Obscurity: Undesirability: P/E: Screening Criteria
Obscurity: Undesirability: P/E: Screening Criteria
Still value this stock because: niche market, sustainable competitive advantage: high barriers to entry (a lot o
search costs is also considered to be high (unless customers really unhappy with them, m
high operating margins as well as stable
dvantage: high barriers to entry (a lot of patents), strong management (diversified in what they offer), high switching costs
customers really unhappy with them, most likely they will not switch), they have high market share and not a lot of competitors
high switching costs
d not a lot of competitors
Calculation of Operating Lease Adjustment
Year Expense PV Expense
1998 21000 19577
1999 20000 17381
2000 17000 13773
2001 12000 9063
2002 8000 5633
Total $ 65,427.13
Average 16.1%
Average 21.2%
Total PP&E
Average
Multiplier
Customer Relations
Average 1.9%
Number of Years 15
Product Portfolio $ 246,424.14
7.8%
$ 161,196 $ 113,933
$ 186,649 $ 257,283
$ 347,845 $ 371,216
46.3% 30.7%
47.7%
1996 1997
$ 789,612 $ 842,833
130072 $ 138,116
16.5% 16.4%
Reproduction Value
$ 132,084
$ 142,969
$ 5,792
$ 7,447
$ 288,292.28
1996 1997
$ 789,612 $ 842,833
$ 164,355 $ 172,795
$ 82,178 $ 86,398
10.4% 10.3%
10.4%
1.5 need to spend a lot of time and money on customers
$ 130,959.10
WACC Calculation
Business Risk Medium High Medium
Optimal Capital Structure 30% 49%
Cost of Debt
Cost of Debt 7.27%
Marginal Tax Rate 39.4%
After-tax Cost of Debt 4.4%
Cost of Equity
Equity Risk Premium 5.0% from a medium financial risk
Cost of Equity 12.3%
WACC 8.521%
0-49% is medium
ROIC 27.9% implies that we will have a high epv relative to nav
ROIC 11.8%
Calculation of Net Asset Value
Book Value Adjustments Reproduction Value
Assets
Cash & Equivalents $ 35,481.0 $ 35,481.0
Receivables $ 132,325.0 Add Allowance $5,799 $ 139,124.0
Inventories - FIFO $ 58,895.0 Add LIFO Reserve $4,032 $ 62,927.0
Deferred Tax Assets $ 13,285.0 Discount 20% $ 10,628.0
Operating Leases PV Operating Lease, Add 65,427 $ 65,427.1
Property, Plants & Equipment $ 171,127.0 Add $117,165 Reproduction Value $ 288,292.3
Excess Real Estate $ - $ -
Goodwill $ 42,149.0 Add Amortization $20,249 $ 62,398.0
Subsidiaries (Non-Consolidated): $ -
Product Portfolio Add $246,424 Reproduction Value $ 246,424.1
Customer Relations Add $130,959 Reproduction Value $ 130,959.1
Licenses $ 10,430.0 $ 10,430.0
Total Assets $ 463,692.0 $ 1,052,090.7
Liabilities
Short-Term Borrowings $ 26,570.0 $ 26,570.0
Accounts Payable $ 48,843.0 $ 48,843.0
Other Current Liabilities $ 88,197.0 $ 88,197.0
Operating Leases PV Operating Lease, Add 65,427 $ 65,427.1
Long-Term Debt $ 48,506.0 Adjust to MV, Add $11,748.5 $ 60,254.5
Deferred Tax Liabilities $ 16,571.0 Discount 20% $ 13,256.8
Preferred Stock $ - $ -
Minority Interest $ - $ -
Employee Stock Options $ - $ -
Underfunded Pension Fund $ - $ -
Total Liabilities $ 228,687.0 $ 302,548.5
EPS Growth
1993 1994 1995
EPS 0.66 0.94 1.25
Growth 42.42% 32.98%
Average Growth
EBIT/Share Growth
1993 1994 1995
EBIT $ 74,113 $ 83,909 $ 108,880
Shares Outstanding 684385 552326 578496
EBIT/Share $ 0.11 $ 0.15 $ 0.19
Average Growth
Revenue/Share Growth
1993 1994 1995
Revenue $ 451,694 $ 519,186 $ 723,120
Shares Outstanding 684385 552326 578496
Revenue/Share $ 0.66 $ 0.94 $ 1.25
Growth 42.42% 32.98%
Average Growth
Growth Capex
Net PP&E $ 171,127
Net PP&E/Sales 20.3%
Change in Sales $ 53,221
Growth Capex $ 10,806
30.3%
1996 1997
130072 $ 138,116
484425 448315
$ 0.27 $ 0.31
42.66% 14.74%
30.4%
1996 1997
$ 789,612 $ 842,833
484425 448315
$ 1.63 $ 1.88
30.40% 15.34%
30.3%
5% 6% 7% 8%
1.53 1.88 2.71 6.70
$ 50.78 $ 62.63 $ 90.06 $ 222.79
ght now is 61
hat graph in the textbook, we have a max growth of 5% and this vgm of 1.9 is saying a growth of 6%