Stanley Black Decker (NYSE:SWK)

Undervalued stock or value trap practice example

Stanley Black Decker 36 Square Capital
Candi Carrera

• Only common stock traded (ticker

NYSE:SWK)

• No tradable corporation
obligations/bonds
• Any debt is private
Stanley Black Decker 36 Square Capital
Candi Carrera
 Stanley Black Decker – Horizontal analysis 36 Square Capital
Candi Carrera

Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Income statement items
Revenue 11,001,200,000 11,338,600,000 11,171,800,000 11,406,900,000 12,747,200,000 13,982,400,000 14,442,200,000 14,534,600,000 15,617,200,000 16,947,400,000 16,197,100,000
Operating profit 1,218,300,000 1,506,800,000 1,585,600,000 1,643,300,000 1,797,900,000 1,679,400,000 1,764,500,000 1,878,300,000 1,953,800,000 914,100,000 319,800,000
Net finance income/expense -147,600,000 -163,600,000 -165,200,000 -171,300,000 -182,500,000 -209,200,000 -230,400,000 -205,100,000 -175,600,000 -283,800,000 -350,700,000
Net Income before Extraordinary Items and Discontinued
Operations 517,300,000 857,700,000 902,200,000 964,900,000 1,225,600,000 605,800,000 958,000,000 1,234,700,000 1,598,600,000 170,300,000 -74,300,000
Net Income Available to Common Stockholders 490,300,000 760,900,000 883,700,000 965,300,000 1,226,000,000 605,200,000 955,800,000 1,233,800,000 1,689,200,000 1,062,500,000 788,800,000

Balance sheet items 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Assets
Cash, cash equivalents & marketable securities 496,200,000 496,600,000 465,400,000 1,131,800,000 637,500,000 288,700,000 297,700,000 1,381,000,000 142,300,000 395,600,000 391,400,000
Inventories 1,485,200,000 1,562,700,000 1,526,400,000 1,478,000,000 2,018,400,000 2,373,500,000 2,255,000,000 2,737,400,000 5,446,800,000 5,861,100,000 5,282,900,000
Accounts receivables 1,633,000,000 1,396,700,000 1,331,800,000 1,302,800,000 1,635,900,000 1,607,800,000 1,454,600,000 1,512,200,000 1,560,800,000 1,231,000,000 1,706,700,000
Property Plant & Equipment 1,485,300,000 1,454,100,000 1,450,200,000 1,451,200,000 1,742,500,000 1,915,200,000 1,959,500,000 2,053,800,000 2,347,100,000 2,353,100,000 2,245,700,000
Goodwill 7,565,300,000 7,275,500,000 7,084,300,000 6,694,000,000 8,776,100,000 8,956,700,000 9,237,500,000 10,038,100,000 8,784,200,000 8,502,700,000 8,509,800,000
Intangibles other than Goodwill 4,105,500,000 3,918,600,000 3,830,700,000 3,574,000,000 4,990,400,000 5,083,400,000 5,395,300,000 6,065,800,000 6,021,200,000 5,800,300,000
Total assets 16,535,100,000 15,849,100,000 15,172,300,000 15,634,900,000 19,079,900,000 19,408,000,000 20,596,600,000 23,566,300,000 28,180,000,000 24,963,300,000 24,933,200,000

Liabilities
Current Debt 402,600,000 7,500,000 7,600,000 12,100,000 988,700,000 378,600,000 481,700,000 140,300,000 2,361,300,000 2,218,200,000 1,784,000,000
Long-term debt 3,799,400,000 3,839,800,000 3,836,600,000 3,815,300,000 2,843,000,000 3,819,800,000 3,176,400,000 4,245,400,000 4,353,600,000 5,352,900,000 6,099,900,000
Total financial debt 4,202,000,000 3,847,300,000 3,844,200,000 3,827,400,000 3,831,700,000 4,198,400,000 3,658,100,000 4,385,700,000 6,714,900,000 7,571,100,000 7,883,900,000

Equity
Paid in Capital 3,866,500,000 3,816,600,000 3,049,000,000 3,186,800,000 3,911,400,000 3,442,000,000 4,250,400,000 5,225,700,000 4,693,700,000 2,498,300,000 2,546,600,000
Retained Earnings/accumulated deficit 3,484,900,000 3,926,300,000 4,491,700,000 5,127,300,000 5,990,400,000 6,219,000,000 6,772,800,000 7,547,600,000 8,742,400,000 9,333,300,000 9,083,000,000
Treasury stock -1,454,400,000 -1,352,800,000 -1,815,000,000 -2,029,900,000 -1,924,100,000 -2,371,300,000 -2,184,800,000 -1,549,300,000 -1,368,100,000 -2,999,600,000 -2,968,500,000
Total equity attributable to parent stockholders 6,799,200,000 6,429,100,000 5,811,600,000 6,367,000,000 8,297,100,000 7,836,200,000 9,136,300,000 11,059,600,000 11,590,500,000 9,712,100,000 9,533,800,000

Cash flow statement items 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Cash dividends -312,700,000 -321,300,000 -319,900,000 -330,900,000 -362,900,000 -384,900,000 -402,000,000 -450,600,000 -493,700,000 -471,600,000 -480,800,000
Issuance of (+)/Payments for Common Stock (-), Net 115,400,000 43,100,000 -486,300,000 44,400,000 62,100,000 -488,600,000 118,500,000 870,800,000 97,100,000 -2,284,300,000 11,700,000
Diluted weighted average shares outstanding (WASO) 158,776,000 159,737,000 152,706,000 148,207,000 152,449,000 151,643,000 150,558,000 155,861,000 165,024,000 156,553,000 151,305,000
Cash dividend per share 1.97 2.01 2.09 2.23 2.38 2.54 2.67 2.89 2.99 3.01 3.18
Share buyback per share (- is dilutive, + is concentrating) -0.73 -0.27 3.18 -0.30 -0.41 3.22 -0.79 -5.59 -0.59 14.59 -0.08

