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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
TickerJBSS MethodologyValuationWeight
Current Price23.15 DCF - FCF/WACC$42.0730%
Dividend TTM1.5 EV/EBITA Multiple$49.6765%
Estimated Yield6.48% NAV$20.625%
Shares Outstanding Mkt Cap Target Price$45.94
Class A2,597,426 Upside %98.4%
Class B8,337,009 Down Side (NYSE:NAV)-10.94%
Total10,934,435$253,132,170 Up/Down9.00
Fully Diluted11,096,271$256,878,674
Valuation Figure: DCF - Free Cash Flow WACC Model Valuation Figure: Net Asset Value
10 Year Treasury3.00%EBITDA56,325 Total Assets373,261
Beta1.25Capex(11,000) Adj Intangibles(6,561)
Equity Risk Premium4.96%Working Capital(2,300) Adjust DTA(1,002)
Cost of Equity9.20%FCF43,025 Re Mkt Val Adj.17,683
Cost of Debt5.50%Growth Rate2.0% Gross Asset Value383,381
Tax Rate0.3512Multiple12.8 Liabilities150,747
After Tax Cost of Debt3.57%Enterprise Value549,903 FV Debt Adj & Def Tax($3,852)
Total Debt83,048Equity Value466,855 Net Asset Value228,782
Market Cap256,878.67FCF Value$42.07 NAV p/Share20.62
Debt %24.43%Current Price23.15 Current Price$23.15
WACC7.82%Target Gain81.74% Target Gain-10.94%
Valuation Figure : Enterprise Value to Cash Flow Model
EntityEVEBITDAMultipleWeightEquity Mkt Cap256,879
JBSS330,10356,3255.90Total Debt83,048
Less Cash:(9,824)
DMND1,160,00099,81111.60.50Enterprise Value330,103
LNCE2,540,000178,65014.20.08EBiTDA TTM56,325
HSH4,680,000495,0009.50.08EV/EBITDA (Implied)11.1
THS3,300,000302,84010.90.08Proj EV624,330
SENECA6,444,900673,4009.60.25Equity Value551,106
EV Share Price$49.67
Current Price$23.15
11.1Target Gain114.54%
Source: Still Our Top Idea: Modest Increase In John B Sanfilippo Valuation