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Acxiom Corp Valuation – July 2018 $ACXM

Company Profile (excerpt from Reuters): Acxiom Corporation (Acxiom), incorporated on October 28, 1983, is a technology and enablement services company. The Company operates through three business segments: Marketing Services, Audience Solutions, and Connectivity. The Company serves a global client base from locations in the United States, Europe and the Asia-Pacific region. The Company’s client base includes organizations in these regions across industry verticals, including financial, insurance and investment services, automotive, retail, telecommunications, healthcare, travel, entertainment, non-profit and government.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ACXM – 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 $2,251,525,241 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.02 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 0.81% Fail
6. Moderate PEmg Ratio PEmg < 20 76.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.25 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.02 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.25 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 $0.39
MG Growth Estimate 8.98%
MG Value $10.32
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $5.66
MG Value based on 0% Growth $3.32
Market Implied Growth Rate 34.15%
Current Price $29.95
% of Intrinsic Value 290.33%

Acxiom Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net 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 $0.24 in 2015 to an estimated $0.39 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 34.15% 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 Acxiom Corporation revealed the company was trading above its Graham Number of $13.89. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 76.79, which was above the industry average of 45.08. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.23.

Acxiom Corporation 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) -$1.23
Graham Number $13.89
PEmg 76.79
Current Ratio 2.02
PB Ratio 3.25
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 $360,345,000
Total Current Liabilities $178,355,000
Long-Term Debt $227,837,000
Total Assets $1,209,253,000
Intangible Assets $672,604,000
Total Liabilities $460,158,000
Shares Outstanding (Diluted Average) 81,282,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.90
Mar2018 $0.29
Mar2017 $0.05
Mar2016 $0.09
Mar2015 -$0.14
Mar2014 $0.12
Mar2013 $0.75
Mar2012 $0.96
Mar2011 -$0.29
Mar2010 $0.56
Mar2009 $0.48
Mar2008 -$0.10
Mar2007 $0.80
Mar2006 $0.71
Mar2005 $0.74
Mar2004 $0.64
Mar2003 $0.24
Mar2002 -$0.36
Mar2001 $0.07
Mar2000 $1.00
Mar1999 -$0.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.39
Mar2018 $0.12
Mar2017 $0.08
Mar2016 $0.18
Mar2015 $0.24
Mar2014 $0.43
Mar2013 $0.55
Mar2012 $0.41
Mar2011 $0.19
Mar2010 $0.45
Mar2009 $0.44
Mar2008 $0.46
Mar2007 $0.71
Mar2006 $0.57
Mar2005 $0.42
Mar2004 $0.28
Mar2003 $0.12

Recommended Reading:

Other ModernGraham posts about the company

Acxiom Corporation Valuation – November 2016 $ACXM
5 Speculative and Overvalued Companies to Avoid – August 2015
Acxiom Corporation Analysis – Initial Coverage $ACXM

Other ModernGraham posts about related companies

Verisign Inc Valuation – May 2018 $VRSN
Motorola Solutions Inc Valuation – May 2018 $MSI
Leidos Holdings Inc Valuation – April 2018 $LDOS
Gartner Inc Valuation – March 2018 $IT
Cognizant Technology Solutions Corp – March 2018 $CTSH
International Business Machines Corp Valuation – February 2018 $IBM
Viavi Solutions Inc Valuation – Initial Coverage $VIAV
Equinix Inc Valuation – July 2017 $EQIX
Liquidity Services Inc Valuation – Initial Coverage $LQDT
LivePerson Inc Valuation – Initial Coverage $LPSN

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.

Acxiom Corporation Valuation – November 2016 $ACXM

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 Acxiom Corporation (ACXM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Acxiom Corporation (Acxiom) is a technology and enablement services company. The Company operates through three business segments: Marketing Services, Audience Solutions, and Connectivity. The Company’s Marketing Services segment helps clients to unify data at individual level. The Audience Solutions segment helps clients to validate the accuracy of their people-based data, enhance it with additional insight and keep it up to date, enabling clients to reach desired audiences with relevant messages. The Connectivity segment activates data and makes it portable across the open marketing ecosystem. The Company serves a global client base from locations in the United States, Europe and the Asia-Pacific region. The Company’s client base includes organizations in these regions across industry verticals, including financial, insurance and investment services, automotive, retail, telecommunications, healthcare, travel, entertainment, non-profit and government.

