Ameren Corp Valuation – March 2019 #AEE

Company Profile (excerpt from Reuters): Ameren Corporation (Ameren), incorporated on August 7, 1995, is a utility holding company. The Company’s primary assets are its equity interests in its subsidiaries, including Ameren Missouri, Ameren Illinois and Ameren Transmission Company (ATXI). The Company operates through four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas and Ameren Transmission. The Ameren Missouri segment includes all of the operations of Ameren Missouri. The Ameren Illinois Electric Distribution segment consists of the electric distribution business of Ameren Illinois. The Ameren Illinois Natural Gas segment consists of the natural gas business of Ameren Illinois. The ATXI segment is primarily composed of the aggregated electric transmission businesses of Ameren Illinois and ATXI.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AEE – 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 $17,540,601,213 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.57 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -780.47% Fail
6. Moderate PEmg Ratio PEmg < 20 24.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.28 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.57 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.81 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.93
MG Growth Estimate 15.00%
MG Value $112.68
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $42.44
MG Value based on 0% Growth $24.88
Market Implied Growth Rate 8.00%
Current Price $71.70
% of Intrinsic Value 63.63%

Ameren 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 current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.35 in 2015 to an estimated $2.93 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8% 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 Ameren Corp revealed the company was trading above its Graham Number of $47.77. The company pays a dividend of $1.85 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.5, which was above the industry average of 23.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-72.59.

Ameren 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) -$72.59
Graham Number $47.77
PEmg 24.50
Current Ratio 0.57
PB Ratio 2.28
Current Dividend $1.85
Dividend Yield 2.58%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,533,000,000
Total Current Liabilities $2,687,000,000
Long-Term Debt $7,859,000,000
Total Assets $27,215,000,000
Intangible Assets $411,000,000
Total Liabilities $19,442,000,000
Shares Outstanding (Diluted Average) 246,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.25
Dec2018 $3.32
Dec2017 $2.14
Dec2016 $2.68
Dec2015 $2.59
Dec2014 $2.40
Dec2013 $1.18
Dec2012 -$4.01
Dec2011 $2.15
Dec2010 $0.58
Dec2009 $2.78
Dec2008 $2.88
Dec2007 $2.98
Dec2006 $2.66
Dec2005 $3.02
Dec2004 $2.84
Dec2003 $3.25
Dec2002 $2.61
Dec2001 $3.40
Dec2000 $3.33
Dec1999 $2.81

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.93
Dec2018 $2.72
Dec2017 $2.34
Dec2016 $1.95
Dec2015 $1.35
Dec2014 $0.64
Dec2013 $0.02
Dec2012 -$0.08
Dec2011 $2.01
Dec2010 $2.09
Dec2009 $2.85
Dec2008 $2.88
Dec2007 $2.90
Dec2006 $2.87
Dec2005 $2.99
Dec2004 $3.01
Dec2003 $3.09

Recommended Reading:

Other ModernGraham posts about the company

Ameren Corp Valuation – May 2018 $AEE
Ameren Corp Valuation – February 2017 $AEE
Ameren Corp Valuation – August 2016 $AEE
Ameren Corporation Analysis – 2015 Update $AEE
21 Companies in the Spotlight This Week – June 14, 2014

Other ModernGraham posts about related companies

NextEra Energy Inc Valuation – February 2019 $NEE
Dominion Energy Inc Valuation – February 2019 $D
Exelon Corp Valuation – January 2019 $EXC
NRG Energy Inc Valuation – January 2019 $NRG
DTE Energy Co Valuation – January 2019 $DTE
AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX
WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO

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.

Ameren Corp Valuation – May 2018 $AEE

Company Profile (excerpt from Reuters): Ameren Corporation (Ameren), incorporated on August 7, 1995, is a utility holding company. The Company’s primary assets are its equity interests in its subsidiaries, including Ameren Missouri, Ameren Illinois and Ameren Transmission Company (ATXI). The Company operates through four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas and Ameren Transmission. The Ameren Missouri segment includes all of the operations of Ameren Missouri. The Ameren Illinois Electric Distribution segment consists of the electric distribution business of Ameren Illinois. The Ameren Illinois Natural Gas segment consists of the natural gas business of Ameren Illinois. The ATXI segment is primarily composed of the aggregated electric transmission businesses of Ameren Illinois and ATXI.

