Aecom Valuation – July 2018 $ACM

Company Profile (excerpt from Reuters): AECOM, incorporated on January 31, 1980, is engaged in designing, building, financing and operating infrastructure assets for governments, businesses and organizations. The Company’s segments include design and consulting services (DCS), construction services (CS) and management services (MS). Its DCS segment is engaged in planning, consulting, architectural and engineering design services to commercial and government clients in major end markets, such as transportation, facilities, environmental, energy, water and government. Its CS segment is engaged in construction services, including building construction and energy, infrastructure and industrial construction, primarily in the Americas. Its MS segment is engaged in programing and facilitating management and maintenance, training, logistics, consulting, technical assistance, and systems integration and information technology services, primarily for agencies of the United States government and other national governments.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ACM – July 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 $5,242,272,720 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.23 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 -34.86% Fail
6. Moderate PEmg Ratio PEmg < 20 29.49 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.23 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 1.23 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.98 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.12
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $16.22
MG Value based on 0% Growth $9.51
Market Implied Growth Rate 10.50%
Current Price $32.99
% of Intrinsic Value N/A

Aecom 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 PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and 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 $1.75 in 2014 to an estimated $1.12 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.5% 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 below the price.

At the time of valuation, further research into Aecom revealed the company was trading above its Graham Number of $26.5. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 29.49, which was above the industry average of 24.98. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-21.5.

Aecom 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) -$21.50
Graham Number $26.50
PEmg 29.49
Current Ratio 1.23
PB Ratio 1.23
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 3/1/2018
Total Current Assets $6,923,960,000
Total Current Liabilities $5,641,841,000
Long-Term Debt $3,814,976,000
Total Assets $14,617,332,000
Intangible Assets $6,310,772,000
Total Liabilities $10,352,707,000
Shares Outstanding (Diluted Average) 159,495,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.23
Sep2017 $2.13
Sep2016 $0.62
Sep2015 -$1.04
Sep2014 $2.33
Sep2013 $2.35
Sep2012 -$0.52
Sep2011 $2.33
Sep2010 $2.05
Sep2009 $1.73
Sep2008 $1.41
Sep2007 $1.15
Sep2006 $0.74
Sep2005 $1.68
Sep2004 $1.57
Sep2003 $0.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.12
Sep2017 $1.13
Sep2016 $0.67
Sep2015 $0.83
Sep2014 $1.75
Sep2013 $1.50
Sep2012 $1.18
Sep2011 $1.93
Sep2010 $1.63
Sep2009 $1.39
Sep2008 $1.25
Sep2007 $1.17
Sep2006 $1.10
Sep2005 $1.11
Sep2004 $0.70
Sep2003 $0.22

Recommended Reading:

Other ModernGraham posts about the company

Aecom Valuation – December 2016 $ACM
Aecom Valuation – November 2016 $ACM
5 Speculative and Overvalued Companies to Avoid – August 2015
Aecom Analysis – Initial Coverage $ACM

Other ModernGraham posts about related companies

Lowe’s Companies Inc Valuation – June 2018 $LOW
Acuity Brands Inc Valuation – June 2018 $AYI
Quanta Services Inc Valuation – May 2018 $PWR
Mohawk Industries Inc Valuation – May 2018 $MHK
Jacobs Engineering Group Inc Valuation – May 2018 $JEC
Masco Corp Valuation – May 2018 $MAS
D.R. Horton Inc Valuation – May 2018 $DHI
Martin Marietta Materials Inc Valuation – May 2018 $MLM
Fluor Corporation Valuation – April 2018 $FLR
Lennar Corp Valuation – April 2018 $LEN

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.

Aecom Valuation – December 2016 $ACM

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 Aecom (ACM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): AECOM is engaged in designing, building, financing and operating infrastructure assets for governments, businesses and organizations. The Company’s segments include design and consulting services (DCS), construction services (CS) and management services (MS). Its DCS segment is engaged in planning, consulting, architectural and engineering design services to commercial and government clients in major end markets, such as transportation, facilities, environmental, energy, water and government. Its CS segment is engaged in construction services, including building construction and energy, infrastructure and industrial construction, primarily in the Americas. Its MS segment is engaged in programing and facilitating management and maintenance, training, logistics, consulting, technical assistance, and systems integration and information technology services, primarily for agencies of the Unite States government and other national governments.

