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Chevron Corp Valuation – April 2019 #CVX

Company Profile (excerpt from Reuters): Chevron Corporation (Chevron), incorporated on January 27, 1926, manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to the United States and international subsidiaries that engage in integrated energy and chemicals operations. The Company operates through two business segments: Upstream and Downstream. Upstream operations consist primarily of exploring for, developing and producing crude oil and natural gas; liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transporting crude oil by international oil export pipelines; processing, transporting, storage and marketing of natural gas, and a gas-to-liquids plant. Downstream operations consist primarily of refining of crude oil into petroleum products; marketing of crude oil and refined products; transporting of crude oil and refined products by pipeline, marine vessel, motor equipment and rail car, and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CVX – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $240,205,960,980 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.25 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 -49.28% Fail
6. Moderate PEmg Ratio PEmg < 20 24.83 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.55 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.25 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.19 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 $5.09
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $73.82
MG Value based on 0% Growth $43.28
Market Implied Growth Rate 8.17%
Current Price $126.42
% of Intrinsic Value N/A

Chevron 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, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings 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 $8.41 in 2015 to an estimated $5.09 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Chevron Corporation revealed the company was trading above its Graham Number of $102.65. The company pays a dividend of $4.48 per share, for a yield of 3.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.83, which was below the industry average of 52.47, 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 $-33.68.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$33.68
Graham Number $102.65
PEmg 24.83
Current Ratio 1.25
PB Ratio 1.55
Current Dividend $4.48
Dividend Yield 3.54%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $34,021,000,000
Total Current Liabilities $27,171,000,000
Long-Term Debt $28,733,000,000
Total Assets $253,863,000,000
Intangible Assets $4,518,000,000
Total Liabilities $98,221,000,000
Shares Outstanding (Diluted Average) 1,906,314,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.79
Dec2018 $7.74
Dec2017 $4.85
Dec2016 -$0.27
Dec2015 $2.45
Dec2014 $10.14
Dec2013 $11.09
Dec2012 $13.32
Dec2011 $13.44
Dec2010 $9.48
Dec2009 $5.24
Dec2008 $11.67
Dec2007 $8.77
Dec2006 $7.80
Dec2005 $6.54
Dec2004 $6.28
Dec2003 $3.48
Dec2002 $0.53
Dec2001 $1.55
Dec2000 $3.99
Dec1999 $1.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.09
Dec2018 $4.82
Dec2017 $4.13
Dec2016 $4.96
Dec2015 $8.41
Dec2014 $11.43
Dec2013 $11.55
Dec2012 $11.40
Dec2011 $10.20
Dec2010 $8.58
Dec2009 $8.09
Dec2008 $9.08
Dec2007 $7.38
Dec2006 $6.10
Dec2005 $4.72
Dec2004 $3.60
Dec2003 $2.25

Recommended Reading:

Other ModernGraham posts about the company

5 Overvalued Dow Components – April 2019
5 Overvalued Dow Components – January 2019
Chevron Corp Valuation – November 2018 $CVX
5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018

Other ModernGraham posts about related companies

Pioneer Natural Resources Co Valuation – April 2019 #PXD
Schlumberger NV Valuation – March 2019 #SLB
Anadarko Petroleum Corp Valuation – March 2019 #APC
Apache Corp Valuation – March 2019 #APA
Cabot Oil & Gas Corp Valuation – March 2019 #COG
Concho Resources Inc Valuation – March 2019 #CXO
Valero Energy Corp Valuation – March 2019 #VLO
Occidental Petroleum Corp Valuation – March 2019 #OXY
Phillips 66 Valuation – March 2019 #PSX
Halliburton Co Valuation – March 2019 #HAL

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.

Apache Corp Valuation – March 2019 #APA

Company Profile (excerpt from Reuters): Apache Corporation, incorporated on December 6, 1954, is an independent energy company. Both domestically and internationally, the Company explores for, develops, and produces natural gas, crude oil and natural gas liquids. The Company’s production segments include: the United States, Egypt and the United Kingdom North Sea. It also pursues exploration interests in Suriname.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of APA – 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 $13,221,778,646 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.22 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 -87.12% Fail
6. Moderate PEmg Ratio PEmg < 20 -20.52 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.52 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 1.22 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 16.57 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg -$1.72
MG Growth Estimate 12.93%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$24.89
MG Value based on 0% Growth -$14.59
Market Implied Growth Rate -14.51%
Current Price $35.22
% of Intrinsic Value N/A

Apache 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, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 growing its EPSmg (normalized earnings) from $-12.42 in 2015 to an estimated $-1.72 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 Apache Corporation revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -20.52, which was below the industry average of 58.42, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.46.

