Apple Inc Valuation – April 2019 #AAPL

Company Profile (excerpt from Reuters): Apple Inc., incorporated on January 3, 1977, designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players. The Company sells a range of related software, services, accessories, networking solutions and third-party digital content and applications. The Company’s segments include the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. The Americas segment includes both North and South America. The Europe segment includes European countries, India, the Middle East and Africa. The Greater China segment includes China, Hong Kong and Taiwan. The Rest of Asia Pacific segment includes Australia and the Asian countries not included in the Company’s other operating segments. The Company’s products and services include iPhone, iPad, Mac, iPod, Apple Watch, Apple TV, a portfolio of consumer and professional software applications, iPhone OS (iOS), OS X and watchOS operating systems, iCloud, Apple Pay and a range of accessory, service and support offerings.

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAPL – April 2019

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 $928,509,329,542 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 Fail
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 151.37% Pass
6. Moderate PEmg Ratio PEmg < 20 19.47 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.97 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 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.86 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

EPSmg $10.11
MG Growth Estimate 6.57%
MG Value $218.81
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $146.65
MG Value based on 0% Growth $85.97
Market Implied Growth Rate 5.48%
Current Price $196.89
% of Intrinsic Value 89.98%

Apple Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $7.03 in 2015 to an estimated $10.11 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 5.48% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Apple Inc. revealed the company was trading above its Graham Number of $71.63. The company pays a dividend of $2.72 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 19.47, which was below the industry average of 35.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.09.

Apple Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.09
Graham Number $71.63
PEmg 19.47
Current Ratio 1.30
PB Ratio 7.97
Current Dividend $2.72
Dividend Yield 1.38%
Number of Consecutive Years of Dividend Growth 7

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 12/1/2018
Total Current Assets $140,828,000,000
Total Current Liabilities $108,283,000,000
Long-Term Debt $92,989,000,000
Total Assets $373,719,000,000
Intangible Assets $0
Total Liabilities $255,827,000,000
Shares Outstanding (Diluted Average) 4,773,252,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.12
Sep2018 $11.91
Sep2017 $9.21
Sep2016 $8.31
Sep2015 $9.22
Sep2014 $6.45
Sep2013 $5.68
Sep2012 $6.31
Sep2011 $3.95
Sep2010 $2.16
Sep2009 $1.30
Sep2008 $0.97
Sep2007 $0.56
Sep2006 $0.32
Sep2005 $0.22
Sep2004 $0.05
Sep2003 $0.01
Sep2002 $0.01
Sep2001 -$0.01
Sep2000 $0.16
Sep1999 $0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.11
Sep2018 $9.75
Sep2017 $8.37
Sep2016 $7.70
Sep2015 $7.03
Sep2014 $5.60
Sep2013 $4.74
Sep2012 $3.83
Sep2011 $2.32
Sep2010 $1.36
Sep2009 $0.86
Sep2008 $0.57
Sep2007 $0.32
Sep2006 $0.18
Sep2005 $0.09
Sep2004 $0.03
Sep2003 $0.04

Recommended Reading:

Other ModernGraham posts about the company

Apple Inc Valuation – November 2018 $AAPL
Apple Inc Valuation – February 2018 $AAPL
Apple Inc Valuation – January 2017 $AAPL
Apple Inc Valuation – August 2016 $AAPL
Apple Inc Valuation – February 2016 $AAPL

Other ModernGraham posts about related companies

Maxim Integrated Products Inc Valuation – April 2019 #MXIM
Keysight Technologies Inc Valuation – April 2019 #KEYS
Lam Research Corp Valuation – April 2019 #LRCX
Emerson Electric Co Valuation – April 2019 #EMR
Skyworks Solutions Inc Valuation – March 2019 #SWKS
Garmin Ltd Valuation – March 2019 #GRMN
Hewlett Packard Enterprise Co Valuation – March 2019 #HPE
Fortive Corp Valuation – March 2019 #FTV
Analog Devices Inc Valuation – March 2019 #ADI
IPG Photonics Corp Valuation – March 2019 #IPGP

Disclaimer:

The author held a long position in AAPL 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.

Advance Auto Parts Inc Valuation – March 2019 #AAP

Company Profile (excerpt from Reuters): Advance Auto Parts, Inc., incorporated on August 1, 2001, provides automotive aftermarket parts in North America, serving do-it-for-me (Professional) and do-it-yourself (DIY), customers. The Company’s stores and branches offer a selection of brand name, original equipment manufacturer (OEM) and private label automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks. The Company serves its Professional and DIY customers through various channels ranging from traditional brick and mortar store locations to self-serving e-commerce sites. As of December 31, 2016, the Company operated 5,062 total stores and 127 branches primarily under the trade names Advance Auto Parts, Autopart International, Carquest and Worldpac. As of December 31, 2016, the Company’s Advance Auto Parts operations consisted of three geographic divisions, which included the operations of the stores operating under the Advance Auto Parts, Carquest and Autopart International trade names. The Company’s e-commerce platforms, primarily consisting of its online Websites and Professional ordering platforms, are part of its integrated operating approach of serving its Professional and DIY customers. The Company’s online Websites allow its DIY customers to pick up merchandise at a store or have their purchases shipped directly to them. The majority of the Company’s online DIY sales are picked up at store locations. Through the Company’s online ordering platforms, Professional customers can place orders with a designated store location for delivery to their places of business or pick-up.

