Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev | Next
Author: MFinUS2 Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 466  
Subject: Thumbnail valuation Date: 12/9/2004 11:54 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
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
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev | Next

Announcements

Post of the Day:
Value Hounds

Kate Spade's Wild Ride
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement