CNH
CNH Industrial N.V.
$10.11
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Undervalued
Trading 57.8% below fair value
You pay
$10.11
Bear
$19.39
Fair
$23.95
Bull
$28.52
Bear
$19.39
+91.8%
$1.27 × 20x + net cash
Fair
$23.95
+136.9%
$1.27 × 24x + net cash
Bull
$28.52
+182.1%
$1.27 × 28x + net cash
Key Value Driver
Through-cycle normalized EPS ($1.27)
Implied Market Multiple
8.0x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $13.09 from 14 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $23.95 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.
Price-to-book value of 4.1x 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 $13.09 (from 14 analysts). Our estimate is 104% 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