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAP – March 2019

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 $12,221,885,012 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.57 Fail
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 39.57% Pass
6. Moderate PEmg Ratio PEmg < 20 25.61 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.52 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 1.57 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.48 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

EPSmg $6.66
MG Growth Estimate 1.58%
MG Value $77.67
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $96.55
MG Value based on 0% Growth $56.60
Market Implied Growth Rate 8.56%
Current Price $170.53
% of Intrinsic Value 219.56%

Advance Auto Parts, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. 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 $6.02 in 2015 to an estimated $6.66 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.56% 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 Advance Auto Parts, Inc. revealed the company was trading above its Graham Number of $92.34. The company pays a dividend of $0.24 per share, for a yield of 0.1% Its PEmg (price over earnings per share – ModernGraham) was 25.61, which was above the industry average of 22.49. Finally, the company was trading above its Net Current Asset Value (NCAV) of $8.08.

Advance Auto Parts, 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) $8.08
Graham Number $92.34
PEmg 25.61
Current Ratio 1.57
PB Ratio 3.52
Current Dividend $0.24
Dividend Yield 0.14%
Number of Consecutive Years of Dividend Growth 0

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 12/1/2018
Total Current Assets $6,082,454,000
Total Current Liabilities $3,885,950,000
Long-Term Debt $1,045,720,000
Total Assets $9,040,648,000
Intangible Assets $1,540,830,000
Total Liabilities $5,489,835,000
Shares Outstanding (Diluted Average) 73,328,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.78
Dec2018 $5.73
Dec2017 $6.42
Dec2016 $6.20
Dec2015 $6.40
Dec2014 $6.71
Dec2013 $5.32
Dec2012 $5.22
Dec2011 $5.11
Dec2010 $3.95
Dec2009 $2.83
Dec2008 $2.49
Dec2007 $2.28
Dec2006 $2.16
Dec2005 $2.13
Dec2004 $1.66
Dec2003 $1.11
Dec2002 $0.60
Dec2001 $0.13
Dec2000 $0.23
Dec1999 -$0.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.66
Dec2018 $6.16
Dec2017 $6.32
Dec2016 $6.17
Dec2015 $6.02
Dec2014 $5.64
Dec2013 $4.90
Dec2012 $4.44
Dec2011 $3.81
Dec2010 $3.02
Dec2009 $2.49
Dec2008 $2.26
Dec2007 $2.06
Dec2006 $1.81
Dec2005 $1.46
Dec2004 $1.00
Dec2003 $0.57

Recommended Reading:

Other ModernGraham posts about the company

Advance Auto Parts Inc Valuation – June 2018 $AAP
Advance Auto Parts Inc Valuation – August 2017 $AAP
Advance Auto Parts Inc Valuation – November 2016 $AAP
Advance Auto Parts Inc. Analysis – Initial Coverage $AAP

Other ModernGraham posts about related companies

LKQ Corp Valuation – March 2019 #LKQ
Aptiv PLC Valuation – March 2019 #APTV
Paccar Inc Valuation – March 2019 #PCAR
BorgWarner Inc Valuation – February 2019 $BWA
CarMax Inc Valuation – February 2019 $KMX
Ford Motor Co Valuation – February 2019 $F
General Motors Co Valuation – February 2019 $GM
O’Reilly Automotive Inc Valuation – February 2019 $ORLY
Goodyear Tire & Rubber Co Valuation – January 2019 $GT
Genuine Parts Co Valuation – January 2019 $GPC

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.

Mid-America Apartment Communities Inc Valuation – March 2019 #MAA

Company Profile (excerpt from Reuters): Mid-America Apartment Communities, Inc. (MAA), incorporated on September 22, 1993, is a multifamily focused, self-administered and self-managed real estate investment trust (REIT). The Company owns, operates, acquires and develops apartment communities primarily located in the Southeast and Southwest regions of the United States. It operates through three segments: Large market same store, Secondary market same store and Non-Same Store and Other. Its Large market same store communities are communities in markets with a population of at least one million and at least 1% of the total public multifamily REIT units that it has owned and that have been stabilized for at least a full 12 months. Its Secondary market same store communities are communities in markets with populations of more than one million but less than 1% of the total public multifamily REIT units or markets with populations of less than one million that it has owned and that have been stabilized for at least a full 12 months. Its Non-same store communities and other includes recent acquisitions and communities in development or lease-up communities.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MAA – March 2019

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 $12,056,183,749 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.08 Fail
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 52.37% Pass
6. Moderate PEmg Ratio PEmg < 20 44.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.89 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 0.08 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.93 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.39
MG Growth Estimate -2.51%
MG Value $8.32
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $34.69
MG Value based on 0% Growth $20.34
Market Implied Growth Rate 17.88%
Current Price $105.90
% of Intrinsic Value 1273.44%

Mid-America Apartment Communities Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.87 in 2015 to an estimated $2.39 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.88% 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 Mid-America Apartment Communities Inc revealed the company was trading above its Graham Number of $48.81. The company pays a dividend of $3.69 per share, for a yield of 3.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 44.27, which was below the industry average of 61.92, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-43.18.