Interest coverage ratio 3.32 4.65 5.35 5.64 6.72 2.89 4.15 6.02 9.62 3.74 2.25
Debt to Equity ratio 0.62 0.60 0.66 0.60 0.46 0.54 0.40 0.40 0.58 0.78 0.83
The Art of Value Investing 36 Square Capital
Candi Carrera

Level 1 tests Level 2 tests Level 3 tests

Fundamental screens Intrinsic Valuation
Moat & intangible metrics

• Blue chip company • Price to book < 3

• Earnings consistency 5 to 10 years
• Price to Earnings (P/E) ratio < 15
• Return to shareholders >4% after-tax
• ROIC > 8-10% for 5 years
• Debt to Equity (D/E) < 3 & Interest Coverage
Ratio > 3, preferably > 5
Scuttlebutt method including
• Adjusted Price to book < 3
• Dividend Discount Model > 25-30% safety
• High customer sentiment
• Discounted Future Earnings > 25-30% safety
• Good employee sentiment
• Discounted FCF Model > 25-30 safety

YOU AS AN INVESTOR
1. Act & think as a business owner reviewing & recalculating every quarter the assumptions of your companies
2. Define your circle of competence / investment universe
3. Follow 5+1 mindset (Patience, Courage, O-leverage, Humility, Discipline + Continuous education)
4. Do not invest based on 1 favorable ratio or favorable test – be disciplined
Stanley Black Decker 36 Square Capital
Candi Carrera

• Blue chip company OK but not Top100

Level 1 tests
Fundamental screens

• Blue chip company

• Earnings consistency 5 to 10 years
• Price to Earnings (P/E) ratio < 15
• Return to shareholders >4% after-tax
• ROIC > 8-10% for 5 years
• Debt to Equity (D/E) < 3 & Interest Coverage
Ratio > 3, preferably > 5
Stanley Black Decker 36 Square Capital
Candi Carrera

• Earnings consistency
Level 1 tests • using horizonal analysis
Fundamental screens

• Blue chip company

• Earnings consistency 5 to 10 years
• Price to Earnings (P/E) ratio < 15
• Return to shareholders >4% after-tax
• ROIC > 8-10% for 5 years
• Debt to Equity (D/E) < 3 & Interest Coverage
Ratio > 3, preferably > 5
Stanley Black Decker 36 Square Capital
Candi Carrera

• Price to Earnings
Level 1 tests • at 91.56 USD per share
Fundamental screens • Outstanding common shares 153,023,886
according to latest 10Q report
• Blue chip company • Diluted WASO 150,227,000 shares
• Earnings consistency 5 to 10 years • TTM earnings per share at 5.25 USD per
•
•
Price to Earnings (P/E) ratio < 15
Return to shareholders >4% after-tax
share
• ROIC > 8-10% for 5 years • P/E at 17.44
• Debt to Equity (D/E) < 3 & Interest Coverage • Stockanalysis.com shows PE at 17.82
Ratio > 3, preferably > 5
• Morningstar shows negative PE at ‘-’

• Let’s consider more or less OK as close to 15

Sources :

stockanalysis.com/stocks/swk/
www.morningstar.com/stocks/xnys/swk/valuation
Stanley Black Decker 36 Square Capital
Candi Carrera

• Return to shareholders >4% after-tax considering

Level 1 tests • 15% tax treatment for US companies
• DTT with your country
Fundamental screens • 0.810 USD per quarter pre-tax gives (0.810*4)*0.85 = 2.754
USD per share after tax on cash dividends with current
share price at 91.56 USD, yields at 3.00% after tax
• Blue chip company
• Earnings consistency 5 to 10 years
• Price to Earnings (P/E) ratio < 15
• Return to shareholders >4% after-tax
• ROIC > 8-10% for 5 years
• Debt to Equity (D/E) < 3 & Interest Coverage
Ratio > 3, preferably > 5
• What about share buybacks ?
• With exception of 2015, 2018 & 2022, share buybacks were always
lower than shares printed (probably for employee remuneration)
Cash flow statement items 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Cash dividends -312,700,000 -321,300,000 -319,900,000 -330,900,000 -362,900,000 -384,900,000 -402,000,000 -450,600,000 -493,700,000 -471,600,000 -480,800,000
Issuance of (+)/Payments for Common Stock (-), Net 115,400,000 43,100,000 -486,300,000 44,400,000 62,100,000 -488,600,000 118,500,000 870,800,000 97,100,000 -2,284,300,000 11,700,000
Diluted weighted average shares outstanding (WASO) 158,776,000 159,737,000 152,706,000 148,207,000 152,449,000 151,643,000 150,558,000 155,861,000 165,024,000 156,553,000 151,305,000
Cash dividend per share 1.97 2.01 2.09 2.23 2.38 2.54 2.67 2.89 2.99 3.01 3.18
Share buyback per share (- is dilutive, + is concentrating) -0.73 -0.27 3.18 -0.30 -0.41 3.22 -0.79 -5.59 -0.59 14.59 -0.08

Sources :

www.morningstar.com/stocks/xnys/swk/financials
The Art of Value Investing 36 Square Capital
Candi Carrera

• ROIC for last 5 years

• Morningstar latest ROIC shows 5.39% TTM & 7.05% for 2022, consistent with our numbers
Level 1 tests • Stockanalysis shows 7.30% for current & 9.10% for 2022, probably different way of
calculating
Fundamental screens

