PII
Polaris Inc.
$53.49
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 23.4% above fair value
You pay
$53.49
Bear
$31.52
Fair
$43.34
Bull
$55.16
Bear
$31.52
-41.1%
$7.88 × 4x
Fair
$43.34
-19.0%
$7.88 × 6x
Bull
$55.16
+3.1%
$7.88 × 7x
Adjust Assumptions
5.5x
7.88$
Key Value Driver
Through-cycle normalized EPS ($7.88)
Implied Market Multiple
6.8x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (27 analysts)
$64.00
Divergence from AlphaVal
32%
Summary
Using 7-year normalized EPS of $7.88 at a 6x cycle multiple, the base-case value is $43.34 per share. P/TBV cross-check: 107.2x.
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.
Price-to-book value of 107.2x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
Wall Street's average price target is $64.00 (from 27 analysts). Our estimate is 32% below the consensus -- consider that gap carefully.
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