ARRIS International PLC Valuation – July 2018 $ARRS

Company Profile (excerpt from Reuters): ARRIS International plc, incorporated on April 20, 2015, is a media entertainment and data communications solutions provider. The Company operates in two segments: Customer Premises Equipment (CPE), and Network & Cloud (N&C). The Company enables service providers, including cable, telephone, and digital broadcast satellite operators, and media programmers to deliver media, voice and Internet Protocol (IP) data services to their subscribers. It is engaged in offering set-tops, digital video and IP television (IPTV) distribution systems, broadband access infrastructure platforms, and associated data and voice CPE, which it also sells directly to consumers through retail channels. Its solutions are complemented by an array of services, including technical support, repair and refurbishment, and system design and integration.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ARRS – July 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 $4,691,966,732 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.65 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 233.02% Pass
6. Moderate PEmg Ratio PEmg < 20 18.49 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.47 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 1.65 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 Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.36
MG Growth Estimate 12.48%
MG Value $45.58
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $19.75
MG Value based on 0% Growth $11.58
Market Implied Growth Rate 5.00%
Current Price $25.19
% of Intrinsic Value 55.26%

ARRIS International 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. 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 Undervalued after growing its EPSmg (normalized earnings) from $0.74 in 2014 to an estimated $1.36 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into ARRIS International plc revealed the company was trading below its Graham Number of $33.7. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 18.49, which was below the industry average of 38.56, 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 $-7.45.

ARRIS International 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) -$7.45
Graham Number $33.70
PEmg 18.49
Current Ratio 1.65
PB Ratio 1.47
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $2,832,112,000
Total Current Liabilities $1,714,791,000
Long-Term Debt $2,095,320,000
Total Assets $7,366,488,000
Intangible Assets $3,920,119,000
Total Liabilities $4,209,114,000
Shares Outstanding (Diluted Average) 184,805,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.95
Dec2017 $0.49
Dec2016 $0.09
Dec2015 $0.62
Dec2014 $2.21
Dec2013 -$0.37
Dec2012 $0.46
Dec2011 -$0.15
Dec2010 $0.50
Dec2009 $0.71
Dec2008 -$1.04
Dec2007 $0.87
Dec2006 $1.30
Dec2005 $0.52
Dec2004 -$0.33
Dec2003 -$0.62
Dec2002 -$2.33
Dec2001 -$3.13
Dec2000 $0.52
Dec1999 $1.33
Dec1998 $0.15

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.36
Dec2017 $0.58
Dec2016 $0.62
Dec2015 $0.77
Dec2014 $0.74
Dec2013 $0.08
Dec2012 $0.24
Dec2011 $0.14
Dec2010 $0.35
Dec2009 $0.34
Dec2008 $0.19
Dec2007 $0.66
Dec2006 $0.27
Dec2005 -$0.56
Dec2004 -$1.12
Dec2003 -$1.30
Dec2002 -$1.32

Recommended Reading:

Other ModernGraham posts about the company

ARRIS International PLC Valuation – January 2017 $ARRS
Arris Group Inc. Analysis – Initial Coverage $ARRS

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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.

ARRIS International PLC Valuation – January 2017 $ARRS

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 ARRIS International PLC (ARRS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): ARRIS International plc focuses on entertainment and communications technology. The Company operates in two segments: Customer Premises Equipment (CPE), and Network & Cloud (N&C). The CPE segment’s products include Set-Top, Gateway, digital subscriber line (DSL) and Cable Modem, and Embedded Multimedia Terminal Adapter (E-MTA) and Voice/Data Modem. The N&C segment includes various products, such as Infrastructure Products, Global Services and Cloud Solutions. It enables service providers, including cable, telephone, and digital broadcast satellite operators, and media programmers to deliver media, voice and Internet Protocol (IP) data services to their subscribers. It is engaged in offering set-tops, digital video and Internet Protocol Television (IPTV) distribution systems, broadband access infrastructure platforms, and associated data and voice CPE, which it also sells directly to consumers through retail channels.

ARRS Chart

ARRS data by YCharts

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of ARRS – January 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,679,442,661 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.74 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 483.33% Pass
6. Moderate PEmg Ratio PEmg < 20 43.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.91 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 1.74 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $0.70
MG Growth Estimate 15.00%
MG Value $26.77
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $10.08
MG Value based on 0% Growth $5.91
Market Implied Growth Rate 17.44%
Current Price $30.16
% of Intrinsic Value 112.66%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.24 in 2012 to an estimated $0.7 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.44% 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 ARRIS International plc revealed the company was trading above its Graham Number of $10.71. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 43.37, which was below the industry average of 68.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-8.26.

