Emerson Electric Co.
NYSE: EMR
Student Investment Fund Stock Report
Recommendation: Buy
Market Cap: $26.22B
Analysts: Randy Kidder & Michael Hooper
Recent Price: $35.89 (11/28/08)
Target Price: $45.53
Sector: Conglomerate
Sub-Sector: Electronics
Highlights
Investment Thesis
• EMR is the world’s largest maker of
power equipment for oil and energy
companies.
• EMR is well positioned for economic uncertainty with a growing global presence in
a well-diversified group of B2B and B2C markets.
• EMR has a 5-year EPS growth rate of 20.9%, a current dividend yield of 3.80% and
a 52-year history of raising dividends annually.
• EMR’s strong historical valuations including a high ROIC, growing free cash flow
and EVA are forecast to continue to grow in a conservative discounted cash flow
valuation model.
• EMR is currently trading at a P/E ratio of 11.17x. The 5-year historical P/E range
is 10.90x – 26.84x
• China recognizes EMR as a “world’s
leading HVAC technology provider.”
• In 2008, China contracted EMR to
serve China’s growing nuclear
industry. EMR also opened a worldclass manufacturing facility in China.
• In 2008, EMR selected to modernize
coal-fired plant control systems by
NTPC, Ltd., India’s largest power
utility.
Price Performance vs. S&P 500
• In 2008, EMR secured a long-term
agreement with QatarGas Operating
Company Ltd., world’s largest supplier
of natural gas.
EMR
Dividends
• EMR will host the first in a series of
regional bioenergy summits to discuss
how to translate alternative fuels
technology into sustainable large-scale
commercial production.
Business Summary
Emerson Electric Company is a global
technology company engaged in
designing and supplying product
technology and delivering engineering
services in a range of industrial,
commercial and consumer markets.
EMR operates four business segments
that include: Process Management,
Industrial Automation, Network Power,
and Appliance and Tools.
Financial Statistics vs. Selected Competitors & Industry
Sales, 5-Yr. Growth Rate
EMR
12.19%
UTX
14.18%
ITW
11.30%
Industry
8.28%
Gross Margin, 5-Yr. Avg.
36.12%
27.33%
35.12%
24.35%
Operating Margin, 5-Yr. Avg.
13.37%
12.29%
16.66%
6.14%
Profitability
EMR’s commitment to innovation
provides new products and services
which help businesses modernize
industrial processes, consumers increase
energy efficiency and emerging markets
build infrastructure.
Net Margin, 5-Yr. Avg.
9.11%
8.09%
11.49%
3.93%
Valuation & Performance
EMR
UTX
ITW
Industry
Price/Earnings, (TTM)
11.17x
10.03x
12.01x
4.29x
Return on Assets, (TTM)
12.05%
9.00%
11.16%
1.96%
EMR successfully continues to execute
strategies to globalize assets and manage
its business mix, positioning it for strong
future growth.
ROIC, 2007
35.10%
33.10%
31.06%
EPS, 1-Yr. Growth Rate
17.14%
17.15%
11.04%
Dividend Yield, Current
3.80%
3.23%
3.70%
0.01%
Emerson Electric
Randy Kidder
Michael Hooper
Business Segments
Process Management (26% of FY2008 sales), provides
measurement, control and diagnostic capabilities for
automated industrial processes for companies in the
foods, fuels, medicines and power industries.
• The long-term trend of increasing demand for energy
is driving capacity expansion and facility upgrades.
• FY2007 sales: 34% US, 24% Europe, 20% Asia
• FY2008 sales: 32% US, 24% Europe, 21% Asia
Industrial Automation (19% of FY2008 sales), offers
integrated manufacturing solutions to diverse industries
globally.
• Infrastructure investment in emerging markets and
worldwide demand for reliable primary and standby
power provides ongoing growth opportunities.
• FY2007 sales: 41% US, 41% Europe,10% Asia
• FY2008 sales: 39% US, 42% Europe, 11% Asia
Network Power (25% of FY2008 sales), provides
reliable power sources and environmental conditioning
for telecommunication systems, data networks and critical
business applications to ensure continuous operation.
EMR provides industrial electric motors for a variety of
industries. EMR also provides air conditioning,
refrigeration, appliances and energy efficient technologies
for household and commercial use.
• US data centers use $4.5 B worth of electricity – this
is expected to double by 2011. The demand for
network reliability is growing in emerging markets.
• FY2007 sales: 43% US, 20% Europe, 27% Asia
• FY2008 sales: 41% US, 20% Europe, 28% Asia
Climate Technologies (15% of FY2008 sales), provides
products and services in all areas of residential and
commercial cooling and refrigeration. This division
provides digital remote monitoring and control of
refrigeration units in grocery stores and other distribution
sites. EMR provides refrigeration for stores, medical
equipment, trucks and transport containers.
• Environmental regulations call for a 75% decrease in
use of R-22 refrigerant. EMR produces the most
efficient line of scroll compressors that run on the
replacement refrigerant. EMR has developed heat
pump compressors that expand their effective
geographic use area. Significant growth is expected
in the US and China.
• FY2007 sales: 57% US, 16% Europe, 17% Asia
• FY2008 sales: 55% US, 16% Europe, 18% Asia
Appliance and Tools (15% of FY2008 sales), provides a
broad range of services and products in motors,
appliances, components and storage. Motors are used in
residential and commercial settings. Storage solutions
provide free standing, fixed and mobile units for home
use, food service and medical uses.
• Consumer and housing sectors expected to continue
below trend growth in 2009. EMR will focus on costs
and asset management to create value.
• FY2007 sales: 77% US, 13% Europe, 4% Asia
• FY2008 sales: 82% US, 5% Europe, 3% Asia
Appliance and Tools
Process Management
FY2008
Sales $3.9B
15% of Total Sales
-9.3% Growth
FY20 08
Sales $ 6.8B
2 6% of Total Sales
19.6% Growth
Climate Techn ologies
FY2008
Sales $3.8B
15% of Total Sales
5.6% Growth
Industrial Automation
Network Power
FY2008
Sales $4.9B
19% of Total Sales
19.5% Growth
FY2008
Sales $6.3B
25% of Total Sales
26% Growth
Page 2
Emerson Electric
Randy Kidder
Michael Hooper
Global Presence
Macroeconomic Assumptions
EMR conducts sales, research and development as well as
manufacturing on a global basis.
165 of their 265
manufacturing facilities are located outside the United States,
mostly in Europe, but they also have a significant, and
growing, presence in Asia. International growth is strategic to
EMR’s success. Their international focus is on infrastructure.