• Blue chip company

• Earnings consistency 5 to 10 years
• Price to Earnings (P/E) ratio < 15
• Return to shareholders >4% after-tax
• ROIC > 8-10% for 5 years
• Debt to Equity (D/E) < 3 & Interest Coverage
Ratio > 3, preferably > 5

Sources :

www.morningstar.com/stocks/xnys/swk/performance
stockanalysis.com/stocks/swk/financials/ratios/
Stanley Black Decker 36 Square Capital
Candi Carrera

• Debt to Equity
Level 1 tests • Interest Coverage Ratio
Fundamental screens

• Blue chip company

• Earnings consistency 5 to 10 years
• Price to Earnings (P/E) ratio < 15
• Return to shareholders >4% after-tax
• ROIC > 8-10% for 5 years
• Debt to Equity (D/E) < 3 & Interest Coverage
Ratio > 3, preferably > 5

Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Interest coverage ratio 3.32 4.65 5.35 5.64 6.72 2.89 4.15 6.02 9.62 3.74 2.25
Debt to Equity ratio 0.62 0.60 0.66 0.60 0.46 0.54 0.40 0.40 0.58 0.78 0.83
Sources :
www.morningstar.com/stocks/xnys/swk/performance
stockanalysis.com/stocks/swk/financials/ratios/
Stanley Black Decker 36 Square Capital
Candi Carrera

• Price to Book & Adjusted Price to Book

Level 2 tests • Diluted WASO 150,227,000 shares
• Book value per share = 63.46 USD per share
Intrinsic Valuation
• Price to book
• Share price at 91.56 USD
• Price to book < 3 • P/B = 91.56 / 63.46 = 1.44
• Adjusted Price to book < 3
• Dividend Discount Model > 25-30% safety
• Discounted Future Earnings > 25-30% safety
• Discounted FCF Model > 25-30 safety

Equity 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Paid in Capital 3,866,500,000 3,816,600,000 3,049,000,000 3,186,800,000 3,911,400,000 3,442,000,000 4,250,400,000 5,225,700,000 4,693,700,000 2,498,300,000 2,546,600,000
Retained Earnings/accumulated deficit 3,484,900,000 3,926,300,000 4,491,700,000 5,127,300,000 5,990,400,000 6,219,000,000 6,772,800,000 7,547,600,000 8,742,400,000 9,333,300,000 9,083,000,000
Treasury stock -1,454,400,000 -1,352,800,000 -1,815,000,000 -2,029,900,000 -1,924,100,000 -2,371,300,000 -2,184,800,000 -1,549,300,000 -1,368,100,000 -2,999,600,000 -2,968,500,000
Total equity attributable to parent stockholders 6,799,200,000 6,429,100,000 5,811,600,000 6,367,000,000 8,297,100,000 7,836,200,000 9,136,300,000 11,059,600,000 11,590,500,000 9,712,100,000 9,533,800,000

Sources :
www.morningstar.com/stocks/xnys/swk/performance
stockanalysis.com/stocks/swk/financials/ratios/
Stanley Black Decker 36 Square Capital
Candi Carrera

• DDM & GGM

• With cost of capital of 7%
Level 2 tests • Dividend growth at 1.25%

Intrinsic Valuation Level 2 tests - Dividend intrinsic valuation Intrinsic value per share
Margin of safety vs
current share price
Gordon dividend model IV (pure dividend yield & no growth on
46.29 -49.45%
dividends nor share buybacks)
Gordon dividend growth IV (2 factors - dividend yield & growth of
• Price to book < 3 dividends)
56.35 -38.46%

• Adjusted Price to book < 3

• Dividend Discount Model > 25-30% safety
• Discounted Future Earnings > 25-30% safety
• Discounted FCF Model > 25-30 safety

Equity 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Paid in Capital 3,866,500,000 3,816,600,000 3,049,000,000 3,186,800,000 3,911,400,000 3,442,000,000 4,250,400,000 5,225,700,000 4,693,700,000 2,498,300,000 2,546,600,000
Retained Earnings/accumulated deficit 3,484,900,000 3,926,300,000 4,491,700,000 5,127,300,000 5,990,400,000 6,219,000,000 6,772,800,000 7,547,600,000 8,742,400,000 9,333,300,000 9,083,000,000
Treasury stock -1,454,400,000 -1,352,800,000 -1,815,000,000 -2,029,900,000 -1,924,100,000 -2,371,300,000 -2,184,800,000 -1,549,300,000 -1,368,100,000 -2,999,600,000 -2,968,500,000
Total equity attributable to parent stockholders 6,799,200,000 6,429,100,000 5,811,600,000 6,367,000,000 8,297,100,000 7,836,200,000 9,136,300,000 11,059,600,000 11,590,500,000 9,712,100,000 9,533,800,000

Sources :
www.morningstar.com/stocks/xnys/swk/performance
stockanalysis.com/stocks/swk/financials/ratios/
Stanley Black Decker 36 Square Capital
Candi Carrera

• DDM & GGM

• With cost of capital of 7%
Level 2 tests • Dividend growth at 1.25%

Intrinsic Valuation Level 2 tests - Dividend intrinsic valuation Intrinsic value per share
Margin of safety vs
current share price
Gordon dividend model IV (pure dividend yield & no growth on
46.29 -49.45%
dividends nor share buybacks)
Gordon dividend growth IV (2 factors - dividend yield & growth of
• Price to book < 3 dividends)
56.35 -38.46%

