American Water Works Co Inc Valuation – March 2019 #AWK

Company Profile (excerpt from Reuters): American Water Works Company, Inc., incorporated on August 28, 1936, is a holding company for regulated and market-based subsidiaries throughout the United States and Ontario, Canada. The Company’s Regulated Businesses segment provided water and wastewater services as public utilities in 16 states in the United States as of December 31, 2016. The Market-Based Businesses consists of four segments, including Military Services Group, which conducts operation and maintenance (O&M) of water and wastewater systems for military bases; Contract Operations Group, which conducts O&M of water and wastewater facilities for municipalities and the food and beverage industry; Homeowner Services Group, which primarily provides water and sewer line protection plans for homeowners, and Keystone, which provides water services for natural gas exploration and production companies.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AWK – 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 $19,002,457,263 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.37 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 71.64% Pass
6. Moderate PEmg Ratio PEmg < 20 34.76 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.28 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 0.37 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.76 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.02
MG Growth Estimate 4.70%
MG Value $54.13
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $43.86
MG Value based on 0% Growth $25.71
Market Implied Growth Rate 13.13%
Current Price $105.13
% of Intrinsic Value 194.23%

American Water Works Company 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 PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.3 in 2015 to an estimated $3.02 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.13% 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 American Water Works Company Inc revealed the company was trading above its Graham Number of $50.93. The company pays a dividend of $1.78 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 34.76, which was above the industry average of 23.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-79.66.

American Water Works Company Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$79.66
Graham Number $50.93
PEmg 34.76
Current Ratio 0.37
PB Ratio 3.28
Current Dividend $1.78
Dividend Yield 1.69%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $781,000,000
Total Current Liabilities $2,094,000,000
Long-Term Debt $7,569,000,000
Total Assets $21,223,000,000
Intangible Assets $1,659,000,000
Total Liabilities $15,359,000,000
Shares Outstanding (Diluted Average) 183,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.55
Dec2018 $3.15
Dec2017 $2.38
Dec2016 $2.62
Dec2015 $2.64
Dec2014 $2.35
Dec2013 $2.06
Dec2012 $2.01
Dec2011 $1.75
Dec2010 $1.53
Dec2009 -$1.39
Dec2008 -$3.52
Dec2007 -$2.14
Dec2006 -$1.01
Dec2005 -$2.03
Dec2001 $1.61
Dec2000 $1.61
Dec1999 $1.40
Dec1998 $1.54
Dec1997 $1.42
Dec1996 $1.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.02
Dec2018 $2.72
Dec2017 $2.47
Dec2016 $2.46
Dec2015 $2.30
Dec2014 $2.07
Dec2013 $1.68
Dec2012 $1.02
Dec2011 $0.10
Dec2010 -$0.92
Dec2009 -$2.10
Dec2008 -$2.11
Dec2007 -$1.07
Dec2006 -$0.25
Dec2005 $0.36
Dec2001 $1.55
Dec2000 $1.49

Recommended Reading:

Other ModernGraham posts about the company

American Water Works Co Inc Valuation – June 2018 $AWK
American Water Works Company Inc Valuation – Initial Coverage $AWK

Other ModernGraham posts about related companies

Alliant Energy Corp Valuation – March 2019 #LNT
Consolidated Edison Inc Valuation – March 2019 #ED
Duke Energy Corp Valuation – March 2019 #DUK
Sempra Energy Valuation – March 2019 #SRE
Ameren Corp Valuation – March 2019 #AEE
NextEra Energy Inc Valuation – February 2019 $NEE
Dominion Energy Inc Valuation – February 2019 $D
Exelon Corp Valuation – January 2019 $EXC
NRG Energy Inc Valuation – January 2019 $NRG
DTE Energy Co Valuation – January 2019 $DTE

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.

Mohawk Industries Inc Valuation – March 2019 #MHK

Company Profile (excerpt from Reuters): Mohawk Industries, Inc., incorporated on December 22, 1988, is a flooring manufacturer that creates products for residential and commercial spaces around the world. The Company operates in three segments: Global Ceramic, Flooring North America (Flooring NA) and Flooring Rest of the World (Flooring ROW). The Company’s manufacturing and distribution processes provide carpet, rugs, ceramic tile, laminate, wood, stone, luxury vinyl tile (LVT) and vinyl flooring. The Company has operations in Australia, Brazil, Canada, Europe, India, Malaysia, Mexico, New Zealand, Russia and the United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MHK – 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 $9,606,383,941 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.38 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 294.08% Pass
6. Moderate PEmg Ratio PEmg < 20 11.80 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.32 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 1.38 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.22 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $11.26
MG Growth Estimate 11.73%
MG Value $359.73
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $163.21
MG Value based on 0% Growth $95.68
Market Implied Growth Rate 1.65%
Current Price $132.85
% of Intrinsic Value 36.93%

Mohawk Industries, 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 $6.32 in 2015 to an estimated $11.26 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.65% 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 Mohawk Industries, Inc. revealed the company was trading below its Graham Number of $151.26. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 11.8, which was below the industry average of 20.99, 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 $-15.5.

