Anthem Inc Valuation – February 2019 $ANTM

Company Profile (excerpt from Reuters): Anthem, Inc., incorporated on July 17, 2001, is a health benefits company. The Company operates through three segments: Commercial and Specialty Business, Government Business and Other. It offers a full spectrum of network-based managed care plans to large and small employer, individual, Medicaid and Medicare markets. Its managed care plans include preferred provider organizations (PPOs); health maintenance organizations (HMOs); point-of-service (POS), plans; indemnity plans and other hybrid plans, including consumer-driven health plans (CDHPs); and hospital only and limited benefit products. In addition, it provides an array of managed care services to self-funded customers, including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs and other administrative services. It provides an array of specialty and other insurance products and services, such as dental, vision, life and disability insurance benefits, radiology benefit management and analytics-driven personal healthcare. It also provides services to the federal government in connection with the Federal Employee Program (FEP).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ANTM – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $77,501,965,462 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 104.74% Pass
5. Moderate PEmg Ratio PEmg < 20 21.15 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.79 Fail
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 $14.26
MG Growth Estimate 9.48%
MG Value $391.61
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $206.78
MG Value based on 0% Growth $121.22
Market Implied Growth Rate 6.32%
Current Price $301.55
% of Intrinsic Value 77.00%

Anthem Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $8.74 in 2015 to an estimated $14.26 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 6.32% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Anthem Inc revealed the company was trading above its Graham Number of $207.01. The company pays a dividend of $3 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 21.15, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $207.01
PEmg 21.15
PB Ratio 2.79
Dividend Yield 0.99%
TTM Dividend $3.00
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $17,217,000,000
Total Assets $71,571,000,000
Intangible Assets $29,511,000,000
Total Liabilities $43,030,000,000
Shares Outstanding (Diluted Average) 263,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.26
Dec2018 $14.19
Dec2017 $14.35
Dec2016 $9.21
Dec2015 $9.38
Dec2014 $8.99
Dec2013 $8.20
Dec2012 $8.18
Dec2011 $7.25
Dec2010 $6.94
Dec2009 $9.88
Dec2008 $4.76
Dec2007 $5.56
Dec2006 $4.82
Dec2005 $3.94
Dec2004 $3.05
Dec2003 $2.73
Dec2002 $2.26
Dec2001 $1.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $14.26
Dec2018 $12.25
Dec2017 $10.86
Dec2016 $9.01
Dec2015 $8.74
Dec2014 $8.25
Dec2013 $7.95
Dec2012 $7.68
Dec2011 $7.25
Dec2010 $6.96
Dec2009 $6.58
Dec2008 $4.76
Dec2007 $4.52
Dec2006 $3.78
Dec2005 $3.08
Dec2004 $2.42
Dec2003 $1.84

Recommended Reading:

Other ModernGraham posts about the company

Anthem Inc Valuation – May 2018 $ANTM
Anthem Inc Valuation – January 2017 $ANTM
15 Best Undervalued Stocks of the Week – 8/20/16
Anthem Inc Valuation – August 2016 $ANTM
15 Best Stocks For Value Investors This Week – 2/13/16

Other ModernGraham posts about related companies

Arthur J Gallagher & Co Valuation – February 2019 $AJG
Brighthouse Financial Inc Valuation – February 2019 $BHF
Allstate Corp Valuation – February 2019 $ALL
Hartford Financial Services Group Inc Valuation – February 2019 $HIG
Unum Group Valuation – February 2019 $UNM
Everest Re Group Ltd Valuation – February 2019 $RE
Cigna Corp Valuation – January 2019 $CI
MetLife Inc Valuation – January 2019 $MET
Aflac Inc Valuation – January 2019 $AFL
Principal Financial Group Inc Valuation – January 2019 $PFG

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.

