NPKI
NPK International Inc.
$11.09
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 46.7% above fair value
You pay
$11.09
Bear
$5.88
Fair
$7.56
Bull
$9.24
Bear
$5.88
-47.0%
$0.42 × 14x
Fair
$7.56
-31.8%
$0.42 × 18x
Bull
$9.24
-16.7%
$0.42 × 22x
Adjust Assumptions
18.0x
0.42$
Key Value Driver
Through-cycle normalized EPS ($0.42)
Implied Market Multiple
26.4x
Summary
Using 7-year normalized EPS of $0.42 at a 18x cycle multiple, the base-case value is $7.56 per share. P/TBV cross-check: 3.7x.
Warnings
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.
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