2016 is so far another good year for SWK shareholders. Share are up YTD by around 12%, so almost twice as much as S&P500. Over the last 5 years shares of SWK are up by 100% – well done!

Reminding:

Stanley Black & Decker (SWK) is a manufacturer of industrial tools, household hardware, security products and locks founded in 1843 year. Current company is the result of merger between Stanley Works and Black & Decker conducted in 2010 year.

Split of sales is presented below:

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Let’s see whether business growth justifies recent share price performance.

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As we can see YTD financial results are up by 12% (I exclude loss from discontinued operations). This is more or less the same as share price. Wow, it is rarely happens. It means that multiples are similar y/y, so there was no rerating, only justified growth.

Estimated multiples (next year consensus):

EV/EBITDA = 11

P/E = 17

Dividend yield 2%

 

Well, it is not cheap, but also comparing to other companies it is not overly expensive. Especially if you keep in mind that company is growing in double-digit pace (is it sustainable?).

Recently company informed that: Stanley Black & Decker To Acquire Newell Tools, A Highly Strategic & Synergistic Transaction. Purchase price of 3 times sales and around 13 times EBITDA is not cheap, but long term quality of SWK

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$0.50 EPS accretion within 3 years is not too much in my opinion, but on the other hand cost of capital is low currently.

 

Summing up, I have no reason to change my last opinion: SWK is an awesome example of long-term growth story, but I see no point in buying at current levels… Unfortunately I should have seen the point to invest in SWK at the beginning of this year. Now again, I see no reason, but if financial results will increase and acquisition of Newell Tools will go in line or better than expectations then shares should continue growth trend.

 

Disclosure SWK – no position