Apache 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) -$26.46
Graham Number $0.00
PEmg -20.52
Current Ratio 1.22
PB Ratio 1.52
Current Dividend $1.00
Dividend Yield 2.84%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,687,000,000
Total Current Liabilities $2,201,000,000
Long-Term Debt $8,054,000,000
Total Assets $21,582,000,000
Intangible Assets $0
Total Liabilities $12,770,000,000
Shares Outstanding (Diluted Average) 381,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.32
Dec2018 $0.11
Dec2017 $3.41
Dec2016 -$3.71
Dec2015 -$27.40
Dec2014 -$21.76
Dec2013 $5.50
Dec2012 $4.92
Dec2011 $11.47
Dec2010 $8.46
Dec2009 -$0.87
Dec2008 $2.09
Dec2007 $8.39
Dec2006 $7.64
Dec2005 $7.84
Dec2004 $5.03
Dec2003 $3.43
Dec2002 $1.80
Dec2001 $2.25
Dec2000 $2.46
Dec1999 $0.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.72
Dec2018 -$4.90
Dec2017 -$7.87
Dec2016 -$11.83
Dec2015 -$12.42
Dec2014 -$2.71
Dec2013 $6.51
Dec2012 $6.41
Dec2011 $6.74
Dec2010 $4.63
Dec2009 $3.49
Dec2008 $5.84
Dec2007 $7.30
Dec2006 $6.22
Dec2005 $5.03
Dec2004 $3.42
Dec2003 $2.45

Recommended Reading:

Other ModernGraham posts about the company

Apache Corp Valuation – June 2018 $APA
Apache Corp Valuation – April 2017 $APA
Apache Corporation Valuation – January 2016 Update $APA
32 Companies in the Spotlight This Week – 12/6/14
Apache Corporation Annual Valuation – 2014 $APA

Other ModernGraham posts about related companies

Cabot Oil & Gas Corp Valuation – March 2019 #COG
Concho Resources Inc Valuation – March 2019 #CXO
Valero Energy Corp Valuation – March 2019 #VLO
Occidental Petroleum Corp Valuation – March 2019 #OXY
Phillips 66 Valuation – March 2019 #PSX
Halliburton Co Valuation – March 2019 #HAL
Kinder Morgan Inc Valuation – February 2019 $KMI
National Oilwell Varco Inc Valuation – February 2019 $NOV
Diamondback Energy Inc Valuation – February 2019 $FANG
TechnipFMC PLC Valuation – February 2019 $FTI

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.

Archer-Daniels Midland Co Valuation – February 2019 $ADM

Company Profile (excerpt from Reuters): Archer-Daniels-Midland Company, incorporated on May 2, 1923, is a processor of oilseeds, corn, wheat, cocoa and other agricultural commodities. The Company manufactures protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other food and feed ingredients. The Company’s segments include Agricultural Services, Corn Processing, Oilseeds Processing, Wild Flavors and Specialty Ingredients, Other and Corporate. Its geographical segments include the United States, Switzerland, Cayman Islands and Germany. The Company also has a global grain elevator and transportation network to procure, store, clean and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats and barley, as well as processed agricultural commodities. The Company is engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. The Company also processes corn, oilseeds, and wheat into products for food, animal feed, chemical and energy uses.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ADM – 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 $23,798,182,550 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.75 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 15.81% Fail
6. Moderate PEmg Ratio PEmg < 20 14.26 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.27 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.75 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.87 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.98
MG Growth Estimate 1.15%
MG Value $32.19
Opinion Overvalued
MG Grade A-
MG Value based on 3% Growth $43.19
MG Value based on 0% Growth $25.32
Market Implied Growth Rate 2.88%
Current Price $42.49
% of Intrinsic Value 132.00%

Archer Daniels Midland Co 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 growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.77 in 2015 to an estimated $2.98 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.88% 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 Archer Daniels Midland Co revealed the company was trading below its Graham Number of $49.76. The company pays a dividend of $1.34 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.26, which was below the industry average of 26.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.2.

