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Fair Warning

Union Pacific Corporation
Union Pacific Corporation operates a Class I railroad with 32,000 route miles. The company’s freight traffic consists of coal, grain, rock, or soda ash, lumber, steel, paper, food, chemicals, finished vehicles, intermodal containers and truck trailers. Industry peers include Burlington Northern Santa Fe, LLC, CSX Corporation, and Norfolk Southern Corporation.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $148.83, with an initial trailing stop at $144.81. Upward price movement will find no resistance. Downward price movement will find support at $141.90 and $137.40, with final support at $134.

Days to Cover
The most recent days to cover number is 5. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Union Pacific Corporation, as a result of its initial analysis of the Tax Act and existing implementation guidance, the company remeasured its deferred tax assets and liabilities and computed its transition tax liability net of offsetting foreign tax credits. This resulted in a $5.9 billion reduction in its income tax expense in 2017. The company also recorded a $212 million reduction to its operating expense related to income tax adjustments at equity-method affiliates.

Note that for fiscal 2017, 25% of net income came from taxes.

Insider Transactions
In the past 12 months, the company reported 79 insider trades involving 888,086 shares of stock. Of those 79 insider trades, 31 were Buys involving 495,404 shares of stock, and 48 were Sells involving 392,682 shares of stock, creating an insider buy to sell ratio of 1.3 to 1.

Acquisitions
The company recorded no acquisitions during fiscal 2017.

Divestitures and Dispositions
The company recorded no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Union Pacific Corporation, revenue grew by 7%, earnings grew by 115%, free cash flow grew by 138%, total debt increased by 13%, and the stock price increased by 23%. Year to date the stock price is up 10%.

Future Value
My future (5 year hold) target price for the stock is $276, which is an average annual return of 18%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 23% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $92. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $248. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Union Pacific Corporation the current twelve month trailing PE Ratio is 9, the PEG Ratio is 0.8, Book Value is $32, and Tangible Book Value is $32.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Union Pacific Corporation (NYSE: UNP) – FYE 12/2017 – UNDER VALUED The stock is currently trading below my most recent $149 buy target. Please See Linked PDF Worksheet

Disclosure
I hold shares of Union Pacific Corporation
Posted on 06/15/18

Newell Brands, Inc.
Newell Rubbermaid is a marketer of consumer and commercial products marketed under a portfolio of brands, including Sharpie®, Paper Mate®, Parker®, Waterman®, Dymo®, Rubbermaid®, Contigo®, Levolor®, Goody®, Calphalon®, Irwin®, Lenox®, Rubbermaid Commercial Products®, Graco®, Aprica®, Baby Jogger®, Yankee Candle®, Crock-Pot®, FoodSaver®, Mr. Coffee®, Oster®, Coleman®, First Alert®, Rawlings®, Jostens®, K2®, Marker®, Marmot®, and Völkl®. Listed competitors include ACCO Brands, Avery Dennison, and Tupperware Brands

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $28.95, with an initial trailing stop at $25.99. Upward price movement will find resistance at $27.57 and $28.86, with final resistance at $30.67. Downward price movement will find support at $25.11, with final support at $23.31.

Days to Cover
The most recent days to cover number is 7. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Newell Brands, Inc., the company recorded a deferred tax benefit of $1.5 billion due to statutory tax rate changes in the United States and an $87.2 million tax benefit to reverse the company’s deferred tax liability on historical Jarden earnings, partially offset by a $195 million tax expense relating to a mandatory repatriation tax. The company accounted for the tax rate change in the valuation of deferred taxes. As a result, the company recorded a tax benefit of $1.5 billion for FY1207.

Insider Transactions
In the past 12 months, the company reported 41 insider trades involving 3,117,317 shares of stock. Of those 41 insider trades, 25 were Buys involving 397,297 shares of stock, and 16 were Sells involving 2,719,588 shares of stock, creating an insider buy to sell ratio of 0.1 to 1.

Acquisitions
In September 2017, the company acquired Chesapeake Bay Candle, a manufacturer and marketer of premium candles and other home fragrance products, focused on consumer wellness and natural fragrance, for $75 million. In April 2017, the company acquired Sistema Plastics, a New Zealand based manufacturer and marketer of innovative food storage containers with strong market shares and presence in Australia, New Zealand, U.K. and parts of continental Europe for a purchase price of $472 million. In January 2017, the company acquired Smith Mountain Industries (“Smith Mountain”), a provider of premium home fragrance products, sold primarily under the WoodWick® Candle brand, for a purchase price of approximately $100 million.

