REVG
REV Group, Inc.
$63.90
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 245.8% above fair value
You pay
$63.90
Bear
$15.40
Fair
$18.48
Bull
$21.56
Bear
$15.40
-75.9%
$0.77 × 20x
Fair
$18.48
-71.1%
$0.77 × 24x
Bull
$21.56
-66.3%
$0.77 × 28x
Adjust Assumptions
24.0x
0.77$
Key Value Driver
Through-cycle normalized EPS ($0.77)
Implied Market Multiple
83.0x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (12 analysts)
$33.75
Divergence from AlphaVal
45%
Summary
Using 7-year normalized EPS of $0.77 at a 24x cycle multiple, the base-case value is $18.48 per share. P/TBV cross-check: 16.2x.
Warnings
Recent profits ($1.89/share) are 145% above the mid-cycle average ($0.77). 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 45% 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