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Company: SuperValu (SVU)
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edit "Once debt is paid down, company can return money to shareholders"

Top Contributor: Will Morrissett | Created when SVU was $28.83 | Edit | History

Debt is abnormally large at the moment because SVU is paying for its acquisition of Albertson's, a high-end grocer. As debt is paid down, the Company can convert more of its cash into shareholder earnings.

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edit Once debt is paid down, company can return money to shareholders

Top Contributor: Will Morrissett | Created when SVU was $28.83 | Edit | History

Debt is abnormally large at the moment because SVU is paying for its acquisition of Albertson's, a high-end grocer. As debt is paid down, the Company can convert more of its cash into shareholder earnings.

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edit Can pay down debt without any growth in earnings

Top Contributor: Will Morrissett | Created when SVU was $28.83 | Edit | History

Sales could remain level for years as debt is serviced and EPS will grow more than 0-1%. The current price is too pessimistic. Assume a modest and organic increase in sales over the long term and it's not hard to imagine SuperValu growing earnings at a more impressive rate.

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edit Current valuation assumes almost no growth - any growth at all is upside

Top Contributor: Will Morrissett | Created when SVU was $28.83 | Edit | History

No matter what happens with inflation, people have to eat. At the current price, SVU represents a dreary sentiment for growth in earnings. The current price assumes the company will grow earnings 0% for the next five years followed by a future growth rate of 1% (10% discount assumed, DFCF).

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