Align Technology Inc Valuation – February 2019 $ALGN

Company Profile (excerpt from Reuters): Align Technology, Inc., incorporated on April 3, 1997, designs, manufactures and markets a system of clear aligner therapy, intra-oral scanners and computer-aided design/computer-aided manufacturing (CAD/CAM) digital services used in dentistry, orthodontics and dental records storage. The Company operates through two segments: Clear Aligner segment and Scanner and Services (Scanner) segment. The Clear Aligner segment consists of its Invisalign System, which includes Invisalign Full, Teen and Assist (Comprehensive Products), Express/Lite (Non-Comprehensive Products) and Vivera Retainers, along with its training and ancillary products for treating malocclusion (Non-Case). The Scanner segment consists of intra-oral scanning systems and other services available with the intra-oral scanners that provide digital alternatives to the traditional cast models. The Scanner segment includes its iTero scanner and OrthoCAD services. iTero scanner is used by dental professionals, and labs and services for restorative and orthodontic digital procedures, as well as Invisalign digital impression submission.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ALGN – 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 $19,185,761,689 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.88 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 391.57% Pass
6. Moderate PEmg Ratio PEmg < 20 63.09 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 15.50 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 1.88 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.80
MG Growth Estimate 15.00%
MG Value $146.43
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $55.15
MG Value based on 0% Growth $32.33
Market Implied Growth Rate 27.29%
Current Price $239.94
% of Intrinsic Value 163.86%

Align Technology, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.37 in 2015 to an estimated $3.8 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 27.29% 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 below the price.

At the time of valuation, further research into Align Technology, Inc. revealed the company was trading above its Graham Number of $39.78. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 63.09, which was above the industry average of 51.18. Finally, the company was trading above its Net Current Asset Value (NCAV) of $6.21.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $6.21
Graham Number $39.78
PEmg 63.09
Current Ratio 1.88
PB Ratio 15.50
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 $1,302,479,000
Total Current Liabilities $692,073,000
Long-Term Debt $0
Total Assets $2,052,458,000
Intangible Assets $81,949,000
Total Liabilities $799,567,000
Shares Outstanding (Diluted Average) 80,943,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.49
Dec2018 $4.92
Dec2017 $2.83
Dec2016 $2.33
Dec2015 $1.77
Dec2014 $1.77
Dec2013 $0.78
Dec2012 $0.71
Dec2011 $0.83
Dec2010 $0.95
Dec2009 -$0.45
Dec2008 $1.18
Dec2007 $0.50
Dec2006 -$0.55
Dec2005 $0.02
Dec2004 $0.14
Dec2003 -$0.35
Dec2002 -$1.52
Dec2001 -$2.61
Dec2000 -$25.64
Dec1999 -$3.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.80
Dec2018 $3.21
Dec2017 $2.21
Dec2016 $1.75
Dec2015 $1.37
Dec2014 $1.11
Dec2013 $0.71
Dec2012 $0.67
Dec2011 $0.63
Dec2010 $0.46
Dec2009 $0.19
Dec2008 $0.43
Dec2007 $0.02
Dec2006 -$0.30
Dec2005 -$0.40
Dec2004 -$2.41
Dec2003 -$4.71

Recommended Reading:

Other ModernGraham posts about the company

Align Technology Inc Valuation – April 2018 $ALGN
Align Technology Inc Valuation – August 2016 $ALGN
Align Technology Inc Valuation – May 2016 $ALGN
Align Technology Inc. Valuation – November 2015 Update $ALGN
Align Technology Analysis – Initial Coverage $ALGN

Other ModernGraham posts about related companies

Abiomed Inc Valuation – February 2019 $ABMD
Laboratory Corp of America Holdings Inc Valuation – January 2019 $LH
Intuitive Surgical Inc Valuation – January 2019 $ISRG
PerkinElmer Inc Valuation – January 2019 $PKI
Cardinal Health Inc Valuation – January 2019 $CAH
Varian Medical Systems Inc Valuation – January 2019 $VAR
Zimmer Biomet Holdings Inc Valuation – January 2019 $ZBH
Henry Schein Inc Valuation – January 2019 $HSIC
Medtronic PLC Valuation – January 2019 $MDT
UnitedHealth Group Inc Valuation – November 2018 $UNH

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.

