RGR
Sturm, Ruger & Company, Inc.
$43.38
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Undervalued
Trading 39.7% below fair value
You pay
$43.38
Bear
$58.86
Fair
$71.94
Bull
$85.02
Bear
$58.86
+35.7%
$3.27 × 18x
Fair
$71.94
+65.8%
$3.27 × 22x
Bull
$85.02
+96.0%
$3.27 × 26x
Adjust Assumptions
22.0x
3.27$
Key Value Driver
Through-cycle normalized EPS ($3.27)
Implied Market Multiple
13.3x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (12 analysts)
$46.00
Divergence from AlphaVal
56%
Summary
Using 7-year normalized EPS of $3.27 at a 22x cycle multiple, the base-case value is $71.94 per share. P/TBV cross-check: 2.5x.
Warnings
Price-to-book value of 2.5x 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 $46.00 (from 12 analysts). Our estimate is 56% above 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