PLAB
Photronics, Inc.
$51.46
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 17.6% above fair value
You pay
$51.46
Bear
$35.36
Fair
$43.75
Bull
$52.13
Bear
$35.36
-31.3%
$2.03 × 12x + net cash
Fair
$43.75
-15.0%
$2.03 × 16x + net cash
Bull
$52.13
+1.3%
$2.03 × 20x + net cash
Key Value Driver
Through-cycle normalized EPS ($2.03)
Implied Market Multiple
25.3x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $49.33 from 11 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $43.75 per share.
Warnings
Price-to-book value of 2.6x 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