AGX
Argan, Inc.
$656.35
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 249.1% above fair value
You pay
$656.35
Bear
$167.77
Fair
$188.00
Bull
$208.23
Bear
$167.77
-74.4%
$3.32 × 14x + net cash
Fair
$188.00
-71.4%
$3.32 × 18x + net cash
Bull
$208.23
-68.3%
$3.32 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($3.32)
Implied Market Multiple
197.8x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $446.50 from 7 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $188.00 per share.
Warnings
Recent profits ($9.73/share) are 193% above the mid-cycle average ($3.32). Buying based on peak profits is the most common mistake with boom-and-bust businesses.
Price-to-book value of 21.2x 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 $446.50 (from 7 analysts). Our estimate is 72% 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