Sunday, March 05, 2006

LEG Updated Analysis

In the previous article, we looked at LEG balance sheets and analyzed its prospects. The link to the previous article is in:

As noted in the above report, LEG has a very disciplined and principled management. The pointer to the companie's investor relations page is Very few companies state their objectives as clearly as LEG does. This is one of the reasons I like this company.

LEG revenues increased by 2.83% in 2005 compared to 2004. This is a significant drop from close to 16% revenue growth in 2004 compared to 2003. The previous two years, revenue growth has been somewhat stagnant at 2.73% and and 3.8% respectively.

Let us look at the 10-K form to see what management thinks the prospects of the company are for the next year.

The company has assets worth about $13/share. This is after subtracting the liabilities from the balance sheet. If one takes into account cash flow from operating activities, it has averaged about 400 million dollars per year for the past three years. Assuming 7% growth in cash flow and a 5% discount, in five years, there should be another 2billion added to the balance sheet. Subtracting the dividends paid, there should be about 1.350 billion dollars left over. If this is added to the assets the value of the stock is about $20=00. This doesnt count in the dividends. Including the dividends - the stock is currently rightly valued at 23-24$/share. The company is pursuing some acquisitions and if all goes well - there is more of an upside to the stock.

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