<div id="readability-page-1"><div><h3>Key Insights</h3><ul><li> SEEK's estimated fair value is AU$31.47 based on 2 Stage Free Cash Flow to Equity </li> <li> Current share price of AU$23.66 suggests SEEK is potentially 25% undervalued </li> <li> Our fair value estimate is 3.7% higher than SEEK's analyst price target of AU$30.34 </li> </ul><p>Does the December share price for SEEK Limited (ASX:SEK) reflect what it's really worth? Today, we will estimate the stock's intrinsic value  by projecting its future cash flows and then discounting them to today's value.  This will be done using the Discounted Cash Flow (DCF) model.  Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.</p><p> Remember though, that there are many ways to estimate a company's value, and a DCF is just one method.  For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. </p><p>We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.</p><h2> Crunching The Numbers </h2> <p> 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.  </p><p> 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: </p><h4> 10-year free cash flow (FCF) estimate </h4><table><tbody><tr><td> </td><td><strong>2026</strong></td><td><strong>2027</strong></td><td><strong>2028</strong></td><td><strong>2029</strong></td><td><strong>2030</strong></td><td><strong>2031</strong></td><td><strong>2032</strong></td><td><strong>2033</strong></td><td><strong>2034</strong></td><td><strong>2035</strong></td></tr><tr><td><strong> Levered FCF (A$, Millions) </strong></td><td>AU$223.2m</td><td>AU$285.5m</td><td>AU$349.9m</td><td>AU$456.0m</td><td>AU$534.6m</td><td>AU$604.4m</td><td>AU$665.6m</td><td>AU$719.3m</td><td>AU$767.1m</td><td>AU$810.4m</td></tr><tr><td><strong>Growth Rate Estimate Source</strong></td><td>Analyst x6</td><td>Analyst x6</td><td>Analyst x6</td><td>Analyst x1</td><td>Est @ 17.23%</td><td>Est @ 13.05%</td><td>Est @ 10.13%</td><td>Est @ 8.08%</td><td>Est @ 6.65%</td><td>Est @ 5.64%</td></tr><tr><td><strong> Present Value (A$, Millions) Discounted @ 8.1% </strong></td><td>AU$206</td><td>AU$244</td><td>AU$277</td><td>AU$333</td><td>AU$361</td><td>AU$378</td><td>AU$385</td><td>AU$385</td><td>AU$379</td><td>AU$370</td></tr></tbody></table><p><i>(&#34;Est&#34; = FCF growth rate estimated by Simply Wall St)</i><br/><strong>Present Value of 10-year Cash Flow (PVCF)</strong> = AU$3.3b</p><p> After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage.  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 3.3%. We discount the terminal cash flows to today's value at a cost of equity of 8.1%. </p><p><strong>Terminal Value (TV)</strong>= FCF<sub>2035</sub> × (1 + g) ÷ (r – g) = AU$810m× (1 + 3.3%) ÷ (8.1%– 3.3%) = AU$17b</p><p><strong>Present Value of Terminal Value (PVTV)</strong>= TV / (1 + r)<sup>10</sup>= AU$17b÷ ( 1 + 8.1%)<sup>10</sup>= AU$7.9b</p><p> The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value,  which in this case is AU$11b.  In the final step we divide the equity value by the number of shares outstanding.  Compared to the current share price of AU$23.7, the company appears   a touch undervalued    at a 25% discount to where the stock price trades currently.   Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. </p><figure><img height="760" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/21922191-dcf-1-dark-2/1766454682652?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="1706" original-src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/21922191-dcf-1-dark-2/1766454682652"/><figcaption>ASX:SEK Discounted Cash Flow December 23rd 2025</figcaption></figure> <h2> The Assumptions </h2><p> The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the 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 SEEK 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 8.1%, which is based on a levered beta of 1.150. 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. </p> <p><span> View our latest analysis for SEEK </span></p><h3>SWOT Analysis for SEEK</h3><div><div><p><strong>Strength</strong></p><ul><li>Debt is not viewed as a risk.</li></ul> <ul><li>Dividends are covered by earnings and cash flows.</li></ul> <ul> Dividend information for SEK.</ul> </div><div><p><strong>Weakness</strong></p><ul><li>Dividend is low compared to the top 25% of dividend payers in the Interactive Media and Services market.</li></ul></div><div><p><strong>Opportunity</strong></p><ul><li>Annual revenue is forecast to grow faster than the Australian market.</li></ul> <ul><li>Trading below our estimate of fair value by more than 20%.</li></ul> </div><div><p><strong>Threat</strong></p><ul><li> Annual earnings are forecast to grow slower than the Australian market.</li></ul> <ul> What else are analysts forecasting for SEK?</ul> </div></div><h2> Looking Ahead: </h2><p> Although the valuation of a company is important, it  ideally won't be the sole piece of analysis you scrutinize for a company.  It's not possible to obtain a foolproof valuation with a DCF model.  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 SEEK, there are three  pertinent  items  you should look at: </p><ol> <li> <strong>Risks</strong>: For instance, we've identified  <strong> 1 warning sign for SEEK</strong>  that you should be aware of. </li> <li> <strong>Future Earnings</strong>: How does SEK'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. </li><li> <strong>Other Solid Businesses</strong>: 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! </li> </ol><p> 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.</p><div><p>Mobile Infrastructure for Defense and Disaster</p><p>The next wave in robotics isn't humanoid. Its fully autonomous towers delivering 5G, ISR, and radar in under 30 minutes, anywhere.</p><p>Get the investor briefing before the next round of contracts</p><p><span>Sponsored On Behalf of CiTech</span></p></div></div></div>

<p>SEEK Limited (ASX:SEK) shares are estimated to be 25% below their intrinsic value, with a fair value of AU$31.47 based on a 2-stage Free Cash Flow to Equity model. The current share price is AU$23.66. The fair value estimate is 3.7% higher than the analyst price target of AU$30.34. The valuation uses a Discounted Cash Flow model, projecting future cash flows and discounting them to present value.</p>

SEEK Limited (ASX:SEK) Shares Could Be 25% Below Their Intrinsic Value Estimate