Align Technology Inc Valuation – April 2018 $ALGN

Company Profile (excerpt from Reuters): Align Technology, Inc., incorporated on April 3, 1997, designs, manufactures and markets a system of clear aligner therapy, intra-oral scanners and computer-aided design/computer-aided manufacturing (CAD/CAM) digital services used in dentistry, orthodontics and dental records storage. The Company operates through two segments: Clear Aligner segment and Scanner and Services (Scanner) segment. The Clear Aligner segment consists of its Invisalign System, which includes Invisalign Full, Teen and Assist (Comprehensive Products), Express/Lite (Non-Comprehensive Products) and Vivera Retainers, along with its training and ancillary products for treating malocclusion (Non-Case). The Scanner segment consists of intra-oral scanning systems and other services available with the intra-oral scanners that provide digital alternatives to the traditional cast models. The Scanner segment includes its iTero scanner and OrthoCAD services. iTero scanner is used by dental professionals, and labs and services for restorative and orthodontic digital procedures, as well as Invisalign digital impression submission.

ALGN Chart

ALGN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ALGN – April 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 $21,278,224,300 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.32 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 618.05% Pass
6. Moderate PEmg Ratio PEmg < 20 87.39 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 18.94 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 2.32 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.04
MG Growth Estimate 15.00%
MG Value $116.96
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $44.05
MG Value based on 0% Growth $25.82
Market Implied Growth Rate 39.45%
Current Price $265.50
% of Intrinsic Value 226.99%

Align Technology, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.11 in 2014 to an estimated $3.04 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 39.45% 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 Align Technology, Inc. revealed the company was trading above its Graham Number of $37.68. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 87.39, which was above the industry average of 44.81. Finally, the company was trading above its Net Current Asset Value (NCAV) of $6.45.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $6.45
Graham Number $37.68
PEmg 87.39
Current Ratio 2.32
PB Ratio 18.94
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 12/1/2017
Total Current Assets $1,157,003,000
Total Current Liabilities $497,816,000
Long-Term Debt $0
Total Assets $1,777,856,000
Intangible Assets $89,068,000
Total Liabilities $627,486,000
Shares Outstanding (Diluted Average) 82,057,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.39
Dec2017 $2.83
Dec2016 $2.33
Dec2015 $1.77
Dec2014 $1.77
Dec2013 $0.78
Dec2012 $0.71
Dec2011 $0.83
Dec2010 $0.95
Dec2009 -$0.45
Dec2008 $1.18
Dec2007 $0.50
Dec2006 -$0.55
Dec2005 $0.02
Dec2004 $0.14
Dec2003 -$0.35
Dec2002 -$1.52
Dec2001 -$2.61
Dec2000 -$25.64
Dec1999 -$3.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.04
Dec2017 $2.21
Dec2016 $1.75
Dec2015 $1.37
Dec2014 $1.11
Dec2013 $0.71
Dec2012 $0.67
Dec2011 $0.63
Dec2010 $0.46
Dec2009 $0.19
Dec2008 $0.43
Dec2007 $0.02
Dec2006 -$0.30
Dec2005 -$0.40
Dec2004 -$2.41
Dec2003 -$4.71
Dec2002 -$6.82

Recommended Reading:

Other ModernGraham posts about the company

Align Technology Inc Valuation – August 2016 $ALGN
Align Technology Inc Valuation – May 2016 $ALGN
Align Technology Inc. Valuation – November 2015 Update $ALGN
Align Technology Analysis – Initial Coverage $ALGN

Other ModernGraham posts about related companies

HCA Healthcare Inc Valuation – April 2018 $HCA
Express Scripts Holding Co Valuation – April 2018 $ESRX
Stryker Corp Valuation – April 2018 $SYK
Cerner Corporation Valuation – April 2018 $CERN
Quest Diagnostics Inc Valuation – April 2018 $DGX
Laboratory Corporation of America Holdings Valuation – March 2018 $LH
Intuitive Surgical Inc valuation – March 2018 $ISRG
PerkinElmer Inc Valuation – March 2018 $PKI
Cardinal Health Inc Valuation – March 2018 $CAH
Varian Medical Systems Inc Valuation – March 2018 $VAR

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.

Align Technology Inc Valuation – August 2016 $ALGN

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 Align Technology Inc (ALGN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Align Technology, Inc. designs, manufactures and markets a system of clear aligner therapy, intra-oral scanners and computer-aided design and computer-aided manufacturing (CAD/CAM) digital services used in dentistry, orthodontics and dental records storage. The Company operates through two segments: Clear Aligner segment and Scanner and Services (Scanner) segment. The Clear Aligner segment consists of its Invisalign System, which includes Invisalign Full, Express/Lite, Teen, Assist and Vivera Retainers, along with its training and ancillary products for treating malocclusion. The Scanner segment consists of intra-oral scanning systems and other services available with the intra-oral scanners that provide digital alternatives to the traditional cast models. The Company’s iTero scanner is used by dental professionals, and labs and services for restorative and orthodontic digital procedures, as well as Invisalign digital impression submission.