Anthem Inc Valuation – May 2018 $ANTM

Company Profile (excerpt from Reuters): Anthem, Inc., incorporated on July 17, 2001, is a health benefits company. The Company operates through three segments: Commercial and Specialty Business, Government Business and Other. It offers a full spectrum of network-based managed care plans to large and small employer, individual, Medicaid and Medicare markets. Its managed care plans include preferred provider organizations (PPOs); health maintenance organizations (HMOs); point-of-service (POS), plans; indemnity plans and other hybrid plans, including consumer-driven health plans (CDHPs); and hospital only and limited benefit products. In addition, it provides an array of managed care services to self-funded customers, including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs and other administrative services. It provides an array of specialty and other insurance products and services, such as dental, vision, life and disability insurance benefits, radiology benefit management and analytics-driven personal healthcare. It also provides services to the federal government in connection with the Federal Employee Program (FEP).

ANTM Chart

ANTM data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ANTM – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $57,902,286,848 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 61.03% Pass
5. Moderate PEmg Ratio PEmg < 20 18.22 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.23 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 $12.59
MG Growth Estimate 7.89%
MG Value $305.47
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $182.49
MG Value based on 0% Growth $106.98
Market Implied Growth Rate 4.86%
Current Price $229.26
% of Intrinsic Value 75.05%

Anthem Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $8.25 in 2014 to an estimated $12.59 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 4.86% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Anthem Inc revealed the company was trading above its Graham Number of $188.14. The company pays a dividend of $2.7 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 18.22, which was below the industry average of 31.35, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $188.14
PEmg 18.22
PB Ratio 2.23
Dividend Yield 1.18%
TTM Dividend $2.70
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 3/1/2018
Long-Term Debt & Capital Lease Obligation $18,110,100,000
Total Assets $73,300,400,000
Intangible Assets $29,261,500,000
Total Liabilities $46,288,000,000
Shares Outstanding (Diluted Average) 262,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $15.20
Dec2017 $14.35
Dec2016 $9.21
Dec2015 $9.38
Dec2014 $8.99
Dec2013 $8.20
Dec2012 $8.18
Dec2011 $7.25
Dec2010 $6.94
Dec2009 $9.88
Dec2008 $4.76
Dec2007 $5.56
Dec2006 $4.82
Dec2005 $3.94
Dec2004 $3.05
Dec2003 $2.73
Dec2002 $2.26
Dec2001 $1.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.59
Dec2017 $10.86
Dec2016 $9.01
Dec2015 $8.74
Dec2014 $8.25
Dec2013 $7.95
Dec2012 $7.68
Dec2011 $7.25
Dec2010 $6.96
Dec2009 $6.58
Dec2008 $4.76
Dec2007 $4.52
Dec2006 $3.78
Dec2005 $3.08
Dec2004 $2.42
Dec2003 $1.84
Dec2002 $1.19

Recommended Reading:

Other ModernGraham posts about the company

Anthem Inc Valuation – January 2017 $ANTM
15 Best Undervalued Stocks of the Week – 8/20/16
Anthem Inc Valuation – August 2016 $ANTM
15 Best Stocks For Value Investors This Week – 2/13/16
Anthem Inc Valuation – February 2016 $ANTM

Other ModernGraham posts about related companies

Arthur J Gallagher & Co Valuation – April 2018 $AJG
Allstate Corp Valuation – April 2018 $ALL
Hartford Financial Services Group Inc Valuation – April 2018 $HIG
Unum Group Valuation – April 2018 $UNM
Brighthouse Financial Inc Valuation – Initial Coverage $BHF
XL Group Ltd Valuation – April 2018 $XL
Aetna Inc Valuation – April 2018 $AET
Everest Re Group Ltd Valuation – Initial Coverage $RE
Cigna Corp Valuation – March 2018 $CI
Aspen Insurance Holdings Ltd Valuation – March 2018 $AHL

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.

Anthem Inc Valuation – January 2017 $ANTM

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 – January 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 Anthem Inc (ANTM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Anthem, Inc. is a health benefit company. The Company offers a range of network-based managed care plans to large and small employer, individual, Medicaid and Medicare markets. The Company has three segments: Commercial and Specialty Business, Government Business and Other. The Company’s Commercial and Specialty Business, and Government Business segments offer managed care products, including preferred provider organizations (PPOs), health maintenance organizations (HMOs), traditional indemnity benefits and point-of-service (POS) plans, as well as various hybrid benefit plans, including consumer-driven health plans (CDHPs), hospital only and limited benefit products. In addition, the Company also provides an array of managed care services to self-funded customers, including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs and other administrative services.

