BLDR
Builders FirstSource, Inc.
$74.15
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Undervalued
Trading 41.7% below fair value
You pay
$74.15
Bear
$93.22
Fair
$127.12
Bull
$161.02
Bear
$93.22
+25.7%
$9.06 × 14x + net cash
Fair
$127.12
+71.4%
$9.06 × 18x + net cash
Bull
$161.02
+117.2%
$9.06 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($9.06)
Implied Market Multiple
8.2x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $106.64 from 43 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $127.12 per share.
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.
Wall Street's average price target is $106.64 (from 43 analysts). Our estimate is 27% above 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