Long Term Partners
Below is a small discussion and analysis of cash flow and how it pertains
to our selection process. The company used as as example is Stryker Corporation,
a medical technology company.Stryker Corp. Symbol: SYK
A company profile is available at Yahoo HERE
CASH FLOW ANALYSIS AS OF FEB. 12, 2009
Stryker Corp. holds no long term debt, one of our favorite situations. Common shares have not been overly diluted, and the
dividend can be easily serviced based on increasing cash flows. The company also sports a very healthy return on equity, and
trades at about 3 times book value.We calculate owner earnings as "cash flow minus capital expenditures". This is a healthy number which is generally larger than EPS.
This clearly indicates that the company spits out lots of cash, another of our favorite characteristics of value opportunities.
At $ 42.00/$ 43.00/ share, the company is now available at a very attractive price. Today in December 2011, Stryker Corp. trades
at a price of $ 54.00 which warrants further research as this may still be excellent value.
Feb 12 2009 Stryker Symbol SYK 1999 2000 2001 2002 2003 2004 2005 2006 2007 5.41 5.84 6.61 7.60 9.08 10.59 12.02 13.25 14.60 Sales per sh 0.67 0.84 1.13 1.37 1.71 2.08 2.49 2.85 3.33 ‘‘Cash Flow’’ per sh 0.41 0.55 0.67 0.88 1.12 1.43 1.75 2.02 2.40 Earnings per sh B 0.03 0.04 0.04 0.05 0.06 0.07 0.09 0.11 0.22 Div’ds Decl’d per sh C 0.20 0.21 0.41 0.35 0.36 0.47 0.67 0.53 0.46 Cap’l Spending per sh 1.73 2.18 2.68 3.78 5.40 6.84 8.03 10.27 13.09 Book Value per sh 388.80 391.80 393.40 396.20 399.40 402.50 405.20 407.90 411.00 Common Shs Outst’g D 35.5 37.1 40.3 33.0 32.4 33.0 27.7 23.6 27.9 Avg Ann’l P/E Ratio 2.02 2.41 2.07 1.80 1.85 1.74 1.47 1.27 1.46 Relative P/E Ratio 1181.1 876.5 720.9 491.0 18.8 0.7 184.2 -- -- Long-Term Debt ($mill) 671.5 854.9 1056.2 1498.2 2154.8 2752.0 3251.8 4191.0 5378.5 Shr. Equity ($mill) 11.80% 15.20% 17.00% 19.00% 21.40% 21.40% 20.90% 19.80% 18.60% Return on Total Cap’l 23.90% 25.90% 25.70% 23.80% 21.00% 21.30% 22.10% 19.80% 18.60% Return on Shr. Equity 0.47 0.63 0.72 1.02 1.35 1.61 1.82 2.32 2.87 Owner Earnings (Cash flow - cap ex) 6.38% 6.35% 5.56% 4.90% 4.44% 4.35% 4.95% 4.74% 7.67% Dividends to Owner Earnings Long Term Partners
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