SWM - Mark Moore

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Discounted Dividends ApproachFigures in Millionst 0 1 2 3 4 5 6 7 8 9 10Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019DPS (Dividends Per Share) 0.66 0.72 0.77 0.82 0.87 0.92 0.97 1.02 1.07 0.66PV Factor 0.86 0.74 0.64 0.55 0.47 0.41 0.35 0.30 0.26 0.22YBY PV Annual Dividend 0.57 0.53 0.49 0.45 0.41 0.37 0.34 0.31 0.28 0.15Schweitzer-‐Mauduit's Discounted Dividends Sensitivity Analysis Total PV of YBY Dividends 3.888488978 Growth Rate PV TV Perp 0Cost of Equity 0.00% 1.04% 2.70% 4.05% 5.40% 6.75% 8.10% Model Value 12/31/2008 3.888488978 8.39% 9.92 10.5 11.86 13.73 17.28 26.69 123.72Time Consistent Price 4.40833923 9.70% 8.75 9.14 9.99 11.04 12.77 16.06 24.9311.01% 7.84 8.11 8.67 9.33 10.3 11.89 14.95Observed Share Price11/1/2009 $50.95 12.32% 7.12 7.31 7.69 8.13 8.74 9.63 11.1Initial Cost of Equity (YouDerive) 16.25% 13.63% 6.52 6.6 6.94 7.24 7.64 8.19 9.02Perpetuity Growth Rate (g) 8.10% 14.94% 6.02 6.13 6.33 6.55 6.82 7.19 7.716.25% 5.6 5.77 5.83 5.99 6.19 6.44 6.78Overvalued < $43.31 15% Analyst Position $43.31 < Fairly Valued < $58.60 Undervalued > $58.60 212
Discounted Free Cash Flowt 0 1 2 3 4 5 6 7 8 9 10Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Cash FlowFromOperations(Millions) 63.97 67.80 71.19 74.75 77.74 80.85 84.09 87.03 90.08 93.23 96.49Cash FlowFromInvestingActivities 141.8645 119.654178 125.64 123.12 128.05 133.17 133.55 138.23 143.06 148.07 153.25FCFFirm'sAssets 205.8306 187.4582122 196.83 197.88 205.79 214.02 217.64 225.26 233.14 241.3 249.74PV Factor(WACC orKe?) 1.0000 0.9187 0.8440 0.7754 0.7123 0.6544 0.6012 0.5523 0.5074 0.4662 0.4283PV YBYFree CashFlows 172.2170071 166.13 153.43 146.59 140.06 130.85 124.42 118.3 112.49 106.96Perp.Total PVYBY FCFFCF Perp$1,371.44 Schweitzer-‐Mauduit's Free Cash Flow Sensitivity Analysis $- Growth Rate <strong>Mark</strong>etValue ofAssets(12/31/87)BookValueDebt &PreferredStock$1,371.44 0.00% 1.04% 2.70% 4.05% 5.40% 6.75% 8.10% $451.30 4.95% 2.94 3.5 5.47 12.45 N/A N/A N/A<strong>Mark</strong>etValue ofEquity $920.14 5.60% 2.55 2.96 4.7 7.17 N/A N/A N/Adivide byShares toGet PPSWeighted Average Cost at 12/31 $0.60of Capital 6.25% 2.25 2.55 3.39 5.01 11.76 N/A N/ATimeconsistentPrice(11/1/88) 0.64 6.90% 2.01 2.24 2.83 3.83 6.62 59.68 N/AObservedSharePrice(11/1/88) 50.95 7.55% 1.81 1.98 2.42 3.09 4.59 11.15 N/A8.20% 1.64 1.78 2.11 2.58 3.5 6.13 79.83WACC 8.85% 8.85% 1.49 1.6 1.86 2.21 2.82 4.21 10.63PerpGrowthRate 6.75%15% Analyst Position $43.31 < Fairly Valued < Overvalued < $43.31 $58.60 Undervalued > $58.60 213
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Schweitzer-Mauduit International,
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Buyers Willingness to Switch……
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Net Sales/Accounts Receivable……
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Enterprise/EBITDA………………
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Competitive ForceRivalry Among Exis
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they spend money devoted to R & D.
