AVAV
AeroVironment, Inc.
$145.72
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 49.5% above fair value
You pay
$145.72
Bear
$79.50
Fair
$97.44
Bull
$115.39
Bear
$79.50
-45.4%
$1.72 × 18x + net cash
Fair
$97.44
-33.1%
$1.72 × 22x + net cash
Bull
$115.39
-20.8%
$1.72 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($1.72)
Implied Market Multiple
84.7x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $277.67 from 28 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $97.44 per share.
Warnings
Price-to-book value of 12.5x 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 $277.67 (from 28 analysts). Our estimate is 87% 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