CBS Corp Valuation – February 2019 $CBS

Company Profile (excerpt from Reuters): CBS Corporation, incorporated on November 10, 1986, is a mass media company. The Company operates through four segment: Entertainment, Cable Networks, Publishing and Local Media. The Entertainment segment comprises the CBS Television Network; CBS Television Studios; CBS Studios International and CBS Television Distribution; CBS Interactive; CBS Films; and the Company’s digital streaming services, CBS All Access and CBSN. The Cable Networks segment comprises Showtime Networks, which operates its subscription program services, Showtime, The Movie Channel, and Flix. The Publishing segment comprises Simon & Schuster, which publishes and distributes consumer books under imprints, such as Simon & Schuster, Pocket Books, Scribner and Gallery Books. The Local Media segment comprises CBS TV Stations, and CBS Local Digital Media. Its businesses span the media and entertainment industries, including the CBS TV Network, cable networks, content production and distribution, television stations, Internet-based businesses, and consumer publishing. It focuses on exhibiting its content on multiple digital platforms, including digital streaming services, as well as third-party live television streaming offerings.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CBS – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,347,191,065 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.51 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 168.39% Pass
6. Moderate PEmg Ratio PEmg < 20 15.10 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.39 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 1.51 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.62 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.25
MG Growth Estimate -0.52%
MG Value $24.24
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $47.08
MG Value based on 0% Growth $27.60
Market Implied Growth Rate 3.30%
Current Price $49.02
% of Intrinsic Value 202.26%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.36 in 2014 to an estimated $3.25 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.3% 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 CBS Corporation Common Stock revealed the company was trading above its Graham Number of $24.44. The company pays a dividend of $0.72 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 15.1, which was below the industry average of 31.72, 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 $-33.02.

CBS Corporation Common Stock 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) -$33.02
Graham Number $24.44
PEmg 15.10
Current Ratio 1.51
PB Ratio 7.39
Current Dividend $0.72
Dividend Yield 1.47%
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 9/1/2018
Total Current Assets $6,040,000,000
Total Current Liabilities $3,993,000,000
Long-Term Debt $9,465,000,000
Total Assets $21,068,000,000
Intangible Assets $7,571,000,000
Total Liabilities $18,554,000,000
Shares Outstanding (Diluted Average) 379,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.14
Dec2017 $0.88
Dec2016 $2.81
Dec2015 $2.89
Dec2014 $5.27
Dec2013 $3.01
Dec2012 $2.39
Dec2011 $1.92
Dec2010 $1.04
Dec2009 $0.33
Dec2008 -$17.43
Dec2007 $1.73
Dec2006 $2.15
Dec2005 -$8.98
Dec2004 -$20.37
Dec2003 $1.61
Dec2002 $0.82
Dec2001 -$0.26
Dec2000 -$1.34
Dec1999 $0.90
Dec1998 -$0.42

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.25
Dec2017 $2.52
Dec2016 $3.32
Dec2015 $3.42
Dec2014 $3.36
Dec2013 $2.19
Dec2012 $0.40
Dec2011 -$1.23
Dec2010 -$2.68
Dec2009 -$4.50
Dec2008 -$7.47
Dec2007 -$3.25
Dec2006 -$5.48
Dec2005 -$8.01
Dec2004 -$6.32
Dec2003 $0.58
Dec2002 $0.03

Recommended Reading:

Other ModernGraham posts about the company

CBS Corporation Valuation – April 2018 $CBS
7 Best Undervalued Stocks of the Week – 9/3/16
CBS Corporation Valuation – August 2016 $CBS
6 Best Stocks For Value Investors This Week – 5/14/16
CBS Corporation Valuation – May 2016 $CBS

Other ModernGraham posts about related companies

Discovery Inc Valuation – February 2019 $DISCA
Comcast Corp Valuation – January 2019 $CMCSA
Viacom Inc Valuation – January 2019 $VIAB
Twenty-First Century Fox Inc Valuation – January 2019 $FOX
Walt Disney Co Valuation – November 2018 $DIS
Tegna Inc Valuation – August 2018 $TGNA
E.W. Scripps Co Valuation – August 2018 $SSP
Cinemark Holdings Inc Valuation – August 2018 $CNK
Corus Entertainment Inc Valuation – July 2018 $TSE:CJR.B
AMC Networks Inc Valuation – July 2018 $AMCX

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.

