SWBI
Smith & Wesson Brands, Inc.
$13.71
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Undervalued
Trading 51.7% below fair value
You pay
$13.71
Bear
$23.22
Fair
$28.38
Bull
$33.54
Bear
$23.22
+69.4%
$1.29 × 18x
Fair
$28.38
+107.0%
$1.29 × 22x
Bull
$33.54
+144.6%
$1.29 × 26x
Adjust Assumptions
22.0x
1.29$
Key Value Driver
Through-cycle normalized EPS ($1.29)
Implied Market Multiple
10.6x
Summary
Using 7-year normalized EPS of $1.29 at a 22x cycle multiple, the base-case value is $28.38 per share. P/TBV cross-check: 1.7x.
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