HAYZ,
Would love to see it at $30, but I'm not a big fan of using price to sales ratios as it ignores margins, which can vary a decent amount, and capital structure. EV to sales eliminates the latter issue, but not the former.
For valuation purposes, I've started to look at HAYZ from a slightly different perspective. Starting with the 270 EBITDA number, I have assumed the company can generate 'normalized' FCF of 70 mil -- that is FCF after interest, taxes and maintenance cap ex, which I have assumed is 120 mil. A 10% yield off of that FCF number gives you a $23.30 stock price. Now, the company might be able to invest some of that FCF in a positive manner, but its returns on that investment should not be that great considering the industry. So, maybe ascribe another dollar or two to growth prospects, giving you a $25 stock. That, to me, is the best case scenario for the HAYZ stock -- unless/until HAYZ manages to outperform the POR figures.
--Brian |