Mohawk Industries, 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) -$15.50
Graham Number $151.26
PEmg 11.80
Current Ratio 1.38
PB Ratio 1.32
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 $4,509,296,000
Total Current Liabilities $3,266,239,000
Long-Term Debt $1,515,601,000
Total Assets $13,099,123,000
Intangible Assets $3,482,776,000
Total Liabilities $5,659,064,000
Shares Outstanding (Diluted Average) 74,161,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.15
Dec2018 $11.47
Dec2017 $12.98
Dec2016 $12.48
Dec2015 $8.31
Dec2014 $7.25
Dec2013 $4.82
Dec2012 $3.61
Dec2011 $2.52
Dec2010 $2.65
Dec2009 -$0.08
Dec2008 -$21.32
Dec2007 $10.32
Dec2006 $6.70
Dec2005 $5.72
Dec2004 $5.49
Dec2003 $4.62
Dec2002 $4.39
Dec2001 $3.55
Dec2000 $3.00
Dec1999 $2.61

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $11.26
Dec2018 $11.37
Dec2017 $10.60
Dec2016 $8.71
Dec2015 $6.32
Dec2014 $4.94
Dec2013 $3.42
Dec2012 $0.97
Dec2011 -$0.62
Dec2010 -$1.58
Dec2009 -$2.37
Dec2008 -$1.89
Dec2007 $7.41
Dec2006 $5.77
Dec2005 $5.12
Dec2004 $4.61
Dec2003 $3.99

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Stocks for the Enterprising Investor – January 2019
Most Undervalued Stocks of the S&P 500 – August 2018
Mohawk Industries Inc Valuation – May 2018 $MHK
Mohawk Industries Inc Valuation – February 2017 $MHK
Mohawk Industries Inc. Analysis – October 2015 Update $MHK

Other ModernGraham posts about related companies

Jacobs Engineering Group Inc Valuation – March 2019 #JEC
Masco Corp Valuation – February 2019 $MAS
D.R. Horton Inc Valuation – February 2019 $DHI
Martin Marietta Materials Inc Valuation – February 2019 $MLM
Fluor Corp Valuation – February 2019 $FLR
Lennar Corp Valuation – February 2019 $LEN
Vulcan Materials Co Valuation – February 2019 $VMC
PulteGroup Inc Valuation – January 2019 $PHM
Sherwin-Williams Co Valuation – January 2019 $SHW
Johnson Controls International PC Valuation – January 2019 $JCI

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.

American Water Works Co Inc Valuation – June 2018 $AWK

Company Profile (excerpt from Reuters): American Water Works Company, Inc., incorporated on August 28, 1936, is a holding company for regulated and market-based subsidiaries throughout the United States and Ontario, Canada. The Company’s Regulated Businesses segment provided water and wastewater services as public utilities in 16 states in the United States as of December 31, 2016. The Market-Based Businesses consists of four segments, including Military Services Group, which conducts operation and maintenance (O&M) of water and wastewater systems for military bases; Contract Operations Group, which conducts O&M of water and wastewater facilities for municipalities and the food and beverage industry; Homeowner Services Group, which primarily provides water and sewer line protection plans for homeowners, and Keystone, which provides water services for natural gas exploration and production companies.

AWK Chart

AWK data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AWK – June 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 $14,686,425,386 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.29 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 337.04% Pass
6. Moderate PEmg Ratio PEmg < 20 28.77 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.60 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 0.29 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.53 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 $2.75
MG Growth Estimate 4.96%
MG Value $50.71
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $39.93
MG Value based on 0% Growth $23.41
Market Implied Growth Rate 10.13%
Current Price $79.22
% of Intrinsic Value 156.22%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.07 in 2014 to an estimated $2.75 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.13% 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 American Water Works Company Inc revealed the company was trading above its Graham Number of $47.05. The company pays a dividend of $1.62 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 28.77, which was above the industry average of 22.69. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-75.69.

