TXT
Textron Inc.
$91.83
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Mild
·
Conviction
Overvalued
Trading 3.7% above fair value
You pay
$91.83
Bear
$69.92
Fair
$88.56
Bull
$107.20
Bear
$69.92
-23.9%
$4.33 × 18x + net cash
Fair
$88.56
-3.6%
$4.33 × 22x + net cash
Bull
$107.20
+16.7%
$4.33 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($4.33)
Implied Market Multiple
21.2x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $107.40 from 29 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $88.56 per share.
Warnings
Price-to-book value of 3.1x 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