ALGN Chart

ALGN data by YCharts

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of ALGN – 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 $7,415,636,995 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.76 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 364.23% Pass
6. Moderate PEmg Ratio PEmg < 20 54.63 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.30 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 2.76 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

ALGN value chart August 2016

EPSmg $1.70
MG Growth Estimate 15.00%
MG Value $65.48
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $24.66
MG Value based on 0% Growth $14.46
Market Implied Growth Rate 23.06%
Current Price $92.90
% of Intrinsic Value 141.88%

Align Technology, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.67 in 2012 to an estimated $1.7 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 23.06% 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 Align Technology, Inc. revealed the company was trading above its Graham Number of $23.58. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 54.63, which was above the industry average of 40.07. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.95.

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

Stage 3: Information for Further Research

ALGN charts August 2016

Net Current Asset Value (NCAV) $5.95
Graham Number $23.58
PEmg 54.63
Current Ratio 2.76
PB Ratio 8.30
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $825,407,000
Total Current Liabilities $298,989,000
Long-Term Debt $0
Total Assets $1,251,273,000
Intangible Assets $83,749,000
Total Liabilities $341,415,000
Shares Outstanding (Diluted Average) 81,281,000

Earnings Per Share History

Next Fiscal Year Estimate $2.17
Dec2015 $1.77
Dec2014 $1.77
Dec2013 $0.78
Dec2012 $0.71
Dec2011 $0.83
Dec2010 $0.95
Dec2009 -$0.45
Dec2008 $1.18
Dec2007 $0.50
Dec2006 -$0.55
Dec2005 $0.02
Dec2004 $0.14
Dec2003 -$0.35
Dec2002 -$1.52
Dec2001 -$2.61
Dec2000 -$25.64
Dec1999 -$3.66

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.70
Dec2015 $1.37
Dec2014 $1.11
Dec2013 $0.71
Dec2012 $0.67
Dec2011 $0.63
Dec2010 $0.46
Dec2009 $0.19
Dec2008 $0.43
Dec2007 $0.02
Dec2006 -$0.30
Dec2005 -$0.40
Dec2004 -$2.41
Dec2003 -$4.71
Dec2002 -$6.82
Dec2001 -$8.44
Dec2000 -$9.52

Recommended Reading:

Other ModernGraham posts about the company

Align Technology Inc Valuation – May 2016 $ALGN
Align Technology Inc. Valuation – November 2015 Update $ALGN
Align Technology Analysis – Initial Coverage $ALGN

Other ModernGraham posts about related companies

HCA Holdings Inc Valuation – August 2016 $HCA
Express Scripts Holding Co Valuation – August 2016 $ESRX
Universal Health Services Inc Valuation – August 2016 $UHS
Endo International PLC Valuation – August 2016 $ENDP
C R Bard Inc Valuation – August 2016 $BCR
Psychemedics Corp Valuation – August 2016 $PMD
Patterson Companies Inc Valuation – August 2016 $PDCO
Edwards Lifesciences Corp Valuation – August 2016 $EW
Baxter International Inc Valuation – August 2016 $BAX
Cerner Corporation Valuation – August 2016 $CERN

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.

Align Technology Inc Valuation – May 2016 $ALGN

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – March 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Align Technology Inc (ALGN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Align Technology, Inc. designs, manufactures and markets a system of clear aligner therapy, intra-oral scanners and computer-aided design and computer-aided manufacturing (CAD/CAM) digital services used in dentistry, orthodontics and dental records storage. The Company operates through two segments: Clear Aligner segment and Scanner and Services (Scanner) segment. The Clear Aligner segment consists of its Invisalign System, which includes Invisalign Full, Express/Lite, Teen, Assist and Vivera Retainers, along with its training and ancillary products for treating malocclusion. The Scanner segment consists of intra-oral scanning systems and other services available with the intra-oral scanners that provide digital alternatives to the traditional cast models. The Company’s iTero scanner is used by dental professionals, and labs and services for restorative and orthodontic digital procedures, as well as Invisalign digital impression submission.

