CF
CF Industries Holdings, Inc.
$121.70
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 59.7% above fair value
You pay
$121.70
Bear
$52.02
Fair
$76.21
Bull
$100.41
Bear
$52.02
-57.3%
$7.87 × 7x + net cash
Fair
$76.21
-37.4%
$7.87 × 10x + net cash
Bull
$100.41
-17.5%
$7.87 × 12x + net cash
Key Value Driver
Through-cycle normalized EPS ($7.87)
Implied Market Multiple
15.5x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $109.44 from 41 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $76.21 per share.
Warnings
Price-to-book value of 10.0x 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 $109.44 (from 41 analysts). Our estimate is 43% 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