Bed Bath & Beyond Inc Valuation – March 2018 $BBBY

Company Profile (obtained from Marketwatch): Bed Bath & Beyond, Inc. engages in the operation of retail stores specializes in domestic merchandise. It operates through the Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat!, Harmon or Harmon Face Values, buybuy BABY, and World Market, Cost Plus World Market or Cost Plus brands. Its products include domestic merchandise and home furnishings such as bed linens and related items, bath items, and kitchen textiles, kitchen and tabletop items, fine tabletop, basic house wares, general home furnishings, consumables, and certain juvenile products. The company was founded by Warren Eisenberg and Leonard Feinstein in 1971 and is headquartered in Union, NJ.

BBBY Chart

BBBY data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BBBY – March 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 $3,217,205,868 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.67 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 78.89% Pass
6. Moderate PEmg Ratio PEmg < 20 5.36 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.13 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 1.67 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.94 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.19
MG Growth Estimate 0.01%
MG Value $35.70
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $60.76
MG Value based on 0% Growth $35.62
Market Implied Growth Rate -1.57%
Current Price $22.46
% of Intrinsic Value 62.92%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.19 in 2014 to an estimated $4.19 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.57% annual earnings loss 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 Bed Bath & Beyond Inc. revealed the company was trading below its Graham Number of $34.59. The company pays a dividend of $0.38 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 5.36, which was below the industry average of 35.42, 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 $-3.6.

Bed Bath & Beyond Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.60
Graham Number $34.59
PEmg 5.36
Current Ratio 1.67
PB Ratio 1.13
Current Dividend $0.38
Dividend Yield 1.67%
Number of Consecutive Years of Dividend Growth 1

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 11/1/2017
Total Current Assets $3,940,491,000
Total Current Liabilities $2,361,067,000
Long-Term Debt $1,491,952,000
Total Assets $7,188,878,000
Intangible Assets $716,283,000
Total Liabilities $4,440,032,000
Shares Outstanding (Diluted Average) 138,790,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.86
Feb2017 $4.58
Feb2016 $5.10
Feb2015 $5.07
Feb2014 $4.79
Feb2013 $4.56
Feb2012 $4.06
Feb2011 $3.07
Feb2010 $2.30
Feb2009 $1.64
Feb2008 $2.10
Feb2007 $2.09
Feb2006 $1.92
Feb2005 $1.65
Feb2004 $1.31
Feb2003 $1.00
Feb2002 $0.74
Feb2001 $0.59
Feb2000 $0.46
Feb1999 $0.34
Feb1998 $0.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.19
Feb2017 $4.84
Feb2016 $4.89
Feb2015 $4.63
Feb2014 $4.19
Feb2013 $3.63
Feb2012 $2.99
Feb2011 $2.38
Feb2010 $2.03
Feb2009 $1.89
Feb2008 $1.95
Feb2007 $1.78
Feb2006 $1.52
Feb2005 $1.24
Feb2004 $0.96
Feb2003 $0.73
Feb2002 $0.56

Recommended Reading:

Other ModernGraham posts about the company

10 Companies Benjamin Graham Would Invest In Today – May 2016
10 Low PE Stocks for the Enterprising Investor – May 2016
10 Companies Benjamin Graham Would Invest In Today – February 2016
10 Low PE Stocks for the Enterprising Investor – February 2016
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – January 2016

Other ModernGraham posts about related companies

Ross Stores Inc Valuation – March 2018 $ROST
Nordstrom Inc Valuation – February 2018 $JWN
Walmart Inc Valuation – February 2018 $WMT
Costco Wholesale Corp Valuation – September 2017 $COST
McKesson Corp Valuation – August 2017 $MCK
Big 5 Sporting Goods Corp Valuation – Initial Coverage $BGFV
Amazon.com Inc Valuation – August 2017 $AMZN
Fossil Group Inc Valuation – March 2017 $FOSL
Lumber Liquidators Holdings Inc Valuation – Initial Coverage $LL
CVS Health Corp Valuation – March 2017 $CVS

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.