ACXM Chart

ACXM data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

moderngraham-valuation-of-acxm-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 $2,045,397,577 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.93 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 -61.70% Fail
6. Moderate PEmg Ratio PEmg < 20 133.54 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.97 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.93 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.84 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

acxm-value-chart-november-2016

EPSmg $0.20
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $2.88
MG Value based on 0% Growth $1.69
Market Implied Growth Rate 62.52%
Current Price $26.53
% of Intrinsic Value N/A

Acxiom Corporation 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 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 $0.52 in 2013 to an estimated $0.2 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 62.52% 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 Acxiom Corporation revealed the company was trading above its Graham Number of $9.18. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 133.54, which was above the industry average of 35.13. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.51.

Acxiom Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

acxm-charts-november-2016

Net Current Asset Value (NCAV) -$0.51
Graham Number $9.18
PEmg 133.54
Current Ratio 1.93
PB Ratio 2.97
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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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 $354,181,000
Total Current Liabilities $183,969,000
Long-Term Debt $142,341,000
Total Assets $1,102,057,000
Intangible Assets $557,580,000
Total Liabilities $394,569,000
Shares Outstanding (Diluted Average) 79,277,000

Earnings Per Share History

Next Fiscal Year Estimate $0.41
Mar2016 $0.09
Mar2015 -$0.14
Mar2014 $0.12
Mar2013 $0.75
Mar2012 $0.89
Mar2011 -$0.36
Mar2010 $0.56
Mar2009 $0.48
Mar2008 -$0.10
Mar2007 $0.80
Mar2006 $0.71
Mar2005 $0.74
Mar2004 $0.64
Mar2003 $0.24
Mar2002 -$0.36
Mar2001 $0.07
Mar2000 $1.00
Mar1999 -$0.19
Mar1998 $0.57
Mar1997 $0.47

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.20
Mar2016 $0.18
Mar2015 $0.23
Mar2014 $0.41
Mar2013 $0.52
Mar2012 $0.37
Mar2011 $0.17
Mar2010 $0.45
Mar2009 $0.44
Mar2008 $0.46
Mar2007 $0.71
Mar2006 $0.57
Mar2005 $0.42
Mar2004 $0.28
Mar2003 $0.12
Mar2002 $0.11
Mar2001 $0.36

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – August 2015
Acxiom Corporation Analysis – Initial Coverage $ACXM

Other ModernGraham posts about related companies

Equinix Inc Valuation – August 2016 $EQIX
Qualcomm Inc Valuation – August 2016 $QCOM
Verisign Inc Valuation – August 2016 $VRSN
Akamai Technologies Inc Valuation – August 2016 $AKAM
Motorola Solutions Inc Valuation – August 2016 $MSI
F5 Networks Inc Valuation – July 2016 $FFIV
Computer Sciences Corp Valuation – July 2016 $CSC
Infosys Ltd Valuation – July 2016 $INFY
Cognizant Technology Solutions Corp Valuation – July 2016 $CTSH
Total System Services Inc Valuation – May 2016 $TSS

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.

Acxiom Corporation Analysis – Initial Coverage $ACXM

Acxiom_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 Acxiom Corporation (ACXM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Acxiom Corporation is an enterprise data, analytics and software-as-a-service Company. The Company operates in three segments: Marketing and Data Services, IT Infrastructure Management and Other Services. The Marketing and data services segment includes global lines of business for Customer Data Integration, Consumer Insight Solutions, the Marketing Management Services and E-mail Fulfillment and Agency Services. It provides data sourcing; data activation via analytics, integration and enhancement; the building and managing of customer marketing databases and partner integration. The information technology (IT) Infrastructure management segment provides mainframe, server hosting and cloud computing services. The Company has experience in hosting, processing-intensive database environments and maintaining secure IT environment. The Other services segment includes the Company’s United Kingdom fulfillment business providing outsourced call-center operations e-mail fulfillment.

