CBRE Group Inc Valuation – July 2016 $CBG

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 – June 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 CBRE Group Inc (CBG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CBRE Group, Inc. is a holding company that conducts all of its operations through its subsidiaries. The Company is a commercial real estate services and investment company. The Company operates through the segments: The Americas; Europe, Middle East and Africa (EMEA); Asia Pacific; Global Investment Management, and Development Services. It offers services to occupiers, owners, lenders and investors in office, retail, industrial, multifamily and other types of commercial real estate. It offers commercial real estate services under the CBRE brand name, investment management services under the CBRE Global Investors brand name and development services under the Trammell Crow Company brand name. It is focused on several competencies, including commercial property, corporate facilities, project and transaction management, tenant/occupier and property/agency leasing, capital markets solutions, real estate investment management, valuation, development services and proprietary research.

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ModernGraham Valuation of CBG – July 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 $9,539,252,832 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.11 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -272.61% Fail
6. Moderate PEmg Ratio PEmg < 20 16.87 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.30 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.11 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.75 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

CBG value chart July 2016

EPSmg $1.63
MG Growth Estimate 15.00%
MG Value $62.86
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $23.67
MG Value based on 0% Growth $13.88
Market Implied Growth Rate 4.19%
Current Price $27.55
% of Intrinsic Value 43.83%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.34 in 2012 to an estimated $1.63 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.19% 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.

CBRE Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

CBG charts July 2016

Net Current Asset Value (NCAV) -$8.68
Graham Number $20.16
PEmg 16.87
Current Ratio 1.11
PB Ratio 3.30
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $4,086,896,000
Total Current Liabilities $3,696,420,000
Long-Term Debt $2,635,045,000
Total Assets $9,835,135,000
Intangible Assets $4,550,202,000
Total Liabilities $7,017,540,000
Shares Outstanding (Diluted Average) 337,506,000

Earnings Per Share History

Next Fiscal Year Estimate $2.15
Dec2015 $1.63
Dec2014 $1.45
Dec2013 $0.95
Dec2012 $0.97
Dec2011 $0.74
Dec2010 $0.63
Dec2009 $0.12
Dec2008 -$4.81
Dec2007 $1.66
Dec2006 $1.35
Dec2005 $0.95
Dec2004 $0.30
Dec2003 -$0.63
Dec2002 $0.41
Dec2001 $0.73

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.63
Dec2015 $1.30
Dec2014 $1.07
Dec2013 $0.82
Dec2012 $0.34
Dec2011 -$0.09
Dec2010 -$0.41
Dec2009 -$0.67
Dec2008 -$0.74
Dec2007 $1.10
Dec2006 $0.71
Dec2005 $0.37
Dec2004 $0.11
Dec2003 $0.05
Dec2002 $0.33
Dec2001 $0.24

Recommended Reading:

Other ModernGraham posts about the company

58 Companies in the Spotlight This Week – 1/31/15
CBRE Group Inc. Annual Valuation – 2015 $CBG
14 Companies in the Spotlight This Week – 1/11/14
ModernGraham Valuation: CBRE Group Inc. (CBG)

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Disclaimer:

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

CBRE Group Inc. Annual Valuation – 2015 $CBG

CBRE_logoBenjamin 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 Most Undervalued Companies for the Defensive Investor – December 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 CBRE Group Inc. (CBG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CBRE Group, Inc. is a holding company that conducts all of its operations through its indirect subsidiaries. The Company is a commercial real estate services firm. The Company offers a range of services to occupiers, owners, lenders and investors in office, retail, industrial, multi-family and other types of commercial real estate. As of December 31, 2011, it operated approximately 300 offices worldwide, providing commercial real estate services under the CBRE brand name, investment management services under the CBRE Global Investors brand name and development services under the Trammell Crow brand name. In August 2014, CBRE Group Inc acquired Preuss Gesellschaft mbH and subsidiaries (Preuss), provider of project management services in Germany. In August 2014, the Company acquired CBRE Louisville, commercial real estate services firm that has served as CBRE’s affiliate in metropolitan Louisville, Kentucky and southern Indiana.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 1/7

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

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

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – 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 $32.95
MG Value $44.33
MG Opinion Undervalued
Value Based on 3% Growth $16.69
Value Based on 0% Growth $9.79
Market Implied Growth Rate 10.06%
Net Current Asset Value (NCAV) -$5.75
PEmg 28.62
Current Ratio 1.29
PB Ratio 5.13

