CNH
CNH Industrial N.V.
$11.22
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Undervalued
Trading 63.2% below fair value
You pay
$11.22
Bear
$25.40
Fair
$30.48
Bull
$35.56
Bear
$25.40
+126.4%
$1.27 × 20x
Fair
$30.48
+171.7%
$1.27 × 24x
Bull
$35.56
+216.9%
$1.27 × 28x
Adjust Assumptions
24.0x
1.27$
Key Value Driver
Through-cycle normalized EPS ($1.27)
Implied Market Multiple
8.8x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (15 analysts)
$14.45
Divergence from AlphaVal
111%
Summary
Using 7-year normalized EPS of $1.27 at a 24x cycle multiple, the base-case value is $30.48 per share. P/TBV cross-check: 4.6x.
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 4.6x 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 $14.45 (from 15 analysts). Our estimate is 111% 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