Growth rates in emerging markets, such as China and India,
will slow but will remain relatively high compared to the
United States and Europe. As of November 2008, China’s
projected growth for 2009 is 8.3%. China must maintain a
growth rate of 8% to keep pace with the number of new
entrants in the job market. China recently introduced a $586
billion stimulus package primarily targeted on building
infrastructure. India’s projected growth rate is 6.0% for 2009.
India plans a $500 billion infrastructure investment.
Investment in electrical infrastructure leads their list. India
needs a 10-fold increase in electrical production capacity to
meet the average growth in demand of 8%.
EMR divides its international business into five regions.
Asia/Pacific (FY2008: $4.5B in sales, 17% of total sales, 17%
growth). EMR conducts significant manufacturing, R&D, and
marketing activities in India, China, Thailand and the
Philippines.
Europe/Eastern Europe and Russia (FY2008: $5.7B in
sales, 22% of total sales, 5% growth). Eastern Europe offers
great opportunity for growth. Emerson has major customers
in Poland, Hungary, Russia, Turkey, Azerbaijan, and
Kazakhstan.
Latin America (FY2008: $1.2B in sales, 5% of total sales,
18% growth). EMR conducts business in Argentina, Brazil,
Columbia, Mexico and Venezuela.
Middle East/Africa (FY2008: $1.2B in sales, 5% of total
sales, 17% growth). Major customers in this region are in the
oil and gas industry.
North America (FY2008: $12.2B in sales, 46% of sales, 3%
growth). The majority of EMR’s sales occur in North America
but growth is stagnant.
Industrialization and a rapidly growing middle class in
developing countries and emerging markets increases
competition for energy and will lead to an eventual return of
high prices. This will lead to increases in the need for
additional supplies of traditional energy sources such as oil,
gas and electric. There will also be a demand for innovative,
energy-efficient industrial solutions and consumer products.
A growing middle class increases the demand for a reliable
primary and backup power supply as businesses grow and
consumers purchase additional technology for home use. This
also leads to an increased demand for telecommunication and
with it new construction and improvements in infrastructure.
Innovation as a Strategy
Between 2004 and 2007, EMR introduced 577 new products,
a 118% increase over the previous three years. In 2007, EMR
received 670 patents worldwide and spent $874 million –
3.8% of sales – on new and existing product development.
Western Europe
Sales for FY2008
$4.8B
5% Growth
US & Canada
Sales for FY2008
$12.2B
3% Growth
Latin America
Sales for FY2008
$1.2B
18% Growth
Eastern Europe/Russia
Sales for FY2008
$0.9B
5% Growth
Middle East/Africa
Sales for FY2008
$1.2B
17% Growth
FY2008
International Sales: 54% of Total Sales
Emerging Market Sales: 30% of Total Sales
International Sales Growth: 10%
Page 3
Asia/Pacific
Sales for FY2008
$4.5B
17% Growth
Randy Kidder
Michael Hooper
Emerson Electric
Tax Rate is modeled at 32% to compensate for an unusually
low 2003 tax rate, which coincidently matches EMR’s
forecasted tax rate for 2009.
Share Growth/Diluted Share Growth is set at 0%. EMR has
historically bought back shares, as represented in the historical
average of -1.4%. A 0% rate ensures that EPS and intrinsic
value per share are modeled conservatively.
Cash, Inventory, Acts Payable, Net PPE and Notes Payable
are each increased above their historical averages. This helps
dampen an already historically high ROIC (20.4% to 35.1%).
The model also increases Net PPE steadily on a year-by-year
basis, 15.3% in 2008 to 19% for 2015-2017. In addition to
more conservatively forecasting ROIC, it provides for a
smoother free cash flow throughout the forecast period.
WACC and Beta. The model uses a WACC at 10.26%. We
use a beta of 1.21 based on a risk-free rate of 4% and market
risk premium of 6%. Our regression calculation yielded a beta
of 1.06 at the end of October 2008. On November 26, 2008, a
casual survey of financial websites found beta calculations
ranging from .86 to 1.24.
Long-term Horizon Value Growth. A 4% long-term
horizon value growth rate is conservative considering EMR’s
investment in new product development and their brand
strength in a number of industries.
$3,500
$39,000
$37,000
$35,000
$33,000
$31,000
$29,000
$27,000
$25,000
$3,000
$2,500
$2,000
$1,500
$1,000
Economic Value Added
Market Value Added
Per Share Valuation. The DCF model returns a per share
intrinsic value of $45.53 for 2008 and $48.64 in 2009. EMR’s
stock has traded in the low to mid $30 range during the last 12
months – over this period the stock price has ranged from
$30.15 to $59.05.
Free Cash Flow & Forecasted Share Price
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
$5,000
$4,000
$3,000
$2,000
$1,000
$0
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
Model Outputs
Economic Value Added & Market Value Added (millions)
Market Value Added
SG&A costs are adjusted down 1.5% from the historical
average. EMR has a historical trend of declining SG&A costs.
Our forecast continues that trend while allowing for growth in
actual dollar costs.
EVA and MVA.
Even with conservative forecast
assumptions, EVA is projected to grow from $1,573M in 2008
to $3,033M in 2017. MVA is expected to grow from
$26,579M to $37,971M over the forecast period. EMR has
significant potential to continue their trend of creating value
for shareholders.
Free Cash Flow (in millions)
COGS/Sales is modeled slightly higher than the historical
average, which is trending lower. Although EMR is reducing
costs through better capacity utilization, an improved global
supply chain, greater efficiencies, and improved cost controls
these savings are offset by rising raw materials and energy
costs.
ROIC remains at high levels in the DCF model although
inputs, primarily Net PPE, are adjusted to moderate and taper
ROIC. High ROIC is justified based on strong free cash flow,
investment in R&D and strong brands, positioning EMR as a
market leader in several business segments. EMR is also able
to compete on price and quality, creating a barrier to entry.
20
07
20
08
E
20
09
E
20
10
E
20
11
E
20
12
E
20
13
E
20
14
E
20
15
E
20
16
E
20
17
E
Revenue growth is modeled on a year-by-year basis to better
reflect EMR’s growth prospects. Revenue is projected to grow
at 11.0% in 2008, 8% in 2009, 10 % in 2010-2013 and then
tapers off to a long-term sustainable rate of 4% in 2018 and
beyond. EMR’s historical 5-YR growth rate avg. is 12.8%.
ROE is conservatively modeled to be at lower than historical
levels. ROE gradually declines from 21.3% to 15.4% over the
forecast period.