AEE Chart

AEE data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AEE – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,605,629,605 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.47 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 41.56% Pass
6. Moderate PEmg Ratio PEmg < 20 21.59 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.89 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.47 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.81 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.61
MG Growth Estimate 15.00%
MG Value $100.31
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $37.78
MG Value based on 0% Growth $22.15
Market Implied Growth Rate 6.55%
Current Price $56.26
% of Intrinsic Value 56.09%

Ameren 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 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. 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 $0.64 in 2014 to an estimated $2.61 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.55% 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 Ameren Corp revealed the company was trading above its Graham Number of $44.56. The company pays a dividend of $1.78 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.59, which was below the industry average of 23.55, 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 $-71.15.

Ameren 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) -$71.15
Graham Number $44.56
PEmg 21.59
Current Ratio 0.47
PB Ratio 1.89
Current Dividend $1.78
Dividend Yield 3.16%
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 3/1/2018
Total Current Assets $1,567,000,000
Total Current Liabilities $3,345,000,000
Long-Term Debt $6,766,000,000
Total Assets $26,079,000,000
Intangible Assets $411,000,000
Total Liabilities $18,849,000,000
Shares Outstanding (Diluted Average) 242,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.98
Dec2017 $2.14
Dec2016 $2.68
Dec2015 $2.59
Dec2014 $2.40
Dec2013 $1.18
Dec2012 -$4.01
Dec2011 $2.15
Dec2010 $0.58
Dec2009 $2.78
Dec2008 $2.88
Dec2007 $2.98
Dec2006 $2.66
Dec2005 $3.02
Dec2004 $2.84
Dec2003 $3.25
Dec2002 $2.61
Dec2001 $3.40
Dec2000 $3.33
Dec1999 $2.81
Dec1998 $2.82

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.61
Dec2017 $2.34
Dec2016 $1.95
Dec2015 $1.35
Dec2014 $0.64
Dec2013 $0.02
Dec2012 -$0.08
Dec2011 $2.01
Dec2010 $2.09
Dec2009 $2.85
Dec2008 $2.88
Dec2007 $2.90
Dec2006 $2.87
Dec2005 $2.99
Dec2004 $3.01
Dec2003 $3.09
Dec2002 $3.01

Recommended Reading:

Other ModernGraham posts about the company

Ameren Corp Valuation – February 2017 $AEE
Ameren Corp Valuation – August 2016 $AEE
Ameren Corporation Analysis – 2015 Update $AEE
21 Companies in the Spotlight This Week – June 14, 2014
Ameren Corporation Annual Valuation – 2014 $AEE

Other ModernGraham posts about related companies

NextEra Energy Inc Valuation – May 2018 $NEE
PG&E Corp Valuation – April 2018 $PCG
Dominion Energy Inc Valuation – April 2018 $D
Exelon Corp Valuation – March 2018 $EXC
NRG Energy Inc Valuation – March 2018 $NRG
DTE Energy Co Valuation – March 2018 $DTE
The AES Corp Valuation – March 2018 $AES
FirstEnergy Corp Valuation – March 2018 $FE
Edison International Valuation – March 2018 $EIX
WEC Energy Group Inc Valuation – March 2018 $WEC

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.

Ameren Corp Valuation – February 2017 $AEE

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 – February 2017.  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 Ameren Corp (AEE) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Ameren Corporation (Ameren) is a public utility holding company. Ameren’s primary assets are its equity interests in its subsidiaries, including Union Electric Company (doing business as Ameren Missouri) and Ameren Illinois Company (Ameren Illinois). Ameren operates through two segments: Ameren Missouri and Ameren Illinois. Ameren Missouri and Ameren Illinois each have one segment. The Ameren Missouri segment for both Ameren and Ameren Missouri includes all the operations of Ameren Missouri. The Ameren Illinois segment for both Ameren and Ameren Illinois consists of all of the operations of Ameren Illinois. Ameren’s subsidiaries are separate, independent legal entities with separate businesses, assets, and liabilities. Ameren Missouri operates an electric generation, transmission, and distribution business and a natural gas transmission and distribution business in Missouri. Ameren Illinois operates an electric and natural gas transmission and distribution businesses in Illinois.

