UAN
CVR Partners, LP
$130.80
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 47.6% above fair value
You pay
$130.80
Bear
$65.31
Fair
$88.64
Bull
$111.96
Bear
$65.31
-50.1%
$9.33 × 7x
Fair
$88.64
-32.2%
$9.33 × 10x
Bull
$111.96
-14.4%
$9.33 × 12x
Adjust Assumptions
9.5x
9.33$
Key Value Driver
Through-cycle normalized EPS ($9.33)
Implied Market Multiple
14.0x
Summary
Using 7-year normalized EPS of $9.33 at a 10x cycle multiple, the base-case value is $88.64 per share. P/TBV cross-check: 5.2x.
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 5.2x 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