Aptiv PLC Valuation – March 2019 #APTV

Company Profile (excerpt from Reuters): Aptiv PLC, formerly Delphi Automotive PLC, incorporated on May 19, 2011, is a global technology company serving the automotive sector. The Company designs and manufactures vehicle components, and provides electrical and electronic and active safety technology solutions to the global automotive and commercial vehicle markets. The Company’s segments include Electrical/Electronic Architecture, and Electronics & Safety. The Company is a vehicle component manufacturer and its customers include automotive original equipment manufacturers (OEMs). As of December 31, 2016, the Company operated 126 manufacturing facilities and 15 technical centers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of APTV – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $21,484,092,414 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.29 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 135.70% Pass
6. Moderate PEmg Ratio PEmg < 20 17.36 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.94 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 1.29 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.73 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 $4.76
MG Growth Estimate 1.66%
MG Value $56.30
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $69.02
MG Value based on 0% Growth $40.46
Market Implied Growth Rate 4.43%
Current Price $82.62
% of Intrinsic Value 146.74%

Aptiv PLC 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 Overvalued after growing its EPSmg (normalized earnings) from $4.28 in 2015 to an estimated $4.76 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.43% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Aptiv PLC revealed the company was trading above its Graham Number of $39.38. The company pays a dividend of $0.88 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 17.36, which was below the industry average of 22.49, 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 $-15.3.

Aptiv PLC 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) -$15.30
Graham Number $39.38
PEmg 17.36
Current Ratio 1.29
PB Ratio 5.94
Current Dividend $0.88
Dividend Yield 1.07%
Number of Consecutive Years of Dividend Growth 0

 

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,777,000,000
Total Current Liabilities $3,694,000,000
Long-Term Debt $4,038,000,000
Total Assets $12,480,000,000
Intangible Assets $3,904,000,000
Total Liabilities $8,810,000,000
Shares Outstanding (Diluted Average) 263,660,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.18
Dec2018 $4.02
Dec2017 $5.06
Dec2016 $4.59
Dec2015 $5.06
Dec2014 $4.48
Dec2013 $3.89
Dec2012 $3.33
Dec2011 $2.72

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.76
Dec2018 $4.58
Dec2017 $4.78
Dec2016 $4.52
Dec2015 $4.28
Dec2014 $3.56
Dec2013 $2.73
Dec2012 $1.84
Dec2011 $0.91

Recommended Reading:

Other ModernGraham posts about the company

Aptiv PLC Valuation – Initial Coverage May 2018 $APTV

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Paccar Inc Valuation – March 2019 #PCAR
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CarMax Inc Valuation – February 2019 $KMX
Ford Motor Co Valuation – February 2019 $F
General Motors Co Valuation – February 2019 $GM
O’Reilly Automotive Inc Valuation – February 2019 $ORLY
Goodyear Tire & Rubber Co Valuation – January 2019 $GT
Genuine Parts Co Valuation – January 2019 $GPC
Autozone Inc Valuation – January 2019 $AZO
Linamar Corp Valuation – October 2018 $TSE-LNR

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.

Aptiv PLC Valuation – Initial Coverage May 2018 $APTV

Company Profile (excerpt from Reuters): Aptiv PLC, formerly Delphi Automotive PLC, incorporated on May 19, 2011, is a global technology company serving the automotive sector. The Company designs and manufactures vehicle components, and provides electrical and electronic and active safety technology solutions to the global automotive and commercial vehicle markets. The Company’s segments include Electrical/Electronic Architecture, and Electronics & Safety. The Company is a vehicle component manufacturer and its customers include automotive original equipment manufacturers (OEMs). As of December 31, 2016, the Company operated 126 manufacturing facilities and 15 technical centers.

APTV Chart

APTV data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of APTV – 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 $25,762,129,642 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.60 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 448.90% Pass
6. Moderate PEmg Ratio PEmg < 20 19.63 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.07 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 1.60 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.88 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.00
MG Growth Estimate 6.07%
MG Value $103.26
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $72.51
MG Value based on 0% Growth $42.51
Market Implied Growth Rate 5.56%
Current Price $98.14
% of Intrinsic Value 95.05%

Aptiv PLC is suitable for the Enterprising Investor but not 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 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 $3.56 in 2014 to an estimated $5 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.56% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Aptiv PLC revealed the company was trading above its Graham Number of $38.4. The company pays a dividend of $1.16 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 19.63, which was above the industry average of 17.22. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.02.

