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FLIR Systems Inc Valuation – May 2016 $FLIR

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 Companies Benjamin Graham Would Invest In Today – March 2016.  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 FLIR Systems Inc (FLIR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): FLIR Systems, Inc. (FLIR) designs, develops, markets and distributes thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems and advanced threat-detection solutions. The Company’s segments include Surveillance, Instruments, Security, OEM & Emerging Markets, Maritime and Detection. Its Surveillance segment provides enhanced imaging and recognition solutions. Its Instruments segment provides devices that image, measure and assess thermal energy, gases and other environmental elements for industrial, commercial, and scientific applications under the FLIR and Extech brands. Its OEM & Emerging Markets segment provides thermal imaging camera cores and components. Its Maritime segment develops and manufactures electronics and imaging instruments. Its Security segment develops and manufactures a range of cameras and video recording systems. The Detection segment offers sensors, instruments and integrated platform solutions.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of FLIR – May 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 $4,125,272,044 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.41 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 30.11% Fail
6. Moderate PEmg Ratio PEmg < 20 19.77 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.52 Pass
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 2.41 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.12 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

FLIR value chart May 2016

EPSmg $1.53
MG Growth Estimate 0.95%
MG Value $15.91
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $22.18
MG Value based on 0% Growth $13.00
Market Implied Growth Rate 5.63%
Current Price $30.23
% of Intrinsic Value 189.97%

FLIR Systems, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.44 in 2012 to an estimated $1.53 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.63% 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.

FLIR Systems, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

FLIR charts May 2016

Net Current Asset Value (NCAV) $3.93
Graham Number $20.89
PEmg 19.77
Current Ratio 2.41
PB Ratio 2.52
Current Dividend $0.45
Dividend Yield 1.49%
Number of Consecutive Years of Dividend Growth 6

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Most Recent Balance Sheet Figures

Balance Sheet Information
Total Current Assets $1,290,230,000
Total Current Liabilities $535,149,000
Long-term Debt $90,000,000
Total Assets $2,413,209,000
Intangible Assets $739,886,000
Total Liabilities $745,180,000
Shares Outstanding (Diluted Average) 138,779,000

Earnings Per Share History

Next Fiscal Year Estimate $1.60
12/1/2015 $1.72
12/1/2014 $1.39
12/1/2013 $1.22
12/1/2012 $1.45
12/1/2011 $1.38
12/1/2010 $1.54
12/1/2009 $1.45
12/1/2008 $1.28
12/1/2007 $0.89
12/1/2006 $0.66
12/1/2005 $0.58
12/1/2004 $0.47
12/1/2003 $0.32
12/1/2002 $0.29
12/1/2001 $0.20
12/1/2000 -$0.23
12/1/1999 -$0.48
12/1/1998 $0.18
12/1/1997 -$0.65
12/1/1996 $0.11

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.53
12/1/2015 $1.47
12/1/2014 $1.37
12/1/2013 $1.37
12/1/2012 $1.44
12/1/2011 $1.39
12/1/2010 $1.32
12/1/2009 $1.13
12/1/2008 $0.90
12/1/2007 $0.67
12/1/2006 $0.53
12/1/2005 $0.43
12/1/2004 $0.31
12/1/2003 $0.16
12/1/2002 $0.05
12/1/2001 -$0.11
12/1/2000 -$0.25

Recommended Reading:

Other ModernGraham posts about the company

FLIR Systems Inc. Valuation – November 2015 Update $FLIR
FLIR Systems Inc. Analysis – August 2015 Update $FLIR
47 Companies in the Spotlight This Week – 5/16/15
FLIR Systems Inc. Quarterly Valuation – May 2015 $FLIR
58 Companies in the Spotlight This Week – 1/31/15

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Analog Devices Inc Stock Valuation – February 2016 $ADI
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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.

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