Bed Bath & Beyond Inc Valuation – June 2016 $BBBY

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

Company Profile (obtained from Google Finance): Bed Bath & Beyond Inc. and subsidiaries is a retailer selling an assortment of domestics merchandise and home furnishings, which operates under the names Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon or Harmon Face Values, buybuy BABY and World Market, Cost Plus World Market or Cost Plus. Customers can purchase products from the Company either in-store, online or through a mobile device. In addition, the Company operates Of a Kind, an e-commerce Website that features specially commissioned, limited edition items from emerging fashion and home designers. It also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, healthcare and other industries. The Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond. It sells an assortment of domestics merchandise and home furnishings.

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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.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of BBBY – June 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $6,647,803,471 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.05 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 147.68% Pass
6. Moderate PEmg Ratio PEmg < 20 8.86 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.81 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 2.05 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.77 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

BBBY value chart June 2016

EPSmg $4.91
MG Growth Estimate 5.29%
MG Value $93.73
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $71.24
MG Value based on 0% Growth $41.76
Market Implied Growth Rate 0.18%
Current Price $43.53
% of Intrinsic Value 46.44%

Bed Bath & Beyond Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.63 in 2013 to an estimated $4.91 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.18% 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.

Bed Bath & Beyond Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

BBBY charts June 2016

Net Current Asset Value (NCAV) -$0.69
Graham Number $41.96
PEmg 8.86
Current Ratio 2.05
PB Ratio 2.81
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 2/1/2016
Total Current Assets $3,825,962,000
Total Current Liabilities $1,867,225,000
Long-Term Debt $1,500,000,000
Total Assets $6,498,940,000
Intangible Assets $487,169,000
Total Liabilities $3,939,400,000
Shares Outstanding (Diluted Average) 165,016,000

Earnings Per Share History

Next Fiscal Year Estimate $4.79
Feb2016 $5.10
Feb2015 $5.07
Feb2014 $4.79
Feb2013 $4.56
Feb2012 $4.06
Feb2011 $3.07
Feb2010 $2.30
Feb2009 $1.64
Feb2008 $2.10
Feb2007 $2.09
Feb2006 $1.92
Feb2005 $1.65
Feb2004 $1.31
Feb2003 $1.00
Feb2002 $0.74
Feb2001 $0.59
Feb2000 $0.46
Feb1999 $0.34
Feb1998 $0.26
Feb1997 $0.20

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.91
Feb2016 $4.89
Feb2015 $4.63
Feb2014 $4.19
Feb2013 $3.63
Feb2012 $2.99
Feb2011 $2.38
Feb2010 $2.03
Feb2009 $1.89
Feb2008 $1.95
Feb2007 $1.78
Feb2006 $1.52
Feb2005 $1.24
Feb2004 $0.96
Feb2003 $0.73
Feb2002 $0.56
Feb2001 $0.44

Recommended Reading:

Other ModernGraham posts about the company

10 Companies Benjamin Graham Would Invest In Today – May 2016
10 Low PE Stocks for the Enterprising Investor – May 2016
10 Companies Benjamin Graham Would Invest In Today – February 2016
10 Low PE Stocks for the Enterprising Investor – February 2016
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – January 2016

Other ModernGraham posts about related companies

Wal-Mart Stores Inc Valuation – May 2016 $WMT
Aaron’s Inc Valuation – May 2016 $AAN
Nordstrom Inc Valuation – May 2016 $JWN
Tractor Supply Company Valuation – May 2016 $TSCO
Fossil Group Inc Stock Valuation – February 2016 $FOSL
TJX Companies Inc Valuation – February 2016 Update $TJX
Coach Inc Valuation – February 2016 Update $COH
Tiffany & Company Valuation – February 2016 Update $TIF
Urban Outfitters Inc Valuation – January 2016 Update $URBN
TJX Companies Inc Valuation – February 2016 Update $TJX

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.