Divestitures
In July 2017, the company sold its Winter Sports business for a selling price of approximately $240 million. During 2017, the company sold its Rubbermaid® consumer storage totes business, its stroller business under the Teutonia® brand, its Lehigh business, its firebuilding business and its triathlon apparel business under the Zoot® and Squadra® brands. The selling prices for these businesses were not material. The company sold the firebuilding business to Royal Oak Enterprises, LLC (“Royal Oak”). In March 2017, the company completed the sale of its Tools business, including the Irwin®, Lenox® and Hilmor® brands. The selling price was $1.95 billion.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Newell Brands, Inc., revenue grew by 11%, free cash flow grew by 233%, earnings grew by 364%, total debt declined by 11%, and the stock price declined by 44%. Year to date the stock price is down 15%.

Future Value
My future (5 year hold) target price for the stock is $55, which is an average annual return of 22%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 8% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $42. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $163. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Mueller Industries, Inc. the current twelve month trailing PE Ratio is 6, the PEG Ratio is 0.4, Book Value is $29, and Tangible Book Value is (-$22).

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Newell Brands, Inc. (NYSE: NWL) – FYE 12/2017 – UNDER VALUED The stock is currently trading below my most recent $163 fair value estimate. Please See Linked PDF Worksheet

Disclosure
I hold shares of Newell Brands, Inc.
Posted on 06/15/18

Reliance Steel and Aluminum
Reliance Steel and Aluminum operates 300 metals service centers providing metals processing services, and distributes approximately 100,000 metal products including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium and specialty steel products. Metals service centers acquire carbon steel, aluminum, stainless and alloy steel and other metal products from primary metals producers and then process these materials to meet customer specifications. Industry peers include AM Castle and Company, Ryerson Holding Corporation, and Worthington Industries.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $97.56, with an initial trailing stop at $93.35. Upward price movement will find resistance at $95.99. Downward price movement will find support at $93.54 and $91.77, with final support at $89.15.

Days to Cover
The most recent days to cover number is 2. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Reliance Steel and Aluminum, the company recognized a provisional net tax benefit in 2017 relating to Tax Reform of $207.3 million.

Insider Transactions
In the past 12 months, the company reported 56 insider trades involving 370,411 shares of stock. Of those 56 insider trades, 27 were Buys involving 198,350 shares of stock, and 172,061 were Sells involving 172,061 shares of stock, creating an insider buy to sell ratio of 1.2 to 1.

Acquisitions
In October 2017 the company acquired Ferguson Perforating Company (“Ferguson”). Ferguson, headquartered in Providence, Rhode Island, specializes in manufacturing highly engineered and complex perforated metal parts that have application in diverse end markets including industrial machinery, automotive, aerospace, sugar products and consumer electronics manufacturers.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Reliance Steel and Aluminum, revenue grew by 13%, free cash flow grew by 32%, earnings grew by 44%, total debt declined by 1%, and the stock price increased by 32%. Year to date the stock price is up 10%.

Future Value
My future (5 year hold) target price for the stock is $117, which is an average annual return of 5%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 8% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $83. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $140. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Mueller Industries, Inc. the current twelve month trailing PE Ratio is 8, the PEG Ratio is 0.6, Book Value is $65, and Tangible Book Value is $24.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Reliance Steel and Aluminum (NYSE: RS) – FYE 12/2017 – FAIRLY VALUED The stock is currently trading in line with my most recent $140 fair value estimate. Please See Linked PDF Worksheet

Disclosure
I hold shares of Reliance Steel and Aluminum
Posted on 06/14/18

Olympic Steel, Inc.
Olympic Steel is a metals service center that provides metals processing and distribution services. Their primary flat products focus is on the direct sale and distribution of large volumes of processed carbon, coated, aluminum and stainless flat-rolled sheet, coil and plate products. Through their Chicago Tube and Iron (CTI) subsidiary they distribute metal tubing, pipe, bar, valves and fittings and fabricate pressure parts supplied to various industrial markets. Industry peers include Reliance Steel and Aluminum Company, Ryerson Holding Corporation, and Steel Technologies LLC

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $24.33, with an initial trailing stop at $22.42. Upward price movement will find resistance at $23.59 and $24.24, with final resistance at $24.93. Downward price movement will find support at $22.14 and $21.38, with final support at $24.93.

Days to Cover
The most recent days to cover number is 2. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Olympic Steel, Inc., the company decreased its net deferred tax liability by $6.2 million resulting in an income tax benefit to reflect the estimated impact of the Tax Act. Based on the company’s predominantly U.S. based operational footprint, additional international and minimum tax provisions under the Tax Act, including the one-time transition tax for the transition from the worldwide system to the territorial system, are not applicable, or would not be material to the company.

Insider Transactions
In the past 12 months, the company reported 3 insider trades involving 17,500 shares of stock. Of those 3 insider trades, 2 were Buys involving 5,500 shares of stock, and 1 was a Sell involving 12,000 shares of stock, creating an insider buy to sell ratio of 0.5 to 1.

