Dyno Nobel Limited (ASX:DNL) Shares Could Be 30% Below Their Intrinsic Value Estimate

Simply Wall St.

Dec 23, 2025

Key Insights Using the 2 Stage Free Cash Flow to Equity, Dyno Nobel fair value estimate is AU$4.68 Dyno Nobel is estimated to be 30% undervalued based on current share price of AU$3.29 Our fair ...

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Using the most recent financial data, we'll take a look at whether the stock is fairly priced  by projecting its future cash flows and then discounting them to today's value.  Our analysis will employ the Discounted Cash Flow (DCF) model.  There's really not all that much to it, even though it might appear quite complex.  Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation.  Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. What's The Estimated Valuation?   We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate.  To begin with, we have to get estimates of the next ten years of cash flows.   Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.   A DCF is all about the idea that a dollar in the future is less valuable than a dollar today,  so we need to discount the sum of these future cash flows to arrive at a present value estimate:  10-year free cash flow (FCF) estimate  2026202720282029203020312032203320342035 Levered FCF (A$, Millions) AU$469.7mAU$377.6mAU$384.8mAU$393.2mAU$403.1mAU$414.2mAU$426.3mAU$439.2mAU$452.9mAU$467.3mGrowth Rate Estimate SourceAnalyst x2Analyst x2Analyst x2Est @ 2.19%Est @ 2.52%Est @ 2.76%Est @ 2.92%Est @ 3.03%Est @ 3.11%Est @ 3.17% Present Value (A$, Millions) Discounted @ 7.5% AU$437AU$326AU$309AU$294AU$280AU$268AU$256AU$245AU$235AU$226(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = AU$2.9b The second stage is also known as Terminal Value, this is the business's cash flow after the first stage.  For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (3.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 7.5%. Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = AU$467m× (1 + 3.3%) ÷ (7.5%– 3.3%) = AU$11bPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= AU$11b÷ ( 1 + 7.5%)10= AU$5.5b The total value, or equity value, is then the sum of the present value of the future cash flows,  which in this case is AU$8.4b.  To get the intrinsic value per share, we divide this by the total number of shares outstanding.  Compared to the current share price of AU$3.3, the company appears   a touch undervalued    at a 30% 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. ASX:DNL Discounted Cash Flow December 22nd 2025  The Assumptions  We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows.  Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions.  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 Dyno Nobel 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 7.5%, which is based on a levered beta of 1.009. 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 Dyno Nobel SWOT Analysis for Dyno NobelStrength Debt is not viewed as a risk. Balance sheet summary for DNL. Weakness Dividend is low compared to the top 25% of dividend payers in the Chemicals market.Opportunity Annual earnings are forecast to grow faster than the Australian market. Trading below our estimate of fair value by more than 20%. Threat Dividends are not covered by earnings and cashflows. Annual revenue is expected to decline over the next 3 years.  See DNL's dividend history.  Next Steps:  Although the valuation of a company is important, it  ideally won't be the sole piece of analysis you scrutinize 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.  If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different.   What is the reason for the share price sitting below the intrinsic value?   For Dyno Nobel, there are three  additional  elements  you should further research:   Risks: Be aware that  Dyno Nobel is showing  2 warning signs in our investment analysis , and 1 of those is a bit concerning...    Future Earnings: How does DNL'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 High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!   PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the ASX every day. If you want to find the calculation for other stocks just search here.Mobile Infrastructure for Defense and DisasterThe next wave in robotics isn't humanoid. Its fully autonomous towers delivering 5G, ISR, and radar in under 30 minutes, anywhere.Get the investor briefing before the next round of contractsSponsored On Behalf of CiTechNew: Manage All Your Stock Portfolios in One PlaceWe've created the ultimate portfolio companion for stock investors, and it's free.• Connect an unlimited number of Portfolios and see your total in one currency• Be alerted to new Warning Signs or Risks via email or mobile• Track the Fair Value of your stocksTry a Demo Portfolio for FreeHave 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.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"}}}