Bed Bath & Beyond Inc. Valuation – November 2015 Update $BBBY

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 – November 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 Bed Bath & Beyond Inc. (BBBY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Bed Bath & Beyond Inc. and subsidiaries is a retailer selling an assortment of domestics merchandise and home furnishings, which operates under the names Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon or Harmon Face Values, buybuy BABY and World Market, Cost Plus World Market or Cost Plus. Customers can purchase products from the Company either in-store, online or through a mobile device. In addition, the Company operates Of a Kind, an e-commerce Website that features specially commissioned, limited edition items from emerging fashion and home designers. It also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, healthcare and other industries. The Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond. It sells an assortment of domestics merchandise and home furnishings.

[level-free]

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of BBBY – November 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 $9,159,889,820 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.00 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 156.26% Pass
6. Moderate PEmg Ratio PEmg < 20 11.09 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.51 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 2.00 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.75 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

BBBY value Chart November 2015

EPSmg $4.88
MG Growth Estimate 9.49%
MG Value $134.12
Opinion Undervalued
MG Value based on 3% Growth $70.79
MG Value based on 0% Growth $41.50
Market Implied Growth Rate 1.29%
Current Price $54.14
% of Intrinsic Value 40.37%

Bed Bath & Beyond Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio and lack of dividends.  The Enterprising Investor is only initially concerned by the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.99 in 2012 to an estimated $4.88 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.29% 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 Bed Bath & Beyond Inc. (BBBY)?  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

BBBY Charts November 2015

Net Current Asset Value (NCAV) -$0.51
Graham Number $41.94
PEmg 11.09
Current Ratio 2.00
PB Ratio 3.51
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 Aug15
Total Current Assets $3,997,892,000
Total Current Liabilities $2,003,199,000
Long-Term Debt $1,500,000,000
Total Assets $6,651,306,000
Intangible Assets $487,139,000
Total Liabilities $4,083,038,000
Shares Outstanding (Diluted Average) 166,633,000

Earnings Per Share History

Next Fiscal Year Estimate $5.08
Feb15 $5.07
Feb14 $4.79
Feb13 $4.56
Feb12 $4.06
Feb11 $3.07
Feb10 $2.30
Feb09 $1.64
Feb08 $2.10
Feb07 $2.09
Feb06 $1.92
Feb05 $1.65
Feb04 $1.31
Feb03 $1.00
Feb02 $0.74
Feb01 $0.59
Feb00 $0.46
Feb99 $0.34
Feb98 $0.26
Feb97 $0.20
Feb96 $0.15

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.88
Feb15 $4.63
Feb14 $4.19
Feb13 $3.63
Feb12 $2.99
Feb11 $2.38
Feb10 $2.03
Feb09 $1.89
Feb08 $1.95
Feb07 $1.78
Feb06 $1.52
Feb05 $1.24
Feb04 $0.96
Feb03 $0.73
Feb02 $0.56
Feb01 $0.43
Feb00 $0.33

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – November 2015
10 Low PE Stocks for the Enterprising Investor – November 2015
The Best Companies of the Retail Industry – August 2015
15 Best Stocks For Value Investors This Week – 8/22/15
Bed Bath & Beyond Inc. Analysis – August 2015 Update $BBBY

Other ModernGraham posts about related companies

Kohl’s Corporation Valuation – November 2015 Update $KSS
Aaron’s Inc. Valuation – October 2015 Update $AAN
Nordstrom Inc. Valuation – October 2015 Update $JWN
Tractor Supply Company Valuation – October 2015 Update $TSCO
Coach Inc. Valuation – October 2015 Update $COH
Dollar Tree Stores Inc. Valuation – October 2015 Update $DLTR
TJX Companies Inc. Valuation – October 2015 Update $TJX
Tiffany and Company Valuation – October 2015 Update $TIF
Urban Outfitters Inc. Analysis – October 2015 Update $URBN
Staples Inc. Analysis – September 2015 Update $SPLS

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.

