NVEC
NVE Corporation
$108.81
Cyclical & Capital-Intensive
70%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 115.3% above fair value
You pay
$108.81
Bear
$37.90
Fair
$50.53
Bull
$63.16
Bear
$37.90
-65.2%
$3.16 × 12x
Fair
$50.53
-53.6%
$3.16 × 16x
Bull
$63.16
-42.0%
$3.16 × 20x
Adjust Assumptions
16.0x
3.16$
Key Value Driver
Through-cycle normalized EPS ($3.16)
Implied Market Multiple
34.5x
Summary
Using 7-year normalized EPS of $3.16 at a 16x cycle multiple, the base-case value is $50.53 per share. P/TBV cross-check: 9.0x.
Warnings
Price-to-book value of 9.0x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
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