Aptiv PLC receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.02
Graham Number $38.40
PEmg 19.63
Current Ratio 1.60
PB Ratio 7.07
Current Dividend $1.16
Dividend Yield 1.18%
Number of Consecutive Years of Dividend Growth 2

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 $5,926,000,000
Total Current Liabilities $3,708,000,000
Long-Term Debt $4,163,000,000
Total Assets $12,560,000,000
Intangible Assets $3,184,000,000
Total Liabilities $8,862,000,000
Shares Outstanding (Diluted Average) 266,440,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.28
Dec2017 $5.06
Dec2016 $4.59
Dec2015 $5.06
Dec2014 $4.48
Dec2013 $3.89
Dec2012 $3.33
Dec2011 $2.72

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.00
Dec2017 $4.78
Dec2016 $4.52
Dec2015 $4.28
Dec2014 $3.56
Dec2013 $2.73
Dec2012 $1.84
Dec2011 $0.91

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

BorgWarner Inc Valuation – April 2018 $BWA
CarMax Inc Valuation – April 2018 $KMX
Ford Motor Company Valuation – April 2018 $F
General Motors Co Valuation – April 2018 $GM
O’Reilly Automotive Inc Valuation – April 2018 $ORLY
Goodyear Tire & Rubber Co Valuation – March 2018 $GT
Genuine Parts Co Valuation – March 2018 $GPC
AutoZone Inc Valuation – February 2018 $AZO
Thor Industries Inc Valuation – Initial Coverage $THO
Titan International Inc Valuation – Initial Coverage $TWI

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.

Copart Inc Valuation – April 2019 #CPRT

Company Profile (excerpt from Reuters): Copart, Inc. (Copart), incorporated on January 6, 2012, is a provider of online auctions and vehicle remarketing services in the United States, Canada, the United Kingdom, the United Arab Emirates, Oman, Bahrain, Brazil, Ireland, Spain and India. The Company also provides vehicle remarketing services in Germany. The Company operates through two segments: United States and International. The Company provides vehicle sellers with a range of services to process and sell vehicles primarily over the Internet through its virtual bidding third generation Internet auction-style sales technology (VB3). It sells vehicles primarily to insurance companies, such as banks and financial institutions, charities, car dealerships, municipalities, fleet operators and vehicle rental companies. The Company sells the vehicles principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers and exporters and, at certain locations, to the general public.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CPRT – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,418,055,149 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.69 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 227.38% Pass
6. Moderate PEmg Ratio PEmg < 20 37.14 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.41 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 1.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.55 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.70
MG Growth Estimate 15.00%
MG Value $65.48
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $24.66
MG Value based on 0% Growth $14.46
Market Implied Growth Rate 14.32%
Current Price $63.17
% of Intrinsic Value 96.48%

Copart, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.73 in 2015 to an estimated $1.7 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 14.32% 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 Copart, Inc. revealed the company was trading above its Graham Number of $17.91. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 37.14, which was above the industry average of 22.44. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.87.

Copart, 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) -$0.87
Graham Number $17.91
PEmg 37.14
Current Ratio 1.69
PB Ratio 10.41
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 1/1/2019
Total Current Assets $628,466,000
Total Current Liabilities $372,033,000
Long-Term Debt $398,740,000
Total Assets $2,296,905,000
Intangible Assets $398,310,000
Total Liabilities $836,952,000
Shares Outstanding (Diluted Average) 240,660,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.11
Jul2018 $1.73
Jul2017 $1.66
Jul2016 $1.11
Jul2015 $0.84
Jul2014 $0.68
Jul2013 $0.70
Jul2012 $0.70
Jul2011 $0.54
Jul2010 $0.45
Jul2009 $0.42
Jul2008 $0.44
Jul2007 $0.37
Jul2006 $0.26
Jul2005 $0.28
Jul2004 $0.22
Jul2003 $0.16
Jul2002 $0.16
Jul2001 $0.13
Jul2000 $0.09
Jul1999 $0.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.70
Jul2018 $1.40
Jul2017 $1.15
Jul2016 $0.87
Jul2015 $0.73
Jul2014 $0.65
Jul2013 $0.61
Jul2012 $0.55
Jul2011 $0.46
Jul2010 $0.41
Jul2009 $0.38
Jul2008 $0.35
Jul2007 $0.29
Jul2006 $0.23
Jul2005 $0.21
Jul2004 $0.17
Jul2003 $0.14

Recommended Reading:

Other ModernGraham posts about the company

Copart Inc Valuation – August 2018 $CPRT
14 Best Stocks for Value Investors This Week – 2/11/17
Copart Inc Valuation – Initial Coverage $CPRT

Other ModernGraham posts about related companies

Harley-Davidson Inc Valuation – April 2019 #HOG
Advance Auto Parts Inc Valuation – March 2019 #AAP
LKQ Corp Valuation – March 2019 #LKQ
Aptiv PLC Valuation – March 2019 #APTV
Paccar Inc Valuation – March 2019 #PCAR
BorgWarner Inc Valuation – February 2019 $BWA
CarMax Inc Valuation – February 2019 $KMX
Ford Motor Co Valuation – February 2019 $F
General Motors Co Valuation – February 2019 $GM
O’Reilly Automotive Inc Valuation – February 2019 $ORLY

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.