ARRIS International 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) -$8.26
Graham Number $10.71
PEmg 43.37
Current Ratio 1.74
PB Ratio 1.91
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $3,049,712,000
Total Current Liabilities $1,753,128,000
Long-Term Debt $0
Total Assets $7,651,816,000
Intangible Assets $3,855,810,000
Total Liabilities $4,631,554,000
Shares Outstanding (Diluted Average) 191,508,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.32
Dec2015 $0.62
Dec2014 $2.21
Dec2013 -$0.37
Dec2012 $0.46
Dec2011 -$0.15
Dec2010 $0.50
Dec2009 $0.71
Dec2008 -$1.04
Dec2007 $0.87
Dec2006 $1.30
Dec2005 $0.52
Dec2004 -$0.33
Dec2003 -$0.62
Dec2002 -$2.33
Dec2001 -$3.13
Dec2000 $0.52
Dec1999 $1.33
Dec1998 $0.15
Dec1997 -$0.55
Dec1996 $0.67

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.70
Dec2015 $0.77
Dec2014 $0.74
Dec2013 $0.08
Dec2012 $0.24
Dec2011 $0.14
Dec2010 $0.35
Dec2009 $0.34
Dec2008 $0.19
Dec2007 $0.66
Dec2006 $0.27
Dec2005 -$0.56
Dec2004 -$1.12
Dec2003 -$1.30
Dec2002 -$1.32
Dec2001 -$0.66
Dec2000 $0.53

Recommended Reading:

Other ModernGraham posts about the company

Arris Group Inc. Analysis – Initial Coverage $ARRS

Other ModernGraham posts about related companies

Windstream Holdings Inc Valuation – August 2016 $WIN
Verizon Communications Inc Valuation – July 2016 $VZ
AT&T Inc Valuation – July 2016 $T
Harris Corporation Valuation – February 2016 $HRS
CenturyLink Inc Valuation – February 2016 $CTL
Frontier Communications Corp Valuation – November 2015 Update $FTR
Harris Corporation Analysis – September 2015 Update $HRS
Arris Group Inc. Analysis – Initial Coverage $ARRS
Level 3 Communications Inc. Analysis – Initial Coverage $LVLT
Windstream Holdings Analysis – 2015 Update $WIN

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.

Arris Group Inc. Analysis – Initial Coverage $ARRS

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

[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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of ARRS – August 2015

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

What kind of Intelligent Investor are you?

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

Stage 2: Determination of Intrinsic Value

EPSmg 1.00
MG Growth Estimate 15.00%
MG Value $38.50
Opinion Undervalued
MG Value based on 3% Growth $14.50
MG Value based on 0% Growth $8.50
Market Implied Growth Rate 8.70%
Current Price $25.90
% of Intrinsic Value 67.27%

Arris Group does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, lack of dividends, and the poor PEmg ratio.  The Enterprising Investor is concerned with the level of debt relative to the net current assets, the lack of earnings stability over the last five years, and the lack of dividends.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.14 in 2011 to an estimated $1.00 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.7% 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.

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 Arris Group Inc. (ARRS)?  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

ARRS charts August 2015

Net Current Asset Value (NCAV) -$5.02
PEmg 25.82
Current Ratio 2.01
PB Ratio 2.23
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

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Useful Links:

ModernGraham tagged articles Morningstar
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Most Recent Balance Sheet Figures

Total Current Assets $2,083,161,000
Total Current Liabilities $1,036,937,000
Long-Term Debt $1,537,641,000
Total Assets $4,558,675,000
Intangible Assets $1,941,267,000
Total Liabilities $2,832,525,000
Shares Outstanding (Diluted Average) 149,276,000

Earnings Per Share History

Next Fiscal Year Estimate $1.30
Dec14 $2.21
Dec13 -$0.37
Dec12 $0.46
Dec11 -$0.15
Dec10 $0.50
Dec09 $0.71
Dec08 -$1.04
Dec07 $0.87
Dec06 $1.30
Dec05 $0.52
Dec04 -$0.33
Dec03 -$0.62
Dec02 -$2.33
Dec01 -$3.13
Dec00 $0.52
Dec99 $1.33
Dec98 $0.15
Dec97 -$0.55
Dec96 $0.67
Dec95 $0.23