Balance Sheet – September 2014

Current Assets $3,461,000,000
Current Liabilities $2,677,000,000
Total Debt $2,084,000,000
Total Assets $7,530,000,000
Intangible Assets $3,130,000,000
Total Liabilities $5,384,000,000
Outstanding Shares 334,300,000

Earnings Per Share

2014 (estimate) $1.69
2013 $0.95
2012 $0.97
2011 $0.74
2010 $0.63
2009 $0.12
2008 -$4.81
2007 $1.66
2006 $1.35
2005 $0.95
2004 $0.30

Earnings Per Share – ModernGraham

2014 (estimate) $1.15
2013 $0.82
2012 $0.34
2011 -$0.09
2010 -$0.41
2009 -$0.67

Dividend History
CBRE Group Inc. does not pay a dividend.

Conclusion:

CBRE Group Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, lack of earnings stability or growth over the last ten years, lack of dividends, as well as the poor PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the net current assets along with the lack of dividends.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $0.41 in 2010 to an estimated gain of $1.15 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 10.06% 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 CBRE Group Inc. (CBG) for greater 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 CBRE Group Inc. (CBG)?  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 CBRE Group Inc. (CBG) 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.

ModernGraham Valuation: CBRE Group Inc. (CBG)

moneyCompany Profile (obtained from Google Finance): CBRE Group, Inc is a holding company that conducts all of its operations through its indirect subsidiaries. The Company is a commercial real estate services firm. The Company offers a range of services to occupiers, owners, lenders and investors in office, retail, industrial, multi-family and other types of commercial real estate. The Company operates in five segments: Americas, Europe, Middle East and Africa (EMEA), Asia Pacific, Global Investment Management and Development Services. In June 2013, the Company acquired SOGESMAINT-CBRE. Effective September 2, 2013, CBRE Group Inc acquired an undisclosed majority interest in Basale Sverige AB, from Basale Gruppen AS, In September 2013, CBRE Group Inc acquired Fameco. In November 2013, CBRE Group Inc acquired Alan Selby & Partners LLP. In December 2013, CBRE Group Inc acquired The CAC Group. Effective December 23, 2013, CBRE Group Inc acquired Norland Managed Services Ltd.

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

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 1/7

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

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

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

Valuation Summary (Explanation of the ModernGraham Valuation Model)

Key Data:

MG Value $34.70
MG Opinion Fairly Valued
Value Based on 3% Growth $13.07
Value Based on 0% Growth $7.66
Market Implied Growth Rate 10.31%
Net Current Asset Value (NCAV) -$5.61
PEmg 29.12
Current Ratio 1.39
PB Ratio 4.95

Balance Sheet – 9/30/2013 

Current Assets $2,559,000,000
Current Liabilities $1,842,700,000
Total Debt $1,878,500,000
Total Assets $6,177,300,000
Intangible Assets $2,700,200,000
Total Liabilities $4,419,300,000
Outstanding Shares 331,380,000

Earnings Per Share

2013 (estimate) $1.24
2012 $0.96
2011 $0.72
2010 $0.60
2009 $0.12
2008 -$4.86
2007 $1.65
2006 $1.35
2005 $0.95
2004 $0.30
2003 -$0.63

Earnings Per Share – ModernGraham 

2013 (estimate) $0.90
2012 $0.32
2011 -$0.11
2010 -$0.43
2009 -$0.68
2008 -$0.76

Conclusion:

CBRE Group Inc. is yet another company in a long line of recent reviews that is not suitable for either the Defensive Investor or the Enterprising Investor.  It’s important to note that one of the reasons we put companies through these requirements is to eliminate all but those that present the least amount of risk to investors.  CBRE Group is no different; the company has not had stable earnings over the last ten years, does not pay dividends, has a poor current ratio, has not grown earnings over the ten year period, and is trading at high PEmg and PB ratios.  Defensive Investors and Enterprising Investors would be better suited looking at less risky companies that pass these tests.  From a valuation perspective, the company actually fares somewhat well, having grown EPSmg (normalized earnings) from -$0.76 in 2008 to an estimated $0.90 for 2013.  The market is currently implying a growth rate of 10.31%, and that rate is supported by the historical performance.  As a result, the company would appear to be fairly valued at the present time.

