TXT
Textron Inc.
$90.53
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Mild
·
Conviction
Overvalued
Trading 3.3% above fair value
You pay
$90.53
Bear
$69.20
Fair
$87.65
Bull
$106.10
Bear
$69.20
-23.6%
$4.33 × 18x + net cash
Fair
$87.65
-3.2%
$4.33 × 22x + net cash
Bull
$106.10
+17.2%
$4.33 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($4.33)
Implied Market Multiple
20.9x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $103.75 from 29 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $87.65 per share.
Warnings
Price-to-book value of 3.0x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
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