American Water Works Company 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) -$75.69
Graham Number $47.05
PEmg 28.77
Current Ratio 0.29
PB Ratio 2.60
Current Dividend $1.62
Dividend Yield 2.04%
Number of Consecutive Years of Dividend Growth 4

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 $729,000,000
Total Current Liabilities $2,539,000,000
Long-Term Debt $6,396,000,000
Total Assets $19,728,000,000
Intangible Assets $1,379,000,000
Total Liabilities $14,277,000,000
Shares Outstanding (Diluted Average) 179,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.26
Dec2017 $2.38
Dec2016 $2.62
Dec2015 $2.64
Dec2014 $2.35
Dec2013 $2.06
Dec2012 $2.01
Dec2011 $1.75
Dec2010 $1.53
Dec2009 -$1.39
Dec2008 -$3.52
Dec2007 -$2.14
Dec2006 -$1.01
Dec2005 -$2.03
Dec2001 $1.61
Dec2000 $1.61
Dec1999 $1.40
Dec1998 $1.54
Dec1997 $1.42
Dec1996 $1.31
Dec1995 $1.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.75
Dec2017 $2.47
Dec2016 $2.46
Dec2015 $2.30
Dec2014 $2.07
Dec2013 $1.68
Dec2012 $1.02
Dec2011 $0.10
Dec2010 -$0.92
Dec2009 -$2.10
Dec2008 -$2.11
Dec2007 -$1.07
Dec2006 -$0.25
Dec2005 $0.36
Dec2001 $1.55
Dec2000 $1.49
Dec1999 $1.42

Recommended Reading:

Other ModernGraham posts about the company

American Water Works Company Inc Valuation – Initial Coverage $AWK

Other ModernGraham posts about related companies

Alliant Energy Corp Valuation – June 2018 $LNT
Consolidated Edison Inc Valuation – June 2018 $ED
Duke Energy Corp Valuation – May 2018 $DUK
Sempra Energy Valuation – May 2018 $SRE
Ameren Corp Valuation – May 2018 $AEE
NextEra Energy Inc Valuation – May 2018 $NEE
PG&E Corp Valuation – April 2018 $PCG
Dominion Energy Inc Valuation – April 2018 $D
Exelon Corp Valuation – March 2018 $EXC
NRG Energy Inc Valuation – March 2018 $NRG

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.

Mohawk Industries Inc Valuation – May 2018 $MHK

Company Profile (excerpt from Reuters): Mohawk Industries, Inc., incorporated on December 22, 1988, is a flooring manufacturer that creates products for residential and commercial spaces around the world. The Company operates in three segments: Global Ceramic, Flooring North America (Flooring NA) and Flooring Rest of the World (Flooring ROW). The Company’s manufacturing and distribution processes provide carpet, rugs, ceramic tile, laminate, wood, stone, luxury vinyl tile (LVT) and vinyl flooring. The Company has operations in Australia, Brazil, Canada, Europe, India, Malaysia, Mexico, New Zealand, Russia and the United States.

MHK Chart

MHK data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MHK – 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 $15,582,922,189 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.54 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 698.82% Pass
6. Moderate PEmg Ratio PEmg < 20 16.56 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.13 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 1.54 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.06 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 $12.62
MG Growth Estimate 15.00%
MG Value $485.69
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $182.92
MG Value based on 0% Growth $107.23
Market Implied Growth Rate 4.03%
Current Price $208.89
% of Intrinsic Value 43.01%

Mohawk Industries, Inc. 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. 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 $4.94 in 2014 to an estimated $12.62 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.03% 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 Mohawk Industries, Inc. revealed the company was trading above its Graham Number of $180.11. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 16.56, which was below the industry average of 26.36, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.35.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.35
Graham Number $180.11
PEmg 16.56
Current Ratio 1.54
PB Ratio 2.13
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 3/1/2018
Total Current Assets $4,297,039,000
Total Current Liabilities $2,795,910,000
Long-Term Debt $1,585,651,000
Total Assets $12,560,372,000
Intangible Assets $3,412,604,000
Total Liabilities $5,222,429,000
Shares Outstanding (Diluted Average) 74,929,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $15.20
Dec2017 $12.98
Dec2016 $12.48
Dec2015 $8.31
Dec2014 $7.25
Dec2013 $4.82
Dec2012 $3.61
Dec2011 $2.52
Dec2010 $2.65
Dec2009 -$0.08
Dec2008 -$21.32
Dec2007 $10.32
Dec2006 $6.70
Dec2005 $5.72
Dec2004 $5.49
Dec2003 $4.62
Dec2002 $4.39
Dec2001 $3.55
Dec2000 $3.00
Dec1999 $2.61
Dec1998 $1.89