• Adjusted Price to book < 3

• Dividend Discount Model > 25-30% safety Level 2 tests - Discounted Future Earnings & Future Cash Flow intrinsic Margin of safety vs
Intrinsic value per share
• Discounted Future Earnings > 25-30% safety valuation current share price

• Discounted FCF Model > 25-30 safety Future earnings/net income IV 91.44 -0.13%
Future cash flows IV 459.39 401.74%
Stanley Black Decker 36 Square Capital
Candi Carrera

• DDM & GGM

• With cost of capital of 7%
Level 2 tests • Dividend growth at 1.25%

Intrinsic Valuation Level 2 tests - Dividend intrinsic valuation Intrinsic value per share
Margin of safety vs
current share price
Gordon dividend model IV (pure dividend yield & no growth on
46.29 -49.45%
dividends nor share buybacks)
Gordon dividend growth IV (2 factors - dividend yield & growth of
• Price to book < 3 dividends)
56.35 -38.46%

• Adjusted Price to book < 3

• Dividend Discount Model > 25-30% safety Level 2 tests - Discounted Future Earnings & Future Cash Flow intrinsic Margin of safety vs
Intrinsic value per share
• Discounted Future Earnings > 25-30% safety valuation current share price

• Discounted FCF Model > 25-30 safety Future earnings/net income IV 91.44 -0.13%
Future cash flows IV 459.39 401.74%
 Stanley Black Decker 36 Square Capital
Candi Carrera

Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Income statement items
Revenue 11,001,200,000 11,338,600,000 11,171,800,000 11,406,900,000 12,747,200,000 13,982,400,000 14,442,200,000 14,534,600,000 15,617,200,000 16,947,400,000 16,197,100,000
Operating profit 1,218,300,000 1,506,800,000 1,585,600,000 1,643,300,000 1,797,900,000 1,679,400,000 1,764,500,000 1,878,300,000 1,953,800,000 914,100,000 319,800,000
Net finance income/expense -147,600,000 -163,600,000 -165,200,000 -171,300,000 -182,500,000 -209,200,000 -230,400,000 -205,100,000 -175,600,000 -283,800,000 -350,700,000

Analysis
Net Income before Extraordinary Items and Discontinued Operations 517,300,000 857,700,000 902,200,000 964,900,000 1,225,600,000 605,800,000 958,000,000 1,234,700,000 1,598,600,000 170,300,000 -74,300,000
Net Income Available to Common Stockholders 490,300,000 760,900,000 883,700,000 965,300,000 1,226,000,000 605,200,000 955,800,000 1,233,800,000 1,689,200,000 1,062,500,000 788,800,000

Balance sheet items

Assets
(1) Company2013 has sold2014 10% of its 2015
balance 2016
sheet. Short-term
2017 2018
effect is2019 2020 2021 2022 TTM

Cash, cash equivalents & marketable securities

Inventories increase in cash flow 1,562,700,000
496,200,000
1,485,200,000 seen in (2)
496,600,000 465,400,000
1,526,400,000
1,131,800,000
1,478,000,000
637,500,000
2,018,400,000
288,700,000
2,373,500,000
297,700,000
2,255,000,000
1,381,000,000
2,737,400,000
142,300,000
5,446,800,000
395,600,000
5,861,100,000
391,400,000
5,282,900,000
Accounts receivables 1,633,000,000 1,396,700,000 1,331,800,000 1,302,800,000 1,635,900,000 1,607,800,000 1,454,600,000 1,512,200,000 1,560,800,000 1,231,000,000 1,706,700,000

1
Property Plant & Equipment 1,485,300,000 1,454,100,000 1,450,200,000 1,451,200,000 1,742,500,000 1,915,200,000 1,959,500,000 2,053,800,000 2,347,100,000 2,353,100,000 2,245,700,000

Remember that selling long-lived assets6,694,000,000

has an impact
8,776,100,000 on8,956,700,000
future 9,237,500,000
Assets Held for Sale/Discontinued Operations, Non-Current 2,420,200,000 0 0
Goodwill 7,565,300,000 7,275,500,000 7,084,300,000 10,038,100,000 8,784,200,000 8,502,700,000 8,509,800,000
Intangibles other than Goodwill 4,105,500,000 3,918,600,000 3,830,700,000 3,574,000,000 4,990,400,000 5,083,400,000 5,395,300,000 6,065,800,000 6,021,200,000 5,800,300,000
earnings as 16,535,100,000
those assets can no longer15,634,900,000
participate in generating
1
Total assets 15,849,100,000 15,172,300,000 19,079,900,000 19,408,000,000 20,596,600,000 23,566,300,000 28,180,000,000 24,963,300,000 24,933,200,000
3,216,700,000
Liabilities
Current Debt
profits in the 402,600,000
future (under the assumption
7,500,000 7,600,000
that they
12,100,000
were generating
988,700,000 378,600,000 481,700,000 140,300,000 2,361,300,000 2,218,200,000 1,784,000,000
Long-term debt
Total financial debt
profits) 3,799,400,000
4,202,000,000
3,839,800,000
3,847,300,000
3,836,600,000
3,844,200,000
3,815,300,000
3,827,400,000
2,843,000,000
3,831,700,000
3,819,800,000
4,198,400,000
3,176,400,000
3,658,100,000
4,245,400,000
4,385,700,000
4,353,600,000
6,714,900,000
5,352,900,000
7,571,100,000
6,099,900,000
7,883,900,000

