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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Kohl’s Corporation Valuation – June 2018 $KSS
Dollar Tree Inc Valuation – May 2018 $DLTR
TJX Companies Inc Valuation – May 2018 $TJX
Tractor Supply Co Valuation – April 2018 $TSCO
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.

Aaron’s Inc Valuation – November 2016 $AAN

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 – August 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 Aaron’s Inc (AAN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Aaron’s, Inc. is a specialty retailer of furniture, consumer electronics, computers, appliances and household accessories. The Company’s operating segments include Sales and Lease Ownership, Progressive, HomeSmart, DAMI, Franchise, Manufacturing and Others. The Company’s store-based operations engage in the lease ownership and retail sale of a range of products, such televisions, computers, tablets, mobile phones, living room, dining room and bedroom furniture, mattresses, washers, dryers and refrigerators. Its stores carry brands, such as Samsung, Frigidaire, Hewlett-Packard, LG, Whirlpool, Simmons, Philips, JVC, Sharp and Magnavox. It has approximately 2,040 stores, which consist of over 1,300 Company-operated stores in approximately 30 states, and over 730 independently owned franchised stores in approximately 47 states and Canada. DAMI serves customers that may not qualify for traditional prime lending and desire to purchase goods and services from participating merchants.

AAN Chart

AAN data by YCharts

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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-aan-november-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 $2,099,321,895 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.46 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 43.19% Pass
6. Moderate PEmg Ratio PEmg < 20 16.68 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.46 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 2.46 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.57 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

aan-value-chart-november-2016

EPSmg $1.74
MG Growth Estimate 0.57%
MG Value $16.76
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $25.22
MG Value based on 0% Growth $14.78
Market Implied Growth Rate 4.09%
Current Price $29.01
% of Intrinsic Value 173.06%

Aaron’s, 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 Overvalued after growing its EPSmg (normalized earnings) from $1.68 in 2012 to an estimated $1.74 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.09% 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 Aaron’s, Inc. revealed the company was trading below its Graham Number of $30.3. The company pays a dividend of $0.1 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 16.68, which was below the industry average of 49.91, 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 $5.12.

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

Stage 3: Information for Further Research

aan-charts-november-2016

Net Current Asset Value (NCAV) $5.12
Graham Number $30.30
PEmg 16.68
Current Ratio 2.46
PB Ratio 1.46
Current Dividend $0.10
Dividend Yield 0.34%
Number of Consecutive Years of Dividend Growth 14

[/not-level-free]

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 9/1/2016
Total Current Assets $1,468,747,000
Total Current Liabilities $598,124,000
Long-Term Debt $496,170,000
Total Assets $2,551,390,000
Intangible Assets $783,829,000
Total Liabilities $1,094,294,000
Shares Outstanding (Diluted Average) 73,199,000

Earnings Per Share History

Next Fiscal Year Estimate $2.00
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
Dec1997 $0.28
Dec1996 $0.23

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.74
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
Dec2001 $0.30
Dec2000 $0.35

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Tractor Supply Company Valuation – August 2016 $TSCO
Fossil Group Inc Valuation – August 2016 $FOSL
Target Corp Valuation – August 2016 $TGT
TJX Companies Inc Valuation – August 2016 $TJX
Dollar General Corp Valuation – August 2016 $DG
Coach Inc Valuation – August 2016 $COH
Tiffany & Co Valuation – August 2016 $TIF
Best Buy Co Valuation – July 2016 $BBY
GameStop Corp Valuation – July 2016 $GME
Urban Outfitters Inc Valuation – July 2016 $URBN

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 – May 2016 $AAN

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 Aaron’s Inc (AAN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Aaron’s, Inc. is a specialty retailer of furniture, consumer electronics, computers, appliances and household accessories. The Company’s operating segments include Sales and Lease Ownership, Progressive, HomeSmart, DAMI, Franchise, Manufacturing and Others. The Company’s store-based operations engage in the lease ownership and retail sale of a range of products, such televisions, computers, tablets, mobile phones, living room, dining room and bedroom furniture, mattresses, washers, dryers and refrigerators. Its stores carry brands, such as Samsung, Frigidaire, Hewlett-Packard, LG, Whirlpool, Simmons, Philips, JVC, Sharp and Magnavox. It has approximately 2,040 stores, which consist of over 1,300 Company-operated stores in approximately 30 states, and over 730 independently owned franchised stores in approximately 47 states and Canada. DAMI serves customers that may not qualify for traditional prime lending and desire to purchase goods and services from participating merchants.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAN – 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 $1,708,505,560 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.30 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 44.79% Pass
6. Moderate PEmg Ratio PEmg < 20 13.48 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.23 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 2.30 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.65 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

