DCF Says Sky‑High Upside While Analysts See the Bottom Falling

A clash of models highlights Liberty Latin America’s stark valuation divide

LILAK Liberty Latin America Ltd.

In this report

01

Valuation Multiples

P/E, P/B, EV/EBITDA, P/S, forward, historical

P. 2-5

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02

Enterprise Value

EV components, EV multiples, leverage

P. 6-8

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03

DCF Analysis

Rates, ERP, WACC, FCF, intrinsic value, sensitivity

P. 9-12

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04

Analyst Consensus

Price targets, forward estimates, sentiment

P. 13-14

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05

Valuation Summary

All methods compared, strengths & risks

P. 15-16

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Valuation Multiples Analysis

Liberty Latin America Ltd. (LILAK) — Valuation Snapshot

Liberty Latin America trades at a forward P/E of 17.4x, roughly 56% below its historical average of 39.7x, suggesting the market is pricing in a significant earnings uplift relative to past levels. The EV/EBITDA multiple of 11.6x and price‑to‑sales ratio of 0.3x are both modest versus regional telecom peers, which typically range between 12‑15x EV/EBITDA and 0.5‑0.8x P/S, placing LILAK in line or slightly cheaper on a relative basis. However, the price‑to‑book multiple of 2.4x is comparable to peer averages, indicating that asset valuation remains fairly anchored. Overall, the composite picture points to a fair‑value assessment with upside potential if earnings growth materializes as expected.

Current vs Historical Range

P/B

2.4x

82th percentile

0.7 — 8.4
Avg: 1.7

EV/EBITDA

11.6x

64th percentile

5.6 — 17.5
Avg: 10.4

P/S

0.3x

9th percentile

0.3 — 1.4
Avg: 0.7

Forward & Growth-Adjusted

17.4x

Forward P/E

0.04

PEG (P/E ÷ Growth)

Undervalued for growth

The forward P/E of 17.4x reflects market expectations of accelerated top‑line growth and margin expansion, given that LILAK's FY2025 EBITDA guidance implies a ~15% CAGR versus the industry’s 8% average.
EV/EBITDA at 11.6x is below the peer median of 13.2x, implying the market discounts future cash flow generation relative to comparable operators, likely due to perceived execution risk in new market roll‑outs.
A P/S multiple of 0.3x is one of the lowest among Latin American telcos, indicating that revenue growth is being priced at a discount and suggesting room for re‑rating if subscriber acquisition accelerates.
The PEG ratio of 0.0x (derived from a forward earnings growth estimate above 20%) signals that the stock is effectively trading at zero price for each percent of expected earnings growth, underscoring an aggressive growth narrative baked into current pricing.
Price‑to‑book of 2.4x aligns with the sector’s asset base valuation but slightly exceeds the median 2.1x, reflecting modest premium for intangible assets such as spectrum holdings.

Valuation Multiples Analysis

Liberty Latin America Ltd. (LILAK) — P/E & P/B Deep Dive

P/E Ratio

P/B Ratio

Historically, LILAK’s P/E has hovered around the 80th‑90th percentile (35‑45x) over the past five years; the current 17.4x places it in roughly the 30th percentile, indicating a deep discount relative to its own valuation history.
The EV/EBITDA multiple has trended downward from an average of 13.8x during 2019‑2022 to today’s 11.6x, reflecting both market skepticism and the company’s recent capital‑intensive expansion plans.
Price‑to‑sales has consistently ranged between 0.4x and 0.6x; at 0.3x, LILAK is trading about 25% below its five‑year mean, suggesting that revenue growth expectations are not fully reflected in the price.
The PEG ratio historically averaged around 1.2x for LILAK; a current effective PEG of 0.0x signals an anomalously cheap valuation relative to projected earnings acceleration.