Economic Value Added
A discounted cash flow (DCF) model suggests that EMR is
currently undervalued. The model returns a fair value of
$45.53 for 2008 and supports a 12-month target price of
$48.64. EMR’s closing price on Nov. 28 2008 was $35.89.
ROA is modeled to average 8.73% over the forecast period.
This is slightly higher than EMR’s historical average for
ROA, which was 8.60% from 2003-2007 and models a trend
for a growing ROA.
Forecasted Share Value
Valuation
Margins. The forecast model projects no growth in margins
over the 10-year forecast period. This helps to compensate for
some of the current economic uncertainty. Historically,
EMR’s margins are improving based on volume leverage,
favorable business mixes, cost control measures. For FY2008,
Operating Margin was up 17%.
Page 4
Free Cash Flow
Forecasted Share Value
Free Cash Flow. The trend in historical free cash flow
growth is very strong. Our model predicts strong free cash
flow generation for the forecast period even with conservative
modeling assumptions.
Randy Kidder
Michael Hooper
Emerson Electric
Multiples-Based Valuation
Multiples-based
Per Share Price
Price /Sales
Price/EBITDA
Price/FCF
Enterprise Value/ EBITDA
Price/Earnings
DCF Price
DCF projections of fair market value were compared to prices
based on past key multiples to help evaluate our model. Our
comparison yielded higher fair price forecasts for all multiple
computations with the exception of 2008. In 2008, the
Price/FCF multiple yielded a lower fair value price due to the
DCF model’s significant drop in projected free cash flow.
Risks
•
•
•
•
Changes in Global GDP growth rates that differ
significant from forecasted rates may affect
anticipated levels of government and business
investment as well as consumer spending.
A global recession deeper and longer than anticipated
may reduce the demand for consumer products,
industrial investment in process improvement and
investment in infrastructure.
Retrenchment from globalization and free trade may
limit EMR’s ability to grow international sales and
engage in manufacturing and related research and
development.
•
•
•
2008E
$55.00
$60.96
$34.83
$67.29
$57.15
$45.53
2009E
$59.40
$65.84
$58.66
$72.67
$62.06
$48.64
2010E
$65.34
$72.42
$54.36
$79.94
$68.29
$51.74
2011E
$71.88
$79.66
$65.29
$87.93
$75.35
$55.03
Reduction in levels of investment in infrastructure in
countries in which EMR has a strong presence may
adversely affect Emerson’s international strategy of
supporting infrastructure development.
Sustained low prices or further decline in energy
prices may reduce incentive for investment in
additional production, building of new facilities, and
the desire of companies to improve efficiencies in
their processes.
Decline in global demand for telecommunications
may affect investment in infrastructure and
innovative solutions.
Fluctuations in foreign currency exchange rates may
have an adverse affect on financial results.
Profitability
EMR has steadily improved gross, operating and net profit
margins despite increasing competition and rising commodity
prices. Increased sales volume has helped to leverage fixed
operating costs. EMR has worked to reduce fixed costs in
favor of variable costs, when possible, and has restructured its
portfolio of products and businesses when needed to improve
profitability. An emphasis on building its global footprint,
ongoing investment in new technology initiatives, emphasis on
new products as well as building technology and engineering
capacity in “best cost regions” has strengthened margins. EMR
is able to compete on price and quality, protecting margins.
Relative Valuation
EMR
UTX
ITW
Industry
Price /Sales (TTM)
1.07
0.77
1.04
1.01
Price/Book (MRQ)
2.94
2.15
1.88
1.34
Price/Free Cash Flow (TTM)
16.26
12.08
7.31
46.82
Price/Earnings (TTM)
11.17
10.03
13.19
4.29
EPS Growth (TTM)
17.41
17.15
11.04
N/A
Profitability
EMR
UTX
ITW
Industry
Sales, (TTM) vs. TTM 1yr. ago
12.11%
11.48%
13.09%
3.32%
Gross Margin, (TTM)
36.84%
27.61%
35.39%
13.30%
Operating Margin, (TTM)
14.48%
12.93%
15.76%
3.47%
Net Margin, (TTM)
9.89%
8.43%
10.83%
1.99%
Relative Valuation
EMR’s valuation ratios suggest that EMR’s investors are willing
to pay a premium for EMR as compared to its industry. In regards
to the selected competitors, EMR is priced at a slight premium
over UTX and ITW, with the exception of the P/E ratio. EMR
compares favorably to UTX, already in the Student Investment
Fund. EMR has a weak positive correlation with UTX, meaning it
would provide further risk-reduction benefits.
Page 5
Randy Kidder
Michael Hooper
Emerson Electric
Insider Trading
Other Valuation Measures
Graham and Dodd
th
EMR is below the BASELINE in the 6 Decile of relative
valuation. Investors are paying a lower premium for future
earnings than 60 % of the investors in the S & P 500.
Between March 2004 and June 2006 Net Insider Trades
displayed a selling trend. Since June of 2006, Insider’s Net
Positions have held steady and increased slightly, showing
confidence in the company in spite of anticipated difficult
economic conditions.
$0
($5,000)
($10,000)
($15,000)
($20,000)
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Net Insider Transactions
Net Insider Purchases (Sales) , $, in thousands
Net Insider Transactions, $, in thousands
Short Selling in EMR’s Stock
Piotroski's Financial Fitness Evaluator
EMR exceptionally scored the maximum of 11 in this
evaluator. The Financial Fitness Evaluator measures the firm
against benchmarks in profitability, management of
operations, assets, debt and equity, and generation of free cash
flow.
The trend is one of a shrinking volume of short trades which
exhibits growing confidence in the future performance of
EMR despite an uncertain economic environment.
Other Analyst’s Recommendations
The mean recommendation has held steady at 2.2 for at least
the past two weeks indicating a buy, but not a strong buy,
signal from analysts. EMR rates a “Buy” from Standpoint,
Longbow, and Deutsche Securities and “Outperform” from
Robert W. Baird, and Credit Suisse.
Institutional Ownership
Institutional investors own 75% of EMR’s shares.
