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| | Graco
Description of the Business
Graco is market leader in fluid handling systems and components. They market their products worldwide and their products are sold in 30000 shops worldwide.
They are specialist in spray finishing paint circulation and lubrication.
Analysis of Competitors
The main competitors of Graco are:
- Colfax Corporation (weak margins, no paint circulation systems/lubrication)
- Flowserver Corporation (strong margins, no paint circulation systems/lubrication)
- Gorman-Rupp Company (Average margins, smaller competitor and no paint circulation systems/lubrication)
- Idex corporation (average margins, no paint circulation systems)
Competitive Advantages
Graco is market leader in the niche fluid handling of lubrication. They have a strong competitive position and strong margins.
Financial Analysis
They have very strong margins including a ROE of more than 50% and a ROA of more than 20%. Their profit margin is about 15%. They generate high levels of free cash flow.
They have long term debt that is equal to their annual operational cash flow.
Risks
Their main risk is that competitors are able to produce equipment with better quality against lower costs. Also a risk is that large retail chains stop selling graco equipment.
Valuation Calculation
Their future cash flow value is $28.
Their strong competitive position and high ROE provides another $12.
The total value of Graco is $40 a share.
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