Mid-America Apartment Communities Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$43.18
Graham Number $48.81
PEmg 44.27
Current Ratio 0.08
PB Ratio 1.89
Current Dividend $3.69
Dividend Yield 3.48%
Number of Consecutive Years of Dividend Growth 8

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 12/1/2018
Total Current Assets $34,259,000
Total Current Liabilities $413,850,000
Long-Term Debt $4,528,328,000
Total Assets $11,323,781,000
Intangible Assets $3,900,000
Total Liabilities $4,951,592,000
Shares Outstanding (Diluted Average) 113,881,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.96
Dec2018 $1.93
Dec2017 $2.86
Dec2016 $2.69
Dec2015 $4.41
Dec2014 $1.97
Dec2013 $2.25
Dec2012 $2.56
Dec2011 $1.31
Dec2010 $0.56
Dec2009 $0.85
Dec2008 $0.64
Dec2007 $1.01
Dec2006 $0.29
Dec2005 $0.25
Dec2004 $0.50
Dec2003 -$0.07
Dec2002 -$0.11
Dec2001 $0.72
Dec2000 $0.78
Dec1999 $0.93

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.39
Dec2018 $2.66
Dec2017 $2.97
Dec2016 $2.94
Dec2015 $2.87
Dec2014 $1.98
Dec2013 $1.83
Dec2012 $1.47
Dec2011 $0.91
Dec2010 $0.70
Dec2009 $0.71
Dec2008 $0.61
Dec2007 $0.53
Dec2006 $0.25
Dec2005 $0.24
Dec2004 $0.27
Dec2003 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Mid-America Apartment Communities Inc Valuation – June 2018 $MAA
Mid-America Apartment Communities Inc Valuation – Initial Coverage $MAA

Other ModernGraham posts about related companies

Extra Space Storage Inc Valuation – March 2019 #EXR
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Equity Residential Valuation – March 2019 #EQR
Prologis Inc Valuation – March 2019 #PLD
Duke Realty Corp Valuation – March 2019 $DRE
Realty Income Corp Valuation – February 2019 $O
Ventas Inc Valuation – February 2019 $VTR
SL Green Realty Corp Valuation – February 2019 $SLG
Regency Centers Corp Valuation – February 2019 $REG
Host Hotels & Resorts Inc Valuation – February 2019 $HST

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.

American Airlines Group Inc Valuation – March 2019 #AAL

Company Profile (excerpt from Reuters): American Airlines Group Inc., incorporated on February 16, 1982, is a holding company. The Company’s primary business activity is the operation of a network air carrier, providing scheduled air transportation for passengers and cargo. The Company operates through American segment, which provides air transportation for passengers and cargo. Together with its regional airline subsidiaries and third-party regional carriers operating as American Eagle, its airline operated an average of nearly 6,700 flights per day to nearly 350 destinations in more than 50 countries, principally from its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, District of Columbia, as of December 31, 2016. In the fiscal year ended December 31, 2016, approximately 199 million passengers boarded its mainline and regional flights.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAL – March 2019

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 $14,392,244,457 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.12 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 -141.07% Fail
6. Moderate PEmg Ratio PEmg < 20 7.09 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.26 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 1.12 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.67 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

EPSmg $4.52
MG Growth Estimate 15.00%
MG Value $174.07
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $65.56
MG Value based on 0% Growth $38.43
Market Implied Growth Rate -0.71%
Current Price $32.04
% of Intrinsic Value 18.41%

American Airlines Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.37 in 2015 to an estimated $4.52 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.71% annual earnings loss 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 above the price.

At the time of valuation, further research into American Airlines Group Inc revealed the company was trading below its Graham Number of $55.21. The company pays a dividend of $0.4 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 7.09, which was below the industry average of 10.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-86.27.

American Airlines Group 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) -$86.27
Graham Number $55.21
PEmg 7.09
Current Ratio 1.12
PB Ratio 1.26
Current Dividend $0.40
Dividend Yield 1.25%
Number of Consecutive Years of Dividend Growth 0

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 12/1/2018
Total Current Assets $19,257,000,000
Total Current Liabilities $17,121,000,000
Long-Term Debt $20,650,000,000
Total Assets $70,878,000,000
Intangible Assets $15,322,000,000
Total Liabilities $59,108,000,000
Shares Outstanding (Diluted Average) 461,916,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.50
Dec2018 $3.03
Dec2017 $2.61
Dec2016 $4.65
Dec2015 $11.07
Dec2014 $3.93
Dec2013 -$6.54
Dec2012 -$7.52
Dec2011 -$15.83
Dec2010 -$3.78
Dec2009 -$13.36
Dec2008 -$21.85
Dec2007 $4.77
Dec2006 $2.62
Dec2005 -$13.87
Dec2004 -$12.69
Dec2003 -$20.78
Dec2002 -$60.46
Dec2001 -$30.60
Dec2000 $13.47
Dec1999 $16.76

