Tootsie Roll Industries, Inc. – Value Analysis (NYSE:TR) : July 11, 2017

Capitalcube gives Tootsie Roll Industries, Inc. a score of 56.

Our analysis is based on comparing Tootsie Roll Industries, Inc. with the following peers – Hershey Company, Rocky Mountain Chocolate Factory, Inc., John B. Sanfilippo & Son, Inc. and Mondelez International, Inc. Class A (HSY-US, RMCF-US, JBSS-US and MDLZ-US).

Investment Outlook

Tootsie Roll Industries, Inc. has a fundamental score of 56 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis perspective, relative outperformance last month is up from a median performance last year.
  • It trades at a lower Price/Book multiple (1.94) than its peer median (2.54).
  • The market expects TR-US‘s earnings to grow at about the same rate as its chosen peers and also does not seem to expect much improvement in its below peer median returns.
  • TR-US‘s relatively high profit margins are burdened by relative asset inefficiency.
  • Changes in the company’s annual revenue and earnings are around the median among its peers.
  • TR-US‘s return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While TR-US‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company is likely overinvesting in a business with only median returns.
  • TR-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

TR-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 0.35% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 10.31%), and a well-cushioned interest coverage level of 888.20x, TR-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 4 peers for the company have an outstanding debt balance.

TR-US has maintained its Quick & Able profile from the recent year-end.

  • TR-US‘s interest coverage is greater than (but within one standard deviation of) its five-year average interest coverage of 852.18x.
  • Though its interest coverage has remained relatively stable at 888.20x compared to 2016, its peer median has increased to 19.91x from 16.47x during this period.
  • Interest coverage fell 3.44 points relative to peers.
  • TR-US‘s debt-EV is its lowest relative to the last five years and compares to a high of 0.52% in 2012.
  • Like the interest coverage trend, its debt-EV has also remained relatively stable at 0.35%, while its peer median has increased during this period (to 10.31% from 8.54%).
  • Relative to peers, debt-EV fell 1.77 percentage points.

Access the detailed analysis for Tootsie Roll Industries, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Hershey Company 11.24 1.1 17.12 41.11
Rocky Mountain Chocolate Factory, Inc. 5.3 1.84 35.61 159.02
John B. Sanfilippo & Son, Inc. 10.31 2.05 19.91 78.71
Mondelez International, Inc. Class A 22.23 0.56 4.19 18.4
Tootsie Roll Industries, Inc. 0.35 4.54 888.2 1115.2
Peer Median 10.31 1.84 19.91 78.71
Best In Class 0.35 4.54 888.2 1115.2

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Company Profile

Tootsie Roll Industries, Inc. engages in the manufacture and sale of confectionery products. Its services include wholesale distribution of candies to groceries, supermarkets, variety stores, dollar stores, chain grocers, drug and discount chains, cooperative grocery associations, warehouse and membership club stores, vending machine operators, the U. S. military, and fund-raising charitable organizations. Its principal markets include U.S., Canada, and Mexico. The company was founded by Leo Hirshfield in 1896 and is headquartered in Chicago, IL.

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