CF
CF Industries Holdings, Inc.
$120.85
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 61.6% above fair value
You pay
$120.85
Bear
$55.09
Fair
$74.77
Bull
$94.44
Bear
$55.09
-54.4%
$7.87 × 7x
Fair
$74.77
-38.1%
$7.87 × 10x
Bull
$94.44
-21.9%
$7.87 × 12x
Adjust Assumptions
9.5x
7.87$
Key Value Driver
Through-cycle normalized EPS ($7.87)
Implied Market Multiple
15.4x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (42 analysts)
$128.63
Divergence from AlphaVal
42%
Summary
Using 7-year normalized EPS of $7.87 at a 10x cycle multiple, the base-case value is $74.77 per share. P/TBV cross-check: 9.8x.
Warnings
Price-to-book value of 9.8x 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 $128.63 (from 42 analysts). Our estimate is 42% 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