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.62
Dec2017 $10.60
Dec2016 $8.71
Dec2015 $6.32
Dec2014 $4.94
Dec2013 $3.42
Dec2012 $0.97
Dec2011 -$0.62
Dec2010 -$1.58
Dec2009 -$2.37
Dec2008 -$1.89
Dec2007 $7.41
Dec2006 $5.77
Dec2005 $5.12
Dec2004 $4.61
Dec2003 $3.99
Dec2002 $3.48

Recommended Reading:

Other ModernGraham posts about the company

Mohawk Industries Inc Valuation – February 2017 $MHK
Mohawk Industries Inc. Analysis – October 2015 Update $MHK
14 Companies in the Spotlight This Week – 1/25/14
Mohawk Industries (MHK) Annual Valuation

Other ModernGraham posts about related companies

Jacobs Engineering Group Inc Valuation – May 2018 $JEC
Masco Corp Valuation – May 2018 $MAS
D.R. Horton Inc Valuation – May 2018 $DHI
Martin Marietta Materials Inc Valuation – May 2018 $MLM
Fluor Corporation Valuation – April 2018 $FLR
Lennar Corp Valuation – April 2018 $LEN
Vulcan Materials Co Valuation – April 2018 $VMC
PulteGroup Inc Valuation – March 2018 $PHM
Sherwin-Williams Co Valuation – March 2018 $SHW
Cummins Inc Valuation – March 2018 $CMI

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.

American Water Works Company Inc Valuation – Initial Coverage $AWK

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how American Water Works Company (AWK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): American Water Works Company, Inc. is a holding company. The Company is a water and wastewater utility company. The Company operates through two segments: the Regulated Businesses and the Market-Based Businesses. Its Regulated Businesses segment involves the ownership of subsidiaries that provide water and wastewater utility services to residential, commercial, industrial and other customers, including sale for resale and public authority customers. The Market-Based Businesses segment provides water and wastewater services to military bases, municipalities, industrial, commercial and residential customers that are not subject to economic regulation by state Public Utility Commissions (PUCs). Its properties consist of transmission, distribution and collection pipes, water and wastewater treatment plants, pumping wells, tanks, meters, supply lines, dams, reservoirs, buildings, vehicles, land, easements, software rights, and other facilities and equipment.

AWK Chart

AWK data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AWK – March 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 $13,685,741,621 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.33 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 -344.67% Fail
6. Moderate PEmg Ratio PEmg < 20 28.83 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.65 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 0.33 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.58 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 $2.68
MG Growth Estimate 8.88%
MG Value $70.38
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $38.87
MG Value based on 0% Growth $22.79
Market Implied Growth Rate 10.17%
Current Price $77.29
% of Intrinsic Value 109.82%

American Water Works Company Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.68 in 2013 to an estimated $2.68 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 10.17% 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 American Water Works Company Inc revealed the company was trading above its Graham Number of $44.56. The company pays a dividend of $1.47 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 28.83, which was above the industry average of 23.36. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-69.72.

American Water Works Company 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) -$69.72
Graham Number $44.56
PEmg 28.83
Current Ratio 0.33
PB Ratio 2.65
Current Dividend $1.47
Dividend Yield 1.90%
Number of Consecutive Years of Dividend Growth 4

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $784,000,000
Total Current Liabilities $2,392,000,000
Long-Term Debt $5,749,000,000
Total Assets $18,482,000,000
Intangible Assets $1,345,000,000
Total Liabilities $13,264,000,000
Shares Outstanding (Diluted Average) 179,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.01
Dec2016 $2.62
Dec2015 $2.64
Dec2014 $2.35
Dec2013 $2.06
Dec2012 $2.01
Dec2011 $1.75
Dec2010 $1.53
Dec2009 -$1.39
Dec2008 -$3.52
Dec2007 -$2.14
Dec2006 -$1.01
Dec2005 -$1.72
Dec2001 $1.61
Dec2000 $1.61
Dec1999 $1.40
Dec1998 $1.54
Dec1997 $1.42
Dec1996 $1.31
Dec1995 $1.32
Dec1994 $1.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.68
Dec2016 $2.46
Dec2015 $2.30
Dec2014 $2.07
Dec2013 $1.68
Dec2012 $1.02
Dec2011 $0.10
Dec2010 -$0.92
Dec2009 -$2.08
Dec2008 -$2.07
Dec2007 -$1.00
Dec2006 -$0.17
Dec2005 $0.47
Dec2001 $1.55
Dec2000 $1.49
Dec1999 $1.42
Dec1998 $1.41

Recommended Reading:

Other ModernGraham posts about the company

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

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Consolidated Edison Inc Valuation – February 2017 $ED
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NextEra Energy Inc Valuation – December 2016 $NEE

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.

