Advanced Micro Devices Inc Valuation – February 2019 $AMD

Company Profile (excerpt from Reuters): Advanced Micro Devices, Inc. (AMD), incorporated on May 1, 1969, is a global semiconductor company. The Company is engaged in offering x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs) and professional graphics, and, server and embedded processors and semi-custom System-on-Chip (SoC) products and technology for game consoles. The Company’s segments include the Computing and Graphics segment, and the Enterprise, Embedded and Semi-Custom segment. The Computing and Graphics segment primarily includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics. The Enterprise, Embedded and Semi-Custom segment primarily includes server and embedded processors, semi-custom SoC products, development services, technology for game consoles and licensing portions of its intellectual property portfolio. The Company sells its products through its direct sales force and through independent distributors and sales representatives in both domestic and international markets. Its microprocessor customers consist primarily of original equipment manufacturers (OEMs), original design manufacturers (ODMs), system builders and independent distributors in both domestic and international markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMD – 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 $24,489,084,253 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.78 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 -333.33% Fail
6. Moderate PEmg Ratio PEmg < 20 304.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 20.82 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 1.78 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.72 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.08
MG Growth Estimate 15.00%
MG Value $3.08
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $1.16
MG Value based on 0% Growth $0.68
Market Implied Growth Rate 148.00%
Current Price $24.36
% of Intrinsic Value 790.91%

Advanced Micro Devices, 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 poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.61 in 2015 to an estimated $0.08 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 148% 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 Advanced Micro Devices, Inc. revealed the company was trading above its Graham Number of $3.42. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 304.5, which was above the industry average of 29.46. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.23.

Advanced Micro Devices, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.23
Graham Number $3.42
PEmg 304.50
Current Ratio 1.78
PB Ratio 20.82
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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Yahoo Finance Seeking Alpha
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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,540,000,000
Total Current Liabilities $1,984,000,000
Long-Term Debt $1,114,000,000
Total Assets $4,556,000,000
Intangible Assets $515,000,000
Total Liabilities $3,290,000,000
Shares Outstanding (Diluted Average) 1,082,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.41
Dec2018 $0.32
Dec2017 -$0.03
Dec2016 -$0.60
Dec2015 -$0.84
Dec2014 -$0.53
Dec2013 -$0.11
Dec2012 -$1.60
Dec2011 $0.66
Dec2010 $0.64
Dec2009 $0.45
Dec2008 -$5.15
Dec2007 -$6.06
Dec2006 -$0.34
Dec2005 $0.40
Dec2004 $0.25
Dec2003 -$0.79
Dec2002 -$3.81
Dec2001 -$0.18
Dec2000 $2.89
Dec1999 -$0.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.08
Dec2018 -$0.17
Dec2017 -$0.42
Dec2016 -$0.65
Dec2015 -$0.61
Dec2014 -$0.40
Dec2013 -$0.22
Dec2012 -$0.51
Dec2011 -$0.61
Dec2010 -$1.53
Dec2009 -$2.45
Dec2008 -$3.33
Dec2007 -$2.05
Dec2006 -$0.32
Dec2005 -$0.48
Dec2004 -$0.72
Dec2003 -$0.95

Recommended Reading:

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Advanced Micro Devices Inc Valuation – May 2018 $AMD
Advanced Micro Devices Inc Valuation – January 2017 $AMD
Advanced Micro Devices Inc. Analysis – Initial Coverage $AMD
Valuation: Advanced Micro Devices (AMD)

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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.

Camden Property Trust Valuation – August 2018 $CPT

Company Profile (excerpt from Reuters): Camden Property Trust, incorporated in 1933, is a real estate investment trust (REIT). The Company is engaged in the ownership, management, development, redevelopment, acquisition and construction of multifamily apartment communities. As of December 31, 2016, the Company owned interests in, operated, or were developing 159 multifamily properties, which consisted of 55,366 apartment homes across the United States. The Company also owns land holdings, which it may develop into multifamily communities. The Company’s properties typically consist of mid-rise buildings or two and three story buildings in a landscaped setting and provide residents with a range of amenities common to multifamily rental properties. The 152 operating properties in which it owned interests and operated, as of December 31, 2016, averaged 953 square feet of living area per apartment home. As of December 31, 2016, 137 of its operating properties had over 200 apartment homes.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CPT – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,767,786,648 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.38 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 6621.05% Pass
6. Moderate PEmg Ratio PEmg < 20 26.44 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.57 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 0.38 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -13.94 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 $3.49
MG Growth Estimate 3.27%
MG Value $52.58
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $50.66
MG Value based on 0% Growth $29.70
Market Implied Growth Rate 8.97%
Current Price $92.38
% of Intrinsic Value 175.70%