What do you think?  Do you agree that CBRE Group Inc. is fairly valued?  What would be your assessment?  Is the company not suitable for Defensive Investors or Enterprising Investors?  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 CBRE Group Inc. (CBG) at the time of publication and had no intention of changing that position within the next 72 hours.

Photo Credit:  Andrew Magill

CBRE Group Inc Valuation – June 2018 $CBRE

Company Profile (excerpt from Reuters): CBRE Group, Inc., incorporated on February 20, 2001, is a holding company that conducts all of its operations through its subsidiaries. The Company operates as a commercial real estate services and investment company. The Company operates through the segments: The Americas; Europe, Middle East and Africa (EMEA); Asia Pacific; Global Investment Management, and Development Services. The Company provides services in the office, retail, industrial, multifamily and hotel sectors of commercial real estate.

CBRE Chart

CBRE data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CBRE – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,651,811,146 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.18 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 346.98% Pass
6. Moderate PEmg Ratio PEmg < 20 21.20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.57 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.18 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.99 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 $2.17
MG Growth Estimate 15.00%
MG Value $83.67
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $31.51
MG Value based on 0% Growth $18.47
Market Implied Growth Rate 6.35%
Current Price $46.07
% of Intrinsic Value 55.06%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.07 in 2014 to an estimated $2.17 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.35% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into CBRE Group Inc revealed the company was trading above its Graham Number of $27.99. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 21.2, which was below the industry average of 22.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.06.

CBRE Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.06
Graham Number $27.99
PEmg 21.20
Current Ratio 1.18
PB Ratio 3.57
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $5,754,300,000
Total Current Liabilities $4,869,655,000
Long-Term Debt $1,758,188,000
Total Assets $11,907,442,000
Intangible Assets $4,677,134,000
Total Liabilities $7,488,768,000
Shares Outstanding (Diluted Average) 342,590,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.94
Dec2017 $2.03
Dec2016 $1.69
Dec2015 $1.63
Dec2014 $1.45
Dec2013 $0.95
Dec2012 $0.97
Dec2011 $0.74
Dec2010 $0.63
Dec2009 $0.12
Dec2008 -$4.81
Dec2007 $1.66
Dec2006 $1.35
Dec2005 $0.95
Dec2004 $0.30
Dec2003 -$0.23
Dec2002 $0.15
Dec2001 $0.73

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.17
Dec2017 $1.71
Dec2016 $1.48
Dec2015 $1.30
Dec2014 $1.07
Dec2013 $0.82
Dec2012 $0.34
Dec2011 -$0.09
Dec2010 -$0.41
Dec2009 -$0.67
Dec2008 -$0.74
Dec2007 $1.13
Dec2006 $0.74
Dec2005 $0.42
Dec2004 $0.17
Dec2003 $0.11
Dec2002 $0.25

Recommended Reading:

Other ModernGraham posts about the company

CBRE Group Inc Valuation – July 2016 $CBG
58 Companies in the Spotlight This Week – 1/31/15
CBRE Group Inc. Annual Valuation – 2015 $CBG
14 Companies in the Spotlight This Week – 1/11/14
ModernGraham Valuation: CBRE Group Inc. (CBG)

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Disclaimer:

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

T Rowe Price Group Inc Valuation – August 2016 $TROW

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 – August 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 T Rowe Price Group Inc (TROW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): T. Rowe Price Group, Inc. is a financial services holding company. The Company provides global investment management services to individual and institutional investors in the sponsored T. Rowe Price mutual funds distributed in the United States and other investment portfolios. It operates through investment advisory business segment. Its assets under management are accumulated from a client base across over four primary distribution channels, including third-party financial intermediaries that distribute its managed investment portfolios in the United States and other countries; individual the United States investors on a direct basis; the United States defined contribution retirement plans, and institutional investors across the globe. It manages assets, including the United States and international stock, blended asset, bond and money market mutual funds, and other investment portfolios. The Company offers advisory services, distribution management and administrative services.

TROW Chart

TROW data by YCharts

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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. 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 TROW – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $16,908,450,052 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.79 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 124.19% Pass
6. Moderate PEmg Ratio PEmg < 20 16.27 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.56 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 2.79 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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

TROW value chart August 2016

EPSmg $4.22
MG Growth Estimate 8.03%
MG Value $103.50
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $61.12
MG Value based on 0% Growth $35.83
Market Implied Growth Rate 3.89%
Current Price $68.59
% of Intrinsic Value 66.27%

T. Rowe Price Group Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. 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 $2.75 in 2012 to an estimated $4.22 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.89% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into T. Rowe Price Group Inc revealed the company was trading above its Graham Number of $41.69. The company pays a dividend of $2.12 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.27, which was below the industry average of 19.87, 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 $-0.07.

