Financial Services Stocks

Calamos Asset Management Inc Valuation – Initial Coverage $CLMS

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 Stocks for Using A Benjamin Graham Value Investing Strategy – January 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 Calamos Asset Management Inc (CLMS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Calamos Asset Management, Inc. is a holding company. The Company is the manager of Calamos Investments LLC, which owns and manages its operating companies. The Company provides investment advisory services to individuals and institutional investors through investment products that include open-end and closed-end funds (Funds), an exchange traded fund, separate accounts, offshore funds and partnerships. The subsidiaries through which the Company provides these services include Calamos Advisors LLC (CAL), an investment advisor; Calamos Financial Services LLC (CFS), a broker-dealer; Calamos Wealth Management LLC, an investment advisor, and Calamos Investments LLP, a United Kingdom-based investment advisor, and a distributor of the offshore funds and Company products.

CLMS Chart

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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. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CLMS – January 2017

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 $172,465,716 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 11.69 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
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 55.00% Pass
6. Moderate PEmg Ratio PEmg < 20 21.89 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.78 Pass
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 11.69 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 Fail

Stage 2: Determination of Intrinsic Value

EPSmg $0.38
MG Growth Estimate -4.25%
MG Value $7.40
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $5.58
MG Value based on 0% Growth $3.27
Market Implied Growth Rate 6.69%
Current Price $8.42
% of Intrinsic Value 113.83%

Calamos Asset Management, Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, and the high PEmg ratio. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. 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 seeing its EPSmg (normalized earnings) decline from $0.7 in 2012 to an estimated $0.38 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.69% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Calamos Asset Management, Inc revealed the company was trading above its Graham Number of $2.85. The company pays a dividend of $0.6 per share, for a yield of 7.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.89, which was above the industry average of 21.33. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.4.

Calamos Asset Management, Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.40
Graham Number $2.85
PEmg 21.89
Current Ratio 11.69
PB Ratio 0.78
Current Dividend $0.60
Dividend Yield 7.13%
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $763,738,000
Total Current Liabilities $65,356,000
Long-Term Debt $0
Total Assets $822,716,000
Intangible Assets $7,152,000
Total Liabilities $636,974,000
Shares Outstanding (Diluted Average) 17,137,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.04
Dec2015 $0.18
Dec2014 $0.71
Dec2013 $0.92
Dec2012 $0.88
Dec2011 $0.77
Dec2010 $0.99
Dec2009 $0.62
Dec2008 -$1.24
Dec2007 $1.22
Dec2006 $1.45
Dec2005 $1.26
Dec2004 $0.00
Dec2003 $0.70
Dec2002 $0.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.38
Dec2015 $0.60
Dec2014 $0.83
Dec2013 $0.87
Dec2012 $0.70
Dec2011 $0.56
Dec2010 $0.51
Dec2009 $0.40
Dec2008 $0.37
Dec2007 $1.09
Dec2006 $0.93
Dec2005 $0.59
Dec2004 $0.24
Dec2003 $0.30
Dec2002 $0.09

Recommended Reading:

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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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