SWBI
Smith & Wesson Brands, Inc.
$15.47
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Undervalued
Trading 41.2% below fair value
You pay
$15.47
Bear
$21.17
Fair
$26.32
Bull
$31.48
Bear
$21.17
+36.9%
$1.29 × 18x + net cash
Fair
$26.32
+70.2%
$1.29 × 22x + net cash
Bull
$31.48
+103.5%
$1.29 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($1.29)
Implied Market Multiple
12.0x
Summary
Using 7-year normalized EPS of $1.29 at a 22x cycle multiple, the base-case value is $26.32 per share. P/TBV cross-check: 2.0x.
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