AAN value chart May 2016

EPSmg $1.77
MG Growth Estimate 0.80%
MG Value $17.85
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $25.61
MG Value based on 0% Growth $15.01
Market Implied Growth Rate 2.49%
Current Price $23.81
% of Intrinsic Value 133.39%

Aaron’s, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the small size. 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 Overvalued after growing its EPSmg (normalized earnings) from $1.68 in 2012 to an estimated $1.77 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.49% 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.

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

Stage 3: Information for Further Research

AAN charts May 2016

Net Current Asset Value (NCAV) $3.84
Graham Number $30.23
PEmg 13.48
Current Ratio 2.30
PB Ratio 1.23
Current Dividend $0.10
Dividend Yield 0.40%
Number of Consecutive Years of Dividend Growth 11

[/not-level-free]

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
Total Current Assets $1,411,647,000
Total Current Liabilities $612,804,000
Long-term Debt $518,041,000
Total Assets $2,548,767,000
Intangible Assets $792,922,000
Total Liabilities $1,130,845,000
Shares Outstanding (Diluted Average) 73,217,000

Earnings Per Share History

Next Fiscal Year Estimate $2.08
12/1/2015 $1.86
12/1/2014 $1.08
12/1/2013 $1.58
12/1/2012 $2.25
12/1/2011 $1.43
12/1/2010 $1.44
12/1/2009 $1.37
12/1/2008 $1.11
12/1/2007 $0.99
12/1/2006 $0.98
12/1/2005 $0.76
12/1/2004 $0.69
12/1/2003 $0.49
12/1/2002 $0.38
12/1/2001 $0.18
12/1/2000 $0.41
12/1/1999 $0.37
12/1/1998 $0.31
12/1/1997 $0.28
12/1/1996 $0.23

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.77
12/1/2015 $1.62
12/1/2014 $1.52
12/1/2013 $1.70
12/1/2012 $1.68
12/1/2011 $1.35
12/1/2010 $1.26
12/1/2009 $1.13
12/1/2008 $0.98
12/1/2007 $0.87
12/1/2006 $0.76
12/1/2005 $0.60
12/1/2004 $0.49
12/1/2003 $0.38
12/1/2002 $0.33
12/1/2001 $0.30
12/1/2000 $0.35

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Nordstrom Inc Valuation – May 2016 $JWN
Tractor Supply Company Valuation – May 2016 $TSCO
Fossil Group Inc Stock Valuation – February 2016 $FOSL
TJX Companies Inc Valuation – February 2016 Update $TJX
Coach Inc Valuation – February 2016 Update $COH
Tiffany & Company Valuation – February 2016 Update $TIF
Urban Outfitters Inc Valuation – January 2016 Update $URBN
TJX Companies Inc Valuation – February 2016 Update $TJX
Coach Inc Valuation – February 2016 Update $COH
Tiffany & Company Valuation – February 2016 Update $TIF

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 – October 2015 Update $AAN

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 Most Undervalued Companies for the Defensive Investor – October 2015.  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 Aaron’s Inc. (AAN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Aaron’s, Inc. (Aaron’s) is a specialty retailer of furniture, consumer electronics, computers, appliances and household accessories. The Company operates through five segments: The Aaron’s Sales and Lease Ownership segment, which offers furniture, electronics, appliances and computers to consumers on a monthly payment basis; Progressive, which is a virtual lease-to-own company that provides lease-purchase solutions; The HomeSmart segment, which offers furniture, electronics, appliances and computers to consumers on a weekly payment basis; Franchise, which awards franchises and supports franchisees of its sales and lease ownership concept, and Manufacturing segment, which manufactures upholstered furniture and bedding for use by Company-operated and franchised stores. Its products include flat-screen televisions, computers, tablets, living room, dining room and bedroom furniture, among others. Its brands include Samsung, Frigidaire, Hewlett-Packard, LG, Maytag, RCA and JVC.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAN – October 2015