Harley-Davidson Inc Valuation – April 2019 #HOG

Company Profile (excerpt from Reuters): Harley-Davidson, Inc., incorporated on March 8, 1991, is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two segments: the Motorcycles & Related Products (Motorcycles) and the Financial Services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HOG – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,914,027,961 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.25 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 53.65% Pass
6. Moderate PEmg Ratio PEmg < 20 11.78 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.42 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.25 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.51 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.16
MG Growth Estimate -1.28%
MG Value $18.74
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $45.79
MG Value based on 0% Growth $26.84
Market Implied Growth Rate 1.64%
Current Price $37.19
% of Intrinsic Value 198.44%

Harley-Davidson Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.45 in 2015 to an estimated $3.16 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.64% 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 Harley-Davidson Inc revealed the company was trading above its Graham Number of $26.38. The company pays a dividend of $1.48 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.78, which was below the industry average of 22.44, 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 $-27.04.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$27.04
Graham Number $26.38
PEmg 11.78
Current Ratio 1.25
PB Ratio 3.42
Current Dividend $1.48
Dividend Yield 3.98%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,484,442,000
Total Current Liabilities $3,597,600,000
Long-Term Debt $4,887,667,000
Total Assets $10,665,664,000
Intangible Assets $61,046,000
Total Liabilities $8,891,715,000
Shares Outstanding (Diluted Average) 162,973,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.84
Dec2018 $3.19
Dec2017 $3.02
Dec2016 $3.83
Dec2015 $3.69
Dec2014 $3.88
Dec2013 $3.28
Dec2012 $2.72
Dec2011 $2.55
Dec2010 $0.62
Dec2009 -$0.24
Dec2008 $2.79
Dec2007 $3.74
Dec2006 $3.93
Dec2005 $3.41
Dec2004 $3.00
Dec2003 $2.50
Dec2002 $1.90
Dec2001 $1.43
Dec2000 $1.13
Dec1999 $0.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.16
Dec2018 $3.39
Dec2017 $3.50
Dec2016 $3.66
Dec2015 $3.45
Dec2014 $3.09
Dec2013 $2.40
Dec2012 $1.86
Dec2011 $1.59
Dec2010 $1.46
Dec2009 $2.16
Dec2008 $3.37
Dec2007 $3.54
Dec2006 $3.28
Dec2005 $2.79
Dec2004 $2.31
Dec2003 $1.83

Recommended Reading:

Other ModernGraham posts about the company

Harley-Davidson Inc Valuation – June 2018 $HOG
Harley-Davidson Inc Valuation – August 2017 $HOG
12 Best Stocks For Value Investors This Week – 7/1/16
Harley-Davidson Inc Valuation – June 2016 $HOG
19 Best Stocks For Value Investors This Week – 1/9/16

Other ModernGraham posts about related companies

LKQ Corp Valuation – March 2019 #LKQ
Aptiv PLC Valuation – March 2019 #APTV
Paccar Inc Valuation – March 2019 #PCAR
BorgWarner Inc Valuation – February 2019 $BWA
CarMax Inc Valuation – February 2019 $KMX
Ford Motor Co Valuation – February 2019 $F
General Motors Co Valuation – February 2019 $GM
O’Reilly Automotive Inc Valuation – February 2019 $ORLY
Goodyear Tire & Rubber Co Valuation – January 2019 $GT
Genuine Parts Co Valuation – January 2019 $GPC

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.