ANTM Chart

ANTM 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 ANTM – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $39,990,835,968 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 36.93% Pass
5. Moderate PEmg Ratio PEmg < 20 16.95 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.66 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 $9.03
MG Growth Estimate 2.64%
MG Value $124.49
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $131.00
MG Value based on 0% Growth $76.79
Market Implied Growth Rate 4.22%
Current Price $153.11
% of Intrinsic Value 122.99%

Anthem Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history. 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 $7.68 in 2012 to an estimated $9.03 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.22% 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.

At the time of valuation, further research into Anthem Inc revealed the company was trading above its Graham Number of $140.13. The company pays a dividend of $2.58 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 16.95, which was below the industry average of 18.78, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $140.13
PEmg 16.95
PB Ratio 1.66
Dividend Yield 1.68%
TTM Dividend $2.58
Number of Consecutive Years of Dividend Growth 6

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Long-Term Debt & Capital Lease Obligation $14,242,300,000
Total Assets $64,399,900,000
Intangible Assets $25,574,500,000
Total Liabilities $39,655,700,000
Shares Outstanding (Diluted Average) 268,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.29
Dec2015 $9.38
Dec2014 $8.99
Dec2013 $8.20
Dec2012 $8.18
Dec2011 $7.25
Dec2010 $6.94
Dec2009 $9.88
Dec2008 $4.76
Dec2007 $5.56
Dec2006 $4.82
Dec2005 $3.94
Dec2004 $3.05
Dec2003 $2.73
Dec2002 $2.26
Dec2001 $1.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.03
Dec2015 $8.74
Dec2014 $8.25
Dec2013 $7.95
Dec2012 $7.68
Dec2011 $7.25
Dec2010 $6.96
Dec2009 $6.58
Dec2008 $4.76
Dec2007 $4.52
Dec2006 $3.78
Dec2005 $3.08
Dec2004 $2.42
Dec2003 $1.84
Dec2002 $1.19
Dec2001 $0.55

Recommended Reading:

Other ModernGraham posts about the company

15 Best Stocks For Value Investors This Week – 2/13/16
Anthem Inc Valuation – February 2016 $ANTM
The Best Companies of the Insurance Industry – October 2015
Anthem Inc. Analysis – September 2015 Update $ANTM
Anthem Inc. Analysis – June 2015 Update $ANTM

Other ModernGraham posts about related companies

American Financial Group Inc Valuation – January 2017 $AFG
Selective Insurance Group Valuation – Initial Coverage $SIGI
Berkshire Hathaway Inc Valuation – January 2017 $BRK.B
Infinity Property and Casualty Corp Valuation – Initial Coverage $IPCC
Hartford Financial Services Group Inc Valuation – December 2016 $HIG
AFLAC Inc Valuation – December 2016 $AFL
Arthur J Gallagher & Co Valuation – December 2016 $AJG
Aspen Insurance Holdings Limited Valuation – December 2016 $AHL
MetLife Inc Valuation – December 2016 $MET
Travelers Companies Inc Valuation – November 2016 $TRV

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.

Anthem Inc Valuation – August 2016 $ANTM

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

Company Profile (obtained from Google Finance): Anthem, Inc. is a health benefit company. The Company offers a range of network-based managed care plans to large and small employer, individual, Medicaid and Medicare markets. The Company has three segments: Commercial and Specialty Business, Government Business and Other. The Company’s Commercial and Specialty Business, and Government Business segments offer managed care products, including preferred provider organizations (PPOs), health maintenance organizations (HMOs), traditional indemnity benefits and point-of-service (POS) plans, as well as various hybrid benefit plans, including consumer-driven health plans (CDHPs), hospital only and limited benefit products. In addition, the Company also provides an array of managed care services to self-funded customers, including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs and other administrative services.