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 $2,486,532,265 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.30 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 56.49% Pass
6. Moderate PEmg Ratio PEmg < 20 19.93 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.90 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 2.30 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.70 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

AAN value Chart October 2015

EPSmg $1.72
MG Growth Estimate 4.14%
MG Value $28.87
Opinion Overvalued
MG Value based on 3% Growth $24.93
MG Value based on 0% Growth $14.61
Market Implied Growth Rate 5.71%
Current Price $34.26
% of Intrinsic Value 118.69%

Aaron’s Inc. qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.35 in 2011 to an estimated $1.72 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 5.71% 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.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Aaron’s Inc. (AAN)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

AAN Charts October 2015

Net Current Asset Value (NCAV) $2.86
Graham Number $29.70
PEmg 19.93
Current Ratio 2.30
PB Ratio 1.90
Dividend Yield 0.26%
Number of Consecutive Years of Dividend Growth 10

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $1,246,116,000
Total Current Liabilities $542,760,000
Long-Term Debt $494,858,000
Total Assets $2,354,707,000
Intangible Assets $818,140,000
Total Liabilities $1,037,618,000
Shares Outstanding (Diluted Average) 72,965,000

Earnings Per Share History

Next Fiscal Year Estimate $2.16
Dec14 $1.08
Dec13 $1.58
Dec12 $2.25
Dec11 $1.43
Dec10 $1.44
Dec09 $1.37
Dec08 $1.11
Dec07 $0.97
Dec06 $1.00
Dec05 $0.76
Dec04 $0.69
Dec03 $0.49
Dec02 $0.38
Dec01 $0.18
Dec00 $0.41
Dec99 $0.37
Dec98 $0.31
Dec97 $0.28
Dec96 $0.23
Dec95 $0.04

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.72
Dec14 $1.52
Dec13 $1.70
Dec12 $1.68
Dec11 $1.35
Dec10 $1.26
Dec09 $1.13
Dec08 $0.98
Dec07 $0.87
Dec06 $0.76
Dec05 $0.60
Dec04 $0.49
Dec03 $0.38
Dec02 $0.33
Dec01 $0.30
Dec00 $0.35
Dec99 $0.30

Recommended Reading:

Other ModernGraham posts about the company

Aaron’s Inc. Analysis – Initial Coverage $AAN

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TJX Companies Inc. Valuation – October 2015 Update $TJX
Tiffany and Company Valuation – October 2015 Update $TIF
Urban Outfitters Inc. Analysis – October 2015 Update $URBN
Staples Inc. Analysis – September 2015 Update $SPLS
Fossil Group Inc. Analysis – September 2015 Update $FOSL
Ross Stores Inc. Analysis – August 2015 Update $ROST

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. Analysis – Initial Coverage $AAN

Aarons_Logo_Blue_CMYK

Aaron’s Inc. passes the initial requirements of both the Defensive Investor and the Enterprising Investor. Specifically, the Defensive Investor is only initially concerned with the high PEmg ratio, while the Enterprising Investor has no initial concerns. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $1.35 in 2011 to only an estimated $1.74 for 2015. This level of demonstrated growth does not support the market’s implied estimate for annual earnings growth of 6.29% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 5.77% annually, but the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, and returns an estimate of intrinsic value well below the current price, indicating that Aaron’s is overvalued at the present time.

Read the full valuation on Guru Focus!


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. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

5 Undervalued Companies for Value Investors with a Low Beta – January 2019

imageThere are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected five undervalued companies with a low beta reviewed by ModernGraham.

A company’s beta indicates the correlation at which its price moves in relation to the market.  A beta less than 1 indicates a company is less volatile than the market.

Each company has been determined to be suitable for either the Defensive Investor or the Enterprising Investor according to the ModernGraham approach. Defensive Investors are defined as investors who need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk.

With a low beta, Mr. Market may not hit these companies as harshly in a downturn, so be sure to check them out in depth!

