COL
Rockwell Collins, Inc.
$141.04
Cyclical & Capital-Intensive
70%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 48.4% above fair value
You pay
$141.04
Bear
$77.33
Fair
$95.01
Bull
$112.69
Bear
$77.33
-45.2%
$4.42 × 18x + net cash
Fair
$95.01
-32.6%
$4.42 × 22x + net cash
Bull
$112.69
-20.1%
$4.42 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($4.42)
Implied Market Multiple
31.9x
Summary
Using 7-year normalized EPS of $4.42 at a 22x cycle multiple, the base-case value is $95.01 per share. P/TBV cross-check: 57.3x.
Warnings
Price-to-book value of 57.3x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
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