Bed Bath & Beyond Inc. Analysis – August 2015 Update $BBBY

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 Bed Bath & Beyond Inc. (BBBY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Bed Bath & Beyond Inc. is a retailer, which operates under the names Bed Bath & Beyond (BBB), Christmas Tree Shops, Christmas Tree Shops andThat! or andThat! (collectively, CTS), Harmon or Harmon Face Values (collectively, Harmon), buybuy BABY (Baby) and World Market, Cost Plus World Market or Cost Plus (collectively, Cost Plus World Market). The Company operates in two segments: North American Retail and Institutional Sales. The Company’s customers can purchase products from the Company either in-store, online or through a mobile device. The Company also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, healthcare and other industries. Additionally, the Company is a partner in a joint venture which operates five retail stores in Mexico under the name Bed Bath & Beyond. The Company sells a range of domestics merchandise and home furnishings.

[level-free]

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of BBBY – 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 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 Pass
6. Moderate PEmg Ratio PEmg < 20 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 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 4.91
MG Growth Estimate 9.60%
MG Value $135.91
Opinion Undervalued
MG Value based on 3% Growth $71.13
MG Value based on 0% Growth $41.70
Market Implied Growth Rate 2.10%
Current Price $62.29
% of Intrinsic Value 45.83%

Bed Bath & Beyond Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, lack of dividends, and the high PB ratio.  The Enterprising Investor is only initially concerned with the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.99 in 2012 to an estimated $4.91 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.1% 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 Bed Bath & Beyond Inc. (BBBY)?  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

BBBY charts August 2015

Net Current Asset Value (NCAV) -$0.68
PEmg 12.69
Current Ratio 1.99
PB Ratio 4.18
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

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

Useful Links:

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

Most Recent Balance Sheet Figures

Total Current Assets $3,930,701,000
Total Current Liabilities $1,973,153,000
Long-Term Debt $1,500,000,000
Total Assets $6,599,077,000
Intangible Assets $486,279,000
Total Liabilities $4,046,881,000
Shares Outstanding (Diluted Average) 171,133,000

Earnings Per Share History

Next Fiscal Year Estimate $5.15
Feb15 $5.07
Feb14 $4.79
Feb13 $4.56
Feb12 $4.06
Feb11 $3.07
Feb10 $2.30
Feb09 $1.64
Feb08 $2.10
Feb07 $2.09
Feb06 $1.92
Feb05 $1.65
Feb04 $1.31
Feb03 $1.00
Feb02 $0.74
Feb01 $0.59
Feb00 $0.46
Feb99 $0.34
Feb98 $0.26
Feb97 $0.20
Feb96 $0.15

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.91
Feb15 $4.63
Feb14 $4.19
Feb13 $3.63
Feb12 $2.99
Feb11 $2.38
Feb10 $2.03
Feb09 $1.89
Feb08 $1.95
Feb07 $1.78
Feb06 $1.52
Feb05 $1.24
Feb04 $0.96
Feb03 $0.73
Feb02 $0.56
Feb01 $0.43
Feb00 $0.33

Recommended Reading:

Other ModernGraham posts about the company

The 12 Best Stocks For Value Investors This Week – 5/30/15
Bed Bath & Beyond Inc. Quarterly Valuation – May 2015 $BBBY
27 Companies in the Spotlight This Week – 2/14/15
Bed Bath & Beyond Inc. Quarterly Valuation – February 2015 $BBBY
Bed Bath & Beyond Quarterly Valuation – November 2014 $BBBY

Other ModernGraham posts about related companies

Ann Inc. Analysis – Initial Coverage $ANN
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Tiffany & Company Analysis – July 2015 Update $TIF
Urban Outfitters Analysis – July 2015 Update $URBN

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.