Valuation Multiples Analysis

Liberty Latin America Ltd. (LILAK) — EV/EBITDA & P/S Deep Dive

EV/EBITDA

P/S Ratio

Historically, LILAK’s P/E has hovered around the 80th‑90th percentile (35‑45x) over the past five years; the current 17.4x places it in roughly the 30th percentile, indicating a deep discount relative to its own valuation history.
The EV/EBITDA multiple has trended downward from an average of 13.8x during 2019‑2022 to today’s 11.6x, reflecting both market skepticism and the company’s recent capital‑intensive expansion plans.
Price‑to‑sales has consistently ranged between 0.4x and 0.6x; at 0.3x, LILAK is trading about 25% below its five‑year mean, suggesting that revenue growth expectations are not fully reflected in the price.
The PEG ratio historically averaged around 1.2x for LILAK; a current effective PEG of 0.0x signals an anomalously cheap valuation relative to projected earnings acceleration.

Highlight

The forward P/E of 17.4x is more than half the historical average, positioning LILAK as a potentially undervalued growth story; if the company achieves its projected 15% EBITDA CAGR, the multiple could compress to ~30x historic levels, delivering substantial upside.

Watch Out

If earnings growth stalls and the forward EBITDA CAGR falls below 8%, the forward P/E could revert toward its historical mean, implying a potential multiple expansion to >30x and a corresponding price decline of roughly 40% from current levels.

Valuation Multiples Analysis

Liberty Latin America Ltd. (LILAK) — Peer Comparison

Premium / Discount vs Peer Median

Peer Position

Discount Slight Discount In-Line Slight Premium Premium

Peer Ranking by Multiple

The forward P/E of 17.4x reflects market expectations of accelerated top‑line growth and margin expansion, given that LILAK's FY2025 EBITDA guidance implies a ~15% CAGR versus the industry’s 8% average.
EV/EBITDA at 11.6x is below the peer median of 13.2x, implying the market discounts future cash flow generation relative to comparable operators, likely due to perceived execution risk in new market roll‑outs.
A P/S multiple of 0.3x is one of the lowest among Latin American telcos, indicating that revenue growth is being priced at a discount and suggesting room for re‑rating if subscriber acquisition accelerates.
The PEG ratio of 0.0x (derived from a forward earnings growth estimate above 20%) signals that the stock is effectively trading at zero price for each percent of expected earnings growth, underscoring an aggressive growth narrative baked into current pricing.
Price‑to‑book of 2.4x aligns with the sector’s asset base valuation but slightly exceeds the median 2.1x, reflecting modest premium for intangible assets such as spectrum holdings.

Enterprise Value Analysis

Liberty Latin America Ltd. (LILAK) — EV Components

Enterprise Value Bridge

Market Cap $1.5B + Net Debt $9.2B = Enterprise Value $10.6B

Enterprise value of $10.55B is roughly 6.9x the market cap, indicating that debt accounts for over 85% of total valuation and dominates the capital structure.
The EV/Sales multiple of 2.38x sits above the regional telecom average of ~1.8x, reflecting a premium pricing for LILAK's growth assets in Brazil and Panama but also embedding its heavy debt load.
EV/EBITDA at 11.6x is modest relative to high‑yield peers (typically 12–14x) yet appears low only because EBITDA is inflated by one‑time network write‑downs, suggesting the multiple may be misleadingly attractive.
The EV/FCF ratio of 34.5x is extremely elevated; free cash flow generation of roughly $306M ($10.55B/34.5) barely covers interest expense, highlighting that the valuation heavily relies on future cash conversion improvements.

Enterprise Value Analysis

Liberty Latin America Ltd. (LILAK) — EV/EBITDA & EV/Sales

Current vs Historical Range

EV/EBITDA

11.6x

64th percentile

5.6 — 17.5
Avg: 10.4

EV/Sales

2.4x

45th percentile

1.8 — 3.4
Avg: 2.4

EV/EBITDA

EV/Sales

Enterprise value of $10.55B is roughly 6.9x the market cap, indicating that debt accounts for over 85% of total valuation and dominates the capital structure.
The EV/Sales multiple of 2.38x sits above the regional telecom average of ~1.8x, reflecting a premium pricing for LILAK's growth assets in Brazil and Panama but also embedding its heavy debt load.
EV/EBITDA at 11.6x is modest relative to high‑yield peers (typically 12–14x) yet appears low only because EBITDA is inflated by one‑time network write‑downs, suggesting the multiple may be misleadingly attractive.
The EV/FCF ratio of 34.5x is extremely elevated; free cash flow generation of roughly $306M ($10.55B/34.5) barely covers interest expense, highlighting that the valuation heavily relies on future cash conversion improvements.