 

H & R Block Inc (HRB)

H & R Block Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB 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 $1.55 in 2015 to an estimated $2.05 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.95% 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 H & R Block Inc revealed the company was trading above its Graham Number of $8.61. The company pays a dividend of $0.96 per share, for a yield of 3.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.39, which was below the industry average of 18, 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 $-6.68.

H & R Block Inc performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

LGI Homes Inc (LGIH)

LGI Homes 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 poor dividend history. 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 Undervalued after growing its EPSmg (normalized earnings) from $0.74 in 2014 to an estimated $4.43 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.26% 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 LGI Homes Inc revealed the company was trading above its Graham Number of $55.97. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 13.01, which was below the industry average of 25.8, 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 $21.67.

LGI Homes Inc performs fairly well in the ModernGraham grading system, scoring a B-.  (See the full valuation)

Tyson Foods, Inc. (TSN)

Tyson Foods, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years. 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 Undervalued after growing its EPSmg (normalized earnings) from $2.13 in 2014 to an estimated $5.52 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.07% 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 Tyson Foods, Inc. revealed the company was trading below its Graham Number of $73.4. The company pays a dividend of $0.9 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 12.65, which was below the industry average of 24.35, 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 $-26.88.

Tyson Foods, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Constellation Brands, Inc. Class A (STZ)

Constellation Brands, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and 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 Fairly Valued after growing its EPSmg (normalized earnings) from $4.88 in 2015 to an estimated $8.7 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 8.5% 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 Constellation Brands, Inc. revealed the company was trading above its Graham Number of $94.52. The company pays a dividend of $2.08 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 25.5, which was above the industry average of 24.61. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-45.22.

Constellation Brands, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.  (See the full valuation)

Aaron’s, Inc. (AAN)

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. performs fairly well in the ModernGraham grading system, scoring an B.  (See the full valuation)

 

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.

McKesson Corp Valuation – June 2018 $MCK

Company Profile (excerpt from Reuters): McKesson Corporation, incorporated on July 7, 1994, is a healthcare supply chain management solutions, retail pharmacy, community oncology and specialty care, and healthcare information technology company. The Company provides medicines, medical products and healthcare services by partnering with pharmaceutical manufacturers, providers, pharmacies, governments and other organizations in healthcare. It operates through two segments: McKesson Distribution Solutions and McKesson Technology Solutions.

MCK Chart

MCK data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MCK – 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 $29,995,548,994 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.01 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 145.53% Pass
6. Moderate PEmg Ratio PEmg < 20 13.52 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.98 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 1.01 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 14.97 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 $10.76
MG Growth Estimate 13.30%
MG Value $377.58
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $155.96
MG Value based on 0% Growth $91.43
Market Implied Growth Rate 2.51%
Current Price $145.37
% of Intrinsic Value 38.50%

McKesson Corporation 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 has concerns regarding the level of debt relative to the 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 $5.7 in 2015 to an estimated $10.76 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.51% 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 McKesson Corporation revealed the company was trading above its Graham Number of $120.24. The company pays a dividend of $1.3 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 13.52, 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 $-64.02.

McKesson Corporation performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$64.02
Graham Number $120.24
PEmg 13.52
Current Ratio 1.01
PB Ratio 2.98
Current Dividend $1.30
Dividend Yield 0.89%
Number of Consecutive Years of Dividend Growth 5

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 $37,136,000,000
Total Current Liabilities $36,685,000,000
Long-Term Debt $6,751,000,000
Total Assets $60,381,000,000
Intangible Assets $15,026,000,000
Total Liabilities $50,324,000,000
Shares Outstanding (Diluted Average) 206,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.24
Mar2018 $0.32
Mar2017 $22.73
Mar2016 $9.70
Mar2015 $6.27
Mar2014 $5.41
Mar2013 $5.59
Mar2012 $5.59
Mar2011 $4.57
Mar2010 $4.62
Mar2009 $2.95
Mar2008 $3.32
Mar2007 $2.99
Mar2006 $2.38
Mar2005 -$0.53
Mar2004 $2.19
Mar2003 $1.88
Mar2002 $1.43
Mar2001 -$0.17
Mar2000 $2.55
Mar1999 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.76
Mar2018 $9.30
Mar2017 $12.51
Mar2016 $7.11
Mar2015 $5.70
Mar2014 $5.33
Mar2013 $5.08
Mar2012 $4.62
Mar2011 $3.99
Mar2010 $3.55
Mar2009 $2.75
Mar2008 $2.46
Mar2007 $1.94
Mar2006 $1.44
Mar2005 $0.96
Mar2004 $1.66
Mar2003 $1.33

