SARO
StandardAero, Inc.
$26.73
Cyclical & Capital-Intensive
70%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 36.0% above fair value
You pay
$26.73
Bear
$15.52
Fair
$19.66
Bull
$23.79
Bear
$15.52
-41.9%
$0.83 × 18x + net cash
Fair
$19.66
-26.5%
$0.83 × 22x + net cash
Bull
$23.79
-11.0%
$0.83 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($0.83)
Implied Market Multiple
32.2x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $35.20 from 7 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $19.66 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.
Price-to-book value of 12.0x 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 $35.20 (from 7 analysts). Our estimate is 55% 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