Mohawk Industries Inc Valuation – February 2017 $MHK

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 Mohawk Industries Inc (MHK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Mohawk Industries, Inc. is a flooring manufacturer that creates products for residential and commercial spaces around the world. The Company’s manufacturing and distribution processes provide carpet, rugs, ceramic tile, laminate, wood, stone, luxury vinyl tile (LVT) and vinyl flooring. It operates in three segments: Global Ceramic, which designs, manufactures, sources, distributes and markets a line of ceramic tile, porcelain tile and natural stone products; Flooring North America (Flooring NA), which designs, manufactures, sources, distributes and markets carpet, laminate, carpet pad, rugs, hardwood and vinyl, including LVT, in a range of colors, textures and patterns, and Flooring Rest of the World (Flooring ROW), which designs, manufactures, sources, distributes and markets laminate, hardwood flooring, roofing elements, insulation boards, medium-density fiberboard, chipboards and vinyl flooring products. Its trademarks include American Olean, Bigelow, Lees, Quick-Step and Unilin.

MHK Chart

MHK 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 MHK – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,927,144,677 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.20 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 -353.25% Fail
6. Moderate PEmg Ratio PEmg < 20 24.71 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.84 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 1.20 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.97 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 $8.72
MG Growth Estimate 15.00%
MG Value $335.57
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $126.38
MG Value based on 0% Growth $74.09
Market Implied Growth Rate 8.11%
Current Price $215.39
% of Intrinsic Value 64.19%

Mohawk Industries, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $0.97 in 2012 to an estimated $8.72 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.11% 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 above the price.

At the time of valuation, further research into Mohawk Industries, Inc. revealed the company was trading above its Graham Number of $146.59. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 24.71, which was below the industry average of 28.49, 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 $-15.8.

Mohawk Industries, 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) -$15.80
Graham Number $146.59
PEmg 24.71
Current Ratio 1.20
PB Ratio 2.84
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $3,576,314,000
Total Current Liabilities $2,983,320,000
Long-Term Debt $1,165,577,000
Total Assets $10,420,593,000
Intangible Assets $3,208,536,000
Total Liabilities $4,755,151,000
Shares Outstanding (Diluted Average) 74,613,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.50
Dec2015 $8.31
Dec2014 $7.25
Dec2013 $4.82
Dec2012 $3.61
Dec2011 $2.52
Dec2010 $2.65
Dec2009 -$0.08
Dec2008 -$21.32
Dec2007 $10.32
Dec2006 $6.70
Dec2005 $5.72
Dec2004 $5.49
Dec2003 $4.62
Dec2002 $4.39
Dec2001 $3.55
Dec2000 $3.00
Dec1999 $2.61
Dec1998 $1.89
Dec1997 $1.32
Dec1996 $0.95

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.72
Dec2015 $6.32
Dec2014 $4.94
Dec2013 $3.42
Dec2012 $0.97
Dec2011 -$0.62
Dec2010 -$1.58
Dec2009 -$2.37
Dec2008 -$1.89
Dec2007 $7.41
Dec2006 $5.77
Dec2005 $5.12
Dec2004 $4.61
Dec2003 $3.99
Dec2002 $3.48
Dec2001 $2.85
Dec2000 $2.31

Recommended Reading:

Other ModernGraham posts about the company

Mohawk Industries Inc. Analysis – October 2015 Update $MHK
14 Companies in the Spotlight This Week – 1/25/14
Mohawk Industries (MHK) Annual Valuation

Other ModernGraham posts about related companies

Quanta Services Inc Valuation – August 2016 $PWR
Jacobs Engineering Group Inc Valuation – August 2016 $JEC
PPG Industries Inc Valuation – August 2016 $PPG
D.R. Horton Inc Valuation – August 2016 $DHI
Martin Marietta Materials Inc Valuation – August 2016 $MLM
Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI

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.

