Eric Cota's  Instablog

Eric Cota
Send Message
I'm a value investor for the long term primarily focused on firms in the S&P 500 that produce solid free cash flow and pay dividends. I look for undervalued firms using a discounted cash flow model. I reinvest dividends and track performance on a total return, risk-adjusted basis. Five years... More
My blog:
Manzanita Drive
  • Bemis Company Inc: cash flow valuation 2 comments
    Jul 7, 2011 7:03 PM | about stocks: BMS
    Current Price: ~ $34/share
    Projected Yield: ~ 2.80%
     
     
    Bemis manufactures flexible packaging materials primarily for the food packaging industry as well as for the health, hygiene and medical sectors. Additionally, Bemis develops pressure-sensitive materials used for labels, signage, and industrial applications. In 2010, Bemis completed its acquisition of Alcan's Food Americas business. This acquisition should boost Bemis' revenue by more than a third and increase its mix of revenue from food packaging.
     
    I estimated the firm's WACC today at 7.91% using the Capital Asset Pricing Model and the company's recent SEC filings.
     
    Recent free cash flows and growth rates:
    Year
    FCF $Millions
    2001
    200
    2002
    196
    2003
    299
    2004
    137
    2005
    93
    2006
    190
    2007
    227
    2008
    173
    2009
    387
    2010
    255
    TTM
    233
     
    Average Annual Growth FCF: ~ 17%
    CAGR FCF: ~ 3%
    Consensus Forecast Industry 5-Year Growth: ~ 11% per year
    Consensus Forecast Company 5-Year Growth: ~ 9% per year
     
    Average FCF in last three years is $272 million.  Starting at $272 million FCF, assuming the company achieves a 5-year growth rate in FCF of 9% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:
     
    Discounted Cash Flow Valuation
    Year
    FCF $Millions
    0
    272
    1
    296
    2
    323
    3
    352
    4
    384
    5
    419
    Terminal Value
    5771
     
    The firm's future cash flows, discounted at a WACC of 7.91%, give a present value for the entire firm (Debt + Equity) of $5347 million. If the firm's fair value of debt is estimated at $1521 million, then the fair value of the firm's equity could be $3826 million.  $3826 million / 105 million outstanding shares is approximately $36 per share and a 20% margin of safety is $29/share.
     
    Sources
    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Stocks: BMS
Back To Eric Cota's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (2)
Track new comments
  • christian09x
    , contributor
    Comment (1) | Send Message
     
    Hey, I'm doing a project on Bemis and am stock on a few questions, would you mind helping me?
    17 Nov 2012, 07:07 AM Reply Like
  • Eric Cota
    , contributor
    Comments (22) | Send Message
     
    Author’s reply » Not at all - I hope I can help you. But I'll be away from my desk/computer until later this evening PST So I won't be able to get back to you until then. Good luck.

     

    Eric
    17 Nov 2012, 12:11 PM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.