Leggett & Platt (LEG)

Fundamental analysis of Leggett & Platt Inc., June 2, 2017

 

Description:

Leggett & Platt is a designer and manufacturer of home and office products. It has its headquarters in Carthage, Missouri.

Valuation:

Leggett & Platt seems expensive at a trailing P/E of 19.0. Over the average past three years the P/E is even worse at 27.6. The Shiller P/E is very high at 46.7. Given the high amount of intangible assets the company’s Price to book ratio is very high at 53.3.

Balance sheet:

With a Working capital of $620m seems well capitalized. At least they don’t have any problems with paying their short-term bills. However the company has a Debt to equity ratio of 1.7, a figure associated with high risk. Net earnings to sales in 2016 came in at 10.3 per cent which is good for a manufacturing company. Last year’s Return on equity was very high at 35 per cent.

Free cash flow and dividend:

Leggett & Platt has a Free cash flow of $430m which equates to $3 per share. Of this the company pays out a dividend of $1.12 (2.5 per cent) which seems reasonable.

Conclusion:

Leggett & Platt is a well run company with solid earnings and good cash flow. However, at these prices I would not buy new stock.

 

Update, August 21, 2017:

Leggett & Platt is neither expensive nor cheap at 16.8 times the earnings of 2016. Assuming forward earnings of $2.50 for 2017, the forward P/E ratio is 18.6 which is on the high side. I would not be a buyer of the stock at these prices.

 

Update, December 15, 2017

It’s time to revisit this interesting stock which is spitting out cash like there’s no tomorrow. Its P/E over 2016’s earnings is 16.7 and if we assume that the company will make $4.16 this year, the forward P/E ratio is a solid 11.1. This isn’t what I would characterize as a cheap stock, but cheap enough to whet my appetite.

The company has been paying out a dividend of $1.76 so far this year which gives a current dividend yield of 4.8 per cent.

Conclusion:

At these prices Leggett & Platt is a buy!

 

 If you would like to learn more about fundamental analysis you can do that here.

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