DRS
Leonardo DRS, Inc.
$44.92
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 53.2% above fair value
You pay
$44.92
Bear
$24.14
Fair
$29.32
Bull
$34.50
Bear
$24.14
-46.3%
$1.03 × 18x + net cash
Fair
$29.32
-34.7%
$1.03 × 22x + net cash
Bull
$34.50
-23.2%
$1.03 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($1.03)
Implied Market Multiple
43.6x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $53.33 from 9 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $29.32 per share.
Warnings
Price-to-book value of 8.7x 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 $53.33 (from 9 analysts). Our estimate is 56% 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