According to S&P, Carlisle is a diversified manufacturer of rubber roofing and insulation, small
tires and wheels, heavy duty braking systems, foodservice plastics, and specialty wire.
As of 5/13/08, Carlisle is trading at $31.05 (16.86 Price/Earning, 9.51 Price Cash Flow, and 0.65 Price/Sales). According to Morningstar, Carlisle has a fair value of $46. S&P place a conservative 12-Mo. Target price at $40. Using a more conservative valuation of the two, there is a 28% upside to Carlisle.
Using the Value line estimation, Carlisle should be trading at 11 x Cash flow which brings the upside down to 15%.
Based on my estimation, however, I’ve place a target price of $45 (45% upside) and $22 (-37% downside) on CSL. This figure is based on my analysis of the company discounted cash flow model. To top it off, the company has been increasing its dividend payout for 28 years with the recent increase of 7% this past year.
Why then has the stock been declining since October 2007? Further research unveiled a loss of $1.01 per share in the first quarter which according to the company was from after-tax impairment charges of $89.5 million, or $1.46 per diluted share, related to Carlisle’s power transmission belt business and on-highway brake business reported in the Specialty Products segment. In addition, Carlisle announced on April 24 that it will sell the specialty product group. The revenue from this segment is 12% of total corporate revenue, but contributes only 5% of operating income. Disposition of this business should allow the management to concentrate on segment such as construction materials which account for 47% of sales, but 57% of operating income. Due to higher input cost (rise in commodities & oil) the margin has been hurt in such segment.
Carlisle, in my view, has been oversold and mispriced. The stock has been sold off hard and currently trading more than 60% below its high and within 10% above its low. Margin contraction along with one time charge has created a great opportunity for you to research more into Carlisle.
Disclosure: I currently have a long position
tires and wheels, heavy duty braking systems, foodservice plastics, and specialty wire.
As of 5/13/08, Carlisle is trading at $31.05 (16.86 Price/Earning, 9.51 Price Cash Flow, and 0.65 Price/Sales). According to Morningstar, Carlisle has a fair value of $46. S&P place a conservative 12-Mo. Target price at $40. Using a more conservative valuation of the two, there is a 28% upside to Carlisle.
Using the Value line estimation, Carlisle should be trading at 11 x Cash flow which brings the upside down to 15%.
Based on my estimation, however, I’ve place a target price of $45 (45% upside) and $22 (-37% downside) on CSL. This figure is based on my analysis of the company discounted cash flow model. To top it off, the company has been increasing its dividend payout for 28 years with the recent increase of 7% this past year.
Why then has the stock been declining since October 2007? Further research unveiled a loss of $1.01 per share in the first quarter which according to the company was from after-tax impairment charges of $89.5 million, or $1.46 per diluted share, related to Carlisle’s power transmission belt business and on-highway brake business reported in the Specialty Products segment. In addition, Carlisle announced on April 24 that it will sell the specialty product group. The revenue from this segment is 12% of total corporate revenue, but contributes only 5% of operating income. Disposition of this business should allow the management to concentrate on segment such as construction materials which account for 47% of sales, but 57% of operating income. Due to higher input cost (rise in commodities & oil) the margin has been hurt in such segment.
Carlisle, in my view, has been oversold and mispriced. The stock has been sold off hard and currently trading more than 60% below its high and within 10% above its low. Margin contraction along with one time charge has created a great opportunity for you to research more into Carlisle.
Disclosure: I currently have a long position
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