Simply Wall St
5 min read
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Investors may be wondering if Adams Diversified Equity Fund is offering good value at its current price, or if the recent run has already priced in the opportunity.
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The fund last closed at US$23.12, with a 1.8% decline over the past week, a 3.4% gain over the last 30 days, and returns of 20.5% over 1 year, 103.5% over 3 years and 114.1% over 5 years, which may catch the eye of those weighing potential reward against risk.
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These moves sit against a backdrop of broader market attention on listed equity funds and how they are priced relative to the value of their underlying portfolios. For Adams Diversified Equity Fund, that context makes its current pricing and any discount or premium a central part of the story.
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Simply Wall St currently gives Adams Diversified Equity Fund a valuation score of 4 out of 6, based on checks of whether it looks undervalued on different measures. Next, we will walk through those methods before closing with a more complete way to think about its value.
The Excess Returns model looks at how effectively a company uses shareholders’ equity to generate profits above its cost of capital. Rather than focusing on cash flows, it focuses on what is earned on each dollar of book value and whether those earnings exceed the required return.
For Adams Diversified Equity Fund, the model uses a Book Value of US$23.35 per share and a Stable EPS of US$3.62 per share, based on the median return on equity from the past 5 years. The Average Return on Equity is 17.62%, compared with a Cost of Equity of US$1.98 per share, which results in an Excess Return of US$1.64 per share. A Stable Book Value of US$20.56 per share, sourced from the median book value over 5 years, supports these inputs.
Feeding these assumptions into the Excess Returns framework gives an estimated intrinsic value of about US$46.35 per share. Against the recent share price of US$23.12, this implies the stock is 50.1% undervalued on this method.
Result: UNDERVALUED
Our Excess Returns analysis suggests Adams Diversified Equity Fund is undervalued by 50.1%. Track this in your watchlist or portfolio, or discover 871 more undervalued stocks based on cash flows.
