IP
International Paper Company
$38.29
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 51.2% above fair value
You pay
$38.29
Bear
$15.58
Fair
$25.32
Bull
$35.05
Bear
$15.58
-59.3%
$2.76 × 7x + net cash
Fair
$25.32
-33.9%
$2.76 × 10x + net cash
Bull
$35.05
-8.5%
$2.76 × 12x + net cash
Key Value Driver
Through-cycle normalized EPS ($2.76)
Implied Market Multiple
13.9x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $47.50 from 29 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $25.32 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 3.7x 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 $47.50 (from 29 analysts). Our estimate is 62% 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