Bank of New York Mellon Corp Valuation – February 2019 $BK

Company Profile (excerpt from Reuters): The Bank of New York Mellon Corporation, incorporated on February 9, 2007, is a global investments company. The Company is focused on helping its clients manage and service their financial assets throughout the investment lifecycle. It provides financial services for institutions, corporations or individual investors. It allows clients to create, trade, hold, manage, service, distribute or restructure investments. The Company operates businesses through two segments: Investment Management and Investment Services. The Company also has an Other segment, which includes the leasing portfolio, corporate treasury activities (including its investment securities portfolio), derivatives and other trading, corporate and bank-owned life insurance and renewable energy investments, and business exits. As of September 30, 2018, the Company had $34.5 trillion in assets under custody and/or administration and $1.8 trillion in assets under management.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BK – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $52,474,421,623 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 97.25% Pass
5. Moderate PEmg Ratio PEmg < 20 14.41 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.34 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.68
MG Growth Estimate 10.24%
MG Value $106.77
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $53.41
MG Value based on 0% Growth $31.31
Market Implied Growth Rate 2.95%
Current Price $53.07
% of Intrinsic Value 49.70%

Bank of New York Mellon Corp qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. 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 $2.19 in 2015 to an estimated $3.68 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.95% 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.

At the time of valuation, further research into Bank of New York Mellon Corp revealed the company was trading below its Graham Number of $59.25. The company pays a dividend of $1.04 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 14.41, which was below the industry average of 20.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Bank of New York Mellon Corp fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $59.25
PEmg 14.41
PB Ratio 1.34
Dividend Yield 1.96%
TTM Dividend $1.04
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $29,163,000,000
Total Assets $362,873,000,000
Intangible Assets $20,570,000,000
Total Liabilities $322,134,000,000
Shares Outstanding (Diluted Average) 1,030,404,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.04
Dec2018 $3.72
Dec2017 $3.72
Dec2016 $3.15
Dec2015 $2.71
Dec2014 $2.15
Dec2013 $1.73
Dec2012 $1.73
Dec2011 $2.03
Dec2010 $2.06
Dec2009 -$1.16
Dec2008 $1.20
Dec2007 $2.18
Dec2006 $3.94
Dec2005 $2.03
Dec2004 $1.85
Dec2003 $1.52
Dec2002 $1.24
Dec2001 $1.81
Dec2000 $1.92
Dec1999 $2.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.68
Dec2018 $3.37
Dec2017 $3.02
Dec2016 $2.55
Dec2015 $2.19
Dec2014 $1.93
Dec2013 $1.64
Dec2012 $1.46
Dec2011 $1.30
Dec2010 $1.17
Dec2009 $1.03
Dec2008 $2.16
Dec2007 $2.53
Dec2006 $2.51
Dec2005 $1.76
Dec2004 $1.64
Dec2003 $1.61

Recommended Reading:

Other ModernGraham posts about the company

Bank of New York Mellon Corp Valuation – May 2018 $BK
15 Best Stocks for Value Investors This Week – 1/14/17
Bank of New York Mellon Corp Valuation – January 2017 $BK
10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016
5 Best Undervalued Stocks of the Week – 8/14/16

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Raymond James Financial Valuation – February 2019 $RJF
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Intercontinental Exchange Inc Valuation – January 2019 $ICE
H&R Block Inc Valuation – January 2019 $HRB
State Street Corp Valuation – January 2019 $STT
Morgan Stanley Valuation – January 2019 $MS
MSCI Inc Valuation – January 2019 $MSCI

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.

Booking Holdings Inc Valuation – January 2019 $BKNG

Company Profile (excerpt from Reuters): Booking Holdings Inc., formerly The Priceline Group Inc., incorporated on July 30, 1998, is a provider of travel and restaurant online reservation and related services. The Company, through its online travel companies (OTCs), connects consumers wishing to make travel reservations with providers of travel services across the world. It offers consumers an array of accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through its Booking.com, priceline.com and agoda.com brands. Its other brands include KAYAK, Rentalcars.com and OpenTable, Inc. (OpenTable).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BKNG – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $84,685,840,413 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.41 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 329.88% Pass
6. Moderate PEmg Ratio PEmg < 20 30.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.77 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 2.41 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.57 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 $59.93
MG Growth Estimate 11.55%
MG Value $1,894.30
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $868.95
MG Value based on 0% Growth $509.38
Market Implied Growth Rate 11.00%
Current Price $1,827.90
% of Intrinsic Value 96.49%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $33.85 in 2014 to an estimated $59.93 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 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 within a margin of safety relative to the price.