[level-free]

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of ALGN – May 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $6,057,308,498 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.85 Pass
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 358.54% Pass
6. Moderate PEmg Ratio PEmg < 20 45.17 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.91 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.85 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

ALGN value Chart May 2016

EPSmg $1.68
MG Growth Estimate 15.00%
MG Value $64.58
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $24.32
MG Value based on 0% Growth $14.26
Market Implied Growth Rate 18.34%
Current Price $75.77
% of Intrinsic Value 117.33%

Align Technology, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.67 in 2012 to an estimated $1.68 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 18.34% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

Align Technology, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

ALGN Charts May 2016

Net Current Asset Value (NCAV) $5.75
Graham Number $0.00
PEmg 45.23
Current Ratio 2.85
PB Ratio 6.92
Dividend Yield 2.84%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information Mar2016
Total Current Assets $783,003,000
Total Current Liabilities $274,750,000
Long-Term Debt $0
Total Assets $1,207,560,000
Intangible Assets $78,606,000
Total Liabilities $315,530,000
Shares Outstanding (Diluted Average) 81,320,000

Earnings Per Share History

Next Fiscal Year Estimate $2.10
Dec2015 $1.77
Dec2014 $1.77
Dec2013 $0.78
Dec2012 $0.71
Dec2011 $0.83
Dec2010 $0.95
Dec2009 -$0.45
Dec2008 $1.18
Dec2007 $0.50
Dec2006 -$0.55
Dec2005 $0.02
Dec2004 $0.14
Dec2003 -$0.35
Dec2002 -$1.42
Dec2001 -$2.57
Dec2000 -$25.64
Dec1999 -$3.65

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.68
Dec2015 $1.37
Dec2014 $1.11
Dec2013 $0.71
Dec2012 $0.67
Dec2011 $0.63
Dec2010 $0.46
Dec2009 $0.19
Dec2008 $0.43
Dec2007 $0.02
Dec2006 -$0.29
Dec2005 -$0.39
Dec2004 -$2.38
Dec2003 -$4.67
Dec2002 -$6.77
Dec2001 -$8.42
Dec2000 -$9.52

Recommended Reading:

Other ModernGraham posts about the company

Align Technology Inc. Valuation – November 2015 Update $ALGN
Align Technology Analysis – Initial Coverage $ALGN

Other ModernGraham posts about related companies

C.R. Bard Inc Stock Valuation – February 2016 $BCR
Psychemedics Corp Stock Valuation – February 2016 $PMD
Patterson Companies Inc Stock Valuation – February 2016 $PDCO
Edwards Lifesciences Corp Valuation – February 2016 $EW
Baxter International Inc Valuation – February 2016 $BAX
Cerner Corporation Valuation – February 2016 Update $CERN
Henry Schein Inc Valuation – February 2016 Update $HSIC
Medtronic PLC Valuation – January 2016 Update $MDT
Intuitive Surgical Inc Valuation – January 2016 Update $ISRG
PerkinElmer Inc Valuation – January 2016 Update $PKI

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.

Align Technology Inc. Valuation – November 2015 Update $ALGN

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – October 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Align Technology Inc. (ALGN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Align Technology, Inc. (Align) is a medical device company. The Company designs, manufactures and markets a system of clear aligner therapy, intra-oral scanners and computer-aided design and computer-aided manufacturing (CAD/CAM) digital services for dentistry, orthodontics, and dental records storage. The Company operates through two segments: Clear Aligner, known as the Invisalign system, and Scanners and Services, known as the iTero intraoral scanner and OrthoCAD services. The Company’s Clear Aligner segment provides malocclusion and orthodontic treatment. The Company’s Scanners and Services Segment offers iTero intraoral scanner, which utilizes laser and optical scanning to capture the contours of the patient’s dentition, gingival structures and the bite. It distributes products directly to customers, including orthodontists and general practitioner dentists (GPs), as well as to restorative dentists, including prosthodontists, periodontists and oral surgeons.

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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. Here is a free sample valuation pdf, and 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 ALGN – November 2015

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,127,114,998 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.91 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 274.34% Pass
6. Moderate PEmg Ratio PEmg < 20 48.21 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.55 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.91 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

ALGN value Chart November 2015

EPSmg $1.34
MG Growth Estimate 15.00%
MG Value $51.51
Opinion Overvalued
MG Value based on 3% Growth $19.40
MG Value based on 0% Growth $11.37
Market Implied Growth Rate 19.85%
Current Price $64.50
% of Intrinsic Value 125.21%

Align Technology Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, lack of dividends, and the high PEmg and PB ratios.  The Enterprising Investor is only concerned with the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.63 in 2011 to an estimated $1.34 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 15% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

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

Stage 3: Information for Further Research

ALGN Charts November 2015

Net Current Asset Value (NCAV) $5.31
Graham Number $19.41
PEmg 48.25
Current Ratio 2.91
PB Ratio 6.56
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

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

Useful Links:

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

Most Recent Balance Sheet Figures

Total Current Assets $711,733,000
Total Current Liabilities $244,511,000
Long-Term Debt $0
Total Assets $1,079,562,000
Intangible Assets $79,715,000
Total Liabilities $281,303,000
Shares Outstanding (Diluted Average) 81,092,000

Earnings Per Share History

Next Fiscal Year Estimate $1.68
Dec14 $1.77
Dec13 $0.78
Dec12 $0.71
Dec11 $0.83
Dec10 $0.95
Dec09 -$0.45
Dec08 $1.18
Dec07 $0.50
Dec06 -$0.55
Dec05 $0.02
Dec04 $0.14
Dec03 -$0.35
Dec02 -$1.52
Dec01 -$2.61
Dec00 -$25.64
Dec99 -$3.65

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.34
Dec14 $1.11
Dec13 $0.71
Dec12 $0.67
Dec11 $0.63
Dec10 $0.46
Dec09 $0.19
Dec08 $0.43
Dec07 $0.02
Dec06 -$0.30
Dec05 -$0.40
Dec04 -$2.41
Dec03 -$4.71
Dec02 -$6.82
Dec01 -$8.44
Dec00 -$9.52
Dec99 -$1.22

Recommended Reading:

Other ModernGraham posts about the company

Align Technology Analysis – Initial Coverage $ALGN

Other ModernGraham posts about related companies

Psychemedics Corporation Valuation – November 2015 Update $PMD
C.R. Bard Inc. Valuation – November 2015 Update $BCR
Henry Schein Inc. Valuation – October 2015 Update $HSIC
Medtronic PLC Valuation – October 2015 Update $MDT
PerkinElmer Inc. Analysis – October 2015 Update $PKI
Quest Diagnostics Inc. Analysis – October 2015 Update $DGX
Stryker Corporation Analysis – October 2015 Update $SYK
The Best Companies of the Medical Industry – September 2015
Zimmer Biomet Holdings Inc. Analysis – September 2015 Update $ZBH

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.

Align Technology Analysis – Initial Coverage $ALGN

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 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 Align Technology Inc. (ALGN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Align Technology, Inc. (Align) is a medical device company. The Company designs, manufactures and markets a system of clear aligner therapy, intra-oral scanners and computer-aided design and computer-aided manufacturing (CAD/CAM) digital services for dentistry, orthodontics, and dental records storage. The Company operates through two segments: Clear Aligner, known as the Invisalign system, and Scanners and Services, known as the iTero intraoral scanner and OrthoCAD services. The Company’s Clear Aligner segment provides malocclusion and orthodontic treatment. The Company’s Scanners and Services Segment offers iTero intraoral scanner, which utilizes laser and optical scanning to capture the contours of the patient’s dentition, gingival structures and the bite. It distributes products directly to customers, including orthodontists and general practitioner dentists (GPs), as well as to restorative dentists, including prosthodontists, periodontists and oral surgeons.

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

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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of ALGN – August 2015

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

What kind of Intelligent Investor are you?

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

Stage 2: Determination of Intrinsic Value

EPSmg 1.27
MG Growth Estimate 15.00%
MG Value $49.07
Opinion Overvalued
MG Value based on 3% Growth $18.48
MG Value based on 0% Growth $10.83
Market Implied Growth Rate 19.52%
Current Price $60.59
% of Intrinsic Value 123.46%

Align Technology Inc. qualifies for the Enterprising Investor but is not suitable for the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, lack of dividends, and the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.63 in 2011 to an estimated $1.27 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 19.52% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

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

Stage 3: Information for Further Research

ALGN charts August 2015

Net Current Asset Value (NCAV) $4.90
PEmg 47.53
Current Ratio 2.95
PB Ratio 6.41
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

Total Current Assets $657,906,000
Total Current Liabilities $222,925,000
Long-Term Debt $0
Total Assets $1,028,581,000
Intangible Assets $80,590,000
Total Liabilities $258,780,000
Outstanding Shares 81,394,000

Earnings Per Share History

Next Fiscal Year Estimate $1.49
Dec14 $1.77
Dec13 $0.78
Dec12 $0.71
Dec11 $0.83
Dec10 $0.95
Dec09 -$0.45
Dec08 $1.18
Dec07 $0.50
Dec06 -$0.55
Dec05 $0.02
Dec04 $0.14
Dec03 -$0.35
Dec02 -$1.52
Dec01 -$2.61
Dec00 -$25.64
Dec99 -$3.65

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.27
Dec14 $1.11
Dec13 $0.71
Dec12 $0.67
Dec11 $0.63
Dec10 $0.46
Dec09 $0.19
Dec08 $0.43
Dec07 $0.02
Dec06 -$0.30
Dec05 -$0.40
Dec04 -$2.41
Dec03 -$4.71
Dec02 -$6.82
Dec01 -$8.44
Dec00 -$9.52
Dec99 -$1.22

