Valuation
To arrive at a price target for LASM, we utilized a Justified Price to Earnings (P/E) Model with our estimated forward earnings for the company as well as a relative P/E valuation approach with respect to its manufacturing and distributing peers traded on the Jamaica Stock Exchange. Our estimate for the 2023 Financial year-end eps amounted to $0.49. To arrive at a discount rate, we utilized the capital asset pricing model to arrive at a discount rate of 14.73%. We calculated the company’s sustainable growth rate based on factors including the company’s net profit margin, equity multiplier, total asset turnover and retention ratio, arriving at an outturn of 11.31%. This was further discounted by 25% for risks associated with tight monetary conditions and the potential for escalation in key points of global macroeconomic risk, yielding a result of 8.48%. This long-term growth rate resulted in the company having a justified P/E ratio of 16.02x, giving us a price target of $7.87. When compared to peers, the company trades at a discount from the average P/E of 9.28 times; applying this multiple to our forward projection resulted in a target price of $4.56. When averaged with the justified P/E result, our final price target was $6.22. The company currently trades at a multiple of 8.87x and with our expected eps output for FY 2023, the company trades at a forward P/E of 8.26x. With consideration to the expected return along with other factors stated above, we recommend investors OVERWEIGHT LASM.
| Stock | LASM |
|---|---|
| Current Price | J$4.06 |
| 52 Week High | J$5.90 |
| 52 Week Low | J$3.75 |
| YTD Return | -3.79% |
| Estimated Fair Value | J$6.22 |
| Potential Return | 20.63% |
| Trailing P/E | 8.95x |
| Forward P/E | 8.34x |
| Total Return | 8.34x |
| Total Return | 53.15% |
| Recommendation | OVERWEIGHT |
as at March 21st , 2023
Lasco Manufacturers Limited | Equity Analysis