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.00
Dec14 $0.74
Dec13 $0.08
Dec12 $0.24
Dec11 $0.14
Dec10 $0.35
Dec09 $0.34
Dec08 $0.19
Dec07 $0.66
Dec06 $0.27
Dec05 -$0.56
Dec04 -$1.12
Dec03 -$1.30
Dec02 -$1.32
Dec01 -$0.66
Dec00 $0.53
Dec99 $0.48

Recommended Reading:

Other ModernGraham posts about the company

None

Other ModernGraham posts about related companies

Level 3 Communications Inc. Analysis – Initial Coverage $LVLT
Windstream Holdings Analysis – 2015 Update $WIN
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Harris Corporation Quarterly Valuation – March 2015 $HRS
Verizon Communications Annual Valuation – 2015 $VZ
AT&T Inc. Annual Valuation – 2015 $T
CenturyLink Inc. Annual Valuation – 2014 $CTL
Harris Corporation Quarterly Valuation – December 2014 $HRS
Frontier Communications Corp Annual Valuation – 2014 $FTR
AT&T Inc. Quarterly Valuation – November 2014 $T

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.

SBA Communications Corp Valuation – January 2019 $SBAC

Company Profile (excerpt from Reuters): SBA Communications Corporation, incorporated on December 23, 1996, is an independent owner and operator of wireless communications tower structures, rooftops and other structures that support antennas used for wireless communications. The Company’s operating segments include site leasing and site development. The site leasing business includes segments, domestic site leasing and international site leasing. The Company’s primary business line is its site leasing business. In its site leasing business, the Company leases antenna space to wireless service providers on towers that it owns or operates, and manages rooftop and tower sites for property owners under various contractual arrangements. The Company owns approximately 25,460 towers. The Company also manages or leases approximately 5,500 actual or potential towers. The Company’s other business line is its site development business, through which it assists wireless service providers in developing and maintaining their own wireless service networks. The Company’s principal operations are in the United States and its territories. In addition, it owns and operates towers in Canada, Central America and South America.

Downloadable PDF version of this valuation:

ModernGraham Valuation of SBAC – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,326,242,846 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.23 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 -138.56% Fail
6. Moderate PEmg Ratio PEmg < 20 895.24 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -6.04 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 1.23 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 156.23 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.18
MG Growth Estimate 15.00%
MG Value $7.03
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $2.65
MG Value based on 0% Growth $1.55
Market Implied Growth Rate 443.37%
Current Price $163.53
% of Intrinsic Value 2325.29%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.75 in 2014 to an estimated $0.18 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 443.37% 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 SBA Communications Corporation revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 895.24, which was above the industry average of 25.67. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-86.39.

SBA Communications Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$86.39
Graham Number $0.00
PEmg 895.24
Current Ratio 1.23
PB Ratio -6.04
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 9/1/2018
Total Current Assets $327,663,000
Total Current Liabilities $265,512,000
Long-Term Debt $9,710,145,000
Total Assets $7,213,823,000
Intangible Assets $3,387,955,000
Total Liabilities $10,358,906,000
Shares Outstanding (Diluted Average) 116,114,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.08
Dec2017 $0.86
Dec2016 $0.61
Dec2015 -$1.37
Dec2014 -$0.19
Dec2013 -$0.44
Dec2012 -$1.51
Dec2011 -$1.14
Dec2010 -$1.68
Dec2009 -$1.20
Dec2008 -$0.61
Dec2007 -$0.74
Dec2006 -$1.36
Dec2005 -$1.28
Dec2004 -$2.52
Dec2003 -$3.36
Dec2002 -$5.29
Dec2001 -$2.99
Dec2000 -$0.70
Dec1999 -$1.77
Dec1998 -$2.64

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.18
Dec2017 $0.12
Dec2016 -$0.36
Dec2015 -$0.87
Dec2014 -$0.75
Dec2013 -$1.08
Dec2012 -$1.34
Dec2011 -$1.20
Dec2010 -$1.19
Dec2009 -$0.98
Dec2008 -$1.01
Dec2007 -$1.43
Dec2006 -$2.10
Dec2005 -$2.68
Dec2004 -$3.24
Dec2003 -$3.34
Dec2002 -$3.11

Recommended Reading:

Other ModernGraham posts about the company

SBA Communications Corp Valuation – Initial Coverage $SBAC

Other ModernGraham posts about related companies

Harris Corp Valuation – December 2018 $HRS
Verizon Communications Inc Valuation – November 2018 $VZ
Lumentum Holdings Inc Valuation – October 2018 $LITE
Windstream Holdings Inc Valuation – September 2018 $WIN
Sierra Wireless Inc Valuation – September 2018 $TSE:SW
Frontier Communications Corp Valuation – August 2018 $FTR
Consolidated Communications Holdings Inc Valuation – August 2018 $CNSL
Comtech Telecommunications Corp Valuation – August 2018 $CMTL
Shaw Communications Inc Valuation – July 2018 $TSE:SJR.B
ARRIS International PLC Valuation – July 2018 $ARRS

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.