Advance Auto Parts Inc Valuation – March 2019 #AAP

Company Profile (excerpt from Reuters): Advance Auto Parts, Inc., incorporated on August 1, 2001, provides automotive aftermarket parts in North America, serving do-it-for-me (Professional) and do-it-yourself (DIY), customers. The Company’s stores and branches offer a selection of brand name, original equipment manufacturer (OEM) and private label automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks. The Company serves its Professional and DIY customers through various channels ranging from traditional brick and mortar store locations to self-serving e-commerce sites. As of December 31, 2016, the Company operated 5,062 total stores and 127 branches primarily under the trade names Advance Auto Parts, Autopart International, Carquest and Worldpac. As of December 31, 2016, the Company’s Advance Auto Parts operations consisted of three geographic divisions, which included the operations of the stores operating under the Advance Auto Parts, Carquest and Autopart International trade names. The Company’s e-commerce platforms, primarily consisting of its online Websites and Professional ordering platforms, are part of its integrated operating approach of serving its Professional and DIY customers. The Company’s online Websites allow its DIY customers to pick up merchandise at a store or have their purchases shipped directly to them. The majority of the Company’s online DIY sales are picked up at store locations. Through the Company’s online ordering platforms, Professional customers can place orders with a designated store location for delivery to their places of business or pick-up.

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAP – 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 $12,221,885,012 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.57 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 39.57% Pass
6. Moderate PEmg Ratio PEmg < 20 25.61 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.52 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 1.57 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.48 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.66
MG Growth Estimate 1.58%
MG Value $77.67
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $96.55
MG Value based on 0% Growth $56.60
Market Implied Growth Rate 8.56%
Current Price $170.53
% of Intrinsic Value 219.56%

Advance Auto Parts, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $6.02 in 2015 to an estimated $6.66 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.56% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Advance Auto Parts, Inc. revealed the company was trading above its Graham Number of $92.34. The company pays a dividend of $0.24 per share, for a yield of 0.1% Its PEmg (price over earnings per share – ModernGraham) was 25.61, which was above the industry average of 22.49. Finally, the company was trading above its Net Current Asset Value (NCAV) of $8.08.

Advance Auto Parts, 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) $8.08
Graham Number $92.34
PEmg 25.61
Current Ratio 1.57
PB Ratio 3.52
Current Dividend $0.24
Dividend Yield 0.14%
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 $6,082,454,000
Total Current Liabilities $3,885,950,000
Long-Term Debt $1,045,720,000
Total Assets $9,040,648,000
Intangible Assets $1,540,830,000
Total Liabilities $5,489,835,000
Shares Outstanding (Diluted Average) 73,328,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.78
Dec2018 $5.73
Dec2017 $6.42
Dec2016 $6.20
Dec2015 $6.40
Dec2014 $6.71
Dec2013 $5.32
Dec2012 $5.22
Dec2011 $5.11
Dec2010 $3.95
Dec2009 $2.83
Dec2008 $2.49
Dec2007 $2.28
Dec2006 $2.16
Dec2005 $2.13
Dec2004 $1.66
Dec2003 $1.11
Dec2002 $0.60
Dec2001 $0.13
Dec2000 $0.23
Dec1999 -$0.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.66
Dec2018 $6.16
Dec2017 $6.32
Dec2016 $6.17
Dec2015 $6.02
Dec2014 $5.64
Dec2013 $4.90
Dec2012 $4.44
Dec2011 $3.81
Dec2010 $3.02
Dec2009 $2.49
Dec2008 $2.26
Dec2007 $2.06
Dec2006 $1.81
Dec2005 $1.46
Dec2004 $1.00
Dec2003 $0.57

Recommended Reading:

Other ModernGraham posts about the company

Advance Auto Parts Inc Valuation – June 2018 $AAP
Advance Auto Parts Inc Valuation – August 2017 $AAP
Advance Auto Parts Inc Valuation – November 2016 $AAP
Advance Auto Parts Inc. Analysis – Initial Coverage $AAP

Other ModernGraham posts about related companies

LKQ Corp Valuation – March 2019 #LKQ
Aptiv PLC Valuation – March 2019 #APTV
Paccar Inc Valuation – March 2019 #PCAR
BorgWarner Inc Valuation – February 2019 $BWA
CarMax Inc Valuation – February 2019 $KMX
Ford Motor Co Valuation – February 2019 $F
General Motors Co Valuation – February 2019 $GM
O’Reilly Automotive Inc Valuation – February 2019 $ORLY
Goodyear Tire & Rubber Co Valuation – January 2019 $GT
Genuine Parts Co Valuation – January 2019 $GPC

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.

