- If you are wondering whether Leggett & Platt is attractively priced or a value trap, starting with a clear view of its recent share performance and valuation checks can help bring that picture into focus.
- The stock last closed at US$11.68, with returns of 6.3% year to date and 30.1% over the past year, set against longer term 3 year and 5 year returns of 62.0% and 69.7% declines.
- Recent news around Leggett & Platt has mainly centered on its position in bedding and furniture components, and how the company is adjusting its operations and capital allocation in response to changing demand across these end markets. This broader context helps explain why shorter term gains are sitting alongside much weaker multi year returns.
- On our framework the company scores a 4 out of 6 valuation score. This sets up a closer look at traditional valuation tools like P/E, cash flow based measures and asset backing. We will also finish with a more comprehensive way to think about fair value overall.
Approach 1: Leggett & Platt Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model estimates what a business might be worth by projecting its future cash flows and discounting them back to today, so you can compare that value with the current share price.
For Leggett & Platt, the model used is a 2 Stage Free Cash Flow to Equity approach. The company’s latest twelve month free cash flow is about $260.4 million. Based on cash flow projections supplied for the next decade by Simply Wall St, which extend beyond typical analyst horizons, free cash flow is estimated at $189.1 million in 2035, with each year between now and then explicitly modeled in the forecast.
When those projected cash flows are discounted back to today, the DCF model produces an estimated intrinsic value of US$14.36 per share. Compared with the recent share price of US$11.68, this result implies the stock is around 18.7% undervalued on this model.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Leggett & Platt is undervalued by 18.7%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.
Approach 2: Leggett & Platt Price vs Earnings
For a company that is generating profits, the P/E ratio is a straightforward way to link what you pay for each share to the earnings tied to that share. Investors generally look for a P/E that lines up with their view of a company’s earnings stability, growth prospects and risk profile, since higher expected growth or lower perceived risk can support a higher “normal” P/E, while slower growth or higher uncertainty can point to a lower one.
Leggett & Platt currently trades on a P/E of 6.72x. That sits below the Consumer Durables industry average P/E of 13.15x and below the broader peer group average of 16.15x. Simply Wall St’s Fair Ratio for Leggett & Platt is 11.94x. This is a proprietary estimate of what the P/E might be based on factors such as the company’s earnings growth profile, industry, profit margins, market value and risk characteristics.
This Fair Ratio goes a step further than a simple comparison with peers or the industry because it adjusts for company specific factors rather than assuming all firms deserve similar multiples. Comparing the 6.72x actual P/E with the 11.94x Fair Ratio suggests the shares are trading below the level implied by those fundamentals.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Leggett & Platt Narrative
Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives, where you set out your story for Leggett & Platt, link it to specific forecasts for revenue, earnings and margins, then compare the fair value that falls out of those assumptions with today’s price. That fair value will automatically update as new news or earnings arrive. One investor might build a Narrative around the US$12.50 fair value and modestly positive revenue growth and margin improvement, while another might lean more on risks around demand, competition and leverage. You can see all of these perspectives side by side to help you decide whether the current price looks attractive or stretched on your own terms.
Do you think there's more to the story for Leggett & Platt? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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