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The next part of our financial anal
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Company OverviewSchweitzer-Mauduit
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table also shows that SWM’s sales
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Competitive ForceDegree of Competit
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The size of the firms in the indust
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Total Assets 3500 3000 2500 2000 1
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Excess CapacityExcess capacity aris
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scale in the industry is vital to a
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1400 1200 1000 800 600 400 200 0 Pr
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RelationshipsThe relationships of t
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its product (indirectly), the threa
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it is easy for them to dictate the
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As far as the purpose of tobacco pa
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Volume per BuyersThe volume a buyer
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(SWM 10-K). Considering the overall
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Cost LeadershipCost leadership mean
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likely for the customer to return a
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of pride in being the “the world
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educing product costs. The governme
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It is evident when reading the tabl
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The second of the two accounting po
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SWM for the most part does a suffic
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Schweitzer-Mauduit and its competit
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their economic activity. If firms h
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contracts and, to a lesser extent,
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The ability to do this gives firms
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their sales in U.S. dollars to mini
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Schweitzer Mauduit 2004 2005 2006 2
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ConclusionThe accounting strategy a
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Schweitzer-Mauduit2004 2007 2006 20
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than capitalized. The only reason t
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5 Δ Sales/Cash from Sales 4 3 2
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Δ Net Sales/Accounts Receivable
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Δ Net Sales/Inventory 30 25 20 1
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0.3 CFFO/OI 0.25 0.2 0.15 0.1 0.05
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12 CFFO/NOA 10 8 6 4 2 SWM AOI UVV
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200 Δ Asset Turnover 150 100 50
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4 Δ Total Accurals/ Sales 2 0 -
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ConclusionThe ratios examined above
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of a firm’s financials. The firm
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Restated Income Statement For ye
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Research and Development Schweitz
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New taxes on Net IncomeIn millions
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Amortized Goodwill
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obligations in the past five years,
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1.200 Quick Asset Ratio 1.000 0.8
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2004 2005 2006 2007 2008SWM 25.9881
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comparison. A small ratio shows inv
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6 Inventory Turnover 5 4 3 2 1 SWM
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2004 2005 2006 2007 2008SWM 79.5248
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Profitability Ratio AnalysisProfita
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Operating Expense RatioThe operatin
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15 Operating Pro`it Margin 10 5 0
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Net Profit Margin 2004 2005 2006 20
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Return on AssetsThe return on asset
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40 Return on Equity 20 0 -20 -40
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Internal Growth Rate 2004 2005 2006
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industry average as much as it did
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Debt/Equity RatioThe debt-to-equity
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Schweitzer-Mauduit is at a low 1.61
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Mauduit has stayed pretty stable th
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it looks to keep declining, meaning
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Gross profit is the next step in fo
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Balance Sheet143
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liabilities, we take the already fo
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Statement of Cash FlowsThe statemen
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Estimating Cost of CapitalCost of E
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Size-Adjusted Cost of EquityThe CAP
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The table below shows the liability
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The cost of capital is the interest
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declared overvalued. Prices falling
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P/E ForecastedCompany PPS EPS P/E F
Page 161 and 162: Dividends/Price RatioCompany PPS DP
Page 163 and 164: Price/EBITDACompany Market Cap EBIT
Page 165 and 166: Price/Free Cash FlowCompany Market
Page 167 and 168: November 2, 2009 we had to calculat
Page 169 and 170: Schweitzer-‐Mauduit's Free Ca
Page 171 and 172: Now that we have calculated the tot
Page 173 and 174: subtracting the normal earnings for
Page 175 and 176: Long-Run Residual Income Valuation
Page 177 and 178: Cost of EquityReturn on Equity-0.14
Page 179 and 180: Growth RateReturn on Equity-0.14 -0
Page 181 and 182: Return on Equity RestatedGrowth Rat
Page 183 and 184: Once the industry analysis had been
Page 185 and 186: AppendicesSales Manipulation Diagno
Page 187 and 188: CFFO/ OI Change 2004 2005 2006
Page 189 and 190: UVV 2.170832 2.687889 2.78523 2
Page 191 and 192: Capital Structure RatiosDebt to Equ
Page 193 and 194: 3MonthRatesSUMMARY OUTPUT Regressio
Page 195 and 196: Coefficients Intercept 0.035115 X
Page 197 and 198: Total 71 0.987349 Intercept X Vari
Page 199 and 200: Total 35 0.775347 Intercept X Vari
Page 201 and 202: Total 59 1 2 0.939751 Coefficients
Page 203 and 204: Total 23 3 5 0.624714 Coefficients
Page 205 and 206: Residual Total 46 47 0.624852 0.848
Page 207 and 208: Residual Total 70 71 1 1 6 0.7615
Page 209 and 210: Residual Total 34 35 0.519917 0.775
Page 211: Price Earnings Growth(P.E.G.)Compan
Page 215 and 216: Price(11/1/1988)Initial Costof Equi
Page 217 and 218: Figures in Millions (Except per S
Page 219 and 220: Growth Rate RestatedReturn on Equit
Page 221 and 222: Return on EquityGrowth RateKe -30%
Page 223 and 224: Schweitzer-‐Mauduit Restated
Page 225: Heakal, Reem. "What Are Economies o
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SWM - Mark Moore

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