Bed Bath & Beyond Inc. Quarterly Valuation – May 2015 $BBBY

500px-Bedbath&beyond.svgBed, Bath & Beyond (BBBY) has shown very strong earnings growth over the last several years, which will immediately intrigue many investors, even though the company’s most recently quarterly results disappointed some analysts. For example, Treetis has concerns that earnings will continue to slowwhile competition heats up. On the other hand, Equity Watch takes a longer term view and expects the company’s future to be bright.

However, Benjamin Graham, the father of value investing, taught that investors must take emotion out of the equation, as the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here’s a look at how the company fares in the ModernGraham valuation model.

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

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

BBBY Chart

BBBY data by YCharts

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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 5/7

  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 – PASS
  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 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – Must pass at least 4 of the following 5 tests or be suitable for a Defensive Investor: Score = 4/5

  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 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $71.17
MG Value $169.77
MG Opinion Undervalued
Value Based on 3% Growth $67.07
Value Based on 0% Growth $39.32
Market Implied Growth Rate 3.44%
Net Current Asset Value (NCAV) $0.38
PEmg 15.39
Current Ratio 2.10
PB Ratio 4.62

Balance Sheet – February 2015

Current Assets $4,084,000,000
Current Liabilities $1,943,000,000
Total Debt $1,500,000,000
Total Assets $6,759,000,000
Intangible Assets $486,000,000
Total Liabilities $4,016,000,000
Outstanding Shares 178,100,000

Earnings Per Share

2015 $5.07
2014 $4.79
2013 $4.56
2012 $4.06
2011 $3.07
2010 $2.30
2009 $1.64
2008 $2.10
2007 $2.09
2006 $1.92
2005 $1.65

Earnings Per Share – ModernGraham

2015 $4.63
2014 $4.19
2013 $3.63
2012 $2.99
2011 $2.38
2010 $2.03

Dividend History

Bed Bath & Beyond does not pay a dividend.

Conclusion

Bed, Bath & Beyond performs well in the ModernGraham model and is suitable for Enterprising Investors. The Defensive Investor is concerned with the lack of dividends and the high PB ratio, while the Enterprising Investor is only concerned by the lack of dividends. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $2.38 in 2011 to $4.63 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 3.44% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged over 18% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.

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

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Bed Bath & Beyond Inc. Quarterly Valuation – February 2015 $BBBY

500px-Bedbath&beyond.svg

Bed Bath & Beyond does fairly well in the ModernGraham model and is suitable for Enterprising Investors. The Defensive Investor is concerned with the lack of dividend payments, along with the high PB ratio, while the Enterprising Investor is only concerned by the lack of dividend payments. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $2.38 in 2011 to an estimated $4.63 for 2014. This is a strong level of demonstrated growth which is well above the market’s implied estimate of 4.13% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 19% per year, which is clearly unsustainable over the long term. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.

Be sure to check out previous ModernGraham valuations of Bed Bath & Beyond Inc. (BBBY) for greater perspective!

Read the full valuation on Seeking Alpha!

BBBY Chart

BBBY data by YCharts

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

Bed Bath & Beyond Quarterly Valuation – November 2014 $BBBY

500px-Bedbath&beyond.svgBenjamin 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 5 Highest Dividend Yields Among Undervalued Companies for the Defensive Investor – October 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Bed Bath & Beyond (BBBY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Bed Bath & Beyond Inc. is a chain of retail stores, operating under the names Bed Bath & Beyond (BBB), Christmas Tree Shops (CTS), Harmon and Harmon Face Values (Harmon), buybuy BABY and World Market or Cost Plus World Market (World Market). In addition, it is a partner in a joint venture, which operates three stores in the Mexico City market under the name Bed Bath & Beyond. The Company sells a range of domestics merchandise and home furnishings. Domestics merchandise includes categories, such as bed linens and related items, bath items and kitchen textiles. Home furnishings include categories, such as kitchen and tabletop items, fine tabletop, basic housewares and general home. During fiscal year ended March 2, 2013 (fiscal 2012), the Company opened a total of 38 stores, including 12 BBB stores throughout the United States and Canada, five CTS stores, one Harmon store and 18 buybuy BABY stores, and six World Market stores throughout the United States and closed one BBB store.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  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 – PASS
  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 – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