At the time of valuation, further research into Booking Holdings Inc revealed the company was trading above its Graham Number of $677.42. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 30.5, which was below the industry average of 38.01, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-103.68.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$103.68
Graham Number $677.42
PEmg 30.50
Current Ratio 2.41
PB Ratio 8.77
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $9,467,847,000
Total Current Liabilities $3,930,224,000
Long-Term Debt $8,703,901,000
Total Assets $24,370,476,000
Intangible Assets $4,962,404,000
Total Liabilities $14,418,666,000
Shares Outstanding (Diluted Average) 47,751,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $87.79
Dec2017 $46.86
Dec2016 $42.65
Dec2015 $49.45
Dec2014 $45.67
Dec2013 $36.11
Dec2012 $27.66
Dec2011 $20.63
Dec2010 $10.73
Dec2009 $9.88
Dec2008 $3.74
Dec2007 $3.42
Dec2006 $1.68
Dec2005 $4.21
Dec2004 $0.76
Dec2003 $0.27
Dec2002 -$0.57
Dec2001 -$0.48
Dec2000 -$11.82
Dec1999 -$47.39
Dec1998 -$8.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $59.93
Dec2017 $45.38
Dec2016 $43.20
Dec2015 $40.95
Dec2014 $33.85
Dec2013 $25.63
Dec2012 $18.43
Dec2011 $12.44
Dec2010 $7.53
Dec2009 $5.48
Dec2008 $3.11
Dec2007 $2.55
Dec2006 $1.83
Dec2005 $1.55
Dec2004 -$0.64
Dec2003 -$4.89
Dec2002 -$9.56

Recommended Reading:

Other ModernGraham posts about the company

Booking Holdings Inc Valuation – April 2018 $BKNG

Other ModernGraham posts about related companies

TripAdvisor Inc Valuation – January 2019 $TRIP
ILG Inc Valuation – July 2018 $ILG
Royal Caribbean Cruises Ltd Valuation – Initial Coverage June 2018 $RCL
Expedia Group Inc Valuation – May 2018 $EXPE
Booking Holdings Inc Valuation – April 2018 $BKNG
TripAdviser Inc Valuation – March 2018 $TRIP
Expedia Inc Valuation – February 2017 $EXPE
Priceline Group Inc Valuation – July 2016 $PCLN
TripAdvisor Inc Valuation – June 2016 $TRIP
TripAdvisor Inc. Valuation – November 2015 Update $TRIP

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.

Bank of New York Mellon Corp Valuation – May 2018 $BK

Company Profile (excerpt from Reuters): The Bank of New York Mellon Corporation, incorporated on February 9, 2007, is an investments company. The Company operates businesses through two segments: Investment Management and Investment Services. The Company also has an Other segment, which includes the leasing portfolio, corporate treasury activities (including its investment securities portfolio), derivatives and other trading, corporate and bank-owned life insurance and renewable energy investments, and business exits. As of December 31, 2016, the Company had $29.9 trillion in assets under custody and/or administration and $1.6 trillion in assets under management.

BK Chart

BK data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BK – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $55,043,947,962 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 269.62% Pass
5. Moderate PEmg Ratio PEmg < 20 15.81 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.33 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.45
MG Growth Estimate 11.76%
MG Value $110.36
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $49.98
MG Value based on 0% Growth $29.30
Market Implied Growth Rate 3.65%
Current Price $54.49
% of Intrinsic Value 49.37%

Bank of New York Mellon Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. 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 $1.93 in 2014 to an estimated $3.45 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.65% 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.

