Lancaster Colony Corp Valuation – Initial Coverage $LANC

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Lancaster Colony Corp (LANC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Lancaster Colony Corporation is a manufacturer and marketer of specialty food products for the retail and foodservice channels. The Company’s food products include Salad dressings and sauces, Vegetable dips and fruit dips, Frozen garlic breads, Frozen Parkerhouse style yeast rolls and dinner rolls, Premium dry egg noodles, Frozen specialty noodles, Croutons and salad toppings, Flatbread wraps and pizza crusts, and Caviar. Its brands include Marzetti, Marzetti Simply Dressed, Cardini’s, Girard’s, Katherine’s Kitchen, New York BRAND Bakery, Mamma Bella’s, Sister Schubert’s, Mary B’s, Inn Maid, Amish Kitchen, Reames, Aunt Vi’s, Flatout and Romanoff. It manufactures and sells other products pursuant to brand license agreements, including Olive Garden dressing, Jack Daniel’s mustards and Hungry Girl flatbreads. A portion of its sales are dressing packets, frozen specialty noodles, pasta and flatbreads sold to industrial customers for use as ingredients or components in their products.

LANC Chart

LANC data by YCharts

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[otw_shortcode_button href=”” size=”medium” icon_position=”left” shape=”square”]Learn More About Premium Membership[/otw_shortcode_button]


Downloadable PDF version of this valuation:

ModernGraham Valuation of LANC – February 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,606,240,512 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.97 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 51.53% Pass
6. Moderate PEmg Ratio PEmg < 20 31.82 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.46 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.97 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $4.14
MG Growth Estimate 1.40%
MG Value $46.85
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $60.07
MG Value based on 0% Growth $35.21
Market Implied Growth Rate 11.66%
Current Price $131.80
% of Intrinsic Value 281.33%

Lancaster Colony Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.79 in 2013 to an estimated $4.14 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.66% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Lancaster Colony Corp. revealed the company was trading above its Graham Number of $46.7. The company pays a dividend of $2.05 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 31.82, which was above the industry average of 24.74. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.28.

Lancaster Colony Corp. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $5.28
Graham Number $46.70
PEmg 31.82
Current Ratio 3.97
PB Ratio 6.46
Current Dividend $2.05
Dividend Yield 1.56%
Number of Consecutive Years of Dividend Growth 2


Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $276,959,000
Total Current Liabilities $69,845,000
Long-Term Debt $0
Total Assets $691,458,000
Intangible Assets $229,728,000
Total Liabilities $131,975,000
Shares Outstanding (Diluted Average) 27,441,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.75
Jun2016 $4.44
Jun2015 $3.72
Jun2014 $2.74
Jun2013 $3.99
Jun2012 $3.51
Jun2011 $3.84
Jun2010 $4.07
Jun2009 $3.17
Jun2008 $1.28
Jun2007 $1.45
Jun2006 $2.48
Jun2005 $2.56
Jun2004 $2.04
Jun2003 $3.11
Jun2002 $2.49
Jun2001 $2.37
Jun2000 $2.51
Jun1999 $2.28
Jun1998 $2.22
Jun1997 $2.01

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.14
Jun2016 $3.79
Jun2015 $3.49
Jun2014 $3.46
Jun2013 $3.79
Jun2012 $3.52
Jun2011 $3.27
Jun2010 $2.82
Jun2009 $2.19
Jun2008 $1.79
Jun2007 $2.14
Jun2006 $2.50
Jun2005 $2.51
Jun2004 $2.49
Jun2003 $2.66
Jun2002 $2.42
Jun2001 $2.35

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

J M Smucker Co Valuation – February 2017 $SJM
Kraft Heinz Co Valuation – Initial Coverage $KHC
Dr Pepper Snapple Group Inc Valuation – January 2017 $DPS
J&J Snack Foods Corp Valuation – Initial Coverage $JJSF
Sysco Corporation Valuation – January 2017 $SYY
General Mills Inc Valuation – January 2017 $GIS
Coca-Cola European Partners PLC Valuation – January 2017 $CCE
Archer Daniels Midland Company Valuation – January 2017 $ADM
McCormick & Company Valuation – January 2017 $MKC
Conagra Brands Inc Valuation – December 2016 $CAG


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.






Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.