STMEF
STMicroelectronics N.V.
$64.93
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 88.2% above fair value
You pay
$64.93
Bear
$26.66
Fair
$34.50
Bull
$42.34
Bear
$26.66
-58.9%
$1.96 × 12x + net cash
Fair
$34.50
-46.9%
$1.96 × 16x + net cash
Bull
$42.34
-34.8%
$1.96 × 20x + net cash
Key Value Driver
Through-cycle normalized EPS ($1.96)
Implied Market Multiple
33.1x
Summary
Using 7-year normalized EPS of $1.96 at a 16x cycle multiple, the base-case value is $34.50 per share. P/TBV cross-check: 3.4x.
Warnings
Price-to-book value of 3.4x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
This company has heavy ongoing investment costs. Valuation shortcuts that ignore those costs can make the stock look cheaper than it really is.
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