On the four Ms, Lear Corp earns 58 for management and 50 for moat. The management score rests on a return on invested capital of 8.5% and a gross margin of 8.2% — figures that describe returns closer to the cost of the capital behind them. Debt sits at 0.81x equity.
The price anchors are built on deliberately conservative assumptions. Growth is modelled at 6.4% a year, the rate measured from the filings. The exit multiple assumed is 12.8x. That produces an intrinsic value of $63.35, a 10-CAP price of $202.78 and a payback time price of $216.77, with the value zone set at the highest of the three, $216.77. Today's price of $121.37 sits inside that zone.
The price sits inside the value zone, but the business scores 50 for moat and 58 for management. Cheap and good are different tests, and only one of them is passed here.
| Price | $121.37 |
| Market cap | $6.1B |
| P/E ratio | 11.3x |
| Return on invested capital | 8.5% |
| Gross margin | 8.2% |
| Debt to equity | 0.81x |
| Free cash flow yield | 8.7% |
| Growth rate used | 6.4% |
| Growth rate measured | 6.0% |
| Exit multiple assumed | 12.8x |
| Company | Moat | Buy price |
| Lkq Corp (LKQ) | 43 | $26.89 |
| Garrett Motion Inc (GTX) | 26 | $20.36 |
| Gentex Corp (GNTX) | 66 | $29.05 |
| Autoliv Inc (ALV) | 79 | $134.26 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Lear Corp rather than accepting ours.