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.
|Current Price||23.15||DCF - FCF/WACC||$42.07||30%|
|Dividend TTM||1.5||EV/EBITA Multiple||$49.67||65%|
|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%|
|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|
|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|
|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|
|EV Share Price||$49.67|
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.