Harris Corp Valuation – December 2018 $HRS

Company Profile (excerpt from Reuters): Harris Corporation, incorporated on December 6, 1926, is a technology company that provides products, systems and services that have defense and civil government applications, as well as commercial applications. The Company offers its products and services to government and commercial customer. The Company operates in four segments: Communication Systems, which serves markets in tactical communications and defense, and public safety networks; Space and Intelligence Systems, which provides complete Earth observation, environmental, geospatial, space protection, and intelligence solutions from advanced sensors and payloads, as well as ground processing and information analytics; Electronic Systems, which offers a portfolio of solutions in electronic warfare, avionics, wireless technology, command, control, communications, computers and intelligence (C4I) and undersea systems, and Critical Networks, which provides managed services supporting air traffic management, energy and maritime communications, and ground network operation and sustainment, as well as information technology (IT) and engineering services.

HRS Chart

HRS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HRS – December 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 $16,342,125,676 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.17 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 99.89% Pass
6. Moderate PEmg Ratio PEmg < 20 24.58 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.17 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 1.17 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 10.27 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 $5.66
MG Growth Estimate 14.26%
MG Value $209.33
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $82.01
MG Value based on 0% Growth $48.08
Market Implied Growth Rate 8.04%
Current Price $139.04
% of Intrinsic Value 66.42%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.9 in 2015 to an estimated $5.66 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.04% 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 Harris Corporation revealed the company was trading above its Graham Number of $70.7. The company pays a dividend of $2.28 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 24.58, which was below the industry average of 30.21, 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 $-36.13.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$36.13
Graham Number $70.70
PEmg 24.58
Current Ratio 1.17
PB Ratio 5.17
Current Dividend $2.28
Dividend Yield 1.64%
Number of Consecutive Years of Dividend Growth 17

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 9/1/2018
Total Current Assets $2,288,000,000
Total Current Liabilities $1,956,000,000
Long-Term Debt $3,410,000,000
Total Assets $9,889,000,000
Intangible Assets $6,333,000,000
Total Liabilities $6,645,000,000
Shares Outstanding (Diluted Average) 120,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.91
Jun2018 $5.92
Jun2017 $4.44
Jun2016 $2.59
Jun2015 $3.11
Jun2014 $4.95
Jun2013 $1.01
Jun2012 $0.26
Jun2011 $4.60
Jun2010 $4.28
Jun2009 $0.28
Jun2008 $3.26
Jun2007 $3.43
Jun2006 $1.71
Jun2005 $1.46
Jun2004 $0.97
Jun2003 $0.45
Jun2002 $0.62
Jun2001 $0.16
Jun2000 $0.13
Jun1999 $0.34

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.66
Jun2018 $4.42
Jun2017 $3.52
Jun2016 $2.83
Jun2015 $2.90
Jun2014 $2.87
Jun2013 $1.92
Jun2012 $2.42
Jun2011 $3.39
Jun2010 $2.72
Jun2009 $1.97
Jun2008 $2.60
Jun2007 $2.05
Jun2006 $1.25
Jun2005 $0.93
Jun2004 $0.60
Jun2003 $0.39

Recommended Reading:

Other ModernGraham posts about the company

Harris Corporation Valuation – February 2018 $HRS
Harris Corporation Valuation – February 2016 $HRS
10 Best Stocks For Value Investors This Week – 9/26/15
Harris Corporation Analysis – September 2015 Update $HRS
Harris Corporation Analysis – June 2015 Update $HRS

Other ModernGraham posts about related companies

Lumentum Holdings Inc Valuation – October 2018 $LITE
Windstream Holdings Inc Valuation – September 2018 $WIN
Sierra Wireless Inc Valuation – September 2018 $TSE:SW
Frontier Communications Corp Valuation – August 2018 $FTR
Consolidated Communications Holdings Inc Valuation – August 2018 $CNSL
Comtech Telecommunications Corp Valuation – August 2018 $CMTL
Shaw Communications Inc Valuation – July 2018 $TSE:SJR.B
ARRIS International PLC Valuation – July 2018 $ARRS
Iridium Communications Inc Valuation – July 2018 $IRDM
CenturyLink Inc Valuation – June 2018 $CTL

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.

