VSEC
VSE Corporation
$171.88
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 97.5% above fair value
You pay
$171.88
Bear
$68.72
Fair
$87.03
Bull
$105.37
Bear
$68.72
-60.0%
$2.48 × 18x + net cash
Fair
$87.03
-49.4%
$2.48 × 22x + net cash
Bull
$105.37
-38.7%
$2.48 × 26x + net cash
Key Value Driver
Through-cycle normalized EPS ($2.48)
Implied Market Multiple
69.4x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $247.00 from 11 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $87.03 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 7.8x 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 $247.00 (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