GLDD
Great Lakes Dredge & Dock Corporation
$17.00
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 34.9% above fair value
You pay
$17.00
Bear
$9.24
Fair
$12.60
Bull
$15.96
Bear
$9.24
-45.6%
$0.84 × 14x + net cash
Fair
$12.60
-25.9%
$0.84 × 18x + net cash
Bull
$15.96
-6.1%
$0.84 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($0.84)
Implied Market Multiple
20.2x
Summary
Using 7-year normalized EPS of $0.84 at a 18x cycle multiple, the base-case value is $12.60 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.
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