BECN
Beacon Roofing Supply, Inc.
$124.17
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 551.8% above fair value
You pay
$124.17
Bear
$13.97
Fair
$19.05
Bull
$24.13
Bear
$13.97
-88.7%
$1.27 × 14x + net cash
Fair
$19.05
-84.7%
$1.27 × 18x + net cash
Bull
$24.13
-80.6%
$1.27 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($1.27)
Implied Market Multiple
97.8x
Summary
Using 7-year normalized EPS of $1.27 at a 18x cycle multiple, the base-case value is $19.05 per share. P/TBV cross-check: 110.4x.
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 110.4x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
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