Acquisitions
The company recorded no business acquisitions during fiscal 2017.

Dispositions
The company recorded no business dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Olympic Steel, Inc., revenue grew by 26%, free cash flow grew by 39%, earnings grew by 72%, total debt increased by 18%, and the stock price decreased by 13%. Year to date the stock price is up 6%.

Future Value
My future (5 year hold) target price for the stock is $34, which is an average annual return of 9%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of (-0.15%) per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $55. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $53. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Olympic Steel, Inc. the current twelve month trailing PE Ratio is 6, the PEG Ratio is 2.2, Book Value is $25, and Tangible Book Value is $23.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Olympic Steel, Inc. (Nasdaq: ZEUS) – FYE 12/2017 – UNDER VALUED The stock is currently trading at levels below my most recent $32 buy target. Please See Linked PDF Worksheet

Disclosure
I hold shares of Olympic Steel, Inc.
Posted on 06/13/18

Mueller Industries, Inc.
Mueller Industries is a of copper, brass, aluminum, and plastic products such as copper tube and fittings; line sets; brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; plastic fittings and valves; refrigeration valves and fittings; fabricated tubular products; and steel nipples. The company also resells imported brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products. Listed competitors are Cerro Flow Products, Cambridge-Lee Industries LLC, and Charlotte Pipe and Foundry Company.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $32.24, with an initial trailing stop at $30.94. Upward price movement will find resistance at $33.34 and $34.58, with final resistance at $35.56. Downward price movement will find support at $30.5 and $29.87, with final support at $29.20.

Days to Cover
The most recent days to cover number is 5. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for the stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Mueller Industries, Inc., the Company recorded a provisional amount for its one-time transition tax liability, resulting in an increase in income tax expense of $12.9 million.

Additionally, the company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent. However, the company is still analyzing certain aspects of the Act and refining its calculations, which could potentially affect the measurement of these balances. The provisional amount recorded related to the remeasurement of the deferred tax balance was an income tax benefit of $12.1 million.

Insider Transactions
In the past 12 months, the company reported 45 insider trades involving 237,516 shares of stock. Of those 45 insider trades, 34 were Buys involving 205,024 shares of stock, and 11 were Sells involving 32,492 shares of stock, creating an insider buy to sell ratio of 6.3 to 1.

Acquisitions
In May 2017, the company acquired all of the outstanding shares of Pexcor Manufacturing Company Inc. and Heatlink Group Inc. for approximately $16.3 million in cash. The purchased company based out of Calgary, Alberta, Canada, produces and sells a complete line of products for PEX plumbing and radiant systems. In April 2016, the company purchased a 60% equity interest in Jungwoo-Mueller for approximately $20.5 million in cash. Jungwoo-Mueller, manufactures copper-based pipe joining products, and is headquartered in Seoul, South Korea.

In July 2015, the company purchased of all of the outstanding shares of Great Lakes Copper Ltd. (Great Lakes) for $70.0 million in cash. Great Lakes manufactures copper tube products in Canada. In June 2015, the company purchased of all of the outstanding equity interests of Sherwood Valve LLC (Sherwood) for $21.8 million in cash. Sherwood manufactures valves and fluid control solutions for the HVAC, refrigeration, and compressed gas markets.

In March 2015, the company purchased of all of the outstanding capital stock of Turbotec Products, Inc. (Turbotec) for approximately $14.1 million in cash. Turbotec manufactures coaxial heat exchangers and twisted tubes for the heating, ventilation, and air-conditioning (HVAC), geothermal, refrigeration, swimming pool heat pump, marine, ice machine, commercial boiler, and heat reclamation markets.

Dispositions
In June 2017, the company entered into a definitive equity transfer agreement with Jiangsu Xingrong Hi-Tech Co. Ltd. and Jiangsu Baiyang Industries Co. Ltd. (Baiyang), together, the minority partners in Mueller-Xingrong (the Company’s Chinese joint venture), pursuant to which the company sold its 50.5 percent equity interest in Mueller-Xingrong to Baiyang for approximately $18.3 million. Mueller-Xingrong manufactured engineered copper tube primarily for air-conditioning applications in China.

Year-Over-Year
There are several year over year metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Mueller Industries, Inc., revenue increased by 10%, free cash flow declined by5%, earnings declined by 11%, total debt increased by 105%, and the stock price decreased by 13%. Year to date the stock price is down 11%.