Camden Property Trust 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 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 $2.87 in 2014 to an estimated $3.49 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.97% 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 Camden Property Trust revealed the company was trading above its Graham Number of $36.25. The company pays a dividend of $3 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 26.44, which was below the industry average of 47.15, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-27.34.

Camden Property Trust 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) -$27.34
Graham Number $36.25
PEmg 26.44
Current Ratio 0.38
PB Ratio 2.57
Current Dividend $3.00
Dividend Yield 3.25%
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 6/1/2018
Total Current Assets $97,125,000
Total Current Liabilities $255,309,000
Long-Term Debt $2,205,288,000
Total Assets $6,131,906,000
Intangible Assets $0
Total Liabilities $2,703,302,000
Shares Outstanding (Diluted Average) 95,337,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.59
Dec2017 $2.13
Dec2016 $9.05
Dec2015 $2.76
Dec2014 $3.27
Dec2013 $3.78
Dec2012 $3.30
Dec2011 $0.66
Dec2010 $0.33
Dec2009 -$0.80
Dec2008 $1.28
Dec2007 $2.51
Dec2006 $3.96
Dec2005 $3.58
Dec2004 $0.98
Dec2003 $0.71
Dec2002 $1.73
Dec2001 $1.41
Dec2000 $1.63
Dec1999 $1.23
Dec1998 $1.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.49
Dec2017 $4.36
Dec2016 $5.13
Dec2015 $3.03
Dec2014 $2.87
Dec2013 $2.26
Dec2012 $1.32
Dec2011 $0.49
Dec2010 $0.75
Dec2009 $1.34
Dec2008 $2.43
Dec2007 $2.79
Dec2006 $2.68
Dec2005 $1.92
Dec2004 $1.16
Dec2003 $1.28
Dec2002 $1.52

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14 Best Stocks for Value Investors This Week – 2/11/17
Camden Property Trust Valuation – Initial Coverage $CPT

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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.

Advanced Micro Devices Inc Valuation – May 2018 $AMD

Company Profile (excerpt from Reuters): Advanced Micro Devices, Inc. (AMD), incorporated on May 1, 1969, is a global semiconductor company. The Company is engaged in offering x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs) and professional graphics, and, server and embedded processors and semi-custom System-on-Chip (SoC) products and technology for game consoles. The Company’s segments include the Computing and Graphics segment, and the Enterprise, Embedded and Semi-Custom segment. The Computing and Graphics segment primarily includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics. The Enterprise, Embedded and Semi-Custom segment primarily includes server and embedded processors, semi-custom SoC products, development services, technology for game consoles and licensing portions of its intellectual property portfolio. The Company sells its products through its direct sales force and through independent distributors and sales representatives in both domestic and international markets. Its microprocessor customers consist primarily of original equipment manufacturers (OEMs), original design manufacturers (ODMs), system builders and independent distributors in both domestic and international markets.

AMD Chart

AMD data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMD – 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 $10,631,372,090 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.62 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 -113.71% Fail
6. Moderate PEmg Ratio PEmg < 20 -73.13 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 15.94 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 1.62 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.11 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.15
MG Growth Estimate 9.31%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$2.18
MG Value based on 0% Growth -$1.28
Market Implied Growth Rate -40.82%
Current Price $10.97
% of Intrinsic Value N/A

Advanced Micro Devices, 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 poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.4 in 2014 to an estimated $-0.15 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Advanced Micro Devices, Inc. revealed the company was trading above its Graham Number of $2.13. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -73.13, which was below the industry average of 49.78, 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 $-0.29.

