BECN
Beacon Roofing Supply, Inc.
$124.17
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 519.8% above fair value
You pay
$124.17
Bear
$14.95
Fair
$20.03
Bull
$25.11
Bear
$14.95
-88.0%
$1.27 × 14x + net cash
Fair
$20.03
-83.9%
$1.27 × 18x + net cash
Bull
$25.11
-79.8%
$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 $20.03 per share. P/TBV cross-check: 25.6x.
Warnings
Price-to-book value of 25.6x 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