Future Value
My future (5 year hold) target price for the stock is $56, which is an average annual return of 15%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 9% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $32. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $23. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Mueller Industries, Inc. the current twelve month trailing PE Ratio is 14, the PEG Ratio is 0.8, Book Value is $9, and Tangible Book Value is $6.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Mueller Industries, Inc. (NYSE: MLI) – FYE 12/2017 – SELL HALF The stock is currently trading at levels above my most recent $23 fair value estimate, but below my most recent $37 close target. Please See Linked PDF Worksheet

Disclosure
I hold shares of Mueller Industries, Inc.
Posted on 06/12/18

Post Holdings, Inc.
Post Holdings, Inc. is manufacturer, marketer and distributor of branded ready-to-eat cereals in the United States, Canada and Europe, marketing products under the brand names, Honey Bunches of Oats®, Pebbles™, Post Selects®, Great Grains®, Spoon Size® Shredded Wheat, Post® Raisin Bran, Grape-Nuts®, Good Morenings® and Honeycomb®. Industry peers include General Mills, Inc, Kellogg Company, and Pepsico, Inc.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $83.61, with an initial trailing stop at $80.77. Upward price movement will find no resistance. Downward price movement will find support at $80.88 and $79.69, with final support at $77.63.

Days to Cover
The most recent days to cover number is 5. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Post Holdings, Inc., the company had yet to work through any issues related to the Tax Act since their fiscal year does not end until September 2018. However, no provision has been made for income taxes on undistributed earnings of consolidated foreign subsidiaries of $56.4 at September 30, 2017 since it is the company’s intention to indefinitely reinvest undistributed earnings of our foreign subsidiaries. It is not practicable to estimate the additional income taxes and applicable foreign withholding taxes that would be payable on the remittance of such undistributed earnings.

Insider Transactions
In the past 12 months, the company reported 38 insider trades involving 277,071 shares of stock. Of those 38 insider trades, 15 were Buys involving 135,707 shares of stock, and 23 were Sells involving 141,364 shares of stock, creating an insider buy to sell ratio of 1 to 1.

Acquisitions
Since 2013 the company has spent $7.166 billion on acquisitions, of which $1.915 billion was spent in fiscal 2017. These acquisitions have increased goodwill to $4.032 billion, and created a tangible book value for the company of (-$70) per share.

Year-Over-Year
There are several year over year metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Post Holdings, Inc., revenue increased by 4%, free cash flow declined by 12%, earnings declined by 12%, total debt increased by 57%, and the stock price increased by 13%. Year to date the stock price is down 7%.

Future Value
My future (5 year hold) target price for the stock is $169, which is an average annual return of 21%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 39% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $40. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $57. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Post Holdings, Inc. the current twelve month trailing PE Ratio is 15, the PEG Ratio is 3.1, Book Value is $42, and Tangible Book Value is (-$70).

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Post Holdings, Inc. (NYSE: POST) – FYE 12/2017 – SELL HALF The stock is currently trading at levels above my most recent $57 fair value estimate, but below my most recent $91 close target. Please See Linked PDF Worksheet

Disclosure
I hold shares of Post Holdings, Inc.
Posted on 06/11/18

McDermott International
McDermott International provides integrated engineering, procurement, construction and installation (“EPCI”) and module fabrication services for upstream oil and gas field development worldwide. The company delivers fixed and floating production facilities, pipeline installations and subsea systems from concept to commissioning for complex offshore and subsea oil and gas projects. Industry peers include Superior Energy Services, Gulf Island Fabrication, and Oceaneering International.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $22.99, with an initial trailing stop at $20.59. Upward price movement will find resistance at $21.61 and $22.30, with final resistance at $22.98. Downward price movement will find support at $20.26 and $18.86, with final support at $18.08.

Days to Cover
The most recent days to cover number is 5. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of McDermott International, the company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, management is still analyzing certain aspects of the Act and refining their calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the re-measurement of the company’s deferred tax balance was an $86 million decrease, which was offset by a change for the re-measurement of the valuation allowance. The one-time transition tax based on total post-1986 earnings and profits (E&P), which were previously deferred from U.S. income taxes, was insignificant.

Insider Transactions
In the past 12 months, the company reported 0 insider trades involving 0 shares of stock. Of those 0 insider trades, 0 were Buys involving 0 shares of stock, and 0 were Sells involving 0 shares of stock, creating an insider buy to sell ratio of 0 to 1.

Acquisitions
The company made no acquisitions during FY2017.

Year-Over-Year
There are several year over year metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For McDermott International, revenue increased by 13%, free cash flow declined by 905%, earnings increased by 305%, total debt declinec by 29%, and the stock price decreased by 12%. Year to date the stock price is up 218%.

