DIOD
Diodes Incorporated
$99.65
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Mild
·
Conviction
Overvalued
Trading 8.6% above fair value
You pay
$99.65
Bear
$70.47
Fair
$91.75
Bull
$113.03
Bear
$70.47
-29.3%
$4.91 × 12x + net cash
Fair
$91.75
-7.9%
$4.91 × 16x + net cash
Bull
$113.03
+13.4%
$4.91 × 20x + net cash
Key Value Driver
Through-cycle normalized EPS ($4.91)
Implied Market Multiple
20.3x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $120.00 from 13 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $91.75 per share.
Warnings
Price-to-book value of 2.8x 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 $120.00 (from 13 analysts). Our estimate is 29% 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