AAON
AAON, Inc.
$134.60
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 242.7% above fair value
You pay
$134.60
Bear
$28.81
Fair
$39.28
Bull
$49.75
Bear
$28.81
-78.6%
$1.29 × 14x + net cash
Fair
$39.28
-70.8%
$1.29 × 18x + net cash
Bull
$49.75
-63.0%
$1.29 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($1.29)
Implied Market Multiple
104.3x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $119.00 from 5 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $39.28 per share.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Price-to-book value of 15.1x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
Wall Street's average price target is $119.00 (from 5 analysts). Our estimate is 84% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing