Leggett & Platt (LEG) was founded in 1883 year and is a diversified manufacturer that designs and produce various engineered components and products. Three charts below tell more about sales than thousand words.

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When I look on these markets/product mix I ask myself – can situation be so much better? Consumer is strong, housing market is strong, automotive is strong, USD is strong (which makes imported production cheaper and increases margins), steel price is low (significant cost)… not a story for me.

On the other hand I really love the use of cash:

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I am wondering why company spends so much money for share buybacks when valuation is so high… but still I prefer buybacks to acquisitions.

 

As it comes to financials (estimates):

Market cap ~ $6.6B

Net debt ~$0.7B

Payout ratio ~50%

Beta = 1.0

Dividend yield 2.6% + share buyback around 2% annually

 

Estimated valuation ratios:

EV/EBITDA = 11.6

P/E = 20

 

Leggett & Platt (LEG) is one of The Dividend Aristocrats paying increasing dividends since 1972 year. Currently dividend yield is around 2.6% – rather weak result from historical perspective, where yields were even up to 10% in 2009 (naturally housing crisis makes demand for bedding, furniture, carpets etc. lower). So I see no story from dividend yield perspective.

 

Drawdown risk analysis:

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Currently shares are traded around all-time-high levels + valuation is demanding = not interesting for me. Nevertheless each drawdown of more than 20% should be taken seriously to analyze company again. It means that at $40 I will come back.

 

Summing up, Leggett & Platt is definitely a high quality business, but I see no point in buying for long term with current valuation.

 

Disclosure LEG – no position