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.52
Dec2018 $4.37
Dec2017 $4.41
Dec2016 $3.91
Dec2015 $1.37
Dec2014 -$4.30
Dec2013 -$8.75
Dec2012 -$10.72
Dec2011 -$11.55
Dec2010 -$8.38
Dec2009 -$9.90
Dec2008 -$8.18
Dec2007 -$3.56
Dec2006 -$12.16
Dec2005 -$22.26
Dec2004 -$25.04
Dec2003 -$26.25

Recommended Reading:

Other ModernGraham posts about the company

American Airlines Group Inc Valuation – May 2018 $AAL
American Airlines Group Inc Valuation – February 2017 $AAL
American Airlines Group Inc Valuation – August 2016 $AAL
American Airlines Group Analysis – 2015 Initial Coverage $AAL

Other ModernGraham posts about related companies

Alaska Air Group Inc Valuation – February 2019 $ALK
Delta Air Lines Inc Valuation – January 2019 $DAL
United Continental Holdings Inc Valuation – January 2019 $UAL
JetBlue Airways Corp Valuation – August 2018 $JBLU
SkyWest Inc Valuation – July 2018 $SKYW
American Airlines Group Inc Valuation – May 2018 $AAL
Southwest Airlines Co Valuation – May 2018 $LUV
Alaska Air Group Inc Valuation – May 2018 $ALK
Delta Air Lines Inc Valuation – March 2018 $DAL
United Continental Holdings Inc Valuation – Initial Coverage $UAL

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.

Apple Inc Valuation – November 2018 $AAPL

Company Profile (excerpt from Reuters): Apple Inc., incorporated on January 3, 1977, designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players. The Company sells a range of related software, services, accessories, networking solutions and third-party digital content and applications. The Company’s segments include the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. The Americas segment includes both North and South America. The Europe segment includes European countries, India, the Middle East and Africa. The Greater China segment includes China, Hong Kong and Taiwan. The Rest of Asia Pacific segment includes Australia and the Asian countries not included in the Company’s other operating segments. The Company’s products and services include iPhone, iPad, Mac, iPod, Apple Watch, Apple TV, a portfolio of consumer and professional software applications, iPhone OS (iOS), OS X and watchOS operating systems, iCloud, Apple Pay and a range of accessory, service and support offerings.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAPL – November 2018

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 $970,291,506,431 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.12 Fail
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 174.94% Pass
6. Moderate PEmg Ratio PEmg < 20 18.44 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.25 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 1.12 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.48 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

 

EPSmg $11.09
MG Growth Estimate 8.65%
MG Value $286.14
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $160.81
MG Value based on 0% Growth $94.27
Market Implied Growth Rate 4.97%
Current Price $204.47
% of Intrinsic Value 71.46%

Apple Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $7.03 in 2015 to an estimated $11.09 for 2019. 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 the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Apple Inc. revealed the company was trading above its Graham Number of $81.34. The company pays a dividend of $2.72 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 18.44, which was below the industry average of 38.82, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.25.

Apple 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) -$26.25
Graham Number $81.34
PEmg 18.44
Current Ratio 1.12
PB Ratio 9.25
Current Dividend $2.72
Dividend Yield 1.33%
Number of Consecutive Years of Dividend Growth 7

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 9/1/2018
Total Current Assets $131,339,000,000
Total Current Liabilities $116,866,000,000
Long-Term Debt $93,735,000,000
Total Assets $365,725,000,000
Intangible Assets $0
Total Liabilities $258,578,000,000
Shares Outstanding (Diluted Average) 4,847,547,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.05
Sep2018 $11.91
Sep2017 $9.21
Sep2016 $8.31
Sep2015 $9.22
Sep2014 $6.45
Sep2013 $5.68
Sep2012 $6.31
Sep2011 $3.95
Sep2010 $2.16
Sep2009 $1.30
Sep2008 $0.97
Sep2007 $0.56
Sep2006 $0.32
Sep2005 $0.22
Sep2004 $0.05
Sep2003 $0.01
Sep2002 $0.01
Sep2001 -$0.01
Sep2000 $0.16
Sep1999 $0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $11.09
Sep2018 $9.75
Sep2017 $8.37
Sep2016 $7.70
Sep2015 $7.03
Sep2014 $5.60
Sep2013 $4.74
Sep2012 $3.83
Sep2011 $2.32
Sep2010 $1.36
Sep2009 $0.86
Sep2008 $0.57
Sep2007 $0.32
Sep2006 $0.18
Sep2005 $0.09
Sep2004 $0.03
Sep2003 $0.04

Recommended Reading:

Other ModernGraham posts about the company

Apple Inc Valuation – February 2018 $AAPL
Apple Inc Valuation – January 2017 $AAPL
Apple Inc Valuation – August 2016 $AAPL
Apple Inc Valuation – February 2016 $AAPL
My Personal Holdings: Apple Inc. – September 2015 Update $AAPL

Other ModernGraham posts about related companies

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Cray Inc Valuation – August 2018 $CRAY
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Disclaimer:

The author held a long position in AAPL but 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.