Verizon Communications Inc Valuation – November 2018 $VZ

Company Profile (excerpt from Reuters): Verizon Communications Inc., incorporated on October 7, 1983, is a holding company. The Company, through its subsidiaries, provides communications, information and entertainment products and services to consumers, businesses and governmental agencies. Its segments include Wireless and Wireline. The Wireless segment offers communications products and services, including wireless voice and data services and equipment sales, to consumer, business and government customers across the United States. The Wireline segment offers voice, data and video communications products and services, such as broadband video and data, corporate networking solutions, data center and cloud services, security and managed network services, and local and long distance voice services. The Company has combined Yahoo! Inc operating assets with its existing AOL Inc. business to create a new subsidiary, Oath Inc, a diverse house of more than 50 media and technology brands. The Oath portfolio includes HuffPost, Yahoo Sports, AOL.com, MAKERS, Tumblr, BUILD Studios, Yahoo Finance and Yahoo Mail.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VZ – November 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 $248,416,727,707 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.97 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 335.73% Pass
6. Moderate PEmg Ratio PEmg < 20 12.36 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.44 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.97 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -105.07 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 $4.87
MG Growth Estimate 15.00%
MG Value $187.32
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $70.55
MG Value based on 0% Growth $41.36
Market Implied Growth Rate 1.93%
Current Price $60.15
% of Intrinsic Value 32.11%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.11 in 2014 to an estimated $4.87 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.93% 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 Verizon Communications Inc. revealed the company was trading above its Graham Number of $32.89. The company pays a dividend of $2.34 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.36, which was below the industry average of 30.21, 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 $-42.59.

Verizon Communications 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) -$42.59
Graham Number $32.89
PEmg 12.36
Current Ratio 0.97
PB Ratio 4.44
Current Dividend $2.34
Dividend Yield 3.88%
Number of Consecutive Years of Dividend Growth 11

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 9/1/2018
Total Current Assets $33,154,000,000
Total Current Liabilities $34,167,000,000
Long-Term Debt $106,440,000,000
Total Assets $265,562,000,000
Intangible Assets $132,937,000,000
Total Liabilities $209,475,000,000
Shares Outstanding (Diluted Average) 4,140,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.55
Dec2017 $7.36
Dec2016 $3.21
Dec2015 $4.37
Dec2014 $2.42
Dec2013 $4.00
Dec2012 $0.31
Dec2011 $0.85
Dec2010 $0.90
Dec2009 $1.72
Dec2008 -$0.77
Dec2007 $1.90
Dec2006 $2.12
Dec2005 $2.65
Dec2004 $2.79
Dec2003 $1.12
Dec2002 $1.49
Dec2001 $0.14
Dec2000 $4.31
Dec1999 $2.97
Dec1998 $1.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.87
Dec2017 $4.77
Dec2016 $3.27
Dec2015 $3.00
Dec2014 $2.11
Dec2013 $1.82
Dec2012 $0.69
Dec2011 $0.89
Dec2010 $1.00
Dec2009 $1.21
Dec2008 $1.21
Dec2007 $2.18
Dec2006 $2.22
Dec2005 $2.06
Dec2004 $1.83
Dec2003 $1.57
Dec2002 $1.92

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2018
10 Low PE Stock Picks for the Defensive Investor – June 2018
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2018
10 Undervalued Companies for the Defensive Investor – June 2018
5 Undervalued Companies for Value Investors with a Low Beta – May 2018

Other ModernGraham posts about related companies

Lumentum Holdings Inc Valuation – October 2018 $LITE
Windstream Holdings Inc Valuation – September 2018 $WIN
Sierra Wireless Inc Valuation – September 2018 $TSE:SW
Frontier Communications Corp Valuation – August 2018 $FTR
Consolidated Communications Holdings Inc Valuation – August 2018 $CNSL
Comtech Telecommunications Corp Valuation – August 2018 $CMTL
Shaw Communications Inc Valuation – July 2018 $TSE:SJR.B
ARRIS International PLC Valuation – July 2018 $ARRS
Iridium Communications Inc Valuation – July 2018 $IRDM
CenturyLink Inc Valuation – June 2018 $CTL

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.

Lumentum Holdings Inc Valuation – October 2018 $LITE

Company Profile (excerpt from Reuters): Lumentum Holdings Inc., incorporated on February 10, 2015, is a provider of optical and photonic products for a range of end market applications, including data communications (Datacom) and telecommunications (Telecom) networking and commercial lasers (commercial lasers) for manufacturing, inspection and life-science applications. The Company operates in two segments: Optical Communications (OpComms) and Commercial Lasers (Lasers). The Company’s customers include original equipment manufacturers (OEMs).