ACM Chart

ACM 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.

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

Downloadable PDF version of this valuation:

moderngraham-valuation-of-acm-december-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 $5,787,627,687 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.13 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 -54.14% Fail
6. Moderate PEmg Ratio PEmg < 20 27.48 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.73 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 1.13 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.40 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 Fail

Stage 2: Determination of Intrinsic Value

acm-value-chart-december-2016

EPSmg $1.36
MG Growth Estimate -1.41%
MG Value $7.70
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $19.69
MG Value based on 0% Growth $11.54
Market Implied Growth Rate 9.49%
Current Price $37.32
% of Intrinsic Value 484.51%

Aecom 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 PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and 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 $1.5 in 2013 to an estimated $1.36 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.49% 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 Aecom revealed the company was trading above its Graham Number of $37.12. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 27.48, which was below the industry average of 28.02, 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 $-27.93.

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

Stage 3: Information for Further Research

acm-charts-december-2016

Net Current Asset Value (NCAV) -$27.93
Graham Number $37.12
PEmg 27.48
Current Ratio 1.13
PB Ratio 1.73
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/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 $6,000,771,000
Total Current Liabilities $5,304,756,000
Long-Term Debt $3,758,966,000
Total Assets $13,726,745,000
Intangible Assets $6,303,282,000
Total Liabilities $10,359,824,000
Shares Outstanding (Diluted Average) 156,073,000

Earnings Per Share History

Next Fiscal Year Estimate $2.80
Sep2016 $0.62
Sep2015 -$1.04
Sep2014 $2.33
Sep2013 $2.35
Sep2012 -$0.52
Sep2011 $2.33
Sep2010 $2.05
Sep2009 $1.73
Sep2008 $1.41
Sep2007 $1.15
Sep2006 $0.74
Sep2005 $1.68
Sep2004 $1.57
Sep2003 $0.65

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.36
Sep2016 $0.67
Sep2015 $0.83
Sep2014 $1.75
Sep2013 $1.50
Sep2012 $1.18
Sep2011 $1.93
Sep2010 $1.63
Sep2009 $1.39
Sep2008 $1.25
Sep2007 $1.17
Sep2006 $1.10
Sep2005 $1.11
Sep2004 $0.70
Sep2003 $0.22

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – August 2015
Aecom Analysis – Initial Coverage $ACM

Other ModernGraham posts about related companies

Quanta Services Inc Valuation – August 2016 $PWR
Jacobs Engineering Group Inc Valuation – August 2016 $JEC
PPG Industries Inc Valuation – August 2016 $PPG
D.R. Horton Inc Valuation – August 2016 $DHI
Martin Marietta Materials Inc Valuation – August 2016 $MLM
Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI

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.

Aecom Valuation – November 2016 $ACM

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 Aecom (ACM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): AECOM is engaged in designing, building, financing and operating infrastructure assets for governments, businesses and organizations. The Company’s segments include design and consulting services (DCS), construction services (CS) and management services (MS). Its DCS segment is engaged in planning, consulting, architectural and engineering design services to commercial and government clients in major end markets, such as transportation, facilities, environmental, energy, water and government. Its CS segment is engaged in construction services, including building construction and energy, infrastructure and industrial construction, primarily in the Americas. Its MS segment is engaged in programing and facilitating management and maintenance, training, logistics, consulting, technical assistance, and systems integration and information technology services, primarily for agencies of the Unite States government and other national governments.

ACM Chart

ACM data by YCharts

[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. 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.