T. Rowe Price Group Inc fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

TROW charts August 2016

Net Current Asset Value (NCAV) -$0.07
Graham Number $41.69
PEmg 16.27
Current Ratio 2.79
PB Ratio 3.56
Current Dividend $2.12
Dividend Yield 3.09%
Number of Consecutive Years of Dividend Growth 20

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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

Balance Sheet Information 6/1/2016
Total Current Assets $1,702,600,000
Total Current Liabilities $610,400,000
Long-Term Debt $0
Total Assets $6,581,700,000
Intangible Assets $665,700,000
Total Liabilities $1,720,800,000
Shares Outstanding (Diluted Average) 252,100,000

Earnings Per Share History

Next Fiscal Year Estimate $3.98
Dec2015 $4.63
Dec2014 $4.55
Dec2013 $3.90
Dec2012 $3.36
Dec2011 $2.92
Dec2010 $2.53
Dec2009 $1.65
Dec2008 $1.82
Dec2007 $2.40
Dec2006 $1.90
Dec2005 $1.58
Dec2004 $1.26
Dec2003 $0.88
Dec2002 $0.76
Dec2001 $0.76
Dec2000 $1.04
Dec1999 $0.93
Dec1998 $0.67
Dec1997 $0.57
Dec1996 $0.40

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.22
Dec2015 $4.18
Dec2014 $3.79
Dec2013 $3.23
Dec2012 $2.75
Dec2011 $2.38
Dec2010 $2.09
Dec2009 $1.87
Dec2008 $1.92
Dec2007 $1.85
Dec2006 $1.47
Dec2005 $1.19
Dec2004 $0.98
Dec2003 $0.85
Dec2002 $0.83
Dec2001 $0.84
Dec2000 $0.83

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2016
Dividend Growth Stocks for Intelligent Investors – July 2016
Dividend Growth Stocks for Intelligent Investors – June 2016
T.Rowe Price Group Inc Stock Valuation – February 2016 $TROW
Dividend Growth Stocks for Intelligent Investors – February 2016

Other ModernGraham posts about related companies

Franklin Resources Inc Valuation – August 2016 $BEN
Equifax Inc Valuation – August 2016 $EFX
Charles Schwab Corp Valuation – August 2016 $SCHW
Northern Trust Corp Valuation – July 2016 $NTRS
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
Invesco Ltd Valuation – July 2016 $IVZ
Nasdaq Inc Valuation – July 2016 $NDAQ
Leucadia National Corp Valuation – July 2016 $LUK
E*Trade Financial Corp Valuation – July 2016 $ETFC
CBRE Group Inc Valuation – July 2016 $CBG

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.

Moody’s Corporation Valuation – August 2016 $MCO

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 – August 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 Moody’s Corporation (MCO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Moody’s Corporation (Moody’s) is a provider of credit ratings; credit, capital markets and economic related research, data and analytical tools; software solutions and related risk management services; quantitative credit risk measures, financial services training and certification services, and outsourced research and analytical services to financial institution customers. It operates in two segments: Moody’s Investors Service (MIS) and Moody’s Analytics (MA). The MIS segment publishes credit ratings on a range of debt obligations and the entities that issue such obligations in markets across the world. It consists of approximately five lines of business, which include corporate finance group (CFG); structured finance group (SFG); financial institutions group (FIG); Public, project and infrastructure finance (PPIF), and MIS Other. The MA segment consists of approximately three lines of business, which include enterprise risk solutions (ERS) and professional service (PS).

MCO Chart

MCO data by YCharts

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ModernGraham Valuation of MCO – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,312,641,542 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.64 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 121.82% Pass
6. Moderate PEmg Ratio PEmg < 20 24.58 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -34.49 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 2.64 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.82 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

MCO value chart August 2016

EPSmg $4.30
MG Growth Estimate 11.21%
MG Value $132.98
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $62.35
MG Value based on 0% Growth $36.55
Market Implied Growth Rate 8.04%
Current Price $105.69
% of Intrinsic Value 79.48%

Moody’s Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.46 in 2012 to an estimated $4.3 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 8.04% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Moody’s Corporation revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.42 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 24.58, which was above the industry average of 19.87. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-13.35.