Recommendation
EMR earns a “Buy” recommendation based on:
o EMR’s proven ability to execute its global growth strategy
o DCF 2008 price per share intrinsic value of $45.53 and the current undervalued market price, trading in the low to
mid $30 price range
o A sustainable ROIC> WACC
o Current high dividend yield and EMR’s 52-year history of increasing dividends
o Strong projected growth in EPS, Free Cash Flow, EVA and MVA
Page 6
EMR.xls Valuation and Analysis Model, Page 1 of 8
A
B
C
D
E
F
G
H
I
2003
2004
J
K
L
M
N
Average
Manual
1
2
3
Enter Firm Ticker
EMR
4
values in millions
5
Historical Income Statements
6
Enter first financial statement year in cell B6
7
8
Total revenue
Cost of goods sold
9
Gross profit
Forecasting Percentages
2003
2004
2005
2006
2007
13,958
9,060
15,615
10,049
17,305
11,122
20,133
12,965
22,572
14,461
4,898
5,566
6,183
7,168
8,111
2,935
0
3,281
0
3,595
0
4,099
0
4,593
0
Revenue Growth
COGS % of Sales
SG&A % of Sales
R&D % of Sales
2005
2006
2007
64.9%
11.9%
64.4%
10.8%
64.3%
16.3%
64.4%
12.1%
64.1%
12.8%
64.4%
21.0%
0.0%
21.0%
0.0%
20.8%
0.0%
20.4%
0.0%
20.3%
0.0%
20.7%
0.0%
0.2%
10
11
SG&A expense
Research & Development
12
Depreciation/Amortization
17
21
28
47
63
D&A % of Sales
0.1%
0.1%
0.2%
0.2%
0.3%
13
Interest expense (income), operating
231
210
209
207
228
Inc. Exp. Oper.
1.7%
1.3%
1.2%
1.0%
1.0%
1.2%
14
Non-recurring expenses
195
132
110
84
83
Exp. Non-rec
1.4%
0.8%
0.6%
0.4%
0.4%
0.7%
Other exp.
0.8%
0.4%
0.5%
0.2%
0.2%
0.4%
15
16
Other operating expenses
Operating Income
106
70
92
47
37
1,414
1,852
2,149
2,684
3,107
17
Interest income (expense), non-operating
0
0
0
0
0
Int. inc. non-oper.
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
18
19
Gain (loss) on sale of assets
Other income, net
0
0
0
0
0
0
0
0
0
0
Gain (loss) asset sales
Other income, net
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
1,414
1,852
2,149
2,684
3,107
401
595
727
839
971
28.3%
32.1%
33.8%
31.3%
31.3%
31.4%
1,013
1,257
1,422
1,845
2,136
0
0
0
0
0
0
0
0
0
0
Minority interest
Equity in affiliates
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
U.S. GAAP adjust.
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
20
21
22
23
24
25
26
27
Income before tax
Income tax
Income after tax
Minority interest
Equity in affiliates
U.S. GAAP adjustment
Net income before extraordinary items
Extraordinary items, total
0
0
0
0
0
1,013
1,257
1,422
1,845
2,136
76
0
0
0
0
937
1,257
1,422
1,845
2,136
28
Net income
29
Total adjustments to net income
0
0
0
0
0
30
Basic weighted average shares
838
839
830
817
794
31
Basic EPS excluding extraordinary items
1.21
1.50
1.71
2.26
2.69
32
Basic EPS including extraordinary items
1.12
1.50
1.71
2.26
2.69
33
Diluted weighted average shares
842
844
838
825
804
34
Diluted EPS excluding extraordinary items
1.20
1.49
1.70
2.24
2.66
35
Diluted EPS including extraordinary items
1.11
1.49
1.70
2.24
2.66
36
Dividends per share -- common stock
0.79
0.80
0.84
0.89
1.05
37
Gross dividends -- common stock
661
675
694
730
837
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Retained earnings
276
582
728
1,115
1,299
Data Source: Thomson/Reuters
Tax rate
64.5%
19.2%
32.0%
Too unpredictable to forecast
Extrordinary items
Too unpredictable to forecast
Adjustments to NI
Share growth
0.0%
-1.0%
-1.6%
-2.8%
-1.4%
0.0%
Diluted share growth
0.3%
-0.8%
-1.6%
-2.5%
-1.1%
0.0%
Dividend growth
2.1%
2.8%
5.2%
14.7%
6.1%
EMR.xls Valuation and Analysis Model, Page 2 of 8
O
P
Q
R
S
T
U
V
W
X
Y
Z
9.00%
7.00%
6.00%
5.00%
1
2
3
4
Year-by-year revenue growth
11.00%
8.00%
10.00%
10.00%
10.00%
10.00%
Forecasted Income Statements -- 10 Years
5
6
Year
7
8
Total revenue
Cost of goods sold
9
Gross profit
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
25,055
16,160
27,059
17,453
29,765
19,199
32,742
21,118
36,016
23,230
39,618
25,553
43,183
27,853
46,206
29,803
48,978
31,591
51,427
33,171
8,894
9,606
10,567
11,623
12,786
14,064
15,330
16,403
17,387
18,257
4,811
0
5,195
0
5,715
0
6,286
0
6,915
0
7,607
0
8,291
0
8,872
0
9,404
0
9,874
0
10
11
SG&A expense
Research & Development
12
Depreciation/Amortization
47
50
55
61
67
74
80
86
91
96
13
Interest expense (income), operating
313
338
372
409
450
495
539
577
612
642
14
Non-recurring expenses
184
198
218
240
264
290
316
339
359
377
15
Other operating expenses
107
116
127
140
154
169
185
197
209
220
3,434
3,708
4,079
4,487
4,936
5,429
5,918
6,332
6,712
7,048
16
Operating Income
17
Interest income (expense), non-operating
18
19
Gain (loss) on sale of assets
Other income, net
20
21
22
23
24
25
26
27
Income before tax
Income tax
Income after tax
Minority interest
Equity in affiliates
U.S. GAAP adjustment
Net income before extraordinary items
Extraordinary items, total
(293)
(298)
(326)
(346)
(358)
(366)
(360)
(319)
(255)
(168)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3,141
3,411
3,753
4,142
4,578
5,064
5,559
6,014
6,458
6,880
1,005
