Lorillard Inc. (LO): Fundamental Stock Research Analysis

Page 2 of 2

The consensus of 12 leading analysts reporting to Capital IQ forecast Lorillard Inc. (NYSE:LO)’s long-term earnings growth at 12%.  Lorillard Inc has high long-term debt at 208% of capital.  Lorillard Inc is currently trading at a P/E of 14.4, which is inside the value corridor (defined by the five orange lines) of a maximum P/E of 18.  If the earnings materialize as forecast, based upon forecasted earnings growth of 12%, Lorillard Inc’s share price would $82.49 at the end of 2018 (brown circle on EYE Chart), which would represent a 16.8% annual rate of total return which includes dividends paid (yellow highlighting).

Earnings Yield Estimates

Discounted Future Cash Flows: All companies derive their value from the future cash flows (earnings) they are capable of generating for their stakeholders over time. Therefore, because Earnings Determine Market Price in the long run, we expect the future earnings of a company to justify the price we pay.

Since all investments potentially compete with all other investments, it is useful to compare investing in any prospective company to that of a comparable investment in low risk Treasury bonds. Comparing an investment in Lorillard Inc. (NYSE:LO) to an equal investment in 10-year Treasury bonds illustrates that Lorillard Inc’s expected earnings would be 5.1 (purple circle) times that of the 10-year T-bond interest (see EYE chart below). This is the essence of the importance of proper valuation as a critical investing component.

Summary & Conclusions

This report presented essential “fundamentals at a glance” illustrating the past and present valuation based on earnings achievements as reported.  Future forecasts for earnings growth are based on the consensus of leading analysts.  Although with just a quick glance you can know a lot about the company, it’s imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.

Disclosure:  No Positions at the time of writing.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation. A comprehensive due diligence effort is recommended.

F.A.S.T. Graphs™ is a powerful research tool providing “essential fundamentals at a glance” on over 17,000 symbols. F.A.S.T. Graphs™ empowers the user to research stocks deeper and faster by allowing them to exploit the undeniable relationship and functional correlation between long-term earnings growth and market price. Warren Buffett, the greatest capital allocator of all time, said; “there are only two things that investor needs to know; how to value a company and how to think about stock prices.” With the F.A.S.T. Graphs™ at their disposal, users are able to perform both of these critical tasks… FAST. Get F.A.S.T. Graphs™ here!

Page 2 of 2