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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 1/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – FAIL
  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 – FAIL
  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 = 2/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  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 – PASS

Valuation Summary

Key Data:

Recent Price $18.38
MG Value $2.19
MG Opinion Overvalued
Value Based on 3% Growth $2.67
Value Based on 0% Growth $1.56
Market Implied Growth Rate 45.70%
Net Current Asset Value (NCAV) -$2.65
PEmg 99.89
Current Ratio 1.67
PB Ratio 2.02

Balance Sheet – March 2015

Current Assets $414,000,000
Current Liabilities $248,000,000
Total Debt $255,000,000
Total Assets $1,322,000,000
Intangible Assets $674,000,000
Total Liabilities $619,000,000
Outstanding Shares 77,400,000

Earnings Per Share

2015 -$0.15
2014 -$0.04
2013 $0.75
2012 $0.89
2011 -$0.36
2010 $0.56
2009 $0.48
2008 -$0.10
2007 $0.80
2006 $0.71
2005 $0.74

Earnings Per Share – ModernGraham

2015 $0.18
2014 $0.35
2013 $0.52
2012 $0.37
2011 $0.17
2010 $0.45

Dividend History

Free Cash Flow

Conclusion:

Acxiom Corporation does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth 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 net current assets, the lack of dividends, and the insufficient earnings 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 growing its EPSmg (normalized earnings) from $0.17 in 2011 to only $0.18 for 2015.  This level of earnings growth does not support the market’s implied estimate of 45.7% 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 Acxiom Corporation (ACXM)?  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.

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Verisign Inc Valuation – March 2019 #VRSN

Company Profile (excerpt from Reuters): VeriSign, Inc., incorporated on April 12, 1995, is a provider of domain name registry services and Internet security, enabling Internet navigation for various domain names and providing protection for Websites and enterprises around the world. The Company operates through Registry Services and Security Services segment. Registry Services ensure the security, stability and resiliency of Internet infrastructure and services, including the .com and .net domains, and operation of the root-zone maintainer functions for the core of the Internet’s Domain Name System (DNS). Security Services provides infrastructure assurance services consisting of Distributed Denial of Services (DDoS) Protection Services and Managed DNS Services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VRSN – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $21,248,216,007 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.39 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 81.88% Pass
6. Moderate PEmg Ratio PEmg < 20 40.77 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -15.55 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 1.39 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.83 Fail
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 $4.35
MG Growth Estimate 9.85%
MG Value $122.80
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $63.12
MG Value based on 0% Growth $37.00
Market Implied Growth Rate 16.14%
Current Price $177.49
% of Intrinsic Value 144.54%

Verisign, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, 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 $2.63 in 2015 to an estimated $4.35 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.14% 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 Verisign, 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 40.77, which was below the industry average of 56.55, 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 $-16.33.

Verisign, 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) -$16.33
Graham Number $0.00
PEmg 40.77
Current Ratio 1.39
PB Ratio -15.55
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 12/1/2018
Total Current Assets $1,317,034,000
Total Current Liabilities $947,590,000
Long-Term Debt $1,785,047,000
Total Assets $1,914,504,000
Intangible Assets $52,527,000
Total Liabilities $3,299,978,000
Shares Outstanding (Diluted Average) 121,407,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.12
Dec2018 $4.75
Dec2017 $3.68
Dec2016 $3.42
Dec2015 $2.82
Dec2014 $2.52
Dec2013 $3.49
Dec2012 $1.95
Dec2011 $0.86
Dec2010 $4.64
Dec2009 $1.28
Dec2008 -$1.90
Dec2007 -$0.63
Dec2006 $1.53
Dec2005 $1.63
Dec2004 $0.60
Dec2003 -$1.20
Dec2002 -$20.97
Dec2001 -$65.64
Dec2000 -$19.57
Dec1999 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.35
Dec2018 $3.79
Dec2017 $3.27
Dec2016 $2.99
Dec2015 $2.63
Dec2014 $2.58
Dec2013 $2.56
Dec2012 $1.85
Dec2011 $1.48
Dec2010 $1.53
Dec2009 $0.11
Dec2008 -$0.24
Dec2007 $0.52
Dec2006 -$0.49
Dec2005 -$6.71
Dec2004 -$14.37
Dec2003 -$21.73

Recommended Reading:

Other ModernGraham posts about the company

Verisign Inc Valuation – May 2018 $VRSN
Verisign Inc Valuation – February 2017 $VRSN
Verisign Inc Valuation – August 2016 $VRSN
Verisign Inc. Analysis – 2015 Update $VRSN
20 Companies in the Research Spotlight This Week – June 7, 2014

Other ModernGraham posts about related companies

Motorola Solutions Inc Valuation – February 2019 $MSI
Gartner Inc Valuation – January 2019 $IT
Xerox Corp Valuation – January 2019 $XRX
Cognizant Technology Solutions Corp Valuation – January 2019 $CTSH
International Business Machines Corp Valuation – November 2018 $IBM
DXC Technology Corp Valuation – November 2018 $DXC
Sykes Enterprises Inc Valuation – October 2018 $SYKE
Computer Programs and Systems Inc Valuation – August 2018 $CPSI
Science Applications International Corp Valuation – July 2018 $SAIC
Acxiom Corp Valuation – July 2018 $ACXM

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.