LKQ Corp Valuation – March 2019 #LKQ

Company Profile (excerpt from Reuters): LKQ Corporation (LKQ), incorporated on February 13, 1998, is a distributor of vehicle products, including replacement parts, components and systems used in the repair and maintenance of vehicles, as well as specialty vehicle products and accessories, and automotive glass products. The Company’s segments include Wholesale-North America; Europe; Specialty, and Self Service. The Company offers its customers a range of replacement systems, components, equipment and parts to repair and accessorize automobiles, trucks, and recreational and performance vehicles. The Company distributes a range of products to collision and mechanical repair shops, including aftermarket collision and mechanical products, recycled collision and mechanical products, refurbished collision products, such as wheels, bumper covers and lights, and remanufactured engines. The Company also has operations in North America, Europe and Taiwan.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LKQ – 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 $8,762,889,571 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.67 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 158.80% Pass
6. Moderate PEmg Ratio PEmg < 20 15.26 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.83 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.67 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.48 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.83
MG Growth Estimate 8.59%
MG Value $46.87
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $26.47
MG Value based on 0% Growth $15.52
Market Implied Growth Rate 3.38%
Current Price $27.86
% of Intrinsic Value 59.44%

LKQ Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value 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 $1.16 in 2015 to an estimated $1.83 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.38% 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 LKQ Corporation revealed the company was trading below its Graham Number of $28.19. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 15.26, which was below the industry average of 22.49, 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 $-6.38.

LKQ Corporation fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$6.38
Graham Number $28.19
PEmg 15.26
Current Ratio 2.67
PB Ratio 1.83
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 $4,520,949,000
Total Current Liabilities $1,690,348,000
Long-Term Debt $4,188,674,000
Total Assets $11,393,402,000
Intangible Assets $5,310,210,000
Total Liabilities $6,554,650,000
Shares Outstanding (Diluted Average) 318,543,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.35
Dec2018 $1.53
Dec2017 $1.71
Dec2016 $1.50
Dec2015 $1.38
Dec2014 $1.25
Dec2013 $1.02
Dec2012 $0.87
Dec2011 $0.71
Dec2010 $0.58
Dec2009 $0.45
Dec2008 $0.36
Dec2007 $0.28
Dec2006 $0.20
Dec2005 $0.16
Dec2004 $0.12
Dec2003 $0.10
Dec2002 -$0.28
Dec2001 $0.03
Dec2000 -$0.01

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.83
Dec2018 $1.53
Dec2017 $1.48
Dec2016 $1.31
Dec2015 $1.16
Dec2014 $1.00
Dec2013 $0.82
Dec2012 $0.68
Dec2011 $0.55
Dec2010 $0.43
Dec2009 $0.34
Dec2008 $0.26
Dec2007 $0.20
Dec2006 $0.13
Dec2005 $0.07
Dec2004 $0.01
Dec2003 -$0.04

Recommended Reading:

Other ModernGraham posts about the company

LKQ Corporation – June 2018 $LKQ
LKQ Corporation Valuation – Initial Coverage $LKQ

Other ModernGraham posts about related companies

Aptiv PLC Valuation – March 2019 #APTV
Paccar Inc Valuation – March 2019 #PCAR
BorgWarner Inc Valuation – February 2019 $BWA
CarMax Inc Valuation – February 2019 $KMX
Ford Motor Co Valuation – February 2019 $F
General Motors Co Valuation – February 2019 $GM
O’Reilly Automotive Inc Valuation – February 2019 $ORLY
Goodyear Tire & Rubber Co Valuation – January 2019 $GT
Genuine Parts Co Valuation – January 2019 $GPC
Autozone Inc Valuation – January 2019 $AZO

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.

AutoNation Inc Valuation – September 2018 $AN

Company Profile (excerpt from Reuters): AutoNation, Inc. (AutoNation), incorporated on May 30, 1991, is an automotive retailer in the United States. The Company offers a range of automotive products and services, including new vehicles, used vehicles, parts and service, which includes automotive repair and maintenance services, as well as wholesale parts and collision businesses, and automotive finance and insurance products, which include vehicle service and other protection products, as well as the arranging of financing for vehicle purchases through third-party finance sources. It operates through three segments: Domestic, Import and Premium Luxury. These segments consist of retail automotive franchises that sell various new vehicle brands, including Ram, Genesis, Volkswagen, Jaguar, Porsche, Infiniti, Volvo, Land Rover, smart and Mazda. As of December 31, 2016, it owned and operated 371 new vehicle franchises from 260 stores located in the United States, predominantly in metropolitan markets in the Sunbelt region.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AN – September 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 $4,119,282,216 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.86 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 191.70% Pass
6. Moderate PEmg Ratio PEmg < 20 10.69 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.65 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.86 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.53 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.24
MG Growth Estimate 7.42%
MG Value $98.97
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $61.50
MG Value based on 0% Growth $36.05
Market Implied Growth Rate 1.10%
Current Price $45.35
% of Intrinsic Value 45.82%

AutoNation, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.84 in 2014 to an estimated $4.24 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.1% 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 AutoNation, Inc. revealed the company was trading below its Graham Number of $50.79. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 10.69, which was below the industry average of 29.84, 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 $-33.82.

