Tuesday, February 28, 2012

Graco (GGG) 2012 Review


Graco (GGG) designs, manufactures and markets specialty pumps, air and airless spray guns, regulators, meters and valves for moving and applying fluids and semi-solids for the vehicular, construction, food, chemical and plastic industries.

GGG has earned a 25-40% return on equity over the past 10 years. In addition, it has grown earnings and dividends 7-19% annually in that same time period. As with many industrial firms, the company suffered during the 2008/2009 economic downturn. However, it is returning to an above average growth rate as a result of:

(1). new product development--GGG spends 4-5% of revenue on research and development resulting in a rapidly growing pipeline of new products. Over one third of the company’s sales are generated from new products,

(2). expansion into Asia and other emerging markets,

(3). rising demand and increased pricing flexibility.

Negatives:

(1) rising interest payments,

(2) potential recession in Europe.

GGG is rated B++ by Value Line, has a 24% debt to equity ratio and its stock yields 2.2%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
GGG 2.2% 5% 36% 10
IND 1.4 8 22 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
GGG 24% 32% 2 15% B++
IND 37 17 NA 6 NA

Chart

Note: GGG stock made good progress off its March 2009 low. It quickly surpassed the November 2008 trading high (green line), but had difficulty challenging the down trend off its April 2006 high (red line). Long term the stock is in an up trend (straight blue lines). In August 2011, GGG broke its uptrend off the March 2009 low and re-set to a trading range (purple lines). The wiggly blue line is on balance volume. The Aggressive Growth Portfolio does not own shares in GGG. The upper boundary of its Buy Value Range is $23; the lower boundary of its Sell Half Range is $61.




http://finance.yahoo.com/q?s=GGG

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.