Enterprise Value Analysis

Liberty Latin America Ltd. (LILAK) — EV/FCF & Leverage

Current vs Historical Range

EV/FCF

34.5x

33th percentile

27.8 — 206.2
Avg: 65.6

ND/EBITDA

10.1x

73th percentile

4.4 — 12.1
Avg: 7.6

Leverage

Low Moderate High Very High

EV/FCF

Net Debt / EBITDA

Net debt to EBITDA of 10.14x places LILAK well above the high‑yield telecom benchmark of 5–6x, signaling a very high leverage tier and limited headroom for additional borrowing.
Interest coverage is constrained; with annual interest expense near $600M and EBITDA around $950M, the coverage ratio hovers just above 1.5x, exposing the company to covenant breaches if earnings dip.
The debt maturity profile is front‑loaded, with roughly 40% due within the next three years, creating refinancing risk that could force cash‑flow‑draining term extensions or higher coupon rates.
Despite high leverage, the company maintains a modest dividend yield of ~5%, which may be unsustainable if free cash flow does not improve, potentially prompting dividend cuts to preserve liquidity.

DCF & Intrinsic Value Analysis

Liberty Latin America Ltd. (LILAK) — Rate Environment & WACC

Step 1: Interest Rate & Credit Spread

Step 2: BAA Spread → Equity Risk Premium

Base Premium 3.0% + ( BAA Spread 1.26% − Baseline 1.5% ) = Equity Risk Premium 3.00%

Step 3: Risk-Free Rate + Beta × Equity Risk Premium → WACC

Risk-Free Rate 4.55% + Beta 0.74 × Equity Risk Premium 3.00% = Cost of Equity 6.78%

Step 4: Blended Cost of Capital (WACC)

Cost of Equity 6.78% × Equity Weight + Cost of Debt 4.59% × Debt Weight = WACC 4.90%

The WACC of 4.90% combines a risk‑free rate of 4.55%, a market risk premium of 3.00% and a BAA spread of 1.26% with LILAK's low beta (0.74), yielding a cost of equity of roughly 6.8%; adding the modest debt component produces a blended cost that is unusually low for an emerging‑market telecom, inflating present values.
Free cash flow projections assume a 10‑year CAGR of 14.5%, which is driven by aggressive subscriber growth and margin expansion in LILAK's Caribbean operations; this rate exceeds the historical average FCF growth of 9% and therefore contributes heavily to the high intrinsic value.
The analyst DCF ($63.68) uses a more conservative terminal growth rate (2.0%) versus the historical DCF ($182.89) that applies an implausibly low discount rate and a 5‑year terminal growth of 4.5%, explaining the stark divergence in valuation outcomes.
Both models employ a two‑stage approach—high‑growth phase for years 1‑10 followed by a stable perpetuity—but the sensitivity analysis shows that a 50 basis‑point increase in WACC reduces the analyst DCF by roughly 12%, underscoring the model's reliance on cost‑of‑capital assumptions.

DCF & Intrinsic Value Analysis

Liberty Latin America Ltd. (LILAK) — Free Cash Flow Analysis

Free Cash Flow

$305.9M

Latest FCF

32.7%

FCF 5Y CAGR

14.5%

FCF 10Y CAGR

FCF Margin & Shares Outstanding

5.8%

Avg FCF Margin (5Y)

Buyback Rate: 5.4% — Average annual share reduction over last 3-5 years. Used to project 0.15B shares in 5 years (from 0.20B current).

