Stanley Black & Decker

Fundamental analysis of Stanley Black & Decker, June 10, 2017

Yellow picture of wrench with text about Stanley, Black & Decker

Update, December 10, 2017

Since we last looked at this stock prices have gone up a further 20 per cent and it is now even more expensive. The earnings multiple comes in at 21.6 which is high and taking an average of the past three years’ earnings the multiple is 25 which is too expensive.

Having said all this, there’s nothing wrong with the company. They don’t have too much debt, have a good profitability to equity ratio (as is important for a manufacturing company) and reasonably high return on equity.

Conclusion:

Had the stock been priced at 50 per cent of its current value I would be a buyer. Now I’m not.

Update, August 8, 2017

The price of the SWK stock hasn’t really been moving since we last looked. The one thing that has changed is that they have released a new quarterly report. Based on the quarterly report the company earned $4.40 for the last six months.

If we say that the company will make $8 for the whole of 2017, then the P/E ratio will come in at 17.6 which is good, but still a little bit expensive.

The Price to book ratio is negative because of high intangibles.

The company made $1.14 million dollars in Free cash flow last year which equates to $7.70 per share. Of this they pay a dividend of 58 cents per quarter.

Conclusion:

I would not be a buyer of StanleyBlack & Decker at these prices.

 

 

Description:

Stanley Black & Decker is a Fortune 500 manufacturer of industrial tools, household hardware and provider of security products. Its headquarters are located in New Britain, Connecticut.

Valuation:

At $140, the Price to earnings ratio is 21.5 (trailing earnings) which in my opinion is expensive. The Price to the average of the past three years’ earnings is hardly better at 24.6. The Book value of the company is negative because they have a lot of intangible assets (which should be subtracted from the Equity to arrive at the Book value).

 

Balance sheet:

With Current assets of $4.8bn and Current Liabilities of $2.8bn, the company has a Working capital of $2bn which is a lot of cash in the bank. They have a Debt to equity ratio of 1.5 which is not out of the ordinary.

 

Free cash flow and dividend:

Stanley Black & Decker has a Free cash flow of $1.14bn which allows it to pay out a dividend of $2.26 per share (or a 1.6 per cent yield). The company is part of the Dividend aristocrats, which is a list of the companies that has paid out uninterrupted and rising dividends for 25 straight years.

 

Conclusion:

Stanley Black & Decker is a well run company with solid earnings and a good free cash flow. However, the current price is too high for my taste.

 

 

 

 

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

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