CBS Corporation Valuation – April 2018 $CBS

Company Profile (excerpt from Reuters): CBS Corporation, incorporated on November 10, 1986, is a mass media company. The Company operates through four segment: Entertainment, Cable Networks, Publishing and Local Media. The Entertainment segment comprises the CBS Television Network; CBS Television Studios; CBS Studios International and CBS Television Distribution; CBS Interactive; CBS Films; and the Company’s digital streaming services, CBS All Access and CBSN. The Cable Networks segment comprises Showtime Networks, which operates its subscription program services, Showtime, The Movie Channel, and Flix. The Publishing segment comprises Simon & Schuster, which publishes and distributes consumer books under imprints, such as Simon & Schuster, Pocket Books, Scribner and Gallery Books. The Local Media segment comprises CBS TV Stations, and CBS Local Digital Media. Its businesses span the media and entertainment industries, including the CBS TV Network, cable networks, content production and distribution, television stations, Internet-based businesses, and consumer publishing. It focuses on exhibiting its content on multiple digital platforms, including digital streaming services, as well as third-party live television streaming offerings.

CBS Chart

CBS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CBS – 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 $19,385,377,917 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.58 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 167.17% Pass
6. Moderate PEmg Ratio PEmg < 20 15.74 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.24 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 1.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.11 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.23
MG Growth Estimate -0.58%
MG Value $23.75
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $46.88
MG Value based on 0% Growth $27.48
Market Implied Growth Rate 3.62%
Current Price $50.90
% of Intrinsic Value 214.29%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.36 in 2014 to an estimated $3.23 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.62% 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 CBS Corporation revealed the company was trading above its Graham Number of $24.34. The company pays a dividend of $0.72 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 15.74, which was below the industry average of 32.74, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-31.64.

CBS Corporation 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) -$31.64
Graham Number $24.34
PEmg 15.74
Current Ratio 1.58
PB Ratio 10.24
Current Dividend $0.72
Dividend Yield 1.41%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $6,273,000,000
Total Current Liabilities $3,972,000,000
Long-Term Debt $9,464,000,000
Total Assets $20,843,000,000
Intangible Assets $7,557,000,000
Total Liabilities $18,865,000,000
Shares Outstanding (Diluted Average) 398,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.10
Dec2017 $0.88
Dec2016 $2.81
Dec2015 $2.89
Dec2014 $5.27
Dec2013 $3.01
Dec2012 $2.39
Dec2011 $1.92
Dec2010 $1.04
Dec2009 $0.33
Dec2008 -$17.43
Dec2007 $1.73
Dec2006 $2.15
Dec2005 -$8.98
Dec2004 -$20.37
Dec2003 $1.61
Dec2002 $0.82
Dec2001 -$0.26
Dec2000 -$1.34
Dec1999 $0.90
Dec1998 -$0.42

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.23
Dec2017 $2.52
Dec2016 $3.32
Dec2015 $3.42
Dec2014 $3.36
Dec2013 $2.19
Dec2012 $0.40
Dec2011 -$1.23
Dec2010 -$2.68
Dec2009 -$4.50
Dec2008 -$7.47
Dec2007 -$3.25
Dec2006 -$5.48
Dec2005 -$8.01
Dec2004 -$6.32
Dec2003 $0.58
Dec2002 $0.03

Recommended Reading:

Other ModernGraham posts about the company

7 Best Undervalued Stocks of the Week – 9/3/16
CBS Corporation Valuation – August 2016 $CBS
6 Best Stocks For Value Investors This Week – 5/14/16
CBS Corporation Valuation – May 2016 $CBS
5 Undervalued Companies for Value Investors with a High Beta – January 2016

Other ModernGraham posts about related companies

Discovery Inc Valuation – April 2018 $DISCA
Time Warner Inc Valuation – March 2018 $TWX
Viacom Inc Valuation – March 2018 $VIAB
Twenty-First Century Fox Inc Valuation – March 2018 $FOXA
Walt Disney Co Valuation – February 2018 $DIS
Live Nation Entertainment Inc Valuation – Initial Coverage $LYV
Walt Disney Co Valuation – March 2017 $DIS
Tegna Inc Valuation – February 2017 $TGNA
E.W. Scripps Co Valuation – Initial Coverage $SSP
News Corp Valuation – February 2017 $NWSA

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.