At the time of valuation, further research into Bank of New York Mellon Corp revealed the company was trading below its Graham Number of $57.58. The company pays a dividend of $0.86 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 15.81, which was below the industry average of 21.11, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Bank of New York Mellon Corp performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $57.58
PEmg 15.81
PB Ratio 1.33
Dividend Yield 1.58%
TTM Dividend $0.86
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Long-Term Debt & Capital Lease Obligation $27,939,000,000
Total Assets $373,597,000,000
Intangible Assets $20,966,000,000
Total Liabilities $331,869,000,000
Shares Outstanding (Diluted Average) 1,021,731,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.96
Dec2017 $3.72
Dec2016 $3.15
Dec2015 $2.71
Dec2014 $2.15
Dec2013 $1.73
Dec2012 $1.73
Dec2011 $2.03
Dec2010 $2.06
Dec2009 -$1.16
Dec2008 $1.20
Dec2007 $2.18
Dec2006 $3.94
Dec2005 $2.03
Dec2004 $1.85
Dec2003 $1.52
Dec2002 $1.24
Dec2001 $1.81
Dec2000 $1.92
Dec1999 $2.27
Dec1998 $1.53

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.45
Dec2017 $3.02
Dec2016 $2.55
Dec2015 $2.19
Dec2014 $1.93
Dec2013 $1.64
Dec2012 $1.46
Dec2011 $1.30
Dec2010 $1.17
Dec2009 $1.03
Dec2008 $2.16
Dec2007 $2.53
Dec2006 $2.51
Dec2005 $1.76
Dec2004 $1.64
Dec2003 $1.61
Dec2002 $1.68

Recommended Reading:

Other ModernGraham posts about the company

15 Best Stocks for Value Investors This Week – 1/14/17
Bank of New York Mellon Corp Valuation – January 2017 $BK
10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016
5 Best Undervalued Stocks of the Week – 8/14/16
Bank of New York Mellon Corp Valuation – August 2016 $BK

Other ModernGraham posts about related companies

Citizens Financial Group Inc Valuation – April 2018 $CFG
BB&T Corporation Valuation – April 2018 $BBT
M&T Bank Corp Valuation – April 2018 $MTB
Bank of America Corp Valuation – March 2018 $BAC
Fifth Third Bancorp Valuation – March 2018 $FITB
Regions Financial Corp Valuation – March 2018 $RF
Huntington Bancshares Inc Valuation – March 2018 $HBAN
Zions Bancorp Valuation – March 2018 $ZION
State Street Corp Valuation – March 2018 $STT
PNC Financial Services Group Inc Valuation – March 2018 $PNC

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.

Booking Holdings Inc Valuation – April 2018 $BKNG

Company Profile (excerpt from Reuters): Booking Holdings Inc., formerly The Priceline Group Inc., incorporated on July 30, 1998, is a provider of travel and restaurant online reservation and related services. The Company, through its online travel companies (OTCs), connects consumers wishing to make travel reservations with providers of travel services across the world. It offers consumers an array of accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through its Booking.com, priceline.com and agoda.com brands. Its other brands include KAYAK, Rentalcars.com and OpenTable, Inc. (OpenTable).

BKNG Chart

BKNG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BKNG – April 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 $100,459,103,900 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.58 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 320.73% Pass
6. Moderate PEmg Ratio PEmg < 20 35.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.17 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.59 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 $58.13
MG Growth Estimate 10.78%
MG Value $1,747.21
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $842.89
MG Value based on 0% Growth $494.11
Market Implied Growth Rate 13.64%
Current Price $2,080.39
% of Intrinsic Value 119.07%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $33.83 in 2014 to an estimated $58.13 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.64% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Booking Holdings Inc. revealed the company was trading above its Graham Number of $654.27. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 35.79, which was below the industry average of 42.33, 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 $-103.9.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$103.90
Graham Number $654.27
PEmg 35.79
Current Ratio 2.58
PB Ratio 9.17
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 12/1/2017
Total Current Assets $9,034,805,000
Total Current Liabilities $3,497,868,000
Long-Term Debt $8,809,788,000
Total Assets $25,451,263,000
Intangible Assets $4,914,494,000
Total Liabilities $14,190,665,000
Shares Outstanding (Diluted Average) 49,624,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $82.40
Dec2017 $46.86
Dec2016 $42.65
Dec2015 $49.45
Dec2014 $45.67
Dec2013 $36.11
Dec2012 $27.66
Dec2011 $20.63
Dec2010 $10.35
Dec2009 $9.88
Dec2008 $3.74
Dec2007 $3.42
Dec2006 $1.68
Dec2005 $4.21
Dec2004 $0.76
Dec2003 $0.27
Dec2002 -$0.57
Dec2001 -$0.48
Dec2000 -$11.82
Dec1999 -$47.39
Dec1998 -$8.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $58.13
Dec2017 $45.38
Dec2016 $43.20
Dec2015 $40.95
Dec2014 $33.83
Dec2013 $25.58
Dec2012 $18.36
Dec2011 $12.34
Dec2010 $7.40
Dec2009 $5.48
Dec2008 $3.11
Dec2007 $2.55
Dec2006 $1.83
Dec2005 $1.55
Dec2004 -$0.64
Dec2003 -$4.89
Dec2002 -$9.56