ANTM Chart

ANTM data by YCharts

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of ANTM – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $33,698,691,028 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 35.54% Pass
5. Moderate PEmg Ratio PEmg < 20 14.42 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.43 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

ANTM value chart August 2016

EPSmg $8.94
MG Growth Estimate 2.46%
MG Value $119.95
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $129.65
MG Value based on 0% Growth $76.00
Market Implied Growth Rate 2.96%
Current Price $128.94
% of Intrinsic Value 107.50%

Anthem Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $7.68 in 2012 to an estimated $8.94 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 2.96% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Anthem Inc revealed the company was trading below its Graham Number of $136.63. The company pays a dividend of $2.55 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 14.42, which was below the industry average of 16.56, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Anthem Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

ANTM charts August 2016

Graham Number $136.63
PEmg 14.42
PB Ratio 1.43
Dividend Yield 1.98%
TTM Dividend $2.55
Number of Consecutive Years of Dividend Growth 6

[/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
Long-Term Debt & Capital Lease Obligation $14,202,400,000
Total Assets $64,062,600,000
Intangible Assets $25,621,900,000
Total Liabilities $39,829,000,000
Shares Outstanding (Diluted Average) 268,200,000

Earnings Per Share History

Next Fiscal Year Estimate $9.01
Dec2015 $9.38
Dec2014 $8.99
Dec2013 $8.20
Dec2012 $8.18
Dec2011 $7.25
Dec2010 $6.94
Dec2009 $9.88
Dec2008 $4.76
Dec2007 $5.56
Dec2006 $4.82
Dec2005 $3.94
Dec2004 $3.05
Dec2003 $2.73
Dec2002 $2.26
Dec2001 $1.65

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $8.94
Dec2015 $8.74
Dec2014 $8.25
Dec2013 $7.95
Dec2012 $7.68
Dec2011 $7.25
Dec2010 $6.96
Dec2009 $6.58
Dec2008 $4.76
Dec2007 $4.52
Dec2006 $3.78
Dec2005 $3.08
Dec2004 $2.42
Dec2003 $1.84
Dec2002 $1.19
Dec2001 $0.55

Recommended Reading:

Other ModernGraham posts about the company

15 Best Stocks For Value Investors This Week – 2/13/16
Anthem Inc Valuation – February 2016 $ANTM
The Best Companies of the Insurance Industry – October 2015
Anthem Inc Valuation – February 2016 $ANTM
The Best Companies of the Insurance Industry – October 2015

Other ModernGraham posts about related companies

AFLAC Inc Valuation – August 2016 $AFL
Hartford Financial Services Group Inc Valuation – August 2016 $HIG
MetLife Inc Valuation – August 2016 $MET
Genworth Financial Inc Valuation – August 2016 $GNW
Aetna Inc Valuation – July 2016 $AET
XL Group Ltd Valuation – July 2016 $XL
Marsh & McLennan Companies Inc Valuation – July 2016 $MMC
Cigna Corp Valuation – July 2016 $CI
Progressive Corporation Valuation – June 2016 $PGR
Cincinnati Financial Corporation Valuation – May 2016 $CINF

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.

Anthem Inc Valuation – February 2016 $ANTM

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 – February 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 Anthem Inc (ANTM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Anthem, Inc. is a health benefit company. The Company offers a range of network-based managed care plans to large and small employer, individual, Medicaid and Medicare markets. Its managed care plans include preferred provider organizations (PPOs), health maintenance organizations (HMOs), point-of-service (POS), plans, traditional indemnity plans and other hybrid plans, including consumer-driven health plans (CDHPs), and hospital only and limited benefit products. In addition, the Company also provides an array of managed care services to self-funded customers, including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs and other administrative services. The Company provides an array of specialty and other insurance products and services, such as dental, vision, life and disability insurance benefits, radiology benefit management and analytics-driven personal health care.

[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 ANTM

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 $29,814,829,594 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 49.22% Pass
5. Moderate PEmg Ratio PEmg < 20 11.97 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.33 Pass
Score
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

ANTM value chart February 2016

EPSmg $9.79
MG Growth Estimate 4.12%
MG Value $163.82
Opinion Undervalued
MG Value based on 3% Growth $141.97
MG Value based on 0% Growth $83.22
Market Implied Growth Rate 1.74%
Current Price $117.22
% of Intrinsic Value 71.55%

Anthem Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short dividend history.  The Enterprising Investor has no initial concerns.  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 undervalued after growing its EPSmg (normalized earnings) from $7.68 in 2012 to an estimated $9.79 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.74% 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.

