PRIM
Primoris Services Corporation
$72.14
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 61.1% above fair value
You pay
$72.14
Bear
$34.83
Fair
$44.78
Bull
$54.74
Bear
$34.83
-51.7%
$2.49 × 14x
Fair
$44.78
-37.9%
$2.49 × 18x
Bull
$54.74
-24.1%
$2.49 × 22x
Adjust Assumptions
18.0x
2.49$
Key Value Driver
Through-cycle normalized EPS ($2.49)
Implied Market Multiple
29.0x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (25 analysts)
$123.60
Divergence from AlphaVal
64%
Summary
Using 7-year normalized EPS of $2.49 at a 18x cycle multiple, the base-case value is $44.78 per share. P/TBV cross-check: 6.2x.
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.
Recent profits ($5.02/share) are 102% above the mid-cycle average ($2.49). Buying based on peak profits is the most common mistake with boom-and-bust businesses.
Price-to-book value of 6.2x 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 $123.60 (from 25 analysts). Our estimate is 64% 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