NX
Quanex Building Products Corporation
$18.17
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Undervalued
Trading 28.7% below fair value
You pay
$18.17
Bear
$18.70
Fair
$25.50
Bull
$32.30
Bear
$18.70
+2.9%
$1.70 × 14x + net cash
Fair
$25.50
+40.3%
$1.70 × 18x + net cash
Bull
$32.30
+77.8%
$1.70 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($1.70)
Implied Market Multiple
10.7x
Summary
Using 7-year normalized EPS of $1.70 at a 18x cycle multiple, the base-case value is $25.50 per share.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
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