Equity 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Paid in Capital
Retained Earnings/accumulated deficit 1st
cherry on the cake (3). In 2022 they spent 2.2B on share
3,866,500,000
3,484,900,000
3,816,600,000
3,926,300,000
3,049,000,000
4,491,700,000
3,186,800,000
5,127,300,000
3,911,400,000
5,990,400,000
3,442,000,000
6,219,000,000
4,250,400,000
6,772,800,000
5,225,700,000
7,547,600,000
4,693,700,000
8,742,400,000
2,498,300,000
9,333,300,000
2,546,600,000
9,083,000,000

buybacks so net net the disposal of long-lived assets has been used
Treasury stock -1,454,400,000 -1,352,800,000 -1,815,000,000 -2,029,900,000 -1,924,100,000 -2,371,300,000 -2,184,800,000 -1,549,300,000 -1,368,100,000 -2,999,600,000 -2,968,500,000
Total equity attributable to parent stockholders 6,799,200,000 6,429,100,000 5,811,600,000 6,367,000,000 8,297,100,000 7,836,200,000 9,136,300,000 11,059,600,000 11,590,500,000 9,712,100,000 9,533,800,000

Cash flow statement items +/- 80% to do2013

share buybacks
2014 while
2015 the 2016
cash position
2017 remains
2018 fragile
2019 2020 2021 2022 TTM

Issuance of (+)/Payments for Common Stock (-), at

Net 390 MUSD.
Cash dividends -312,700,000 -321,300,000 -319,900,000 -330,900,000 -362,900,000 -384,900,000 -402,000,000 -450,600,000 -493,700,000 -471,600,000 -480,800,000
115,400,000 43,100,000 -486,300,000 44,400,000 62,100,000 -488,600,000 118,500,000 870,800,000 97,100,000 -2,284,300,000 11,700,000
Diluted weighted average shares outstanding (WASO) 158,776,000 159,737,000 152,706,000 148,207,000 152,449,000 151,643,000 150,558,000 155,861,000 165,024,000 156,553,000 151,305,000
Cash dividend per share 1.97 2.01 2.09 2.23 2.38 2.54 2.67 2.89 2.99 3.01 3.18
Share buyback per share (- is dilutive, + is concentrating) -0.73 -0.27 3.18 -0.30 -0.41 3.22 -0.79 -5.59 -0.59 14.59 -0.08
Free Cash Flow to the Firm 2nd cherry on 2013the cake 2014(4). The 2015long-term 2016 debt of 2017the company 2018 2019 2020 2021 2022 TTM

2
Operating cash flow 868,000,000.00 1,295,900,000.00 1,182,300,000.00 1,485,200,000.00 1,418,600,000.00 1,260,900,000.00 1,505,700,000.00 2,022,100,000.00 663,100,000.00 -1,459,500,000.00 203,600,000.00
Investing cash flow
grows from-1,198,400,000.00
Investing cash flow excluding long-term assets sold
4.3B to 6.7B
-362,000,000.00
in 2021,
-382,200,000.00
-390,500,000.00
7.5B -284,000,000.00
-205,000,000.00
-216,500,000.00
in 2022 -2,289,100,000.00
-259,300,000.00
and according
-495,100,000.00
to latest
-989,100,000.00 -1,208,600,000.00
-506,700,000.00 -699,900,000.00
-1,577,100,000.00
-331,700,000.00
-2,623,800,000.00
-593,700,000.00
3,572,600,000.00
-544,300,000.00
3,759,900,000.00
-391,800,000.00
Free Cash Flow to the Firm
Adjusted FCFF 10Q reporting to 7.8B
-330,400,000.00
506,000,000.00 in 2023965,800,000.00
913,700,000.00
905,400,000.00 Q2 that1,225,900,000.00
is a 81% increase
977,300,000.00 1,201,200,000.00 -870,500,000.00
923,500,000.00 of the debt
271,800,000.00
754,200,000.00
297,100,000.00
805,800,000.00
445,000,000.00
1,690,400,000.00
-1,960,700,000.00
69,400,000.00
2,113,100,000.00
-2,003,800,000.00
3,963,500,000.00
-188,200,000.00

!!! 2
Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Interest coverage ratio 3.32 4.65 5.35 5.64 6.72 2.89 4.15 6.02 9.62 3.74 2.25
Debt to Equity ratio 0.62 0.60 0.66 0.60 0.46 0.54 0.40 0.40 0.58 0.78 0.83
ROIC in % 4.63 7.41 9.16 9.48 11.01 5.19 7.76 8.06 10.59 7.05 5.05
Stanley Black Decker 36 Square Capital
Candi Carrera

1
 The Art of Value Investing 36 Square Capital
Candi Carrera

Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Income statement items
Revenue 11,001,200,000 11,338,600,000 11,171,800,000 11,406,900,000 12,747,200,000 13,982,400,000 14,442,200,000 14,534,600,000 15,617,200,000 16,947,400,000 16,197,100,000
Operating profit 1,218,300,000 1,506,800,000 1,585,600,000 1,643,300,000 1,797,900,000 1,679,400,000 1,764,500,000 1,878,300,000 1,953,800,000 914,100,000 319,800,000
Net finance income/expense -147,600,000 -163,600,000 -165,200,000 -171,300,000 -182,500,000 -209,200,000 -230,400,000 -205,100,000 -175,600,000 -283,800,000 -350,700,000

Analysis
Net Income before Extraordinary Items and Discontinued Operations 517,300,000 857,700,000 902,200,000 964,900,000 1,225,600,000 605,800,000 958,000,000 1,234,700,000 1,598,600,000 170,300,000 -74,300,000
Net Income Available to Common Stockholders 490,300,000 760,900,000 883,700,000 965,300,000 1,226,000,000 605,200,000 955,800,000 1,233,800,000 1,689,200,000 1,062,500,000 788,800,000