Recommended Reading:

Other ModernGraham posts about the company

Priceline Group Inc Valuation – July 2016 $PCLN
30 Companies in the Spotlight This Week – 5/23/15
Priceline Group Annual Valuation – 2015 $PCLN
27 Companies in the Spotlight This Week – 2/14/15
Priceline Group Inc. Quarterly Valuation – February 2015 $PCLN

Other ModernGraham posts about related companies

TripAdviser Inc Valuation – March 2018 $TRIP
Expedia Inc Valuation – February 2017 $EXPE
Priceline Group Inc Valuation – July 2016 $PCLN
TripAdvisor Inc Valuation – June 2016 $TRIP
TripAdvisor Inc. Valuation – November 2015 Update $TRIP
Expedia Inc. Analysis – October 2015 Update $EXPE
Tripadvisor Stock Analysis – August 2015 Update $TRIP
Priceline Group Annual Valuation – 2015 $PCLN
Tripadvisor Inc. Quarterly Valuation – May 2015 $TRIP
Tripadvisor Inc. Quarterly Valuation – February 2015 $TRIP

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.

Bank of New York Mellon Corp Valuation – January 2017 $BK

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 – December 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 Bank of New York Mellon Corp (BK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Bank of New York Mellon Corporation (BNY Mellon) is an investments company. The Company operates businesses through two segments: Investment Management and Investment Services. The Company also has an Other segment, which includes credit-related services; the leasing portfolio; corporate treasury activities, including its investment securities portfolio; its equity interest in ConvergEx Group; business exits, and corporate overhead. The Company has over $1.6 trillion in assets under management. BNY Mellon’s subsidiaries include The Bank of New York Mellon and BNY Mellon, National Association (BNY Mellon, N.A.). The Bank of New York Mellon is a New York state-chartered bank, which houses its Investment Services businesses, including Asset Servicing, Issuer Services, Treasury Services, Broker-Dealer and Advisor Services, as well as the bank-advised business of Asset Management.

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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 BK – January 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $51,016,635,714 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 259.01% Pass
5. Moderate PEmg Ratio PEmg < 20 19.00 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.30 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.54
MG Growth Estimate 11.13%
MG Value $77.99
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $36.76
MG Value based on 0% Growth $21.55
Market Implied Growth Rate 5.25%
Current Price $48.17
% of Intrinsic Value 61.76%

Bank of New York Mellon Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. 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 $1.46 in 2012 to an estimated $2.54 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.25% 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.

At the time of valuation, further research into Bank of New York Mellon Corp revealed the company was trading below its Graham Number of $48.91. The company pays a dividend of $0.7 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 19, which was below the industry average of 21.43, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Bank of New York Mellon Corp performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Graham Number $48.91
PEmg 19.00
PB Ratio 1.30
Dividend Yield 1.45%
TTM Dividend $0.70
Number of Consecutive Years of Dividend Growth 6

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Long-Term Debt & Capital Lease Obligation $25,367,000,000
Total Assets $374,114,000,000
Intangible Assets $21,120,000,000
Total Liabilities $334,419,000,000
Shares Outstanding (Diluted Average) 1,067,682,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.11
Dec2015 $2.71
Dec2014 $2.15
Dec2013 $1.73
Dec2012 $1.73
Dec2011 $2.03
Dec2010 $2.06
Dec2009 -$1.16
Dec2008 $1.20
Dec2007 $2.18
Dec2006 $3.94
Dec2005 $2.03
Dec2004 $1.85
Dec2003 $1.52
Dec2002 $1.24
Dec2001 $1.81
Dec2000 $1.92
Dec1999 $2.27
Dec1998 $1.53
Dec1997 $1.36
Dec1996 $1.21

