Banks Stocks

People’s United Financial Inc Valuation – June 2016 $PBCT

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 People’s United Financial Inc (PBCT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): People’s United Financial, Inc. (People’s United) is the bank holding company for People’s United Bank, National Association (the Bank). The principal business of the Company is to provide, through the Bank and its subsidiaries, commercial banking, retail banking and wealth management services to individual, corporate and municipal customers. The Company’s segments include Commercial Banking, Retail Banking, Wealth Management, Treasury and Other. The Treasury area manages the Company’s securities portfolio, short-term investments, brokered deposits and wholesale borrowings. Its traditional banking activities include secured and unsecured commercial and consumer loans, originating mortgage loans secured by residential and commercial properties, and accepting consumer, commercial and municipal deposits. The Bank provides specialized financial services, such as personal, institutional and employee benefit trust; cash management, and municipal banking and finance.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of PBCT – June 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $4,771,826,748 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 106.45% Pass
5. Moderate PEmg Ratio PEmg < 20 18.44 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.97 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PBCT value chart June 2016

EPSmg $0.83
MG Growth Estimate 9.53%
MG Value $22.89
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $12.04
MG Value based on 0% Growth $7.06
Market Implied Growth Rate 4.97%
Current Price $15.32
% of Intrinsic Value 66.93%

People’s United Financial, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.51 in 2012 to an estimated $0.83 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.97% 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 above the price.

People’s United Financial, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

PBCT charts June 2016

Graham Number $17.28
PEmg 18.44
PB Ratio 0.97
Dividend Yield 4.39%
Number of Consecutive Years of Dividend Growth 20

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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 3/1/2016
Long-Term Debt $4,113,500,000
Total Assets $39,263,800,000
Intangible Assets $2,078,900,000
Total Liabilities $34,472,600,000
Shares Outstanding (Diluted Average) 301,900,000

Earnings Per Share History

Next Fiscal Year Estimate $0.86
Dec2015 $0.86
Dec2014 $0.84
Dec2013 $0.74
Dec2012 $0.72
Dec2011 $0.57
Dec2010 $0.24
Dec2009 $0.30
Dec2008 $0.42
Dec2007 $0.52
Dec2006 $0.41
Dec2005 $0.46
Dec2004 $0.68
Dec2003 $0.22
Dec2002 $0.19
Dec2001 $0.26
Dec2000 $0.79
Dec1999 $0.81
Dec1998 $0.64
Dec1997 $0.67
Dec1996 $0.58

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.83
Dec2015 $0.79
Dec2014 $0.71
Dec2013 $0.60
Dec2012 $0.51
Dec2011 $0.40
Dec2010 $0.34
Dec2009 $0.40
Dec2008 $0.47
Dec2007 $0.48
Dec2006 $0.44
Dec2005 $0.42
Dec2004 $0.41
Dec2003 $0.33
Dec2002 $0.44
Dec2001 $0.59
Dec2000 $0.73

Recommended Reading:

Other ModernGraham posts about the company

10 Companies Benjamin Graham Would Invest In Today – March 2016
Dividend Growth Stocks for Intelligent Investors – February 2016
13 Best Stocks For Value Investors This Week – 12/12/15
People’s United Financial Corp Valuation – December 2015 Update $PBCT
Dividend Growth Stocks for the Intelligent Investor – November 2015

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Disclaimer:

The author held a long position in People’s United Financial Inc but did not hold a position in any other 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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