HII
Huntington Ingalls Industries, Inc.
$269.13
Cyclical & Capital-Intensive
70%
Normalized Earnings × Cycle Multiple
Mild
·
Conviction
Fair Value
Trading 10.9% below fair value
You pay
$269.13
Bear
$238.43
Fair
$302.01
Bull
$365.59
Bear
$238.43
-11.4%
$14.87 × 18x + net cash
Fair
$302.01
+12.2%
$14.87 × 22x + net cash
Bull
$365.59
+35.8%
$14.87 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($14.87)
Implied Market Multiple
18.1x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $360.33 from 27 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $302.01 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 6.1x 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