Motorola Solutions Inc Valuation – February 2019 $MSI

Company Profile (excerpt from Reuters): Motorola Solutions, Inc., incorporated on March 9, 1973, is a provider of communication infrastructure, devices, accessories, software and services. The Company operates through two segments: Products and Services. It serves global customer base spanning federal, state, county, province, territory, municipal and departmental independent bodies, along with its commercial and industrial customers. The Company, through VaaS International Holdings, Inc. (VaaS), provides data and image analytics for vehicle location. The Company’s image capture and analysis platform, which includes fixed and mobile license plate reader cameras driven by machine learning and artificial intelligence, provides vehicle location data to public safety and commercial customers. VaaS platform enables controllable, audited data-sharing across multiple law enforcement agencies. Vehicle location information can help accelerate time to resolution and improve outcomes for public safety agencies, particularly when combined with police records.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MSI – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $22,938,661,879 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.38 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 48.30% Pass
6. Moderate PEmg Ratio PEmg < 20 31.40 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -19.00 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 1.38 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.50 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 $4.46
MG Growth Estimate 2.37%
MG Value $58.99
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $64.65
MG Value based on 0% Growth $37.90
Market Implied Growth Rate 11.45%
Current Price $139.98
% of Intrinsic Value 237.29%

Motorola Solutions 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. 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 $3.85 in 2015 to an estimated $4.46 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.45% 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 Motorola Solutions Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $2.13 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 31.4, which was below the industry average of 51.56, 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 $-37.03.

Motorola Solutions 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) -$37.03
Graham Number $0.00
PEmg 31.40
Current Ratio 1.38
PB Ratio -19.00
Current Dividend $2.13
Dividend Yield 1.52%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,272,000,000
Total Current Liabilities $3,096,000,000
Long-Term Debt $5,289,000,000
Total Assets $9,409,000,000
Intangible Assets $2,744,000,000
Total Liabilities $10,685,000,000
Shares Outstanding (Diluted Average) 173,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.55
Dec2018 $5.62
Dec2017 -$0.95
Dec2016 $3.24
Dec2015 $3.02
Dec2014 $5.29
Dec2013 $4.06
Dec2012 $2.96
Dec2011 $3.41
Dec2010 $1.87
Dec2009 -$0.14
Dec2008 -$13.09
Dec2007 -$0.14
Dec2006 $10.22
Dec2005 $12.67
Dec2004 $4.38
Dec2003 $2.66
Dec2002 -$7.63
Dec2001 -$12.46
Dec2000 $4.06
Dec1999 $2.87

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.46
Dec2018 $3.02
Dec2017 $2.13
Dec2016 $3.68
Dec2015 $3.85
Dec2014 $4.02
Dec2013 $3.06
Dec2012 $1.38
Dec2011 -$0.15
Dec2010 -$1.37
Dec2009 -$1.36
Dec2008 -$0.38
Dec2007 $5.97
Dec2006 $7.51
Dec2005 $4.08
Dec2004 -$0.75
Dec2003 -$2.91

Recommended Reading:

Other ModernGraham posts about the company

Motorola Solutions Inc Valuation – May 2018 $MSI
5 Undervalued Companies for Value Investors with a Low Beta – July 2017
5 Undervalued Companies for Value Investors with a Low Beta – January 2017
8 Best Stocks for Value Investors This Week – 12/27/16
Motorola Solutions Inc Valuation – December 2016 $MSI

Other ModernGraham posts about related companies

Gartner Inc Valuation – January 2019 $IT
Xerox Corp Valuation – January 2019 $XRX
Cognizant Technology Solutions Corp Valuation – January 2019 $CTSH
International Business Machines Corp Valuation – November 2018 $IBM
DXC Technology Corp Valuation – November 2018 $DXC
Sykes Enterprises Inc Valuation – October 2018 $SYKE
Computer Programs and Systems Inc Valuation – August 2018 $CPSI
Science Applications International Corp Valuation – July 2018 $SAIC
Acxiom Corp Valuation – July 2018 $ACXM
Infosys Ltd Valuation – June 2018 $INFY

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.

