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Bemis Company Inc: cash flow valuation

|Includes:Bemis Company, Inc. (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
Click to enlarge
 
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
Click to enlarge
 
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