Conviction
Overvalued
Trading 52.3% above fair value
You pay
$41.19
Bear
$23.66
Fair
$27.04
Bull
$30.42
Bear
$23.66
-42.6%
$1.69 × 14x P/E
Fair
$27.04
-34.4%
$1.69 × 16x P/E
Bull
$30.42
-26.2%
$1.69 × 18x P/E
Adjust Assumptions
16.0x
1.69$
Key Value Driver
Normalized P/E multiple (16x base case)
Implied Market Multiple
24.4x
Summary
Applying a 16x P/E to adjusted EPS of $1.69, the base-case value is $27.04 per share. DDM cross-check: $72.98.
Warnings
The company pays out 194% of its profits as dividends. That leaves little cushion — the dividend could be cut if business slows down.
Dividend-based valuation: $72.98 (above our primary estimate by 170%). Large gaps may signal the dividend doesn't reflect full earning power.
Financial statements were converted from GBP into USD using GBPUSD at 1.3518 USD per GBP.
Key Risks
- Growth DCF inappropriate — terminal value assumptions dominate
- EV/EBITDA misleading for regulated businesses where capex is mandated
- Regulatory risk is a fat tail not visible in normal multiples