Gartner Inc Valuation – January 2019 $IT

Company Profile (excerpt from Reuters): Gartner, Inc., incorporated on June 1, 1990, is an information technology research and advisory company. The Company works with clients to research, analyze and interpret the business of information technology (IT), supply chain and marketing within the context of their individual roles. The Company operates through three segments: Research, Consulting and Events. Research segment consists of subscription-based research products, access to research inquiry, peer networking services and membership programs. Consulting segment consists of consulting, measurement engagements and strategic advisory services. Events segment consists of various symposia, conferences and exhibitions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IT – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,868,808,106 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.66 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 23.44% Fail
6. Moderate PEmg Ratio PEmg < 20 92.22 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 12.78 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.66 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.57 Fail
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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.42
MG Growth Estimate -3.11%
MG Value $3.22
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $20.53
MG Value based on 0% Growth $12.04
Market Implied Growth Rate 41.86%
Current Price $130.58
% of Intrinsic Value 4051.52%

Gartner 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 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 level of debt relative to the current assets, and the lack of earnings 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 $1.79 in 2014 to an estimated $1.42 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 41.86% 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 Gartner Inc revealed the company was trading above its Graham Number of $19.74. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 92.22, which was above the industry average of 44.74. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-37.63.

Gartner 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) -$37.63
Graham Number $19.74
PEmg 92.22
Current Ratio 0.66
PB Ratio 12.78
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 9/1/2018
Total Current Assets $1,535,340,000
Total Current Liabilities $2,343,596,000
Long-Term Debt $2,077,466,000
Total Assets $5,944,817,000
Intangible Assets $3,996,585,000
Total Liabilities $5,003,269,000
Shares Outstanding (Diluted Average) 92,148,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.60
Dec2017 $0.04
Dec2016 $2.31
Dec2015 $2.06
Dec2014 $2.03
Dec2013 $1.93
Dec2012 $1.73
Dec2011 $1.39
Dec2010 $0.96
Dec2009 $0.85
Dec2008 $1.05
Dec2007 $0.68
Dec2006 $0.50
Dec2005 -$0.02
Dec2004 $0.13
Dec2003 $0.25
Sep2002 $0.46
Sep2001 -$0.78
Sep2000 $0.30
Sep1999 $0.84
Sep1998 $0.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.42
Dec2017 $1.44
Dec2016 $2.10
Dec2015 $1.94
Dec2014 $1.79
Dec2013 $1.57
Dec2012 $1.32
Dec2011 $1.07
Dec2010 $0.88
Dec2009 $0.76
Dec2008 $0.64
Dec2007 $0.39
Dec2006 $0.25
Dec2005 $0.09
Dec2004 $0.12
Dec2003 $0.15
Sep2002 $0.17

Recommended Reading:

Other ModernGraham posts about the company

Gartner Inc Valuation – March 2018 $IT

Other ModernGraham posts about related companies

Xerox Corp Valuation – January 2019 $XRX
Cognizant Technology Solutions Corp Valuation – January 2019 $CTSH
International Business Machines Corp Valuation – November 2018 $IBM
DXC Technology Corp Valuation – November 2018 $DXC
Sykes Enterprises Inc Valuation – October 2018 $SYKE
Computer Programs and Systems Inc Valuation – August 2018 $CPSI
Science Applications International Corp Valuation – July 2018 $SAIC
Acxiom Corp Valuation – July 2018 $ACXM
Infosys Ltd Valuation – June 2018 $INFY
Verisign Inc Valuation – May 2018 $VRSN

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.

Xerox Corp Valuation – January 2019 $XRX

Company Profile (excerpt from Reuters): Xerox Corporation, incorporated on April 18, 1906, is a provider of digital print technology and related solutions. The Company has capabilities in imaging and printing, data analytics, and the development of secure and automated solutions to help customers improve productivity. The Company’s primary offerings span three main areas: Managed Document Services, Workplace Solutions and Graphic Communications. Its Managed Document Services offerings help customers, ranging from small businesses to global enterprises, optimize their printing and related document workflow and business processes. Managed Document Services includes the document outsourcing business, as well as a set of communication and marketing solutions. The Company’s Workplace Solutions and Graphic Communications products and solutions support the work processes of its customers by providing them with printing and communications infrastructure.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of XRX – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,597,258,219 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.82 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 -92.69% Fail
6. Moderate PEmg Ratio PEmg < 20 28.28 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.10 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 1.82 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.16 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.83
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $12.04
MG Value based on 0% Growth $7.06
Market Implied Growth Rate 9.89%
Current Price $23.49
% of Intrinsic Value N/A

Xerox Corp 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 net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.39 in 2014 to an estimated $0.83 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.89% 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 Xerox Corp revealed the company was trading below its Graham Number of $28.83. The company pays a dividend of $0.81 per share, for a yield of 3.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 28.28, which was below the industry average of 44.74, 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 $-19.47.

