ACA
Arcosa, Inc.
$149.15
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 154.2% above fair value
You pay
$149.15
Bear
$45.64
Fair
$58.68
Bull
$71.72
Bear
$45.64
-69.4%
$3.26 × 14x
Fair
$58.68
-60.7%
$3.26 × 18x
Bull
$71.72
-51.9%
$3.26 × 22x
Adjust Assumptions
18.0x
3.26$
Key Value Driver
Through-cycle normalized EPS ($3.26)
Implied Market Multiple
45.8x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (8 analysts)
$145.00
Divergence from AlphaVal
60%
Summary
Using 7-year normalized EPS of $3.26 at a 18x cycle multiple, the base-case value is $58.68 per share. P/TBV cross-check: 7.6x.
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 7.6x 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 $145.00 (from 8 analysts). Our estimate is 60% 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