Stock Analysis

Calculating The Fair Value Of Park Systems Corp. (KOSDAQ:140860)

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Key Insights

  • The projected fair value for Park Systems is ₩228,244 based on 2 Stage Free Cash Flow to Equity
  • Current share price of ₩243,500 suggests Park Systems is potentially trading close to its fair value
  • Analyst price target for A140860 is ₩325,000, which is 42% above our fair value estimate

Does the October share price for Park Systems Corp. (KOSDAQ:140860) 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. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.

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.

The Calculation

We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To start off with, we need to estimate 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.

Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars:

10-year free cash flow (FCF) estimate

2026202720282029203020312032203320342035
Levered FCF (₩, Millions) ₩42.1b₩58.2b₩70.7b₩82.0b₩91.8b₩100.3b₩107.7b₩114.2b₩120.0b₩125.3b
Growth Rate Estimate SourceAnalyst x5Analyst x5Est @ 21.50%Est @ 15.92%Est @ 12.00%Est @ 9.27%Est @ 7.35%Est @ 6.01%Est @ 5.07%Est @ 4.41%
Present Value (₩, Millions) Discounted @ 8.5% ₩38.9k₩49.5k₩55.4k₩59.3k₩61.2k₩61.7k₩61.0k₩59.6k₩57.8k₩55.6k

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = ₩560b

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 2.9%. We discount the terminal cash flows to today's value at a cost of equity of 8.5%.

Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = ₩125b× (1 + 2.9%) ÷ (8.5%– 2.9%) = ₩2.3t

Present Value of Terminal Value (PVTV)= TV / (1 + r)10= ₩2.3t÷ ( 1 + 8.5%)10= ₩1.0t

The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is ₩1.6t. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of ₩244k, the company appears around fair value at the time of writing. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind.

dcf
KOSDAQ:A140860 Discounted Cash Flow October 15th 2025

The Assumptions

Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the 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 Park Systems 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 8.5%, which is based on a levered beta of 1.129. 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.

View our latest analysis for Park Systems

SWOT Analysis for Park Systems

Strength
  • Earnings growth over the past year exceeded the industry.
  • Debt is not viewed as a risk.
Weakness
  • Dividend is low compared to the top 25% of dividend payers in the Electronic market.
  • Expensive based on P/E ratio and estimated fair value.
Opportunity
  • Annual revenue is forecast to grow faster than the South Korean market.
Threat
  • Annual earnings are forecast to grow slower than the South Korean market.

Moving On:

Whilst important, the DCF calculation 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. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For Park Systems, we've put together three additional aspects you should further examine:

  1. Risks: Case in point, we've spotted 1 warning sign for Park Systems you should be aware of.
  2. Future Earnings: How does A140860'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: 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 KOSDAQ every day. If you want to find the calculation for other stocks just search here.

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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.