Packaging Stocks

Bemis Company Inc Valuation – July 2016 $BMS

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 – June 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 Bemis Company Inc (BMS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Bemis Company, Inc. is a manufacturer of packaging products. The Company operates through two business segments: U.S. Packaging and Global Packaging. The U.S. Packaging segment represents food, consumer and industrial products packaging-related manufacturing operations in the United States. The U.S. Packaging segment manufactures multilayer polymer, blown and cast film structures to produce packaging sold for food and personal care product applications, as well as non-food applications. The Global Packaging segment is engaged in packaging-related manufacturing operations outside the United States, as well as global medical device and pharmaceutical packaging manufacturing operations. The Global Packaging segment manufactures multilayer polymer, blown and cast film structures to produce packaging sold for a range of food, medical, pharmaceutical, personal care, electronics and industrial applications. The Company offers its products primarily to customers in the food industry.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of BMS – July 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 $4,909,734,523 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.06 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 45.49% Pass
6. Moderate PEmg Ratio PEmg < 20 22.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.01 Fail
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 2.06 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.40 Fail
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

BMS value chart July 2016

EPSmg $2.28
MG Growth Estimate 5.39%
MG Value $43.96
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $33.08
MG Value based on 0% Growth $19.39
Market Implied Growth Rate 7.04%
Current Price $51.49
% of Intrinsic Value 117.12%

Bemis Company, Inc. is suitable 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 is only concerned with the level of debt relative to the net current assets. 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 $1.68 in 2012 to an estimated $2.28 for 2016. 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.

Bemis Company, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

BMS charts July 2016

Net Current Asset Value (NCAV) -$12.26
Graham Number $27.65
PEmg 22.57
Current Ratio 2.06
PB Ratio 4.01
Current Dividend $1.13
Dividend Yield 2.19%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $1,164,600,000
Total Current Liabilities $564,800,000
Long-Term Debt $1,437,200,000
Total Assets $3,573,100,000
Intangible Assets $1,109,200,000
Total Liabilities $2,340,700,000
Shares Outstanding (Diluted Average) 95,900,000

Earnings Per Share History

Next Fiscal Year Estimate $2.61
Dec2015 $2.44
Dec2014 $1.89
Dec2013 $2.04
Dec2012 $1.66
Dec2011 $1.73
Dec2010 $1.85
Dec2009 $1.38
Dec2008 $1.65
Dec2007 $1.74
Dec2006 $1.65
Dec2005 $1.51
Dec2004 $1.67
Dec2003 $1.37
Dec2002 $1.54
Dec2001 $1.32
Dec2000 $1.22
Dec1999 $1.09
Dec1998 $1.05
Dec1997 $1.00
Dec1996 $0.95

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.28
Dec2015 $2.06
Dec2014 $1.86
Dec2013 $1.81
Dec2012 $1.68
Dec2011 $1.68
Dec2010 $1.66
Dec2009 $1.57
Dec2008 $1.66
Dec2007 $1.64
Dec2006 $1.57
Dec2005 $1.52
Dec2004 $1.49
Dec2003 $1.37
Dec2002 $1.32
Dec2001 $1.19
Dec2000 $1.10

Recommended Reading:

Other ModernGraham posts about the company

Bemis Co Inc Valuation – January 2016 Update $BMS
Bemis Company Inc. Analysis – September 2015 Update $BMS
Bemis Company Inc. Analysis – September 2015 Update $BMS
Bemis Company Analysis – June 2015 Update $BMS
23 Companies in the Spotlight This Week – 3/9/15

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Bemis Company Analysis – June 2015 Update $BMS

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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