LITE Chart

LITE data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LITE – October 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 $3,813,220,204 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.27 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 19333.33% Pass
6. Moderate PEmg Ratio PEmg < 20 31.59 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.13 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 5.27 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.37 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.91
MG Growth Estimate 15.00%
MG Value $73.38
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $27.64
MG Value based on 0% Growth $16.20
Market Implied Growth Rate 11.54%
Current Price $60.21
% of Intrinsic Value 82.05%

Lumentum Holdings Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.05 in 2015 to an estimated $1.91 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 11.54% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Lumentum Holdings Inc revealed the company was trading above its Graham Number of $35.14. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 31.59, which was below the industry average of 42.74, 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 $7.42.

Lumentum Holdings Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.42
Graham Number $35.14
PEmg 31.59
Current Ratio 5.27
PB Ratio 4.13
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $1,127,200,000
Total Current Liabilities $214,000,000
Long-Term Debt $334,200,000
Total Assets $1,581,500,000
Intangible Assets $18,300,000
Total Liabilities $655,400,000
Shares Outstanding (Diluted Average) 63,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.72
Jun2018 $3.82
Jun2017 -$1.71
Jun2016 -$0.05
Jun2015 -$0.06
Jun2014 $0.18
Jun2013 $0.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.91
Jun2018 $0.81
Jun2017 -$0.56
Jun2016 $0.02
Jun2015 $0.05
Jun2014 $0.09
Jun2013 $0.04

Recommended Reading:

Other ModernGraham posts about the company

Lumentum Holdings Inc Valuation – Initial Coverage $LITE

Other ModernGraham posts about related companies

Windstream Holdings Inc Valuation – September 2018 $WIN
Sierra Wireless Inc Valuation – September 2018 $TSE:SW
Frontier Communications Corp Valuation – August 2018 $FTR
Consolidated Communications Holdings Inc Valuation – August 2018 $CNSL
Comtech Telecommunications Corp Valuation – August 2018 $CMTL
Shaw Communications Inc Valuation – July 2018 $TSE:SJR.B
ARRIS International PLC Valuation – July 2018 $ARRS
Iridium Communications Inc Valuation – July 2018 $IRDM
CenturyLink Inc Valuation – June 2018 $CTL
American Tower Corp Valuation – June 2018 $AMT

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.

Windstream Holdings Inc Valuation – September 2018 $WIN

Company Profile (excerpt from Reuters): Windstream Holdings, Inc., incorporated on May 23, 2013, is a holding company. The Company is a provider of advanced network communications and technology solutions for consumers, businesses, enterprise organizations and wholesale customers in the United States. The Company operates through four segments: ILEC Consumer and Small Business, Wholesale, Enterprise, and CLEC Consumer and Small Business. It provides data, cloud solutions, unified communications and managed services to small business and enterprise clients. The Company also offers bundled services, including broadband, security solutions, voice and digital television to consumers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WIN – 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 $164,000,000 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.70 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -283.03% Fail
6. Moderate PEmg Ratio PEmg < 20 -0.15 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -0.11 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.70 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -14.44 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 -$24.92
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$361.39
MG Value based on 0% Growth -$211.85
Market Implied Growth Rate -4.33%
Current Price $3.82
% of Intrinsic Value N/A

Windstream Holdings Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, 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 $6.74 in 2014 to an estimated $-24.92 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Windstream Holdings Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.5 per share, for a yield of 39.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -0.15, which was below the industry average of 43.01, 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 $-290.03.

Windstream Holdings Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$290.03
Graham Number $0.00
PEmg -0.15
Current Ratio 0.70
PB Ratio -0.11
Current Dividend $1.50
Dividend Yield 39.27%
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 $935,200,000
Total Current Liabilities $1,341,500,000
Long-Term Debt $5,867,900,000
Total Assets $10,839,800,000
Intangible Assets $4,223,300,000
Total Liabilities $12,246,300,000
Shares Outstanding (Diluted Average) 39,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$12.39
Dec2017 -$62.60
Dec2016 -$20.55
Dec2015 $1.20
Dec2014 -$2.25
Dec2013 $12.05
Dec2012 $8.40
Dec2011 $9.60
Dec2010 $19.80
Dec2009 $22.80
Dec2008 $27.90
Dec2007 $58.20
Dec2006 $37.50
Dec2005 $27.90
Dec2004 $28.80
Dec2003 $21.90
Dec2002 $5.10
Dec2001 -$23.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$24.92
Dec2017 -$25.60
Dec2016 -$4.81
Dec2015 $3.97
Dec2014 $6.74
Dec2013 $12.34
Dec2012 $14.22
Dec2011 $20.64
Dec2010 $28.52
Dec2009 $33.54
Dec2008 $37.96
Dec2007 $40.28
Dec2006 $28.96
Dec2005 $20.50
Dec2004 $13.38
Dec2003 $4.04
Dec2002 -$4.46