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

Downloadable PDF version of this valuation:

moderngraham-valuation-of-acm-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 $5,482,471,544 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.13 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 -55.49% Fail
6. Moderate PEmg Ratio PEmg < 20 27.24 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.68 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 1.13 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.40 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 Fail

Stage 2: Determination of Intrinsic Value

acm-value-chart-november-2016

EPSmg $1.33
MG Growth Estimate -1.65%
MG Value $6.95
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $19.35
MG Value based on 0% Growth $11.34
Market Implied Growth Rate 9.37%
Current Price $36.35
% of Intrinsic Value 523.23%

Aecom 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 PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and 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 $1.5 in 2013 to an estimated $1.33 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.37% 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 Aecom revealed the company was trading below its Graham Number of $36.68. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 27.24, which was below the industry average of 28.02, 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 $-27.93.

Aecom receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

acm-charts-november-2016

Net Current Asset Value (NCAV) -$27.93
Graham Number $36.68
PEmg 27.24
Current Ratio 1.13
PB Ratio 1.68
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/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 $6,000,771,000
Total Current Liabilities $5,304,756,000
Long-Term Debt $3,758,966,000
Total Assets $13,726,745,000
Intangible Assets $6,303,282,000
Total Liabilities $10,359,824,000
Shares Outstanding (Diluted Average) 156,073,000

Earnings Per Share History

Next Fiscal Year Estimate $2.73
Sep2016 $0.62
Sep2015 -$1.04
Sep2014 $2.33
Sep2013 $2.35
Sep2012 -$0.52
Sep2011 $2.33
Sep2010 $2.05
Sep2009 $1.73
Sep2008 $1.41
Sep2007 $1.15
Sep2006 $0.74
Sep2005 $1.68
Sep2004 $1.57
Sep2003 $0.65

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.33
Sep2016 $0.67
Sep2015 $0.83
Sep2014 $1.75
Sep2013 $1.50
Sep2012 $1.18
Sep2011 $1.93
Sep2010 $1.63
Sep2009 $1.39
Sep2008 $1.25
Sep2007 $1.17
Sep2006 $1.10
Sep2005 $1.11
Sep2004 $0.70
Sep2003 $0.22

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – August 2015
Aecom Analysis – Initial Coverage $ACM

Other ModernGraham posts about related companies

Quanta Services Inc Valuation – August 2016 $PWR
Jacobs Engineering Group Inc Valuation – August 2016 $JEC
PPG Industries Inc Valuation – August 2016 $PPG
D.R. Horton Inc Valuation – August 2016 $DHI
Martin Marietta Materials Inc Valuation – August 2016 $MLM
Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI

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.

Aecom Analysis – Initial Coverage $ACM

AECOM_logoBenjamin 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 5 Most Undervalued Companies for the Defensive Investor – July 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 Aecom (ACM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): AECOM is a provider of professional technical and management support services for commercial and government clients around the world. The Company provides planning, consulting, architectural and engineering design, and program and construction management services for a range of projects, including highways, airports, bridges, mass transit systems, government and commercial buildings, water and wastewater facilities, and power transmission and distribution. The Company also provides program and facilities management and maintenance, training, logistics, security and other support services, primarily for agencies of the United States government. It operates in two segments: Professional Technical Services and Management Support Services. Effective July 10, 2014, it acquired ACE International Consultants SL, a Madrid-based provider of consulting services. In July 2014, it acquired Hunt Construction Group, adding to AECOM’s construction services business.

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To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
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[level-mg-stocks-screens-subscriber]

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 0/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $30.90
MG Value $2.67
MG Opinion Overvalued
Value Based on 3% Growth $21.76
Value Based on 0% Growth $12.76
Market Implied Growth Rate 6.05%
Net Current Asset Value (NCAV) -$30.11
PEmg 20.59
Current Ratio 1.34
PB Ratio 1.38

Balance Sheet – March 2015

Current Assets $5,985,000,000
Current Liabilities $4,461,000,000
Total Debt $4,692,000,000
Total Assets $14,016,000,000
Intangible Assets $6,520,000,000
Total Liabilities $10,586,000,000
Outstanding Shares 152,800,000

Earnings Per Share

2015 (estimate) $0.97
2014 $2.33
2013 $2.35
2012 -$0.52
2011 $2.33
2010 $2.05
2009 $1.73
2008 $1.41
2007 $1.15
2006 $0.74
2005 $1.68

Earnings Per Share – ModernGraham

2015 (estimate) $1.50
2014 $1.75
2013 $1.50
2012 $1.18
2011 $1.93
2010 $1.63

Dividend History
Aecom does not pay a dividend.

