Friday, January 27, 2006

Leggett and Platt (LEG) Analysis

Leggett and Platt ( LEG ) is an old economy company. It was founded in 1883 to use bedsprings in mattresses. The business was incorporated in 1901. It has been publicly traded since the 1960's.

Today, as was the case in 1883, the company focusses on bedding products and home furnishings. One of their unit also focuses on textiles, foam and fabric components. LEG is already a part of S&P500 index.

The company has a great record with dividends and per share growth. In the last five years, the company has grown dividends at 9% a year. It has got a yield of 2.7% as of Friday's market closing.

LEGs annual revenue has increased from 1.7 billion in 1994 to 5.2 billion in 2006. Earning before income taxes has doubled between 1995 and 2005. The number of outstanding shares have increased from 167 million to 187 million in this period. The companies investment relations page is a revelation which shows the company in very good light.

The company has set clear priority for its cash flow deployment. From its 10-Q statement,

Cash Flow and Capitalization

Our priorities for the use of cash, in order of importance, are:
• Fund internal growth and acquisitions
• Extend our track record of annual dividend increases
• Use remaining cash (if any) to repurchase stock

The company has been able to increase its cash flows inspite of having the same amount of revenues as in the prior year. In addition, the company has setup factories in China to supply customers who source their parts in China. ( even though it is cheaper to manufacture in the U.S ).

No comments: