REVG
REV Group, Inc.
$63.90
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 188.6% above fair value
You pay
$63.90
Bear
$18.37
Fair
$22.14
Bull
$25.92
Bear
$18.37
-71.3%
$0.82 × 20x + net cash
Fair
$22.14
-65.3%
$0.82 × 24x + net cash
Bull
$25.92
-59.4%
$0.82 × 28x + net cash
Key Value Driver
Through-cycle normalized EPS ($0.82)
Implied Market Multiple
77.9x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $33.75 from 12 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $22.14 per share.
Warnings
Recent profits ($1.89/share) are 130% above the mid-cycle average ($0.82). Buying based on peak profits is the most common mistake with boom-and-bust businesses.
Price-to-book value of 16.2x 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 $33.75 (from 12 analysts). Our estimate is 43% 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