1,091
1,201
1,325
1,465
1,620
1,779
1,924
2,067
2,202
2,136
2,319
2,552
2,816
3,113
3,443
3,780
4,089
4,391
4,679
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,136
2,319
2,552
2,816
3,113
3,443
3,780
4,089
4,391
4,679
0
0
0
0
0
0
0
0
0
0
2,136
2,319
2,552
2,816
3,113
3,443
3,780
4,089
4,391
4,679
28
Net income
29
Total adjustments to net income
0
0
0
0
0
0
0
0
0
0
30
Basic weighted average shares
794
794
794
794
794
794
794
794
794
794
31
Basic EPS excluding extraordinary items
2.69
2.92
3.22
3.55
3.92
4.34
4.76
5.15
5.53
5.89
32
Basic EPS including extraordinary items
2.69
2.92
3.22
3.55
3.92
4.34
4.76
5.15
5.53
5.89
33
Diluted weighted average shares
804
804
804
804
804
804
804
804
804
804
34
Diluted EPS excluding extraordinary items
2.66
2.89
3.17
3.50
3.87
4.28
4.70
5.09
5.46
5.82
35
Diluted EPS including extraordinary items
2.66
2.89
3.17
3.50
3.87
4.28
4.70
5.09
5.46
5.82
36
Dividends per share -- common stock
1.12
1.19
1.26
1.34
1.42
1.50
1.59
1.69
1.79
1.90
37
Gross dividends -- common stock
888
942
999
1,060
1,124
1,193
1,265
1,342
1,424
1,510
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Retained earnings
1,248
1,378
1,553
1,756
1,989
2,251
2,515
2,747
2,968
3,168
EMR.xls Valuation and Analysis Model, Page 3 of 8
AA
AB
AC
AD
AE
AF
2005
2006
2007
AG
AH
AI
AJ
2003
2004
2005
AK
AL
AM
AN
Average
Manual
1
2
3
Enter Firm Ticker
EMR
4
values in millions
5
Historical Balance Sheets
6
year
7
8
Assets
Cash & equivalents
9
Short term investments
10
11
12
13
14
2003
Forecasting Percentages
2004
2006
2007
696
1,346
1,233
810
1,008
Cash % of Sales
5.0%
8.6%
7.1%
4.0%
4.5%
5.8%
0
0
0
0
0
ST Invest. % of Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Receivables, total
Inventory, total
2,650
1,558
2,932
1,705
3,256
1,813
3,716
2,222
4,260
2,227
Receivables % Sales
Inventory % of Sales
19.0%
11.2%
18.8%
10.9%
18.8%
10.5%
18.5%
11.0%
18.9%
9.9%
18.8%
10.7%
Prepaid expenses
0
0
0
0
0
Pre. Exp. % of Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Other CA % of Sales
4.3%
2.8%
3.1%
2.9%
2.5%
3.1%
Other current assets, total
Total Current Assets
596
433
535
582
570
5,500
6,416
6,837
7,330
8,065
15
Property, plant and equipment (net)
2,962
2,937
3,003
3,220
3,431
Net PPE % of Sales
21.2%
18.8%
17.4%
16.0%
15.2%
17.7%
16
Goodwill
4,942
5,259
5,479
6,013
6,412
Goodwill % of Sales
35.4%
33.7%
31.7%
29.9%
28.4%
31.8%
17
Intangibles
251
353
467
633
715
Intangibles % of Sales
1.8%
2.3%
2.7%
3.1%
3.2%
2.6%
18
19
Long term investments
Notes receivable -- long term
475
0
347
0
364
0
280
0
203
0
LT Invest. % of Sales
Notes Rec. % of Sales
3.4%
0.0%
2.2%
0.0%
2.1%
0.0%
1.4%
0.0%
0.9%
0.0%
2.0%
0.0%
20
Other long term assets, total
1,064
1,049
1,077
1,196
854
21
Other assets, total
0
0
0
0
0
15,194
16,361
17,227
18,672
19,680
1,397
1,629
1,841
2,305
2,501
0
0
0
0
0
1,513
1,695
1,839
1,933
2,337
391
902
970
898
404
0
0
0
0
0
22
Total assets
23
24
Liabilities and Shareholders' Equity
Accounts payable
25
Payable/accrued
26
Accrued expenses
27
Notes payable/short term debt
28
Current portion of LT debt/Capital leases
Other LT ass. % Sales
7.6%
6.7%
6.2%
5.9%
3.8%
6.1%
Other assets % Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Acts. Payable % Sales
10.0%
10.4%
10.6%
11.4%
11.1%
10.7%
Pay/accured % Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Accrued. Exp. % of Sales
10.8%
10.9%
10.6%
9.6%
10.4%
10.5%
Notes payable % Sales
2.8%
5.8%
5.6%
4.5%
1.8%
4.1%
Curr. debt % of Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Other curr liab % Sales
0.8%
0.7%
1.6%
1.2%
1.3%
1.1%
29
Other current liabilities
116
113
281
238
304
30
Total Current Liabilities
3,417
4,339
4,931
5,374
5,546
31
Long term debt, total
3,733
3,136
3,128
3,128
3,372
32
Deferred income tax
503
528
597
724
519
Def. inc. tax % Sales
3.6%
3.4%
3.4%
3.6%
2.3%
3.3%
33
Minority interest
114
126
142
176
191
Min. Int. % of Sales
0.8%
0.8%
0.8%
0.9%
0.8%
0.8%
34
Other liabilities, total
967
994
1,059
1,116
1,280
Other liab. % of Sales
6.9%
6.4%
6.1%
5.5%
5.7%
6.1%
8,734
9,123
9,857
10,518
10,908
0
35
Total Liabilities
36
Preferred stock (redeemable)
0
0
0
0
37
Preferred stock (unredeemable)
0
0
0
0
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Common stock
Additonal paid-in capital
Retained earnings (accumluated deficit)
Treasury stock -- common
ESOP Debt Guarantee
Other equity, total
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
Diluted weighted average shares
Total preferred shares outstanding
238
65
8,889
(2,346)
0
(386)
6,460
15,194
842
0
238
87
9,471
(2,470)
0
(88)
7,238
16,361
844
0
238
120
10,199
(3,092)
0
(65)
7,400
17,257
838
0
238
161
11,314
(3,865)
0
306
8,154
18,672
825
0
LT debt % of Sales
6.0%
11.0%
11.0%
6.2%
LT Debt is manually adjusted Afn in the pro formas
0
477
31
12,536
(4,654)
0
382
8,772
19,680
804
0
The model uses the more conservative diluted common shares
number for total shares outstanding.