Recommended Reading:

Other ModernGraham posts about the company

Windstream Holdings Inc Valuation – March 2017 $WIN
Windstream Holdings Inc Valuation – August 2016 $WIN
Windstream Holdings Analysis – 2015 Update $WIN
16 Companies in the Spotlight This Week – 5/24/14
Windstream Holdings Inc. 2014 Annual Valuation $WIN

Other ModernGraham posts about related companies

Sierra Wireless Inc Valuation – September 2018 $TSE:SW
Frontier Communications Corp Valuation – August 2018 $FTR
Consolidated Communications Holdings Inc Valuation – August 2018 $CNSL
Comtech Telecommunications Corp Valuation – August 2018 $CMTL
Shaw Communications Inc Valuation – July 2018 $TSE:SJR.B
ARRIS International PLC Valuation – July 2018 $ARRS
Iridium Communications Inc Valuation – July 2018 $IRDM
CenturyLink Inc Valuation – June 2018 $CTL
American Tower Corp Valuation – June 2018 $AMT
Charter Communications Inc Valuation – May 2018 $CHTR

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.

Sierra Wireless Inc Valuation – September 2018 $TSE:SW

Company Profile (excerpt from Reuters): Sierra Wireless, Inc., incorporated on May 31, 1993, is engaged in building the Internet of Things (IoT) with wireless solutions for organizations. The Company’s segments include OEM Solutions, Enterprise Solutions, and Cloud and Connectivity Services. The Company offers a portfolio of second generation (2G), third generation (3G), and fourth generation (4G) cellular embedded wireless modules and gateways, integrated with its secure cloud and connectivity services. The Company offers its products to original equipment manufacturers (OEMs) and enterprises. The markets for its products are North America, Europe and Asia Pacific. Its OEM Solution segment is engaged in cellular embedded wireless modules for IoT connectivity, including an embedded application framework to support customer applications. Its Enterprise Solution segment is engaged in intelligent routers and gateways, including management tools and applications that enable cellular connectivity. Its Cloud and Connectivity Services segment is engaged in a cloud based platform for deploying and managing IoT applications, Smart SIM supported by mobile core networks, and managed wireless broadband services to enable customer IoT deployments.

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-SW – 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 $687,068,923 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.61 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 -172.13% Fail
6. Moderate PEmg Ratio PEmg < 20 47.31 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.51 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.33 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.52
MG Growth Estimate 9.51%
MG Value $14.31
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $7.54
MG Value based on 0% Growth $4.42
Market Implied Growth Rate 19.40%
Current Price $24.61
% of Intrinsic Value 171.95%

Sierra Wireless, Inc. (USA) 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, low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.32 in 2014 to an estimated $0.52 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 19.4% 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 Sierra Wireless, Inc. (USA) revealed the company was trading above its Graham Number of $21.29. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 47.31, which was above the industry average of 43.01. Finally, the company was trading above its Net Current Asset Value (NCAV) of $2.63.

Sierra Wireless, Inc. (USA) scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $2.63
Graham Number $21.29
PEmg 47.31
Current Ratio 1.61
PB Ratio 1.51
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 $408,261,000
Total Current Liabilities $253,760,000
Long-Term Debt $50,659,000
Total Assets $900,606,000
Intangible Assets $406,206,000
Total Liabilities $313,381,000
Shares Outstanding (Diluted Average) 36,021,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.21
Dec2017 $0.17
Dec2016 $0.64
Dec2015 -$0.11
Dec2014 -$0.61
Dec2013 $1.90
Dec2012 $0.87
Dec2011 -$0.96
Dec2010 -$0.47
Dec2009 -$1.36
Dec2008 $2.47
Dec2007 $1.16
Dec2006 $0.44
Dec2005 -$1.67
Dec2004 $1.17
Dec2003 $0.16
Dec2002 -$3.99
Dec2001 -$2.37
Dec2000 -$0.30
Dec1999 $0.34
Dec1998 $0.15

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.52
Dec2017 $0.25
Dec2016 $0.37
Dec2015 $0.23
Dec2014 $0.32
Dec2013 $0.52
Dec2012 -$0.08
Dec2011 -$0.31
Dec2010 $0.16
Dec2009 $0.38
Dec2008 $1.07
Dec2007 $0.34
Dec2006 -$0.31
Dec2005 -$0.90
Dec2004 -$0.70
Dec2003 -$1.50
Dec2002 -$1.97

Recommended Reading:

Other ModernGraham posts about the company

Sierra Wireless Inc Valuation – Initial Coverage $TSE:SW

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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.