AEE Chart

AEE 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 AEE – February 2017

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,789,470,416 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.70 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 -11.23% Fail
6. Moderate PEmg Ratio PEmg < 20 27.09 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.79 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.70 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.55 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 $1.95
MG Growth Estimate 15.00%
MG Value $75.23
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $28.33
MG Value based on 0% Growth $16.61
Market Implied Growth Rate 9.29%
Current Price $52.93
% of Intrinsic Value 70.36%

Ameren 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 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 $-0.08 in 2012 to an estimated $1.95 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.29% 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 Ameren Corp revealed the company was trading above its Graham Number of $42.28. The company pays a dividend of $1.7 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 27.09, which was above the industry average of 23.36. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-63.16.

Ameren 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) -$63.16
Graham Number $42.28
PEmg 27.09
Current Ratio 0.70
PB Ratio 1.79
Current Dividend $1.70
Dividend Yield 3.21%
Number of Consecutive Years of Dividend Growth 3

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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 $1,599,000,000
Total Current Liabilities $2,291,000,000
Long-Term Debt $6,607,000,000
Total Assets $24,134,000,000
Intangible Assets $411,000,000
Total Liabilities $16,941,000,000
Shares Outstanding (Diluted Average) 242,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.68
Dec2015 $2.59
Dec2014 $2.40
Dec2013 $1.18
Dec2012 -$4.01
Dec2011 $2.15
Dec2010 $0.58
Dec2009 $2.78
Dec2008 $2.88
Dec2007 $2.98
Dec2006 $2.66
Dec2005 $3.02
Dec2004 $2.84
Dec2003 $3.25
Dec2002 $2.61
Dec2001 $3.40
Dec2000 $3.33
Dec1999 $2.81
Dec1998 $2.82
Dec1997 $2.44

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.95
Dec2015 $1.35
Dec2014 $0.64
Dec2013 $0.02
Dec2012 -$0.08
Dec2011 $2.01
Dec2010 $2.09
Dec2009 $2.85
Dec2008 $2.88
Dec2007 $2.90
Dec2006 $2.87
Dec2005 $2.99
Dec2004 $3.01
Dec2003 $3.09
Dec2002 $3.01
Dec2001 $3.12
Dec2000 $2.75

Recommended Reading:

Other ModernGraham posts about the company

Ameren Corporation Analysis – 2015 Update $AEE
21 Companies in the Spotlight This Week – June 14, 2014
Ameren Corporation Annual Valuation – 2014 $AEE

Other ModernGraham posts about related companies

Superior Plus Corp Valuation – Initial Coverage $TSE:SPB
Energy Company of Minas Valuation – Initial Coverage $CIG
NextEra Energy Inc Valuation – December 2016 $NEE
Westar Energy Inc Valuation – August 2016 $WR
Eversource Energy Valuation – August 2016 $ES
Public Service Enterprise Group Inc Valuation – August 2016 $PEG
NiSource Inc Valuation – August 2016 $NI
Consolidated Edison Inc Valuation – August 2016 $ED
Ameren Corp Valuation – August 2016 $AEE
PG&E Corp Valuation – July 2016 $PCG

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.

Ameren Corp Valuation – August 2016 $AEE

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – July 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 Ameren Corporation (AEE) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Ameren Corporation (Ameren) is a public utility holding company. Ameren’s primary assets are its equity interests in its subsidiaries, including Union Electric Company (doing business as Ameren Missouri) and Ameren Illinois Company (Ameren Illinois). Ameren operates through two segments: Ameren Missouri and Ameren Illinois. Ameren Missouri and Ameren Illinois each have one segment. The Ameren Missouri segment for both Ameren and Ameren Missouri includes all the operations of Ameren Missouri. The Ameren Illinois segment for both Ameren and Ameren Illinois consists of all of the operations of Ameren Illinois. Ameren’s subsidiaries are separate, independent legal entities with separate businesses, assets, and liabilities. Ameren Missouri operates an electric generation, transmission, and distribution business and a natural gas transmission and distribution business in Missouri. Ameren Illinois operates an electric and natural gas transmission and distribution businesses in Illinois.