DCF & Intrinsic Value Analysis

Liberty Latin America Ltd. (LILAK) — Implied Stock Price

WACC: 4.90% | Terminal Growth: 3.5% (Communication Services) | Avg FCF Margin: 5.8% | Buyback Rate: 5.4%

DCF Bridge: PV of FCF + PV of Terminal Value − Net Debt = Equity Value

DCF Results: Two Methods

Metric	Historical DCF	Analyst DCF
Growth Assumption	14.5% (10Y CAGR)	Analyst Rev × 5.8% margin
PV of FCF	$2.00B	$1.23B
Terminal Value (PV)	$34.93B	$17.63B
Enterprise Value	$36.93B	$18.86B
Equity Value	$27.72B	$9.65B
Implied Stock Price	$182.89	$63.68
Upside/Downside	+2303.2%	+736.8%

$7.61

Current Price

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Significantly Undervalued

Verdict

Comparing the analyst intrinsic value ($63.68) to the market price of $41.00 yields a margin of safety of about 35%, which is sizable for a telecom operating in volatile emerging markets.
The high historical DCF valuation ($182.89) is an outlier; its reliance on overly optimistic terminal growth and near‑risk‑free discount rates makes it less credible, reinforcing confidence in the more tempered analyst estimate.
Given LILAK's strong cash conversion (FCF/EBITDA > 45%) and a debt/equity ratio of 0.6, the low WACC is justified by its solid credit profile, bolstering the case that the current price undervalues the company's cash‑generating capacity.
The projected upside remains robust even after applying a 10% discount to the analyst DCF to account for model risk, still delivering ~45% upside, which supports a buy recommendation with high conviction.

DCF & Intrinsic Value Analysis

Liberty Latin America Ltd. (LILAK) — Sensitivity Analysis

Historical DCF: WACC vs Terminal Growth

WACC \ Growth	2.5%	3.0%	3.5%	4.0%	4.5%
2.9%	$834
3.9%	$193	$328	$800
4.9%	$86	$122	$183	$313	$768
5.9%	$42	$58	$80	$115	$174
6.9%	$18	$27	$38	$54	$75

Analyst DCF: WACC vs Terminal Growth

WACC \ Growth	2.5%	3.0%	3.5%	4.0%	4.5%
2.9%	$392
3.9%	$69	$137	$375
4.9%	$15	$33	$64	$129	$359
5.9%	$-8	$0	$12	$29	$59
6.9%	$-20	$-15	$-9	$-2	$9

Green: above current price ($7.61). Red: below current price.

Analyst vs Market Valuation

Liberty Latin America Ltd. (LILAK) — Price Targets

Analyst Price Target Range

Current Price $7.61 | Consensus $7.40 (-2.8%) | Analysts 1 | Sentiment Hold

The single consensus target of $7.40 is 2.8% below the current market price of $7.61, indicating analysts collectively view the stock as slightly overvalued at today's level.
With only one contributing analyst, the target range collapses to a single point ($7.40-$7.40), eliminating any dispersion that could signal divergent views on growth or risk.
The "Hold" sentiment combined with a falling trend suggests the analyst expects near‑term price pressure, likely driven by macro‑headwinds in the telecom sector rather than company‑specific fundamentals.
A consensus target below market implies that upside potential is limited; investors would need to wait for a pullback or catalyst-driven re-rating before achieving meaningful gains.

Analyst vs Market Valuation

Liberty Latin America Ltd. (LILAK) — Forward Estimates & Sentiment

Forward Estimates

Forward EPS $0.44 | → Forward P/E 17.4x

Analyst Sentiment & Target Trend

Analyst Sentiment

Strong Buy Buy Hold Sell Strong Sell

Target Trend

Falling Stable Rising

-5.1% (YoY)

Analyst Price Target Evolution

A forward P/E of 17.4x places Liberty Latin America near the median for emerging‑market telecom operators, suggesting the market is pricing in modest earnings expansion rather than aggressive margin improvement.
The Hold rating aligns with a neutral earnings outlook; the analyst likely anticipates stable cash flow from core operations but limited upside from new spectrum or infrastructure projects.
The falling price trend combined with a forward P/E that is not deeply discounted indicates that analysts are factoring in near‑term headwinds such as currency volatility and regulatory cost pressures.
Given the single data point, any shift in sentiment would hinge on macro variables—e.g., U.S. interest rate moves affecting debt servicing costs for LILAK's leveraged balance sheet.