Free Cash Flow

Conclusion:

Aecom does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, lack of dividends, and the high PEmg ratio.  The Enterprising Investor is concerned by the level of debt relative to the current assets, the lack of dividends, and the insufficient earnings growth or stability over the last five years.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a speculative attitude.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $1.93 in 2011 to an estimated $1.50 for 2015.  This level of earnings growth does not support the market’s implied estimate of 6.05% annual earnings decrease over the next 7-10 years, and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return 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 Aecom (ACM)?  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.

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.

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

 

Home Depot Inc Valuation – November 2018 $HD

Company Profile (excerpt from Reuters): The Home Depot, Inc. (The Home Depot), incorporated on June 29, 1978, is a home improvement retailer. The Company sells an assortment of building materials, home improvement products, and lawn and garden products, and provides various services. The Home Depot stores averaged approximately 104,000 square feet of enclosed space, with over 24,000 additional square feet of outside garden area, as of January 29, 2017. The Home Depot stores serve three primary customer groups: do-it-yourself (DIY) customers, do-it-for-me (DIFM) customers and professional customers. The Company had approximately 2,278 stores located throughout the United States, including the Commonwealth of Puerto Rico and the territories of the United States Virgin Islands and Guam, Canada and Mexico, as of January 29, 2017.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HD – 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 $202,535,298,071 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.09 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 288.26% Pass
6. Moderate PEmg Ratio PEmg < 20 23.52 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 153.02 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 1.09 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 14.46 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 $7.53
MG Growth Estimate 15.00%
MG Value $289.75
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $109.13
MG Value based on 0% Growth $63.97
Market Implied Growth Rate 7.51%
Current Price $177.02
% of Intrinsic Value 61.09%

Home Depot 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 and PB ratios. 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 $3.64 in 2015 to an estimated $7.53 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.51% 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 Home Depot Inc revealed the company was trading above its Graham Number of $16.6. The company pays a dividend of $3.56 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 23.52, which was above the industry average of 20.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-21.1.

Home Depot 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) -$21.10
Graham Number $16.60
PEmg 23.52
Current Ratio 1.09
PB Ratio 153.02
Current Dividend $3.56
Dividend Yield 2.01%
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 10/1/2018
Total Current Assets $19,809,000,000
Total Current Liabilities $18,196,000,000
Long-Term Debt $23,332,000,000
Total Assets $45,200,000,000
Intangible Assets $2,258,000,000
Total Liabilities $43,880,000,000
Shares Outstanding (Diluted Average) 1,141,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.75
Jan2018 $7.29
Jan2017 $6.45
Jan2016 $5.46
Jan2015 $4.71
Jan2014 $3.76
Jan2013 $3.00
Jan2012 $2.47
Jan2011 $2.01
Jan2010 $1.57
Jan2009 $1.34
Jan2008 $2.37
Jan2007 $2.79
Jan2006 $2.72
Jan2005 $2.26
Jan2004 $1.88
Jan2003 $1.56
Jan2002 $1.29
Jan2001 $1.10
Jan2000 $1.00
Jan1999 $0.71

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.53
Jan2018 $6.12
Jan2017 $5.25
Jan2016 $4.39
Jan2015 $3.64
Jan2014 $2.92
Jan2013 $2.36
Jan2012 $2.01
Jan2011 $1.86
Jan2010 $1.91
Jan2009 $2.15
Jan2008 $2.50
Jan2007 $2.46
Jan2006 $2.18
Jan2005 $1.81
Jan2004 $1.51
Jan2003 $1.26

Recommended Reading:

Other ModernGraham posts about the company

Home Depot Inc Valuation – February 2018 $HD
Home Depot Inc Valuation – February 2017 $HD
Home Depot Inc. Valuation – November 2015 Update $HD
30 Companies in the Spotlight This Week – 11/15/14
Home Depot Inc. Annual Valuation – 2014 $HD

Other ModernGraham posts about related companies

Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ
Aecon Group Inc Valuation – July 2018 $TSE:ARE
Aecom Valuation – July 2018 $ACM

Disclaimer:

The author held a long position in HD 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.

