STMEF
STMicroelectronics N.V.
$44.34
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 41.4% above fair value
You pay
$44.34
Bear
$23.52
Fair
$31.36
Bull
$39.20
Bear
$23.52
-47.0%
$1.96 × 12x
Fair
$31.36
-29.3%
$1.96 × 16x
Bull
$39.20
-11.6%
$1.96 × 20x
Adjust Assumptions
16.0x
1.96$
Key Value Driver
Through-cycle normalized EPS ($1.96)
Implied Market Multiple
22.6x
Summary
Using 7-year normalized EPS of $1.96 at a 16x cycle multiple, the base-case value is $31.36 per share. P/TBV cross-check: 2.3x.
Warnings
Price-to-book value of 2.3x 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