Intrinsic value of Leggett & Platt, Incorporated - LEG

Previous Close

$38.51

  Intrinsic Value

$44.22

stock screener

  Rating & Target

hold

+15%

Previous close

$38.51

 
Intrinsic value

$44.22

 
Up/down potential

+15%

 
Rating

hold

We calculate the intrinsic value of LEG stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 5.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
Revenue, $m
  4,539
  4,819
  5,111
  5,415
  5,732
  6,062
  6,407
  6,767
  7,144
  7,537
  7,948
  8,378
  8,827
  9,298
  9,790
  10,306
  10,846
  11,412
  12,005
  12,626
  13,278
  13,960
  14,676
  15,427
  16,214
  17,040
  17,906
  18,815
  19,769
  20,769
Variable operating expenses, $m
  4,006
  4,247
  4,498
  4,759
  5,032
  5,317
  5,613
  5,923
  6,247
  6,585
  6,837
  7,207
  7,594
  7,999
  8,422
  8,866
  9,331
  9,818
  10,328
  10,862
  11,422
  12,010
  12,626
  13,271
  13,949
  14,659
  15,404
  16,186
  17,007
  17,867
Fixed operating expenses, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Total operating expenses, $m
  4,005
  4,246
  4,497
  4,758
  5,031
  5,316
  5,612
  5,922
  6,246
  6,584
  6,836
  7,206
  7,593
  7,998
  8,421
  8,865
  9,330
  9,817
  10,326
  10,860
  11,420
  12,008
  12,624
  13,269
  13,947
  14,657
  15,402
  16,184
  17,005
  17,865
Operating income, $m
  534
  573
  614
  656
  701
  747
  795
  845
  898
  953
  1,112
  1,172
  1,235
  1,300
  1,369
  1,441
  1,517
  1,596
  1,679
  1,766
  1,857
  1,952
  2,052
  2,157
  2,267
  2,383
  2,504
  2,631
  2,764
  2,904
EBITDA, $m
  713
  757
  803
  851
  900
  952
  1,006
  1,063
  1,122
  1,184
  1,248
  1,316
  1,386
  1,460
  1,538
  1,618
  1,703
  1,792
  1,885
  1,983
  2,085
  2,192
  2,304
  2,422
  2,546
  2,675
  2,811
  2,954
  3,104
  3,261
Interest expense (income), $m
  38
  63
  71
  79
  87
  95
  104
  114
  123
  133
  144
  155
  167
  179
  191
  205
  218
  233
  248
  264
  281
  298
  317
  336
  356
  377
  399
  422
  447
  472
  499
Earnings before tax, $m
  471
  502
  535
  570
  605
  643
  682
  722
  765
  809
  957
  1,005
  1,056
  1,109
  1,165
  1,223
  1,284
  1,348
  1,415
  1,485
  1,559
  1,636
  1,717
  1,801
  1,890
  1,984
  2,081
  2,184
  2,292
  2,405
Tax expense, $m
  127
  136
  145
  154
  163
  174
  184
  195
  206
  218
  258
  271
  285
  299
  314
  330
  347
  364
  382
  401
  421
  442
  463
  486
  510
  536
  562
  590
  619
  649
Net income, $m
  344
  367
  391
  416
  442
  469
  498
  527
  558
  591
  698
  734
  771
  810
  850
  893
  937
  984
  1,033
  1,084
  1,138
  1,194
  1,253
  1,315
  1,380
  1,448
  1,519
  1,594
  1,673
  1,755

