Linamar Corp T.LNR

Linamar - Valuation Perspective

[Jonathan9]

In 2015 Linamar reached an all time high closing price of close to $90 per share. At that time sales were $5 Billion and EPS of $6+. Book value was $30 per share.

Since then Linamar has launched 8, 9, 10 speed business, acquired Montupet, Macdon, Salford, GF interest, Dura Shiloh assets, Mobex assets, and now Bourgault. Company has also retired 4 million shares.

In 2021 Linamar reached an intra day all time high of $91.98 per share. Sales were $6 Billion+ and $6+ EPS, Book value $70.

Since then, Linamar has acquired Salford, GF interest, Mobex Assets, Dura Shiloh assets, Bourgault and retired 4 million shares.

All during a time period of low interest fueling competition. Competitors have high debt loads in a higher interest rate environment. In a recession, I expect Linamar to outperform its competition. Linamar has one of the best balance sheets in the industry and continues to invest heavily to grow the business. As CapEx drops, FCF will explode higher.

This year I expect $10.5 Billion+ in Sales and $10 EPS. Book value $90+ per share. Company is growing double digit. Owner's Earnings are compounding double digit. High insider ownership. Current share price is $69 per share.  Market is trading at a 20 X P/E. Return to a normal valuation gets you to $120 per share.

I expect all time high share price in 2024.

[Jonathan9]

Linamar paid $1.2 Billion for Macdon with sales of approximately $600 million. 2X sales. Commentary stated Macdon sales are now over $1 Billion. Using the same multiple Macdon would be worth $2 Billion. Add in the rest of the Ag business and you get a Ag division worth $3 Billion. This doesn't include Skyjack. Market Cap of all of Linamar is $4.3 Billion. Cheap.

[Jonathan9]

In 2006, almost 20 years ago, Oshkosh acquired JLG for $3.2 Billion USD. JLG had $2.3 Billion in revenues. Paid 1.4 x revenue. Skyjack today has over $1 Billion CAD in sales and is growing double digit. Similar valuation would be somewhere between $1.25-$1.65 Billion CAD. More than 20 years ago Linamar acquired the first 50% for $22 million and then the remaining 50% for $9 million. It has

[Jonathan9]

TSX and S&P 500 are both trading at over 20x earnings. Linamar forward P/E is 7 with expected double digit top and bottom line growth. Sionna investment did a piece on Linamar coming to the same conclusion. Undervalued & mispriced.