AGX
Argan, Inc.
$534.91
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 154.4% above fair value
You pay
$534.91
Bear
$187.62
Fair
$210.29
Bull
$232.95
Bear
$187.62
-64.9%
$3.32 × 14x + net cash
Fair
$210.29
-60.7%
$3.32 × 18x + net cash
Bull
$232.95
-56.5%
$3.32 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($3.32)
Implied Market Multiple
161.2x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $559.00 from 7 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $210.29 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 17.3x 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 $559.00 (from 7 analysts). Our estimate is 78% 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