Stage 3: Information for Further Research

ANTM charts February 2016

Graham Number $145.79
PEmg 11.97
PB Ratio 1.33
Dividend Yield 1.97%
Number of Consecutive Years of Dividend Growth 6

 

[/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 Dec2015
Long-Term Debt $15,324,500,000
Total Assets $61,717,800,000
Intangible Assets $25,720,200,000
Total Liabilities $38,673,700,000
Shares Outstanding (Diluted Average) 261,030,000

Earnings Per Share History

Next Fiscal Year Estimate $10.70
Dec2015 $10.45
Dec2014 $8.99
Dec2013 $8.20
Dec2012 $8.18
Dec2011 $7.25
Dec2010 $6.94
Dec2009 $9.88
Dec2008 $4.76
Dec2007 $5.56
Dec2006 $4.82
Dec2005 $3.94
Dec2004 $3.05
Dec2003 $2.73
Dec2002 $2.26
Dec2001 $1.65

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $9.79
Dec2015 $9.10
Dec2014 $8.25
Dec2013 $7.95
Dec2012 $7.68
Dec2011 $7.25
Dec2010 $6.96
Dec2009 $6.58
Dec2008 $4.76
Dec2007 $4.52
Dec2006 $3.78
Dec2005 $3.08
Dec2004 $2.42
Dec2003 $1.84
Dec2002 $1.19
Dec2001 $0.55

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Insurance Industry – October 2015
Anthem Inc. Analysis – September 2015 Update $ANTM
Anthem Inc. Analysis – June 2015 Update $ANTM
18 Companies in the Spotlight This Week – 3/15/15
Anthem Inc. Quarterly Valuation – March 2015 $ANTM

Other ModernGraham posts about related companies

Aflac Inc Valuation – February 2016 $AFL
MetLife Inc Valuation – February 2016 Update $MET
Aetna Inc Valuation – February 2016 Update $AET
Marsh & McLennan Company Valuation – January 2016 Update $MMC
Aon PLC Valuation – January 2016 Update $AON
Progressive Corp Valuation – November 2015 Update $PGR
Progressive Corp Valuation – November 2015 Update $PGR
Ace Limited Valuation – November 2015 Update $ACE
Travelers Companies Inc. Valuation – November 2015 Update $TRV
Lincoln National Corp Valuation – November 2015 Update $LNC

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.

Anthem Inc. Analysis – September 2015 Update $ANTM

In the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.

We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.

In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  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.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

What follows is a specific look at how Anthem Inc. (ANTM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Anthem, Inc. is a health benefit company. The Company offers a range of network-based managed care plans to large and small employer, individual, Medicaid and Medicare markets. Its managed care plans include preferred provider organizations (PPOs), health maintenance organizations (HMOs), point-of-service (POS), plans, traditional indemnity plans and other hybrid plans, including consumer-driven health plans (CDHPs), and hospital only and limited benefit products. In addition, the Company also provides an array of managed care services to self-funded customers, including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs and other administrative services. The Company provides an array of specialty and other insurance products and services, such as dental, vision, life and disability insurance benefits, radiology benefit management and analytics-driven personal health care.
[level-free]

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.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of ANTM – September 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $38,374,831,173 1 Pass
2. Earnings Stability Positive EPS for 10 years prior 1 Pass
3. Dividend Record Dividend Payments for 10 years prior 0 Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 78.27% 1 Pass
5. Moderate PEmg Ratio PEmg < 20 16.52 1 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.74 1 Pass
Score 5
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 1 Pass
2. Dividend Record Currently Pays Dividend 1 Pass
3. Earnings Growth EPSmg greater than 5 years ago 1 Pass