Future Value
My future (5 year hold) target price for the stock is $28, which is an average annual return of 6%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of (-8%) per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $19. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $12. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Valmont Industries, Inc. the current twelve month trailing PE Ratio is 33, the PEG Ratio is 2.6, Book Value is $6, and Tangible Book Value is $6.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. McDermott International (NYSE: MDR) – FYE 12/2017 – OVER VALUED The stock is currently trading at levels above my most recent $93 close target. Please See Linked PDF Worksheet

Disclosure
I hold shares of McDermott International
Posted on 06/09/18


Valmont Industries, Inc.
Valmont is a producer of fabricated metal products, steel and aluminum poles, towers and structures, concrete pole structures, outdoor lighting and traffic control structures, wireless communication structures and components, and mechanized irrigation systems. The company also provides metal coating services, including galvanizing, painting and anodizing and roadway safety and industrial access systems. Industry peers include Ajax Metal Processing, Lindsay Corporation, and Thomas and Betts Corporation.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $160.97, with an initial trailing stop at $148.39. Upward price movement will find resistance at $158.60 and at $161.80, with final resistance at $166.50. Downward price movement will find support at $148.40 and at $146.10, with final support at $144.10.

Days to Cover
The most recent days to cover number is 4. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all of the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Valmont Industries, Inc., the company recorded a one-time charge of approximately $42 million for the fourth quarter of 2017 related to the transition effects of the Act. The $42 million charge is comprised of (a) approximately $9.9 million of expense related to the taxation of unremitted foreign earnings, the federal portion of which is payable over eight (8) years beginning in 2018, (b) approximately $20.4 million of expense related to the remeasurement of U.S. deferred tax balances to reflect the new U.S. corporate income tax rate, using a federal and state tax rate of 25.0%, and (c) approximately $11.7 million of deferred expenses related to foreign withholding taxes and U.S. state income taxes.

Insider Transactions
In the past 12 months, the company recorded 36 insider trades involving 299,801 shares of stock. Of those 36 insider trades, 22 were Buys involving 161,570 shares of stock, and 14 were Sells involving 138,231 shares of stock, creating an insider buy to sell ratio of 1.2 to 1.

Acquisitions
In July 2017, the company purchased Aircon Guardrails Private Limited for $5.4 million in cash. Aircon produced highway safety systems including guardrails, structural metal products, and solar structural products in India with annual sales of approximately $10 million. In April 2016, the company acquired the remaining 30% of IGC Galvanizing Industries (M) Sdn Bhd that it did not own for $5.8 million and in June 2016, the company acquired 5.2% of the remaining 10% of Valmont SM that it did not own for $5.2 million. In September 2015, the company purchased American Galvanizing for $12.8 million in cash. American Galvanizing operated a custom galvanizing operation in New Jersey with annual sales of approximately $8.0 million.

Year-Over-Year
There are several year over year metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Valmont Industries, Inc., revenue increased by 9%, free cash flow declined by 17%, earnings decreased by 27%, total debt was unchanged, and the stock price increased by 15%. Year to date the stock price is down 9%.

Future Value
My future (5 year hold) target price for the stock is $222, which is an average annual return of 10%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 4% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $70. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $58. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Valmont Industries, Inc. the current twelve month trailing PE Ratio is 30, the PEG Ratio is 3.0, Book Value is $52, and Tangible Book Value is $31.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Valmont Industries, Inc. (NYSE: VMI) – FYE 12/2017 – OVER VALUED The stock is currently trading at levels above my most recent $93 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Valmont Industries, Inc.
Posted on 06/06/18

Graham Corporation
Graham Corporation designs, manufactures and sells critical equipment for the energy, defense and chemical/petrochemical industries. Energy markets include oil refining, cogeneration, nuclear and alternative power. For the defense industry, the company’s equipment is used in nuclear propulsion power systems for the U.S. Navy. The company also designs and manufactures custom engineered ejectors, vacuum pumping systems, surface condensers and vacuum systems, and is a nuclear code accredited fabrication and specialty machining company, supplying the components used inside reactor vessels and outside containment vessels of nuclear power facilities. Industry peers include Alfa Laval AB, Gardner Denver, and Kemco Systems.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $24.69, with an initial trailing stop at $25.45. Upward price movement will find no resistance. Downward price movement will find support at $25.46 and $23.89, with final support at $22.51.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Graham Corporation, the company remeasured certain U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%, and recorded an income tax benefit of $971 related to such re-measurement. The one-time transition tax is based on the total post-1986 earnings and profits (“E&P”) of the company’s foreign subsidiary that has previously been deferred from U.S. income taxes. The company recorded its one-time transition liability of its foreign subsidiary resulting in additional income tax expense of $185.

Insider Transactions
In the past 12 months, the company recorded 31 insider trades involving 53,240 shares of stock. Of those 31 insider trades, 16 were Buys involving 46,374 shares of stock, and 15 were Sells involving 6,866 shares of stock, creating an insider buy to sell ratio of 6.8 to 1.

Acquisitions
The company had no acquisitions during fiscal 2018.

Year-Over-Year
There are several year over year metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Graham Corporation, revenue decreased by 15%, free cash flow declined by 34%, earnings decreased by 5%, debt decreased by 33%, and the stock price fell by 7%. Year to date the stock price has increased 21%.