Xerox Corp receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$19.47
Graham Number $28.83
PEmg 28.28
Current Ratio 1.82
PB Ratio 1.10
Current Dividend $0.81
Dividend Yield 3.46%
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 9/1/2018
Total Current Assets $4,970,000,000
Total Current Liabilities $2,736,000,000
Long-Term Debt $4,815,000,000
Total Assets $15,353,000,000
Intangible Assets $4,131,000,000
Total Liabilities $9,917,000,000
Shares Outstanding (Diluted Average) 254,053,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.79
Dec2017 $0.71
Dec2016 -$1.95
Dec2015 $1.58
Dec2014 $3.36
Dec2013 $3.64
Dec2012 $3.52
Dec2011 $3.60
Dec2010 $1.72
Dec2009 $2.20
Dec2008 $1.04
Dec2007 $4.76
Dec2006 $4.88
Dec2005 $3.76
Dec2004 $3.44
Dec2003 $1.44
Dec2002 $0.08
Dec2001 -$0.60
Dec2000 -$1.92
Dec1999 $7.40
Dec1998 $1.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.83
Dec2017 $0.72
Dec2016 $1.16
Dec2015 $2.86
Dec2014 $3.39
Dec2013 $3.25
Dec2012 $2.84
Dec2011 $2.55
Dec2010 $2.33
Dec2009 $2.86
Dec2008 $3.32
Dec2007 $4.19
Dec2006 $3.51
Dec2005 $2.43
Dec2004 $1.34
Dec2003 $0.62
Dec2002 $0.54

Recommended Reading:

Other ModernGraham posts about the company

Xerox Corp Valuation – March 2018 $XRX
Xerox Corp Valuation – June 2016 $XRX
58 Companies in the Spotlight This Week – 1/31/15
Xerox Corporation Annual Valuation – 2015 $XRX
14 Companies in the Spotlight This Week – 1/4/14

Other ModernGraham posts about related companies

International Business Machines Corp Valuation – November 2018 $IBM
DXC Technology Corp Valuation – November 2018 $DXC
Sykes Enterprises Inc Valuation – October 2018 $SYKE
Computer Programs and Systems Inc Valuation – August 2018 $CPSI
Science Applications International Corp Valuation – July 2018 $SAIC
Acxiom Corp Valuation – July 2018 $ACXM
Infosys Ltd Valuation – June 2018 $INFY
Verisign Inc Valuation – May 2018 $VRSN
Motorola Solutions Inc Valuation – May 2018 $MSI
Leidos Holdings Inc Valuation – April 2018 $LDOS

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.

Cognizant Technology Solutions Corp Valuation – January 2019 $CTSH

Company Profile (excerpt from Reuters): Cognizant Technology Solutions Corporation, incorporated on April 6, 1988, is a professional services company. The Company operates through four segments: Financial Services, Healthcare, Manufacturing/Retail/Logistics, and Other. The Company’s services include consulting and technology services and outsourcing services. Its consulting and technology services include business, process, operations and technology consulting, application development and systems integrations, application testing, enterprise information management and software solutions and related services. Its outsourcing services include application maintenance, IT infrastructure services and business process services. The Company deploys a range of commercial and delivery models, including managed services, fixed bid, output and outcome based pricing and platforms to address the various needs of its customers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CTSH – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $39,333,372,216 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.24 Pass
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 146.00% Pass
6. Moderate PEmg Ratio PEmg < 20 23.65 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.59 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 3.24 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 Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.87
MG Growth Estimate 7.26%
MG Value $66.09
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $41.63
MG Value based on 0% Growth $24.41
Market Implied Growth Rate 7.58%
Current Price $67.92
% of Intrinsic Value 102.77%

Cognizant Technology Solutions Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and 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 $1.94 in 2014 to an estimated $2.87 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.58% 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 Cognizant Technology Solutions Corp revealed the company was trading above its Graham Number of $37.96. The company pays a dividend of $0.45 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 23.65, which was below the industry average of 44.74, 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 $7.64.

