VSEC
VSE Corporation
$195.42
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 122.2% above fair value
You pay
$195.42
Bear
$69.44
Fair
$87.95
Bull
$106.48
Bear
$69.44
-64.5%
$2.48 × 18x + net cash
Fair
$87.95
-55.0%
$2.48 × 22x + net cash
Bull
$106.48
-45.5%
$2.48 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($2.48)
Implied Market Multiple
78.9x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $251.60 from 11 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $87.95 per share.
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 10.9x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
Wall Street's average price target is $251.60 (from 11 analysts). Our estimate is 81% below the consensus -- consider that gap carefully.
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