1. Graco Inc. (GGG)
1
Analyst: Jody Hirschi

2. Company
Overview
Risks
Industry
Assessment
Valuation
Summary
Investment
Thesis
Sources:
Investment
Thesis
2
Investment Thesis
 Graco Inc. (GGG) has managed to maintain consistent performance despite the
recent market turmoil that has affected most industrials.
 GGG has been active in the M&A activity to purchase highly synergistic
acquisitions which have strengthened their technological moat while increasing
the units sold per engagement.
 Low debt levels, with high returns and cash balances allow them to maintain
their market position. Developing a position in the international markets.
 Long-term history of High ROE and ROIC and consistent sales growth
 Discrepancies from earnings and stock price, and current P/E levels suggest we
ought to hold.
 Watchlist Recommendation: ADD to the Watchlist
 Valuation Recommendation (USD): Hold
• Buy Price: $73.22
• Sell Price: $114.66
• Current Price: $76.45

3. Company
Overview
Sources:
Background and
Context
Business Model
Analysis
SCT Analysis
Background and
Context
Annual Report 2013, S&:P Capital IQ
Company Overview
• GGG is an international Industrial Machinery Company, with
3,200 employees, from Minneapolis. Incorporated in 1926.
• FLOW CONTROL EQUIPMENT
• Their products are used to pump, meter, mix, and dispense fluid
and powder materials.
• Equipment is used by construction, automotive, mining,
Oil/NG, process, and public works industries.
• They specialize in equipment that handles materials with high
viscosities, or corrosive properties. They cater to niche markets
and command a leading position with differentiated products.
• Positioned with a strong balance sheet and market position to
acquire new technologies that boost their ability to further market
current and new products.
3

4. Company
Overview
Sources:
Background and
Context
Business Model
Analysis
SCT Analysis
Background and
Context
Company Overview
• The company reports its operations in three segments,
namely: Industrial, Contractor, Process/Lubrication.
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5. Company
Overview
Background and
Context
Business Model
Analysis
SCT Analysis
Business Model
Analysis
Business Model Analysis
5
GGG is an OEM that makes equipment for end-users. End Users are
primarily industrial businesses.
Although their products are specialized, their business model is
simple:
Raw Materials  Products  to End Users
Raw
Materials
Industrial
47.9% Rev
33% OperM
Process
21.3% Rev
16% OperM
Contractor
30.8% Rev
22% Oper %
Various
End-Users

6. Company
Overview
Sources:
Background and
Context
Business Model
Analysis
SCT AnalysisSCT Analysis
Fin415/GFA Single Company Tool Rept. Cncy:
Company Ticker: GGG US GICS: 20106020 12/2015 Currency: USD
Name: Graco Inc Sector: Industrials Major Index: SPX
Country: United States Last Report: 12/15 Industry Group: Capital Goods
Equity Fund Currency:US Dollar Spot Industry: Machinery
Reporting: (FQ vs. FS)FQ Sub-Industry: Industrial Machinery
Name: Graco Inc in USD currency Price: USD 76.64
Single Company Tool Averages 2/23/16
FYEnd: 12/15 10 Year 5 Year 3 Year 1 Year T12 Graphs
Multiples
PE * 19.15 20.70 22.40 22.08 20.21
PB * 7.84 7.23 7.27 6.43 6.65
EV/S * 3.08 3.45 3.91 3.45 3.45
EV/EBITDA * 11.34 12.52 14.01 12.81 12.81
Dividend Yield 2.0% 1.7% 1.4% 1.6% 1.6%
OFCF/Equity 0.37 0.27 0.24 0.16 0.16
Operations
Sales Growth (CAGR) 5.8% 11.6% 8.3% 5.4% 5.4%
Gross Profit Margin 53.7% 54.6% 54.3% 53.2% 53.2%
Operating Margin 23.3% 24.2% 24.7% 23.5% 23.5%
Net Profit Margin 16.9% 19.0% 21.5% 26.9% 26.9%
DuPont
NI/S (Profitability) 16.9% 19.0% 21.5% 26.9% 26.9%
S/TA (Efficiency) 115.3% 86.7% 84.9% 92.5% 92.5%
TA/OE (Leverage) 2.40 2.50 2.29 2.19 2.19
ROE 44.5% 40.5% 41.8% 54.4% 54.4%
Altman Z 6.55 5.33 5.79 5.75 5.86
ROIC ** 55.9% 40.9% 40.1% 45.7% 45.7%
ROIC *** 27.8% 22.1% 20.0% 20.2% 20.2%
ROA 28.5% 23.0% 21.1% 20.6% 21.7%
Markets
Market Cap. (US$ mn) 2,975 3,846 4,568 4,096 4,224
CapEx% of Net Income 17.6% 13.1% 12.2% 12.1% 12.1%
Net-net (CA-TL)/MC -2.4% -1.6% -2.1% -6.0% -5.8%
Fiscal Year Returns versus the SPX Index From 12/31/15
GGG US Avg. Ann. Returns 12.1% 16.8% 16.6% -8.6% 6.9%
SPX Avg. Ann. Returns 9.1% 13.1% 15.8% 1.4% -5.7%
Difference 2.9% 3.7% 0.8% -10.0% 12.6%
* Harmonic mean calculations. ^ Period calculations only (not averages)
** ROIC = EBIT/(Average of CA-CL+NPP&E) T12 = Trailing 12 Months (most recent 4 Qtrs)
*** Bloomberg ROIC = Trailing 12M Earnings/(Average Total Invested Capital)
Single Company Tool
6
Incredibly efficient
Operations consistently
earning high returns.
Seems they are able to
efficiently turnover their
assets over into revenue.

