POWW
Outdoor Holding Company
$2.06
Cyclical & Capital-Intensive
70%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Undervalued
Trading 66.7% below fair value
You pay
$2.06
Bear
$5.10
Fair
$6.18
Bull
$7.26
Bear
$5.10
+147.8%
$0.27 × 18x + net cash
Fair
$6.18
+200.2%
$0.27 × 22x + net cash
Bull
$7.26
+252.6%
$0.27 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($0.27)
Implied Market Multiple
7.6x
Summary
Using 7-year normalized EPS of $0.27 at a 22x cycle multiple, the base-case value is $6.18 per share. P/TBV cross-check: 7.5x.
Warnings
Price-to-book value of 7.5x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
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