Moody’s Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

MCO charts August 2016

Net Current Asset Value (NCAV) -$13.35
Graham Number $0.00
PEmg 24.58
Current Ratio 2.64
PB Ratio -34.49
Current Dividend $1.42
Dividend Yield 1.34%
Number of Consecutive Years of Dividend Growth 7

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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

Balance Sheet Information 6/1/2016
Total Current Assets $3,030,100,000
Total Current Liabilities $1,146,400,000
Long-Term Debt $3,420,400,000
Total Assets $5,044,900,000
Intangible Assets $1,366,400,000
Total Liabilities $5,644,900,000
Shares Outstanding (Diluted Average) 195,800,000

Earnings Per Share History

Next Fiscal Year Estimate $4.38
Dec2015 $4.63
Dec2014 $4.61
Dec2013 $3.60
Dec2012 $3.05
Dec2011 $2.49
Dec2010 $2.15
Dec2009 $1.69
Dec2008 $1.87
Dec2007 $2.58
Dec2006 $2.58
Dec2005 $1.84
Dec2004 $1.40
Dec2003 $1.19
Dec2002 $0.92
Dec2001 $0.66
Dec2000 $0.49
Dec1999 $0.48
Dec1998 $0.82

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.30
Dec2015 $4.07
Dec2014 $3.58
Dec2013 $2.91
Dec2012 $2.46
Dec2011 $2.16
Dec2010 $2.06
Dec2009 $2.04
Dec2008 $2.17
Dec2007 $2.18
Dec2006 $1.85
Dec2005 $1.39
Dec2004 $1.09
Dec2003 $0.87
Dec2002 $0.70
Dec2001 $0.55
Dec2000 $0.45

Recommended Reading:

Other ModernGraham posts about the company

10 Best Stocks For Value Investors This Week – 9/26/15
Moody’s Corporation Analysis – September 2015 Update $MCO
The Best Stocks of the Financial Services Industry – September 2015
The 10 Best Stocks For Value Investors This Week – 6/20/15
Moody’s Corporation Analysis – June 2015 Update $MCO

Other ModernGraham posts about related companies

Franklin Resources Inc Valuation – August 2016 $BEN
Equifax Inc Valuation – August 2016 $EFX
Charles Schwab Corp Valuation – August 2016 $SCHW
Northern Trust Corp Valuation – July 2016 $NTRS
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
Invesco Ltd Valuation – July 2016 $IVZ
Nasdaq Inc Valuation – July 2016 $NDAQ
Leucadia National Corp Valuation – July 2016 $LUK
E*Trade Financial Corp Valuation – July 2016 $ETFC
CBRE Group Inc Valuation – July 2016 $CBG

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.

KKR & Co L.P. Valuation – August 2016 $KKR

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 – August 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 KKR & Co L.P. (KKR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): KKR & CO. L.P. (KKR) is a global investment firm that manages investments across multiple asset classes, including private equity, energy, infrastructure, real estate, credit and hedge funds. The Company’s business offers a range of investment management services to its fund investors, and provides capital markets services to its firm, its portfolio companies and third parties. It operates through four segments. Through its Private Markets segment, KKR manages and sponsors a group of private equity funds and co-investment vehicles that invest capital for long-term appreciation, either through controlling ownership of a company or strategic minority positions. The Company operates and reports its combined credit and hedge funds businesses through the Public Markets segment. Its Capital Markets segment consists primarily of the Company’s global capital markets business. Through Principal Activities segment, the Company manages its firm’s assets and deploys capital.

KKR Chart

KKR data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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 KKR – 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 $11,797,738,264 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 6466566.67% Pass
5. Moderate PEmg Ratio PEmg < 20 16.84 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 Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

KKR value chart August 2016

EPSmg $0.88
MG Growth Estimate -2.61%
MG Value $2.89
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $12.74
MG Value based on 0% Growth $7.47
Market Implied Growth Rate 4.17%
Current Price $14.80
% of Intrinsic Value 511.97%

KKR & Co. L.P. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.06 in 2012 to an estimated $0.88 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.17% 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 below the price.