Mohawk Industries Inc. Analysis – October 2015 Update $MHK

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 – September 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 Mohawk Industries Inc. (MHK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Mohawk Industries, Inc. is a flooring manufacturer that creates products for residential and commercial spaces around the world. The Company operates in three segments: the Carpet segment, the Ceramic segment, and the Laminate and Wood segment. The Carpet segment designs, manufactures, sources, distributes and markets its carpet and rug product lines in a range of colors, textures and patterns for residential and commercial applications. The Ceramic segment designs, manufactures, sources, distributes and markets a line of ceramic tile, porcelain tile and natural stone products. The Laminate and Wood segment designs, manufactures, sources, licenses, distributes and markets laminate and hardwood flooring. Its manufacturing and distribution processes provide carpet, rugs, ceramic tile, laminate, wood, stone and vinyl flooring. Its brands include American Olean, Bigelow, Daltile, Durkan, Karastan, Kerama Marazzi, Lees, Marazzi, Mohawk, Pergo, Quick-Step and Unilin.

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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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[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of MHK – October 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 $13,910,261,039 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.20 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 -576.94% Fail
6. Moderate PEmg Ratio PEmg < 20 30.61 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.08 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.20 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.93 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

MHK value Chart October 2015

EPSmg $6.28
MG Growth Estimate 15.00%
MG Value $241.78
Opinion Fairly Valued
MG Value based on 3% Growth $91.06
MG Value based on 0% Growth $53.38
Market Implied Growth Rate 11.05%
Current Price $192.22
% of Intrinsic Value 79.50%

Mohawk Industries Inc. does not qualify for 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, lack of dividends, and the high PEmg and PB ratios.  The Enterprising Investor is concerned by the level of debt relative to the current assets 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 at this time or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from a loss of $0.62 in 2011 to an estimated gain of $6.28 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 11.05% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Mohawk Industries Inc. (MHK)?  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

MHK Charts October 2015

Net Current Asset Value (NCAV) -$26.42
Graham Number $107.86
PEmg 30.61
Current Ratio 1.20
PB Ratio 3.08
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

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Useful Links:

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

Most Recent Balance Sheet Figures

Total Current Assets $3,608,622,000
Total Current Liabilities $3,001,531,000
Long-Term Debt $1,777,828,000
Total Assets $10,165,670,000
Intangible Assets $3,225,510,000
Total Liabilities $5,557,436,000
Shares Outstanding (Diluted Average) 73,756,000

Earnings Per Share History

Next Fiscal Year Estimate $8.20
Dec14 $7.25
Dec13 $4.82
Dec12 $3.61
Dec11 $2.52
Dec10 $2.65
Dec09 -$0.08
Dec08 -$21.32
Dec07 $10.37
Dec06 $6.70
Dec05 $5.72
Dec04 $5.49
Dec03 $4.62
Dec02 $4.39
Dec01 $3.55
Dec00 $3.00
Dec99 $2.61
Dec98 $1.89
Dec97 $1.32
Dec96 $0.95
Dec95 $0.13

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $6.28
Dec14 $4.94
Dec13 $3.42
Dec12 $0.97
Dec11 -$0.62
Dec10 -$1.57
Dec09 -$2.36
Dec08 -$1.87
Dec07 $7.43
Dec06 $5.77
Dec05 $5.12
Dec04 $4.61
Dec03 $3.99
Dec02 $3.48
Dec01 $2.85
Dec00 $2.31
Dec99 $1.77

Recommended Reading:

Other ModernGraham posts about the company

14 Companies in the Spotlight This Week – 1/25/14
Mohawk Industries (MHK) Annual Valuation

Other ModernGraham posts about related companies

PulteGroup Inc. Analysis – October 2015 Update $PHM
Masco Corporation Analysis – September 2015 Update $MAS
Flowserve Corporation Analysis – August 2015 Update $FLS
Alexander & Baldwin Inc Analysis – Initial Coverage $ALEX
Lennar Corporation Analysis – August 2015 Update $LEN
Aecom Analysis – Initial Coverage $ACM
Quanta Services Inc. Analysis – July 2015 Update $PWR
Fluor Corporation Analysis – July 2015 Update $FLR
Martin Marietta Materials Inc. Analysis – Initial Coverage $MLM
D.R. Horton Inc. Analysis – July 2015 Update $DHI

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.

Mohawk Industries (MHK) Annual Valuation

moneyCompany Profile (obtained from Google Finance): Mohawk Industries, Inc. (Mohawk) is a producer of floor covering products for residential and commercial applications in the United States and residential applications in Europe. The Company is a carpet and rug manufacturer and manufacturers, marketers and distributors of ceramic tile, natural stone and hardwood flooring in the United States, as well as a producer of laminate flooring in the United States and Europe. The Company has three reporting segments: the Mohawk segment, the Dal-Tile segment and the Unilin segment. The Company has recently expanded its international presence through investments in Australia, Brazil, China, France, Mexico and Russia. In January 2013, the Company acquired Pergo. In April 2013, it completed the acquisition of the Marazzi Group. In May 2013, the Company acquired Spano Group.