Stage 2: Determination of Intrinsic Value

ANTM value Chart September 2015

EPSmg $8.88
MG Growth Estimate 3.37%
MG Value $135.33
Opinion Fairly Valued
MG Value based on 3% Growth $128.73
MG Value based on 0% Growth $75.46
Market Implied Growth Rate 4.01%
Current Price $146.70
% of Intrinsic Value 108.40%

Anthem Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short dividend history while the Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $7.25 in 2011 to an estimated $8.88 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 4.01% 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 within a margin of safety relative to 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 Anthem Inc. (ANTM)?  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

ANTM Charts September 2015

Graham Number $139.43
PEmg 16.52
PB Ratio 1.74
Dividend Yield 1.45%
Number of Consecutive Years of Dividend Growth 5

 

[/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

Long-Term Debt $15,468,400,000
Total Assets $64,263,800,000
Intangible Assets $25,817,200,000
Total Liabilities $41,201,200,000
Shares Outstanding (Diluted Average) 274,300,000

Earnings Per Share History

Next Fiscal Year Estimate $9.80
Dec14 $8.99
Dec13 $8.20
Dec12 $8.18
Dec11 $7.25
Dec10 $6.94
Dec09 $9.88
Dec08 $4.76
Dec07 $5.56
Dec06 $4.82
Dec05 $3.94
Dec04 $3.05
Dec03 $2.73
Dec02 $2.26
Dec01 $1.65

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $8.88
Dec14 $8.25
Dec13 $7.95
Dec12 $7.68
Dec11 $7.25
Dec10 $6.96
Dec09 $6.58
Dec08 $4.76
Dec07 $4.52
Dec06 $3.78
Dec05 $3.08
Dec04 $2.41
Dec03 $1.84
Dec02 $1.19
Dec01 $0.55

Recommended Reading:

Other ModernGraham posts about the company

Anthem Inc. Analysis – June 2015 Update $ANTM
18 Companies in the Spotlight This Week – 3/15/15
Anthem Inc. Quarterly Valuation – March 2015 $ANTM
26 Companies in the Spotlight This Week – 12/13/14
Anthem Inc. Quarterly Valuation – December 2014 $ANTM

Other ModernGraham posts about related companies

Aflac Inc. Analysis – September 2015 Update $AFL
Marsh & McLennan Companies Analysis – September 2015 Update $MMC
Berkshire Hathaway Analysis – August 2015 Update $BRK/B
Progressive Corporation Analysis – August 2015 Update $PGR
Ace Limited Analysis – August 2015 Update $ACE
Travelers Companies Analysis – August 2015 Update $TRV
Lincoln National Corporation Analysis – August 2015 Update $LNC
Unum Group Analysis – August 2015 Update $UNM
Principal Financial Group Analysis – August 2015 Update $PFG
Assurant Inc. Analysis – August 2015 Update $AIZ

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 review our detailed disclaimer.

Anthem Inc. Analysis – June 2015 Update $ANTM

220px-Anthem_Inc_LogoAnthem Inc. (ANTM) has seen a significant price rise in the last year, greatly outpacing the market. Such a rise will intrigue some speculators who think that a price run up can be indicative of a good company. After all, far too often individuals believe that if a company rises in price, it will continue to rise. However, Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

ANTM Chart

ANTM data by YCharts

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

Defensive Investor – Must pass all 6 of the following tests: Score = 5/6

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – Has paid a dividend for at least 10 straight years – FAIL
  4. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
  5. Moderate PEmg (price over normalized earnings) Ratio – PEmg is less than 20 – PASS
  6. Moderate Price-to-Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – Must pass all 3 of the following tests or be suitable for a Defensive Investor: Score = 3/3

  1. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  2. Dividend Record – Currently pays a dividend – PASS
  3. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $163.32
MG Value $136.20
MG Opinion Overvalued
Value Based on 3% Growth $128.97
Value Based on 0% Growth $75.60
Market Implied Growth Rate 4.93%
PEmg 18.36
PB Ratio 1.88

Balance Sheet – March 2015

Total Debt $14,764,000,000
Total Assets $65,546,000,000
Intangible Assets $25,865,000,000
Total Liabilities $41,212,000,000
Outstanding Shares 280,400,000