Frontier Communications Corp Valuation – August 2018 $FTR

Company Profile (excerpt from Reuters): Frontier Communications Corporation (Frontier), incorporated on November 12, 1935, is a provider of communications services in the United States. The Company offers a portfolio of communications services for residential and business customers. Its products and services include data and Internet services, video services, voice services, access services and customer premise equipment (CPE). The Company offers a range of broadband services. The principal residential service it provides is broadband Internet service. Its commercial services include Ethernet, Dedicated Internet, Multiprotocol Label Switching (MPLS), Time Division Multiplexing (TDM) data transport services and optical transport services. It also offers wireless broadband services (using unlicensed spectrum) in various markets utilizing networks that it owns or operates. In addition, the Company offers its Frontier Secure suite of products, including computer security, cloud backup and sharing, identity protection and equipment insurance.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FTR – 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 $601,000,782 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.47 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -422.72% Fail
6. Moderate PEmg Ratio PEmg < 20 -0.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.18 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.47 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.96 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 -$9.97
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$144.62
MG Value based on 0% Growth -$84.78
Market Implied Growth Rate -4.53%
Current Price $5.68
% of Intrinsic Value N/A

Frontier Communications Corp 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, low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, 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 $2.01 in 2014 to an estimated $-9.97 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Frontier Communications Corp revealed the company was trading above its Graham Number of $0. The company pays a dividend of $3.38 per share, for a yield of 59.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -0.57, which was below the industry average of 37.58, 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 $-267.87.

Frontier Communications Corp 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) -$267.87
Graham Number $0.00
PEmg -0.57
Current Ratio 0.47
PB Ratio 0.18
Current Dividend $3.38
Dividend Yield 59.42%
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 $1,428,000,000
Total Current Liabilities $3,056,000,000
Long-Term Debt $16,209,000,000
Total Assets $24,730,000,000
Intangible Assets $8,784,000,000
Total Liabilities $22,329,000,000
Shares Outstanding (Diluted Average) 78,026,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$3.19
Dec2017 -$25.99
Dec2016 -$7.61
Dec2015 -$4.41
Dec2014 $1.95
Dec2013 $1.65
Dec2012 $1.95
Dec2011 $2.25
Dec2010 $3.45
Dec2009 $5.70
Dec2008 $8.55
Dec2007 $9.75
Dec2006 $15.90
Dec2005 $9.00
Dec2004 $3.45
Dec2003 $9.60
Dec2002 -$36.45
Dec2001 -$5.70
Dec2000 -$1.65
Dec1999 $8.25
Dec1998 $3.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$9.97
Dec2017 -$11.20
Dec2016 -$2.97
Dec2015 -$0.21
Dec2014 $2.01
Dec2013 $2.36
Dec2012 $3.27
Dec2011 $4.60
Dec2010 $6.74
Dec2009 $8.85
Dec2008 $10.06
Dec2007 $10.39
Dec2006 $7.24
Dec2005 $0.60
Dec2004 -$4.45
Dec2003 -$7.33
Dec2002 -$12.68

Recommended Reading:

Other ModernGraham posts about the company

Most Overvalued Stocks of the S&P 500 – March 2017
Frontier Communications Corp Valuation – February 2017 $FTR
Frontier Communications Corp Valuation – November 2015 Update $FTR
Frontier Communications Corp Annual Valuation – 2014 $FTR

Other ModernGraham posts about related companies

Consolidated Communications Holdings Inc Valuation – August 2018 $CNSL
Comtech Telecommunications Corp Valuation – August 2018 $CMTL
Shaw Communications Inc Valuation – July 2018 $TSE:SJR.B
ARRIS International PLC Valuation – July 2018 $ARRS
Iridium Communications Inc Valuation – July 2018 $IRDM
CenturyLink Inc Valuation – June 2018 $CTL
American Tower Corp Valuation – June 2018 $AMT
Charter Communications Inc Valuation – May 2018 $CHTR
DISH Network Corp Valuation – Initial Coverage $DISH
AT&T Inc Valuation – April 2018 $T

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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