Cognizant Technology Solutions Corp receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.64
Graham Number $37.96
PEmg 23.65
Current Ratio 3.24
PB Ratio 3.59
Current Dividend $0.45
Dividend Yield 0.66%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $8,727,000,000
Total Current Liabilities $2,693,000,000
Long-Term Debt $624,000,000
Total Assets $15,274,000,000
Intangible Assets $4,058,000,000
Total Liabilities $4,296,000,000
Shares Outstanding (Diluted Average) 580,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.53
Dec2017 $2.53
Dec2016 $2.55
Dec2015 $2.65
Dec2014 $2.35
Dec2013 $2.02
Dec2012 $1.72
Dec2011 $1.43
Dec2010 $1.19
Dec2009 $0.89
Dec2008 $0.72
Dec2007 $0.58
Dec2006 $0.39
Dec2005 $0.28
Dec2004 $0.18
Dec2003 $0.11
Dec2002 $0.07
Dec2001 $0.05
Dec2000 $0.04
Dec1999 $0.02
Dec1998 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.87
Dec2017 $2.50
Dec2016 $2.41
Dec2015 $2.24
Dec2014 $1.94
Dec2013 $1.63
Dec2012 $1.36
Dec2011 $1.10
Dec2010 $0.88
Dec2009 $0.67
Dec2008 $0.52
Dec2007 $0.38
Dec2006 $0.26
Dec2005 $0.17
Dec2004 $0.11
Dec2003 $0.07
Dec2002 $0.05

Recommended Reading:

Other ModernGraham posts about the company

Cognizant Technology Solutions Corp – March 2018 $CTSH
12 Best Stocks For Value Investors This Week – 7/1/16
Cognizant Technology Solutions Corp Valuation – July 2016 $CTSH
18 Best Stocks For Value Investors This Week – 1/30/16
Cognizant Technology Solutions Corp Valuation – January 2016 Update $CTSH

Other ModernGraham posts about related companies

International Business Machines Corp Valuation – November 2018 $IBM
DXC Technology Corp Valuation – November 2018 $DXC
Sykes Enterprises Inc Valuation – October 2018 $SYKE
Computer Programs and Systems Inc Valuation – August 2018 $CPSI
Science Applications International Corp Valuation – July 2018 $SAIC
Acxiom Corp Valuation – July 2018 $ACXM
Infosys Ltd Valuation – June 2018 $INFY
Verisign Inc Valuation – May 2018 $VRSN
Motorola Solutions Inc Valuation – May 2018 $MSI
Leidos Holdings Inc Valuation – April 2018 $LDOS

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.

International Business Machines Corp Valuation – November 2018 $IBM

Company Profile (excerpt from Reuters): International Business Machines Corporation (IBM), incorporated on June 16, 1911, is a technology company. The Company operates through five segments: Cognitive Solutions, Global Business Services (GBS), Technology Services & Cloud Platforms, Systems and Global Financing.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IBM – 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 $110,482,042,902 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.31 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 -11.68% Fail
6. Moderate PEmg Ratio PEmg < 20 11.36 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.59 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 1.31 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.15 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $10.71
MG Growth Estimate -2.96%
MG Value $27.70
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $155.24
MG Value based on 0% Growth $91.00
Market Implied Growth Rate 1.43%
Current Price $121.57
% of Intrinsic Value 438.89%

IBM Common Stock 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 growth over the last ten years, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $13.33 in 2014 to an estimated $10.71 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.43% 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 IBM Common Stock revealed the company was trading above its Graham Number of $71.86. The company pays a dividend of $5.9 per share, for a yield of 4.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.36, which was below the industry average of 49.32, 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 $-58.8.

