IPGP
IPG Photonics Corporation
$107.47
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Mild
·
Conviction
Overvalued
Trading 11.7% above fair value
You pay
$107.47
Bear
$78.18
Fair
$96.25
Bull
$114.33
Bear
$78.18
-27.3%
$3.65 × 12x + net cash
Fair
$96.25
-10.4%
$3.65 × 16x + net cash
Bull
$114.33
+6.4%
$3.65 × 20x + net cash
Key Value Driver
Through-cycle normalized EPS ($3.65)
Implied Market Multiple
29.4x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $151.50 from 27 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $96.25 per share.
Warnings
Price-to-book value of 2.3x 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 $151.50 (from 27 analysts). Our estimate is 49% 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