RTX
RTX Corporation
$193.34
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 151.1% above fair value
You pay
$193.34
Bear
$63.00
Fair
$77.00
Bull
$91.00
Bear
$63.00
-67.4%
$3.50 × 18x
Fair
$77.00
-60.2%
$3.50 × 22x
Bull
$91.00
-52.9%
$3.50 × 26x
Adjust Assumptions
22.0x
3.5$
Key Value Driver
Through-cycle normalized EPS ($3.50)
Implied Market Multiple
55.2x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (26 analysts)
$231.36
Divergence from AlphaVal
67%
Summary
Using 7-year normalized EPS of $3.50 at a 22x cycle multiple, the base-case value is $77.00 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 ($4.96/share) are 42% above the mid-cycle average ($3.50). Buying based on peak profits is the most common mistake with boom-and-bust businesses.
Wall Street's average price target is $231.36 (from 26 analysts). Our estimate is 67% 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