SNA Snap-on
Trophy franchise, 2% growth: great business whose price already pays for perfection.
The story
Snap-on is a century-old trophy franchise selling professional tools and diagnostics to auto technicians through its franchised mobile-van network, a moat built on brand, route density, and switching costs. It is a mature business: pricing power sustains ~26-27% operating margins, but the addressable market grows only ~2% a year. This is a cash-return story (buybacks, dividends, net cash) dressed in a growth-stock multiple.
TTM data confirms the prior story rather than changing it: revenue of 5.27B is ~2.1% growth, margin of 26.6% sits right at the 26.5% sustainable target (below the 27.9% peak), and measured sales-to-capital of 0.74 validates my 0.75. I keep all prior drivers; the moat justifies 8 years of excess returns, but the 2% revenue record rules out a longer reinvestment runway.
Value drivers
| Revenue growth (Y1) | 2.5% |
| Terminal growth | 2.0% |
| Forecast horizon | 8y |
| Target operating margin | 26.5% |
| Years to target margin | 5 |
| Sales-to-capital | 0.75 |
| Beta | 1.05 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 9.4% |
| Terminal WACC | 9.2% |
Valuation bridge
| PV of explicit FCFF | 5.61B |
| PV of terminal value | 7.83B |
| Equity value | 13.70B |
| ÷ shares → per share | $264.80 |
News
neutral -0.10 · 8 articles
- 3 Reasons SNA is Risky and 1 Stock to Buy Instead
- Are Wall Street Analysts Bullish on Snap-on Stock?
- Snap On (SNA) Beat Expectations, Is The Stock Fully Priced?
- Spotting Winners: Snap-on (NYSE:SNA) And Professional Tools and Equipment Stocks In Q2
- Can Snap-on's RCI Execution and Innovation Sustain Growth?
- 1 Mid-Cap Stock for Long-Term Investors and 2 That Underwhelm
- 1 Momentum Industrials Stock on Our Watchlist and 2 We Avoid
- Can Snap-on's Tools Group Sustain Growth Momentum Ahead?
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 5.41B | 2.5% | 26.6% | 1.12B | 175.83M | 946.07M | 864.80M |
| 2 | 5.54B | 2.4% | 26.6% | 1.15B | 175.08M | 973.04M | 813.04M |
| 3 | 5.67B | 2.4% | 26.5% | 1.17B | 174.05M | 1.00B | 763.85M |
| 4 | 5.80B | 2.3% | 26.5% | 1.20B | 172.76M | 1.03B | 717.12M |
| 5 | 5.93B | 2.2% | 26.5% | 1.23B | 171.18M | 1.05B | 672.78M |
| 6 | 6.05B | 2.1% | 26.5% | 1.25B | 169.33M | 1.08B | 631.38M |
| 7 | 6.18B | 2.1% | 26.5% | 1.28B | 167.19M | 1.11B | 592.11M |
| 8 | 6.30B | 2.0% | 26.5% | 1.30B | 164.77M | 1.14B | 554.88M |
Key risks
- Technician headcount stagnation and EV transition shrinking traditional tool spend
- Cyclical downturn in auto repair and technician incomes pressuring franchisee orders
- Multiple compression if the market stops paying a growth price for a 2% grower
Catalysts
- Aging car fleet extending repair demand and tool replacement cycles
- Aggressive buybacks and dividends supported by net cash and ~100% FCF conversion