We raised our fair value estimate by 2% to $231 per share from $226. About half of the fair value estimate increase was attributed to the time value of money since our last update. We also increased our long-term estimates of profitability in the tools group.
The growth in vehicle miles driven increases the wear and tear on vehicles, requiring more maintenance and repair work to keep them on the road and benefiting Snap-on.
Bears
The ease with which individuals can order products online could spur technicians to buy more tools from e-retailers. In addition, online reviews may help technicians close any knowledge gap as they’re comparing which products to buy online.
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Snap-on manufactures premium tools and software for repair professionals. Hand tools are sold through a franchisee-operated mobile van network that serve auto technicians who purchase tools at their own expense. A unique element of its business model is that franchisees bear significant risk, as they must invest in the mobile van, inventory, and software. At the same time, franchisees extend personal credit directly to technicians on an individual tool basis. Snap-on currently operates three segments: repair systems and information, commercial and industrial, and tools. Its finance arm provides financing to franchisees to run their operations, which includes offering loans and leases for mobile vans.