AEE Chart

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

[/level-free]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of AEE – August 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 $12,424,902,323 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.66 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 -12.96% Fail
6. Moderate PEmg Ratio PEmg < 20 26.56 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.77 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.66 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.90 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

AEE value chart August 2016

EPSmg $1.90
MG Growth Estimate 15.00%
MG Value $73.30
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $27.61
MG Value based on 0% Growth $16.18
Market Implied Growth Rate 9.03%
Current Price $50.57
% of Intrinsic Value 68.99%

Ameren 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 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 $-0.08 in 2012 to an estimated $1.9 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.03% 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 Ameren Corp revealed the company was trading above its Graham Number of $40.3. The company pays a dividend of $1.69 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 26.56, which was above the industry average of 24.74. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-62.97.

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

Stage 3: Information for Further Research

AEE charts August 2016

Net Current Asset Value (NCAV) -$62.97
Graham Number $40.30
PEmg 26.56
Current Ratio 0.66
PB Ratio 1.77
Current Dividend $1.69
Dividend Yield 3.33%
Number of Consecutive Years of Dividend Growth 3

[/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 6/1/2016
Total Current Assets $1,594,000,000
Total Current Liabilities $2,430,000,000
Long-Term Debt $6,605,000,000
Total Assets $23,793,000,000
Intangible Assets $411,000,000
Total Liabilities $16,871,000,000
Shares Outstanding (Diluted Average) 242,600,000

Earnings Per Share History

Next Fiscal Year Estimate $2.53
Dec2015 $2.59
Dec2014 $2.40
Dec2013 $1.18
Dec2012 -$4.01
Dec2011 $2.15
Dec2010 $0.58
Dec2009 $2.78
Dec2008 $2.88
Dec2007 $2.98
Dec2006 $2.66
Dec2005 $3.02
Dec2004 $2.84
Dec2003 $3.25
Dec2002 $2.61
Dec2001 $3.40
Dec2000 $3.33
Dec1999 $2.81
Dec1998 $2.82
Dec1997 $2.44

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.90
Dec2015 $1.35
Dec2014 $0.64
Dec2013 $0.02
Dec2012 -$0.08
Dec2011 $2.01
Dec2010 $2.09
Dec2009 $2.85
Dec2008 $2.88
Dec2007 $2.90
Dec2006 $2.87
Dec2005 $2.99
Dec2004 $3.01
Dec2003 $3.09
Dec2002 $3.00
Dec2001 $3.12
Dec2000 $2.75

Recommended Reading:

Other ModernGraham posts about the company

Ameren Corporation Analysis – 2015 Update $AEE
21 Companies in the Spotlight This Week – June 14, 2014
Ameren Corporation Annual Valuation – 2014 $AEE

Other ModernGraham posts about related companies

PG&E Corp Valuation – July 2016 $PCG
SCANA Corporation Valuation – July 2016 $SCG
Exelon Corporation Valuation – July 2016 $EXC
DTE Energy Co Valuation – July 2016 $DTE
AES Corporation Valuation – July 2016 $AES
FirstEnergy Corp Valuation – July 2016 $FE
Edison International Valuation – July 2016 $EIX
WEC Energy Group Inc Valuation – June 2016 $WEC
CenterPoint Energy Inc Valuation – June 2016 $CNP
Southern Company Valuation – June 2016 $SO

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.

Ameren Corporation Analysis – 2015 Update $AEE

220px-Ameren_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 – May 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 Ameren Corporation (AEE) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Ameren Corporation (Ameren) is a utility holding company. The Company’s principal subsidiaries are Union Electric Company (Ameren Missouri) and Ameren Illinois Company (Ameren Illinois). The Company’s segments include Ameren Missouri and Ameren Illinois. Ameren Missouri operates a rate-regulated electric generation, transmission and distribution business, and a rate-regulated natural gas transmission and distribution business in Missouri. Ameren Illinois operates a rate-regulated electric and natural gas transmission and distribution business in Illinois. AER consists of non-rate-regulated operations, including Ameren Energy Generating Company (Genco), Ameren Energy Resources Generating Company (AERG), Ameren Energy Resources Company and Ameren Energy Marketing Company (Marketing Company). Ameren’s portfolio of natural gas supply resources includes firm transportation capacity and firm no-notice storage capacity leased from interstate pipelines.