Balance sheet items

Assets
(1) Company2013 has sold2014 10% of its 2015
balance 2016
sheet. Short-term
2017 2018
effect is2019 2020 2021 2022 TTM

Cash, cash equivalents & marketable securities

Inventories increase in cash flow 1,562,700,000
496,200,000
1,485,200,000 seen in (2)
496,600,000 465,400,000
1,526,400,000
1,131,800,000
1,478,000,000
637,500,000
2,018,400,000
288,700,000
2,373,500,000
297,700,000
2,255,000,000
1,381,000,000
2,737,400,000
142,300,000
5,446,800,000
395,600,000
5,861,100,000
391,400,000
5,282,900,000
Accounts receivables 1,633,000,000 1,396,700,000 1,331,800,000 1,302,800,000 1,635,900,000 1,607,800,000 1,454,600,000 1,512,200,000 1,560,800,000 1,231,000,000 1,706,700,000

1
Property Plant & Equipment 1,485,300,000 1,454,100,000 1,450,200,000 1,451,200,000 1,742,500,000 1,915,200,000 1,959,500,000 2,053,800,000 2,347,100,000 2,353,100,000 2,245,700,000

Remember that selling long-lived assets6,694,000,000

has an impact
8,776,100,000 on8,956,700,000
future 9,237,500,000
Assets Held for Sale/Discontinued Operations, Non-Current 2,420,200,000 0 0
Goodwill 7,565,300,000 7,275,500,000 7,084,300,000 10,038,100,000 8,784,200,000 8,502,700,000 8,509,800,000
Intangibles other than Goodwill 4,105,500,000 3,918,600,000 3,830,700,000 3,574,000,000 4,990,400,000 5,083,400,000 5,395,300,000 6,065,800,000 6,021,200,000 5,800,300,000
earnings as 16,535,100,000
those assets can no longer15,634,900,000
participate in generating
1
Total assets 15,849,100,000 15,172,300,000 19,079,900,000 19,408,000,000 20,596,600,000 23,566,300,000 28,180,000,000 24,963,300,000 24,933,200,000
3,216,700,000
Liabilities
Current Debt
profits in the 402,600,000
future (under the assumption
7,500,000 7,600,000
that they
12,100,000
were generating
988,700,000 378,600,000 481,700,000 140,300,000 2,361,300,000 2,218,200,000 1,784,000,000
Long-term debt
Total financial debt
profits) 3,799,400,000
4,202,000,000
3,839,800,000
3,847,300,000
3,836,600,000
3,844,200,000
3,815,300,000
3,827,400,000
2,843,000,000
3,831,700,000
3,819,800,000
4,198,400,000
3,176,400,000
3,658,100,000
4,245,400,000
4,385,700,000
4,353,600,000
6,714,900,000
5,352,900,000
7,571,100,000
6,099,900,000
7,883,900,000

Equity 2013 2014 2015 2016 2017 2018 2019 2020 4 2021 2022 TTM
Paid in Capital
Retained Earnings/accumulated deficit 1st
cherry on the cake (3). In 2022 they spent 2.2B on share
3,866,500,000
3,484,900,000
3,816,600,000
3,926,300,000
3,049,000,000
4,491,700,000
3,186,800,000
5,127,300,000
3,911,400,000
5,990,400,000
3,442,000,000
6,219,000,000
4,250,400,000
6,772,800,000
5,225,700,000
7,547,600,000
4,693,700,000
8,742,400,000
2,498,300,000
9,333,300,000
2,546,600,000
9,083,000,000

buybacks so net net the disposal of long-lived assets has been used
Treasury stock -1,454,400,000 -1,352,800,000 -1,815,000,000 -2,029,900,000 -1,924,100,000 -2,371,300,000 -2,184,800,000 -1,549,300,000 -1,368,100,000 -2,999,600,000 -2,968,500,000
Total equity attributable to parent stockholders 6,799,200,000 6,429,100,000 5,811,600,000 6,367,000,000 8,297,100,000 7,836,200,000 9,136,300,000 11,059,600,000 11,590,500,000 9,712,100,000 9,533,800,000

Cash flow statement items +/- 80% to do2013

share buybacks
2014 while
2015 the 2016
cash position
2017 remains
2018 fragile
2019 2020 2021 2022 TTM

Issuance of (+)/Payments for Common Stock (-), at

Net 390 MUSD.
3
Cash dividends -312,700,000 -321,300,000 -319,900,000 -330,900,000 -362,900,000 -384,900,000 -402,000,000 -450,600,000 -493,700,000 -471,600,000 -480,800,000
115,400,000 43,100,000 -486,300,000 44,400,000 62,100,000 -488,600,000 118,500,000 870,800,000 97,100,000 -2,284,300,000 11,700,000
Diluted weighted average shares outstanding (WASO) 158,776,000 159,737,000 152,706,000 148,207,000 152,449,000 151,643,000 150,558,000 155,861,000 165,024,000 156,553,000 151,305,000
Cash dividend per share 1.97 2.01 2.09 2.23 2.38 2.54 2.67 2.89 2.99 3.01 3.18
Share buyback per share (- is dilutive, + is concentrating) -0.73 -0.27 3.18 -0.30 -0.41 3.22 -0.79 -5.59 -0.59 14.59 -0.08
Free Cash Flow to the Firm 2nd cherry on 2013the cake 2014(4). The 2015long-term 2016 debt of 2017the company 2018 2019 2020 2021 2022 TTM