CBS Corporation Valuation – August 2016 $CBS

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 CBS Corporation (CBS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CBS Corporation is a mass media company. The Company’s segments include Entertainment, Cable Networks, Publishing and Local Broadcasting. Its Entertainment segment is composed of the CBS Television Network; CBS Television Studios; CBS Global Distribution Group (composed of CBS Studios International and CBS Television Distribution); CBS Interactive, and CBS Films. The Company’s Cable Networks segment is composed of Showtime Networks; CBS Sports Network, and Smithsonian Networks. The Publishing segment is composed of Simon & Schuster, which publishes and distributes consumer books under imprints, such as Simon & Schuster, Pocket Books, Scribner, Gallery Books, Touchstone and Atria Books. The Local Broadcasting segment is composed of CBS Television Stations, its approximately 30 owned broadcast television stations, and CBS Radio, through which it owns and operates radio stations in the United States markets. It operates businesses, which span the media and entertainment industries.

CBS Chart

CBS data by YCharts

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of CBS – 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 $23,052,888,078 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.65 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -178.59% Fail
6. Moderate PEmg Ratio PEmg < 20 14.10 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.39 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 1.65 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.09 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

CBS value chart August 2016

EPSmg $3.69
MG Growth Estimate 15.00%
MG Value $142.14
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $53.53
MG Value based on 0% Growth $31.38
Market Implied Growth Rate 2.80%
Current Price $52.04
% of Intrinsic Value 36.61%

CBS Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PB ratio. 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 Undervalued after growing its EPSmg (normalized earnings) from $0.4 in 2012 to an estimated $3.69 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.8% 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 CBS Corporation revealed the company was trading above its Graham Number of $32.64. The company pays a dividend of $0.6 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 14.1, which was below the industry average of 40.02, 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 $-27.81.

CBS Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

CBS charts August 2016

Net Current Asset Value (NCAV) -$27.81
Graham Number $32.64
PEmg 14.10
Current Ratio 1.65
PB Ratio 4.39
Current Dividend $0.60
Dividend Yield 1.15%
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
Total Current Assets $5,096,000,000
Total Current Liabilities $3,087,000,000
Long-Term Debt $8,223,000,000
Total Assets $23,138,000,000
Intangible Assets $12,035,000,000
Total Liabilities $17,750,000,000
Shares Outstanding (Diluted Average) 455,000,000

Earnings Per Share History

Next Fiscal Year Estimate $3.92
Dec2015 $2.89
Dec2014 $5.27
Dec2013 $3.01
Dec2012 $2.39
Dec2011 $1.92
Dec2010 $1.04
Dec2009 $0.33
Dec2008 -$17.43
Dec2007 $1.73
Dec2006 $2.15
Dec2005 -$8.98
Dec2004 -$20.37
Dec2003 $1.61
Dec2002 $0.82
Dec2001 -$0.26
Dec2000 -$1.34
Dec1999 $0.90
Dec1998 -$0.42
Dec1997 $2.08
Dec1996 $6.46

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.69
Dec2015 $3.42
Dec2014 $3.36
Dec2013 $2.19
Dec2012 $0.40
Dec2011 -$1.23
Dec2010 -$2.68
Dec2009 -$4.50
Dec2008 -$7.47
Dec2007 -$3.25
Dec2006 -$5.48
Dec2005 -$8.01
Dec2004 -$6.32
Dec2003 $0.58
Dec2002 $0.03
Dec2001 -$0.18
Dec2000 $0.42

Recommended Reading:

Other ModernGraham posts about the company

6 Best Stocks For Value Investors This Week – 5/14/16
CBS Corporation Valuation – May 2016 $CBS
5 Undervalued Companies for Value Investors with a High Beta – January 2016
12 Best Stocks For Value Investors This Week – 11/14/15
CBS Corporation Valuation – November 2015 Update $CBS

Other ModernGraham posts about related companies

Twenty-First Century Fox Inc Valuation – August 2016 $FOXA
Discovery Communications Inc Valuation – August 2016 $DISCA
Scripps Networks Valuation – July 2016 $SNI
Cablevision Systems Corp Valuation – July 2016 $CVC
Time Warner Inc Valuation – July 2016 $TWX
Comcast Corporation Valuation – June 2016 $CMCSA
Viacom Inc Valuation – June 2016 $VIAB
CBS Corporation Valuation – May 2016 $CBS
Graham Holdings Company Valuation – May 2016 $GHC
Twenty-First Century Fox Inc Valuation – February 2016 Update $FOXA

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.

CBS Corporation Valuation – May 2016 $CBS

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

Company Profile (obtained from Google Finance): CBS Corporation is a mass media company. The Company’s segments include Entertainment, Cable Networks, Publishing and Local Broadcasting. Its Entertainment segment is composed of the CBS Television Network; CBS Television Studios; CBS Global Distribution Group (composed of CBS Studios International and CBS Television Distribution); CBS Interactive, and CBS Films. The Company’s Cable Networks segment is composed of Showtime Networks; CBS Sports Network, and Smithsonian Networks. The Publishing segment is composed of Simon & Schuster, which publishes and distributes consumer books under imprints, such as Simon & Schuster, Pocket Books, Scribner, Gallery Books, Touchstone and Atria Books. The Local Broadcasting segment is composed of CBS Television Stations, its approximately 30 owned broadcast television stations, and CBS Radio, through which it owns and operates radio stations in the United States markets. It operates businesses, which span the media and entertainment industries.