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 – PASS
  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 = 1/5

  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 – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $38.00
MG Value $0.00
MG Opinion Overvalued
Value Based on 3% Growth $19.01
Value Based on 0% Growth $11.15
Market Implied Growth Rate 10.24%
Net Current Asset Value (NCAV) -$58.48
PEmg 28.98
Current Ratio 0.79
PB Ratio 1.38

Balance Sheet – March 2015

Current Assets $1,993,000,000
Current Liabilities $2,520,000,000
Total Debt $5,860,000,000
Total Assets $22,884,000,000
Intangible Assets $411,000,000
Total Liabilities $16,180,000,000
Outstanding Shares 242,600,000

Earnings Per Share

2015 (estimate) $2.48
2014 $2.40
2013 $1.18
2012 -$4.01
2011 $2.15
2010 $0.58
2009 $2.78
2008 $2.88
2007 $2.98
2006 $2.66
2005 $3.02

Earnings Per Share – ModernGraham

2015 (estimate) $1.31
2014 $0.64
2013 $0.02
2012 -$0.08
2011 $2.01
2010 $2.09

Dividend History

Conclusion:

Ameren Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the insufficient earnings growth or stability over the last ten years, and the high PEmg ratio.  The Enterprising Investor is concerned with the level of debt relative to the current assets, and the lack of earnings growth or stability over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $2.01 in 2011 to only an estimated $1.31 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 10.24% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value well 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 Ameren Corporation (AEE)?  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.

Ameren Corporation Annual Valuation – 2014 $AEE

220px-Ameren_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 Undervalued Companies for the Enterprising Investor Near 52 Week Lows.  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 specific look at how Ameren Corporation (AEE) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Ameren Corporation (Ameren) is a utility holding company. The Company’s principal subsidiaries are Union Electric Company (Ameren Missouri) and Ameren Illinois Company (Ameren Illinois). The Company’s segments include Ameren Missouri and Ameren Illinois. Ameren Missouri operates a rate-regulated electric generation, transmission and distribution business, and a rate-regulated natural gas transmission and distribution business in Missouri. Ameren Illinois operates a rate-regulated electric and natural gas transmission and distribution business in Illinois. AER consists of non-rate-regulated operations, including Ameren Energy Generating Company (Genco), AmerenEnergy Resources Generating Company (AERG) and Ameren Energy Marketing Company (Marketing Company). In December 2013, the Company announced that it has completed the divestiture of its merchant generation business, formerly known as Ameren Energy Resources Company, LLC (AER).

AEE Chart

AEE data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  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 – PASS
  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 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 1/5

  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 – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $38.62
MG Value $0.00
MG Opinion Overvalued
Value Based on 3% Growth $12.28
Value Based on 0% Growth $7.20
Market Implied Growth Rate 18.56%
Net Current Asset Value (NCAV) -$52.82
PEmg 45.61
Current Ratio 0.68
PB Ratio 1.44

Balance Sheet – 3/31/2014

Current Assets $1,840,000,000
Current Liabilities $2,725,000,000
Total Debt $5,226,000,000
Total Assets $21,166,000,000
Intangible Assets $428,000,000
Total Liabilities $14,653,000,000
Outstanding Shares 242,600,000

Earnings Per Share

2014 (estimate) $2.29
2013 $2.10
2012 -$4.01
2011 $2.15
2010 $0.58
2009 $2.78
2008 $2.88
2007 $2.98
2006 $2.66
2005 $3.13
2004 $2.84

Earnings Per Share – ModernGraham

2014 (estimate) $0.85
2013 $0.32
2012 -$0.08
2011 $2.01
2010 $2.09
2009 $2.85

Dividend History

AEE Dividend Chart

AEE Dividend data by YCharts

Conclusion:

Ameren Corporation is not suitable for either Defensive Investors or Enterprising Investors.  The company’s high level of debt is a concern for both investor types along with the instability in earnings, and lack of earnings growth.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As far as a valuation is concerned, the company is grossly overvalued based on the drop in EPSmg (normalized earnings) from $2.09 in 2010 to an estimated $0.85 for 2014.  Clearly this does not support the market’s implied estimate of 18.56% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value well below the market 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 Ameren Corporation (AEE)?  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 Ameren Corporation (AEE) or 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.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

Evergy Inc Valuation – March 2019 #EVRG

Company Profile (excerpt from Reuters): Evergy, Inc., is an energy company. The Company provides electricity generation, transmission and distribution services. It serves the customers under Westar and KCP&L brand names.