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.54
Dec2015 $2.19
Dec2014 $1.93
Dec2013 $1.64
Dec2012 $1.46
Dec2011 $1.30
Dec2010 $1.17
Dec2009 $1.03
Dec2008 $2.16
Dec2007 $2.53
Dec2006 $2.51
Dec2005 $1.76
Dec2004 $1.64
Dec2003 $1.61
Dec2002 $1.68
Dec2001 $1.86
Dec2000 $1.81

Recommended Reading:

Other ModernGraham posts about the company

5 Best Undervalued Stocks of the Week – 8/14/16
Bank of New York Mellon Corp Valuation – August 2016 $BK
19 Best Stocks For Value Investors This Week – 1/9/16
Bank of New York Mellon Valuation – January 2016 Update $BK
10 Companies Benjamin Graham Would Invest In Today – October 2015

Other ModernGraham posts about related companies

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Cullen/Frost Bankers Inc Valuation – Initial Coverage $CFR
Signature Bank Valuation – Initial Coverage $SBNY
Cardinal Financial Corp Valuation – Initial Coverage $CFNL
Citizens Financial Group Inc Valuation – Initial Coverage $CFG

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.

Bank of New York Mellon Corp Valuation – August 2016 $BK

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

Company Profile (obtained from Google Finance): The Bank of New York Mellon Corporation (BNY Mellon) is an investments company. The Company operates businesses through two segments: Investment Management and Investment Services. The Company also has an Other segment, which includes credit-related services; the leasing portfolio; corporate treasury activities, including its investment securities portfolio; its equity interest in ConvergEx Group; business exits, and corporate overhead. The Company has over $1.6 trillion in assets under management. BNY Mellon’s subsidiaries include The Bank of New York Mellon and BNY Mellon, National Association (BNY Mellon, N.A.). The Bank of New York Mellon is a New York state-chartered bank, which houses its Investment Services businesses, including Asset Servicing, Issuer Services, Treasury Services, Broker-Dealer and Advisor Services, as well as the bank-advised business of Asset Management.

BK Chart

BK data by YCharts

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ModernGraham Valuation of BK – August 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $45,470,233,652 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 250.00% Pass
5. Moderate PEmg Ratio PEmg < 20 16.44 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.14 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

BK value chart August 2016

EPSmg $2.47
MG Growth Estimate 10.44%
MG Value $72.55
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $35.80
MG Value based on 0% Growth $20.98
Market Implied Growth Rate 3.97%
Current Price $40.59
% of Intrinsic Value 55.95%

Bank of New York Mellon Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. 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 $1.46 in 2012 to an estimated $2.47 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.97% 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.

At the time of valuation, further research into Bank of New York Mellon Corp revealed the company was trading below its Graham Number of $46.78. The company pays a dividend of $0.68 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 16.44, which was above the industry average of 13.43.

Bank of New York Mellon Corp receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

BK charts August 2016

Graham Number $46.78
PEmg 16.44
PB Ratio 1.14
Dividend Yield 1.68%
TTM Dividend $0.68
Number of Consecutive Years of Dividend Growth 6

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Long-Term Debt & Capital Lease Obligation $24,671,000,000
Total Assets $372,351,000,000
Intangible Assets $21,239,000,000
Total Liabilities $333,792,000,000
Shares Outstanding (Diluted Average) 1,078,271,000

Earnings Per Share History

Next Fiscal Year Estimate $2.91
Dec2015 $2.71
Dec2014 $2.15
Dec2013 $1.73
Dec2012 $1.73
Dec2011 $2.03
Dec2010 $2.06
Dec2009 -$1.16
Dec2008 $1.20
Dec2007 $2.18
Dec2006 $3.94
Dec2005 $2.03
Dec2004 $1.85
Dec2003 $1.52
Dec2002 $1.24
Dec2001 $1.81
Dec2000 $1.92
Dec1999 $2.27
Dec1998 $1.53
Dec1997 $1.36
Dec1996 $1.21

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.47
Dec2015 $2.19
Dec2014 $1.93
Dec2013 $1.64
Dec2012 $1.46
Dec2011 $1.30
Dec2010 $1.17
Dec2009 $1.03
Dec2008 $2.16
Dec2007 $2.53
Dec2006 $2.51
Dec2005 $1.76
Dec2004 $1.64
Dec2003 $1.61
Dec2002 $1.68
Dec2001 $1.86
Dec2000 $1.81