Cavco Industries Inc Valuation – September 2018 $CVCO

Company Profile (excerpt from Reuters): Cavco Industries, Inc., incorporated on January 14, 2003, designs and produces factory-built homes. The Company operates through two segments: factory-built housing, which includes wholesale and retail systems-built housing operations, and financial services, which includes manufactured housing consumer finance and insurance. The Company’s factory-built homes are primarily distributed through a network of independent and the Company-owned retailers, planned community operators and residential developers. The Company markets its products under the brands, including Cavco Homes, Fleetwood Homes, Palm Harbor Homes, Fairmont Homes and Chariot Eagle. The Company is also a builder of park model recreational vehicle (RVs), vacation cabins and systems-built commercial structures, as well as modular homes built primarily under the Nationwide Homes brand.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CVCO – September 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 $2,291,046,820 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.44 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 771.15% Pass
6. Moderate PEmg Ratio PEmg < 20 44.84 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.92 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 2.44 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.13 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 $5.63
MG Growth Estimate 15.00%
MG Value $216.93
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $81.70
MG Value based on 0% Growth $47.89
Market Implied Growth Rate 18.17%
Current Price $252.65
% of Intrinsic Value 116.46%

Cavco Industries, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability 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 $1.86 in 2015 to an estimated $5.63 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 18.17% 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 Cavco Industries, Inc. revealed the company was trading above its Graham Number of $90.95. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 44.84, which was above the industry average of 25.8. Finally, the company was trading above its Net Current Asset Value (NCAV) of $22.81.

Cavco Industries, 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) $22.81
Graham Number $90.95
PEmg 44.84
Current Ratio 2.44
PB Ratio 4.92
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 $429,237,000
Total Current Liabilities $175,626,000
Long-Term Debt $33,884,000
Total Assets $693,561,000
Intangible Assets $82,936,000
Total Liabilities $217,874,000
Shares Outstanding (Diluted Average) 9,267,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.27
Mar2018 $6.68
Mar2017 $4.17
Mar2016 $3.15
Mar2015 $2.64
Mar2014 $1.94
Mar2013 $0.71
Mar2012 $2.19
Mar2011 $0.41
Mar2010 -$0.52
Mar2009 $0.07
Mar2008 $0.95
Mar2007 $1.74
Mar2006 $2.23
Mar2005 $1.54
Mar2004 $0.97

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.63
Mar2018 $4.45
Mar2017 $3.06
Mar2016 $2.38
Mar2015 $1.86
Mar2014 $1.29
Mar2013 $0.84
Mar2012 $0.81
Mar2011 $0.25
Mar2010 $0.42
Mar2009 $1.02
Mar2008 $1.50
Mar2007 $1.61
Mar2006 $1.35
Mar2005 $0.77
Mar2004 $0.32

Recommended Reading:

Other ModernGraham posts about the company

6 Best Stocks for Value Investors This Week – 3/26/17
Cavco Industries Inc Valuation – Initial Coverage $CVCO

Other ModernGraham posts about related companies

LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ
Aecon Group Inc Valuation – July 2018 $TSE:ARE
Aecom Valuation – July 2018 $ACM
Lowe’s Companies Inc Valuation – June 2018 $LOW

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.

LGI Homes Inc Valuation – September 2018 $LGIH

Company Profile (excerpt from Reuters): LGI Homes, Inc., incorporated on June 26, 2013, is a homebuilder and land developer. The Company is engaged in the design, construction, marketing and sale of new homes in markets in Texas, Arizona, Florida, Georgia, New Mexico, South Carolina, North Carolina, Colorado, Washington and Tennessee. The Company operates through five segments: the Texas division, the Southwest division, the Southeast division, the Florida division and the Northwest division. The Texas division includes homebuilding operations in Houston, Dallas/Fort Worth, San Antonio and Austin locations. The Southwest division includes homebuilding operations in Phoenix, Tucson, Albuquerque, Denver and Colorado Springs locations. The Southeast division includes homebuilding operations in Atlanta, Charlotte and Nashville locations. The Florida division includes homebuilding operations in Tampa, Orlando, Fort Myers and Jacksonville locations. The Northwest division includes homebuilding operations in Seattle location.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LGIH – September 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 $1,307,283,805 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 47733.33% Pass
6. Moderate PEmg Ratio PEmg < 20 13.01 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 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 2.21 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.10 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 $4.43
MG Growth Estimate 15.00%
MG Value $170.45
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $64.20
MG Value based on 0% Growth $37.63
Market Implied Growth Rate 2.26%
Current Price $57.60
% of Intrinsic Value 33.79%

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-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $21.67
Graham Number $55.97
PEmg 13.01
Current Ratio 2.21
PB Ratio 2.53
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 $1,172,890,000
Total Current Liabilities $529,853,000
Long-Term Debt $67,235,000
Total Assets $1,199,919,000
Intangible Assets $12,018,000
Total Liabilities $631,237,000
Shares Outstanding (Diluted Average) 25,001,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.21
Dec2017 $4.73
Dec2016 $3.41
Dec2015 $2.44
Dec2014 $1.33
Dec2013 $0.34
Dec2012 $1.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.43
Dec2017 $3.17
Dec2016 $2.17
Dec2015 $1.38
Dec2014 $0.74
Dec2013 $0.39
Dec2012 $0.35

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for Value Investors with a Low Beta – July 2017
Stocks Trading Closest to Net Current Asset Value – April 2017
Best Stocks Below Their Graham Number – March 2017
5 Best Stocks for Value Investors This Week – 3/18/17
LGI Homes Inc Valuation – Initial Coverage $LGIH

Other ModernGraham posts about related companies

Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ
Aecon Group Inc Valuation – July 2018 $TSE:ARE
Aecom Valuation – July 2018 $ACM
Lowe’s Companies Inc Valuation – June 2018 $LOW
Acuity Brands Inc Valuation – June 2018 $AYI
Quanta Services Inc Valuation – May 2018 $PWR

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.

Stantec Inc Valuation – August 2018 $TSE-STN

Company Profile (excerpt from Reuters): Stantec Inc. is a provider of professional services in the area of infrastructure and facilities for clients in the public and private sectors. The Company’s operates through four segments Consulting Services-Canada, Consulting Services-United States, Consulting Services-Global and Construction Services. The Company’s services include engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, construction services, project management, and project economics, from initial project concept and planning through to design, construction, commissioning, maintenance, decommissioning and remediation. The Company provides professional consulting services in engineering, architecture, interior design, landscape architecture, surveying, environmental services, project management and project economics in the area of infrastructure and facilities, principally under fee-for-service agreements with clients.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-STN – August 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 $3,760,000,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.69 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 125.73% Pass
6. Moderate PEmg Ratio PEmg < 20 23.44 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.90 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 1.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.22 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 $1.40
MG Growth Estimate 0.70%
MG Value $13.90
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $20.35
MG Value based on 0% Growth $11.93
Market Implied Growth Rate 7.47%
Current Price $32.90
% of Intrinsic Value 236.76%

Stantec 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 ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.34 in 2014 to an estimated $1.4 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.47% 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 Stantec Inc. revealed the company was trading above its Graham Number of $25.88. The company pays a dividend of $0.5 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 23.44, which was below the industry average of 24.98, 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 $-3.86.

