Wolverine World Wide NYSE: WWW By Christian Gabis

My Basic Checklist Is the business easy to understand? Yes Is the business easy to understand? Yes Does the business have a competitive advantage? Yes, licensed products and brand loyalty, difficult for competition to enter. Does the business have a competitive advantage? Yes, licensed products and brand loyalty, difficult for competition to enter. Is the management able and trustworthy? After listening to the conference call (CC), and looking at the historical performance of the company, I think they are very capable. Is the management able and trustworthy? After listening to the conference call (CC), and looking at the historical performance of the company, I think they are very capable.

Keep On Checking Do the company's earnings and FCF show consistent growth? Yes and Yes! Do the company's earnings and FCF show consistent growth? Yes and Yes! Can the company earn a return on equity of 12% or higher? Yes! Around 16% over the past few years. Can the company earn a return on equity of 12% or higher? Yes! Around 16% over the past few years. Will the company be able to keep growing and is their product bought on a predictable basis? Growth will depend on the rollout of the licensed Patagonia products coming on line. Work boots are usually worn out after 2 years. Will the company be able to keep growing and is their product bought on a predictable basis? Growth will depend on the rollout of the licensed Patagonia products coming on line. Work boots are usually worn out after 2 years. Does the company pay a dividend and if so is it growing? Yes, currently the yield is around 1.7% and has been growing at 21% per year for the last 5 years. Does the company pay a dividend and if so is it growing? Yes, currently the yield is around 1.7% and has been growing at 21% per year for the last 5 years.

Earnings and Dividends

…And Checking Is the company buying back shares? Yes! From 2000 to 2007 the company bought back nearly 10 million shares leaving it with just 53 million shares. Is the company buying back shares? Yes! From 2000 to 2007 the company bought back nearly 10 million shares leaving it with just 53 million shares. Is the debt manageable? Yes! Just 2% of market cap. Easily manageable. Is the debt manageable? Yes! Just 2% of market cap. Easily manageable. Insider ownership? Insiders own around 5% of stock but they have not been buying the stock. Insider ownership? Insiders own around 5% of stock but they have not been buying the stock.

Compare With Alternatives Compare with CD rates… Compare with CD rates…P/E=13.31/13.3=7.51% Best current CD yield= 5.3% Good. The earnings of the company are “yielding” a higher rate than a CD. Some margin of safety.

Growth Projections? You must be very careful here. If you are too aggressive with your projections your estimate of the company will be way off. You must be very careful here. If you are too aggressive with your projections your estimate of the company will be way off. BE CONSERVATIVE!!! BE CONSERVATIVE!!! WWW has grown earnings in the lower double digits for the past 10 years. Management feels this will continue. So use a conservative 11% growth estimate and do a DCF. Note: VL has an estimate of 15%, so we appear to be well under their projections. WWW has grown earnings in the lower double digits for the past 10 years. Management feels this will continue. So use a conservative 11% growth estimate and do a DCF. Note: VL has an estimate of 15%, so we appear to be well under their projections.

DCF Analysis Use the DCF model on the CCIG resources page to start your DCF analysis. Use the DCF model on the CCIG resources page to start your DCF analysis. Using a MARR of 15% and a final sale price of 12 time FCF we arrive at a price of about $35. Using a MARR of 15% and a final sale price of 12 time FCF we arrive at a price of about $35. Using a MARR of 15% and a final sale price of 11 times FCF we arrive at a price of about $30. Using a MARR of 15% and a final sale price of 11 times FCF we arrive at a price of about $30.

Is the DCF Reasonable At $30 to $35 a share the company is selling for around $1.6 Billion. With sales of around $1.2 billion $30 might be a bit high for these shares. But we are in the ballpark. At $30 to $35 a share the company is selling for around $1.6 Billion. With sales of around $1.2 billion $30 might be a bit high for these shares. But we are in the ballpark. Higher margins are one of managements priorities as stated in the CC and evidenced in the past several years. As margins continue to improve the earnings should get a boost. Higher margins are one of managements priorities as stated in the CC and evidenced in the past several years. As margins continue to improve the earnings should get a boost. The barrier to entry for competition gives this stock some protection. The barrier to entry for competition gives this stock some protection.

And The Price For Wolverine Is...

Current Price $21.72 $21.72 Our Estimate $30~$35 Our Estimate $30~$35 A 30% difference! A 30% difference! Buy when you are comfortable enough with the difference being equal to your ability to reasonably predict the company's earnings. Buy when you are comfortable enough with the difference being equal to your ability to reasonably predict the company's earnings.