UAN
CVR Partners, LP
$125.17
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 85.8% above fair value
You pay
$125.17
Bear
$41.45
Fair
$67.36
Bull
$93.26
Bear
$41.45
-66.9%
$10.36 × 7x + net cash
Fair
$67.36
-46.2%
$10.36 × 10x + net cash
Bull
$93.26
-25.5%
$10.36 × 12x + net cash
Key Value Driver
Through-cycle normalized EPS ($10.36)
Implied Market Multiple
12.1x
Summary
Using 7-year normalized EPS of $10.36 at a 10x cycle multiple, the base-case value is $67.36 per share. P/TBV cross-check: 5.0x.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Price-to-book value of 5.0x 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