Downloadable PDF version of this valuation:

ModernGraham Valuation of EVRG – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,535,813,734 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.59 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 29.25% Fail
6. Moderate PEmg Ratio PEmg < 20 22.82 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.51 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.59 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.64 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.53
MG Growth Estimate 2.29%
MG Value $33.05
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $36.65
MG Value based on 0% Growth $21.48
Market Implied Growth Rate 7.16%
Current Price $57.67
% of Intrinsic Value 174.47%

Evergy 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 high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.19 in 2015 to an estimated $2.53 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.16% 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 Evergy Inc revealed the company was trading above its Graham Number of $49.23. The company pays a dividend of $1.74 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 22.82, which was below the industry average of 23.71, 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 $-53.07.

Evergy 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) -$53.07
Graham Number $49.23
PEmg 22.82
Current Ratio 0.59
PB Ratio 1.51
Current Dividend $1.74
Dividend Yield 3.01%
Number of Consecutive Years of Dividend Growth 15

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,681,000,000
Total Current Liabilities $2,867,200,000
Long-Term Debt $6,687,400,000
Total Assets $25,598,100,000
Intangible Assets $2,338,900,000
Total Liabilities $15,607,400,000
Shares Outstanding (Diluted Average) 262,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.83
Dec2018 $2.50
Dec2017 $2.27
Dec2016 $2.43
Dec2015 $2.09
Dec2014 $2.35
Dec2013 $2.27
Dec2012 $2.15
Dec2011 $1.93
Dec2010 $1.80
Dec2009 $1.58
Dec2008 $1.69
Dec2007 $1.83
Dec2006 $1.87
Dec2005 $1.54
Dec2004 $2.13
Dec2003 $1.16
Dec2002 -$11.06
Dec2001 -$0.31
Dec2000 $1.96
Dec1999 $0.20

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.53
Dec2018 $2.36
Dec2017 $2.29
Dec2016 $2.28
Dec2015 $2.19
Dec2014 $2.20
Dec2013 $2.06
Dec2012 $1.91
Dec2011 $1.79
Dec2010 $1.73
Dec2009 $1.70
Dec2008 $1.77
Dec2007 $1.78
Dec2006 $0.88
Dec2005 -$0.18
Dec2004 -$1.10
Dec2003 -$2.35

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

Pinnacle West Capital Corp Valuation – March 2019 #PNW
NiSource Inc Valuation – March 2019 #NI
American Electric Power Company Inc Valuation – March 2019 #AEP
American Water Works Co Inc Valuation – March 2019 #AWK
Alliant Energy Corp Valuation – March 2019 #LNT
Consolidated Edison Inc Valuation – March 2019 #ED
Duke Energy Corp Valuation – March 2019 #DUK
Sempra Energy Valuation – March 2019 #SRE
Ameren Corp Valuation – March 2019 #AEE
NextEra Energy Inc Valuation – February 2019 $NEE

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.

Entergy Corp Valuation – March 2019 #ETR

Company Profile (excerpt from Reuters): Entergy Corporation, incorporated on August 19, 1992, is a holding company. The Company is an integrated energy company engaged in electric power production and retail electric distribution operations. The Company operates through two segments: Utility and Entergy Wholesale Commodities. As of December 31, 2016, the Company owned and operated power plants with over 30,000 megawatts of aggregate electric generating capacity, including approximately 10,000 megawatts of nuclear-fueled capacity.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ETR – 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 $18,067,984,316 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.54 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 -35.85% Fail
6. Moderate PEmg Ratio PEmg < 20 32.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.99 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.54 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.24 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 $2.94
MG Growth Estimate -0.27%
MG Value $23.41
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $42.68
MG Value based on 0% Growth $25.02
Market Implied Growth Rate 11.86%
Current Price $94.86
% of Intrinsic Value 405.24%

Entergy 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 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. 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 in 2015 to an estimated $2.94 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.86% 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 Entergy Corporation revealed the company was trading above its Graham Number of $74.62. The company pays a dividend of $3.58 per share, for a yield of 3.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 32.23, which was above the industry average of 23.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-196.69.

