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National Presto Industries (NPK) Valuation

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Company Profile (obtained from Google Finance): National Presto Industries, Inc. operates in three business segments: Housewares/Small Appliance, Defense Products and Absorbent Products. The Housewares/Small Appliance segment designs, markets and distributes housewares and small electrical appliances, including pressure cookers and canners, kitchen electrics, and comfort appliances. The Defense Products segment manufactures 40mm ammunition, precision mechanical and electro-mechanical assemblies, medium caliber cartridge cases, and performs Load, Assemble and Pack (LAP) operations on ordnance related products primarily for the U.S. government and prime contractors.

ModernGraham Comments: None at this time

Defensive and Enterprising Investor Tests:

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – FAIL
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary:

  • Last updated 12/29/09
  • MG Value = $248
  • MG Opinion = Undervalued
  • Value based on 3% Growth = $93
  • Value based on 0% Growth = $55
  • Market-implied growth rate = 4.26%
  • Net Current Asset Value (NCAV) = $37.26
  • Current Ratio = 5.93
  • Price to Book Ratio = 2.39

Key Data:

Balance Sheet – 10/4/2009

    • Current Assets    $307,450,000
    • Current Liabilities    $51,870,000
    • Total Debt    $0
    • Total Assets    $369,290,000
    • Intangible Assets    $0
    • Goodwill    $11,490,000
    • Total Liabilities    $55,260,000
    • Outstanding Shares    6,860,000

      Earnings Per Share – Diluted

      • 2009 (estimate) – $8.62
      • 2008 – $6.45
      • 2007 – $5.65
      • 2006 – $4.09
      • 2005 – $2.40
      • 2004 – $2.26
      • 2003 – $2.27
      • 2002 – $1.27
      • 2001 – $0.92
      • 2000 – $2.16
      • 1999 – $2.84

      Earnings Per Share – Modern Graham

      • 2009 (estimate) – $6.43
      • 2008  – $4.95
      • 2007 – $3.91
      • 2006 – $2.84
      • 2005 – $2.09
      • 2004 – $1.88
      • 2003 – $1.76

      Valuation History:

      • 12/29/09 – Value $248, Actual Price $109.39, Undervalued & Defensive
      • 9/25/09 – Value $235, Actual Price $84.75, Undervalued & Defensive
      • 6/24/09 – Value $228, Actual Price $77.33, Undervalued & Defensive
      • 3/14/09 – Value $192, Actual Price $52.82, Undervalued & Defensive

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