SWBI
Smith & Wesson Brands, Inc.
$14.91
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Undervalued
Trading 46.9% below fair value
You pay
$14.91
Bear
$22.89
Fair
$28.07
Bull
$33.25
Bear
$22.89
+53.5%
$1.30 × 18x + net cash
Fair
$28.07
+88.3%
$1.30 × 22x + net cash
Bull
$33.25
+123.0%
$1.30 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($1.30)
Implied Market Multiple
11.5x
Summary
Using 7-year normalized EPS of $1.30 at a 22x cycle multiple, the base-case value is $28.07 per share. P/TBV cross-check: 1.9x.
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