Latham Group Inc scores 27 for management and 46 for moat. The management score rests on a return on invested capital of 3.3% and a gross margin of 33.4% — figures that describe capital earning less than it costs to employ. Debt sits at 0.77x equity. The moderate moat and weak management are not the same judgement, and the gap between them is where the argument about this business sits.
Three independent anchors set the price worth paying. Growth is modelled at 6.2% a year, the rate measured from the filings. The exit multiple assumed is 12.5x. That produces an intrinsic value of $0.26, a 10-CAP price of $3.88 and a payback time price of $4.11, with the value zone set at the highest of the three, $4.11. Today's price of $6.27 is 53% above it.
The price is above the value zone and the business scores 46 for moat and 27 for management. Neither test argues for paying up here.
| Price | $6.27 |
| Market cap | $736.2M |
| P/E ratio | 134.5x |
| Return on invested capital | 3.3% |
| Gross margin | 33.4% |
| Debt to equity | 0.77x |
| Free cash flow yield | 3.5% |
| Growth rate used | 6.2% |
| Growth rate measured | 6.0% |
| Exit multiple assumed | 12.5x |
| Company | Moat | Buy price |
| Trex Company Inc (TREX) | 64 | $25.60 |
| Fortune Brands Innovations I (FBIN) | 15 | $35.92 |
| Builders FirstSource (BLDR) | 57 | $91.50 |
| Armstrong World Industries (AWI) | 88 | $90.70 |
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 Latham Group Inc rather than accepting ours.