PII
Polaris Inc.
$73.33
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 135.9% above fair value
You pay
$73.78
Bear
$12.51
Fair
$31.27
Bull
$50.04
Bear
$12.51
-83.0%
$7.88 × 4x + net cash
Fair
$31.27
-57.6%
$7.88 × 6x + net cash
Bull
$50.04
-32.2%
$7.88 × 7x + net cash
Key Value Driver
Through-cycle normalized EPS ($7.88)
Implied Market Multiple
9.4x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $66.00 from 27 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $31.27 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.
Price-to-book value of 147.8x 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 $66.00 (from 27 analysts). Our estimate is 70% 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