Advanced Micro Devices, 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) -$0.29
Graham Number $2.13
PEmg -73.13
Current Ratio 1.62
PB Ratio 15.94
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 3/1/2018
Total Current Assets $2,751,000,000
Total Current Liabilities $1,697,000,000
Long-Term Debt $1,165,000,000
Total Assets $3,763,000,000
Intangible Assets $289,000,000
Total Liabilities $3,048,000,000
Shares Outstanding (Diluted Average) 1,039,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.32
Dec2017 $0.04
Dec2016 -$0.60
Dec2015 -$0.84
Dec2014 -$0.53
Dec2013 -$0.11
Dec2012 -$1.60
Dec2011 $0.66
Dec2010 $0.64
Dec2009 $0.45
Dec2008 -$5.15
Dec2007 -$6.06
Dec2006 -$0.34
Dec2005 $0.40
Dec2004 $0.25
Dec2003 -$0.79
Dec2002 -$3.81
Dec2001 -$0.18
Dec2000 $2.89
Dec1999 -$0.30
Dec1998 -$0.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.15
Dec2017 -$0.39
Dec2016 -$0.65
Dec2015 -$0.61
Dec2014 -$0.40
Dec2013 -$0.22
Dec2012 -$0.51
Dec2011 -$0.61
Dec2010 -$1.53
Dec2009 -$2.45
Dec2008 -$3.33
Dec2007 -$2.05
Dec2006 -$0.32
Dec2005 -$0.48
Dec2004 -$0.72
Dec2003 -$0.95
Dec2002 -$0.80

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Advanced Micro Devices Inc Valuation – January 2017 $AMD
Advanced Micro Devices Inc. Analysis – Initial Coverage $AMD
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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.

Camden Property Trust Valuation – Initial Coverage $CPT

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 Camden Property Trust (CPT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Camden Property Trust is a real estate investment trust (REIT). The Company is engaged in the ownership, management, development, redevelopment, acquisition and construction of multifamily apartment communities. The Company operates in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities segment. The Company owns interests in, operates, or is developing approximately 180 multifamily properties consisting of approximately 62,650 apartment homes across the United States. Of the over 180 properties, approximately eight properties are under construction. It also owns land holdings. Its properties consist of mid-rise buildings or two and three story buildings in a landscaped setting and provide residents with various amenities common to multifamily rental properties. Its operating properties have over 200 apartment homes. Its properties include Camden Copper Square, Camden Montierra and Camden Ballantyne.

CPT Chart

CPT data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CPT – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,214,472,682 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 1513.58% Pass
5. Moderate PEmg Ratio PEmg < 20 20.23 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.48 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $4.07
MG Growth Estimate 12.00%
MG Value $132.41
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $59.06
MG Value based on 0% Growth $34.62
Market Implied Growth Rate 5.87%
Current Price $82.43
% of Intrinsic Value 62.25%

Camden Property Trust 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 ratio. 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 Undervalued after growing its EPSmg (normalized earnings) from $2.26 in 2013 to an estimated $4.07 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.87% 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 above the price.

At the time of valuation, further research into Camden Property Trust revealed the company was trading above its Graham Number of $31.26. The company pays a dividend of $3 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.24, which was below the industry average of 31.91, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Camden Property Trust receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Graham Number $31.26
PEmg 20.24
PB Ratio 2.48
Dividend Yield 3.64%
TTM Dividend $3.00
Number of Consecutive Years of Dividend Growth 7

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Useful Links:

ModernGraham tagged articles Morningstar
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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Long-Term Debt & Capital Lease Obligation $2,480,588,000
Total Assets $6,028,152,000
Intangible Assets $0
Total Liabilities $3,013,279,000
Shares Outstanding (Diluted Average) 90,844,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.26
Dec2016 $9.05
Dec2015 $2.76
Dec2014 $3.27
Dec2013 $3.78
Dec2012 $3.30
Dec2011 $0.66
Dec2010 $0.33
Dec2009 -$0.80
Dec2008 $1.28
Dec2007 $2.51
Dec2006 $3.96
Dec2005 $3.58
Dec2004 $0.98
Dec2003 $0.71
Dec2002 $1.73
Dec2001 $1.41
Dec2000 $1.63
Dec1999 $1.23
Dec1998 $1.12
Dec1997 $1.41