At the time of valuation, further research into KKR & Co. L.P. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.09 per share, for a yield of 7.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.84, which was below the industry average of 19.87, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

KKR & Co. L.P. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

KKR charts August 2016

Graham Number $0.00
PEmg 16.84
PB Ratio 1.30
Dividend Yield 7.36%
TTM Dividend $1.09
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Long-Term Debt & Capital Lease Obligation $17,894,036,000
Total Assets $37,506,871,000
Intangible Assets $0
Total Liabilities $32,022,715,000
Shares Outstanding (Diluted Average) 481,810,000

Earnings Per Share History

Next Fiscal Year Estimate -$0.23
Dec2015 $1.01
Dec2014 $1.16
Dec2013 $2.30
Dec2012 $2.21
Dec2011 $0.01
Dec2010 $1.62

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.88
Dec2015 $1.40
Dec2014 $1.55
Dec2013 $1.57
Dec2012 $1.06
Dec2011 $0.44
Dec2010 $0.54

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Enterprising Investor – February 2016
7 Best Stocks For Value Investors This Week – 10/24/15
KKR & Co. LP Valuation – October 2015 Update $KKR
5 Undervalued Companies for Value Investors with a High Beta – October 2015
The Best Stocks of the Financial Services Industry – September 2015

Other ModernGraham posts about related companies

Franklin Resources Inc Valuation – August 2016 $BEN
Equifax Inc Valuation – August 2016 $EFX
Charles Schwab Corp Valuation – August 2016 $SCHW
Northern Trust Corp Valuation – July 2016 $NTRS
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
Invesco Ltd Valuation – July 2016 $IVZ
Nasdaq Inc Valuation – July 2016 $NDAQ
Leucadia National Corp Valuation – July 2016 $LUK
E*Trade Financial Corp Valuation – July 2016 $ETFC
CBRE Group Inc Valuation – July 2016 $CBG

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.

Franklin Resources Inc Valuation – August 2016 $BEN

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 Franklin Resources Inc (BEN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Franklin Resources, Inc. (Franklin), is a holding company. Franklin together with its various subsidiaries (collectively, the Company), is referred to as Franklin Templeton Investments, is a global investment management organization offering investment management and related services under the Franklin, Templeton, Mutual Series, Bissett, Fiduciary and Darby brand names. It provides services to investment funds in jurisdictions globally, which include the United States- and non- United States-registered open-end and closed-end funds, unregistered funds, and institutional, high net-worth and separately-managed accounts. The Company’s investment management and related services include fund administration, shareholder services, transfer agency, underwriting, distribution, custodial, trustee and other fiduciary services. Its sponsored investment products include a range of equity, hybrid, fixed-income and cash management funds and accounts, including alternative investment products.

BEN Chart

BEN data by YCharts

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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]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of BEN – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $21,417,599,621 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 13.07 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 68.06% Pass
6. Moderate PEmg Ratio PEmg < 20 11.51 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.81 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 13.07 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.19 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

BEN value chart August 2016

EPSmg $3.20
MG Growth Estimate 4.20%
MG Value $54.08
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $46.40
MG Value based on 0% Growth $27.20
Market Implied Growth Rate 1.50%
Current Price $36.82
% of Intrinsic Value 68.08%

Franklin Resources, Inc. 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 $2.5 in 2012 to an estimated $3.2 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.5% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Franklin Resources, Inc. revealed the company was trading above its Graham Number of $35.55. The company pays a dividend of $0.69 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 11.51, which was below the industry average of 19.87, 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 $14.41.

Franklin Resources, Inc. fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

BEN charts August 2016

Net Current Asset Value (NCAV) $14.41
Graham Number $35.55
PEmg 11.51
Current Ratio 13.07
PB Ratio 1.81
Current Dividend $0.69
Dividend Yield 1.87%
Number of Consecutive Years of Dividend Growth 20

[/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
Total Current Assets $12,556,900,000
Total Current Liabilities $961,100,000
Long-Term Debt $2,163,800,000
Total Assets $15,997,500,000
Intangible Assets $2,213,500,000
Total Liabilities $4,215,400,000
Shares Outstanding (Diluted Average) 578,900,000

Earnings Per Share History

Next Fiscal Year Estimate $2.75
Sep2015 $3.29
Sep2014 $3.79
Sep2013 $3.37
Sep2012 $2.98
Sep2011 $2.87
Sep2010 $2.11
Sep2009 $1.28
Sep2008 $2.22
Sep2007 $2.34
Sep2006 $1.62
Sep2005 $1.35
Sep2004 $0.92
Sep2003 $0.66
Sep2002 $0.55
Sep2001 $0.64
Sep2000 $0.76
Sep1999 $0.56
Sep1998 $0.66
Sep1997 $0.57
Sep1996 $0.83

