Leggett & Platt Stock

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Why I’m investing in LEG? Here are some reasons:


What does LEG Do?

Leggett & Platt is the company that literally invented the bed spring in 1883. They make springs for beds, its “innersprings system is the most used sleep system in the United States. They even have coils and springs that are easily rolled up and shipped for those buying bedding online.

They make carpet cushioning, sewing machines, mattress packaging and quilting machines. Auto seats are yet another area they’re involved in. Lastly, they serve manufacturers of bedding and upholstery furniture.

Size: They have 145 facilities in 18 different countries. However, 62% of their manufacturing is inside the United States.

They just acquired Elite Comfort Solutions who is a leader in foam technology. This foam is used in autos, furniture and even in the medical industry:

http://elitecomfortsolutions.com/

In summary, LEG is a diversified company with many areas to increase profits, R & D new products and expand their customer base.

HERE IS THEIR WEBSITE:

http://leggett.com/


The Most recent Leggett & Platt Earnings report SUMMARY

Q1 sales grew 12% from 2018

Acquisitions contributed to 13% of sales

Total sales up 8.3% in 2018, some of it’s income gains were due to tariffs.

Volatility of steel prices has hurt some margins

While Revenues were up, EPS was down from .57 Q1 2018 to .45 Q1 2019. However, this includes a reduction of .04 due to the acquisition of ECS.

They are exiting the fashion bed business because it’s not profitable, auto seat sales are in a decline due to slowing demand of vehicles.


How does the Dividend look for LEG

Yield-4.10%

1 yr dividend growth-5.26%

5 yr dividend growth-5.92%

Payout Ratio-71%

DIVIDEND GROWTH From LEG Website

Some Comments about the Dividend

This company has one of the most impressive records of increasing its dividends out there. It’s grown its dividend for 47 years! If that’s not impressive, I don’t know what is. This company is a DIVIDEND ARISTOCRAT.

Another fun fact-This company also did NOT cut its dividend during the great recession. We can see the dividend is growing at a decent rate (I generally like the 6% area). The payout ratio is a little higher than I like, as it doesn’t give the company a huge ceiling to grow it’s dividend. However, for now, I can live with it. Given the payout ratio and cash flow, I do believe the dividend is safe.


Valuation Metrics for LEGG

P/E = 17.66

P/Book = 4.15

Enterprise/EBIDTA =12.72

Profit Margin = 6.58%

Return on Equity = 24.19%

P/Cash Flow = 11.72

Long term Debt/Equity = 136%

Projected EPS growth = 10.53%

Credit Valuation= BBB rating

The P/E is a little above 15, but I think the stock is fairly valued, especially in today’s market where finding value is more difficult each day and the market itself is overvalued. A price to book of 4 is higher than I’d like to see it but I’ll take it. Profit Margin is on the low side but this is a capital intensive business; I don’t expect high margins.

Return on Equity is outstanding and a projected EPS growth of around 10% is very good. It’s nice to see a small-cap value company with decent growth numbers. The revenue growth is pretty good for the last 5 years. I can’t say I like the Long-term debt to equity number. However, the dividends are safely covered regardless of long-term debt. Not to mention the debt to assets is only about 18%.


Closing thoughts

Some closing thoughts-I do believe they’ll be better prices for LEG in the future when the market corrects or slows down. I expect the P/E and P/Book to decrease at some point within the next year. This is due largely to the housing industry exposure of LEG. However, I’m going ahead, purchasing and deploying cash for the dividend yield. I’ll dollar cost average in later as my investment timeline is over a 10 year period with no intentions to sell.

Please keep in mind I am NOT a financial advisor nor is this financial advice. I am simply presenting my investment decisions for entertainment purposes only or to archive my own decisions. As always, please consult a professional and do your own research before making any investment.

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One Comment

  1. Is Anyone else investing in LEG? I’d love to hear from you or what other value small cap stocks you are buying in today’s market.

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