Recommended Reading:

Other ModernGraham posts about the company

McKesson Corp Valuation – August 2017 $MCK
McKesson Corp Valuation – July 2016 $MCK
47 Companies in the Spotlight This Week – 5/16/15
McKesson Corporation Annual Valuation – 2015 $MCK
18 Companies in the Spotlight This Week – 5/17/14

Other ModernGraham posts about related companies

JC Penney Company Valuation – June 2018 $JCP
Shoe Carnival Inc Valuation – June 2018 $SCVL
Aaron’s Inc Valuation – June 2018 $AAN
GameStop Corp Valuation – June 2018 $GME
Urban Outfitters Inc Valuation – June 2018 $URBN
Ulta Beauty Inc Valuation – June 2018 $ULTA
Kohl’s Corporation Valuation – June 2018 $KSS
Dollar Tree Inc Valuation – May 2018 $DLTR
TJX Companies Inc Valuation – May 2018 $TJX
Tractor Supply Co Valuation – April 2018 $TSCO

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.

Big 5 Sporting Goods Corp Valuation – June 2018 $BGFV

Company Profile (excerpt from Reuters): Big 5 Sporting Goods Corporation, incorporated on October 31, 1997, is a sporting goods retailer in the western United States. The Company offers a range of products in a sporting goods store format. The Company also offers products online through its e-commerce platform. The Company’s product mix includes athletic shoes, apparel and accessories, as well as a range of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, winter and summer recreation, and roller sports. The Company purchases merchandise from sporting goods equipment, athletic footwear and apparel manufacturers. It offers various brands, such as adidas, Coleman, Footjoy, JanSport, Rawlings, Spalding, Asics, Columbia, Franklin, Lifetime, Razor, Speedo, Bearpaw, Crocs, Gildan, Mizuno, Rollerblade and Timex.

BGFV Chart

BGFV data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BGFV – 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 $184,177,204 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.17 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 -39.92% Fail
6. Moderate PEmg Ratio PEmg < 20 16.27 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.98 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 2.17 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.36 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 $0.53
MG Growth Estimate -4.25%
MG Value $4.41
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $7.67
MG Value based on 0% Growth $4.49
Market Implied Growth Rate 3.88%
Current Price $8.60
% of Intrinsic Value 195.02%

Big 5 Sporting Goods Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years. 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 $0.83 in 2014 to an estimated $0.53 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.88% 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 Big 5 Sporting Goods Corporation revealed the company was trading below its Graham Number of $11.49. The company pays a dividend of $0.6 per share, for a yield of 7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.27, 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 $4.41.

Big 5 Sporting Goods Corporation performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $4.41
Graham Number $11.49
PEmg 16.27
Current Ratio 2.17
PB Ratio 0.98
Current Dividend $0.60
Dividend Yield 6.98%
Number of Consecutive Years of Dividend Growth 2

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 $352,053,000
Total Current Liabilities $162,544,000
Long-Term Debt $68,901,000
Total Assets $442,690,000
Intangible Assets $0
Total Liabilities $259,705,000
Shares Outstanding (Diluted Average) 20,942,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.67
Dec2017 $0.05
Dec2016 $0.77
Dec2015 $0.70
Dec2014 $0.67
Dec2013 $1.27
Dec2012 $0.69
Dec2011 $0.53
Dec2010 $0.94
Dec2009 $1.01
Dec2008 $0.64
Dec2007 $1.25
Dec2006 $1.35
Dec2005 $1.21
Dec2004 $1.47
Dec2003 $1.03
Dec2002 $0.48
Dec2001 $0.42
Dec2000 $0.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.53
Dec2017 $0.54
Dec2016 $0.79
Dec2015 $0.79
Dec2014 $0.83
Dec2013 $0.91
Dec2012 $0.74
Dec2011 $0.80
Dec2010 $0.97
Dec2009 $1.02
Dec2008 $1.08
Dec2007 $1.28
Dec2006 $1.24
Dec2005 $1.09
Dec2004 $0.93
Dec2003 $0.59
Dec2002 $0.32