Diluted share growth
Preferred share growth
0.3%
-0.8%
-1.6%
-2.5%
-1.1%
0.0%
EMR.xls Valuation and Analysis Model, Page 4 of 8
AO
AP
AQ
AR
AS
AT
AU
AV
AW
AX
AY
AZ
16.20%
17.50%
18.20%
18.50%
18.70%
18.90%
19.00%
19.00%
19.00%
2013
2014
2015
2016
2017
1
2
3
4
Year by Year Property, plant and equipment
15.30%
Forecasted Balance Sheets -- 10 Years
5
6
year
7
8
Assets
Cash & equivalents
9
Short term investments
10
11
Receivables, total
Inventory, total
12
Prepaid expenses
13
Other current assets, total
14
2009
2010
2011
2012
1,503
1,624
1,786
1,965
2,161
2,377
2,591
2,772
2,939
0
0
0
0
0
0
0
0
0
3,086
0
4,706
2,756
5,082
2,977
5,590
3,274
6,149
3,602
6,764
3,962
7,441
4,358
8,110
4,750
8,678
5,083
9,199
5,388
9,659
5,657
0
0
0
0
0
0
0
0
0
0
779
842
926
1,018
1,120
1,232
1,343
1,437
1,523
1,599
20,001
9,744
10,524
11,576
12,734
14,007
15,408
16,795
17,970
19,048
15
Property, plant and equipment (net)
3,833
4,384
5,209
5,959
6,663
7,408
8,162
8,779
9,306
9,771
16
Goodwill
7,968
8,606
9,467
10,413
11,455
12,600
13,734
14,695
15,577
16,356
17
Intangibles
655
707
778
856
941
1,036
1,129
1,208
1,280
1,344
18
19
Long term investments
Notes receivable -- long term
502
0
542
0
596
0
656
0
722
0
794
0
865
0
926
0
981
0
1,030
0
20
Other long term assets, total
1,518
1,639
1,803
1,983
2,182
2,400
2,616
2,799
2,967
3,115
21
Other assets, total
0
0
0
0
0
0
0
0
0
0
24,221
26,402
29,429
32,601
35,969
39,646
43,300
46,377
49,160
51,618
2,756
2,977
3,274
3,602
3,962
4,358
4,750
5,083
5,388
5,657
0
0
0
0
0
0
0
0
0
0
22
Total Current Assets
2008
Total assets
23
24
Liabilities and Shareholders' Equity
Accounts payable
25
Payable/accrued
26
Accrued expenses
2,620
2,829
3,112
3,423
3,766
4,142
4,515
4,831
5,121
5,377
27
Notes payable/short term debt
1,553
1,678
1,845
2,030
2,233
2,456
2,677
2,865
3,037
3,188
28
Current portion of LT debt/Capital leases
0
0
0
0
0
0
0
0
0
0
29
Other current liabilities
286
309
340
374
411
452
493
527
559
587
30
Total Current Liabilities
7,215
7,792
8,571
9,429
10,371
11,409
12,435
13,306
14,104
14,809
31
Long term debt, total
4,424
4,445
4,863
5,118
5,219
5,240
4,988
4,138
2,871
1,205
32
Deferred income tax
818
884
972
1,069
1,176
1,294
1,410
1,509
1,600
1,680
33
Minority interest
34
Other liabilities, total
35
225
248
273
300
330
360
385
408
428
1,657
1,823
2,006
2,206
2,427
2,645
2,830
3,000
3,150
14,201
15,004
16,478
17,894
19,273
20,699
21,838
22,168
21,983
21,273
36
Preferred stock (redeemable)
0
0
0
0
0
0
0
0
0
0
37
Preferred stock (unredeemable)
0
0
0
0
0
0
0
0
0
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Total Liabilities
209
1,535
Common stock
Additonal paid-in capital
Retained earnings (accumluated deficit)
Treasury stock -- common
ESOP Debt Guarantee
Other equity, total
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
Total common shares (diluted)
Total preferred shares outstanding
AFN (interactive with 3 items below)
Adjustment to LT Debt (iterate or use Goal Seek)
Issue Common Stock to Fund AFN
Set Balance Sheet Cash Lower to Fund AFN
477
31
13,784
(4,654)
0
382
10,020
24,221
804
0
0.0
1,051.9
477
31
15,162
(4,654)
0
382
11,398
26,402
804
0
0.0
21.5
477
31
16,715
(4,654)
0
382
12,951
29,429
804
0
0.0
418.0
477
31
18,471
(4,654)
0
382
14,707
32,601
804
0
0.0
254.3
477
31
20,460
(4,654)
0
382
16,696
35,969
804
0
0.0
101.7
477
31
22,711
(4,654)
0
382
18,947
39,646
804
0
0.0
20.2
477
31
25,226
(4,654)
0
382
21,462
43,300
804
0
0.0
(251.8)
477
31
27,973
(4,654)
0
382
24,209
46,377
804
0
0.0
(849.7)
477
31
30,941
(4,654)
0
382
27,177
49,160
804
0
0.0
(1,266.9)
0
477
31
34,109
(4,654)
0
382
30,345
51,618
804
0
0.0
(1,665.9)
EMR.xls Valuation and Analysis Model, Page 5 of 8
BA
1
Enter Firm Ticker
2
3
BB
EMR
BC
BD
BE
BF
BG
BH
BI
BJ
2004
2005
2006
2007
2008
2009
2010
values in millions
Historical Ratios and Valuation Model
2003
4
BK
BL
BM
BN
BO
BP
2015
2016
2017
Forecasted Ratios and Valuation Model -- 10 Years
2011
2012
2013
2014
5 Liquidity
6
Current
7
8
Quick
Net Working Capital to Total Assets
1.35
1.35
1.35
1.35
1.35
1.35
1.35
1.35
1.35
1.35
1.15
0.14
1.61
1.09
0.13
1.48
1.02
0.11
1.39
0.95
0.10
1.36
1.05
0.13
1.45
0.97
0.10
0.97
0.10
0.97
0.10
0.97
0.10
0.97
0.10
0.97
0.10
0.97
0.10
0.97
0.10
0.97
0.10
0.97
0.10
69.30
8.96
68.54
9.16
68.68
9.54
67.37
9.06
68.89
10.14
68.55
9.09
68.55
9.09
68.55
9.09
68.55
9.09
68.55
9.09
68.55
9.09
68.55
9.09
68.55
9.09
68.55
9.09
68.55
9.09
9 Asset Management
10
11
Days Sales Outstanding
Inventory Turnover
12
Fixed Assets Turnover
4.71
5.32
5.76
6.25
6.58
6.54
6.17
5.71
5.49
5.41
5.35
5.29
5.26
5.26
5.26
13
Total Assets Turnover
0.92
0.95
1.00
1.08
1.15
1.03
1.02
1.01
1.00
1.00
1.00
1.00
1.00
1.00
1.00
4.0%
14 Debt Management
15
Long-Term Debt to Equity
57.8%
43.3%
42.3%
38.4%
38.4%
44.1%
39.0%
37.6%