[level-free]

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of CBS – May 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 $24,259,909,874 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.64 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -179.38% Fail
6. Moderate PEmg Ratio PEmg < 20 14.54 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.59 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.64 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.83 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

CBS value Chart May 2016

EPSmg $3.73
MG Growth Estimate 15.00%
MG Value $143.68
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $54.11
MG Value based on 0% Growth $31.72
Market Implied Growth Rate 3.02%
Current Price $54.28
% of Intrinsic Value 37.78%

CBS Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PB ratio. 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 Undervalued after growing its EPSmg (normalized earnings) from $0.4 in 2012 to an estimated $3.73 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.02% 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.

CBS Corporation performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

CBS Charts May 2016

Net Current Asset Value (NCAV) -$26.91
Graham Number $7.39
PEmg 14.54
Current Ratio 1.64
PB Ratio 4.59
Dividend Yield 6.92%
Number of Consecutive Years of Dividend Growth 2

[/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 Mar2016
Total Current Assets $5,534,000,000
Total Current Liabilities $3,384,000,000
Long-Term Debt $8,226,000,000
Total Assets $23,501,000,000
Intangible Assets $12,042,000,000
Total Liabilities $18,018,000,000
Shares Outstanding (Diluted Average) 464,000,000

Earnings Per Share History

Next Fiscal Year Estimate $4.04
Dec2015 $2.89
Dec2014 $5.27
Dec2013 $3.01
Dec2012 $2.39
Dec2011 $1.92
Dec2010 $1.04
Dec2009 $0.33
Dec2008 -$17.43
Dec2007 $1.73
Dec2006 $2.15
Dec2005 -$8.98
Dec2004 -$10.19
Dec2003 $0.80
Dec2002 $0.41
Dec2001 -$0.13
Dec2000 -$0.67
Dec1999 $0.45
Dec1998 -$0.21
Dec1997 $2.07
Dec1996 $3.23

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.73
Dec2015 $3.42
Dec2014 $3.36
Dec2013 $2.19
Dec2012 $0.40
Dec2011 -$1.23
Dec2010 -$2.68
Dec2009 -$4.50
Dec2008 -$6.80
Dec2007 -$1.95
Dec2006 -$3.58
Dec2005 -$5.50
Dec2004 -$3.16
Dec2003 $0.29
Dec2002 $0.01
Dec2001 -$0.02
Dec2000 $0.35

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for Value Investors with a High Beta – January 2016
12 Best Stocks For Value Investors This Week – 11/14/15
CBS Corporation Valuation – November 2015 Update $CBS
The Best Companies of the Media Entertainment Industry – October 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15

Other ModernGraham posts about related companies

Twenty-First Century Fox Inc Valuation – February 2016 Update $FOXA
Scripps Networks Interactive Inc Valuation – February 2016 Update $SNI
Walt Disney Co Valuation – December 2015 Update $DIS
Twenty-First Century Fox Inc Valuation – February 2016 Update $FOXA
Scripps Networks Interactive Inc Valuation – February 2016 Update $SNI
Walt Disney Co Valuation – December 2015 Update $DIS
Wal-Mart Stores Inc. Valuation – November 2015 Update $WMT
CBS Corporation Valuation – November 2015 Update $CBS
Time Warner Cable Inc. Valuation – November 2015 Update $TWC
News Corporation Valuation – November 2015 Update $NWSA

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.

CBS Corporation Valuation – November 2015 Update $CBS

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 – October 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 CBS Corporation (CBS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CBS Corporation is a mass media company. The Company operates through segments, including Entertainment, Cable Networks, Publishing and Local Broadcasting. The Entertainment segment is composed of the CBS Television Network, CBS Television Studios, CBS Global Distribution Group, CBS Interactive and CBS Films. The Cable Networks segment is composed of Showtime Networks, which operates program services, such as Showtime, The Movie Channel, and Flix; CBS Sports Network, and Smithsonian Networks, which operates a program service, Smithsonian Channel. The Publishing segment is composed of Simon & Schuster, which publishes and distributes consumer books under imprints such as Simon & Schuster, Pocket Books, Scribner and Atria Books. The Local Broadcasting segment is composed of CBS Television Stations, the Company’s 30 owned broadcast television stations, and CBS Radio, through which the Company owns and operates 117 radio stations in 26 United States markets.

