Editing Safran SA (section)

=== Dividend Discount Model (DDM) ===

==== Equity valuation ====
In the following table, we present the key values used in a DDM (Dividend Discount Model) analysis, including the CAPM model, risk-free rate of return, beta, market rate of return, and the corresponding cost of equity.
{| class="wikitable"
!CAPM model
|Values
|-
|Risk-free rate of return (Euro  short-term rate (€STR))
|3.41%
|-
|Beta  (5Y Monthly, levered)
|1.35
|-
|Market rate of return (European  Stocks Portfolio)
|7.31%
|-
|Cost of equity
|8.7%
|}
The graphical representation below illustrates the dividend history of Safran over the past years, showcasing the annual dividends paid, including the notable occurrence of zero dividends in the year 2019.
[[File:Dividends.png|left|thumb|600x600px]]








{| class="wikitable"
!Year
!2011
!2012
!2013
!2014
!2015
!2016
!2017
!2018
!2019
!2020
!2021
!2022
|-
!Dividend per share
|0.62
|0.96
|1.12
|1.20
|1.38
|1.52
|1.60
|1.82
|0.00
|0.43
|0.50
|1.35
|}
To evaluate Safran's valuation, we applied the Gordon Growth Model (GGM), projecting the historical dividend growth rate from 2011 to 2018 to estimate the current growth rate starting from 2022. By doing so, we can make an estimation of the 2023 dividend.
{| class="wikitable"
!Period
|/
!2011-
2012
!2012-2013
!2013-2014
!2014-2015
!2015-2016
!2016-2017
!2017-2018
|-
!Dividend Growth Rate
|/
|0.55
|0.17
|0.07
|0.15
|0.10
|0.05
|0.14
|-
!Average  Growth Rate
|0.18
| colspan="7" rowspan="3" |
|-
!CAGR
|0.14
|-
!Constant  growth rate
|'''0.017'''
|}
The DDM value of '''19.67 €''' suggests that, according to the model's assumptions, the stock is overvalued relative to its intrinsic worth. On the other hand, the market value of 144.82 € reflects the collective perception of investors in the open market, which may be influenced by a variety of short-term and long-term factors.
{| class="wikitable"
!Value  per Share (DDM)
| '''                  19.67 €'''
|-
!Market value per share
|                144.82 €
|}
We also performed a sensitivity analysis.
{| class="wikitable"
|
! colspan="8" |Constant Growth rate
|-
! rowspan="8" |Cost of equity
|
|''1.1%''
|''1.3%''
|''1.5%''
|''1.7%''
|''1.9%''
|''2.1%''
|''2.3%''
|-
|''6.5%''
|25.37  €
|26.40  €
|27.51  €
|28.72  €
|30.04  €
|31.47  €
|33.04  €
|-
|''7.5%''
|21.39  €
|22.13  €
|22.91  €
|23.75  €
|24.65  €
|25.62  €
|26.66  €
|-
|''8.5%''
|18.49  €
|19.05  €
|19.63  €
|20.25  €
|20.91  €
|21.60  €
|22.35  €
|-
|''8.7%''
|18.01  €
|18.53  €
|19.08  €
|'''19.67 €'''
|20.29  €
|20.95  €
|21.65  €
|-
|''8.9%''
|17.54  €
|18.04  €
|18.57  €
|19.12  €
|19.71  €
|20.33  €
|20.99  €
|-
|''9.9%''
|15.54  €
|15.94  €
|16.35  €
|16.78  €
|17.24  €
|17.72  €
|18.22  €
|-
|''10.9%''
|13.96  €
|14.27  €
|14.61  €
|14.96  €
|15.32  €
|15.70  €
|16.10  €
|}

==== Inverse problem ====
In this section, our objective is to calculate the necessary growth rate of Safran's stock to achieve its market value, assuming market efficiency. To achieve this, we will simply reverse the GGM formula to derive the cost of equity.
{| class="wikitable"
|
|Inverse problem
|-
!Market value per share
|144.82 €
|-
!Expected  dividend per share
|1.37 €
|-
!Dividend  growth rate 
|1.70%
|-
!Cost of equity 
|'''2.64%'''
|}
The cost of equity of 2.64% for Safran represents the expected return or required rate of return that investors demand for holding the company's stock. A low cost of equity, such as 2.64%, indicates that investors perceive Safran as a relatively safe and stable investment.