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

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

Valuation Summary

Key Data:

Recent Price $67.34
MG Value $166.31
MG Opinion Undervalued
Value Based on 3% Growth $66.54
Value Based on 0% Growth $39.00
Market Implied Growth Rate 3.09%
Net Current Asset Value (NCAV) $2.01
PEmg 14.68
Current Ratio 2.23
PB Ratio 4.39

Balance Sheet – August 2014

Current Assets $4,480,000,000
Current Liabilities $2,007,000,000
Total Debt $1,500,000,000
Total Assets $7,034,000,000
Intangible Assets $486,300,000
Total Liabilities $4,095,000,000
Outstanding Shares 191,500,000

Earnings Per Share

2015 (estimate) $4.96
2014 $4.79
2013 $4.56
2012 $4.06
2011 $3.07
2010 $2.30
2009 $1.64
2008 $2.10
2007 $2.09
2006 $1.92
2005 $1.65

Earnings Per Share – ModernGraham

2015 (estimate) $4.59
2014 $4.19
2013 $3.63
2012 $2.99
2011 $2.38
2010 $2.03

Dividend History
Bed Bath & Beyond does not pay a dividend.

Conclusion:

Bed Bath & Beyond is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the company’s lack of dividend payments and high PB ratio, while the Enterprising Investor is only concerned with the lack of dividends.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.38 in 2011 to an estimated $4.59 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 3.09% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out previous ModernGraham valuations of Bed Bath & Beyond Inc. (BBBY) for a better perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Bed Bath & Beyond Inc. (BBBY)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Bed Bath & Beyond Inc. (BBBY) or 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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Bed Bath & Beyond Quarterly Valuation – August 2014 $BBBY

500px-Bedbath&beyond.svgBenjamin 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 5 Undervalued Companies for the Defensive Investor with High Dividend Yields.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Bed Bath & Beyond (BBBY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Bed Bath & Beyond Inc. is a chain of retail stores, operating under the names Bed Bath & Beyond (BBB), Christmas Tree Shops (CTS), Harmon and Harmon Face Values (Harmon), buybuy BABY and World Market or Cost Plus World Market (World Market). In addition, it is a partner in a joint venture, which operates three stores in the Mexico City market under the name Bed Bath & Beyond. The Company sells a range of domestics merchandise and home furnishings. Domestics merchandise includes categories, such as bed linens and related items, bath items and kitchen textiles. Home furnishings include categories, such as kitchen and tabletop items, fine tabletop, basic housewares and general home. During fiscal year ended March 2, 2013 (fiscal 2012), the Company opened a total of 38 stores, including 12 BBB stores throughout the United States and Canada, five CTS stores, one Harmon store and 18 buybuy BABY stores, and six World Market stores throughout the United States and closed one BBB store.
BBBY Chart

BBBY data by YCharts

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

  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 – PASS
  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 – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  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 = 4/5

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

Valuation Summary

Key Data:

Recent Price $61.61
MG Value $162.88
MG Opinion Undervalued
Value Based on 3% Growth $66.00
Value Based on 0% Growth $38.69
Market Implied Growth Rate 2.52%
Net Current Asset Value (NCAV) $6.77
PEmg 13.53
Current Ratio 2.03
PB Ratio 3.19

Balance Sheet – 5/31/2014

Current Assets $3,835,200,000
Current Liabilities $1,887,600,000
Total Debt $0
Total Assets $6,362,300,000
Intangible Assets $486,300,000
Total Liabilities $2,468,000,000
Outstanding Shares 201,950,000

