PRIM
Primoris Services Corporation
$117.55
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 77.3% above fair value
You pay
$117.55
Bear
$48.63
Fair
$66.30
Bull
$83.98
Bear
$48.63
-58.6%
$2.49 × 14x + net cash
Fair
$66.30
-43.6%
$2.49 × 18x + net cash
Bull
$83.98
-28.6%
$2.49 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($2.49)
Implied Market Multiple
47.2x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $153.25 from 24 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $66.30 per share.
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 10.1x 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 $153.25 (from 24 analysts). Our estimate is 76% 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