Foot Locker, everything is running well

I wrote in my first article about foot locker:

Earnings per share in 2020 would be 7,19$ – I guess a stock of that quality could be sold for 15 times earnings. So that would be 107.85$ in year 2020. The price today is around 62$. That is a pretty nice upside of around 70% – not bad.

 

In my “buy” article about them I wrote:

Some more fun with numbers:

I looked at their debt situation to define a discount rate: Morningstar Debt/Bonds overview FL

They have a year 2022 – 8.5% bond outstanding which is currently trading at 4.93% yield to maturity. I assumed a 6.5% discount rate for the equity.

I calculated with the assumed sell price for the year 2020 which I see at 107,85$ (of course things could turn out quite different). I discounted this price with a rate of 6,5% and came up with a “net present value” of about 82$. (note: this calculation does not include or consider dividends).

Discount Rate
6,5%
2020 107,85
2019 100,83
2018 94,28
2017 88,15
2016 82,42
NPV 82,42
Current price 63,2
Upside 30%

Bottom line:

Considering the stock is now somewhere around 60 US$, this produces a 30% upside. So I bought a small amount.

 

Lets summarise this:

Foot Locker was at 63.0 USD when I bought it

Foot locker is now at 73.68 USD

I estimated the y2020 value of FL 107.85 USD (NPV of that was 82,42 for me)

I thought a PE of 15 would be fair

 

What happend at FL in the mean time:

The 3Q2016 reads like this:

Net income for the Company’s third quarter ended October 29, 2016 was $ 157
million, or $1.17 per share, compared with net income of $80 million, or $0.57 per share in the same period of 2015.
Nice!
Third quarter comparable – store sales increased 4.7percent.
Wow! That sounds healty!

Year-To-Date ResultsNet income for the Company’s firstninemonths of the year increased to $475million, or $3.50per share, compared to net income of $383million, or $2.71$ per share, for the corresponding period in 2015.
The Company’s cash totaled $865 million, while the debt on its balance sheet was $128 million.
The Company spent $76.3 million to repurchase 1.15 million shares during the quarter
and paid a quarterly dividend of $0.275.
During the third quarter, the Company opened 21 new stores, remodeled or relocated 40 stores, and closed 28 stores.
What I also like is that their Non-GAAP Numbers are even lower than their GAAP.

Context:

This sounds good, but i expected “good”… and paid for “good/growth”. Lets see what christmas will bring ;). Looking forward to the 4Q numbers!
FL at the moment is a “hold” for me.

Disclaimer

The content contained on this site represents only the opinions of its author(s). I may hold a position in securities mentioned on this site. In no way should anything on this website be considered investment advice and should never be relied on in making an investment decision. As always please do your own research!

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2 thoughts on “Foot Locker, everything is running well

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