Entergy Corporation 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) -$196.69
Graham Number $74.62
PEmg 32.23
Current Ratio 0.54
PB Ratio 1.99
Current Dividend $3.58
Dividend Yield 3.77%
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 12/1/2018
Total Current Assets $2,958,064,000
Total Current Liabilities $5,443,544,000
Long-Term Debt $15,518,303,000
Total Assets $48,275,066,000
Intangible Assets $377,172,000
Total Liabilities $39,430,761,000
Shares Outstanding (Diluted Average) 185,437,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.26
Dec2018 $4.63
Dec2017 $2.28
Dec2016 -$3.26
Dec2015 -$0.99
Dec2014 $5.22
Dec2013 $3.99
Dec2012 $4.76
Dec2011 $7.55
Dec2010 $6.66
Dec2009 $6.30
Dec2008 $6.20
Dec2007 $5.60
Dec2006 $5.36
Dec2005 $4.19
Dec2004 $3.93
Dec2003 $4.01
Dec2002 $2.64
Dec2001 $3.23
Dec2000 $2.97
Dec1999 $2.25

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.94
Dec2018 $1.72
Dec2017 $0.65
Dec2016 $0.54
Dec2015 $3.00
Dec2014 $5.21
Dec2013 $5.42
Dec2012 $6.19
Dec2011 $6.75
Dec2010 $6.24
Dec2009 $5.87
Dec2008 $5.45
Dec2007 $4.93
Dec2006 $4.40
Dec2005 $3.81
Dec2004 $3.54
Dec2003 $3.23

Recommended Reading:

Other ModernGraham posts about the company

Entergy Corp Valuation – June 2018 $ETR
Entergy Corp Valuation – April 2017 $ETR
Entergy Corp Valuation – January 2016 Update $ETR
5 Speculative and Overvalued Companies to Avoid – December 2014
32 Companies in the Spotlight This Week – 12/6/14

Other ModernGraham posts about related companies

Pinnacle West Capital Corp Valuation – March 2019 #PNW
NiSource Inc Valuation – March 2019 #NI
American Electric Power Company Inc Valuation – March 2019 #AEP
American Water Works Co Inc Valuation – March 2019 #AWK
Alliant Energy Corp Valuation – March 2019 #LNT
Consolidated Edison Inc Valuation – March 2019 #ED
Duke Energy Corp Valuation – March 2019 #DUK
Sempra Energy Valuation – March 2019 #SRE
Ameren Corp Valuation – March 2019 #AEE
NextEra Energy Inc Valuation – February 2019 $NEE

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.

Pinnacle West Capital Corp Valuation – March 2019 #PNW

Company Profile (excerpt from Reuters): Pinnacle West Capital Corporation, incorporated on February 20, 1985, is a holding company that operates through its subsidiaries. The Company operates through regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses and related activities, and includes electricity generation, transmission and distribution. The Company’s subsidiaries include Arizona Public Service Company (APS), which is a vertically-integrated electric utility that provides retail or wholesale electric service to the State of Arizona, with the exceptions of one-half of the Phoenix metropolitan area, the Tucson metropolitan area and Mohave County in northwestern Arizona.

PNW Chart

PNW data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PNW – 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 $10,824,428,063 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.56 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 39.65% Pass
6. Moderate PEmg Ratio PEmg < 20 21.58 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.03 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.56 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.41 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.47
MG Growth Estimate 3.33%
MG Value $67.81
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $64.84
MG Value based on 0% Growth $38.01
Market Implied Growth Rate 6.54%
Current Price $96.52
% of Intrinsic Value 142.35%

Pinnacle West Capital 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, high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.66 in 2015 to an estimated $4.47 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.54% 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 Pinnacle West Capital Corporation revealed the company was trading above its Graham Number of $71.02. The company pays a dividend of $2.82 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.58, which was below the industry average of 23.71, 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 $-101.07.

Pinnacle West Capital Corporation 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) -$101.07
Graham Number $71.02
PEmg 21.58
Current Ratio 0.56
PB Ratio 2.03
Current Dividend $2.82
Dividend Yield 2.92%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $924,991,000
Total Current Liabilities $1,648,964,000
Long-Term Debt $4,638,232,000
Total Assets $17,664,202,000
Intangible Assets $262,902,000
Total Liabilities $12,315,497,000
Shares Outstanding (Diluted Average) 112,703,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.81
Dec2018 $4.54
Dec2017 $4.35
Dec2016 $3.95
Dec2015 $3.92
Dec2014 $3.58
Dec2013 $3.66
Dec2012 $3.45
Dec2011 $3.09
Dec2010 $3.27
Dec2009 $0.67
Dec2008 $2.40
Dec2007 $3.05
Dec2006 $3.27
Dec2005 $1.82
Dec2004 $2.66
Dec2003 $2.63
Dec2002 $1.76
Dec2001 $3.68
Dec2000 $3.56
Dec1999 $1.97