Earnings Per Share

2015 (estimate) $4.85
2014 $4.79
2013 $4.56
2012 $4.06
2011 $3.07
2010 $2.30
2009 $1.64
2008 $2.10
2007 $2.09
2006 $1.92
2005 $1.65

Earnings Per Share – ModernGraham

2015 (estimate) $4.55
2014 $4.19
2013 $3.63
2012 $2.99
2011 $2.38
2010 $2.03

Conclusion:

Bed Bath & Beyond qualifies for either the Defensive Investor or the Enterprising Investor.  The only issue for either investor type is the lack of dividend payments.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.38 in 2011 to an estimated $4.55 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 2.52% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the price.

Be sure to check out the previous ModernGraham valuations of Bed Bath & Beyond (BBBY) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Bed Bath & Beyond (BBBY)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Bed Bath & Beyond (BBBY) or 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.  Logo taken from wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Bed Bath & Beyond (BBBY) Quarterly Valuation – May 2014

500px-Bedbath&beyond.svgBenjamin 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 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Bed Bath & Beyond (BBBY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Bed Bath & Beyond Inc. is a chain of retail stores, operating under the names Bed Bath & Beyond (BBB), Christmas Tree Shops (CTS), Harmon and Harmon Face Values (Harmon), buybuy BABY and World Market or Cost Plus World Market (World Market). In addition, it is a partner in a joint venture, which operates three stores in the Mexico City market under the name Bed Bath & Beyond. The Company sells a range of domestics merchandise and home furnishings. Domestics merchandise includes categories, such as bed linens and related items, bath items and kitchen textiles. Home furnishings include categories, such as kitchen and tabletop items, fine tabletop, basic housewares and general home. During fiscal year ended March 2, 2013 (fiscal 2012), the Company opened a total of 38 stores, including 12 BBB stores throughout the United States and Canada, five CTS stores, one Harmon store and 18 buybuy BABY stores, and six World Market stores throughout the United States and closed one BBB store.

BBBY Chart

BBBY data by YCharts

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

  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 – PASS
  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 – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  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 = 4/5

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

Valuation Summary

Key Data:

MG Value $167.56
MG Opinion Undervalued
Value Based on 3% Growth $66.73
Value Based on 0% Growth $39.12
Market Implied Growth Rate 2.50%
Net Current Asset Value (NCAV) $6.57
PEmg 13.50
Current Ratio 2.07
PB Ratio 3.36

Balance Sheet – 3/1/2014

Current Assets $3,814,600,000
Current Liabilities $1,840,000,000
Total Debt $0
Total Assets $6,356,000,000
Intangible Assets $486,300,000
Total Liabilities $2,414,700,000
Outstanding Shares 212,930,000

Earnings Per Share

2014 (estimate) $5.00
2013 $4.79
2012 $4.56
2011 $4.06
2010 $3.07
2009 $2.30
2008 $1.64
2007 $2.10
2006 $2.09
2005 $1.92
2004 $1.65

Earnings Per Share – ModernGraham

2014 (estimate) $4.60
2013 $4.19
2012 $3.63
2011 $2.99
2010 $2.38
2009 $2.03

Conclusion:

Bed Bath & Beyond is a great company for Defensive Investors and Enterprising Investors to consider.  The only concern for either investor type is the lack of dividend payments.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research into the company and comparing it to other opportunities such as through a review of 5 Low PEmg Companies for the Defensive Investor and 5 Low PEmg Companies for the Enterprising Investor.  From a valuation perspective, the company appears to be significantly undervalued after growing its EPSmg (normalized earnings) from $2.38 in 2010 to an estimated $4.60 for 2014.  This demonstrated level of growth surpasses the market’s implied estimate of 2.5% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well 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 Bed Bath & Beyond (BBBY)?  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.