[level-free]

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of CBS – November 2015

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,977,441,743 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.62 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -190.63% Fail
6. Moderate PEmg Ratio PEmg < 20 13.29 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.15 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.62 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.99 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

CBS value Chart November 2015

EPSmg $3.79
MG Growth Estimate 15.00%
MG Value $145.81
Opinion Undervalued
MG Value based on 3% Growth $54.92
MG Value based on 0% Growth $32.19
Market Implied Growth Rate 2.40%
Current Price $50.35
% of Intrinsic Value 34.53%

CBS Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, and the high PB ratio.  The Enterprising Investor is only initially concerned by the level of debt relative to the net current assets.  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 a loss of $1.23 in 2011 to an estimated gain of $3.79 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.4% 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 CBS Corporation (CBS)?  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

CBS Charts November 2015

Net Current Asset Value (NCAV) -$26.46
Graham Number $33.41
PEmg 13.29
Current Ratio 1.62
PB Ratio 4.15
Dividend Yield 1.19%
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

Total Current Assets $5,555,000,000
Total Current Liabilities $3,432,000,000
Long-Term Debt $8,476,000,000
Total Assets $24,239,000,000
Intangible Assets $12,660,000,000
Total Liabilities $18,360,000,000
Shares Outstanding (Diluted Average) 484,000,000

Earnings Per Share History

Next Fiscal Year Estimate $4.00
Dec14 $5.27
Dec13 $3.01
Dec12 $2.39
Dec11 $1.92
Dec10 $1.04
Dec09 $0.33
Dec08 -$17.43
Dec07 $1.73
Dec06 $2.15
Dec05 -$8.98
Dec04 -$20.37
Dec03 $1.61
Dec02 $0.82
Dec01 -$0.13
Dec00 -$0.67
Dec99 $0.45
Dec98 -$0.21
Dec97 $1.04
Dec96 $3.23
Dec95 $0.43

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.79
Dec14 $3.36
Dec13 $2.19
Dec12 $0.40
Dec11 -$1.23
Dec10 -$2.68
Dec09 -$4.50
Dec08 -$7.47
Dec07 -$3.25
Dec06 -$5.48
Dec05 -$8.00
Dec04 -$6.26
Dec03 $0.67
Dec02 $0.15
Dec01 -$0.09
Dec00 $0.21
Dec99 $0.76

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Media Entertainment Industry – October 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15
CBS Corporation Analysis – August 2015 Update $CBS
47 Companies in the Spotlight This Week – 5/16/15
58 Companies in the Spotlight This Week – 1/31/15

Other ModernGraham posts about related companies

Time Warner Cable Inc. Valuation – November 2015 Update $TWC
News Corporation Valuation – November 2015 Update $NWSA
The Best Companies of the Media Entertainment Industry – October 2015
Twenty-First Century Fox Inc. Valuation – October 2015 Update $FOXA
Graham Holdings Company Analysis – September 2015 Update $GHC
Scripps Networks Interactive Inc. Analysis – September 2015 Update $SNI
AMC Networks Inc. Analysis – Initial Coverage $AMCX
CBS Corporation Analysis – August 2015 Update $CBS
Twenty-First Century Fox Analysis – July 2015 Update $FOXA
Discovery Communications Analysis – 2015 Annual Update $DISCA

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.

CBS Corporation Analysis – August 2015 Update $CBS

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 5 Most Undervalued Companies for the Defensive Investor – July 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 CBS Corporation (CBS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CBS Corporation is a mass media company. The Company operates through segments, including Entertainment, Cable Networks, Publishing and Local Broadcasting. The Entertainment segment is composed of the CBS Television Network, CBS Television Studios, CBS Global Distribution Group, CBS Interactive and CBS Films. The Cable Networks segment is composed of Showtime Networks, which operates program services, such as Showtime, The Movie Channel, and Flix; CBS Sports Network, and Smithsonian Networks, which operates a program service, Smithsonian Channel. The Publishing segment is composed of Simon & Schuster, which publishes and distributes consumer books under imprints such as Simon & Schuster, Pocket Books, Scribner and Atria Books. The Local Broadcasting segment is composed of CBS Television Stations, the Company’s 30 owned broadcast television stations, and CBS Radio, through which the Company owns and operates 117 radio stations in 26 United States markets.

[level-free]

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.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of CBS – August 2015

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

What kind of Intelligent Investor are you?