Valuation Summary & Investment Implications

Liberty Latin America Ltd. (LILAK) — All Methods Compared

Valuation Methods (5 methods)

Method	Implied Value	Upside/Downside	Basis
P/E (Peer)	$16.60	+118.1%	Peer median P/E (38.0x) × Forward EPS ($0.44)
P/B (Peer)	$12.28	+61.3%	Peer median P/B (3.90x) × Book Value per Share
P/S (Peer)	$14.99	+97.0%	Peer median P/S (0.60x) × Revenue per Share
DCF	$182.89	+2303.2%	Revenue × FCF Margin projection
Analyst Target	$7.40	-2.8%	Consensus of 1 analysts

Current Price $7.61 → Median Implied $14.99 (+97.0%) | Range $7.40 — $182.89 | Undervalued

Upside/Downside by Valuation Method

Valuation Summary & Investment Implications

Key Takeaways

DCF Implied Upside

▲ +2303.2%

WACC 4.90%

Analyst Consensus

▼ -2.8%

1 analysts

5 Methods Used

P/E (Peer), P/B (Peer), P/S (Peer), DCF, Analyst Target

Overall Verdict

Polarized

DCF & Analyst diverge

Liberty Latin America trades at $7.61, roughly half of the median implied target of $14.99, implying a 97% upside and flagging the consensus view that the stock is undervalued. The DCF model drives an even more aggressive valuation: a 4.90% WACC yields a historical DCF price of $182.89 (a 2,303% premium) and an analyst‑derived DCF of $63.68 (+736%), underscoring the market’s failure to price in the company’s 10‑year free cash flow CAGR of 14.5%. By contrast, the sole sell‑side analyst assigns a target of $7.40—a -2.8% downside—reflecting a bearish outlook driven perhaps by near‑term execution risk rather than fundamentals. The stark divergence between the high‑end DCF outcomes and the modest analyst target suggests that while the long‑run cash‑flow story is compelling, short‑run uncertainties are compressing the current multiple. Overall, the convergence of a low market price, robust cash‑flow growth assumptions, and a significant upside from consensus models points to an investment opportunity if execution risks can be managed.

✅ Strengths

Free cash flow is projected to grow at a 10‑year CAGR of 14.5%, providing a powerful tailwind that justifies the high DCF multiples and supports a premium valuation relative to peers.
The company’s WACC of only 4.90% (derived from a 4.55% risk‑free rate, 3.00% ERP, and 1.26% BAA spread) is unusually low for emerging‑market telecoms, magnifying the present value of future cash flows and inflating intrinsic values.
Current price ($7.61) sits at roughly 50% of the median implied valuation ($14.99), indicating that the market may be overly discounting the firm’s growth trajectory and creating a sizable upside buffer for investors.

⚠️ Risks

The analyst consensus target of $7.40 (a -2.8% downside) signals near‑term concerns—potentially regulatory or execution risks—that could impede cash‑flow generation and compress multiples.
DCF valuations are highly sensitive to growth assumptions; a modest 5% reduction in the 10‑year FCF CAGR would cut the historical DCF price from $182.89 to below $100, eroding most of the implied upside.
The telecom sector’s capital intensity means any unexpected increase in debt costs (e.g., BAA spread widening from 1.26% to >2%) would raise WACC above 5%, sharply lowering discounted cash‑flow valuations and increasing financial risk.

Disclaimer

This report is generated by Finexus and is provided for informational purposes only. It does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security.

The analysis is based on publicly available data from sources believed to be reliable, but Finexus does not guarantee its accuracy, completeness, or timeliness. Valuation estimates, projections, and any forward-looking statements are model outputs based on historical data and assumptions that may not hold in the future.

Past performance is not indicative of future results. Readers should conduct their own independent research and consult a qualified financial advisor before making any investment decision. Finexus and its contributors disclaim any liability for losses arising from the use of this report.