Archer Daniels Midland Co fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.20
Graham Number $49.76
PEmg 14.26
Current Ratio 1.75
PB Ratio 1.27
Current Dividend $1.34
Dividend Yield 3.15%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $20,588,000,000
Total Current Liabilities $11,776,000,000
Long-Term Debt $7,698,000,000
Total Assets $40,833,000,000
Intangible Assets $4,041,000,000
Total Liabilities $21,837,000,000
Shares Outstanding (Diluted Average) 567,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.25
Dec2018 $3.19
Dec2017 $2.79
Dec2016 $2.16
Dec2015 $2.98
Dec2014 $3.43
Dec2013 $2.02
Jun2012 $1.84
Jun2011 $3.13
Jun2010 $3.00
Jun2009 $2.62
Jun2008 $2.79
Jun2007 $3.30
Jun2006 $2.00
Jun2005 $1.59
Jun2004 $0.76
Jun2003 $0.70
Jun2002 $0.78
Jun2001 $0.55
Jun2000 $0.41
Jun1999 $0.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.98
Dec2018 $2.87
Dec2017 $2.69
Dec2016 $2.59
Dec2015 $2.77
Dec2014 $2.67
Dec2013 $2.36
Jun2012 $2.58
Jun2011 $2.96
Jun2010 $2.83
Jun2009 $2.65
Jun2008 $2.47
Jun2007 $2.10
Jun2006 $1.39
Jun2005 $1.01
Jun2004 $0.70
Jun2003 $0.63

Recommended Reading:

Other ModernGraham posts about the company

Archer-Daniels Midland Co Valuation – May 2018 $ADM
Archer Daniels Midland Company Valuation – January 2017 $ADM
Archer Daniels Midland Co – August 2016 $ADM
Archer-Daniels Midland Co Valuation – February 2016 $ADM
Archer Daniels Midland Valuation – November 2015 Update $ADM

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Kellogg Co Valuation – January 2019 $K
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The Hershey Co Valuation – January 2019 $HSY
Coca-Cola Co Valuation – November 2018 $KO
Calavo Growers Inc Valuation – October 2018 $CVGW
Lancaster Colony Corp Valuation – August 2018 $LANC
SpartanNash Co Valuation – August 2018 $SPTN
Core-Mark Holding Co Inc Valuation – August 2018 $CORE

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.

Paychex Inc Valuation – January 2019 $PAYX

Company Profile (excerpt from Reuters): Paychex, Inc., incorporated on April 26, 1979, is a provider of integrated human capital management (HCM) solutions for payroll, human resource (HR), retirement and insurance services for small- to medium-sized businesses in the United States. The Company also has operations in Germany. The Company offers services, including Payroll processing, Human Resource Services and Accounting and Financial Services. As of May 31, 2016, the Company serviced approximately 605,000 payroll clients. It offers a portfolio of HCM services and products that allows its clients to meet their payroll and HR needs. Its payroll-related ancillary services and human resource service (HRS) offerings often leverage the information gathered in the base payroll processing service, allowing it to provide outsourcing services covering the HCM spectrum. It also offers professional employer organization (PEO) services and provides insurance offerings through the Paychex Insurance Agency, Inc. (PIA).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PAYX – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,793,370,427 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.23 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 79.53% Pass
6. Moderate PEmg Ratio PEmg < 20 26.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.86 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 1.23 Fail
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

EPSmg $2.47
MG Growth Estimate 7.07%
MG Value $56.02
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $35.86
MG Value based on 0% Growth $21.02
Market Implied Growth Rate 9.12%
Current Price $66.16
% of Intrinsic Value 118.10%

Paychex, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the low current ratio. 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 $1.68 in 2015 to an estimated $2.47 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.12% 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 Paychex, Inc. revealed the company was trading above its Graham Number of $18.85. The company pays a dividend of $2.06 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 26.75, which was above the industry average of 26.19. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.97.

Paychex, 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) $1.97
Graham Number $18.85
PEmg 26.75
Current Ratio 1.23
PB Ratio 9.86
Current Dividend $2.06
Dividend Yield 3.11%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 11/1/2018
Total Current Assets $5,290,000,000
Total Current Liabilities $4,306,800,000
Long-Term Debt $0
Total Assets $7,002,400,000
Intangible Assets $938,600,000
Total Liabilities $4,577,900,000
Shares Outstanding (Diluted Average) 361,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.80
May2018 $2.58
May2017 $2.25
May2016 $2.09
May2015 $1.85
May2014 $1.71
May2013 $1.56
May2012 $1.51
May2011 $1.42
May2010 $1.32
May2009 $1.48
May2008 $1.56
May2007 $1.35
May2006 $1.22
May2005 $0.97
May2004 $0.80
May2003 $0.78
May2002 $0.73
May2001 $0.68
May2000 $0.51
May1999 $0.25

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.47
May2018 $2.24
May2017 $2.01
May2016 $1.84
May2015 $1.68
May2014 $1.57
May2013 $1.48
May2012 $1.45
May2011 $1.42
May2010 $1.41
May2009 $1.41
May2008 $1.31
May2007 $1.13
May2006 $0.98
May2005 $0.84
May2004 $0.75
May2003 $0.68

Recommended Reading:

Other ModernGraham posts about the company

Paychex Inc Valuation – March 2018 $PAYX
Paychex Inc Valuation – June 2016 $PAYX
Paychex Inc. Valuation – November 2015 Update $PAYX
Paychex Inc. Analysis – August 2015 Update $PAYX
30 Companies in the Spotlight This Week – 5/23/15

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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.

