CF
CF Industries Holdings, Inc.
$114.02
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 49.3% above fair value
You pay
$114.02
Bear
$52.14
Fair
$76.38
Bull
$100.63
Bear
$52.14
-54.3%
$7.87 × 7x + net cash
Fair
$76.38
-33.0%
$7.87 × 10x + net cash
Bull
$100.63
-11.7%
$7.87 × 12x + net cash
Key Value Driver
Through-cycle normalized EPS ($7.87)
Implied Market Multiple
14.5x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $110.00 from 41 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $76.38 per share.
Warnings
Price-to-book value of 9.4x 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 $110.00 (from 41 analysts). Our estimate is 44% 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