GPK
Graphic Packaging Holding Company
$10.98
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Undervalued
Trading 31.6% below fair value
You pay
$10.98
Bear
$11.83
Fair
$16.05
Bull
$20.28
Bear
$11.83
+7.7%
$1.69 × 7x
Fair
$16.05
+46.2%
$1.69 × 10x
Bull
$20.28
+84.7%
$1.69 × 12x
Adjust Assumptions
9.5x
1.69$
Key Value Driver
Through-cycle normalized EPS ($1.69)
Implied Market Multiple
6.5x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (27 analysts)
$10.67
Divergence from AlphaVal
50%
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: 5.4x.
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 5.4x 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 $10.67 (from 27 analysts). Our estimate is 50% 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