AutoNation, 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) -$33.82
Graham Number $50.79
PEmg 10.69
Current Ratio 0.86
PB Ratio 1.65
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 6/1/2018
Total Current Assets $4,703,900,000
Total Current Liabilities $5,476,400,000
Long-Term Debt $1,958,100,000
Total Assets $10,288,600,000
Intangible Assets $2,087,400,000
Total Liabilities $7,788,000,000
Shares Outstanding (Diluted Average) 91,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.43
Dec2017 $4.43
Dec2016 $4.15
Dec2015 $3.89
Dec2014 $3.52
Dec2013 $3.04
Dec2012 $2.52
Dec2011 $1.91
Dec2010 $1.43
Dec2009 $1.12
Dec2008 -$6.99
Dec2007 $1.39
Dec2006 $1.38
Dec2005 $1.85
Dec2004 $1.59
Dec2003 $1.67
Dec2002 $1.19
Dec2001 $0.69
Dec2000 $0.91
Dec1999 $0.66
Dec1998 $1.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.24
Dec2017 $4.03
Dec2016 $3.70
Dec2015 $3.31
Dec2014 $2.84
Dec2013 $2.33
Dec2012 $1.32
Dec2011 $0.40
Dec2010 -$0.35
Dec2009 -$0.91
Dec2008 -$1.33
Dec2007 $1.52
Dec2006 $1.57
Dec2005 $1.58
Dec2004 $1.37
Dec2003 $1.18
Dec2002 $0.92

Recommended Reading:

Other ModernGraham posts about the company

AutoNation Inc Valuation – March 2017 $AN
AutoNation Inc Valuation – November 2015 Update $AN
22 Companies in the Spotlight This Week – 11/29/14
AutoNation Inc. Annual Valuation – 2014 $AN

Other ModernGraham posts about related companies

Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL
Delphi Technologies PLC Valuation – August 2018 $DLPH
Cooper-Standard Holdings Inc Valuation – August 2018 $CPS
Copart Inc Valuation – August 2018 $CPRT
Standard Motor Products Inc Valuation – August 2018 $SMP
Harley-Davidson Inc Valuation – June 2018 $HOG
Advance Auto Parts Inc Valuation – June 2018 $AAP
LKQ Corporation – June 2018 $LKQ
Aptiv PLC Valuation – Initial Coverage May 2018 $APTV

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.

Superior Industries International Inc Valuation – August 2018 $SUP

Company Profile (excerpt from Reuters): Superior Industries International, Inc., incorporated on May 4, 2015, is engaged in the design and manufacture of aluminum wheels for sale to original equipment manufacturers (OEMs). The Company supplies cast aluminum wheels to automobile and light truck manufacturers, with wheel manufacturing operations in the United States and Mexico. The Company offers wheels in a range of finishes, which include Bright Machined, Polished Face with Painted Window, Fully Painted, Premium Paint, Polished, Chrome Clad and Mirror Finish Ultra Bright Machining.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SUP – 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 $554,201,164 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.33 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -71.98% Fail
6. Moderate PEmg Ratio PEmg < 20 302.71 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.07 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.33 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.75 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.07
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $1.07
MG Value based on 0% Growth $0.63
Market Implied Growth Rate 147.11%
Current Price $22.30
% of Intrinsic Value N/A

Superior Industries International Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.01 in 2014 to an estimated $0.07 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 147.11% 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 Superior Industries International Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.45 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 302.71, which was above the industry average of 18.51. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-23.17.

Superior Industries International 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) -$23.17
Graham Number $0.00
PEmg 302.71
Current Ratio 2.33
PB Ratio 1.07
Current Dividend $0.45
Dividend Yield 2.02%
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 6/1/2018
Total Current Assets $426,762,000
Total Current Liabilities $182,906,000
Long-Term Debt $669,620,000
Total Assets $1,529,874,000
Intangible Assets $480,817,000
Total Liabilities $1,007,349,000
Shares Outstanding (Diluted Average) 25,053,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.37
Dec2017 -$1.01
Dec2016 $1.62
Dec2015 $0.90
Dec2014 $0.33
Dec2013 $0.83
Dec2012 $1.13
Dec2011 $2.46
Dec2010 $1.93
Dec2009 -$3.53
Dec2008 -$0.98
Dec2007 $0.35
Dec2006 -$0.40
Dec2005 -$0.27
Dec2004 $1.99
Dec2003 $2.97
Dec2002 $3.07
Dec2001 $2.10
Dec2000 $3.04
Dec1999 $2.62
Dec1998 $1.88

