WERN
Werner Enterprises, Inc.
$42.20
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 155.9% above fair value
You pay
$42.20
Bear
$6.59
Fair
$16.49
Bull
$26.36
Bear
$6.59
-84.4%
$2.53 × 4x + net cash
Fair
$16.49
-60.9%
$2.53 × 6x + net cash
Bull
$26.36
-37.5%
$2.53 × 7x + net cash
Key Value Driver
Through-cycle normalized EPS ($2.53)
Implied Market Multiple
16.7x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $40.20 from 36 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $16.49 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 2.1x 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 $40.20 (from 36 analysts). Our estimate is 84% 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