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.07
Dec2016 $5.13
Dec2015 $3.03
Dec2014 $2.87
Dec2013 $2.26
Dec2012 $1.32
Dec2011 $0.49
Dec2010 $0.75
Dec2009 $1.34
Dec2008 $2.43
Dec2007 $2.79
Dec2006 $2.68
Dec2005 $1.92
Dec2004 $1.16
Dec2003 $1.28
Dec2002 $1.52
Dec2001 $1.39

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

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National Retail Properties Inc Valuation – November 2016 $NNN
Welltower Inc Valuation – November 2016 $HCN
Realty Income Corp Valuation – November 2016 $O

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.

Advanced Micro Devices Inc Valuation – January 2017 $AMD

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 – December 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 Advanced Micro Devices Inc (AMD) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Advanced Micro Devices, Inc. is a global semiconductor company. The Company is engaged in offering x86 microprocessors, as a standalone central processing unit (CPU) or as incorporated into an accelerated processing unit (APU), chipsets, and discrete graphics processing units (GPUs) for the consumer, commercial and professional graphics markets, and server and embedded CPUs, GPUs and APUs, and semi-custom System-on-Chip (SoC) products and technology for game consoles. It operates in two segments: the Computing and Graphics segment, which includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics, and the Enterprise, Embedded and Semi-Custom segment, which includes server and embedded processors, dense servers, semi-custom SoC products, engineering services and royalties. Its desktop PC product brands for microprocessors are AMD A-Series, AMD E-Series, AMD FX CPU, AMD Athlon CPU and APU.

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ModernGraham Valuation of AMD – January 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 $10,743,585,982 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.92 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 -81.78% Fail
6. Moderate PEmg Ratio PEmg < 20 -17.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 24.34 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 1.92 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.21 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg -$0.65
MG Growth Estimate -3.96%
MG Value -$0.38
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$9.40
MG Value based on 0% Growth -$5.51
Market Implied Growth Rate -13.12%
Current Price $11.50
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $-0.51 in 2012 to an estimated $-0.65 for 2016. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Advanced Micro Devices, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -17.75, which was below the industry average of 28.12, 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 $-0.5.

Advanced Micro Devices, 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) -$0.50
Graham Number $0.00
PEmg -17.72
Current Ratio 1.92
PB Ratio 24.30
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $2,824,000,000
Total Current Liabilities $1,473,000,000
Long-Term Debt $1,632,000,000
Total Assets $3,616,000,000
Intangible Assets $524,000,000
Total Liabilities $3,231,000,000
Shares Outstanding (Diluted Average) 815,000,000

Earnings Per Share History

Next Fiscal Year Estimate -$0.59
Dec2015 -$0.84
Dec2014 -$0.53
Dec2013 -$0.11
Dec2012 -$1.60
Dec2011 $0.66
Dec2010 $0.64
Dec2009 $0.45
Dec2008 -$5.15
Dec2007 -$6.06
Dec2006 -$0.34
Dec2005 $0.40
Dec2004 $0.25
Dec2003 -$0.79
Dec2002 -$3.81
Dec2001 -$0.18
Dec2000 $2.89
Dec1999 -$0.30
Dec1998 -$0.36
Dec1997 -$0.08
Dec1996 -$0.26

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate -$0.65
Dec2015 -$0.61
Dec2014 -$0.40
Dec2013 -$0.22
Dec2012 -$0.51
Dec2011 -$0.61
Dec2010 -$1.53
Dec2009 -$2.45
Dec2008 -$3.33
Dec2007 -$2.05
Dec2006 -$0.32
Dec2005 -$0.48
Dec2004 -$0.72
Dec2003 -$0.95
Dec2002 -$0.80
Dec2001 $0.60
Dec2000 $0.78

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Advanced Micro Devices Inc. Analysis – Initial Coverage $AMD
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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.