Axon Enterprises Inc Valuation – October 2018 $AAXN

Company Profile (excerpt from Reuters): Axon Enterprise, Inc., formerly TASER International, Inc., incorporated on January 5, 2001, is engaged in development, manufacture and sale of conducted electrical weapons (CEWs) for use by law enforcement, military, corrections and private security personnel, and by private individuals for personal defense. The Company is also engaged in development of connected wearable on-officer cameras, which utilize its cloud-based digital evidence management solution. The Company operates through two segments: the sale of CEWs, accessories, and other related products and services (the TASER Weapons segment), and the Axon business, focused on devices, wearables, applications, cloud and mobile products (the Axon segment).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAXN – October 2018

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 $3,776,783,573 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.03 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
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 -563.16% Fail
6. Moderate PEmg Ratio PEmg < 20 204.51 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.23 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 4.03 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 Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.32
MG Growth Estimate 4.20%
MG Value $5.35
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $4.59
MG Value based on 0% Growth $2.69
Market Implied Growth Rate 98.00%
Current Price $64.76
% of Intrinsic Value 1209.40%

Axon Enterprise Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. 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 $0.25 in 2014 to an estimated $0.32 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 98% 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 Axon Enterprise Inc revealed the company was trading above its Graham Number of $5.72. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 204.51, which was above the industry average of 59.09. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.14.

Axon Enterprise 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) $5.14
Graham Number $5.72
PEmg 204.51
Current Ratio 4.03
PB Ratio 8.23
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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 6/1/2018
Total Current Assets $486,966,000
Total Current Liabilities $120,898,000
Long-Term Debt $0
Total Assets $642,397,000
Intangible Assets $45,126,000
Total Liabilities $193,555,000
Shares Outstanding (Diluted Average) 57,054,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.46
Dec2017 $0.10
Dec2016 $0.32
Dec2015 $0.36
Dec2014 $0.37
Dec2013 $0.34
Dec2012 $0.27
Dec2011 -$0.12
Dec2010 -$0.07
Dec2009 $0.00
Dec2008 $0.06
Dec2007 $0.23
Dec2006 -$0.07
Dec2005 $0.02
Dec2004 $0.30
Dec2003 $0.10
Dec2002 $0.01
Dec2001 $0.01
Dec2000 -$0.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.32
Dec2017 $0.26
Dec2016 $0.34
Dec2015 $0.31
Dec2014 $0.25
Dec2013 $0.15
Dec2012 $0.05
Dec2011 -$0.04
Dec2010 $0.01
Dec2009 $0.05
Dec2008 $0.09
Dec2007 $0.11
Dec2006 $0.06
Dec2005 $0.11
Dec2004 $0.13
Dec2003 $0.03

Recommended Reading:

Other ModernGraham posts about the company

TASER International Inc Valuation – Initial Coverage $TASR

Other ModernGraham posts about related companies

Cubic Corp Valuation – September 2018 $CUB
KLX Inc Valuation – August 2018 $KLXI
Kaman Corp Valuation – August 2018 $KAMN
Raytheon Co Valuation – June 2018 $RTN
General Dynamics Corp Valuation – June 2018 $GD
TransDigm Group Inc Valuation – June 2018 $TDG
Northrop Grumman Corp Valuation – May 2018 $NOC
Rockwell Collins Inc Valuation – May 2018 $COL
L3 Technologies Inc Valuation – March 2018 $LLL
Textron Inc Valuation – March 2018 $TXT

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.

Advance Auto Parts Inc Valuation – June 2018 $AAP

Company Profile (excerpt from Reuters): Advance Auto Parts, Inc., incorporated on August 1, 2001, provides automotive aftermarket parts in North America, serving do-it-for-me (Professional) and do-it-yourself (DIY), customers. The Company’s stores and branches offer a selection of brand name, original equipment manufacturer (OEM) and private label automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks. The Company serves its Professional and DIY customers through various channels ranging from traditional brick and mortar store locations to self-serving e-commerce sites. As of December 31, 2016, the Company operated 5,062 total stores and 127 branches primarily under the trade names Advance Auto Parts, Autopart International, Carquest and Worldpac. As of December 31, 2016, the Company’s Advance Auto Parts operations consisted of three geographic divisions, which included the operations of the stores operating under the Advance Auto Parts, Carquest and Autopart International trade names. The Company’s e-commerce platforms, primarily consisting of its online Websites and Professional ordering platforms, are part of its integrated operating approach of serving its Professional and DIY customers. The Company’s online Websites allow its DIY customers to pick up merchandise at a store or have their purchases shipped directly to them. The majority of the Company’s online DIY sales are picked up at store locations. Through the Company’s online ordering platforms, Professional customers can place orders with a designated store location for delivery to their places of business or pick-up.

