Our target price of $1.35 is a blended valuation based on our NAV-based sum-of-the-parts valuation and our DCF valuation. For our NAV, we value the investment portfolio below book value and apply a multiple to the Corporation EBIT. Our $1.35 target price factors in a discount rate of 9.60%, beta of 0.8, risk-free rate of 4.0%, and equity risk premium of 7.0%.

ABG faces certain industry-specific risks, financial risk and management risk.

Near term risks include higher debt costs as well as a decline in asset values given rising bond yields.

An increase in inflation (and hence bond yields, and interest rates) is also a risk to earnings as cap rates increase and are likely to impact earnings. 

If the impact on the company from any of these factors proves to be more negative than we anticipate, the stock will likely have difficulty achieving our financial and price targets. Conversely, if any of these factors have less of an effect than we anticipate, the stock could materially outperform our target.