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 long position in Bed Bath & Beyond (BBBY) or any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

Bed Bath & Beyond Inc. (BBBY) Quarterly Valuation

500px-Bedbath&beyond.svg

Bed Bath & Beyond is a growing retail company, and many investors may classify it as a “growth” company rather than a “value” company, but the fact is that the two are not mutually exclusive.  A “growth” company can be a “value” company so long as the market is trading at a rate less than the intrinsic value.  An investor simply needs to determine the intrinsic value through fundamental analysis, then look to see how the market is trading relative to that intrinsic value.  By using a ModernGraham analysis, one can maintain a systematic analysis across companies and even industries to easily compare one potential investment’s risk level and opportunity for value against another potential investment.  What follows is a specific look at how Bed Bath & Beyond Inc. fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Bed Bath & Beyond Inc. is a chain of retail stores, operating under the names Bed Bath & Beyond (BBB), Christmas Tree Shops (CTS), Harmon and Harmon Face Values (Harmon), buybuy BABY and World Market or Cost Plus World Market (World Market). In addition, it is a partner in a joint venture, which operates three stores in the Mexico City market under the name Bed Bath & Beyond. The Company sells a range of domestics merchandise and home furnishings. Domestics merchandise includes categories, such as bed linens and related items, bath items and kitchen textiles. Home furnishings include categories, such as kitchen and tabletop items, fine tabletop, basic housewares and general home. During fiscal year ended March 2, 2013 (fiscal 2012), the Company opened a total of 38 stores, including 12 BBB stores throughout the United States and Canada, five CTS stores, one Harmon store and 18 buybuy BABY stores, and six World Market stores throughout the United States and closed one BBB store.

Defensive and Enterprising Investor Tests:

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  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 – PASS
  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 – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

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

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

Valuation Summary

Key Data:

MG Value $161.60
MG Opinion Undervalued
Value Based on 3% Growth $60.86
Value Based on 0% Growth $35.68
Market Implied Growth Rate 3.50%
Net Current Asset Value (NCAV) $7.70
PEmg 15.51
Current Ratio 2.21
PB Ratio 3.36

Balance Sheet – 11/30/2013

2013 (estimate) $4.82
2012 $4.56
2011 $4.06
2010 $3.07
2009 $2.30
2008 $1.64
2007 $2.10
2006 $2.09
2005 $1.92
2004 $1.65
2003 $1.31

Earnings Per Share

2013 (estimate) $4.82
2012 $4.56
2011 $4.06
2010 $3.07
2009 $2.30
2008 $1.64
2007 $2.10
2006 $2.09
2005 $1.92
2004 $1.65
2003 $1.31

Earnings Per Share – ModernGraham 

2013 (estimate) $4.20
2012 $3.63
2011 $2.99
2010 $2.38
2009 $2.03
2008 $1.89

Conclusion:

Bed Bath & Beyond Inc. is an extremely interesting company for value investors.  It is not suitable for the Defensive Investor, by not paying dividends and by trading at a high PB ratio, but it is suitable for the Enterprising Investor because its balance sheet and earnings history are strong enough to overcome the lack of dividend payments.  As a result, Enterprising Investors seeking to follow the ModernGraham methods, based on Benjamin Graham’s classic The Intelligent Investor, should feel comfortable proceeding with further research into the company and comparing its prospects against other companies that pass the ModernGraham requirements such as through a review of ModernGraham’s analysis of Target Inc. (TGT).  From a valuation perspective, the company looks great, having grown EPSmg (normalized earnings) from $1.89 in 2008 to an estimated $4.20 for 2013.  This outstanding level of growth far surpasses the market’s implied growth rate of 3.50%, and the ModernGraham valuation model returns an intrinsic value that is considerably higher than the current market price.

What do you think?  What value would you put on Bed Bath & Beyond (BBBY)?  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 Bed Bath & Beyond (BBBY) 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.

Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

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