Hammond Power in 10 Years Any views or guesses on what Hammond will look like in 10 Years?...
Here are my predictions:
- The electrification trend continues over the next decade increasing market size, demaind and driving strong pricing increases for Hammond of 7% to 10% per year (above inflation).
- Hammond will continue to increase capacity through organic investments, tuck-in acquisitions and efficiency improvements driving annualized sales growth of around 15% over the next 10 years. This will include careful expansions beyond North America (historically Hammond was not ready for their international expansion but they are now or will be in the near future). This will require modest capex but they'll should be able to fund with cash or temporary credit use. I don't think the will do significant/transformational acquisitions. They will do small expansion deals with cash and discipline. I don't think they will buy back stock (although I would like them to).
- Consistent pricing increases and capacity growth combined reasonable cost management will lead to stready EBITDA and net earnings margin improvements. Resulting in EBITDA and earnings increasing on average by 20% annually over the next decade.
- Hammond's dividend will consistently increase on an annual basis over the next decade and remain at about 10% of earnings.
- Overall my prediction is that in 10 years annual sales will exceed $2B and net earnings will be over $300M.
- Hammond Power's share price will continue to appreciate and modest PE and EBITDA mutliple expansion will occur.
- Hammond's share price in a decade will be over $350. Resulting in a cumulative return before dividends of 5.7x from today's share price and annualized return of 55% before dividends.