2
Operating cash flow 868,000,000.00 1,295,900,000.00 1,182,300,000.00 1,485,200,000.00 1,418,600,000.00 1,260,900,000.00 1,505,700,000.00 2,022,100,000.00 663,100,000.00 -1,459,500,000.00 203,600,000.00
Investing cash flow
grows from-1,198,400,000.00
Investing cash flow excluding long-term assets sold
4.3B to 6.7B
-362,000,000.00
in 2021,
-382,200,000.00
-390,500,000.00
7.5B -284,000,000.00
-205,000,000.00
-216,500,000.00
in 2022 -2,289,100,000.00
-259,300,000.00
and according
-495,100,000.00
to latest
-989,100,000.00 -1,208,600,000.00
-506,700,000.00 -699,900,000.00
-1,577,100,000.00
-331,700,000.00
-2,623,800,000.00
-593,700,000.00
3,572,600,000.00
-544,300,000.00
3,759,900,000.00
-391,800,000.00
Free Cash Flow to the Firm
Adjusted FCFF 10Q reporting to 7.8B
-330,400,000.00
506,000,000.00 in 2023965,800,000.00
913,700,000.00
905,400,000.00 Q2 that1,225,900,000.00
is a 81% increase
977,300,000.00 1,201,200,000.00 -870,500,000.00
923,500,000.00 of the debt
271,800,000.00
754,200,000.00
297,100,000.00
805,800,000.00
445,000,000.00
1,690,400,000.00
-1,960,700,000.00
69,400,000.00
2,113,100,000.00
-2,003,800,000.00
3,963,500,000.00
-188,200,000.00

!!! 2
Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Interest coverage ratio 3.32 4.65 5.35 5.64 6.72 2.89 4.15 6.02 9.62 3.74 2.25
Debt to Equity ratio 0.62 0.60 0.66 0.60 0.46 0.54 0.40 0.40 0.58 0.78 0.83
ROIC in % 4.63 7.41 9.16 9.48 11.01 5.19 7.76 8.06 10.59 7.05 5.05
 The Art of Value Investing 36 Square Capital
Candi Carrera

Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Income statement items
Revenue 11,001,200,000 11,338,600,000 11,171,800,000 11,406,900,000 12,747,200,000 13,982,400,000 14,442,200,000 14,534,600,000 15,617,200,000 16,947,400,000 16,197,100,000

5
Operating profit 1,218,300,000 1,506,800,000 1,585,600,000 1,643,300,000 1,797,900,000 1,679,400,000 1,764,500,000 1,878,300,000 1,953,800,000 914,100,000 319,800,000
Net finance income/expense -147,600,000 -163,600,000 -165,200,000 -171,300,000 -182,500,000 -209,200,000 -230,400,000 -205,100,000 -175,600,000 -283,800,000 -350,700,000

Net Income before Extraordinary Items and Discontinued Operations 517,300,000 857,700,000 902,200,000 964,900,000 1,225,600,000 605,800,000 958,000,000 1,234,700,000 1,598,600,000 170,300,000 -74,300,000
Net Income Available to Common Stockholders 490,300,000 760,900,000 883,700,000 965,300,000 1,226,000,000 605,200,000 955,800,000 1,233,800,000 1,689,200,000 1,062,500,000 788,800,000

Balance sheet items 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM
Assets
Cash, cash equivalents & marketable securities 496,200,000 496,600,000 465,400,000 1,131,800,000 637,500,000 288,700,000 297,700,000 1,381,000,000 142,300,000 395,600,000 391,400,000
Inventories 1,485,200,000 1,562,700,000 1,526,400,000 1,478,000,000 2,018,400,000 2,373,500,000 2,255,000,000 2,737,400,000 5,446,800,000 5,861,100,000 5,282,900,000
Accounts receivables 1,633,000,000 1,396,700,000 1,331,800,000 1,302,800,000 1,635,900,000 1,607,800,000 1,454,600,000 1,512,200,000 1,560,800,000 1,231,000,000 1,706,700,000

1
Property Plant & Equipment 1,485,300,000 1,454,100,000 1,450,200,000 1,451,200,000 1,742,500,000 1,915,200,000 1,959,500,000 2,053,800,000 2,347,100,000 2,353,100,000 2,245,700,000
Assets Held for Sale/Discontinued Operations, Non-Current 2,420,200,000 0 0
Goodwill 7,565,300,000 7,275,500,000 7,084,300,000 6,694,000,000 8,776,100,000 8,956,700,000 9,237,500,000 10,038,100,000 8,784,200,000 8,502,700,000 8,509,800,000
Intangibles other than Goodwill 4,105,500,000 3,918,600,000 3,830,700,000 3,574,000,000 4,990,400,000 5,083,400,000 5,395,300,000 6,065,800,000 6,021,200,000 5,800,300,000

1
Total assets 16,535,100,000 15,849,100,000 15,172,300,000 15,634,900,000 19,079,900,000 19,408,000,000 20,596,600,000 23,566,300,000 28,180,000,000 24,963,300,000 24,933,200,000
3,216,700,000
Liabilities
Current Debt
Long-term debt Conclusion 402,600,000
3,799,400,000
7,500,000
3,839,800,000
7,600,000
3,836,600,000
12,100,000
3,815,300,000
988,700,000
2,843,000,000
378,600,000
3,819,800,000
481,700,000
3,176,400,000
140,300,000
4,245,400,000
2,361,300,000
4,353,600,000
2,218,200,000
5,352,900,000
1,784,000,000
6,099,900,000

Reminds me a little bit of the Bed Bath & Beyond story

Total financial debt 4,202,000,000 3,847,300,000 3,844,200,000 3,827,400,000 3,831,700,000 4,198,400,000 3,658,100,000 4,385,700,000 6,714,900,000 7,571,100,000 7,883,900,000