IBM Common Stock receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$58.80
Graham Number $71.86
PEmg 11.36
Current Ratio 1.31
PB Ratio 5.59
Current Dividend $5.90
Dividend Yield 4.85%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $48,257,000,000
Total Current Liabilities $36,822,000,000
Long-Term Debt $35,989,000,000
Total Assets $121,990,000,000
Intangible Assets $39,661,000,000
Total Liabilities $102,072,000,000
Shares Outstanding (Diluted Average) 915,213,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.03
Dec2017 $6.14
Dec2016 $12.38
Dec2015 $13.42
Dec2014 $11.90
Dec2013 $14.94
Dec2012 $14.37
Dec2011 $13.06
Dec2010 $11.52
Dec2009 $10.01
Dec2008 $8.89
Dec2007 $7.15
Dec2006 $6.11
Dec2005 $4.87
Dec2004 $4.38
Dec2003 $3.74
Dec2002 $2.06
Dec2001 $3.69
Dec2000 $4.44
Dec1999 $4.12
Dec1998 $3.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.71
Dec2017 $10.61
Dec2016 $13.04
Dec2015 $13.42
Dec2014 $13.33
Dec2013 $13.63
Dec2012 $12.50
Dec2011 $11.09
Dec2010 $9.65
Dec2009 $8.28
Dec2008 $7.03
Dec2007 $5.82
Dec2006 $4.85
Dec2005 $4.06
Dec2004 $3.66
Dec2003 $3.40
Dec2002 $3.33

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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.

DXC Technology Corp Valuation – November 2018 $DXC

Company Profile (excerpt from Reuters): DXC Technology Company provides digital information technology (IT) services and solutions. The Company provides a range of services, including analytics, applications, business process, cloud and workload, consulting, enterprise and cloud applications, security, and workplace and mobility. The Company also offers e-commerce, finance and administration products and services.

Downloadable PDF version of this valuation:

ModernGraham Valuation of DXC – 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 $17,370,000,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.04 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 118.54% Pass
6. Moderate PEmg Ratio PEmg < 20 14.24 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.50 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 1.04 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 17.97 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 $4.35
MG Growth Estimate 11.74%
MG Value $139.17
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $63.11
MG Value based on 0% Growth $37.00
Market Implied Growth Rate 2.87%
Current Price $62.00
% of Intrinsic Value 44.55%

DXC Technology Co 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. 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 $2.44 in 2015 to an estimated $4.35 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.87% 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 DXC Technology Co revealed the company was trading below its Graham Number of $92.46. The company pays a dividend of $0.72 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 14.24, which was below the industry average of 52.08, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-28.8.

DXC Technology Co receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$28.80
Graham Number $92.46
PEmg 14.24
Current Ratio 1.04
PB Ratio 1.50
Current Dividend $0.72
Dividend Yield 1.16%
Number of Consecutive Years of Dividend Growth 1

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $8,815,000,000
Total Current Liabilities $8,514,000,000
Long-Term Debt $5,409,000,000
Total Assets $28,882,000,000
Intangible Assets $14,019,000,000
Total Liabilities $17,045,000,000
Shares Outstanding (Diluted Average) 285,780,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.04
Mar2018 $6.04
Mar2017 -$0.88
Mar2016 $1.78
Mar2015 $0.01
Mar2014 $6.28
Mar2013 $4.89
Mar2012 -$3.97
Mar2011 $4.73
Mar2010 $5.28
Mar2009 $7.31
Mar2008 $3.20
Mar2007 $2.21
Mar2006 $2.81
Mar2005 $4.22
Mar2004 $2.75
Mar2003 $2.54
Mar2002 $2.01
Mar2001 $1.37
Mar2000 $2.37
Mar1999 $2.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.35
Mar2018 $2.55
Mar2017 $1.35
Mar2016 $2.24
Mar2015 $2.44
Mar2014 $3.59
Mar2013 $2.71
Mar2012 $2.18
Mar2011 $5.02
Mar2010 $4.83
Mar2009 $4.39
Mar2008 $2.96
Mar2007 $2.87
Mar2006 $3.08
Mar2005 $3.01
Mar2004 $2.34
Mar2003 $2.11

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Other ModernGraham posts about related companies

Sykes Enterprises Inc Valuation – October 2018 $SYKE
Computer Programs and Systems Inc Valuation – August 2018 $CPSI
Science Applications International Corp Valuation – July 2018 $SAIC
Acxiom Corp Valuation – July 2018 $ACXM
Infosys Ltd Valuation – June 2018 $INFY
Verisign Inc Valuation – May 2018 $VRSN
Motorola Solutions Inc Valuation – May 2018 $MSI
Leidos Holdings Inc Valuation – April 2018 $LDOS
Gartner Inc Valuation – March 2018 $IT
Cognizant Technology Solutions Corp – March 2018 $CTSH

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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