SARO
StandardAero, Inc.
$20.17
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Mild
·
Conviction
Overvalued
Trading 10.5% above fair value
You pay
$20.17
Bear
$14.94
Fair
$18.26
Bull
$21.58
Bear
$14.94
-25.9%
$0.83 × 18x
Fair
$18.26
-9.5%
$0.83 × 22x
Bull
$21.58
+7.0%
$0.83 × 26x
Adjust Assumptions
22.0x
0.83$
Key Value Driver
Through-cycle normalized EPS ($0.83)
Implied Market Multiple
24.3x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (8 analysts)
$34.00
Divergence from AlphaVal
46%
Summary
Using 5-year normalized EPS of $0.83 at a 22x cycle multiple, the base-case value is $18.26 per share. P/TBV cross-check: 9.1x.
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 9.1x 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 $34.00 (from 8 analysts). Our estimate is 46% 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