GMS
GMS Inc.
$109.96
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 15.2% above fair value
You pay
$109.96
Bear
$69.99
Fair
$95.44
Bull
$120.89
Bear
$69.99
-36.3%
$6.23 × 14x + net cash
Fair
$95.44
-13.2%
$6.23 × 18x + net cash
Bull
$120.89
+9.9%
$6.23 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($6.23)
Implied Market Multiple
17.7x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $101.42 from 15 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $95.44 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.
Price-to-book value of 1970.5x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
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