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TLG Immobilien AG (ETR:TLG) Investors Are Paying Above The Intrinsic Value

In this article I am going to calculate the intrinsic value of TLG Immobilien AG (XTRA:TLG) using the discounted cash flows (DCF) model. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. If you are reading this after June 2018 then I highly recommend you check out the latest calculation for TLG Immobilien here.

What’s the value?

I use what is known as the 2-stage model, which simply means we have two different periods of varying growth rates for the company’s cash flows. Generally the initial phase has higher growth rates that plateau over time. To begin, I use the analyst consensus estimates of TLG’s levered free cash flow (FCF) over the next five years and discounted these figures at the rate of 8.76%. When estimates weren’t available, I’ve extrapolated the average annual growth rate over the previous five years, capped at a reasonable level. This resulted in a present value of 5-year cash flow of €578.44M. Want to understand how I calculated this value? Check out our detailed analysis here.

XTRA:TLG Future Profit Jun 4th 18
XTRA:TLG Future Profit Jun 4th 18

The graph above shows how TLG’s top and bottom lines are expected to move in the future, which should give you some color on TLG’s outlook. Now we need to calculate the terminal value, which accounts for all the future cash flows after the five years. I think it’s suitable to use the 10-year government bond rate of 2.8% as the stable growth rate, which is rightly below GDP growth, but more towards the conservative side. Discounting the terminal value back five years gives us a present value of €1.11B.

The total value is the sum of cash flows for the next five years and the discounted terminal value, which results in the Total Equity Value, which in this case is €1.69B. To get the intrinsic value per share, we divide this by the total number of shares outstanding. This results in an intrinsic value of €16.49, which, compared to the current share price of €24.22, we see that TLG Immobilien is quite expensive at the time of writing.

Next Steps:

Whilst important, DCF calculation shouldn’t be the only metric you look at when researching a company. What is the reason for the share price to differ from the intrinsic value? For TLG, I’ve put together three important factors you should further examine:

  1. Financial Health: Does TLG have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

  2. Future Earnings: How does TLG’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.

  3. Other High Quality Alternatives: Are there other high quality stocks you could be holding instead of TLG? 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 for every stock on the XTRA every 6 hours. If you want to find the calculation for other stocks just search here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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