7. Company
Overview
Sources:
Background and
Context
Business Model
Analysis
SCT AnalysisSCT Analysis
7

8. Industry
Assessment
Sources:
Relative
Performance
SWOT Analysis
Competitor
Analysis
Competitor
Analysis
Bloomberg
Industry Analysis
Hold their cash
better. Indicates
growth

9. Industry
Assessment
Sources:
Relative
Performance
SWOT Analysis
Competitor
Analysis
Competitor
Analysis
Bloomberg
Industry Analysis
Operations
performance
consistent
throughout time

10. Industry
Assessment
Sources:
Relative
Performance
SWOT Analysis
Competitor
Analysis
Relative
Performance
Bloomberg
Relative Performance Analysis
10
Outperformed both the index and
there peers over the last 5 years

11. Industry
Assessment
Sources:
Relative
Performance
SWOT Analysis
Competitor
Analysis
SWOT
Analysis
10k, IBIS world
SWOT Analysis
11
Strengths
Weaknesses
Opportunities
Threats
Market & Competitor
Structure
Buyer Behavior Company Moats Company Business
Model
• The purchase of initial
products facilitates the
use of other products.
• Technologies
could potential be
replaced by
disruptive
technology
• Largely tied to GDP
growth, which is in
flux with the global
economic turmoil of
late.
• A majority of the
undifferentiated,
and therefore easy
to change on the
basis of price
• Unique products
that meet niche
market needs.
• Well-Established
business operations
that has progressed
far down the
experience-curve
• Developing nations
provide large
opportunities.
• Investments
directed to
international growth
• Foreign currency
weakens revenues.
• Utilize known brand
names across the
globe to earn higher
margins.
• Well positioned to
acquire new
technologies which
facilitate increased
market share

12. Risks
Sources:
Risks
• Raw Materials: Futures contract losses M M H
• Disruptive Competing Technology M H M
• Raw Material Costs M L M
• Foreign Investment Slowdown H M L
12
Risk Analysis and Mitigants
Difficult to mitigate the major of
risk other than internal R&D and
overall market awareness.

13. Valuation
Sources:
RC Drivers
Valuation
Models
Earnings
Estimates
Analysis
Earnings
Estimates
Analysis
Earnings Estimates Analysis
13
Share Price has a
significant
deviance from
earnings recently

14. Valuation
Sources:
RC Drivers
Valuation
Models
Earnings
Estimates
Analysis
Valuation
Models
Forecasting Assumptions
14

15. Valuation
Sources:
RC Drivers
Valuation
Models
Earnings
Estimates
Analysis
Valuation
Models
Valuation Models
15

16. Valuation
Sources:
RC Drivers
Valuation
Models
Earnings
Estimates
Analysis
Valuation
Models
Valuation Models
16

17. Summary
Sources:
Summary
Summary
17
 Graco Inc. (GGG) has managed to maintain consistent performance despite the
recent market turmoil that has affected most industrials.
 GGG has been active in the M&A activity to purchase highly synergistic
acquisitions which have strengthened their technological moat while increasing
the units sold per engagement.
 Long-term history of High ROE and ROIC and consistent sales growth
 Low debt levels, with high returns and cash balances allow them to maintain
their market position. Confident that performance will continue in its steady
performance into the future.
 Discrepancies from earnings and stock price, and current P/E levels suggest we
ought to hold.
 Watchlist Recommendation: ADD to the Watchlist
 Valuation Recommendation (USD): Hold
• Buy Price: $73.22
• Sell Price: $114.66
• Current Price: $76.45

18. Summary
Sources:
Summary
BONUS!! ----> GILD
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