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Bank of New York Mellon Valuation – January 2016 Update $BK
10 Companies Benjamin Graham Would Invest In Today – October 2015
8 Best Stocks For Value Investors This Week – 10/13/15
Bank of New York Mellon Corporation Analysis – October 2015 Update $BK

Other ModernGraham posts about related companies

Best Stocks to Invest In: the Bank Industry – August 2016
JPMorgan Chase & Co Valuation – July 2016 $JPM
Dominion Resources Inc Valuation – July 2016 $D
M&T Bank Corp Valuation – July 2016 $MTB
Citigroup Inc Valuation – July 2016 $C
Bank of America Corp Valuation – July 2016 $BAC
Fifth Third Bancorp Valuation – July 2016 $FITB
Zions Bancorp Valuation – June 2016 $ZION
Regions Financial Corp – June 2016 $RF
Wells Fargo & Co Valuation – June 2016 $WFC

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.

Bank of New York Mellon Valuation – January 2016 Update $BK

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 Bank of New York Mellon (BK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Bank of New York Mellon Corporation is a provider of financial products and services in domestic and international markets. Through its two principal businesses, Investment Management and Investment Services, it serves institutions, corporations and high net worth individuals. For institutions and corporations, it provides investment management, trust and custody, foreign exchange, fund administration, global collateral services, securities lending, depositary receipts, corporate trust, global payment/cash management, banking services and clearing services. For individuals, it provides mutual funds, separate accounts, wealth management and private banking services. BNY Mellon’s investment management businesses provide investment products in different asset classes and investment styles. The Company has $28.5 trillion in assets under custody and/or administration and $1.7 trillion in assets under management as of December 31, 2014.

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ModernGraham Valuation of BK – January 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $40,732,043,699 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -11.48% Fail
5. Moderate PEmg Ratio PEmg < 20 17.04 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.08 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

BK value Chart January 2016

EPSmg $2.18
MG Growth Estimate 10.16%
MG Value $62.80
Opinion Undervalued
MG Value based on 3% Growth $31.60
MG Value based on 0% Growth $18.52
Market Implied Growth Rate 4.27%
Current Price $37.13
% of Intrinsic Value 59.12%

Bank of New York Mellon qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years.  The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.30 in 2011 to an estimated $2.18 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.27% 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 Bank of New York Mellon (BK)?  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

BK Charts January 2016

Graham Number $44.58
PEmg 17.04
PB Ratio 1.08
Dividend Yield 1.83%
Number of Consecutive Years of Dividend Growth 5

 

[/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 Sep15
Long-Term Debt $22,078,000,000
Total Assets $377,371,000,000
Intangible Assets $21,593,000,000
Total Liabilities $339,201,000,000
Shares Outstanding (Diluted Average) 1,105,645,000

Earnings Per Share History

Next Fiscal Year Estimate $2.71
Dec14 $1.74
Dec13 $2.03
Dec12 $2.03
Dec11 $2.03
Dec10 $2.06
Dec09 -$1.16
Dec08 $1.20
Dec07 $2.18
Dec06 $3.94
Dec05 $2.03
Dec04 $1.85
Dec03 $1.52
Dec02 $1.24
Dec01 $1.81
Dec00 $1.92
Dec99 $2.27
Dec98 $1.53
Dec97 $1.36
Dec96 $1.21

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.18
Dec14 $1.94
Dec13 $1.82
Dec12 $1.56
Dec11 $1.30
Dec10 $1.17
Dec09 $1.03
Dec08 $2.16
Dec07 $2.53
Dec06 $2.51
Dec05 $1.76
Dec04 $1.64
Dec03 $1.61
Dec02 $1.68
Dec01 $1.86
Dec00 $1.81
Dec99 $1.60

Recommended Reading:

Other ModernGraham posts about the company

10 Companies Benjamin Graham Would Invest In Today – October 2015
8 Best Stocks For Value Investors This Week – 10/13/15
Bank of New York Mellon Corporation Analysis – October 2015 Update $BK
The Best Stocks of the Financial Services Industry – September 2015
The 9 Best Stocks For Value Investors This Week – 7/18/15

Other ModernGraham posts about related companies

Fifth Third Bancorp Valuation – January 2016 Update $FITB
Huntington Bancshares Valuation – January 2016 Update $HBAN
Wells Fargo & Co Valuation – December 2015 Update $WFC
Citigroup Inc Valuation – December 2015 Update $C
People’s United Financial Corp Valuation – December 2015 Update $PBCT
M&T Bank Corp Valuation – December 2015 Update $MTB
KeyCorp Valuation – November 2015 Update $KEY
State Street Corp Valuation – November 2015 Update $STT
BB&T Corporation Valuation – November 2015 Update $BBT
PNC Financial Services Group Valuation – November 2015 Update $PNC

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.

