Hamilton Beach Brands (NYSE:HBB) – Quick Valuation
I took a quick look at Hamilton Beach Brands after reading about it in some of Geoff’s articles. In the 10-K, the company segments profits by NACoal, KC, NACCO & Other, and HBB. So, I’m talking about HBB here and I’m just crunching numbers without doing any sort of qualitative analysis.
- 5Y median Return on Tangible Capital ~23%.
- HBB Revenue ~$600MM.
- 5Y median revenue growth 3.8%, so estimate 3-4% moving forward.
- 5Y median operating margin ~7%.
- Normalized operating profit ~$42MM.
- 5Y median CFFO / operating profit is 84%, so normalized CFFO = $35MM.
- Maintenance Capex ~$5MM.
- FCF ~$30MM.
- Assume forward market return of ~8%. Conservatively, HBB should grow revenues by about 3% per annum. So, a fair multiple in today’s terms is 20x.
- Multiple of 20x on $30MM FCF is $600MM.
- I would want a minimum of a 10% annual return, so I wouldn’t pay more than a 14.3x multiple (1 / [10% – 3% annual growth]). Hence, I’d want to pay around $425MM to consider an investment.
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