Buy Graco (GGG) and get 18.70% compounded rate of return
Graco Inc (GGG) is a global producer of industrial pumps, valves, meters and accessories. Graco's technology gives a wide variety of clients around the world -- including roofers, painters, service garages, and fleet service centers -- the ability to dispense and apply super-sticky fluids with ease.Historical
-ROE is unbelievable! From 1997 to now, just check out the stats:
25%, 47%, 164%, 80%, 45%, 36%, 41%, 54%, 48%, 48%, 45%....that's an A+++!!
-Compounded earnings growth rate for the past 10 years is 16%.
-Profit Margins have increased consistently from 10.8% in 1997 to18%. Another sign of good management.
-Debt/Equity is only 7%.
Forecast
-Current Stock Price of Graco is $38.44
-Current earnings per share is 2.16
-The Earnings yield is 5.62% (eps/stock price)
-Compound the EPS by a 5 year future growth rate of 14% (analyst predict 16-17%) multiplied by a future p/e of 20 equals $83.18 future stock price. Combine it with a 1.7% dividend, that's a compounded rate of return of 18.70% for 5 years.
Factors
-It missed last quarter's numbers but this is a very consistent company. With the housing turnaround, it should be poised for a rebound.
-It's only a $2.5 billion company with lots of room to grow. I bought it today and am holding it for the long term for my retirement savings account.
-With Return on Equity that are just as high as Coca-Cola with virtually no debt, buying Graco stock is really a no brainer.
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posted by RetireRichBlog at 7:05 PM
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2 Comments:
FYI, I also just noticed Graco, and jumped on it. I think it has defensible competitive advantages, a lot of room for growth (mainly international), a good business model (razors and blades - they've more or less saturated the US but people still need replacement parts), and good management. plus the stock took a dip with the earnings surprise, which provided a buying opportunity.
I recently bought some Graco, also for my retirement. It turned up on a screen I run on Value Line's site, for high return on total capital, long term earnings growth, low debt, below market p/e, etc. I was interested to see the estimate of compound growth going forward, as this recalls the method in "Buffetology" by Mary Buffet and David Clark. I see an earnings growth rate less than the analysts estimates was used, which is good policy.
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