Stantec 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) -$3.86
Graham Number $25.88
PEmg 23.44
Current Ratio 1.69
PB Ratio 1.90
Current Dividend $0.50
Dividend Yield 1.52%
Number of Consecutive Years of Dividend Growth 6

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 $1,721,600,000
Total Current Liabilities $1,019,100,000
Long-Term Debt $860,300,000
Total Assets $4,141,000,000
Intangible Assets $1,909,800,000
Total Liabilities $2,162,100,000
Shares Outstanding (Diluted Average) 113,988,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.79
Dec2017 $0.85
Dec2016 $1.22
Dec2015 $1.65
Dec2014 $1.74
Dec2013 $1.57
Dec2012 $1.32
Dec2011 $0.07
Dec2010 $1.03
Dec2009 $0.61
Dec2008 $0.32
Dec2007 $0.75
Dec2006 $0.66
Dec2005 $0.50
Dec2004 $0.40
Dec2003 $0.33
Dec2002 $0.28
Dec2001 $0.22
Dec2000 $0.18
Dec1999 $0.14
Dec1998 $0.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.40
Dec2017 $1.28
Dec2016 $1.49
Dec2015 $1.51
Dec2014 $1.34
Dec2013 $1.07
Dec2012 $0.77
Dec2011 $0.51
Dec2010 $0.71
Dec2009 $0.56
Dec2008 $0.53
Dec2007 $0.60
Dec2006 $0.49
Dec2005 $0.39
Dec2004 $0.32
Dec2003 $0.26
Dec2002 $0.21

Recommended Reading:

Other ModernGraham posts about the company

Stantec Inc Valuation – Initial Coverage $TSE:STN

Other ModernGraham posts about related companies

Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ
Aecon Group Inc Valuation – July 2018 $TSE:ARE
Aecom Valuation – July 2018 $ACM
Lowe’s Companies Inc Valuation – June 2018 $LOW
Acuity Brands Inc Valuation – June 2018 $AYI
Quanta Services Inc Valuation – May 2018 $PWR

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.

Simpson Manufacturing Co Inc Valuation – August 2018 $SSD

Company Profile (excerpt from Reuters): Simpson Manufacturing Co., Inc., incorporated on February 23, 1999, through its subsidiary, Simpson Strong-Tie Company Inc. (SST), designs, engineers and manufactures wood construction products, including connectors, truss plates, fastening systems, fasteners and pre-fabricated lateral systems used in light-frame construction. The Company’s segments are North America, Europe, Asia/Pacific, and Administrative & All Other. The North America segment includes operations primarily in the United States and Canada. The Europe segment includes operations primarily in France, the United Kingdom, Germany, Denmark, Switzerland, Portugal, Poland, the Netherlands and Belgium. The Asia/Pacific segment includes operations primarily in Australia, New Zealand, South Africa, China, Taiwan, and Vietnam.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SSD – August 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 $3,375,258,071 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.81 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 257.22% Pass
6. Moderate PEmg Ratio PEmg < 20 34.31 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.76 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 3.81 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.12
MG Growth Estimate 14.95%
MG Value $81.39
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $30.73
MG Value based on 0% Growth $18.01
Market Implied Growth Rate 12.90%
Current Price $72.71
% of Intrinsic Value 89.33%

Simpson Manufacturing Co, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.06 in 2014 to an estimated $2.12 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 12.9% 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 Simpson Manufacturing Co, Inc. revealed the company was trading above its Graham Number of $35.02. The company pays a dividend of $0.81 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 34.31, which was above the industry average of 24.98. Finally, the company was trading above its Net Current Asset Value (NCAV) of $9.81.

