Grandmaster Bent Larsen vs World Champion Boris Spassky 1970 USSR vs Rest of the World (Kingscrusher)
Tuesday, November 6, 2012
Thursday, October 25, 2012
Friday, October 12, 2012
Sysco Corporation: $SYY Cash Flow Valuation
Current Price: ~ $31/share
Yield: ~ 3.46%
Sysco operates as the largest North American foodservice distributor, controlling 17.5% of the market. The firm distributes more than 400,000 food and nonfood products to 400,000 customers, including restaurants, health care and educational facilities, and lodging establishments. From its founding in 1969 through the end of fiscal 2011, Sysco acquired more than 150 companies or divisions of companies to expand its footprint. Nearly 100% of the firm's sales are derived in North America.
Estimated WACC for the firm today is 7.45% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
|
Year
|
FCF
$Millions
|
|
2003
|
937
|
|
2004
|
659
|
|
2005
|
802
|
|
2006
|
609
|
|
2007
|
800
|
|
2008
|
1080
|
|
2009
|
1118
|
|
2010
|
291
|
|
2011
|
455
|
|
2012
|
620
|
Average Annual Growth FCF: ~ 6%
CAGR FCF: ~ -4%
Consensus Forecast Industry 5-Year Growth: ~ 16% per year
Consensus Forecast Company 5-Year G620rowth: ~ 7% per year
Internal Growth Rate: ~ 4%
Sustainable Growth Rate: ~ 12%
Scenario 1
- Start at $620 million FCF
- Assume a 5-year growth rate in FCF of 7% per year, then 4% growth in FCF per year forever:
Discounted Cash Flow Valuation
The firm's future free cash flows, discounted at a WACC of 7.45%, give a present value for the entire firm (Debt + Equity) of $21883 million. If the firm's fair value of debt is estimated at $3539 million, then the fair value of the firm's equity could be $18344 million. $18344 million / 587 million outstanding shares is approximately $31 per share and a 20% margin of safety is $25/share.
|
Year
|
FCF
$Millions
|
|
0
|
620
|
|
1
|
663
|
|
2
|
710
|
|
3
|
760
|
|
4
|
813
|
|
5
|
870
|
|
Terminal
Value
|
26960
|
The firm's future free cash flows, discounted at a WACC of 7.45%, give a present value for the entire firm (Debt + Equity) of $21883 million. If the firm's fair value of debt is estimated at $3539 million, then the fair value of the firm's equity could be $18344 million. $18344 million / 587 million outstanding shares is approximately $31 per share and a 20% margin of safety is $25/share.
Scenario 2
Average FCF (2012, 2009) is $869 million
Average FCF (2012, 2009) is $869 million
- Start at $869 million FCF
- Assume a 5-year growth rate in FCF of 7% per year, then 2% growth in FCF per year forever:
Discounted Cash Flow Valuation
|
Year
|
FCF
$Millions
|
|
0
|
869
|
|
1
|
930
|
|
2
|
995
|
|
3
|
1065
|
|
4
|
1139
|
|
5
|
1219
|
|
Terminal
Value
|
23924
|
- Present Value of the entire firm (Debt + Equity): $20993 million
- Value of Equity: $17457 million or $30/share
- 20% margin of safety is $24/share
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Friday, September 14, 2012
Clorox Company: $CLX Cash Flow Valuation Update
Current Price: ~ $71/share
Yield: ~ 3.46%
For nearly 100 years, Clorox has operated in the household product industry, expanding its portfolio to include such leading brands as Clorox, Glad, Hidden Valley, and Kingsford. The firm distributes its products through mass merchants, grocery stores, and other retail outlets. With its acquisition of Burt's Bees in 2007, Clorox gained entry into the fast-growing natural personal-care category. International sales amount to 20% of the firm's consolidated total.
Estimated WACC for the firm today is 5.08% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
|
Year
|
FCF
$Millions
|
|
2003
|
598
|
|
2004
|
727
|
|
2005
|
614
|
|
2006
|
342
|
|
2007
|
562
|
|
2008
|
560
|
|
2009
|
541
|
|
2010
|
616
|
|
2011
|
470
|
|
2012
|
420
|
Average Annual Growth FCF: ~ 0%
CAGR FCF: ~ -4%
Consensus Forecast Industry 5-Year Growth: ~ 14% per year
Consensus Forecast Company 5-Year Growth: ~ 8% per year
Internal Growth Rate: ~ 5.5%
Scenario 1
- Start at $420 million FCF
- Assume a 5-year growth rate in FCF of 8% per year, then no growth or 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
The firm's future free cash flows, discounted at a WACC of 5.08%, give a present value for the entire firm (Debt + Equity) of $12524 million. If the firm's fair value of debt is estimated at $2606 million, then the fair value of the firm's equity could be $9918 million. $9918 million / 130 million outstanding shares is approximately $76 per share and a 20% margin of safety is $61/share.
