My friend, Jim Cramer, loves to shout 'buy, buy', 'buy' but I think he shouted too soon and too loud about Stanley (SWK). Jim's trigger to buy SWK is the upgrade of the construction stocks. He's playing Stanley as a 'me, too' that can climb on the back of the bottoming of the housing crash. He may be right about the crash bottoming but I don't share Jim's trader mentality. SWK isn't even a little bit of a wonderful company. Look at the numbers on the Town Toolbox:
There is a lot of red up there for the Moat and the Management numbers, ROE, ROIC and Debt aren't pretty either. This can be a turnaround situation but the Valuation Tool tells me that the 'price is wrong, beawch".
You can see the Sticker is $152, MOS at $76 so with a price at $72 it appears SWK is as on sale as Jim thinks. However, the Payback Time, the time it would take to get fully repaid out of earnings, is at 9 years, a bit on the high side. The 8-year PBT is at $64. Yield is at 2%. This is kind of a good deal but with some reservations, the biggest one being that with this Moat track record and the debt load they are carrying, this is not a predictable company. Pricing this thing where we are pricing it depends on 17% growth to be sustained for a long, long time - outwards of 20 years. For this company, impossible. No way can we do that sort of long term prediction.
All we can say is that our Rule #1 strategy requires a great deal more conviction than Jim's trading style and SWK does not meet our criteria and apparently it does meet his. If he's right he'll be right short term. I want to be right long term. That's the difference.
Now go play.