FOR
Forestar Group Inc.
$25.92
Stable Earnings Power
60%
P/Adj-EPS × Normalized Multiple
Strong
·
Conviction
Undervalued
Trading 51.6% below fair value
You pay
$25.92
Bear
$42.88
Fair
$53.60
Bull
$64.32
Bear
$42.88
+65.4%
$3.29 × 15x P/E
Fair
$53.60
+106.8%
$3.29 × 18x P/E
Bull
$64.32
+148.1%
$3.29 × 22x P/E
Key Value Driver
Normalized P/E multiple (18x base case)
Implied Market Multiple
7.9x
Summary
Our base-case estimate uses a valuation based on adjusted earnings per share and a normalized price-to-earnings multiple. We then blend that result with the average analyst price target of $28.38 from 12 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $53.60 per share.
Warnings
Wall Street's average price target is $28.38 (from 12 analysts). Our estimate is 111% above the consensus -- consider that gap carefully.
Key Risks
- Growth DCF inappropriate — terminal value assumptions dominate
- EV/EBITDA misleading for regulated businesses where capex is mandated
- Regulatory risk is a fat tail not visible in normal multiples