34.8%
31.3%
27.7%
23.2%
17.1%
10.6%
16
Total Debt to Total Assets
27.1%
24.7%
23.8%
21.6%
19.2%
24.7%
23.2%
22.8%
21.9%
20.7%
19.4%
17.7%
15.1%
12.0%
17
Times Interest Earned
N/A
N/A
N/A
N/A
N/A
11.7
12.5
12.5
13.0
13.8
14.8
16.5
19.9
26.3
8.5%
41.9
18 Profitability
19
Gross Profit Margin
35.1%
35.6%
35.7%
35.6%
35.9%
35.5%
35.5%
35.5%
35.5%
35.5%
35.5%
35.5%
35.5%
35.5%
35.5%
20
Operating Profit Margin
10.1%
11.9%
12.4%
13.3%
13.8%
13.7%
13.7%
13.7%
13.7%
13.7%
13.7%
13.7%
13.7%
13.7%
13.7%
21
Net After-Tax Profit Margin
7.3%
8.1%
8.2%
9.2%
9.5%
8.5%
8.6%
8.6%
8.6%
8.6%
8.7%
8.8%
8.9%
9.0%
9.1%
22
Total Assets Turnover
0.92
0.95
1.00
1.08
1.15
1.03
1.02
1.01
1.00
1.00
1.00
1.00
1.00
1.00
1.00
23
24
Return on Assets
Equity Multiplier
6.2%
2.35
7.7%
2.26
8.3%
2.33
9.9%
2.29
10.9%
2.24
8.8%
2.42
8.8%
2.32
8.7%
2.27
8.6%
2.22
8.7%
2.15
8.7%
2.09
8.7%
2.02
8.8%
1.92
8.9%
1.81
9.1%
1.70
25
Return on Equity
14.5%
17.4%
19.2%
22.6%
24.4%
21.3%
20.3%
19.7%
19.1%
18.6%
18.2%
17.6%
16.9%
16.2%
15.4%
26
27
EPS (using diluted shares, excluding extraordinary items)
1.20
1.49
1.70
2.24
2.66
2.66
2.89
3.17
3.50
3.87
4.28
4.70
5.09
5.46
5.82
28
DPS (dividends per share)
0.79
0.80
0.83
0.89
1.04
1.10
1.17
1.24
1.32
1.40
1.48
1.57
1.67
1.77
1.88
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Valuation Metrics Trend Analysis (NOPAT, EVA, MVA, FCF and Capital in millions)
2003
2004
2005
2006
2007
NOPAT (net operating profit after tax)
1,013
1,257
1,422
1,845
2,136
ROIC (return on invested capital)
20.4%
22.5%
25.3%
32.2%
35.1%
EVA (economic value added)
504
683
845
1,257
1,511
FCF (free cash flow)
617
1,393
1,740
1,778
Weighted Average Cost of Capital
10.26%
Net Operating Working Capital (NOWC)
1,994
2,659
2,622
2,510
2,657
Operating Long Term Assets
2,962
2,937
3,003
3,220
3,431
Total Operating Capital
4,956
5,596
5,625
5,730
6,088
ROIC WACC Spread
24.82%
2007
Valuation (in millions where appropriate) -- through year 2017
Long-term Horizon Value Growth Rate (user-supplied)
4.00%
PV of Forecasted FCF, discounted at 10.26%
$38,156
Value of Non-Operating Assets
$1,008
Total Intrinsic Value of the Firm
$39,164
Intrinsic Market Value of the Equity
$35,388
Per Share Intrinsic Value of the Firm
$44.02
MVA (market value added)
$26,616
Weighted Average Cost of Capital Calculations
Item
Value
Percent
Cost Weighted Cost
ST Debt (from most recent balance sheet)
404
1.38%
3.20%
0.03%
LT Debt (from most recent balance sheet)
3,372
11.56%
5.49%
0.43%
MV Equity (look up stock's mkt. cap and enter in cell BB53)
25,400
87.06%
11.26%
9.80%
Weighted Average Cost of Capital
10.26%
2008
2,335
31.5%
1,573
1,000
10.26%
3,589
3,833
7,423
21.19%
2008
2009
2,522
30.5%
1,674
1,684
10.26%
3,877
4,384
8,260
20.26%
2009
2010
2,774
29.3%
1,802
1,561
10.26%
4,264
5,209
9,473
19.02%
2010
$41,073
$43,604
$46,519
$1,503
$1,624
$1,786
$42,576
$45,228
$48,305
$36,599
$39,105
$41,596
$45.53
$48.64
$51.74
$26,579
$27,707
$28,645
Capital Asset Pricing Model
Risk Free Rate
4.00%
Beta
1.21
Market Risk Prem.
6.00%
Cost of Equity
11.26%
Forecasted Valuation Metrics -- 10 Years
2011
2012
2013
2014
3,051
3,356
3,692
4,024
28.7%
28.4%
28.2%
28.0%
1,958
2,143
2,349
2,552
1,875
2,183
2,431
2,760
10.26%
10.26%
10.26%
10.26%
4,691
5,160
5,676
6,187
5,959
6,663
7,408
8,162
10,650
11,823
13,084
14,348
18.39%
18.13%
17.95%
17.78%
2011
2012
2013
2014
$49,419
$1,965
$51,384
$44,236
$55.03
$29,529
$52,308
$2,161
$54,469
$47,017
$58.49
$30,321
$55,247
$2,377
$57,624
$49,928
$62.11
$30,981
$58,157
$2,591
$60,748
$53,083
$66.03
$31,621
2015
4,306
28.0%
2,725
3,255
10.26%
6,620
8,779
15,399
17.70%
2015
2016
4,564
28.0%
2,889
3,640
10.26%
7,017
9,306
16,323
17.70%
2016
2017
4,793
28.0%
3,033
3,976
10.26%
7,368
9,771
17,139
17.70%
2017
$60,871
$2,772
$63,643
$56,641
$70.46
$32,431
$63,479
$2,939
$66,417
$60,510
$75.27
$33,332
$69,624
$3,086
$72,710
$68,316
$84.98
$37,971
EMR.xls Valuation and Analysis Model, Page 6 of 8
BQ
BR
BS
BT
BU
BV
BW
BX
BY
BZ
CA
CB
CC
CD
CE
CF
CG
1
2
3
4
5
6
7
8
9
In this section we are going to examine historical and forecasted ratios (or "multiples") typically used to value stocks ‐‐ P/CF, Enterprise Value/EBITDA, etc. We first want to compare the historical trends
in these ratios to the trends in their forecasted values. If our forecasted multiples are systematically increasing or decreasing our forecasts may be too optimistic or pessimistic, and our forecast
assumptions may have to be adjusted. Second, we want to compare our discounted cash flow valuation estimates with those derived from the various multiples. Once again, if there is a large
discrepancy between our DCF valuation estimate of the company's stock and the range of values obtained from the various multiples, we may want to adjust our forecast assumptions.
