GEF
Greif, Inc.
$64.29
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 16.2% above fair value
You pay
$64.29
Bear
$34.03
Fair
$55.30
Bull
$76.57
Bear
$34.03
-47.1%
$7.75 × 7x + net cash
Fair
$55.30
-14.0%
$7.75 × 10x + net cash
Bull
$76.57
+19.1%
$7.75 × 12x + net cash
Key Value Driver
Through-cycle normalized EPS ($7.75)
Implied Market Multiple
8.3x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $75.00 from 13 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $55.30 per share.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Recent profits ($15.00/share) are 94% above the mid-cycle average ($7.75). Buying based on peak profits is the most common mistake with boom-and-bust businesses.
Price-to-book value of 7.9x 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 $75.00 (from 13 analysts). Our estimate is 33% 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