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,594
  3,816
  4,047
  4,287
  4,538
  4,800
  5,073
  5,358
  5,656
  5,967
  6,293
  6,633
  6,989
  7,362
  7,752
  8,160
  8,588
  9,036
  9,505
  9,997
  10,513
  11,053
  11,620
  12,214
  12,838
  13,492
  14,178
  14,897
  15,652
  16,444
Adjusted assets (=assets-cash), $m
  3,594
  3,816
  4,047
  4,287
  4,538
  4,800
  5,073
  5,358
  5,656
  5,967
  6,293
  6,633
  6,989
  7,362
  7,752
  8,160
  8,588
  9,036
  9,505
  9,997
  10,513
  11,053
  11,620
  12,214
  12,838
  13,492
  14,178
  14,897
  15,652
  16,444
Revenue / Adjusted assets
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
Average production assets, $m
  1,271
  1,349
  1,431
  1,516
  1,605
  1,697
  1,794
  1,895
  2,000
  2,110
  2,225
  2,346
  2,472
  2,603
  2,741
  2,886
  3,037
  3,195
  3,361
  3,535
  3,718
  3,909
  4,109
  4,320
  4,540
  4,771
  5,014
  5,268
  5,535
  5,815
Working capital, $m
  472
  501
  532
  563
  596
  630
  666
  704
  743
  784
  827
  871
  918
  967
  1,018
  1,072
  1,128
  1,187
  1,249
  1,313
  1,381
  1,452
  1,526
  1,604
  1,686
  1,772
  1,862
  1,957
  2,056
  2,160
Total debt, $m
  1,309
  1,455
  1,607
  1,765
  1,930
  2,102
  2,282
  2,470
  2,666
  2,871
  3,085
  3,309
  3,543
  3,788
  4,045
  4,313
  4,595
  4,889
  5,198
  5,522
  5,861
  6,217
  6,590
  6,981
  7,391
  7,822
  8,273
  8,746
  9,243
  9,764
Total liabilities, $m
  2,365
  2,511
  2,663
  2,821
  2,986
  3,158
  3,338
  3,526
  3,722
  3,927
  4,141
  4,365
  4,599
  4,844
  5,101
  5,369
  5,651
  5,945
  6,254
  6,578
  6,917
  7,273
  7,646
  8,037
  8,447
  8,878
  9,329
  9,802
  10,299
  10,820
Total equity, $m
  1,229
  1,305
  1,384
  1,466
  1,552
  1,642
  1,735
  1,833
  1,934
  2,041
  2,152
  2,269
  2,390
  2,518
  2,651
  2,791
  2,937
  3,090
  3,251
  3,419
  3,595
  3,780
  3,974
  4,177
  4,391
  4,614
  4,849
  5,095
  5,353
  5,624
Total liabilities and equity, $m
  3,594
  3,816
  4,047
  4,287
  4,538
  4,800
  5,073
  5,359
  5,656
  5,968
  6,293
  6,634
  6,989
  7,362
  7,752
  8,160
  8,588
  9,035
  9,505
  9,997
  10,512
  11,053
  11,620
  12,214
  12,838
  13,492
  14,178
  14,897
  15,652
  16,444
Debt-to-equity ratio
  1.060
  1.110
  1.160
  1.200
  1.240
  1.280
  1.320
  1.350
  1.380
  1.410
  1.430
  1.460
  1.480
  1.500
  1.530
  1.550
  1.560
  1.580
  1.600
  1.620
  1.630
  1.640
  1.660
  1.670
  1.680
  1.700
  1.710
  1.720
  1.730
  1.740
Adjusted equity ratio
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  344
  367
  391
  416
  442
  469
  498
  527
  558
  591
  698
  734
  771
  810
  850
  893
  937
  984
  1,033
  1,084
  1,138
  1,194
  1,253
  1,315
  1,380
  1,448
  1,519
  1,594
  1,673
  1,755
Depreciation, amort., depletion, $m
  179
  184
  189
  194
  200
  205
  211
  218
  224
  231
  137
  144
  152
  160
  168
  177
  186
  196
  206
  217
  228
  240
  252
  265
  279
  293
  308
  323
  340
  357
Funds from operations, $m
  523
  551
  580
  610
  642
  675
  709
  745
  782
  821
  835
  878
  923
  969
  1,018
  1,070
  1,124
  1,180
  1,239
  1,301
  1,366
  1,434
  1,505
  1,580
  1,658
  1,741
  1,827
  1,918
  2,013
  2,112
Change in working capital, $m
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  95
  99
  104
Cash from operations, $m
  495
  522
  550
  579
  609
  640
  673
  707
  743
  780
  792
  833
  876
  920
  967
  1,016
  1,067
  1,121
  1,177
  1,236
  1,298
  1,363
  1,431
  1,502
  1,577
  1,655
  1,737
  1,823
  1,913
  2,008
Maintenance CAPEX, $m
  -73
  -78
  -83
  -88
  -93
  -98
  -104
  -110
  -116
  -123
  -129
  -137
  -144
  -152
  -160
  -168
  -177
  -186
  -196
  -206
  -217
  -228
  -240
  -252
  -265
  -279
  -293
  -308
  -323
  -340
New CAPEX, $m
  -74
  -78
  -82
  -85
  -89
  -93
  -97
  -101
  -105
  -110
  -115
  -120
  -126
  -132
  -138
  -144
  -151
  -158
  -166
  -174
  -182
  -191
  -200
  -210
  -220
  -231
  -243
  -254
  -267
  -280
Cash from investing activities, $m
  -147
  -156
  -165
  -173
  -182
  -191
  -201
  -211
  -221
  -233
  -244
  -257
  -270
  -284
  -298
  -312
  -328
  -344
  -362
  -380
  -399
  -419
  -440
  -462
  -485
  -510
  -536
  -562
  -590
  -620
Free cash flow, $m
  348
  365
  385
  406
  427
  449
  472
  496
  522
  548
  548
  576
  606
  637
  670
  704
  739
  776
  815
  856
  899
  944
  990
  1,040
  1,091
  1,145
  1,202
  1,261
  1,323
  1,388
Issuance/(repayment) of debt, $m
  140
  146
  152
  158
  165
  172
  180
  188
  196
  205
  214
  224
  234
  245
  257
  269
  281
  295
  309
  324
  339
  356
  373
  391
  410
  430
  451
  473
  497
  521
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  140
  146
  152
  158
  165
  172
  180
  188
  196
  205
  214
  224
  234
  245
  257
  269
  281
  295
  309
  324
  339
  356
  373
  391
  410
  430
  451
  473
  497
  521
Total cash flow (excl. dividends), $m
  488
  511
  537
  564
  592
  621
  652
  684
  718
  753
  762
  800
  840
  882
  926
  972
  1,021
  1,071
  1,124
  1,180
  1,238
  1,299
  1,363
  1,431
  1,501
  1,575
  1,653
  1,734
  1,820
  1,910
Retained Cash Flow (-), $m
  -72
  -76
  -79
  -82
  -86
  -90
  -93
  -98
  -102
  -106
  -111
  -116
  -122
  -127
  -133
  -140
  -146
  -153
  -161
  -168
  -176
  -185
  -194
  -203
  -213
  -224
  -235
  -246
  -258
  -271
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  415
  435
  458
  482
  506
  532
  559
  587
  616
  646
  651
  684
  718
  755
  793
  833
  874
  918
  964
  1,012
  1,062
  1,114
  1,170
  1,227
  1,288
  1,352
  1,418
  1,488
  1,562
  1,639
Discount rate, %
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
  396
  393
  390
  385
  377
  367
  355
  340
  324
  306
  275
  255
  235
  214
  192
  171
  150
  130
  111
  94
  78
  63
  51
  40
  31
  23
  17
  12
  9
  6
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Leggett & Platt, Incorporated is a manufacturer that conceives, designs and produces a range of engineered components and products found in homes, offices and automobiles. The Company operates in four segments: Residential Furnishings, Commercial Products, Industrial Materials and Specialized Products. Its brands include ComfortCore, Mira-Coil, VertiCoil, Quantum, Nanocoil, Lura-Flex and Active Support Technology, which includes mattress innersprings; Semi-Flex, which includes box spring components and foundations; Spuhl, which includes mattress innerspring manufacturing machines; Wall Hugger, which includes recliner chair mechanisms; Super Sagless, which includes motion and sofa sleeper mechanisms; No-Sag, which includes wire forms used in seating; LPSense, which includes capacitive sensing; Hanes, which includes fabric materials; Schukra, Pullmaflex and Flex-O-Lator, which includes automotive seating products, and Gribetz and Porter, which includes quilting and sewing machines.

