DCO
Ducommun Incorporated
$160.05
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 238.1% above fair value
You pay
$160.05
Bear
$38.74
Fair
$47.34
Bull
$55.95
Bear
$38.74
-75.8%
$2.15 × 18x
Fair
$47.34
-70.4%
$2.15 × 22x
Bull
$55.95
-65.0%
$2.15 × 26x
Adjust Assumptions
22.0x
2.15$
Key Value Driver
Through-cycle normalized EPS ($2.15)
Implied Market Multiple
74.4x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (20 analysts)
$210.00
Divergence from AlphaVal
77%
Summary
Using 7-year normalized EPS of $2.15 at a 22x cycle multiple, the base-case value is $47.34 per share. P/TBV cross-check: 8.5x.
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 8.5x 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 $210.00 (from 20 analysts). Our estimate is 77% 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