Earnings Per Share

2015 (estimate) $9.85
2014 $8.99
2013 $8.20
2012 $8.18
2011 $7.25
2010 $6.94
2009 $9.88
2008 $4.76
2007 $5.56
2006 $4.82
2005 $3.94

Earnings Per Share – ModernGraham

2015 (estimate) $8.89
2014 $8.25
2013 $7.95
2012 $7.68
2011 $7.25
2010 $6.96

Dividend History

ANTM Dividend Chart

ANTM Dividend data by YCharts

Conclusion

Anthem passes the initial requirements of the Enterprising Investor but not the Defensive Investor. Specifically, the Defensive Investor is concerned by the short dividend history while the Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $7.25 in 2011 to an estimated $8.89 for 2015. This level of demonstrated growth does not support the market’s implied estimate for annual earnings growth of 4.93% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 4.5% annually, but the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, and returns an estimate of intrinsic value well below the current price, indicating that Anthem is overvalued at the present time.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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

Anthem Inc. Quarterly Valuation – March 2015 $ANTM

220px-Anthem_Inc_Logo

Anthem Inc. passes all of the initial requirements of the Enterprising Investor but not the more conservative Defensive Investor, who is concerned about the short dividend history. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $6.96 in 2010 to $8.25 for 2014. This level of demonstrated growth does not support the market’s implied estimate for earnings growth of 4.69% over the next 7-10 years. In fact, the historical growth is only around 3.69% per year, so the market is expecting a significant rise in earnings growth. The ModernGraham valuation model takes a more conservative approach and reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. Therefore, the model returns an estimate of intrinsic value falling below the current price, indicating the company is overvalued at the present time.

Be sure to check out previous ModernGraham valuations of Anthem Inc. (ANTM) for a greater perspective!

Read the full valuation on Seeking Alpha!

ANTM Chart

ANTM data by YCharts

Disclaimer: The author did not hold a position in Anthem Inc. (ANTM) at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Anthem Inc. Quarterly Valuation – December 2014 $ANTM

220px-Anthem_Inc_LogoIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  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.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Anthem Inc. (ANTM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Anthem, Inc., formerly WellPoint, Inc. (WellPoint), is a health benefit company. The Company manages its operations through three segments: Commercial, Consumer, and Other. The Company is an independent licensee of the Blue Cross and Blue Shield Association (BCBSA), an association of independent health benefit plans. The Company offers a spectrum of network-based managed care plans to the large and small employer, individual, Medicaid and senior markets. Its managed care plans include preferred provider organizations (PPOs); health maintenance organizations (HMOs); point-of-service plans (POS) plans; traditional indemnity plans and other hybrid plans, including consumer-driven health plans (CDHPs); and hospital only and limited benefit products.

Defensive Investor – must pass all 6 of the following tests: Score = 5/6

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

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $126.66
MG Value $111.72
MG Opinion Overvalued
Value Based on 3% Growth $118.40
Value Based on 0% Growth $69.41
Market Implied Growth Rate 3.51%
PEmg 15.51
PB Ratio 1.48

Balance Sheet – September 2014

Total Debt $14,538,000,000
Total Assets $62,058,000,000
Intangible Assets $25,093,000,000
Total Liabilities $37,764,000,000
Outstanding Shares 284,100,000

Earnings Per Share

2014 (estimate) $8.74
2013 $8.20
2012 $8.18
2011 $7.25
2010 $6.94
2009 $9.88
2008 $4.76
2007 $5.56
2006 $4.82
2005 $3.94
2004 $3.05

Earnings Per Share – ModernGraham 

2014 (estimate) $8.17
2013 $7.95
2012 $7.68
2011 $7.25
2010 $6.96
2009 $6.58

Dividend History

Conclusion:

Anthem Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the short dividend history, while the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears overvalued after growing its EPSmg (normalized earnings) from $6.96 in 2010 to only an estimated $8.17 for 2014.  This level of demonstrated growth does not quite support the market’s implied estimate of 3.51% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the market price.

Be sure to check out previous ModernGraham valuations of Anthem Inc. (ANTM) for greater perspective!

