NPKI
NPK International Inc.
$14.53
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 145.1% above fair value
You pay
$14.53
Bear
$4.53
Fair
$5.93
Bull
$7.33
Bear
$4.53
-68.8%
$0.35 × 14x + net cash
Fair
$5.93
-59.2%
$0.35 × 18x + net cash
Bull
$7.33
-49.6%
$0.35 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($0.35)
Implied Market Multiple
41.5x
Summary
Using 7-year normalized EPS of $0.35 at a 18x cycle multiple, the base-case value is $5.93 per share. P/TBV cross-check: 4.8x.
Warnings
Price-to-book value of 4.8x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
This company has heavy ongoing investment costs. Valuation shortcuts that ignore those costs can make the stock look cheaper than it really is.
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