FINANCIAL RATIOS  of  Leggett & Platt, Incorporated (LEG)

Valuation Ratios
P/E Ratio 13.3
Price to Sales 1.4
Price to Book 4.7
Price to Tangible Book
Price to Cash Flow 9.3
Price to Free Cash Flow 12
Growth Rates
Sales Growth Rate -4.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20.4%
Cap. Spend. - 3 Yr. Gr. Rate 8.9%
Financial Strength
Quick Ratio 13
Current Ratio 0.1
LT Debt to Equity 87.5%
Total Debt to Equity 89.6%
Interest Coverage 14
Management Effectiveness
Return On Assets 13.9%
Ret/ On Assets - 3 Yr. Avg. 9.9%
Return On Total Capital 18.8%
Ret/ On T. Cap. - 3 Yr. Avg. 13%
Return On Equity 35.4%
Return On Equity - 3 Yr. Avg. 24.1%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 24%
Gross Margin - 3 Yr. Avg. 22.8%
EBITDA Margin 17.1%
EBITDA Margin - 3 Yr. Avg. 14.9%
Operating Margin 13.9%
Oper. Margin - 3 Yr. Avg. 11.7%
Pre-Tax Margin 13%
Pre-Tax Margin - 3 Yr. Avg. 10.8%
Net Profit Margin 10.3%
Net Profit Margin - 3 Yr. Avg. 7.1%
Effective Tax Rate 24.6%
Eff/ Tax Rate - 3 Yr. Avg. 25.2%
Payout Ratio 45.9%

LEG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LEG stock intrinsic value calculation we used $4270 million for the last fiscal year's total revenue generated by Leggett & Platt, Incorporated. The default revenue input number comes from 0001 income statement of Leggett & Platt, Incorporated. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our LEG stock valuation model: a) initial revenue growth rate of 6.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5%, whose default value for LEG is calculated based on our internal credit rating of Leggett & Platt, Incorporated, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Leggett & Platt, Incorporated.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of LEG stock the variable cost ratio is equal to 88.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $-1 million in the base year in the intrinsic value calculation for LEG stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Leggett & Platt, Incorporated.

Corporate tax rate of 27% is the nominal tax rate for Leggett & Platt, Incorporated. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the LEG stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for LEG are equal to 28%.

Life of production assets of 16.3 years is the average useful life of capital assets used in Leggett & Platt, Incorporated operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for LEG is equal to 10.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1157 million for Leggett & Platt, Incorporated - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 131.163 million for Leggett & Platt, Incorporated is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Leggett & Platt, Incorporated at the current share price and the inputted number of shares is $5.1 billion.

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