Defensive and Enterprising Investor Tests (What is the significance of these tests, and what is PEmg ratio?):

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

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

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 2/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary (Explanation of the ModernGraham Valuation Model)

Key Data:

MG Value $137.24
MG Opinion Fairly Valued
Value Based on 3% Growth $51.69
Value Based on 0% Growth $30.30
Market Implied Growth Rate 16.34%
Net Current Asset Value (NCAV) -$14.48
PEmg 41.17
Current Ratio 2.30
PB Ratio 2.46

Balance Sheet – 9/30/2013 

Current Assets $3,188,500,000
Current Liabilities $1,385,200,000
Total Debt $2,257,400,000
Total Assets $8,564,200,000
Intangible Assets $2,525,000,000
Total Liabilities $4,239,700,000
Outstanding Shares 72,620,000

Earnings Per Share

2013 (estimate) $5.23
2012 $3.61
2011 $2.52
2010 $2.70
2009 -$0.08
2008 -$21.32
2007 $10.32
2006 $6.70
2005 $5.30
2004 $5.46
2003 $4.62

Earnings Per Share – ModernGraham 

2013 (estimate) $3.56
2012 $0.98
2011 -$0.61
2010 -$1.56
2009 -$2.40
2008 -$1.94

Conclusion:

Mohawk Industries has seen some rapid growth over the last few years, but it does not qualify for either the Defensive Investor or the Enterprising Investor.  The company’s earnings have lacked stability over the last 5-10 years, it does not pay a dividend, and it is trading at a high PEmg ratio.  As a result, value investors seeking to follow Benjamin Graham’s methods should review other opportunities, while keeping in mind the 7 Key Tips to Value Investing.  As for a valuation, the company has achieved a substantial level of growth over the last 5 years, having risen EPSmg (normalized earnings) from -$2.40 in 2009 to an estimated $3.56 for 2013.  This level of growth provides some support to the market’s implied estimate for growth of 16.34%, and the company therefore appears to be fairly valued at the present time.

What do you think?  What value would you put on Mohawk Industries (MHK)?  Is the company not suitable for Defensive Investors or Enterprising Investors?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Mohawk Industries (MHK) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Photo Credit:  Andrew Magill

Home Depot Inc Valuation – April 2019 #HD

Company Profile (excerpt from Reuters): The Home Depot, Inc. (The Home Depot), incorporated on June 29, 1978, is a home improvement retailer. The Company sells an assortment of building materials, home improvement products, and lawn and garden products, and provides various services. The Home Depot stores averaged approximately 104,000 square feet of enclosed space, with over 24,000 additional square feet of outside garden area, as of January 29, 2017. The Home Depot stores serve three primary customer groups: do-it-yourself (DIY) customers, do-it-for-me (DIFM) customers and professional customers. The Company had approximately 2,278 stores located throughout the United States, including the Commonwealth of Puerto Rico and the territories of the United States Virgin Islands and Guam, Canada and Mexico, as of January 29, 2017.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HD – 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 $223,054,839,544 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.11 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 257.09% Pass
6. Moderate PEmg Ratio PEmg < 20 23.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -120.72 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 1.11 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 14.79 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 $8.51
MG Growth Estimate 14.05%
MG Value $311.32
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $123.35
MG Value based on 0% Growth $72.31
Market Implied Growth Rate 7.63%
Current Price $202.06
% of Intrinsic Value 64.90%

Home Depot 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 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 $4.39 in 2016 to an estimated $8.51 for 2020. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.63% 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 Home Depot Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $4.12 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 23.75, which was above the industry average of 21.52. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.38.

Home Depot 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) -$24.38
Graham Number $0.00
PEmg 23.75
Current Ratio 1.11
PB Ratio -120.72
Current Dividend $4.12
Dividend Yield 2.04%
Number of Consecutive Years of Dividend Growth 9

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 $18,529,000,000
Total Current Liabilities $16,716,000,000
Long-Term Debt $26,807,000,000
Total Assets $44,003,000,000
Intangible Assets $2,252,000,000
Total Liabilities $45,881,000,000
Shares Outstanding (Diluted Average) 1,122,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.69
Jan2019 $9.73
Jan2018 $7.29
Jan2017 $6.45
Jan2016 $5.46
Jan2015 $4.71
Jan2014 $3.76
Jan2013 $3.00
Jan2012 $2.47
Jan2011 $2.01
Jan2010 $1.57
Jan2009 $1.34
Jan2008 $2.37
Jan2007 $2.79
Jan2006 $2.72
Jan2005 $2.26
Jan2004 $1.88
Jan2003 $1.56
Jan2002 $1.29
Jan2001 $1.10
Jan2000 $1.00

