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No. of Recommendations: 2
```Made a 'quick' thumbnail valuation of this stock:

1. Calculation Owner earnings:

I used yahoo.com data, if not mentioned otherwise

Owner earnings last 3 quarters: OE = Net Income + Depreciation + Amortization l-Capital expenditure-one-time items

Net Income: 515+432+765= 1,872
Depreciation: 160+159+156= 475
Capital Expenditure: 110+74+41= 225
One-time items: 0

1,872+475-225= 2,122 (for 3 Quarters).  To make it full year, I multiplied it by 4/3: 2,829.33 (scenario 1)

I also looked at the last quarter's owners earnings (515+160-110) and multiplied it by 4: 2,260 (scenario 2)

On mornginstar.com, I could not find a 5year-growth rate, so I took the next year growth rate, which is 16% (0.29/0.25-1) for the next 5 years (Sub-scenario A). For sub-scenario B, I used the same growth-rate for next year (16%), then 10.3% for the following 4 years (the industry's average growth rate per Morningstar)

This gives us four future OE:
(1A) 5,942.57
(1B) 4,857.8
(2A) 4,746.77
(2B) 3,880.32

2. Calculating back Net cash (as Cash+ST investments minus LT debt)

Net Cash: 5.3+6.7-0.9=11.1

3. Calculation of the earnings multiple

I  took an earnings multiple of 16 (the growth rate) and added 30%: 20

4. Calculation of the rate of dilution

Looked into their latest Def14A form at sec.gov:
“AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES”
This table has been omitted, as Julie Smolyansky does not hold any options and,
therefore, did not exercise any stock options during 2003.”

I also read in their 2003-financials that “Lifeway also acquired 55,000 shares (110,000 shares when adjusted for the two-for-one stock split paid on March 8, 2004) of its common stock under a repurchase program”

0.110 on 8.55 (8.44 current shares outstanding + 0.110 shares bought back)= 1.29%

So,  taken this 1.29% and assuming no dilution by options,  the total amount of shares will shrink to 8.01 million in 5 years.

5. Calculation of per share values

For the different scenarios, this gives us ( current price: 9.11)

OE	    price in 5y	  Annual. return
(1A)	 5,942.57 	 16.22 	     12%
(1B)	 4,857.80 	 13.52 	     8%
(2A)	 4,746.77 	 13.24 	     8%
(2B)	 3,880.32 	 11.07 	     4%
Note: Forecasted price in 5 years: (OE* 20 (earnings multiple) +11,100 (Net cash in thousands))/8,010 (shares in thousands)

On average, this stock seems to give a 8% return on investment.

Maarten
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