Recommended Reading:

Other ModernGraham posts about the company

Big 5 Sporting Goods Corp Valuation – Initial Coverage $BGFV

Other ModernGraham posts about related companies

JC Penney Company Valuation – June 2018 $JCP
Shoe Carnival Inc Valuation – June 2018 $SCVL
Aaron’s Inc Valuation – June 2018 $AAN
GameStop Corp Valuation – June 2018 $GME
Urban Outfitters Inc Valuation – June 2018 $URBN
Ulta Beauty Inc Valuation – June 2018 $ULTA
Kohl’s Corporation Valuation – June 2018 $KSS
Dollar Tree Inc Valuation – May 2018 $DLTR
TJX Companies Inc Valuation – May 2018 $TJX
Tractor Supply Co Valuation – April 2018 $TSCO

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.

Amazon.com Inc Valuation – June 2018 $AMZN

Company Profile (excerpt from Reuters): Amazon.com, Inc., incorporated on May 28, 1996, offers a range of products and services through its Websites. The Company operates through three segments: North America, International and Amazon Web Services (AWS). The Company’s products include merchandise and content that it purchases for resale from vendors and those offered by third-party sellers. It also manufactures and sells electronic devices. The Company, through its subsidiary, Whole Foods Market, Inc., offers healthy and organic food and staples across its stores. The Company also offers a range of products like whole trade bananas, organic avocados, organic large brown eggs, organic responsibly-farmed salmon and tilapia, organic baby kale and baby lettuce, animal-welfare-rated 85% lean ground beef, creamy and crunchy almond butter, organic gala and fuji apples, organic rotisserie chicken.

AMZN Chart

AMZN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMZN – 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 $817,117,294,796 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.06 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 227.44% Pass
6. Moderate PEmg Ratio PEmg < 20 303.31 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 26.65 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 1.06 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.85 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.55
MG Growth Estimate 15.00%
MG Value $213.75
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $80.50
MG Value based on 0% Growth $47.19
Market Implied Growth Rate 147.41%
Current Price $1,683.99
% of Intrinsic Value 787.82%

Amazon.com, 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 over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years, and the lack of dividends. 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 $0.32 in 2014 to an estimated $5.55 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 147.41% 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 Amazon.com, Inc. revealed the company was trading above its Graham Number of $104.02. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 303.31, which was above the industry average of 37.1. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-88.49.

Amazon.com, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$88.49
Graham Number $104.02
PEmg 303.31
Current Ratio 1.06
PB Ratio 26.65
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 3/1/2018
Total Current Assets $50,829,000,000
Total Current Liabilities $48,045,000,000
Long-Term Debt $24,640,000,000
Total Assets $126,362,000,000
Intangible Assets $13,388,000,000
Total Liabilities $94,899,000,000
Shares Outstanding (Diluted Average) 498,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.40
Dec2017 $6.15
Dec2016 $4.90
Dec2015 $1.25
Dec2014 -$0.52
Dec2013 $0.59
Dec2012 -$0.09
Dec2011 $1.37
Dec2010 $2.53
Dec2009 $2.04
Dec2008 $1.49
Dec2007 $1.12
Dec2006 $0.45
Dec2005 $0.84
Dec2004 $1.39
Dec2003 $0.08
Dec2002 -$0.39
Dec2001 -$1.56
Dec2000 -$4.02
Dec1999 -$2.20
Dec1998 -$0.42

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.55
Dec2017 $3.58
Dec2016 $1.94
Dec2015 $0.48
Dec2014 $0.32
Dec2013 $0.92
Dec2012 $1.21
Dec2011 $1.81
Dec2010 $1.86
Dec2009 $1.42
Dec2008 $1.09
Dec2007 $0.85
Dec2006 $0.64
Dec2005 $0.51
Dec2004 -$0.07
Dec2003 -$1.07
Dec2002 -$1.67

Recommended Reading:

Other ModernGraham posts about the company

Amazon.com Inc Valuation – August 2017 $AMZN
Amazon Inc Valuation – July 2016 $AMZN
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Amazon.com Inc. Annual Valuation – 2015 $AMZN
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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.

