STRNY
Severn Trent Plc
$42.91
Stable Earnings Power
85%
P/Adj-EPS × Normalized Multiple
Strong
·
Conviction
Overvalued
Trading 52.8% above fair value
You pay
$42.91
Bear
$24.58
Fair
$28.09
Bull
$31.60
Bear
$24.58
-42.7%
$1.76 × 14x P/E
Fair
$28.09
-34.5%
$1.76 × 16x P/E
Bull
$31.60
-26.4%
$1.76 × 18x P/E
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 $1.76, the base-case value is $28.09 per share. DDM cross-check: $73.26.
Warnings
The company pays out 195% of its profits as dividends. That leaves little cushion — the dividend could be cut if business slows down.
Dividend-based valuation: $73.26 (above our primary estimate by 161%). Large gaps may signal the dividend doesn't reflect full earning power.
Financial statements were converted from GBP into USD using GBPUSD at 1.3476 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