Equity
Paid in Capital
2013 2014
Lack of fiduciary duty by management & Board of Directors
3,866,500,000 3,816,600,000
2015
3,049,000,000
2016
3,186,800,000
2017
3,911,400,000
2018
3,442,000,000
2019
4,250,400,000
2020
5,225,700,000
4 2021
4,693,700,000
2022
2,498,300,000
TTM
2,546,600,000
Retained Earnings/accumulated deficit 3,484,900,000 3,926,300,000 4,491,700,000 5,127,300,000 5,990,400,000 6,219,000,000 6,772,800,000 7,547,600,000 8,742,400,000 9,333,300,000 9,083,000,000
Treasury stock -1,454,400,000 -1,352,800,000 -1,815,000,000 -2,029,900,000 -1,924,100,000 -2,371,300,000 -2,184,800,000 -1,549,300,000 -1,368,100,000 -2,999,600,000 -2,968,500,000
Total equity attributable to parent stockholders 6,799,200,000 6,429,100,000 5,811,600,000 6,367,000,000 8,297,100,000 7,836,200,000 9,136,300,000 11,059,600,000 11,590,500,000 9,712,100,000 9,533,800,000

Cash flow statement items

With an interest2013
coverage2014 of 2.25 and low cash2016
2015
position, 2017
the company 2018
has to 2019 2020 2021 2022 TTM
turn around situation
-312,700,000very-321,300,000
quickly. -319,900,000
3
Cash dividends -330,900,000 -362,900,000 -384,900,000 -402,000,000 -450,600,000 -493,700,000 -471,600,000 -480,800,000
Issuance of (+)/Payments for Common Stock (-), Net 115,400,000 43,100,000 -486,300,000 44,400,000 62,100,000 -488,600,000 118,500,000 870,800,000 97,100,000 -2,284,300,000 11,700,000
Diluted weighted average shares outstanding (WASO) 158,776,000 159,737,000 152,706,000 148,207,000 152,449,000 151,643,000 150,558,000 155,861,000 165,024,000 156,553,000 151,305,000
Cash dividend per share 1.97 2.01 2.09 2.23 2.38 2.54 2.67 2.89 2.99 3.01 3.18
Operating profit of 319M TTM does NOT cover the net finance income/expense
Share buyback per share (- is dilutive, + is concentrating) -0.73 -0.27 3.18 -0.30 -0.41 3.22 -0.79 -5.59 -0.59 14.59 -0.08
Free Cash Flow to the Firm
of -350M TTM. 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TTM

2
Operating cash flow 868,000,000.00 1,295,900,000.00 1,182,300,000.00 1,485,200,000.00 1,418,600,000.00 1,260,900,000.00 1,505,700,000.00 2,022,100,000.00 663,100,000.00 -1,459,500,000.00 203,600,000.00
Investing cash flow -1,198,400,000.00 -382,200,000.00 -205,000,000.00 -284,000,000.00 -2,289,100,000.00 -989,100,000.00 -1,208,600,000.00 -1,577,100,000.00 -2,623,800,000.00 3,572,600,000.00 3,759,900,000.00
Investing cash flow excluding long-term assets sold -362,000,000.00 -390,500,000.00 -216,500,000.00 -259,300,000.00 -495,100,000.00 -506,700,000.00 -699,900,000.00 -331,700,000.00 -593,700,000.00 -544,300,000.00 -391,800,000.00
Free Cash Flow to the Firm
Adjusted FCFF
At 2.25 the risk spread to be added is of 2.42% and debt is rated BBB, last step
-330,400,000.00
506,000,000.00
913,700,000.00
905,400,000.00
977,300,000.00
965,800,000.00
1,201,200,000.00
1,225,900,000.00
-870,500,000.00
923,500,000.00
271,800,000.00
754,200,000.00
297,100,000.00
805,800,000.00
445,000,000.00
1,690,400,000.00
-1,960,700,000.00
69,400,000.00
2,113,100,000.00
-2,003,800,000.00
3,963,500,000.00
-188,200,000.00
of investment grade before
2014turning into
2015 Junk. 2016
2
Year 2013 2017 2018 2019 2020 2021 2022 TTM
Interest coverage ratio 3.32 4.65 5.35 5.64 6.72 2.89 4.15 6.02 9.62 3.74 2.25
Debt to Equity ratio 0.62 0.60 0.66 0.60 0.46 0.54 0.40 0.40 0.58 0.78 0.83
ROIC in % Source : pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ratings.htm
4.63 7.41 9.16 9.48 11.01 5.19 7.76 8.06 10.59 7.05 5.05
Stanley Black Decker 36 Square Capital
Candi Carrera

Level 3 tests
Moat & intangible metrics

Scuttlebutt method including

• High customer sentiment

• Good employee sentiment
Conclusion 36 Square Capital
Candi Carrera

Level 1 tests Level 2 tests Level 3 tests

Fundamental screens Intrinsic Valuation Moat & intangible metrics

• Blue chip company • Price to book < 3 Scuttlebutt method including

• Earnings consistency 5 to 10 years
• Price to Earnings (P/E) ratio < 15
• Return to shareholders >4% after-tax
• ROIC > 8-10% for 5 years
• Debt to Equity (D/E) < 3 & Interest Coverage
Ratio > 3, preferably > 5
• Adjusted Price to book < 3
• Dividend Discount Model > 25-30% safety • High customer sentiment
• Discounted Future Earnings > 25-30% safety • Good employee sentiment
• Discounted FCF Model > 25-30 safety

+ lack of fiduciary duty of management & Board of Directors on share buyback vs sale of assets instead of
protecting cash would be for me a NOGO decision to invest.