GD
General Dynamics Corporation
$367.73
Cyclical & Capital-Intensive
70%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 24.0% above fair value
You pay
$367.73
Bear
$236.43
Fair
$296.47
Bull
$356.50
Bear
$236.43
-35.7%
$12.27 × 18x + net cash
Fair
$296.47
-19.4%
$12.27 × 22x + net cash
Bull
$356.50
-3.1%
$12.27 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($12.27)
Implied Market Multiple
30.0x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $422.50 from 34 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $296.47 per share.
Warnings
Price-to-book value of 30.7x 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 $422.50 (from 34 analysts). Our estimate is 43% 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