HII
Huntington Ingalls Industries, Inc.
$320.63
Cyclical & Capital-Intensive
70%
Normalized Earnings × Cycle Multiple
Mild
·
Conviction
Overvalued
Trading 1.2% above fair value
You pay
$320.63
Bear
$250.20
Fair
$316.93
Bull
$383.65
Bear
$250.20
-22.0%
$14.87 × 18x + net cash
Fair
$316.93
-1.2%
$14.87 × 22x + net cash
Bull
$383.65
+19.7%
$14.87 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($14.87)
Implied Market Multiple
21.6x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $420.00 from 27 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $316.93 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 7.3x 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 $420.00 (from 27 analysts). Our estimate is 33% below 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