FORM
FormFactor, Inc.
$103.90
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 629.6% above fair value
You pay
$103.90
Bear
$10.68
Fair
$14.24
Bull
$17.80
Bear
$10.68
-89.7%
$0.89 × 12x
Fair
$14.24
-86.3%
$0.89 × 16x
Bull
$17.80
-82.9%
$0.89 × 20x
Adjust Assumptions
16.0x
0.89$
Key Value Driver
Through-cycle normalized EPS ($0.89)
Implied Market Multiple
116.7x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (19 analysts)
$150.50
Divergence from AlphaVal
91%
Summary
Using 7-year normalized EPS of $0.89 at a 16x cycle multiple, the base-case value is $14.24 per share. P/TBV cross-check: 10.1x.
Warnings
Price-to-book value of 10.1x 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 $150.50 (from 19 analysts). Our estimate is 91% 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