Future Value
My future (5 year hold) target price for the stock is $30, which is an average annual return of 3%. A prior five year hold of the stock (FY2014- FY2018) would have returned an average of (-2%) per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $23. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $7. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Graham Corporation the PE Ratio is 48, the PEG Ratio is 2.7, Book Value is $11, and Tangible Book Value is $10.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Graham Corporation (NYSE: GHM) – FYE 03/2018 – OVER VALUED The stock is currently trading at levels above my most recent $11 close target. Please See Linked PDF Worksheet

Disclosure
I hold shares of Graham Corporation
Posted on 06/06/18


ExxonMobil Corporation
The principal business of Exxon Mobil Corporation is energy, involving exploration for, and production of, crude oil and natural gas, manufacture of petroleum products and transportation and sale of crude oil, natural gas and petroleum products. The company is also a manufacturer and marketer of commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and a wide variety of specialty products. Industry peers include BP plc, Chevron Corporation, and Royal Dutch Shell.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $85.95, with an initial trailing stop at $80.60. Upward price movement will find resistance at $83.79 and $87.17, with final resistance at $88.61. Downward price movement will find support at $79.26 and $77.25, with final support at $75.97.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of ExxonMobil Corporation, The company has paid taxes on earnings outside the United States at tax rates on average above the historical U.S. rate of 35 percent. As a result, the deemed repatriation tax does not create a significant tax impact for the company.
Deferred taxes include a net credit of $5,920 million in 2017, reflecting a $5,942 million credit related to U.S. tax reform and $22 million of other changes in tax laws and rates outside of the United States.

Insider Transactions
In the past 12 months, the company recorded 101 insider trades involving 1,445,476 shares of stock. Of those 101 insider trades, 33 were Buys involving 1,129,419 shares of stock, and 68 were Sells involving 316,057 shares of stock, creating an insider buy to sell ratio of 3.6 to 1.

Acquisitions
In February 2017, the company completed the acquisition of InterOil Corporation (IOC) for $2.7 billion. The IOC acquisition was mostly unproved properties in Papua New Guinea. Also in February 2017, the company completed the acquisition for $6.2 billion of a number of companies from the Bass family in Fort Worth, Texas, that indirectly own mostly unproved oil and gas properties in the Permian Basin.

Growth and Not
There are several year over year growth metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For ExxonMobil Corporation, revenue increased by 17%, free cash flow decline by 37%, earnings increased by 29%, debt decreased by 2%, and the stock price fell by 8%. Year to date the stock price has declined 2%.

Future Value
My future (5 year hold) target price for the stock is $95, which is an average annual return of 3%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 0.1% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $83. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $123. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considertaions
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For ExxonMobil Corporation the PE Ratio is 9, the PEG Ratio is 0.6, the Book Value is $45.90, and the Tangible Book Value is $45.90.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. ExxonMobil Corporation (NYSE: XOM) – FYE 12/2017 – FAIRLY VALUED The stock is currently trading at levels in line with my most recent $123 fair value estimate. Please See Linked PDF Worksheet

Disclosure
I hold shares of ExxonMobil Corporation
Posted on 06/03/18


Abaxis, Inc.
Abaxis is a developer, manufacturer and marketer of portable blood analysis systems that are used in a broad range of medical specialties in human or veterinary patient care to provide clinicians with rapid blood constituent measurements. The company’s principal competitors in the point-of-care human medical diagnostic market are Alere Inc., Alfa Wassermann S.P.A., Ortho Clinical Diagnostics, Inc. and F. Hoffmann-La Roche Ltd and Abbott’s i-STAT division. The company’s principal competitors in the veterinary diagnostic market are Idexx Laboratories, Inc. and Heska Corporation.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $75.26, with an initial trailing stop at $81.50. Upward price movement will find no resistance. Downward price movement will find support at $74.96 and $72.10, with final support at $69.79.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Abaxis, Inc., the company’s provisions for income taxes during fiscal 2018 are based on a reasonable estimate of the effects on its transition tax and existing deferred tax balances. The company estimates it will incur no transition tax and has recorded a one-time non-cash charge of $3.4 million due to an estimated reduction in deferred tax assets as a result of the reduction of the federal rate from 35% to 21%.

Insider Transactions
In the past 12 months, the company recorded 159 insider trades involving 380,265 shares of stock. Of those 159 insider trades, 54 were Buys involving 230,505 shares of stock, and 105 were Sells involving 149,760 shares of stock, creating an insider buy to sell ratio of 1.5 to 1.

