MGPI
MGP Ingredients, Inc.
$17.86
Distressed or Transitioning
75%
Current FCF × Depressed Multiple
Strong
·
Conviction
Overvalued
Trading 48.9% above fair value
You pay
$17.86
Bear
$3.23
Fair
$11.99
Bull
$20.75
Bear
$3.23
-81.9%
FCF continues to decline, 4x multiple
Fair
$11.99
-32.9%
Current FCF stabilizes, 6x multiple
Bull
$20.75
+16.2%
Credible recovery, multiple re-rates to 8x
Key Value Driver
Whether the core business model is intact or structurally impaired
Implied Market Multiple
8.3x
Summary
Our base-case estimate uses Current FCF × Depressed Multiple. We then blend that result with the average analyst price target of $21.00 from 14 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $11.99 per share.
Warnings
Don't assume past cash flow levels will return — the company's troubles may have permanently reduced its ability to generate profits.
A stock can look cheap on paper and still lose half its value if the underlying business is permanently damaged.
The wide range between our best and worst cases is intentional — pretending to know a precise value for a troubled company would be misleading.
Debt per share ($11.61) is more than half the stock price. With this much debt on a struggling business, the paths to recovery for shareholders are narrow.
Wall Street's average price target is $21.00 (from 14 analysts). Our estimate is 54% below the consensus -- consider that gap carefully.
Key Risks
- Bullish DCF projections are fundamentally unknowable for distressed companies
- M&A speculation can floor the stock above intrinsic value temporarily
- Management credibility is a key input — new CEO expands the bull case