POWI
Power Integrations, Inc.
$83.76
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 83.0% above fair value
You pay
$83.76
Bear
$35.99
Fair
$45.78
Bull
$55.57
Bear
$35.99
-57.0%
$1.66 × 12x + net cash
Fair
$45.78
-45.3%
$1.66 × 16x + net cash
Bull
$55.57
-33.7%
$1.66 × 20x + net cash
Key Value Driver
Through-cycle normalized EPS ($1.66)
Implied Market Multiple
50.5x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $90.00 from 16 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $45.78 per share.
Warnings
Price-to-book value of 8.2x 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 $90.00 (from 16 analysts). Our estimate is 66% 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