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 Anthem Inc. (ANTM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Anthem Inc. (ANTM) or in any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

Berkshire Hathaway Inc Valuation – April 2019 #BRK.B

Company Profile (excerpt from Reuters): Berkshire Hathaway Inc. (Berkshire), incorporated on June 16, 1998, is a holding company owning subsidiaries engaged in various business activities. The Company’s segments include Insurance, Burlington Northern Santa Fe, LLC (BNSF), Berkshire Hathaway Energy, Manufacturing, McLane Company, Service and retailing, and Finance and financial products. The Company conducts insurance businesses on both a primary basis and a reinsurance basis, a freight rail transportation business and a group of utility and energy generation and distribution businesses. Berkshire also owns and operates a range of other businesses engaged in a range of activities. Its insurance and reinsurance business activities are conducted through various domestic and foreign-based insurance entities. Its insurance businesses provide insurance and reinsurance of property and casualty risks and also reinsure life, accident and health risks across the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BRK.B – April 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $501,551,804,600 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 93.65% Pass
5. Moderate PEmg Ratio PEmg < 20 21.36 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.40 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 Fail
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $9.36
MG Growth Estimate 2.43%
MG Value $125.05
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $135.79
MG Value based on 0% Growth $79.60
Market Implied Growth Rate 6.43%
Current Price $200.07
% of Intrinsic Value 159.99%

Berkshire Hathaway Inc. Class B does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding 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 $8.06 in 2015 to an estimated $9.36 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.43% 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.

At the time of valuation, further research into Berkshire Hathaway Inc. Class B revealed the company was trading above its Graham Number of $178.09. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 21.36, which was above the industry average of 19.43.

Berkshire Hathaway Inc. Class B scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Graham Number $178.09
PEmg 21.36
PB Ratio 1.40
Dividend Yield 0.00%
TTM Dividend $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
Long-Term Debt & Capital Lease Obligation $93,117,000,000
Total Assets $707,794,000,000
Intangible Assets $113,173,000,000
Total Liabilities $355,294,000,000
Shares Outstanding (Diluted Average) 2,462,433,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.00
Dec2018 $1.63
Dec2017 $18.22
Dec2016 $9.76
Dec2015 $9.77
Dec2014 $8.06
Dec2013 $7.90
Dec2012 $5.99
Dec2011 $4.14
Dec2010 $5.29
Dec2009 $3.46
Dec2008 $2.15
Dec2007 $5.70
Dec2006 $4.76
Dec2005 $3.69
Dec2004 $3.17
Dec2003 $3.54
Dec2002 $1.86
Dec2001 $0.35
Dec2000 $1.46
Dec1999 $0.68

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.36
Dec2018 $9.19
Dec2017 $12.23
Dec2016 $8.92
Dec2015 $8.06
Dec2014 $6.90
Dec2013 $5.99
Dec2012 $4.76
Dec2011 $4.15
Dec2010 $4.19
Dec2009 $3.75
Dec2008 $3.89
Dec2007 $4.57
Dec2006 $3.80
Dec2005 $3.06
Dec2004 $2.52
Dec2003 $1.99

Recommended Reading:

Other ModernGraham posts about the company

Berkshire Hathaway Inc Valuation – May 2018 $BRK-B
Berkshire Hathaway Inc Valuation – January 2017 $BRK.B
Berkshire Hathaway Analysis – August 2015 Update $BRK/B
20 Companies in the Spotlight This Week – 8/16/14

Other ModernGraham posts about related companies

Prudential Financial Inc Valuation – April 2019 #PRU
Torchmark Corp Valuation – March 2019 #TMK
Assurant Inc Valuation – March 2019 #AIZ
Humana Inc Valuation – March 2019 #HUM
American International Group Inc Valuation – March 2019 #AIG
Chubb Ltd Valuation – March 2019 #CB
Loews Corporation Valuation – March 2019 #L
Anthem Inc Valuation – February 2019 $ANTM
Arthur J Gallagher & Co Valuation – February 2019 $AJG
Brighthouse Financial Inc Valuation – February 2019 $BHF

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.

Back To Top