Recommended Reading:

Other ModernGraham posts about the company

None

Other ModernGraham posts about related companies

Varian Medical Systems Inc Analysis – August 2015 Update $VAR
Psychemedics Corporation Analysis – August 2015 Update $PMD
C.R. Bard Inc. Analysis – August 2015 Update $BCR
Thermo Fisher Scientific Inc. Analysis – 2015 Update $TMO
Express Scripts Inc. Analysis – 2015 Update $ESRX
HCA Holdings Inc. Analysis – Initial Coverage $HCA
Henry Schein Inc. Analysis – Initial Coverage $HSIC
Medtronic Inc. Analysis – July 2015 Update $MDT
Quest Diagnostics Inc. Analysis – July 2015 Update $DGX
Universal Health Services Inc. Analysis – Initial Coverage $UHS

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.  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.

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

Centene Corp Valuation – March 2019 $CNC

Company Profile (excerpt from Reuters): Centene Corporation, incorporated on September 26, 2001, is a healthcare company. The Company provides a portfolio of services to government sponsored healthcare programs, focusing on under-insured and uninsured individuals. The Company operates through two segments: Managed Care and Specialty Services. It provides member-focused services through locally based staff by assisting in accessing care, coordinating referrals to related health and social services and addressing member concerns and questions. It also provides education and outreach programs to inform and assist members in accessing appropriate healthcare services. The Managed Care segment consists of the Company’s health plans, including all of the functions needed to operate them. The Specialty Services segment consists of the Company’s specialty companies, offering auxiliary healthcare services and products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CNC – 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 $25,290,159,805 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.00 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 769.31% Pass
6. Moderate PEmg Ratio PEmg < 20 21.95 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.34 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 1.00 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 246.22 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 $2.79
MG Growth Estimate 15.00%
MG Value $107.34
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $40.43
MG Value based on 0% Growth $23.70
Market Implied Growth Rate 6.72%
Current Price $61.17
% of Intrinsic Value 56.99%

Centene 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, poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of 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 Undervalued after growing its EPSmg (normalized earnings) from $0.96 in 2015 to an estimated $2.79 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.72% 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 Centene Corp revealed the company was trading above its Graham Number of $49.9. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 21.94, which was below the industry average of 53.13, 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 $-18.78.

Centene 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) -$18.78
Graham Number $49.90
PEmg 21.94
Current Ratio 1.00
PB Ratio 2.33
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 $11,998,000,000
Total Current Liabilities $11,971,000,000
Long-Term Debt $6,648,000,000
Total Assets $30,901,000,000
Intangible Assets $9,254,000,000
Total Liabilities $19,888,000,000
Shares Outstanding (Diluted Average) 420,226,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.18
Dec2018 $2.26
Dec2017 $2.34
Dec2016 $1.71
Dec2015 $1.44
Dec2014 $1.13
Dec2013 $0.74
Dec2012 $0.01
Dec2011 $0.53
Dec2010 $0.47
Dec2009 $0.47
Dec2008 $0.47
Dec2007 $0.41
Dec2006 -$0.25
Dec2005 $0.31
Dec2004 $0.26
Dec2003 $0.22
Dec2002 $0.18
Dec2001 $0.13
Dec2000 $0.09
Dec1999 -$0.92

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.79
Dec2018 $1.99
Dec2017 $1.72
Dec2016 $1.28
Dec2015 $0.96
Dec2014 $0.68
Dec2013 $0.45
Dec2012 $0.33
Dec2011 $0.49
Dec2010 $0.41
Dec2009 $0.35
Dec2008 $0.27
Dec2007 $0.18
Dec2006 $0.09
Dec2005 $0.25
Dec2004 $0.20
Dec2003 $0.10

Recommended Reading:

Other ModernGraham posts about the company

Centene Corp Valuation – May 2018 $CNC
Centene Corp Valuation – Initial Coverage $CNC

Other ModernGraham posts about related companies

Abbott Laboratories Valuation – February 2019 $ABT
Becton Dickinson and Co Valuation – February 2019 $BDX
IQVIA Holdings Inc Valuation – February 2019 $IQV
Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK
Align Technology Inc Valuation – February 2019 $ALGN

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.

