GLDD
Great Lakes Dredge & Dock Corporation
$17.00
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 25.9% above fair value
You pay
$17.00
Bear
$10.50
Fair
$13.50
Bull
$16.50
Bear
$10.50
-38.2%
$0.75 × 14x
Fair
$13.50
-20.6%
$0.75 × 18x
Bull
$16.50
-2.9%
$0.75 × 22x
Adjust Assumptions
18.0x
0.75$
Key Value Driver
Through-cycle normalized EPS ($0.75)
Implied Market Multiple
22.7x
Summary
Using 7-year normalized EPS of $0.75 at a 18x cycle multiple, the base-case value is $13.50 per share. P/TBV cross-check: 2.6x.
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 ($1.08/share) are 44% above the mid-cycle average ($0.75). Buying based on peak profits is the most common mistake with boom-and-bust businesses.
Price-to-book value of 2.6x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
This company has heavy ongoing investment costs. Valuation shortcuts that ignore those costs can make the stock look cheaper than it really is.
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