AAP Chart

AAP data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAP – June 2018

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 $10,032,004,293 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.61 Fail
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 61.82% Pass
6. Moderate PEmg Ratio PEmg < 20 21.22 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.87 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 1.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.49 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

EPSmg $6.46
MG Growth Estimate 2.17%
MG Value $82.90
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $93.66
MG Value based on 0% Growth $54.90
Market Implied Growth Rate 6.36%
Current Price $137.07
% of Intrinsic Value 165.35%

Advance Auto Parts, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. 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 $5.64 in 2014 to an estimated $6.46 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.36% 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 Advance Auto Parts, Inc. revealed the company was trading above its Graham Number of $82.94. The company pays a dividend of $0.24 per share, for a yield of 0.2% Its PEmg (price over earnings per share – ModernGraham) was 21.22, which was above the industry average of 17.9. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.4.

Advance Auto Parts, 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 $82.94
PEmg 21.22
Current Ratio 1.61
PB Ratio 2.87
Current Dividend $0.24
Dividend Yield 0.18%
Number of Consecutive Years of Dividend Growth 0

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 4/1/2018
Total Current Assets $5,617,516,000
Total Current Liabilities $3,480,139,000
Long-Term Debt $1,044,755,000
Total Assets $8,614,953,000
Intangible Assets $1,576,807,000
Total Liabilities $5,068,332,000
Shares Outstanding (Diluted Average) 74,205,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.62
Dec2017 $6.42
Dec2016 $6.20
Dec2015 $6.40
Dec2014 $6.71
Dec2013 $5.32
Dec2012 $5.22
Dec2011 $5.11
Dec2010 $3.95
Dec2009 $2.83
Dec2008 $2.49
Dec2007 $2.28
Dec2006 $2.16
Dec2005 $2.13
Dec2004 $1.66
Dec2003 $1.11
Dec2002 $0.60
Dec2001 $0.13
Dec2000 $0.23
Dec1999 -$0.30
Dec1998 -$0.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.46
Dec2017 $6.32
Dec2016 $6.17
Dec2015 $6.02
Dec2014 $5.64
Dec2013 $4.90
Dec2012 $4.44
Dec2011 $3.81
Dec2010 $3.02
Dec2009 $2.49
Dec2008 $2.26
Dec2007 $2.06
Dec2006 $1.81
Dec2005 $1.46
Dec2004 $1.00
Dec2003 $0.57
Dec2002 $0.24

Recommended Reading:

Other ModernGraham posts about the company

Advance Auto Parts Inc Valuation – August 2017 $AAP
Advance Auto Parts Inc Valuation – November 2016 $AAP
Advance Auto Parts Inc. Analysis – Initial Coverage $AAP

Other ModernGraham posts about related companies

LKQ Corporation – June 2018 $LKQ
Aptiv PLC Valuation – Initial Coverage May 2018 $APTV
BorgWarner Inc Valuation – April 2018 $BWA
CarMax Inc Valuation – April 2018 $KMX
Ford Motor Company Valuation – April 2018 $F
General Motors Co Valuation – April 2018 $GM
O’Reilly Automotive Inc Valuation – April 2018 $ORLY
Goodyear Tire & Rubber Co Valuation – March 2018 $GT
Genuine Parts Co Valuation – March 2018 $GPC
AutoZone Inc Valuation – February 2018 $AZO

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.

Aaron’s Inc Valuation – June 2018 $AAN

Company Profile (excerpt from Reuters): Aaron’s, Inc. (Aaron’s), incorporated on March 28, 1962, is an omnichannel provider of lease-purchase solutions. The Company engages in the sales and lease ownership and specialty retailing of furniture, consumer electronics, home appliances and accessories through its Company-operated and franchised stores in Canada, as well as its e-commerce platform, Aarons.com. The Company’s segments include Sales and Lease Ownership, Progressive Finance Holdings, LLC (Progressive), Dent-A-Med, Inc., doing business as the HELPcard (DAMI), Franchise and Manufacturing. Its stores carry brands, such as Samsung, Frigidaire, Hewlett-Packard, LG, Whirlpool, Simmons, Philips, Ashley and Magnavox. As of December 31, 2016, the Company had 1,864 Aaron’s stores, consisted of 1,165 Company-operated stores in 28 states, the District of Columbia and Canada, and 699 independently-owned franchised stores in 46 states and Canada. The Company owns or has rights to various trademarks and trade names used in its business, including Aaron’s, Aaron’s Sales & Lease Ownership, Progressive, Dent-A-Med, the HELPcard and Woodhaven Furniture Industries.

AAN Chart

AAN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAN – June 2018

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 $2,863,035,408 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.56 Fail
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 117.69% Pass
6. Moderate PEmg Ratio PEmg < 20 14.17 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.67 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 1.56 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.47 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

EPSmg $2.87
MG Growth Estimate 13.37%
MG Value $101.20
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $41.63
MG Value based on 0% Growth $24.41
Market Implied Growth Rate 2.84%
Current Price $40.70
% of Intrinsic Value 40.22%

Aaron’s, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. 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 $1.52 in 2014 to an estimated $2.87 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.84% 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 above the price.