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.07
Dec2017 $0.37
Dec2016 $1.03
Dec2015 $0.87
Dec2014 $1.01
Dec2013 $1.09
Dec2012 $0.88
Dec2011 $0.52
Dec2010 -$0.47
Dec2009 -$1.44
Dec2008 -$0.22
Dec2007 $0.42
Dec2006 $0.79
Dec2005 $1.58
Dec2004 $2.55
Dec2003 $2.81
Dec2002 $2.67

Recommended Reading:

Other ModernGraham posts about the company

Superior Industries International Inc Valuation – Initial Coverage $SUP

Other ModernGraham posts about related companies

Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL
Delphi Technologies PLC Valuation – August 2018 $DLPH
Cooper-Standard Holdings Inc Valuation – August 2018 $CPS
Copart Inc Valuation – August 2018 $CPRT
Standard Motor Products Inc Valuation – August 2018 $SMP
Harley-Davidson Inc Valuation – June 2018 $HOG
Advance Auto Parts Inc Valuation – June 2018 $AAP
LKQ Corporation – June 2018 $LKQ
Aptiv PLC Valuation – Initial Coverage May 2018 $APTV

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.

Lydall Inc Valuation – August 2018 $LDL

Company Profile (excerpt from Reuters): Lydall, Inc., incorporated on August 26, 1987, designs and manufactures specialty engineered filtration media, industrial thermal insulating solutions, automotive thermal and acoustical barriers for filtration/separation and thermal/acoustical applications. The Company’s segments are Performance Materials, Technical Nonwovens, Thermal/Acoustical Metals and Thermal/Acoustical Fibers. The Performance Materials segment includes filtration, thermal insulation and life sciences filtration businesses. The Technical Nonwovens segment includes its industrial filtration and advanced materials products. The Thermal/Acoustical Metals segment includes its metal parts and related tooling used in automotive applications. The Thermal/Acoustical Fibers segment includes its fiber parts business and related tooling used in automotive applications.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LDL – 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 $772,392,250 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.82 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 7420.00% Pass
6. Moderate PEmg Ratio PEmg < 20 17.67 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.05 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.82 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.40 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 $2.48
MG Growth Estimate 15.00%
MG Value $95.30
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $35.89
MG Value based on 0% Growth $21.04
Market Implied Growth Rate 4.59%
Current Price $43.75
% of Intrinsic Value 45.91%

Lydall, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, and the poor dividend history. 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 Undervalued after growing its EPSmg (normalized earnings) from $1.05 in 2014 to an estimated $2.48 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.59% 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 Lydall, Inc. revealed the company was trading above its Graham Number of $33.93. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 17.67, which was below the industry average of 18.51, 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 $5.29.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $5.29
Graham Number $33.93
PEmg 17.67
Current Ratio 2.82
PB Ratio 2.05
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 6/1/2018
Total Current Assets $299,846,000
Total Current Liabilities $106,310,000
Long-Term Debt $76,784,000
Total Assets $578,774,000
Intangible Assets $103,351,000
Total Liabilities $208,059,000
Shares Outstanding (Diluted Average) 17,335,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.51
Dec2017 $2.85
Dec2016 $2.16
Dec2015 $2.71
Dec2014 $1.28
Dec2013 $1.14
Dec2012 $0.99
Dec2011 $0.82
Dec2010 $0.16
Dec2009 -$0.88
Dec2008 -$0.31
Dec2007 $0.55
Dec2006 $0.63
Dec2005 $0.32
Dec2004 -$0.03
Dec2003 $0.47
Dec2002 $0.69
Dec2001 $0.39
Dec2000 -$0.15
Dec1999 $0.68
Dec1998 $0.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.48
Dec2017 $2.31
Dec2016 $1.92
Dec2015 $1.66
Dec2014 $1.05
Dec2013 $0.77
Dec2012 $0.44
Dec2011 $0.14
Dec2010 -$0.13
Dec2009 -$0.16
Dec2008 $0.21
Dec2007 $0.44
Dec2006 $0.40
Dec2005 $0.31
Dec2004 $0.30
Dec2003 $0.44
Dec2002 $0.41

Recommended Reading:

Other ModernGraham posts about the company

11 Best Stocks for Value Investors This Week – 3/4/17
Lydall Inc Valuation – Initial Coverage $LDL

Other ModernGraham posts about related companies

Lithia Motors Inc Valuation – August 2018 $LAD
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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.