Advanced Micro Devices Inc. Analysis – Initial Coverage $AMD

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 – August 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 Advanced Micro Devices Inc. (AMD) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Advanced Micro Devices, Inc. is a global semiconductor company with facilities across the world. The Company offers x86 microprocessors, as standalone devices or as incorporated as an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs) and professional graphics, and server and embedded processors, dense servers, semi-custom System-on-Chip (SoC) products and technology for game consoles. The Company operates in two segments: the Computing and Graphics segment, which includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics, and the Enterprise, Embedded and Semi-Custom segment, which includes server and embedded processors, dense servers, semi-custom SoC products, engineering services and royalties. The Company sells its products through direct sales force and through independent distributors and sales representatives in both domestic and international markets.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AMD

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 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 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 Fail
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 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg -0.58
MG Growth Estimate 0.84%
MG Value $0.00
Opinion Overvalued
MG Value based on 3% Growth -$8.35
MG Value based on 0% Growth -$4.90
Market Implied Growth Rate -5.85%
Current Price $1.84
% of Intrinsic Value N/A

Advanced Micro Devices Inc. is not suitable for the more conservative Defensive Investor or the Enterprising Investor.  The company does not pass a single requirement for the Defensive Investor.  The Enterprising Investor is concerned by the level of debt relative to the net current assets, the lack of dividends and the lack of earnings stability over the last five years.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued due to its long history of negative EPSmg (normalized earnings).  Such a result does not support a positive valuation based on earnings.  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 Advanced Micro Devices Inc. (AMD)?  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

AMD Charts - August 2015

Net Current Asset Value (NCAV) -$1.38
PEmg -3.19
Current Ratio 1.75
PB Ratio -10.15
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

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Most Recent Balance Sheet Figures

Total Current Assets $2,451,000,000
Total Current Liabilities $1,399,000,000
Long-Term Debt $2,034,000,000
Total Assets $3,381,000,000
Intangible Assets $533,000,000
Total Liabilities $3,522,000,000
Outstanding Shares 778,000,000

Earnings Per Share History

Next Fiscal Year Estimate -$0.73
Dec14 -$0.53
Dec13 -$0.11
Dec12 -$1.60
Dec11 $0.66
Dec10 $0.64
Dec09 $0.45
Dec08 -$5.15
Dec07 -$6.06
Dec06 -$0.34
Dec05 $0.40
Dec04 $0.25
Dec03 -$0.79
Dec02 -$3.81
Dec01 -$0.18
Dec00 $2.89
Dec99 -$0.30
Dec98 -$0.36
Dec97 -$0.08
Dec96 -$0.26
Dec95 $0.79

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate -$0.58
Dec14 -$0.40
Dec13 -$0.22
Dec12 -$0.51
Dec11 -$0.61
Dec10 -$1.53
Dec09 -$2.45
Dec08 -$3.33
Dec07 -$2.05
Dec06 -$0.32
Dec05 -$0.48
Dec04 -$0.72
Dec03 -$0.95
Dec02 -$0.80
Dec01 $0.60
Dec00 $0.78
Dec99 -$0.19

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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.  This is not investment advice and all readers should speak with a registered investment adviser prior to making any investment decision.  ModernGraham is not affiliated with the company in any manner.

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Valuation: Advanced Micro Devices (AMD)

Written by Andres Romero

Company Profile: Advanced Micro Devices Inc. (obtained via Google Finance)Advanced Micro Devices, Inc. (AMD), incorporated on May 1, 1969, is a global semiconductor company with facilities worldwide. The Company provides processing solutions for the computing, graphics and consumer electronics markets. During the year ended December 31, 2006, the Company offered primarily x86 microprocessors, for the commercial and consumer markets, which are used for control and computing tasks, and embedded microprocessors for commercial, commercial client and consumer markets. On October 25, 2006, the Company completed the acquisition of ATI Technologies Inc. (ATI). As a result of the acquisition, the Company began to supply three-dimensional (3D) graphics, video and multimedia products, and chipsets for personal computers (PCs), including desktop and notebook PCs, professional workstations and servers, and products for consumer electronic devices, such as mobile phones, digital television and game consoles. The Company operates through four segments: Computation Products, Embedded Products, Graphics and Chipsets, and Consumer Electronics.

Business and Management Review

1) Is the business simple and understandable?