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.20
Sep2015 $3.37
Sep2014 $3.28
Sep2013 $2.86
Sep2012 $2.50
Sep2011 $2.23
Sep2010 $1.91
Sep2009 $1.80
Sep2008 $1.93
Sep2007 $1.65
Sep2006 $1.21
Sep2005 $0.94
Sep2004 $0.73
Sep2003 $0.63
Sep2002 $0.63
Sep2001 $0.65
Sep2000 $0.67

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Defensive Investor – August 2016
Dividend Growth Stocks for Intelligent Investors – July 2016
10 Low PE Stocks for the Defensive Investor – July 2016
Dividend Growth Stocks for Intelligent Investors – June 2016
10 Low PE Stocks for the Defensive Investor – June 2016

Other ModernGraham posts about related companies

Equifax Inc Valuation – August 2016 $EFX
Charles Schwab Corp Valuation – August 2016 $SCHW
Northern Trust Corp Valuation – July 2016 $NTRS
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
Invesco Ltd Valuation – July 2016 $IVZ
Nasdaq Inc Valuation – July 2016 $NDAQ
Leucadia National Corp Valuation – July 2016 $LUK
E*Trade Financial Corp Valuation – July 2016 $ETFC
CBRE Group Inc Valuation – July 2016 $CBG
Fidelity National Information Services Valuation – July 2016 $FIS

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.

Equifax Inc Valuation – August 2016 $EFX

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 Equifax Inc (EFX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Equifax Inc. is a provider of information solutions and human resources business process outsourcing services for businesses, governments and consumers. The Company operates through four segments: U.S. Information Solutions (USIS), International, Workforce Solutions and Personal Solutions. USIS provides consumer and commercial information solutions to businesses in the United States, including online information, decisioning technology solutions, fraud and identity management services, portfolio management services, mortgage reporting and financial marketing services. International includes Canada, Europe and Latin America business units. Workforce Solutions provides services enabling clients to verify income and employment, as well as to outsource and automate the performance of certain payroll-related and human resources management business processes. Personal Solutions provides products to consumers in the United States, Canada and the United Kingdom.

EFX Chart

EFX data by YCharts

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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 EFX – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,482,032,620 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.65 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 87.04% Pass
6. Moderate PEmg Ratio PEmg < 20 36.41 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.24 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.65 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.47 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EFX value chart August 2016

EPSmg $3.60
MG Growth Estimate 11.36%
MG Value $112.34
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $52.16
MG Value based on 0% Growth $30.58
Market Implied Growth Rate 13.96%
Current Price $130.98
% of Intrinsic Value 116.59%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.05 in 2012 to an estimated $3.6 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.96% 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 Equifax Inc. revealed the company was trading above its Graham Number of $46.9. The company pays a dividend of $1.24 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 36.41, which was above the industry average of 19.87. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-28.67.

Equifax Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

EFX charts August 2016

Net Current Asset Value (NCAV) -$28.67
Graham Number $46.90
PEmg 36.41
Current Ratio 0.65
PB Ratio 6.24
Current Dividend $1.24
Dividend Yield 0.95%
Number of Consecutive Years of Dividend Growth 7

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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

Balance Sheet Information 6/1/2016
Total Current Assets $627,200,000
Total Current Liabilities $961,900,000
Long-Term Debt $2,498,700,000
Total Assets $6,640,800,000
Intangible Assets $5,471,400,000
Total Liabilities $4,099,300,000
Shares Outstanding (Diluted Average) 121,100,000

Earnings Per Share History

Next Fiscal Year Estimate $4.59
Dec2015 $3.55
Dec2014 $2.97
Dec2013 $2.84
Dec2012 $2.22
Dec2011 $1.88
Dec2010 $2.11
Dec2009 $1.83
Dec2008 $2.09
Dec2007 $2.02
Dec2006 $2.12
Dec2005 $1.86
Dec2004 $1.76
Dec2003 $1.20
Dec2002 $1.38
Dec2001 $0.90
Dec2000 $1.68
Dec1999 $1.55
Dec1998 $1.34
Dec1997 $1.24
Dec1996 $1.19

