Still Our Top Idea: Modest Increase In John B Sanfilippo Valuation

Feb. 3.14 | About: John B. (JBSS)

We are increasing our target price on John B Sanfilippo and Son (NASDAQ:JBSS) to $46 from $44 per share. JBSS recently reported FY2014 second quarter earnings of $0.83 per share versus $0.76 in the year ago period. As a result, JBSS trailing twelve months EBITDA increased modestly along with a reduction in debt levels. Our investment thesis remains unchanged as the company continues to generate substantial free cash flow and has returned a substantial amount to shareholders with a 6% plus dividend over the last twelve months. With declining debt levels management has the capacity to increase cash returns to shareholders.

See an updated valuation summary below. Valuations increased on both a FCF and EV/EBITDA basis primarily driven by an increase in operating earnings increasing both EBITDA and FCF. JBSS also reduced debt levels from the previous quarter increasing the equity portion of Enterprise Value.

Valuation Summary
Ticker JBSS Methodology Valuation Weight
Current Price 23.15 DCF - FCF/WACC $42.07 30%
Dividend TTM 1.5 EV/EBITA Multiple $49.67 65%
Estimated Yield 6.48% NAV $20.62 5%
Shares Outstanding Mkt Cap Target Price $45.94
Class A 2,597,426 Upside % 98.4%
Class B 8,337,009 Down Side (NYSE:NAV) -10.94%
Total 10,934,435 $253,132,170 Up/Down 9.00
Fully Diluted 11,096,271 $256,878,674
Valuation Figure: DCF - Free Cash Flow WACC Model Valuation Figure: Net Asset Value
10 Year Treasury 3.00% EBITDA 56,325 Total Assets 373,261
Beta 1.25 Capex (11,000) Adj Intangibles (6,561)
Equity Risk Premium 4.96% Working Capital (2,300) Adjust DTA (1,002)
Cost of Equity 9.20% FCF 43,025 Re Mkt Val Adj. 17,683
Cost of Debt 5.50% Growth Rate 2.0% Gross Asset Value 383,381
Tax Rate 0.3512 Multiple 12.8 Liabilities 150,747
After Tax Cost of Debt 3.57% Enterprise Value 549,903 FV Debt Adj & Def Tax ($3,852)
Total Debt 83,048 Equity Value 466,855 Net Asset Value 228,782
Market Cap 256,878.67 FCF Value $42.07 NAV p/Share 20.62
Debt % 24.43% Current Price 23.15 Current Price $23.15
WACC 7.82% Target Gain 81.74% Target Gain -10.94%
Valuation Figure : Enterprise Value to Cash Flow Model
Entity EV EBITDA Multiple Weight Equity Mkt Cap 256,879
JBSS 330,103 56,325 5.9 0 Total Debt 83,048
Less Cash: (9,824)
DMND 1,160,000 99,811 11.6 0.50 Enterprise Value 330,103
LNCE 2,540,000 178,650 14.2 0.08 EBiTDA TTM 56,325
HSH 4,680,000 495,000 9.5 0.08 EV/EBITDA (Implied) 11.1
THS 3,300,000 302,840 10.9 0.08 Proj EV 624,330
SENECA 6,444,900 673,400 9.6 0.25 Equity Value 551,106
EV Share Price $49.67
Current Price $23.15
11.1 Target Gain 114.54%
Click to enlarge

Disclosure: I am long JBSS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.