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

Stage 2: Determination of Intrinsic Value

EPSmg 3.53
MG Growth Estimate 15.00%
MG Value $136.06
Opinion Undervalued
MG Value based on 3% Growth $51.24
MG Value based on 0% Growth $30.04
Market Implied Growth Rate 2.84%
Current Price $50.09
% of Intrinsic Value 36.81%

CBS Corporation qualifies for the Enterprising Investor but is not suitable for the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, and the high PB ratio.  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 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 a loss of $1.23 in 2011 to an estimated gain of $3.53 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.84% 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 CBS Corporation (CBS)?  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

CBS charts August 2015

 

Net Current Asset Value (NCAV) -$25.19
PEmg 14.17
Current Ratio 1.51
PB Ratio 4.16
Dividend Yield 1.20%
Number of Consecutive Years of Dividend Growth 5

 

Useful Links:

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

Most Recent Balance Sheet Figures

Total Current Assets $5,232,000,000
Total Current Liabilities $3,467,000,000
Long-Term Debt $7,686,000,000
Total Assets $23,662,000,000
Intangible Assets $12,660,000,000
Total Liabilities $17,699,000,000
Outstanding Shares 495,000,000

Earnings Per Share History

Next Fiscal Year Estimate $3.24
Dec14 $5.27
Dec13 $3.01
Dec12 $2.39
Dec11 $1.92
Dec10 $1.04
Dec09 $0.33
Dec08 -$17.43
Dec07 $1.73
Dec06 $2.15
Dec05 -$8.98
Dec04 -$20.37
Dec03 $1.61
Dec02 $0.82
Dec01 -$0.13
Dec00 -$0.67
Dec99 $0.45
Dec98 -$0.21
Dec97 $1.04
Dec96 $3.23
Dec95 $0.43

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.53
Dec14 $3.36
Dec13 $2.19
Dec12 $0.40
Dec11 -$1.23
Dec10 -$2.68
Dec09 -$4.50
Dec08 -$7.47
Dec07 -$3.25
Dec06 -$5.48
Dec05 -$8.00
Dec04 -$6.26
Dec03 $0.67
Dec02 $0.15
Dec01 -$0.09
Dec00 $0.21
Dec99 $0.76

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.

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

CBS Corporation Quarterly Valuation – May 2015 $CBS

CBS-CorporationBenjamin 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 – April 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 specific look at how CBS Corporation (CBS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CBS Corporation operates businesses which span the media and entertainment industries. The Company operates in four segments. The Entertainment segment includes the CBS Television Network; CBS Television Studios; CBS Global Distribution Group (composed of CBS Studios International and CBS Television Distribution); CBS Films, and CBS Interactive. The Cable Networks segment includes Showtime Networks, the Company’s subscription program services; CBS Sports Network, the Company’s cable network focused on college athletics and other sports; and Smithsonian Networks, which operates Smithsonian Channel, a basic cable program service. The Publishing segment is composed of Simon & Schuster, which publishes and distributes consumer books. The Local Broadcasting segment includes CBS Television Stations, the Company’s 30 owned broadcast television stations, and CBS Radio, through which the Company owns and operates 126 radio stations in 27 United States markets.

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 -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 – PASS
  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 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

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

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

Valuation Summary

Key Data:

Recent Price $59.72
MG Value $140.29
MG Opinion Undervalued
Value Based on 3% Growth $52.84
Value Based on 0% Growth $30.97
Market Implied Growth Rate 3.94%
Net Current Asset Value (NCAV) -$24.05
PEmg 16.39
Current Ratio 1.69
PB Ratio 4.72

Balance Sheet – March 2015

Current Assets $5,220,000,000
Current Liabilities $3,092,000,000
Total Debt $7,693,000,000
Total Assets $23,786,000,000
Intangible Assets $12,666,000,000
Total Liabilities $17,389,000,000
Outstanding Shares 506,000,000

Earnings Per Share

2015 (estimate) $3.57
2014 $5.27
2013 $3.01
2012 $2.39
2011 $1.92
2010 $1.04
2009 $0.33
2008 -$17.43
2007 $1.73
2006 $2.15
2005 -$8.98

Earnings Per Share – ModernGraham

2015 (estimate) $3.64
2014 $3.36
2013 $2.19
2012 $0.40
2011 -$1.23
2010 -$2.68

Dividend History

Conclusion:

CBS Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, the insufficient earnings growth or stability over the last ten years, and the high PB ratio, while the Enterprising Investor is only concerned by the level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $1.23 in 2011 to an estimated gain of $3.64 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 3.94% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the price.

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 CBS Corporation (CBS)?  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 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.

