Polaris Industries (PII)

Did you know that snowmobiles account for less than 10% of annual revenues at Polaris?

This is a quick look at our canvassing of second opinions … and third opinions … and fourth opinions … in our quest to discover actionable stocks to study.

Polaris Industries (PII)

There it is at the top of this week’s Stocks to Study. The company is no stranger — and has been featured by Ken Kavula during our monthly Round Tables and most recently, at the StockFest 2015 stocks discussion this past weekend in Grand Blanc, Michigan.

For a great overview of this increasingly diverse company, check out Ken’s Round Table analysis from April 2013. The Polaris segment starts at 26:40

By the way, you can find Round Table sessions and specific stocks by going to YouTube.com and searching on terms like Manifest Investing and in this case: Kavula Polaris (PII).

Equity Analysis Guide (EAGLE)

Pii eagle 20150505

Value Line Low Total Return (VLLTR) Forecast

The Value Line low total return forecast for any company is simply a function of four things:

  • Current Price
  • Future Price (Low Forecast)
  • Projected Dividend Yield
  • Number of Years (4)

At MANIFEST, when we publish this forecast, we correct for change in stock price and forecast period (n).

Morningstar Price-to-Fair Value (P/FV)

Determining Fair Value (Source: Morningstar.com)

This philosophy of fundamental research is the foundation for our valuation model. We believe that:

  • How much capital a company invests and what it earns on that capital drive shareholder value.
  • Free cash flow—not reported earnings—is what counts.
  • As Warren Buffett has said, “Growth is always a component in the calculation of value—sometimes a positive, often a negative.” If a company can’t earn its cost of capital, growth destroys value instead of creating it.
  • Competitive advantages disappear over time.
  • It’s dangerous to assume that the future will be better than the past.

These core beliefs guide our stock analysts as they estimate future cash flow, using their in-depth knowledge of each company and its competitive position within its industry. Our analysts forecast revenue growth, profit margins, and capital investment (and all of the numbers that go into them) for each firm they cover.

Their forecasts for each company populate our discounted cash flow model, which calculates the present value of the company’s future discretionary cash flow based on its cost of capital, as determined by our analysts.

Pii mstar pfv chart 20150505

S&P Price-to-Fair Value (P/FV)

The calculation as it appears in the weekly summary is:

139.61/203 (2 days ago) = 69%

$140.41/195.40 = 71.9% (5/6/2015)

A P/FV = 100% is fairly valued. A P/FV < 100% is potentially “on sale.”

Pii sp pfv 20150505

One Year Outlooks

Analyst Consensus Estimates (ACE) (via finance.yahoo.com and/or www.analystratings.net)

  • Current Price = $139.65
  • 1-Year Price Target = $164.06
  • Dividend Yield = 1.5%

1-Year Outlook = Price Apprec. + Dividend Yield = (164.06/139.65) – 1 + 0.015 = +19.0%

There are no current one year price targets for either S&P or Goldman Sachs.

Pii arn 20150505

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