National Presto Industries Inc Valuation – June 2018 $NPK

Company Profile (excerpt from Reuters): National Presto Industries, Inc., incorporated on November 8, 1905, operates through two business segments: the Housewares/Small Appliance segment and the Defense segment. 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 segment manufactures 40 millimeter (mm) ammunition, precision mechanical and electro-mechanical assemblies, and medium caliber cartridge cases; performs Load, Assemble and Pack (LAP) operations on ordnance-related products primarily for the United States Government and prime contractors; produces and sells a range of less lethal products and support accessories, and provides training for the use of less lethal products, and manufactures detonators, booster pellets, release cartridges, lead azide, and other military energetic devices and materials.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NPK – June 2018

 

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 $872,418,120 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.33 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -17.40% Fail
6. Moderate PEmg Ratio PEmg < 20 28.63 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.58 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 6.33 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.33
MG Growth Estimate -3.28%
MG Value $37.66
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $62.80
MG Value based on 0% Growth $36.82
Market Implied Growth Rate 10.06%
Current Price $124.00
% of Intrinsic Value 329.30%

National Presto Industries Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $5.54 in 2014 to an estimated $4.33 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.06% 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 National Presto Industries Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 28.63, which was above the industry average of 17.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $37.66.

National Presto Industries Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $37.66
Graham Number $0.00
PEmg 28.63
Current Ratio 6.33
PB Ratio 2.58
Current Dividend $1.00
Dividend Yield 0.81%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $312,981,000
Total Current Liabilities $49,433,000
Long-Term Debt $0
Total Assets $385,691,000
Intangible Assets $14,071,000
Total Liabilities $49,433,000
Shares Outstanding (Diluted Average) 6,999,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate
Dec2017 $7.58
Dec2016 $6.39
Dec2015 $5.83
Dec2014 $3.82
Dec2013 $5.97
Dec2012 $5.64
Dec2011 $6.98
Dec2010 $9.26
Dec2009 $9.13
Dec2008 $6.45
Dec2007 $5.65
Dec2006 $4.09
Dec2005 $2.40
Dec2004 $2.26
Dec2003 $2.27
Dec2002 $1.27
Dec2001 $0.92
Dec2000 $2.16
Dec1999 $2.84
Dec1998 $2.68

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.33
Dec2017 $6.30
Dec2016 $5.62
Dec2015 $5.37
Dec2014 $5.54
Dec2013 $6.73
Dec2012 $7.24
Dec2011 $7.86
Dec2010 $7.84
Dec2009 $6.60
Dec2008 $4.95
Dec2007 $3.91
Dec2006 $2.84
Dec2005 $2.09
Dec2004 $1.88
Dec2003 $1.76
Dec2002 $1.66

Recommended Reading:

Other ModernGraham posts about the company

National Presto Industries Inc Valuation – July 2016 $NPK
National Presto Industries Valuation – January 2016 Update $NPK
National Presto Industries Inc. Valuation – October 2015 Update $NPK
National Presto Industries Analysis – July 2015 Update $NPK
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Disclaimer:

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.


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