At the time of valuation, further research into Aaron’s, Inc. revealed the company was trading below its Graham Number of $42.55. The company pays a dividend of $0.11 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 14.17, which was below the industry average of 37.1, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.75.

Aaron’s, Inc. fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.75
Graham Number $42.55
PEmg 14.17
Current Ratio 1.56
PB Ratio 1.67
Current Dividend $0.11
Dividend Yield 0.28%
Number of Consecutive Years of Dividend Growth 15

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 3/1/2018
Total Current Assets $404,385,000
Total Current Liabilities $259,476,000
Long-Term Debt $358,519,000
Total Assets $2,719,009,000
Intangible Assets $857,046,000
Total Liabilities $962,817,000
Shares Outstanding (Diluted Average) 72,018,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.26
Dec2017 $4.06
Dec2016 $1.91
Dec2015 $1.86
Dec2014 $1.08
Dec2013 $1.58
Dec2012 $2.25
Dec2011 $1.43
Dec2010 $1.44
Dec2009 $1.37
Dec2008 $1.11
Dec2007 $0.97
Dec2006 $1.00
Dec2005 $0.76
Dec2004 $0.69
Dec2003 $0.49
Dec2002 $0.38
Dec2001 $0.18
Dec2000 $0.41
Dec1999 $0.37
Dec1998 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.87
Dec2017 $2.48
Dec2016 $1.71
Dec2015 $1.62
Dec2014 $1.52
Dec2013 $1.70
Dec2012 $1.68
Dec2011 $1.35
Dec2010 $1.26
Dec2009 $1.13
Dec2008 $0.98
Dec2007 $0.87
Dec2006 $0.76
Dec2005 $0.60
Dec2004 $0.49
Dec2003 $0.38
Dec2002 $0.33

Recommended Reading:

Other ModernGraham posts about the company

Aaron’s Inc Valuation – November 2016 $AAN
Aaron’s Inc Valuation – May 2016 $AAN
Aaron’s Inc. Valuation – October 2015 Update $AAN
Aaron’s Inc. Analysis – Initial Coverage $AAN

Other ModernGraham posts about related companies

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TJX Companies Inc Valuation – May 2018 $TJX
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Tapestry Inc Valuation – April 2018 $TPR
Dollar General Corp Valuation – April 2018 $DG
Tiffany & Co. Valuation – April 2018 $TIF
Best Buy Co Inc Valuation – April 2018 $BBY
Macy’s Inc Valuation – April 2018 $M

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.

Mid-America Apartment Communities Inc Valuation – June 2018 $MAA

Company Profile (excerpt from Reuters): Mid-America Apartment Communities, Inc. (MAA), incorporated on September 22, 1993, is a multifamily focused, self-administered and self-managed real estate investment trust (REIT). The Company owns, operates, acquires and develops apartment communities primarily located in the Southeast and Southwest regions of the United States. It operates through three segments: Large market same store, Secondary market same store and Non-Same Store and Other. Its Large market same store communities are communities in markets with a population of at least one million and at least 1% of the total public multifamily REIT units that it has owned and that have been stabilized for at least a full 12 months. Its Secondary market same store communities are communities in markets with populations of more than one million but less than 1% of the total public multifamily REIT units or markets with populations of less than one million that it has owned and that have been stabilized for at least a full 12 months. Its Non-same store communities and other includes recent acquisitions and communities in development or lease-up communities.

MAA Chart

MAA data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MAA – June 2018

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 $10,843,184,325 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.23 Fail
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 172.79% Pass
6. Moderate PEmg Ratio PEmg < 20 36.05 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.66 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 0.23 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -14.92 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

EPSmg $2.64
MG Growth Estimate 5.02%
MG Value $49.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $38.33
MG Value based on 0% Growth $22.47
Market Implied Growth Rate 13.77%
Current Price $95.29
% of Intrinsic Value 194.47%

Mid-America Apartment Communities Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.98 in 2014 to an estimated $2.64 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.77% 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 Mid-America Apartment Communities Inc revealed the company was trading above its Graham Number of $48.45. The company pays a dividend of $3.48 per share, for a yield of 3.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 36.05, which was below the industry average of 49.08, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-42.36.

Mid-America Apartment Communities Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$42.36
Graham Number $48.45
PEmg 36.05
Current Ratio 0.23
PB Ratio 1.66
Current Dividend $3.48
Dividend Yield 3.65%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

ModernGraham tagged articles Morningstar
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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $88,810,000
Total Current Liabilities $390,380,000
Long-Term Debt $4,498,851,000
Total Assets $11,417,376,000
Intangible Assets $0
Total Liabilities $4,897,013,000
Shares Outstanding (Diluted Average) 113,507,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.87
Dec2017 $2.86
Dec2016 $2.69
Dec2015 $4.41
Dec2014 $1.97
Dec2013 $2.25
Dec2012 $2.56
Dec2011 $1.31
Dec2010 $0.56
Dec2009 $0.85
Dec2008 $0.64
Dec2007 $1.01
Dec2006 $0.29
Dec2005 $0.25
Dec2004 $0.50
Dec2003 -$0.07
Dec2002 -$0.11
Dec2001 $0.72
Dec2000 $0.78
Dec1999 $0.93
Dec1998 $0.82

