It's been a great evening session for Stanley Black & Decker investors, who saw their shares rise 4.7% to a price of $103.98 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:
Stanley Black & Decker, Inc. engages in the tools and storage and industrial businesses in the United States, Canada, rest of Americas, France, rest of Europe, and Asia. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.33 and an average price to book (P/B) ratio of 3.12. In contrast, Stanley Black & Decker has a trailing 12 month P/E ratio of -90.4 and a P/B ratio of 1.68.
Stanley Black & Decker's PEG ratio is 6.12, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Business Is Unprofitable and Its Balance Sheet Is Highly Leveraged:
| 2020-02-21 | 2021-02-18 | 2022-02-22 | 2023-02-23 | |
|---|---|---|---|---|
| Revenue (MM) | $12,913 | $12,750 | $15,281 | $16,947 |
| Gross Margins | 32.8% | 33.9% | 33.3% | 25.3% |
| Operating Margins | 12.9% | 12.0% | 11.2% | 3.8% |
| Net Margins | 7.4% | 9.05% | 10.16% | 1.0% |
| Net Income (MM) | $956 | $1,154 | $1,552 | $170 |
| Net Interest Expense (MM) | -$230 | -$205 | -$176 | -$284 |
| Depreciation & Amort. (MM) | -$560 | -$578 | -$577 | -$572 |
| Earnings Per Share | $6.35 | $7.26 | $9.31 | -$1.15 |
| EPS Growth | n/a | 14.33% | 28.24% | -112.35% |
| Diluted Shares (MM) | 151 | 156 | 165 | 153 |
| Free Cash Flow (MM) | $1,830 | $2,350 | $1,174 | -$971 |
| Capital Expenditures (MM) | -$325 | -$328 | -$511 | -$489 |
| Net Current Assets (MM) | -$6,998 | -$6,464 | -$8,061 | -$7,274 |
| Current Ratio | 1.01 | 1.32 | 0.97 | 1.21 |
| Long Term Debt (MM) | $3,176 | $4,245 | $4,354 | $5,353 |
| Net Debt / EBITDA | 1.99 | 1.58 | 2.87 | 6.1 |
Stanley Black & Decker's financial statements include several red flags such as slimmer gross margins than its peers, weak operating margins with a negative growth trend, and declining EPS growth. Additionally, the firm has a highly leveraged balance sheet. On the other hand, the company benefits from growing revenues and increasing reinvestment in the business and generally positive cash flows. Furthermore, Stanley Black & Decker has just enough current assets to cover current liabilities.