Lithia Motors Inc Valuation – August 2018 $LAD

Company Profile (excerpt from Reuters): Lithia Motors, Inc. incorporated on December 23, 1968, is an operator of automotive franchises and a retailer of new and used vehicles and related services. As of February 28, 2017, it offered 30 brands of new vehicles and all brands of used vehicles in 154 stores in the United States and online at Lithia.com, DCHauto.com and CarboneCars.com. It operates through three segments: Domestic, Import and Luxury. Its Domestic segment consists of retail automotive franchises that sell new vehicles manufactured by Chrysler, General Motors and Ford. Its Import segment consists of retail automotive franchises that sell new vehicles manufactured primarily by Honda, Toyota, Subaru, Nissan and Volkswagen. Its Luxury segment consists of retail automotive franchises that sell new vehicles manufactured primarily by BMW, Mercedes-Benz and Lexus. The franchises in each segment also sell used vehicles, parts and automotive services, and automotive finance and insurance products. It sells new and used cars and replacement parts; provides vehicle maintenance, warranty, paint and repair services; arranges related financing, and sells vehicle service contracts, vehicle protection products and credit insurance. Its dealerships are located across the United States. It seeks domestic, import and luxury franchises in cities ranging from mid-sized regional markets to metropolitan markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LAD – 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 $2,076,632,934 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.20 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 748.73% Pass
6. Moderate PEmg Ratio PEmg < 20 10.12 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.84 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.20 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.69 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 $8.48
MG Growth Estimate 15.00%
MG Value $326.33
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $122.90
MG Value based on 0% Growth $72.05
Market Implied Growth Rate 0.81%
Current Price $85.79
% of Intrinsic Value 26.29%

Lithia Motors Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history. 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 $3.78 in 2014 to an estimated $8.48 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.81% 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 Lithia Motors Inc revealed the company was trading below its Graham Number of $94.66. The company pays a dividend of $1.06 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 10.12, which was below the industry average of 18.51, 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 $-44.61.

Lithia Motors 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) -$44.61
Graham Number $94.66
PEmg 10.12
Current Ratio 1.20
PB Ratio 1.84
Current Dividend $1.06
Dividend Yield 1.24%
Number of Consecutive Years of Dividend Growth 4

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $2,893,329,000
Total Current Liabilities $2,412,211,000
Long-Term Debt $1,295,077,000
Total Assets $5,164,162,000
Intangible Assets $478,065,000
Total Liabilities $4,003,294,000
Shares Outstanding (Diluted Average) 24,882,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.18
Dec2017 $9.75
Dec2016 $7.72
Dec2015 $6.91
Dec2014 $5.26
Dec2013 $4.05
Dec2012 $3.07
Dec2011 $2.21
Dec2010 $0.52
Dec2009 $0.41
Dec2008 -$12.51
Dec2007 $1.06
Dec2006 $1.77
Dec2005 $2.54
Dec2004 $2.27
Dec2003 $1.93
Dec2002 $1.80
Dec2001 $1.60
Dec2000 $1.76
Dec1999 $1.60
Dec1998 $1.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.48
Dec2017 $7.66
Dec2016 $6.21
Dec2015 $5.07
Dec2014 $3.78
Dec2013 $2.71
Dec2012 $0.94
Dec2011 -$0.64
Dec2010 -$1.96
Dec2009 -$2.58
Dec2008 -$3.04
Dec2007 $1.76
Dec2006 $2.10
Dec2005 $2.18
Dec2004 $1.96
Dec2003 $1.78
Dec2002 $1.67

Recommended Reading:

Other ModernGraham posts about the company

Lithia Motors Inc Valuation – Initial Coverage $LAD

Other ModernGraham posts about related companies

Cooper-Standard Holdings Inc Valuation – August 2018 $CPS
Copart Inc Valuation – August 2018 $CPRT
Standard Motor Products Inc Valuation – August 2018 $SMP
Harley-Davidson Inc Valuation – June 2018 $HOG
Advance Auto Parts Inc Valuation – June 2018 $AAP
LKQ Corporation – June 2018 $LKQ
Aptiv PLC Valuation – Initial Coverage May 2018 $APTV
BorgWarner Inc Valuation – April 2018 $BWA
CarMax Inc Valuation – April 2018 $KMX
Ford Motor Company Valuation – April 2018 $F

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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