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.51
Jan2019 $7.52
Jan2018 $6.12
Jan2017 $5.25
Jan2016 $4.39
Jan2015 $3.64
Jan2014 $2.92
Jan2013 $2.36
Jan2012 $2.01
Jan2011 $1.86
Jan2010 $1.91
Jan2009 $2.15
Jan2008 $2.50
Jan2007 $2.46
Jan2006 $2.18
Jan2005 $1.81
Jan2004 $1.51

Recommended Reading:

Other ModernGraham posts about the company

Home Depot Inc Valuation – November 2018 $HD
Home Depot Inc Valuation – February 2018 $HD
Home Depot Inc Valuation – February 2017 $HD
Home Depot Inc. Valuation – November 2015 Update $HD
30 Companies in the Spotlight This Week – 11/15/14

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Disclaimer:

The author held a long position in HD but did not hold a position in any other 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.

Public Service Enterprise Group Inc Valuation – March 2019 #PEG

Company Profile (excerpt from Reuters): Public Service Enterprise Group Incorporated (PSEG), incorporated on July 25, 1985, is a holding company. The Company is an energy company with operations located primarily in the Northeastern and Mid- Atlantic United States. The Company’s segments include Public Service Electric and Gas Company (PSE&G), PSEG Power LLC (Power) and Other. Its other subsidiaries include PSEG Energy Holdings L.L.C. (Energy Holdings), which earns its revenues primarily from its portfolio of lease investments; PSEG Long Island LLC (PSEG LI), which operates the Long Island Power Authority’s (LIPA) transmission and distribution (T&D) system under a contractual agreement, and PSEG Services Corporation (Services), which provides its operating subsidiaries with certain management, administrative and general services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PEG – 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 $30,002,014,276 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.71 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 5.96% Fail
6. Moderate PEmg Ratio PEmg < 20 20.69 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.10 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 0.71 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.22 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 $2.87
MG Growth Estimate -0.25%
MG Value $22.99
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $41.63
MG Value based on 0% Growth $24.41
Market Implied Growth Rate 6.10%
Current Price $59.41
% of Intrinsic Value 258.42%

Public Service Enterprise Group Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg 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 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 $2.92 in 2015 to an estimated $2.87 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.1% 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 below the price.

At the time of valuation, further research into Public Service Enterprise Group Inc. revealed the company was trading above its Graham Number of $44.76. The company pays a dividend of $1.8 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.69, which was below the industry average of 23.71, 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 $-54.13.

Public Service Enterprise Group 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) -$54.13
Graham Number $44.76
PEmg 20.69
Current Ratio 0.71
PB Ratio 2.10
Current Dividend $1.80
Dividend Yield 3.03%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,507,000,000
Total Current Liabilities $4,935,000,000
Long-Term Debt $13,168,000,000
Total Assets $45,326,000,000
Intangible Assets $159,000,000
Total Liabilities $30,949,000,000
Shares Outstanding (Diluted Average) 507,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.13
Dec2018 $2.83
Dec2017 $3.10
Dec2016 $1.75
Dec2015 $3.30
Dec2014 $2.99
Dec2013 $2.45
Dec2012 $2.51
Dec2011 $2.96
Dec2010 $3.08
Dec2009 $3.14
Dec2008 $2.34
Dec2007 $2.62
Dec2006 $1.46
Dec2005 $1.35
Dec2004 $1.52
Dec2003 $2.54
Dec2002 $0.57
Dec2001 $1.84
Dec2000 $1.79
Dec1999 -$0.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.87
Dec2018 $2.76
Dec2017 $2.72
Dec2016 $2.56
Dec2015 $2.92
Dec2014 $2.75
Dec2013 $2.70
Dec2012 $2.82
Dec2011 $2.92
Dec2010 $2.78
Dec2009 $2.48
Dec2008 $2.05
Dec2007 $1.90
Dec2006 $1.53
Dec2005 $1.56
Dec2004 $1.66
Dec2003 $1.59

Recommended Reading:

Other ModernGraham posts about the company

Public Service Enterprise Group Inc Valuation – June 2018 $PEG
Public Service Enterprise Group Inc Valuation – July 2017 $PEG
Public Service Enterprise Group Inc Valuation – August 2016 $PEG
Public Service Enterprise Group Inc. Analysis – 2015 Update $PEG
Public Service Enterprise Group Inc. Annual Valuation – 2014 $PEG

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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.

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