Acquisitions
In May 2018, the company entered into a definitive merger agreement for the purchase of Zoetis, Inc. The completion of the proposed merger is subject to the satisfaction of various closing conditions, including the approval by the company’s shareholders. The merger is expected to be completed in the second half of calendar year 2018 at a price of $83.00 in cash per share of common stock, or approximately $2.0 billion in aggregate, with Abaxis the surviving entity.

Growth and Not
There are several year over year growth metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Abaxis, Inc., revenue increased by 8%, free cash flow grew by 6%, earnings fell by 18%, debt decreased by 36%, and the stock price increased by 32%. Year to date the stock price has increased 17%.

Future Value
My future (5 year hold) target price for the stock is $149, which is an average annual return of 16%. A prior five year hold of the stock (FY2014- FY2018) would have returned an average of 11% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $34. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $14. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5 year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considertaions
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Abraxis Inc. the PE Ratio is 70, the PEG Ratio is 6.3, the Book Value is $12.71, the Tangible Book Value is $12.74.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Abaxis, Inc. (Nasdaq: ABAX) – FYE 03/2018 – OVER VALUED The stock is currently trading at levels above my most recent $22 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Abaxis, Inc.
Posted on 06/03/18


Hawkins, Inc. operated under three reportable segments; Industrial, Water Treatment and Health and Nutrition. The Industrial Group specializes in providing industrial chemicals, products and services to industries such as agriculture, chemical processing, electronics, energy, food, pharmaceutical, plating and power generation. The Water Treatment Group specializes in providing chemicals, equipment and solutions for potable water, municipal and industrial wastewater, industrial process water and non-residential swimming pool water. The Health and Nutrition Group specializes in providing ingredient distribution, processing and formulation solutions to manufacturers of nutraceutical, functional food and beverage, personal care, dietary supplement and other nutritional food and health and wellness products. Industry peers include Brenntag North America, Harcros Chemicals, and JCI Jones Chemicals.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $36.27, with an initial trailing stop at $30.63. Upward price movement will find resistance at $32.82 and $33.87, with final resistance at $35.07. Downward price movement will find no support.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Hawkins, Inc., because their fiscal 2018 ended April 1, 2018, their tax provision for the current year was calculated utilizing a blended statutory federal rate of 31.5%. In future years, they expect their statutory federal rate to be 21%.

Under GAAP, deferred tax assets and liabilities are required to be revalued during the period in which the new tax legislation is enacted. As such, during the fiscal year-end ended April 1, 2018 management revalued the company’s net deferred tax liabilities to reflect the impact of the Tax Act and recorded a one-time benefit of $13.9 million.

Pursuant to SAB 118 (regarding the application of ASC 740 associated with the enactment of the Tax Act), the tax benefit we recorded in the current fiscal year is provisional. The final impact of the Tax Act may differ due to and among other things, changes in interpretations, assumptions made by the company and the issuance of additional guidance that may be provided.

Insider Transactions
In the past 12 months, the company recorded 12 insider trades involving 16,807 shares of stock. Of those 12 insider trades, 9 were Buys involving 12,884 shares of stock, and 3 were Sells involving 3,923 shares of stock, creating an insider buy to sell ratio of 3.3 to 1.

Acquisitions
In December 2015, the company acquired Stauber Performance Ingredients for $157.0 million on a cash-free, debt-free basis subject to a customary working capital adjustment. The total consideration for the acquisition was $158.2 million.

Growth and Not
There are several year over year growth metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Hawkins, Inc., revenue increased by 40%, free cash flow grew by 95%, earnings grew by 59%, debt decreased by 6%, and the stock price increased by 42%. Year to date the stock price has declined 15%.

Future Value
My future (5 year hold) target price for the stock is $43, which is an average annual return of 8%. A prior five year hold of the stock (FY2014- FY2018) would have returned an average of (-0.5%) per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $34. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $37. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5 year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Hawkins, Inc. (Nasdaq: HWKN) – FYE 03/2018 – FAIRLY VALUED The stock is currently trading at levels in line with my most recent $37 fair value estimate. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Hawkins, Inc.
Posted on 06/02/18


Modine Manufaturing Company, Inc.
Modine Manufacturing developers, manufacturers and markets heat exchangers and systems for use in on-highway and off-highway original equipment manufacturer vehicular applications, and to a wide array of building, industrial and refrigeration markets. Products include radiators and radiator cores, condensers, oil coolers, charge air coolers, heat-transfer modules and assemblies, exhaust gas recirculation coolers, and building heating, ventilating and air conditioning equipment. Industry peers include Dana Holding Corporation, Delphi Automotive Systems, and Denso Corporation.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $21.36, with an initial trailing stop at $17.73. Upward price movement will find resistance at $18.38 and $20.31, with final resistance at $21.02. Downward price movement will find support at $17.06.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Modine Manufaturing Company, Inc., the company recorded provisional discrete tax charges of $38.0 million related to the Tax Act. The company adjusted its U.S. deferred tax assets by $19.0 million due to the reduction in the U.S. federal corporate tax rate. This net reduction in deferred tax assets also included the estimated impact on the company’s net state deferred tax assets.