Advanced Micro Devices is a firm that provides desktop, notebook, server, workplace processors and chipsets that innovates the needs of their commercial and consumer markets. Their business is easy to understand as they generate and supply their products to computing, wireless and consumer electronics companies worldwide.

2) Does the business have a consistent operating history?

Since the company went public in 1972, AMD has been a pioneer in the graphic design industry by being the main semiconductor for companies such as Intel, IBM and Microsoft. Their history had been full of success as they had introduced chipsets and processors that had played a big role in the success of the main PC Corporations. For the past seventeen years they had merged and expanded their operations worldwide as globalization had been a serious factor in this business.

3) Does the system have favorable long term prospects?

Technology has been taking over all sectors of the business world. As long as this trend persists AMD will have favorable prospects.

4) Is management rationale?

We are not impressed much with this company’s management. AMD third quarter earnings reported, last October 18th 2007, an 18 percent revenue increase compared to the second quarter of 2007 and a 23 percent improvement compared to the third quarter of 2006 due to increased microprocessor unit shipments, manufacturing efficiencies, improved inventory management, and a richer product mix in the Computing Solutions and Graphics segments. Moreover, its balance sheet is standard as shows constant increase in assets and liabilities. On the other hand, its current ratio is low compared to the industry meaning that they do not carry much liquidity in their books. Furthermore, their Cash Flow Statement shows poor performance in their investment activities as we believe management have not made wise decisions to devote AMD’s capital. The company’s income statement has been unstable, which we believe was caused by high production and operating expenses. However, the company has begun to outsource their input expenses to other parts of the world as AMD is constantly expanding. Finally, AMD shows negative Return on Equity, Return on Assets, Net Profit Margin, Operating Margin and EBITDA Margin which leaves a lot to say about the management role of this company.

5) Is management candid with its shareholders?

AMD contains a decent amount of investor information within its website. The company keeps investors posted of any activities by including a list of upcoming as well as past events.

6) Does management resist the institutional imperative?

We are undecided if management resist institutional imperative due to the lack of dividends paid by their stocks and the below industry growth rate.

Financial and Value Review

Defensive

1) Size of firm

The firm does have market cap greater than two billion dollars, therefore this test passes. “Pass”.

2) Strong financial condition

AMD current ratio is lower than 2, so this test fails. “Fail”.

3) Earnings stability

The company does not have positive net income for the previous ten years, as a result this test fails. “Fail”.

4) Dividend record

AMD does not pay dividends. “Fail”.

5) Earnings growth

Advanced Micro Devices does not have a 1/3 increase in its EPS for the past 10 years. “Fail”.

6) Price to earnings analysis

This test passes as they have a PE lower than 20. “Pass”.

7) Price to book analysis

The company posses a PB ratio lower than 2.5 and a PB*PE ratio lower than 50. Both of these tests pass. “Pass”/”Pass”.

Conclusion

With as score of 3/8 AMD does not pass the Defensive investor Test.

Enterprising:
1) Strong financial condition

AMD possesses a current ratio higher than 1.5, so this test passes. However its debt to NCA is lower than 1.1, thus failing on the other test. “Pass”/”Fail”

2) Earnings stability

They don’t have positive net income for the past 5 years. “Fail”

3) Dividend record

No dividends are paid. “Fail”.

4) Earnings growth

Positive earnings growth over the past five years. “Pass”.

5) Price

This test fails as price is higher than 150% net tangible assets. “Fail”.

Conclusion:

As this company only passes two of the six tests, we do not believe AMD is suitable for enterprising investors.

Valuation:

We find the Fair value of AMD to be $13.80.

Opinion:

Since the company is trading at $13.50 we believe that the stock is fairly valued, but we do not find this company appropriate for neither Enterprise nor Defensive Investors.

None of the staff at ModernGraham held a position in Advanced Micro Devices, Inc. at the time of publication. Also, please read our disclaimer and Our Methods.

