DRS
Leonardo DRS, Inc.
$36.24
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 59.9% above fair value
You pay
$36.24
Bear
$18.54
Fair
$22.66
Bull
$26.78
Bear
$18.54
-48.8%
$1.03 × 18x
Fair
$22.66
-37.5%
$1.03 × 22x
Bull
$26.78
-26.1%
$1.03 × 26x
Adjust Assumptions
22.0x
1.03$
Key Value Driver
Through-cycle normalized EPS ($1.03)
Implied Market Multiple
35.2x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (9 analysts)
$52.50
Divergence from AlphaVal
57%
Summary
Using 7-year normalized EPS of $1.03 at a 22x cycle multiple, the base-case value is $22.66 per share. P/TBV cross-check: 7.0x.
Warnings
Price-to-book value of 7.0x 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 $52.50 (from 9 analysts). Our estimate is 57% 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