Fortune Brands Home (FBHS:NYS) Fundamental Valuation Report


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Fortune Brands Home $61.79 (USD) Close Price as of 07/03/2018

Based on the analysis conducted in this report, Fortune Brands Home, (FBHS:NYS) is found to be  Undervalued.

Company Fortune Brands Home
Symbol:Exchange FBHS:NYS
Industry Consumer Cyclical:Home Furnishings & Fixtures
Close Price/Date $61.79 (USD) 07/03/2018
Weighted Average Valuation $71.68 (USD)
Summary FBHS:NYS is found to be  Undervalued by 16.0% using the 3 valuation models shown below.
Valuation Models Used Analyst Consensus: $75.75 (USD)
(in order of importance) Discounted Cash Flow: $60.63 (USD)
Comparables: $81.55 (USD)
Valuation Methods Analysis This company is:
Cash Flow Basis: Fairly valued on a Cash Flow Valuation basis
Comparable Company Basis: Undervalued on a Comparable Valuation basis
Asset Basis: Fairly valued on an Asset Valuation basis

Valuation Details

Fortune Brands Home Valuations

Summary chart

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for FBHS:NYS

Using a discounted cash flow model we generated an intrinsic value of $60.63 (USD) for FBHS:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

FBHS:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $60.63 1% 5% 1% 5%
WACC (or Ke) 9.69 $73.21 $51.31
Terminal Growth Rate 3.00 $52.38 $71.77
Tax Rate 0.25 $65.64 $55.61
Cash Flow 1,122,700,000 $56.87 $64.38
Capital Expenditures 300,000 $60.63 $60.62
Long Term Debt 1,585,800,000 $61.15 $60.10

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $81.55 (USD) for FBHS:NYS. We also generated a valuation of $52.48 (USD) using other metrics and comparables.
The comparable companies were Leggett & Platt (LEG:NYS), Mohawk Industries (MHK:NYS), Tempur Sealy Intl (TPX:NYS) and Whirlpool (WHR:NYS)

Company FBHS:NYS End Date Value
Earnings/Share $3.03 (USD)
Book Value/Share $17.11 (USD)
Sales/Share $33.91 (USD)
Cash Flow/Share $3.85 (USD)
EBITDA/Share $5.23 (USD)
Price Based on Comps Adjustment Factor (%)
$69.39 (USD) 37.7
$149.41 (USD) -23.8
$42.50 (USD) 78.9
$48.88 (USD) 54.9
$46.64 (USD) 0.0
FBHS:NYS Ratios Used Average Values LEG:NYS MHK:NYS TPX:NYS WHR:NYS
20.26 PE Ratio 22.90 21.06 18.28 18.52 33.74
3.61 PB Ratio 8.73 4.99 2.50 24.77 2.67
1.82 PS Ratio 1.25 1.57 1.87 1.02 0.56
16.04 PCF Ratio 12.69 13.95 14.87 12.59 9.34
12.98 EV to EBITDA 10.77 11.09 11.32 12.17 8.51

Multiples

Using a multiples approach we generated a valuation of  $71.97 (USD) for FBHS:NYS

Company FBHS:NYS End Date Value
Earnings/Share $3.03 (USD)
Book Value/Share $17.11 (USD)
Sales/Share $33.91 (USD)
Cash Flow/Share $3.85 (USD)
EBITDA/Share $5.23 (USD)
Price Based on Comps Adjustment Factor
$79.47 (USD) 0
$61.99 (USD) 0
$64.64 (USD) 0
$75.90 (USD) 0
$77.85 (USD) 0
Ratios Ratio Average
PE Ratio 26.23
PB Ratio 3.62
PS Ratio 1.91
PCF Ratio 19.70
EV to EBITDA 14.89

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  FBHS:NYS for the last 7 years was  3.58

We ran the Adjusted Book Value for  FBHS:NYS and generated a book value of  $17.11 (USD)
By multiplying these we get an adjusted valuation of  $61.31 (USD)

Analyst Data

In the Stockcalc database there are 4 analysts that provide a valuation for FBHS:NYS. The 4 analysts have a concensus valuation for FBHS:NYS for 2018 of $75.75 (USD).

FBHS:NYS Fortune Brands Home

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
5 3 0 4.2500 Outperform 2018-3-6

Current Price: not available

Analyst Consensus
USD Millions 2018 2019 2020
Mean EPS 3.58 4.06 4.45
# EPS Analysts 6 3 1
Mean Revenue 5,629.90 5,927.80 6,240.00
# Revenue Analysts 4 2 1
Mean Target Price 75.75
Mean Cash Flow 4.24 4.74
Mean EBITDA 939.10 1,012.30 1,090.00
Mean Net Income 557.30 607.30
Mean Debt Outstanding 1,052.90 847.20 486.00
Mean Tax Rate
Mean Growth Rate 15.81
Mean Capital Expenditure 176.20 177.00 183.00

Company Overview (FBHS:NYS USD)

Price 61.79
Range 61.35 – 62.16
52 week 59.74 – 73.13
Open 61.56
Vol / Avg. 1.02M/1.33M
Mkt cap 9.6B
P/E 20.26
Div/yield 0.80/0.01
EPS 3.03
Shares 155.29M
Beta 1.58
Summary chart

Detailed Company Description

Fortune Brands Home & Security Inc is a leading home and security products company. It operates four business segments; through which it sells branded products such as cabinets and vanities, sells faucets, showers, locks and security devices, and doors.

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.
The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).
The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.
With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.
If we have Analyst coverage for the company we use the consensus target price here.

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