Fortive Corp Valuation – March 2019 #FTV

Company Profile (excerpt from Reuters): Fortive Corporation, incorporated on November 10, 2015, is a diversified industrial growth company. The Company designs, develops, manufactures and markets professional and engineered products, software and services for a range of end markets. The Company operates through two segments: Professional Instrumentation and Industrial Technologies. The Company’s brands operate in field instrumentation, transportation, sensing, product realization, automation and specialty, and franchise distribution markets. As of September 30, 2016, the Company’s research and development, manufacturing, sales, distribution, service and administrative facilities were located in approximately 40 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FTV – 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 $27,950,071,490 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.45 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 48466.67% Pass
6. Moderate PEmg Ratio PEmg < 20 18.98 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.27 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 1.45 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.04 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 $4.40
MG Growth Estimate 15.00%
MG Value $169.45
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $63.82
MG Value based on 0% Growth $37.41
Market Implied Growth Rate 5.24%
Current Price $83.53
% of Intrinsic Value 49.29%

Fortive 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 poor dividend history, and the high PB 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 $1.44 in 2015 to an estimated $4.4 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.24% 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 Fortive Corp revealed the company was trading above its Graham Number of $38.84. The company pays a dividend of $0.28 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 18.98, which was below the industry average of 35.5, 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 $-9.22.

Fortive 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) -$9.22
Graham Number $38.84
PEmg 18.98
Current Ratio 1.45
PB Ratio 4.27
Current Dividend $0.28
Dividend Yield 0.34%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,171,200,000
Total Current Liabilities $2,192,100,000
Long-Term Debt $2,974,700,000
Total Assets $12,905,600,000
Intangible Assets $8,609,400,000
Total Liabilities $6,292,700,000
Shares Outstanding (Diluted Average) 338,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.40
Dec2018 $8.21
Dec2017 $2.96
Dec2016 $2.51
Dec2015 $2.28
Dec2014 $2.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.40
Dec2018 $4.50
Dec2017 $2.45
Dec2016 $1.96
Dec2015 $1.44
Dec2014 $0.85

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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.

Analog Devices Inc Valuation – March 2019 #ADI

Company Profile (excerpt from Reuters): Analog Devices, Inc. (Analog Devices), incorporated on January 18, 1965, designs, manufactures and markets a portfolio of solutions that leverage high-performance analog, mixed-signal and digital signal processing(DSP) technology, including integrated circuits (ICs), algorithms, software and subsystems. The Company provides Analog Products, such as Converters, Amplifiers/Radio Frequency, Other Analog, and Power Management and Reference. It also offers Digital Signal Processing Products (DSPs). The Company operates in the United States, Rest of North/South America, Europe, Japan and China.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ADI – 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 $40,551,370,837 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.34 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 55.98% Pass
6. Moderate PEmg Ratio PEmg < 20 29.32 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.54 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 2.34 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.49 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 $3.75
MG Growth Estimate 11.06%
MG Value $114.96
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $54.43
MG Value based on 0% Growth $31.91
Market Implied Growth Rate 10.41%
Current Price $110.06
% of Intrinsic Value 95.74%

Analog Devices, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.16 in 2015 to an estimated $3.75 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 10.41% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Analog Devices, Inc. revealed the company was trading above its Graham Number of $59.5. The company pays a dividend of $1.89 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 29.32, which was below the industry average of 35.5, 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 $-22.17.

Analog Devices, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$22.17
Graham Number $59.50
PEmg 29.32
Current Ratio 2.34
PB Ratio 3.54
Current Dividend $1.89
Dividend Yield 1.72%
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 1/1/2019
Total Current Assets $1,985,180,000
Total Current Liabilities $849,955,000
Long-Term Debt $6,234,517,000
Total Assets $21,828,278,000
Intangible Assets $16,885,588,000
Total Liabilities $10,242,841,000
Shares Outstanding (Diluted Average) 372,506,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.30
Oct2018 $3.97
Oct2017 $2.07
Oct2016 $2.76
Oct2015 $2.20
Oct2014 $1.98
Oct2013 $2.14
Oct2012 $2.13
Oct2011 $2.81
Oct2010 $2.33
Oct2009 $0.85
Oct2008 $2.67
Oct2007 $1.50
Oct2006 $1.48
Oct2005 $1.08
Oct2004 $1.45
Oct2003 $0.78
Oct2002 $0.28
Oct2001 $0.93
Oct2000 $1.59
Oct1999 $0.55

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.75
Oct2018 $2.85
Oct2017 $2.27
Oct2016 $2.33
Oct2015 $2.16
Oct2014 $2.19
Oct2013 $2.21
Oct2012 $2.22
Oct2011 $2.18
Oct2010 $1.84
Oct2009 $1.56
Oct2008 $1.83
Oct2007 $1.36
Oct2006 $1.19
Oct2005 $1.00
Oct2004 $0.98
Oct2003 $0.77

Recommended Reading:

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Analog Devices Inc Valuation – June 2018 $ADI
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Analog Devices Inc Valuation – August 2016 $ADI
Analog Devices Inc Stock Valuation – February 2016 $ADI
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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.

