Eastern Co (NASDAQ: EML)

Sector: Industrials Industry: Tools & Accessories CIK: 0000031107
Market Cap 114.55 Mn
P/B 1.66
P/E 20.81
P/S 0.80
ROIC (Qtr) 4.05
Div Yield % 2.59
Rev 1y % (Qtr) -22.36
Total Debt (Qtr) 55.42 Mn
Debt/Equity (Qtr) 0.45
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About

Investment thesis

Bull case

  • Strong tangible asset base of 150.47M provides 2.71x coverage of total debt 55.42M, indicating robust asset backing and low credit risk.
  • Operating cash flow of 16.06M provides strong 13.64x coverage of stock compensation 1.18M, indicating sustainable incentive practices.
  • Robust free cash flow of 14.60M exceeds capital expenditure of 1.46M by 10.01x, indicating strong organic growth funding capability.
  • Retained earnings of 137.49M provide full 2.95x coverage of long-term debt 46.61M, indicating strong internal capital position.
  • Tangible assets of 150.47M provide robust 20.19x coverage of other current liabilities 7.45M, indicating strong asset backing.

Bear case

  • With cash reserves of 9.23M against inventory of 56.77M, the 0.16 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of 16.06M provides thin coverage of dividend payments of (2.70M) with a -5.96 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Investment activities of 2.02M provide weak support for R&D spending of 4.29M, which is 0.47x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Free cash flow of 14.60M represents just -1.44x of debt issuance (10.13M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Retained earnings of 137.49M provide limited buffer against comprehensive income items of (19.94M), which is -6.90x, indicating elevated exposure to market risks.

Subsegments Breakdown of Revenue (2024)

Subsegments Consolidation Items Breakdown of Revenue (2024)

Peer comparison

Companies in the Tools & Accessories
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 LECO Lincoln Electric Holdings Inc 21.98 Bn 84.49 8.07 1.24 Bn
2 SNA Snap-on Inc 19.88 Bn 19.55 3.86 1.26 Bn
3 RBC RBC Bearings INC 17.35 Bn 64.59 9.69 1.05 Bn
4 SWK Stanley Black & Decker, Inc. 14.15 Bn 18.59 1.25 6.61 Bn
5 TTC Toro Co 10.72 Bn 37.66 3.24 1.04 Bn
6 TKR Timken Co 7.37 Bn 25.55 1.61 2.02 Bn
7 KMT Kennametal Inc 3.19 Bn 11.94 1.26 0.64 Bn
8 HLMN Hillman Solutions Corp. 1.82 Bn 45.20 1.17 0.76 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.50 2.04
EV to Cash from Ops. EV/CFO 75.46 30.06
EV to Debt EV to Debt 1.97 8.92
EV to EBIT EV/EBIT 12.49 22.41
EV to EBITDA EV/EBITDA 8.77 16.51
EV to Free Cash Flow [EV/FCF] EV/FCF -56.14 27.38
EV to Market Cap EV to Market Cap 0.95 1.07
EV to Revenue EV/Rev 0.76 3.31
Price to Book Value [P/B] P/B 1.66 4.93
Price to Earnings [P/E] P/E 20.81 32.53
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 2.70 -1.48
Dividend Payout Ratio % Div Payout % (Qtr) 37.00 32.71
Dividend per Basic Share Div per Share (Qtr) 0.44 1.80
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 18.38 30.30
Interest Coverage Int. cover (Qtr) 6.30 7.81
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 83.92 23.87
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 20.30 9.42
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 -4.28
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 376.80 52.65
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -37.98 -3.93
EBIT Growth (1y) % EBIT 1y % (Qtr) 686.44 75.65
EBT Growth (1y) % EBT 1y % (Qtr) 343.69 224.80
EPS Growth (1y) % EPS 1y % (Qtr) 214.42 65.63
FCF Growth (1y) % FCF 1y % (Qtr) 119.08 -578.64
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -15.76 0.79
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.16 0.84
Cash Payout Ratio Cash Payout (Qtr) 0.15 0.18
Cash Ratio Cash Ratio (Qtr) 0.27 0.44
Current Ratio Curr Ratio (Qtr) 2.99 2.82
Debt to Equity Ratio Debt/Equity (Qtr) 0.45 0.51
Interest Cover Ratio Int Coverage (Qtr) 6.30 7.81
Times Interest Earned Times Interest Earned (Qtr) 6.30 7.81
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 7.80 14.53
EBIT Margin % EBIT Margin % (Qtr) 6.45 10.09
EBT Margin % EBT Margin % (Qtr) 5.42 8.30
Gross Margin % Gross Margin % (Qtr) 22.80 33.70
Net Profit Margin % Net Margin % (Qtr) 2.80 6.07