|
Year
|
FCF
$Millions
|
|
0
|
420
|
|
1
|
454
|
|
2
|
490
|
|
3
|
529
|
|
4
|
571
|
|
5
|
617
|
|
Terminal
Value
|
13121
|
The firm's future free cash flows, discounted at a WACC of 5.08%, give a present value for the entire firm (Debt + Equity) of $12524 million. If the firm's fair value of debt is estimated at $2606 million, then the fair value of the firm's equity could be $9918 million. $9918 million / 130 million outstanding shares is approximately $76 per share and a 20% margin of safety is $61/share.
Scenario 2
All else being equal,
All else being equal,
- Assume a 5-year growth rate in FCF of 4% per year, then 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
|
Year
|
FCF
$Millions
|
|
0
|
420
|
|
1
|
437
|
|
2
|
454
|
|
3
|
472
|
|
4
|
491
|
|
5
|
511
|
|
Terminal
Value
|
10462
|
- Present Value of the entire firm (Debt + Equity): $10203 million
- Value of Equity: $7597 million or $58/share
- 20% margin of safety is $46/share
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Automatic Data Processing: $ADP Cash Flow Valuation Update
Current Price: ~ $58/share
Yield: ~ 2.73%
ADP competes in the human resources administration services industry. The firm provides services that satisfy companies' human resources needs, such as payroll processing and benefits administration. The firm was founded in 1949 and has its headquarters in Roseland, N.J. It serves more than 560,000 clients with 57,000 employees worldwide.
Estimated WACC for the firm today is 9.89% using the Capital Asset Pricing Model and the company's recent SEC filings.
Yield: ~ 2.73%
ADP competes in the human resources administration services industry. The firm provides services that satisfy companies' human resources needs, such as payroll processing and benefits administration. The firm was founded in 1949 and has its headquarters in Roseland, N.J. It serves more than 560,000 clients with 57,000 employees worldwide.
Estimated WACC for the firm today is 9.89% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
Year
|
FCF
$Millions
|
2003
|
1431
|
2004
|
1188
|
2005
|
1237
|
2006
|
1402
|
2007
|
975
|
2008
|
1509
|
2009
|
1309
|
2010
|
1455
|
2011
|
1428
|
2012
|
1661
|
Average Annual Growth FCF: ~ 4%
CAGR FCF: ~ 2%
Consensus Forecast Industry 5-Year Growth: ~ 19% per year
Consensus Forecast Company 5-Year Growth: ~ 9% per year
Internal Growth Rate: ~ 2%
Sustainable Growth Rate: ~ 11.5%
Scenario 1
Average FCF (2012, 2011, 2010) is $1515 million
Average FCF (2012, 2011, 2010) is $1515 million
- Start at $1515 million FCF
- Assume a 5-year growth rate in FCF of 9% per year, then no growth or 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
The firm's future free cash flows, discounted at a WACC of 9.89%, give a present value for the entire firm (Debt + Equity) of $23435 million. If the firm's fair value of debt is estimated at $17 million, then the fair value of the firm's equity could be $23418 million. $23418 million / 485 million outstanding shares is approximately $48 per share and a 20% margin of safety is $38/share.
Year
|
FCF
$Millions
|
0
|
1515
|
1
|
1651
|
2
|
1800
|
3
|
1962
|
4
|
2139
|
5
|
2331
|
Terminal
Value
|
25701
|
The firm's future free cash flows, discounted at a WACC of 9.89%, give a present value for the entire firm (Debt + Equity) of $23435 million. If the firm's fair value of debt is estimated at $17 million, then the fair value of the firm's equity could be $23418 million. $23418 million / 485 million outstanding shares is approximately $48 per share and a 20% margin of safety is $38/share.
Scenario 2
All else being equal,
All else being equal,
- Assume a 5-year growth rate in FCF of 9% per year, then 2.50% growth in FCF per year forever:
Discounted Cash Flow Valuation
Year
|
FCF
$Millions
|
0
|
1515
|
1
|
1651
|
2
|
1800
|
3
|
1962
|
4
|
2139
|
5
|
2331
|
Terminal
Value
|
34400
|
- Present Value of the entire firm (Debt + Equity): $28865 million
- Value of Equity: $28848 million or $59/share
- 20% margin of safety is $47/share
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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