GPK
Graphic Packaging Holding Company
$8.57
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Undervalued
Trading 46.6% below fair value
You pay
$8.57
Bear
$11.83
Fair
$16.05
Bull
$20.28
Bear
$11.83
+38.0%
$1.69 × 7x
Fair
$16.05
+87.3%
$1.69 × 10x
Bull
$20.28
+136.6%
$1.69 × 12x
Adjust Assumptions
9.5x
1.69$
Key Value Driver
Through-cycle normalized EPS ($1.69)
Implied Market Multiple
5.1x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (27 analysts)
$10.13
Divergence from AlphaVal
58%
Summary
Using 7-year normalized EPS of $1.69 at a 10x cycle multiple, the base-case value is $16.05 per share. P/TBV cross-check: 4.2x.
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 4.2x 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 $10.13 (from 27 analysts). Our estimate is 58% above 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