Bank of New York Mellon Corporation Analysis – October 2015 Update $BK

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

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

In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

What follows is a specific look at how Bank of New York Mellon (BK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Bank of New York Mellon Corporation is a provider of financial products and services in domestic and international markets. Through its two principal businesses, Investment Management and Investment Services, it serves institutions, corporations and high net worth individuals. For institutions and corporations, it provides investment management, trust and custody, foreign exchange, fund administration, global collateral services, securities lending, depositary receipts, corporate trust, global payment/cash management, banking services and clearing services. For individuals, it provides mutual funds, separate accounts, wealth management and private banking services. BNY Mellon’s investment management businesses provide investment products in different asset classes and investment styles. The Company has $28.5 trillion in assets under custody and/or administration and $1.7 trillion in assets under management as of December 31, 2014.
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To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of BK – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $43,374,858,365 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -12.02% Fail
5. Moderate PEmg Ratio PEmg < 20 18.45 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.17 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

BK value Chart October 2015

EPSmg $2.17
MG Growth Estimate 10.01%
MG Value $61.75
Opinion Undervalued
MG Value based on 3% Growth $31.41
MG Value based on 0% Growth $18.41
Market Implied Growth Rate 4.98%
Current Price $39.97
% of Intrinsic Value 64.73%

Bank of New York Mellon qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor has concerns regarding the insufficient earnings stability or growth over the last ten years while the Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.30 in 2011 to an estimated $2.17 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.98% 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 Bank of New York Mellon (BK)?  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

BK Charts October 2015

Graham Number $44.04
PEmg 18.45
PB Ratio 1.17
Dividend Yield 1.70%
Number of Consecutive Years of Dividend Growth 5

 

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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

Long-Term Debt $21,081,000,000
Total Assets $395,254,000,000
Intangible Assets $21,807,000,000
Total Liabilities $356,984,000,000
Shares Outstanding (Diluted Average) 1,122,135,000

Earnings Per Share History

Next Fiscal Year Estimate $2.67
Dec14 $1.74
Dec13 $2.03
Dec12 $2.03
Dec11 $2.03
Dec10 $2.06
Dec09 -$1.16
Dec08 $1.20
Dec07 $2.18
Dec06 $3.94
Dec05 $2.03
Dec04 $1.85
Dec03 $1.52
Dec02 $1.24
Dec01 $1.81
Dec00 $1.92
Dec99 $2.27
Dec98 $1.53
Dec97 $1.36
Dec96 $1.21
Dec95 $1.08

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.17
Dec14 $1.94
Dec13 $1.82
Dec12 $1.56
Dec11 $1.30
Dec10 $1.17
Dec09 $1.03
Dec08 $2.16
Dec07 $2.53
Dec06 $2.51
Dec05 $1.76
Dec04 $1.64
Dec03 $1.61
Dec02 $1.68
Dec01 $1.86
Dec00 $1.81
Dec99 $1.67

Recommended Reading:

Other ModernGraham posts about the company

The Best Stocks of the Financial Services Industry – September 2015
The 9 Best Stocks For Value Investors This Week – 7/18/15
Bank of New York Mellon Analysis – July 2015 Update $BK
Bank of New York Mellon Quarterly Valuation – April 2015 $BK
14 Companies in the Spotlight This Week – 1/11/14

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The Best Stocks of the Financial Services Industry – September 2015
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Northern Trust Corporation Analysis – September 2015 Update $NTRS
Legg Mason Analysis – August 2015 Update $LM
Capital One Financial Corporation Analysis – August 2015 Update $COF
Affiliated Managers Group Analysis – Initial Coverage $AMG
Visa Inc. Analysis – August 2015 Update $V
Ameriprise Financial Inc. Analysis – August 2015 Update $AMP

Disclaimer:

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

Bank of New York Mellon Analysis – July 2015 Update $BK

Bank-of-New-York-MellonBank of New York Mellon (BK) currently yields about a 1.6% dividend, and has grown its earnings well over the last few years. Recently, multiple analysts have focused on qualitative factors when reviewing the company. For example, Seeking Alpha contributor Josh Arnold discussed the company’s fee-based revenue as a potential problem as interest rates rise. This is a great factor to consider in the final stages of an investment decision, but first one must use quantitative metrics to determine the company’s intrinsic value.

Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits.

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

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

BK Chart

BK data by YCharts

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To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
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Defensive Investor – Must pass all 6 of the following tests: Score = 4/6

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

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

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

Valuation Summary

Key Data

Recent Price $42.71
MG Value $59.93
MG Opinion Undervalued
Value Based on 3% Growth $31.07
Value Based on 0% Growth $18.21
Market Implied Growth Rate 5.72%
PEmg 19.93
PB Ratio 1.29

Balance Sheet – March 2015

Total Debt $21,270,000,000
Total Assets $399,088,000,000
Intangible Assets $21,710,000,000
Total Liabilities $361,760,000,000
Outstanding Shares 1,126,300,000

Earnings Per Share

2015 (estimate) $2.60
2014 $1.74
2013 $2.03
2012 $2.03
2011 $2.03
2010 $2.06
2009 -$1.16
2008 $1.20
2007 $2.18
2006 $3.94
2005 $2.03

Earnings Per Share – ModernGraham

2015 (estimate) $2.14
2014 $1.94
2013 $1.82
2012 $1.56
2011 $1.30
2010 $1.17

Dividend History

BK Dividend Chart

BK Dividend data by YCharts

Conclusion

Bank of New York Mellon passes the initial requirements of the Enterprising Investor but not the Defensive Investor. In fact, the company passes every requirement of the Enterprising Investor types, but the Defensive Investor is concerned by the lack of earnings stability and insufficient earnings growth over the last ten years. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $1.30 in 2011 to an estimated $2.14 for 2015. This is a fairly strong level of demonstrated growth, and outpaces the market’s implied estimate for annual earnings growth of only 5.72% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged nearly 13% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that Bank of New York Mellon 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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Bank of New York Mellon Quarterly Valuation – April 2015 $BK

Bank-of-New-York-MellonBank of New York Mellon (NYSE:BK) presents an intriguing investment possibility for value investors, especially due to the strong earnings growth in recent years. Benjamin Graham, the father of value investing, taught that looking at the price cannot be the sole factor in investment decisions, 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 is an updated 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 in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company. By using theModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

BK Chart

BK data by YCharts

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Defensive Investor – Must pass all 6 of the following tests: Score = 3/6.

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

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

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

Valuation Summary

Key Data

Recent Price $41.13
MG Value $54.37
MG Opinion Fairly Valued
Value Based on 3% Growth $28.06
Value Based on 0% Growth $16.45
Market Implied Growth Rate 6.38%
PEmg 21.25
PB Ratio 1.24

Balance Sheet – December 2014

Total Debt $21,050,000,000
Total Assets $385,303,000,000
Intangible Assets $21,996,000,000
Total Liabilities $347,862,000,000
Outstanding Shares 1,130,800,000

Earnings Per Share

2014 $1.74
2013 $2.03
2012 $2.03
2011 $2.03
2010 $2.06
2009 -$1.16
2008 $1.20
2007 $2.18
2006 $3.94
2005 $2.03
2004 $1.85

Earnings Per Share – ModernGraham

2014 $1.94
2013 $1.82
2012 $1.56
2011 $1.30
2010 $1.17
2009 $1.03

Dividend History

BK Dividend Chart

BK Dividend data by YCharts

Conclusion:

Bank of New York Mellon passes all of the initial requirements of the Enterprising Investor but not the Defensive Investor. The more conservative of the two investor types is concerned by the insufficient level of earnings growth and lack of earnings stability over the last ten years, along with the high PEmg ratio. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.17 in 2010 to $1.94 for 2014. This is a strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of only 6.4% over the next 7-10 years. In fact, the historical growth is around 13% per year, so the market is expecting a 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 returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.

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