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.47
Dec2018 $4.22
Dec2017 $4.01
Dec2016 $3.80
Dec2015 $3.66
Dec2014 $3.49
Dec2013 $3.24
Dec2012 $2.88
Dec2011 $2.56
Dec2010 $2.37
Dec2009 $2.03
Dec2008 $2.69
Dec2007 $2.78
Dec2006 $2.58
Dec2005 $2.32
Dec2004 $2.67
Dec2003 $2.69

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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.

NiSource Inc Valuation – March 2019 #NI

Company Profile (excerpt from Reuters): NiSource Inc., incorporated on March 29, 2000, is an energy holding company. The Company is engaged in the distribution of natural gas. The Company operates through two business segments: Gas Distribution Operations and Electric Operations. The Gas Distribution Operations segment provides natural gas service and transportation for residential, commercial and industrial customers in Ohio, Pennsylvania, Virginia, Kentucky, Maryland, Indiana and Massachusetts. As of December 31, 2016, the Electric Operations segment provided electric services in 20 counties in the northern part of Indiana. The Company’s principal subsidiaries include NiSource Gas Distribution Group, Inc., which is a natural gas distribution holding company, and NIPSCO, which is a gas and electric company. NiSource Finance Corporation (NiSource Finance) is a consolidated finance subsidiary of the Company. NiSource Finance is engaged in financing activities to raise funds for the business operations of the Company and its subsidiaries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NI – 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 $10,657,053,567 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.51 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 -56.27% Fail
6. Moderate PEmg Ratio PEmg < 20 43.61 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.84 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.51 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.59 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 $0.66
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $9.51
MG Value based on 0% Growth $5.58
Market Implied Growth Rate 17.56%
Current Price $28.61
% of Intrinsic Value N/A

NiSource 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 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 $1.34 in 2015 to an estimated $0.66 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.56% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into NiSource Inc. revealed the company was trading above its Graham Number of $19.48. The company pays a dividend of $0.78 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 43.61, which was above the industry average of 23.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-37.86.

NiSource 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) -$37.86
Graham Number $19.48
PEmg 43.61
Current Ratio 0.51
PB Ratio 1.84
Current Dividend $0.78
Dividend Yield 2.73%
Number of Consecutive Years of Dividend Growth 2

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,055,400,000
Total Current Liabilities $4,036,800,000
Long-Term Debt $7,105,400,000
Total Assets $21,804,000,000
Intangible Assets $1,911,400,000
Total Liabilities $16,053,100,000
Shares Outstanding (Diluted Average) 369,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.29
Dec2018 -$0.18
Dec2017 $0.39
Dec2016 $1.02
Dec2015 $0.90
Dec2014 $1.67
Dec2013 $1.70
Dec2012 $1.39
Dec2011 $1.03
Dec2010 $1.01
Dec2009 $0.79
Dec2008 $0.29
Dec2007 $1.17
Dec2006 $1.03
Dec2005 $1.12
Dec2004 $1.64
Dec2003 $0.33
Dec2002 $1.75
Dec2001 $1.03
Dec2000 $1.11
Dec1999 $1.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.66
Dec2018 $0.48
Dec2017 $0.92
Dec2016 $1.23
Dec2015 $1.34
Dec2014 $1.49
Dec2013 $1.33
Dec2012 $1.06
Dec2011 $0.89
Dec2010 $0.83
Dec2009 $0.79
Dec2008 $0.87
Dec2007 $1.13
Dec2006 $1.13
Dec2005 $1.18
Dec2004 $1.20
Dec2003 $1.02

Recommended Reading:

Other ModernGraham posts about the company

NiSource Inc Valuation – June 2018 $NI
NiSource Inc Valuation – March 2017 $NI
NiSource Inc Valuation – August 2016 $NI
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NiSource Inc. Annual Valuation – 2014 $NI

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NextEra Energy Inc Valuation – February 2019 $NEE
Dominion Energy Inc Valuation – February 2019 $D
Exelon Corp Valuation – January 2019 $EXC

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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