Abbott Laboratories Valuation – February 2019 $ABT

Company Profile (excerpt from Reuters): Abbott Laboratories, incorporated on March 6, 1900, is engaged in the discovery, development, manufacture and sale of a range of healthcare products. The Company operates through four segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products and Vascular Products. The Company, through St. Jude Medical, Inc., also offers a range of products, such as rhythm management products, electrophysiology products, heart failure related products, vascular products, structural heart products and neuromodulation products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ABT – 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 $136,723,618,367 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.62 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 -50.67% Fail
6. Moderate PEmg Ratio PEmg < 20 43.49 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.49 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 1.62 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.44 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 $1.79
MG Growth Estimate -3.78%
MG Value $1.68
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $25.94
MG Value based on 0% Growth $15.20
Market Implied Growth Rate 17.50%
Current Price $77.79
% of Intrinsic Value 4629.78%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.39 in 2015 to an estimated $1.79 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.5% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Abbott Laboratories revealed the company was trading above its Graham Number of $35.26. The company pays a dividend of $1.12 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 43.49, which was below the industry average of 51.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.3.

Abbott Laboratories 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) -$12.30
Graham Number $35.26
PEmg 43.49
Current Ratio 1.62
PB Ratio 4.49
Current Dividend $1.12
Dividend Yield 1.44%
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 $14,632,000,000
Total Current Liabilities $9,012,000,000
Long-Term Debt $19,359,000,000
Total Assets $67,173,000,000
Intangible Assets $42,196,000,000
Total Liabilities $36,451,000,000
Shares Outstanding (Diluted Average) 1,773,870,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.18
Dec2018 $1.33
Dec2017 $0.27
Dec2016 $0.94
Dec2015 $2.92
Dec2014 $1.49
Dec2013 $1.62
Dec2012 $3.72
Dec2011 $3.01
Dec2010 $2.96
Dec2009 $3.69
Dec2008 $3.12
Dec2007 $2.31
Dec2006 $1.12
Dec2005 $2.16
Dec2004 $2.06
Dec2003 $1.75
Dec2002 $1.78
Dec2001 $0.99
Dec2000 $1.78
Dec1999 $1.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.79
Dec2018 $1.19
Dec2017 $1.23
Dec2016 $1.85
Dec2015 $2.39
Dec2014 $2.27
Dec2013 $2.77
Dec2012 $3.33
Dec2011 $3.10
Dec2010 $2.98
Dec2009 $2.82
Dec2008 $2.31
Dec2007 $1.89
Dec2006 $1.71
Dec2005 $1.92
Dec2004 $1.76
Dec2003 $1.60

Recommended Reading:

Other ModernGraham posts about the company

10 Most Overvalued Stocks of the S&P 500 – July 2018
Abbott Laboratories Valuation – May 2018 $ABT
Abbott Laboratories Valuation – January 2017 $ABT
Abbott Laboratories Valuation – August 2016 $ABT
5 Speculative and Overvalued Companies to Avoid – March 2015

Other ModernGraham posts about related companies

Becton Dickinson and Co Valuation – February 2019 $BDX
IQVIA Holdings Inc Valuation – February 2019 $IQV
Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK
Align Technology Inc Valuation – February 2019 $ALGN
Quest Diagnostics Inc Valuation – February 2019 $DGX

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.

Becton Dickinson and Co Valuation – February 2019 $BDX

Company Profile (excerpt from Reuters): Becton, Dickinson and Company (BD), incorporated in November 1906, is a global medical technology company engaged in the development, manufacture and sale of a range of medical supplies, devices, laboratory equipment and diagnostic products. The Company operates through two segments: BD Medical and BD Life Sciences. It provides customer solutions that are focused on managing medication management and patient safety; supporting infection prevention practices; equipping surgical and interventional procedures; managing drug delivery; aiding anesthesiology care; managing the diagnosis of infectious diseases and cancers; advancing cellular research and applications, and supporting the management of diabetes. The Company caters to markets, such as healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. The Company’s subsidiaries include Accuri Cytometers, Inc., BD Norge AS, CareFusion Canada 307 ULC, Vital Signs Hong Kong Limited and Dantor S.A.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BDX – 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 $66,862,230,050 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.97 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 3.35% Fail
6. Moderate PEmg Ratio PEmg < 20 41.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.18 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 0.97 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -87.34 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.92
MG Growth Estimate 2.31%
MG Value $77.69
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $85.87
MG Value based on 0% Growth $50.34
Market Implied Growth Rate 16.73%
Current Price $248.50
% of Intrinsic Value 319.88%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $5.13 in 2015 to an estimated $5.92 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.73% 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 Becton Dickinson and Co revealed the company was trading above its Graham Number of $145.91. The company pays a dividend of $3 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 41.96, which was below the industry average of 51.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-89.65.