Fossil Group Inc Valuation – June 2018 $FOSL

Company Profile (excerpt from Reuters): Fossil Group, Inc., incorporated on December 26, 1991, is a design, marketing and distribution company that specializes in consumer fashion accessories. The Company’s segments include Americas, Europe and Asia. Each segment includes sales to wholesale and distributor customers, and sales through the Company-owned retail stores and e-commerce activities based on the location of the selling entity. The Americas segment includes sales to customers based in Canada, Latin America and the United States. The Europe segment includes sales to customers based in European countries, the Middle East and Africa. The Asia segment includes sales to customers based in Australia, China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan and Thailand. The Company’s principal offerings include a line of men’s and women’s fashion watches and jewelry, handbags, small leather goods, belts, sunglasses and soft accessories. The Company’s products are distributed through various distribution channels, including wholesale in countries where it has a physical presence, direct to the consumer (D2C) through its retail stores and commercial Websites and through third-party distributors in countries where it do not maintain a physical presence.

FOSL Chart

FOSL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FOSL – 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 $1,398,383,974 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.21 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 -196.46% Fail
6. Moderate PEmg Ratio PEmg < 20 -15.40 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.63 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 2.21 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.53 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$1.84
MG Growth Estimate -4.25%
MG Value $3.43
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$26.75
MG Value based on 0% Growth -$15.68
Market Implied Growth Rate -11.95%
Current Price $28.40
% of Intrinsic Value 826.87%

Fossil 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 small size, 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 has concerns regarding the lack of earnings stability or growth over the last five years, and the lack of dividends. 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 $6.1 in 2014 to an estimated $-1.84 for 2018. This level of negative earnings does not support a positive valuation.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 Fossil Group Inc revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -15.4, 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 $3.43.

Fossil Group 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) $3.43
Graham Number $0.00
PEmg -15.40
Current Ratio 2.21
PB Ratio 2.63
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,156,424,000
Total Current Liabilities $523,897,000
Long-Term Debt $335,536,000
Total Assets $1,515,671,000
Intangible Assets $83,880,000
Total Liabilities $989,116,000
Shares Outstanding (Diluted Average) 48,712,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.84
Dec2017 -$9.87
Dec2016 $1.63
Dec2015 $4.51
Dec2014 $7.10
Dec2013 $6.56
Dec2012 $5.59
Dec2011 $4.61
Dec2010 $3.77
Dec2009 $2.07
Dec2008 $2.02
Dec2007 $1.75
Dec2006 $1.13
Dec2005 $1.04
Dec2004 $1.23
Dec2003 $0.92
Dec2002 $0.81
Dec2001 $0.62
Dec2000 $0.76
Dec1999 $0.69
Dec1998 $0.44

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.84
Dec2017 -$0.57
Dec2016 $4.41
Dec2015 $5.76
Dec2014 $6.10
Dec2013 $5.24
Dec2012 $4.26
Dec2011 $3.34
Dec2010 $2.52
Dec2009 $1.80
Dec2008 $1.59
Dec2007 $1.32
Dec2006 $1.08
Dec2005 $1.01
Dec2004 $0.95
Dec2003 $0.79
Dec2002 $0.71

Recommended Reading:

Other ModernGraham posts about the company

Fossil Group Inc Valuation – March 2017 $FOSL
10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017
10 Low PE Stock Picks for the Enterprising Investor – March 2017
5 Companies for Enterprising Investors Near 52 Week Lows – March 2017
Best Stocks Below Their Graham Number – February 2017

Other ModernGraham posts about related companies

JC Penney Company Valuation – June 2018 $JCP
Shoe Carnival Inc Valuation – June 2018 $SCVL
Aaron’s Inc Valuation – June 2018 $AAN
GameStop Corp Valuation – June 2018 $GME
Urban Outfitters Inc Valuation – June 2018 $URBN
Ulta Beauty Inc Valuation – June 2018 $ULTA
Kohl’s Corporation Valuation – June 2018 $KSS
Dollar Tree Inc Valuation – May 2018 $DLTR
TJX Companies Inc Valuation – May 2018 $TJX
Tractor Supply Co Valuation – April 2018 $TSCO

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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