GD
General Dynamics Corporation
$342.89
Cyclical & Capital-Intensive
70%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 17.3% above fair value
You pay
$342.89
Bear
$233.16
Fair
$292.37
Bull
$351.57
Bear
$233.16
-32.0%
$12.27 × 18x + net cash
Fair
$292.37
-14.7%
$12.27 × 22x + net cash
Bull
$351.57
+2.5%
$12.27 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($12.27)
Implied Market Multiple
27.9x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $408.83 from 34 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $292.37 per share.
Warnings
Price-to-book value of 28.6x 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 $408.83 (from 34 analysts). Our estimate is 41% 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