Simpson Manufacturing Co, Inc. (SSD)

DrunkenScotsman (38.18) Submitted: 2/18/07 1:22 PM : Start Price: $32.79 SSD Score: 11.08

1. Returns are strong with ROE averaging 17.3% and ROTC at 14.7%
2. Earnings have increased steadily over a 10 year period with EPS growing at a compounded annual rate of 18.73% and average owner earnings compounding at 16.49%
3. Average long term debt of less than 2 years earnings
4. Dividends have only been paid in the last 2 years of SSD's life, but are likely to increase as free cash flow improves.
5. Price ratios appear high with the stock trading above average multiples for both P/E, P/OE
7. Intrinsic value calculated using the average owner earnings compound rate of 16.49% (the lowest compounding rate for SSD) and a discount factor of 10% provides a present value of $2.02 per share.
8. Average Price to Owner Earnings for Simpson over the past 10 years has been 30.55 times. With a present owner earnings valuation of $2.02, Simpson would be valued at $61.59. A current selling price of $30.63 providing a discount of 50.27%
8. Shareholder wealth has grown 17.1% over the period, significantly above my 12% threshold
Simpson is a great company, and follows all of my value investing principles. This security continues to be my preferred purchase, with the the following being my only reservations to it's future apreciation
Low Average Owner Earnings as a result of high capital and working cost requirments
Slightly decreasing earnings growth in the last 5 years
Correlation with housing market
Slightly higher than average price to earnings ratios

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