Freight Stocks

Expeditors International of Washington Valuation – January 2016 Update $EXPD

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Expeditors International of Washington (EXPD) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Expeditors International of Washington, Inc. is engaged in the business of providing global logistics services. The Company’s services include air and ocean freight transportation and customs brokerage. The Company also provides additional services, including order management, time-definite transportation, warehousing and distribution, cargo insurance and logistics solutions. The Company operates in Americas, including the United States, Other North America and Latin America; Asia Pacific; Europe, and Middle East, Africa and India. The Company provides airfreight services and acts either as a freight consolidator or as an agent for the airline, which carries the shipment. The Company operates Expeditors International Ocean, Inc. (EIO), an Ocean Transportation Intermediary, also known as Non-Vessel Operating Common Carrier (NVOCC), which specializes in ocean freight services in trade lanes across the world.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of EXPD – January 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,388,264,299 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.34 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 63.19% Pass
6. Moderate PEmg Ratio PEmg < 20 22.59 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.56 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.34 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EXPD value Chart January 2016

EPSmg $1.96
MG Growth Estimate 4.49%
MG Value $34.20
Opinion Overvalued
MG Value based on 3% Growth $28.37
MG Value based on 0% Growth $16.63
Market Implied Growth Rate 7.04%
Current Price $44.20
% of Intrinsic Value 129.25%

Expeditors International of Washington qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.51 in 2011 to an estimated $1.96 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 7.04% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Expeditors International of Washington (EXPD)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

EXPD Charts January 2016

Net Current Asset Value (NCAV) $6.58
Graham Number $22.81
PEmg 22.59
Current Ratio 2.34
PB Ratio 4.56
Dividend Yield 1.54%
Number of Consecutive Years of Dividend Growth 20

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Total Current Assets $2,235,460,000
Total Current Liabilities $955,202,000
Long-Term Debt $0
Total Assets $2,827,018,000
Intangible Assets $7,927,000
Total Liabilities $987,973,000
Shares Outstanding (Diluted Average) 189,642,000

Earnings Per Share History

Next Fiscal Year Estimate $2.34
Dec14 $1.92
Dec13 $1.68
Dec12 $1.57
Dec11 $1.79
Dec10 $1.59
Dec09 $1.11
Dec08 $1.37
Dec07 $1.21
Dec06 $1.06
Dec05 $0.86
Dec04 $0.59
Dec03 $0.46
Dec02 $0.44
Dec01 $0.45
Dec00 $0.38
Dec99 $0.28
Dec98 $0.22
Dec97 $0.18
Dec96 $0.12
Dec95 $0.09

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.96
Dec14 $1.75
Dec13 $1.62
Dec12 $1.56
Dec11 $1.51
Dec10 $1.33
Dec09 $1.18
Dec08 $1.15
Dec07 $0.97
Dec06 $0.79
Dec05 $0.62
Dec04 $0.49
Dec03 $0.43
Dec02 $0.39
Dec01 $0.35
Dec00 $0.28
Dec99 $0.21

Recommended Reading:

Other ModernGraham posts about the company

Expeditors International of Washington Analysis – October 2015 Update $EXPD
Expeditors International of Washington Analysis – June 2015 Update $EXPD
18 Companies in the Spotlight This Week – 3/21/15
Expeditors International of Washington Quarterly Valuation – March 2015 $EXPD
26 Companies in the Spotlight This Week – 12/13/14

Other ModernGraham posts about related companies

FedEx Corp Valuation – November 2015 Update $FDX
United Parcel Service Inc. Valuation – October 2015 Update $UPS
Expeditors International of Washington Analysis – October 2015 Update $EXPD
FedEx Corporation Analysis – August 2015 Update $FDX
C.H. Robinson Worldwide Inc. Analysis – 2015 Update $CHRW
Expeditors International of Washington Analysis – June 2015 Update $EXPD
FedEx Corporation Quarterly Valuation – March 2015 $FDX
Expeditors International of Washington Quarterly Valuation – March 2015 $EXPD
Ryder System Inc. Annual Valuation – 2015 $R
FedEx Corporation Quarterly Valuation – December 2014 $FDX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top