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.60
Dec2015 $2.96
Dec2014 $2.58
Dec2013 $2.32
Dec2012 $2.05
Dec2011 $1.97
Dec2010 $2.02
Dec2009 $1.98
Dec2008 $2.02
Dec2007 $1.93
Dec2006 $1.81
Dec2005 $1.57
Dec2004 $1.41
Dec2003 $1.28
Dec2002 $1.33
Dec2001 $1.32
Dec2000 $1.49

Recommended Reading:

Other ModernGraham posts about the company

27 Companies in the Spotlight This Week – 4/4/15
Equifax Inc. Annual Valuation – 2015 $EFX
14 Companies in the Spotlight This Week – 4/5/14
Equifax Inc. (EFX) Annual Valuation – 2014

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Disclaimer:

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

Charles Schwab Corp Valuation – August 2016 $SCHW

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 Charles Schwab Corp (SCHW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Charles Schwab Corporation is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, money management and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services and other corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services, as well as retirement business services. The Company offers a range of products to address individuals’ varying investment and financial needs. Its product offerings include brokerage, mutual funds, exchange-traded funds, advice solutions, banking and trust. Its subsidiaries include Charles Schwab & Co., Inc. (Schwab), Charles Schwab Bank (Schwab Bank) and Charles Schwab Investment Management, Inc. (CSIM).

SCHW Chart

SCHW data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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 SCHW – 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 $39,743,346,963 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 -14.05% Fail
5. Moderate PEmg Ratio PEmg < 20 29.67 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.68 Fail
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

SCHW value chart August 2016

EPSmg $1.01
MG Growth Estimate 8.30%
MG Value $25.46
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $14.71
MG Value based on 0% Growth $8.62
Market Implied Growth Rate 10.59%
Current Price $30.11
% of Intrinsic Value 118.26%

Charles Schwab Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.65 in 2012 to an estimated $1.01 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.59% 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 below the price.

At the time of valuation, further research into Charles Schwab Corp revealed the company was trading above its Graham Number of $16.17. The company pays a dividend of $0.25 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 29.67, which was above the industry average of 19.87.

Charles Schwab Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

SCHW charts August 2016

Graham Number $16.17
PEmg 29.67
PB Ratio 2.68
Dividend Yield 0.83%
TTM Dividend $0.25
Number of Consecutive Years of Dividend Growth 1

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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

Balance Sheet Information 6/1/2016
Long-Term Debt & Capital Lease Obligation $2,876,000,000
Total Assets $198,052,000,000
Intangible Assets $1,390,000,000
Total Liabilities $183,062,000,000
Shares Outstanding (Diluted Average) 1,333,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.20
Dec2015 $1.03
Dec2014 $0.95
Dec2013 $0.78
Dec2012 $0.69
Dec2011 $0.70
Dec2010 $0.38
Dec2009 $0.68
Dec2008 $1.05
Dec2007 $1.97
Dec2006 $0.95
Dec2005 $0.55
Dec2004 $0.21
Dec2003 $0.35
Dec2002 $0.08
Dec2001 $0.14
Dec2000 $0.51
Dec1999 $0.49
Dec1998 $0.28
Dec1997 $0.22
Dec1996 $0.19

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.01
Dec2015 $0.89
Dec2014 $0.78
Dec2013 $0.68
Dec2012 $0.65
Dec2011 $0.74
Dec2010 $0.84
Dec2009 $1.06
Dec2008 $1.15
Dec2007 $1.07
Dec2006 $0.56
Dec2005 $0.33
Dec2004 $0.23
Dec2003 $0.27
Dec2002 $0.25
Dec2001 $0.33
Dec2000 $0.40

Recommended Reading:

Other ModernGraham posts about the company

27 Companies in the Spotlight This Week – 4/4/15
Charles Schwab Corporation Annual Valuation – 2015 $SCHW
17 Companies in the Spotlight This Week – 3/29/14
Charles Schwab Corp (SCHW) Annual Valuation – 2014

Other ModernGraham posts about related companies

Northern Trust Corp Valuation – July 2016 $NTRS
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
Invesco Ltd Valuation – July 2016 $IVZ
Nasdaq Inc Valuation – July 2016 $NDAQ
Leucadia National Corp Valuation – July 2016 $LUK
E*Trade Financial Corp Valuation – July 2016 $ETFC
CBRE Group Inc Valuation – July 2016 $CBG
Fidelity National Information Services Valuation – July 2016 $FIS
Capital One Financial Corp Valuation – July 2016 $COF
Intercontinental Exchange Inc Valuation – July 2016 $ICE

Disclaimer:

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

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