GPK
Graphic Packaging Holding Company
$10.17
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Mild
·
Conviction
Fair Value
Trading 9.9% below fair value
You pay
$10.17
Bear
$6.95
Fair
$11.29
Bull
$15.63
Bear
$6.95
-31.7%
$1.69 × 7x + net cash
Fair
$11.29
+11.0%
$1.69 × 10x + net cash
Bull
$15.63
+53.7%
$1.69 × 12x + net cash
Key Value Driver
Through-cycle normalized EPS ($1.69)
Implied Market Multiple
6.0x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $12.20 from 27 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $11.29 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 5.0x 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