2016 Valuation

Presented is my valuation for Platform Specialty Products. Only the math will be presented, without the reasoning. Anyone keen to accounting will understand the reasoning therefore, because of a lack of time to offer additional explanation (because it would require an in depth report), I am only providing a quantitative review.

Step #1. Determine "Owner Earnings" (as defined by Warren Buffett)

(In millions)
$71.6 (Stated Operating Profit)
+ $202 (amortization charge)**
+ $76.5 (purchase accounting inventory adjustment)
+ $6.8 (non-cash fair value adjustment)
- $74 (derivatives contract loss)
- $43.4 (foreign exchange loss)
+ $30.4 (other income)
+ $5 (non-cash stock compensation)
- $147.6 (cash paid for interest)
- $73.3 (cash paid for taxes)

True Owner Earnings = $54 Million

Step #2. Valuation

(In millions)
$54 (Owner Earnings)
/ 4.00% (AAA Corporate Bond Yield the day after 10-K was released)
+ $2,270.50 (current assets)
+ $491.60 (PPE BV)
- $1,062.40 (current liabilities)***
/ 203.2 (diluted shares)

= $15.00 Fair Valuation
Current share price: $8.50
Author's Opinion: Undervalued

** Depreciation, which was not added back in, equaled CapEx which is why CapEx hasn't been included in the equation. Depreciation is what a company "expects" to pay in the future, CapEx is what the company "actually" paid for in the current period. The two are the same and an additional adjustment for CapEx was not warranted.

*** After thourough analysis, this company's market price more closely reflects a discount of current liabilities than total interest bearing debt. One reason why this method is acceptable in this case is because of the business model of the company who's function is to operate at larger than normal debt levels, and it is not in jeopardy of defaulting on its covenants due to 300+% annual increases in its revenue stream.

"The more numerous any assembly may be, of whatever characters composed, the greater is known to be the ascendancy of passion over reason." - Federalist no. 58