FORM
FormFactor, Inc.
$128.99
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 178.0% above fair value
You pay
$128.99
Bear
$36.78
Fair
$46.39
Bull
$56.00
Bear
$36.78
-71.5%
$0.89 × 12x + net cash
Fair
$46.39
-64.0%
$0.89 × 16x + net cash
Bull
$56.00
-56.6%
$0.89 × 20x + net cash
Key Value Driver
Through-cycle normalized EPS ($0.89)
Implied Market Multiple
144.9x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $134.00 from 19 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $46.39 per share.
Warnings
Price-to-book value of 12.5x 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 $134.00 (from 19 analysts). Our estimate is 87% 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