I agree that $85 seems rich. I bought at $69 in April after looking at BGG relative to a peer group of which I am part. They had a decent PE (18.5), margins (20%), and operating efficiency (9%) relative to their peers. However, if I plug in $85, the math no longer works, even with the accretive EPS from the acquisition. Throw in some higher emmission standards via Kerry and who knows what will happen to their business.
I've sold my IRA position and am holding my outright position since I hate short term capital gains. However, I would expect a pull back.
If this stock can maintain the P/E of 18, then projected earnings say it will worth $110 next year -- that's with the analyst estimates.
It's still a great buy at this price. Better after the expansion with Simplicity.
I'm not expecting $110, but it looks like from here the estimate of > $90 is doable, which still makes this a huge bargain with the dividend.
Emmission laws are not a problem for two reasons -- One, they will mean that folks will be buying emmission equipment from BGG. Two, Kerry doesn't stand a chance of winning. Not that it matters in terms of emmissions, but Kerry will lose. Bank on it.
Kerry won't lose the election, but either way it doesn't matter. Briggs will be able to hit emissions levels. They have the technical know how and products developed to do so. It is just a matter of passing on a little cost to the consumer.
When estimating EPS for next year, don't forget to include the dilution effects of the ~2.8 million shares issued to repurchase the $140 million in debt. Also, better count in the 0.6 million shares management will receive in August for their stock options.
I have tracked this stock for a long time, using a little technical and mostly fundamental analysis. I think it is 'fairly' priced around $80-85. Keep an eye on end/year inventories; if they are up significantly it will hurt 2005 EPS.
However you justify the valuation; the stock price is ahead of itself. Those who use technical indicators to steer clear of overpriced ( even if temporarily ) stock should look at the MFI-90s and RSI-80s. We are late to the party at this price.