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.64
Dec2017 $2.97
Dec2016 $2.94
Dec2015 $2.87
Dec2014 $1.98
Dec2013 $1.83
Dec2012 $1.47
Dec2011 $0.91
Dec2010 $0.70
Dec2009 $0.71
Dec2008 $0.61
Dec2007 $0.53
Dec2006 $0.25
Dec2005 $0.24
Dec2004 $0.27
Dec2003 $0.26
Dec2002 $0.49

Recommended Reading:

Other ModernGraham posts about the company

Mid-America Apartment Communities Inc Valuation – Initial Coverage $MAA

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Equity Residential Valuation – June 2018 $EQR
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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.

American Airlines Group Inc Valuation – May 2018 $AAL

Company Profile (excerpt from Reuters): American Airlines Group Inc., incorporated on February 16, 1982, is a holding company. The Company’s primary business activity is the operation of a network air carrier, providing scheduled air transportation for passengers and cargo. The Company operates through American segment, which provides air transportation for passengers and cargo. Together with its regional airline subsidiaries and third-party regional carriers operating as American Eagle, its airline operated an average of nearly 6,700 flights per day to nearly 350 destinations in more than 50 countries, principally from its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, District of Columbia, as of December 31, 2016. In the fiscal year ended December 31, 2016, approximately 199 million passengers boarded its mainline and regional flights.

AAL Chart

AAL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAL – May 2018

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 $20,729,798,638 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.57 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 -140.07% Fail
6. Moderate PEmg Ratio PEmg < 20 8.45 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -20.64 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 0.57 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.99 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

EPSmg $5.24
MG Growth Estimate 15.00%
MG Value $201.74
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $75.98
MG Value based on 0% Growth $44.54
Market Implied Growth Rate -0.02%
Current Price $44.28
% of Intrinsic Value 21.95%

American Airlines Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-4.3 in 2014 to an estimated $5.24 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.02% annual earnings loss 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 above the price.

At the time of valuation, further research into American Airlines Group Inc revealed the company was trading above its Graham Number of $28.91. The company pays a dividend of $0.4 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 8.45, which was below the industry average of 15.91, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-94.03.

American Airlines Group 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) -$94.03
Graham Number $28.91
PEmg 8.45
Current Ratio 0.57
PB Ratio -20.64
Current Dividend $0.40
Dividend Yield 0.90%
Number of Consecutive Years of Dividend Growth 0

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 3/1/2018
Total Current Assets $9,673,000,000
Total Current Liabilities $17,008,000,000
Long-Term Debt $21,946,000,000
Total Assets $53,280,000,000
Intangible Assets $6,284,000,000
Total Liabilities $54,298,000,000
Shares Outstanding (Diluted Average) 474,598,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.50
Dec2017 $3.90
Dec2016 $4.81
Dec2015 $11.07
Dec2014 $3.93
Dec2013 -$6.54
Dec2012 -$7.52
Dec2011 -$15.83
Dec2010 -$3.78
Dec2009 -$13.36
Dec2008 -$21.85
Dec2007 $4.77
Dec2006 $2.62
Dec2005 -$13.87
Dec2004 -$12.69
Dec2003 -$20.78
Dec2002 -$60.46
Dec2001 -$30.60
Dec2000 $13.47
Dec1999 $16.76
Dec1998 $20.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.24
Dec2017 $4.88
Dec2016 $3.97
Dec2015 $1.37
Dec2014 -$4.30
Dec2013 -$8.75
Dec2012 -$10.72
Dec2011 -$11.55
Dec2010 -$8.38
Dec2009 -$9.90
Dec2008 -$8.18
Dec2007 -$3.56
Dec2006 -$12.16
Dec2005 -$22.26
Dec2004 -$25.04
Dec2003 -$26.25
Dec2002 -$22.04

Recommended Reading:

Other ModernGraham posts about the company

American Airlines Group Inc Valuation – February 2017 $AAL
American Airlines Group Inc Valuation – August 2016 $AAL
American Airlines Group Analysis – 2015 Initial Coverage $AAL

Other ModernGraham posts about related companies

Southwest Airlines Co Valuation – May 2018 $LUV
Alaska Air Group Inc Valuation – May 2018 $ALK
Delta Air Lines Inc Valuation – March 2018 $DAL
United Continental Holdings Inc Valuation – Initial Coverage $UAL
American Airlines Group Inc Valuation – February 2017 $AAL
Southwest Airlines Co Valuation – February 2017 $LUV
JetBlue Airways Corporation Valuation – Initial Coverage $JBLU
SkyWest Inc Valuation – Initial Coverage $SKYW
Alaska Air Group Inc Valuation – December 2016 $ALK
American Airlines Group Inc Valuation – August 2016 $AAL

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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