In addition, the company recorded a $19.0 million charge for the transition tax. The company is in process of evaluating whether to utilize its deferred tax attributes for the transition tax. If the company does not utilize its deferred tax attributes for the transition tax, it expects to pay the estimated $19.0 million tax liability over the next eight years, beginning with an estimated payment of $1.5 million in fiscal 2019. The company is also awaiting additional technical guidance on the treatment of the deemed inclusion and its impact on fiscal year taxpayers.

Insider Transactions
In the past 12 months, the company recorded 101 insider trades involving 571,836 shares of stock. Of those 101 insider trades, 40 were Buys involving 339,369 shares of stock, and 61 were Sells involving 232,467 shares of stock, creating an insider buy to sell ratio of 1.5 to 1.

Acquisitions
In November 2016, the company completed its acquisition of Luvata HTS, a global supplier of coils, coolers and coatings to the heating, ventilation, air conditioning, and refrigeration industry. The acquisition price was $415.6 million.

Growth and Not
There are several year over year growth metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Modine Manufaturing Company, Inc., revenue increased by 40%, free cash flow grew by 95%, earnings grew by 59%, debt decreased by 6%, and the stock price increased by 42%. Year to date the stock price has declined 15%.

Future Value
My future (5 year hold) target price for the stock is $24, which is an average annual return of 7%. A prior five year hold of the stock (FY2014- FY2018) would have returned an average of 26% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $18. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $12. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5 year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Modine Manufaturing Company, Inc. (NYSE: MOD) – FYE 03/2018 – SELL HALF The stock is currently trading at levels above my most recent $12 fair value estimate, but below my most recent $20 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Modine Manufaturing Company, Inc.
Posted on 06/01/18


Plantronics, Inc.
Plantronics is a designer, manufacturer, and marketer of lightweight communications headsets, telephone headset systems, and accessories for the business and consumer markets. Industry peers include Motorola Solutions, Logitech international S.A, and Gn Netcom A/S.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $67.06, with an initial trailing stop at $73.23. Upward price movement will find no resistance. Downward price movement will find support at $66.79 and $64.80, with final support at $59.88.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Plantronics, Inc., the company is subject to a one-time deemed repatriation of accumulated foreign subsidiary unremitted earnings (“toll charge”), which the company has elected to pay over an eight-year period as permitted under the Act. The company recorded a $79.7 million toll charge as part of income tax expense for FY2018, representing a provisional estimate based on a 15.5% tax applied to foreign unremitted cash and cash equivalents and an 8% tax applied to permanently reinvested foreign assets.

As part of the Act, the company also completed its re-measurement of deferred tax assets as of March 31, 2018 to the new future federal tax rate of 21%, thereby reducing the company’s deferred tax assets by $4.6 million. The company expects to repatriate substantially all of its unremitted foreign subsidiary earnings and has recorded income tax expenses of $5.0 million related to state income taxes and foreign withholding taxes that will become due over the repatriation period.

Finally, the company files its federal tax return on a fiscal year-end and is therefore required to pro-rate the new and old tax rates during Fiscal Year 2018. The blended, annualized tax rate applied to FY2018 income is 31.56%.

Insider Transactions
In the past 12 months, the company recorded 267 insider trades involving 237,199 shares of stock. Of those 267 insider trades, 117 were Buys involving 151,094 shares of stock, and 150 were Sells involving 86,105 shares of stock, creating an insider buy to sell ratio of 1.8 to 1.

Acquisitions
In March 2018, the company entered into a purchase agreement for the acquisition of Polycom at a purchase price of $2.0 billion, of which the company expects approximately $1.6 billion will be paid in cash and the remaining $0.4 million will be paid in the form of shares of common stock of the company. The purchase is expected to close in the third calendar quarter of 2018, with the transaction expected to be immediately accretive to Non-GAAP earnings per share.

Growth and Not
There are several year over year growth metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Plantronics, Inc., revenue fell by 3%, free cash flow declined by 69%, earnings declined by 106%, there was no increase in debt, and the stock price increased by 11%. Year to date the stock price has increased 23%.

Future Value
My future (5 year hold) target price for the stock is $102, which is an average annual return of 7%. A prior five year hold of the stock (FY2014- FY2018) would have returned an average of 9% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
My baseline valuation as an ongoing concern is $24. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is (-$1). The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5 year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Plantronics, Inc. (NYSE: PLT) – FYE 12/2017 – The stock is OVER VALUED and currently trading above my most recent (-$2) buy target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Plantronics, Inc.
Posted on 05/31/18