Valmont's return on assets is 11.6, compared with 5.6; the return on equity is 21.7 compared with 4.2 and the return on capital is 15.5 compared with 6.6. Valmont also has strong efficiency ratios. Asset turnover is 1.5, compared with an industry average of 0.9; inventory turnover is 5.1 compared with 4.0 and receivables turnover is also strong at 6.1 compared with 6.4. Overall, Valmont Industries has strong ratios compared with other firms in its industry, and there is indication that key ratios are improving over time.
Valmont is considered by the market to have a relatively high volatility. The beta on Valmont' stock is 1.67. An analysis of the five-year chart (MSN Moneycentral, 2010) shows that the source of this volatility was a strong run up on Valmont stock in the 2006 and 2007 years, followed by a strong collapse. The stock, however, has outperformed the major indices at every point in the past five years, even with the large percentage price movements.
In 2009, Moody's upgraded its outlook for Valmont, from stable to positive (Moody's, 2009). The rating for Valmont debt is Ba1 at present, a low-level investment grade that reflects the company's relatively small size and weakness in the agricultural sector over the past year. Standard & Poor's also upgrade Valmont debt in 2009, from BB+ to BBB- (S&P, 2009).
Valmont stock is presently valued at $68.17 per share. This gives the company a price/earnings ratio of 12.00. The multiple reflects a firm with steady growth, but it appears that market enthusiasm is depressed slightly, a function of weakness in the agricultural sector. Valmont's other business lines have helped to insulate it from the impacts of the slowdown in agricultural spending, but its main businesses have slumped in the past year (Shute, 2009). The current share price is down from the 52-week high of $89.30 last August, but is a significant improvement over the 52-week lows of last February ($37.49).
Valmont Industries does not report on what it considers to be its cost of capital. Their debt is currently given a yield of XXX. The company's debt is due in May 2014 and although a yield was not readily available, 7.9% is in the range of corporates with a similar debt rating. The cost of equity...
Using CAPM, this gives a cost of equity of 11.9%. The proportions of debt and equity to calculate the WACC are based on the most recently quarterly balance sheet and are 41.3% debt and 58.7% equity. This gives us a weighted average cost of capital of 10.24%.
Valmont has slowly increased its annual dividend over the past five years. In 2004, the dividend per share was $0.32; by 2008 it was $0.50. For Q2 of 2009, the quarterly dividend was increased from $0.13 to $0.15, which is an annualized $0.60. This equates to a dividend yield of 0.87%. This is a fairly low dividend for a company with the long history of Valmont Industries. However, Valmont has been on a slow but steady growth trajectory for the past several years, so its current dividend seems to be a blend of dividend policies. Valmont pays a dividend as a reflection of the firm's established nature, but it restrains dividend growth as a reflection of the degree to which management prefers to reinvest earnings. The company plowed back $194 million in 2008, for example.
Despite hard times in Valmont's core agricultural business, the company has maintained its growth poster. Valmont has continued to build its revenues, improve its profitability and lower its debt load over the course of the past several years. In the short-run, Valmont still expects to have some revenue pressure as a result of weakness in the agricultural sector, but nonetheless is likely to continue to improve both its profitability and its balance sheet.
Yahoo! Finance. (2010). Metal Fabrication. Retrieved February 10, 2010 from http://biz.yahoo.com/ic/626.html
MSN Moneycentral. (2010). Valmont Industries. Retrieved February 10, 2010 from http://moneycentral.msn.com/detail/stock_quote?Symbol=U.S.%3aVMI
Valmont Industries website, various pages. Retrieved February 10, 2010 from http://www.valmont.com/page.aspx?id=5
Valmont Industries 2008 Annual Report. Retrieved February 10, 2010 from http://www.valmont.com/lgcy/investor_relations/08report/aspx/splash.aspx
Moody's. (2009). Moody's changes Valmont outlook to…
Valuation of Stock Cisco Systems The stock valuation project calls for the choosing of a stock, and I have chosen Cisco Systems. This company is traded on the NASDAQ under the ticker symbol of CSCO. I wanted to choose a stock that is an important part of the business environment. I wanted a growth stock, and looked to technology, but I also wanted to pick something that was a bit under the
Stock Valuation Scholastic Corporate (NASDAQ: SCHL) is an educational publishing firm based in the United States. In order to make an investment recommendation on this stock, a number of different techniques can be used to analyze its financial performance. These include ratio analysis, for which three ratios will be chosen, and trend analysis for the past three years. The stock is currently trading at $26.41, its lowest level since August of
Stock Valuation The insights and expertise of Kathleen Collings-Lang in the video Stock Valuation are invaluable in gaining insights into the similarities and differences of how bonds and stocks are valued today, emerging trends in these fields, and the critical role of quantitative analysis in determining the value of equity investments. The valuation of stock and equity investments is more accurate when qualitative and quantitative factors are taken into account (Fielitz,
Stock Valuation The stock that I chose is PepsiCo. I was drinking a Pepsi when I was thinking about a stock to do, and it just seemed like a good idea. That is why I picked the stock, but PepsiCo (PEP on the NYSE) is a major blue chip stock so there is no reason why I shouldn't pick it. The current stock price of PepsiCo is $85.31 PepsiCo is in the
Stock Valuation The stock that I have chosen is Clorox (CLX), the bleach making company. I wanted to find a company that was about as classic a case of a no growth company as possible. Most of the high profile companies in the stock exchange are fast-growing companies, to the point where even those who have a flat domestic share are trying to grow internationally. I wanted to see if there
Firms, even in the same industry, can only be evaluated on the basis of their ratios when their business characteristics are relatively similar. This includes products, markets, responses to economic stimulus, cost of capital and a variety of other attributes. The further Citrus Glow is from its competitors on any key measure the less useful Dan's method becomes. Furthermore, Dan's assumptions regarding the firm's growth prospects are arbitrary, rather