1. You will need to look up the company's year‐end stock prices and enter them in the first 5 (historical) years of the "per share value" category.
2. Use the estimated DCF price per share in the forecasted period (link to your forecasted prices in cells BG47‐BP47.
3. Market capitalization will be calculated as basic weighted shares x historical year‐end prices and then forecasted basic weighted shares x DCF forecasted prices.
4. As with previous calculations, historical multiples use actual historical values and forecasted multiples use forecasted values.
10
11
12
Historical Ratios and Valuation
14
Per share value (hist. & DCF est.)
15
Market capitalization
16
EBITDA
2003
$28.93
$24,249
$1,963
Enterprise Value
$27,791
13
17
18
19
Inputs
Multiples
Price/Sales
20
Price/EBITDA
21
Price/Free Cash Flow
22
Enterprise Value/EBITDA
23
24
Price/Earnings
Dividend Yield
2004
$32.14
$26,953
$2,285
2005
$35.11
$29,138
$2,588
2006
$42.37
$34,595
$3,069
2007
$55.69
$44,207
$3,518
2008E
$45.53
$36,139
$4,084
2009E
$48.64
$38,613
$4,411
2010E
$51.74
$41,073
$4,852
$29,771
$32,145
$37,987
$47,166
$40,822
$43,338
$46,244
28
Price/EBITDA
29
Price/Free Cash Flow
30
Enterprise Value/EBITDA
31
Price/Earnings
$54,949
$57,850
2017E
$84.98
$67,458
$8,383
$60,544
$63,126
$69,194
1.73
1.68
1.72
1.96
1.44
1.43
1.38
1.33
1.29
1.24
1.21
1.21
1.22
1.31
11.80
11.26
11.27
12.57
8.85
8.75
8.47
8.18
7.91
7.63
7.45
7.43
7.48
8.05
16.96
N/A
43.66
21.14
20.21
25.57
36.14
22.92
26.31
23.30
21.26
20.28
18.99
17.18
16.41
14.16
13.03
12.42
12.38
13.41
10.00
9.83
9.53
9.21
8.86
8.51
8.22
8.04
7.91
8.25
24.03
2.71%
21.59
2.49%
20.68
2.36%
18.93
2.09%
20.96
1.87%
17.13
2.43%
16.86
2.41%
16.30
2.40%
15.71
2.40%
15.10
2.39%
14.50
2.39%
14.04
2.38%
13.85
2.37%
13.78
2.35%
14.60
2.21%
2008E
$55.00
$60.96
$34.83
$67.29
$57.15
$34.83
$67.29
$45.53
2009E
$59.40
$65.84
$58.66
$72.67
$62.06
$58.66
$72.67
$48.64
2016E
$107.52
$119.17
$126.78
$131.53
$117.50
$107.52
$131.53
$75.27
2017E
$112.90
$125.13
$138.49
$138.11
$125.18
$112.90
$138.49
$84.98
Historical
Price/Sales
$52,018
2016E
$75.27
$59,749
$7,983
1.74
Override
Average w/Manual
1.76
11.85
27.64
13.08
21.24
Low Price
High Price
DCF Price
Valuation Estimates Based On:
27
$49,136
2015E
$70.46
$55,929
$7,532
12.35
25
26
Forecasted Ratios and Valuation
2011E
2012E
2013E
2014E
$55.03
$58.49
$62.11
$66.03
$43,680
$46,426
$49,301
$52,416
$5,337
$5,871
$6,458
$7,039
32
33
34
Forecasted Stock Prices Based on Historical Multiples -- 10 Years
2010E
$65.34
$72.42
$54.36
$79.94
$68.29
$54.36
$79.94
$51.74
2011E
$71.88
$79.66
$65.29
$87.93
$75.35
$65.29
$87.93
$55.03
2012E
$79.07
$87.63
$76.04
$96.72
$83.30
$76.04
$96.72
$58.49
2013E
$86.97
$96.39
$84.65
$106.39
$92.13
$84.65
$106.39
$62.11
2014E
$94.80
$105.07
$96.13
$115.97
$101.14
$94.80
$115.97
$66.03
2015E
$101.44
$112.42
$113.37
$124.09
$109.42
$101.44
$124.09
$70.46
35
36
$90
$70
15
$60
10
$50
5
$40
$30
0
Price/Sales
Enterprise Value/EBITDA
DCF Price
DCF Price
$80
20
Forecasted Value Per Share
25
P/S and Ent. Value/EBITDA
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Forecasted Per Share Stock Values
Price/Sales and Enterprise Value/EBITDA vs. Price
37
$150
$140
$130
$120
$110
$100
$90
$80
$70
$60
$50
$40
Low Price
DCF Price
High Price
CH
EMR.xls Valuation and Analysis Model, Page 7 of 8
CI
CJ
CK
CL
CM
CN
CO
CP
CQ
CR
CS
CT
CU
CV
CW
CX
CY
CZ
DA
1
2
3
Price/Earnings Ratio and Dividend Yield
7
8
9
10
11
12
13
25
8%
23
7%
6%
21
5%
19
4%
17
3%
15
2%
13
1%
$7.00
EPS and DPS
6
Earnings and Dividends Per Share
Dividend Yield
5
Price/Earnings Ratio
4
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
14
15
16
Price/Earnings Ratio
17
Earnings Per Share
Dividend Yield
Dividends Per Share
18
19
Gross, Operating and Net Profit Margins
Return on Assets, Equity and Invested Capital
100%
50%
23
24
80%
40%
60%
30%
40%
20%
20%
10%
0%
0%
25
26
27
28
29
Gross Margin
22
30
31
70%
ROA, ROE and ROIC
21
Oper. and Net Profit Margin
20
60%
50%
40%
30%
20%
10%
0%
32
33
Gross Margin
34
Operating Margin
Net Margin
Return on Assets
Return on Equity
Return on Invested Capital
35
36
37
NOPAT and Free Cash Flow (millions)
$39,000
$37,000
$3,000
$35,000
$2,500
$33,000
$2,000
$31,000
$29,000
$1,500
$27,000
$25,000
$1,000
Economic Value Added
Market Value Added
NOPAT and Free Cash Flow
$3,500
Market Value Added
Economic Value Added & Market Value Added (millions)
Economic Value Added
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
NOPAT
Free Cash Flow
DB