Simpson Manufacturing Co, 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) $9.81
Graham Number $35.02
PEmg 34.31
Current Ratio 3.81
PB Ratio 3.76
Current Dividend $0.81
Dividend Yield 1.11%
Number of Consecutive Years of Dividend Growth 4

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 $640,166,000
Total Current Liabilities $167,992,000
Long-Term Debt $0
Total Assets $1,085,887,000
Intangible Assets $163,159,000
Total Liabilities $182,085,000
Shares Outstanding (Diluted Average) 46,677,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.88
Dec2017 $1.94
Dec2016 $1.86
Dec2015 $1.38
Dec2014 $1.29
Dec2013 $1.05
Dec2012 $0.87
Dec2011 $1.04
Dec2010 $0.58
Dec2009 $0.25
Dec2008 $1.10
Dec2007 $1.40
Dec2006 $2.10
Dec2005 $2.02
Dec2004 $1.67
Dec2003 $1.21
Dec2002 $1.05
Dec2001 $0.82
Dec2000 $0.80
Dec1999 $0.79
Dec1998 $0.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.12
Dec2017 $1.66
Dec2016 $1.44
Dec2015 $1.20
Dec2014 $1.06
Dec2013 $0.88
Dec2012 $0.79
Dec2011 $0.79
Dec2010 $0.81
Dec2009 $1.07
Dec2008 $1.54
Dec2007 $1.73
Dec2006 $1.80
Dec2005 $1.55
Dec2004 $1.25
Dec2003 $1.01
Dec2002 $0.88

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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.

KBR Inc Valuation – August 2018 $KBR

Company Profile (excerpt from Reuters): KBR, Inc. (KBR), incorporated on March 21, 2006, is a provider of professional services and technologies across the asset and program life-cycle within the government services and hydrocarbons industries. The Company operates through business segments, including Technology & Consulting (T&C), Engineering & Construction (E&C), Government Services (GS), Non-strategic Business and Other. Its solutions include engineering services, mission and logistics support solutions, technology licensing, consulting, procurement, construction, construction management, program management, operations, maintenance and other support services to a customer base, including domestic and foreign governments, international and national oil and gas companies, independent refiners, petrochemical producers, fertilizer producers and manufacturers. As of December 31, 2016, it had offices around the world with operations in over 40 countries and served customers in over 70 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KBR – August 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 $2,812,565,612 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.28 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -35.75% Fail
6. Moderate PEmg Ratio PEmg < 20 20.71 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.75 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 1.28 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.91 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.97
MG Growth Estimate 15.00%
MG Value $37.19
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $14.01
MG Value based on 0% Growth $8.21
Market Implied Growth Rate 6.11%
Current Price $20.01
% of Intrinsic Value 53.80%

KBR, 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 high PEmg ratio. 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. 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 $-2 in 2014 to an estimated $0.97 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.11% 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 KBR, Inc. revealed the company was trading above its Graham Number of $19.26. The company pays a dividend of $0.32 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 20.71, which was below the industry average of 24.98, 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 $-10.19.

KBR, 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) -$10.19
Graham Number $19.26
PEmg 20.71
Current Ratio 1.28
PB Ratio 1.75
Current Dividend $0.32
Dividend Yield 1.60%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $1,663,000,000
Total Current Liabilities $1,297,000,000
Long-Term Debt $1,065,000,000
Total Assets $4,710,000,000
Intangible Assets $1,815,000,000
Total Liabilities $3,100,000,000
Shares Outstanding (Diluted Average) 141,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.88
Dec2017 $3.06
Dec2016 -$0.43
Dec2015 $1.40
Dec2014 -$8.66
Dec2013 $0.50
Dec2012 $0.97
Dec2011 $3.16
Dec2010 $2.07
Dec2009 $1.79
Dec2008 $1.90
Dec2007 $1.79
Dec2006 $1.20
Dec2005 $1.76
Dec2004 -$2.23
Dec2003 -$0.98
Dec2002 -$0.68

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.97
Dec2017 $0.06
Dec2016 -$1.37
Dec2015 -$1.40
Dec2014 -$2.00
Dec2013 $1.45
Dec2012 $1.95
Dec2011 $2.34
Dec2010 $1.87
Dec2009 $1.74
Dec2008 $1.44
Dec2007 $0.91
Dec2006 $0.25
Dec2005 -$0.29
Dec2004 -$1.14
Dec2003 -$0.51
Dec2002 -$0.23

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Other ModernGraham posts about the company

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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