IPG Photonics Corp Valuation – March 2019 #IPGP

Company Profile (excerpt from Reuters): IPG Photonics Corporation, incorporated on December 2, 1998, is a developer and manufacturer of a line of fiber lasers, fiber amplifiers, diode lasers, laser systems and optical accessories that are used for various applications. The Company offers a line of lasers and amplifiers, which are used in materials processing, communications and medical applications. The Company sells its products globally to original equipment manufacturers (OEMs), system integrators and end users. The Company’s manufacturing facilities are located in the United States, Germany and Russia. The Company offers laser-based systems for certain markets and applications. The Company also makes packaged diodes, direct diode lasers, laser systems and communications components and systems. Its products are designed to be used as general-purpose energy or light sources.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IPGP – 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 $8,167,270,375 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 7.35 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 192.91% Pass
6. Moderate PEmg Ratio PEmg < 20 26.55 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.77 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 7.35 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.03 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.81
MG Growth Estimate 8.87%
MG Value $152.43
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $84.23
MG Value based on 0% Growth $49.37
Market Implied Growth Rate 9.02%
Current Price $154.21
% of Intrinsic Value 101.17%

IPG Photonics Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor 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 Fairly Valued after growing its EPSmg (normalized earnings) from $3.65 in 2015 to an estimated $5.81 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 9.02% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into IPG Photonics Corporation revealed the company was trading above its Graham Number of $67.5. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 26.55, which was below the industry average of 35.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $26.65.

IPG Photonics Corporation receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $26.65
Graham Number $67.50
PEmg 26.55
Current Ratio 7.35
PB Ratio 3.77
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 $1,805,424,000
Total Current Liabilities $245,774,000
Long-Term Debt $41,707,000
Total Assets $2,574,450,000
Intangible Assets $187,861,000
Total Liabilities $368,215,000
Shares Outstanding (Diluted Average) 53,919,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.86
Dec2018 $7.38
Dec2017 $6.36
Dec2016 $4.85
Dec2015 $4.53
Dec2014 $3.79
Dec2013 $2.97
Dec2012 $2.81
Dec2011 $2.41
Dec2010 $1.13
Dec2009 $0.12
Dec2008 $0.79
Dec2007 $0.65
Dec2006 $0.26
Dec2005 $0.16
Dec2004 $0.01
Dec2003 -$0.93
Dec2002 -$2.13
Dec2001 -$2.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.81
Dec2018 $5.98
Dec2017 $5.02
Dec2016 $4.17
Dec2015 $3.65
Dec2014 $3.01
Dec2013 $2.38
Dec2012 $1.87
Dec2011 $1.28
Dec2010 $0.67
Dec2009 $0.43
Dec2008 $0.51
Dec2007 $0.26
Dec2006 -$0.13
Dec2005 -$0.56
Dec2004 -$0.96
Dec2003 -$1.31

Recommended Reading:

Other ModernGraham posts about the company

IPG Photonics Corp Valuation – June 2018 $IPGP
5 Undervalued Stocks for Value Investors with a High Beta – January 2017
IPG Photonics Corp Valuation – Initial Coverage $IPGP

Other ModernGraham posts about related companies

Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC
Texas Instruments Inc Valuation – March 2019 #TXN
Qualcomm Inc Valuation – March 2019 #QCOM
Ametek Inc Valuation – March 2019 #AME
Advanced Micro Devices Inc Valuation – February 2019 $AMD
Qorvo Inc Valuation – February 2019 $QRVO
FLIR Systems Inc Valuation – February 2019 $FLIR
NetApp Inc Valuation – February 2019 $NTAP

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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