Value, Long/Short Equity
Contributor Since 2011
Current Price: ~ $23/share
Projected Yield: ~ 4.85%
2011 EPS: $1.04 DPS: $1.10
Leggett & Platt engineers components and products for a variety of uses. Its springs and spring units are used in bedding and chairs. The company also makes headboards, die-cast products for barbecue grills and lighting fixtures, and store displays and shelving. Its Specialized Products segment offers machinery, manufacturing equipment, automotive seating suspensions, control cable systems, and lumbar supports.
Estimated WACC for the firm today is 10.98% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
Year | FCF $Millions |
2002 | 332 |
2003 | 259 |
2004 | 185 |
2005 | 284 |
2006 | 313 |
2007 | 465 |
2008 | 318 |
2009 | 482 |
2010 | 295 |
2011 | 254 |
Average Annual Growth FCF: ~ 3%
CAGR FCF: ~ -3%
Consensus Forecast Industry 5-Year Growth: ~ 33% per year
Consensus Forecast Company 5-Year Growth: ~ 15% per year
Internal Growth Rate: ~ 0%
Sustainable Growth Rate: ~ -1%
Scenario 1
Discounted Cash Flow Valuation
Year | FCF $Millions |
0 | 254 |
1 | 292 |
2 | 336 |
3 | 386 |
4 | 444 |
5 | 511 |
Terminal Value | 5351 |
The firm's future cash flows, discounted at a WACC of 10.98%, give a present value for the entire firm (Debt + Equity) of $4594 million. If the firm's fair value of debt is estimated at $865 million, then the fair value of the firm's equity could be $3729 million. $3729 million / 140 million outstanding shares is approximately $27 per share and a 20% margin of safety is $22/share.
Scenario 2
All else being equal,
Discounted Cash Flow Valuation
Year | FCF $Millions |
0 | 254 |
1 | 284 |
2 | 319 |
3 | 357 |
4 | 400 |
5 | 448 |
Terminal Value | 4566 |
Scenario 3
All else being equal,
Discounted Cash Flow Valuation
Year | FCF $Millions |
0 | 254 |
1 | 274 |
2 | 296 |
3 | 320 |
4 | 346 |
5 | 373 |
Terminal Value | 5051 |
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.