POWI
Power Integrations, Inc.
$62.75
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 136.3% above fair value
You pay
$62.75
Bear
$19.92
Fair
$26.56
Bull
$33.20
Bear
$19.92
-68.3%
$1.66 × 12x
Fair
$26.56
-57.7%
$1.66 × 16x
Bull
$33.20
-47.1%
$1.66 × 20x
Adjust Assumptions
16.0x
1.66$
Key Value Driver
Through-cycle normalized EPS ($1.66)
Implied Market Multiple
37.8x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (17 analysts)
$85.00
Divergence from AlphaVal
69%
Summary
Using 7-year normalized EPS of $1.66 at a 16x cycle multiple, the base-case value is $26.56 per share. P/TBV cross-check: 6.1x.
Warnings
Price-to-book value of 6.1x 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 $85.00 (from 17 analysts). Our estimate is 69% 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