Landauer LDR
December 09, 2003 - 4:20pm EST by
2003 2004
Price: 37.56 EPS
Shares Out. (in M): 0 P/E
Market Cap (in $M): 334 P/FCF
Net Debt (in $M): 0 EBIT 0 0

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Landauer is the world’s largest radiation dosimetry service company. Their business is characterized by high barriers to entry, high profit margins, consistent growth that is minimally affected by the economy, very high ROIC’s, and minimal capital expenditures, all of which lead to large amounts of free cash flow. Most of their FCF is paid out as a dividend to shareholders, which accounts for their 4.26% dividend yield. Also, they have no debt. Landauer’s business has Coke-like economic fundamentals:

ROIC (5 yr) 45.36%
Operating Margin (5 yr) 38.86%
Sales Growth (5 yr) 8.71%
Cap Ex / FCF (3 yr) 22.52%
FCF / Sales (3 yr) 32.64%
Dividend Yield 4.26%
Total Debt 0.00

Landauer’s clients consist of virtually any company or organization that uses radiation – hospitals, dentists, research labs, nuclear power plants, etc. In many countries, including the U.S., these organizations are legally required to monitor radiation exposure in their workers. Except in the case of very large organizations, it is usually not economical for them to do it themselves.

Landauer’s market share is over twice as large as its nearest competitor – 60% in the U.S. and 27% globally. Even though they dominate their industry, there is room for growth, especially globally. Landauer has subsidiaries in Brazil, China, France, and Japan.

Landauer’s long-term future is bright. It doesn’t take a leap of faith to imagine that an aging developed world will require more X-rays. Also, as developing nations become more prosperous, their populations will demand improved health care, leading to an increased demand for hospital care, including X-rays.

In addition, management appears to be reasonable. Since most of their FCF is paid out as a dividend, it is unlikely they will go on an ill-advised acquisition binge; they appear to be content to stick with their industry. Their options issuance is a breath of fresh air compared to most companies. They have issued a total of 216,000 options OVER THE PAST THREE YEARS, less than 1% of outstanding shares per year.

Landauer stock is not cheap (PE = 20.5), but in my judgment it is reasonably priced, given the high quality of the company. As I write this, it is trading at $37.56 per share for a market cap of $333.9 million, which is the basis for my valuation and yield measures.

In my judgment, Landauer is a great company at a reasonable price. If you’re looking for a cheap stock, look elsewhere. However, if you want a great long-term investment with a high dividend yield, you may want to consider Landauer.


High dividend yield supported by FCF and no debt limits downside risk.
Great company at a reasonable price.
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