Becton Dickinson and 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) -$89.65
Graham Number $145.91
PEmg 41.96
Current Ratio 0.97
PB Ratio 3.18
Current Dividend $3.00
Dividend Yield 1.21%
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 12/1/2018
Total Current Assets $6,941,000,000
Total Current Liabilities $7,145,000,000
Long-Term Debt $17,817,000,000
Total Assets $52,932,000,000
Intangible Assets $39,565,000,000
Total Liabilities $31,528,000,000
Shares Outstanding (Diluted Average) 274,256,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.06
Sep2018 $0.60
Sep2017 $4.60
Sep2016 $4.49
Sep2015 $3.35
Sep2014 $5.99
Sep2013 $6.49
Sep2012 $5.59
Sep2011 $5.62
Sep2010 $5.49
Sep2009 $4.99
Sep2008 $4.46
Sep2007 $3.49
Sep2006 $2.93
Sep2005 $2.77
Sep2004 $1.77
Sep2003 $2.07
Sep2002 $1.79
Sep2001 $1.49
Sep2000 $1.49
Sep1999 $1.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.92
Sep2018 $3.17
Sep2017 $4.63
Sep2016 $4.83
Sep2015 $5.13
Sep2014 $5.96
Sep2013 $5.84
Sep2012 $5.42
Sep2011 $5.16
Sep2010 $4.71
Sep2009 $4.13
Sep2008 $3.49
Sep2007 $2.87
Sep2006 $2.46
Sep2005 $2.15
Sep2004 $1.80
Sep2003 $1.73

Recommended Reading:

Other ModernGraham posts about the company

Becton Dickinson and Co Valuation – May 2018 $BDX
5 of the Worst Stocks to Invest In – January 2017
Becton Dickinson and Co Valuation – January 2017 $BDX
Becton Dickinson & Company Analysis – August 2015 Update $BDX
30 Companies in the Spotlight This Week – 5/23/15

Other ModernGraham posts about related companies

Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK
Align Technology Inc Valuation – February 2019 $ALGN
Quest Diagnostics Inc Valuation – February 2019 $DGX
AmerisourceBergen Corp Valuation – February 2019 $ABC
Abiomed Inc Valuation – February 2019 $ABMD

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.

IQVIA Holdings Inc Valuation – February 2019 $IQV

Company Profile (excerpt from Reuters): IQVIA Holdings Inc., formerly Quintiles IMS Holdings, Inc., incorporated on October 3, 2016, provides integrated information and technology-enabled healthcare services. The Company operates through segments, including Commercial Solutions; Research & Development Solutions, and Integrated Engagement Services. It serves pharmaceutical, biotechnology, medical device and healthcare companies. The Company has its operations in the Americas, Europe and Africa, and the Asia-Pacific.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IQV – 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 $27,790,759,500 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.10 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 841.73% Pass
6. Moderate PEmg Ratio PEmg < 20 37.22 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.13 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 1.10 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 32.08 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 $3.78
MG Growth Estimate 9.77%
MG Value $106.06
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $54.86
MG Value based on 0% Growth $32.16
Market Implied Growth Rate 14.36%
Current Price $140.82
% of Intrinsic Value 132.77%

Iqvia Holdings 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 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 $2.29 in 2015 to an estimated $3.78 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.36% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Iqvia Holdings Inc revealed the company was trading above its Graham Number of $68.27. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 37.22, which was below the industry average of 51.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-57.46.

Iqvia Holdings 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) -$57.46
Graham Number $68.27
PEmg 37.22
Current Ratio 1.10
PB Ratio 4.13
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 $3,874,000,000
Total Current Liabilities $3,534,000,000
Long-Term Debt $10,907,000,000
Total Assets $22,549,000,000
Intangible Assets $17,751,000,000
Total Liabilities $15,595,000,000
Shares Outstanding (Diluted Average) 204,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.11
Dec2018 $1.24
Dec2017 $5.74
Dec2016 $0.47
Dec2015 $3.08
Dec2014 $2.72
Dec2013 $1.77
Dec2012 $1.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.78
Dec2018 $2.63
Dec2017 $3.14
Dec2016 $1.85
Dec2015 $2.29
Dec2014 $1.66
Dec2013 $0.96
Dec2012 $0.46

Recommended Reading:

Other ModernGraham posts about the company

IQVIA Holdings Inc Valuation – Initial Coverage May 2018 $IQV

Other ModernGraham posts about related companies

Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK
Align Technology Inc Valuation – February 2019 $ALGN
Quest Diagnostics Inc Valuation – February 2019 $DGX
AmerisourceBergen Corp Valuation – February 2019 $ABC
Abiomed Inc Valuation – February 2019 $ABMD

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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