CBS Corporation Quarterly Valuation – January 2015 $CBS

CBS-CorporationBenjamin 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 CBS Corporation (CBS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CBS Corporation is a mass media company. The Company has operations in segments, which include Entertainment, Cable Networks, Publishing, Local Broadcasting and Outdoor. During the year ended December 31, 2011, contributions to the Company’s consolidated revenues from its segments were Entertainment 52%, Cable Networks 11%, Publishing 6%, Local Broadcasting 19% and Outdoor 13%. During 2011, it generated approximately 15% of its total revenues from international regions. Effective March 26, 2013, the Company acquired 50% interest in The TV Guide Network from Lions Gate Entertainment Corp. In June 2013, the Company acquired TV Guide Digital, which includes the popular TVGuide.com and TV Guide Mobile properties. In October 2013, Platinum Equity and CBS Corporation announced that an affiliate of Platinum Equity acquired the assets of CBS Outdoor International (CBSO International).

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – 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 – PASS
  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 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

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

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

Valuation Summary

Key Data:

Recent Price $55.88
MG Value $129.59
MG Opinion Undervalued
Value Based on 3% Growth $48.81
Value Based on 0% Growth $28.61
Market Implied Growth Rate 4.05%
Net Current Asset Value (NCAV) -$19.45
PEmg 16.60
Current Ratio 1.59
PB Ratio 4.02

Balance Sheet – September 2014

Current Assets $5,404,000,000
Current Liabilities $3,397,000,000
Total Debt $6,508,000,000
Total Assets $23,455,000,000
Intangible Assets $12,457,000,000
Total Liabilities $15,929,000,000
Outstanding Shares 541,000,000

Earnings Per Share

2014 (estimate) $5.28
2013 $3.01
2012 $2.39
2011 $1.92
2010 $1.04
2009 $0.33
2008 -$17.43
2007 $1.73
2006 $2.15
2005 -$8.98
2004 -$20.37

Earnings Per Share – ModernGraham

2014 (estimate) $3.37
2013 $2.19
2012 $0.40
2011 -$1.23
2010 -$2.68
2009 -$4.50

Dividend History

Conclusion:

CBS Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, lack of sufficient earnings stability or growth over the last ten years, along with the high PB ratio. The Enterprising Investor is only concerned by the level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $2.68 in 2010 to an estimated gain of $3.37 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 4.05% 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 CBS Corporation (CBS) 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 CBS Corporation (CBS)?  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 CBS Corporation (CBS) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

ModernGraham Valuation: CBS Corp (CBS)

moneyCompany Profile (obtained from Google Finance): CBS Corporation is a mass media company. The Company has operations in segments, which include Entertainment, Cable Networks, Publishing, Local Broadcasting and Outdoor. During the year ended December 31, 2011, contributions to the Company’s consolidated revenues from its segments were Entertainment 52%, Cable Networks 11%, Publishing 6%, Local Broadcasting 19% and Outdoor 13%. During 2011, it generated approximately 15% of its total revenues from international regions. Effective March 26, 2013, the Company acquired 50% interest in The TV Guide Network from Lions Gate Entertainment Corp. In June 2013, the Company acquired TV Guide Digital, which includes the popular TVGuide.com and TV Guide Mobile properties. In October 2013, Platinum Equity and CBS Corporation announced that an affiliate of Platinum Equity acquired the assets of CBS Outdoor International (CBSO International).

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 = 2/7

  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 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  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 – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary (Explanation of the ModernGraham Valuation Model)

Key Data:

MG Value $84.78
MG Opinion Undervalued
Value Based on 3% Growth $31.93
Value Based on 0% Growth $18.72
Market Implied Growth Rate 10.00%
Net Current Asset Value (NCAV) -$18.86
PEmg 28.49
Current Ratio 1.30
PB Ratio 3.90

Balance Sheet – 9/30/2013 

Current Assets $4,892,000,000
Current Liabilities $3,753,000,000
Total Debt $5,944,000,000
Total Assets $25,895,000,000
Intangible Assets $15,024,000,000
Total Liabilities $16,224,000,000
Outstanding Shares 601,000,000

Earnings Per Share

2013 (estimate) $3.00
2012 $2.48
2011 $1.90
2010 $1.04
2009 $0.33
2008 -$17.43
2007 $1.70
2006 $1.79
2005 -$10.54
2004 -$8.78
2003 $0.82

Earnings Per Share – ModernGraham 

2013 (estimate) $2.20
2012 $0.42
2011 -$1.23
2010 -$2.71
2009 -$4.66
2008 -$6.99

Conclusion:

CBS Corp is a company that has seen a surge over the last few years, growing EPSmg (normalized earnings) from -$6.99 in 2008 to an estimated $2.20 for 2013.  However, the company does not satisfy the requirements for either the Defensive Investor or Enterprising Investor.  The current ratio is too low for either investor type, the company had some negative earnings years in the 10 year period, the earnings have not grown sufficiently over the 10 year period, and the PEmg ratio is too high.  As a result, Intelligent Investors seeking to follow Benjamin Graham’s value investing methods may wish to seek other opportunities by reviewing other companies that do pass these requirements.  From a valuation side, due to the solid growth in earnings recently, the company fares well, and would appear to be undervalued at the present time.

What do you think?  Do you agree that CBS Corp is undervalued?  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 CBS Corp (CBS) at the time of publication and had no intention of changing that position within the next 72 hours.

Photo Credit:  Andrew Magill

News Corp Valuation – March 2019 #NWSA

Company Profile (excerpt from Reuters): News Corporation, incorporated on December 11, 2012, is a global diversified media and information services company focused on creating and distributing content to consumers and businesses throughout the world. The Company’s operations are organized into five segments: News and Information Services; Book Publishing; Digital Real Estate Services; Cable Network Programming, and Other. The Company comprises businesses across a range of media, including news and information services, book publishing, digital real estate services, cable network programming in Australia and pay-television distribution in Australia, that are distributed under brands, including The Wall Street Journal, Dow Jones, The Australian, Herald Sun, The Sun, The Times, HarperCollins Publishers, FOX SPORTS Australia, realestate.com.au, realtor.com and Foxtel, among others. The Company also owns a stake in Foxtel, a pay-television provider in Australia, which is accounted for as an equity investment. The Company operates primarily in the United States, Australia and the United Kingdom, and its content is distributed and consumed across the world. The Company delivers its content to consumers across numerous distribution platforms consisting not only of traditional print and television, but also through an array of digital platforms, including Websites, applications for mobile devices and tablets, social media and e-book devices.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NWSA – March 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,577,227,483 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.19 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 46.47% Pass
6. Moderate PEmg Ratio PEmg < 20 -15.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.73 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 1.19 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.31 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.81
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$11.76
MG Value based on 0% Growth -$6.90
Market Implied Growth Rate -12.23%
Current Price $12.95
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $-0.2 in 2015 to an estimated $-0.81 for 2019. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into News Corp Class A revealed the company was trading above its Graham Number of $11.04. The company pays a dividend of $0.2 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was -15.96, which was below the industry average of 35.38, 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 $-2.32.

News Corp Class A 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) -$2.32
Graham Number $11.04
PEmg -15.96
Current Ratio 1.19
PB Ratio 0.73
Current Dividend $0.20
Dividend Yield 1.54%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

 

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,429,000,000
Total Current Liabilities $3,712,000,000
Long-Term Debt $936,000,000
Total Assets $16,227,000,000
Intangible Assets $7,796,000,000
Total Liabilities $5,793,000,000
Shares Outstanding (Diluted Average) 587,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.34
Jun2018 -$2.60
Jun2017 -$1.27
Jun2016 $0.30
Jun2015 -$0.26
Jun2014 $0.41
Jun2013 $0.87
Jun2012 -$3.58
Jun2011 $1.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.81
Jun2018 -$1.15
Jun2017 -$0.28
Jun2016 -$0.01
Jun2015 -$0.20
Jun2014 -$0.19
Jun2013 -$0.43
Jun2012 -$0.88
Jun2011 $0.39

Recommended Reading:

Other ModernGraham posts about the company

News Corp Valuation – February 2017 $NWSA
5 Speculative and Overvalued Companies to Avoid – November 2015
News Corporation Valuation – November 2015 Update $NWSA
27 Companies in the Spotlight This Week – 11/8/14
News Corp Annual Valuation – 2014 $NWSA

Other ModernGraham posts about related companies

CBS Corp Valuation – February 2019 $CBS
Discovery Inc Valuation – February 2019 $DISCA
Comcast Corp Valuation – January 2019 $CMCSA
Viacom Inc Valuation – January 2019 $VIAB
Twenty-First Century Fox Inc Valuation – January 2019 $FOX
Walt Disney Co Valuation – November 2018 $DIS
Tegna Inc Valuation – August 2018 $TGNA
E.W. Scripps Co Valuation – August 2018 $SSP
Cinemark Holdings Inc Valuation – August 2018 $CNK
Corus Entertainment Inc Valuation – July 2018 $TSE:CJR.B

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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