Air Products & Chemicals Inc Valuation – January 2019 $APD

Company Profile (excerpt from Reuters): Air Products and Chemicals, Inc., incorporated on May 25, 1961, is an industrial gases company. The Company’s Industrial Gases business provides atmospheric and process gases and related equipment to manufacturing markets, including refining and petrochemical, metals, electronics, and food and beverage. The Company is also a supplier of liquefied natural gas process technology and equipment. The Company operates through five segments: Industrial Gases-Americas, Industrial Gases-Europe, Middle East, and Africa (EMEA), Industrial Gases-Asia, Industrial Gases-Global, and Corporate and other.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of APD – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $34,708,500,605 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.17 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 80.14% Pass
6. Moderate PEmg Ratio PEmg < 20 19.76 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.13 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 2.17 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.22 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.00
MG Growth Estimate 7.96%
MG Value $195.30
Opinion Fairly Valued
MG Grade A-
MG Value based on 3% Growth $115.98
MG Value based on 0% Growth $67.99
Market Implied Growth Rate 5.63%
Current Price $158.09
% of Intrinsic Value 80.95%

Air Products & Chemicals, 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 is only concerned with the level of debt relative to the net current assets. 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 Fairly Valued after growing its EPSmg (normalized earnings) from $5.23 in 2015 to an estimated $8 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 5.63% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Air Products & Chemicals, Inc. revealed the company was trading above its Graham Number of $94.7. The company pays a dividend of $4.25 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.76, which was below the industry average of 20.47, 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 $-13.21.

Air Products & Chemicals, Inc. fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$13.21
Graham Number $94.70
PEmg 19.76
Current Ratio 2.17
PB Ratio 3.13
Current Dividend $4.25
Dividend Yield 2.69%
Number of Consecutive Years of Dividend Growth 20

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 $5,082,200,000
Total Current Liabilities $2,338,300,000
Long-Term Debt $3,351,700,000
Total Assets $19,178,300,000
Intangible Assets $1,227,400,000
Total Liabilities $8,002,000,000
Shares Outstanding (Diluted Average) 221,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.05
Sep2018 $6.78
Sep2017 $13.65
Sep2016 $2.89
Sep2015 $5.88
Sep2014 $4.61
Sep2013 $4.68
Sep2012 $5.44
Sep2011 $5.63
Sep2010 $4.74
Sep2009 $2.96
Sep2008 $4.15
Sep2007 $4.64
Sep2006 $3.18
Sep2005 $0.03
Sep2004 $0.03
Sep2003 $1.78
Sep2002 $2.36
Sep2001 $2.12
Sep2000 $0.57
Sep1999 $2.09

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.00
Sep2018 $7.57
Sep2017 $7.42
Sep2016 $4.44
Sep2015 $5.23
Sep2014 $4.94
Sep2013 $4.97
Sep2012 $4.93
Sep2011 $4.60
Sep2010 $4.03
Sep2009 $3.45
Sep2008 $3.26
Sep2007 $2.52
Sep2006 $1.47
Sep2005 $0.83
Sep2004 $1.28
Sep2003 $1.86

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – August 2018
Best Dividend Paying Stocks for Dividend Growth Investors – June 2018
Best Dividend Paying Stocks for Dividend Growth Investors – April 2018
Air Products & Chemicals Inc Valuation – March 2018 $APD
Air Products & Chemicals Inc Valuation – January 2017 $APD

Other ModernGraham posts about related companies

LyondellBasell Industries NV Valuation – January 2019 $LYB
Eastman Chemical Co Valuation – January 2019 $EMN
DowDuPont Inc Valuation – November 2018 $DWDP
Chemtrade Logistics Income Fund Valuation – July 2018 $TSE:CHE.UN
PPG Industries Inc Valuation – May 2018 $PPG
Innospec Inc Valuation – April 2018 $IOSP
Innophos Holdings Inc Valuation – March 2018 $IPHS
Olin Corp Valuation – March 2018 $OLN
A Schulman Inc Valuation – March 2018 $SHLM
FMC Corp Valuation – March 2018 $FMC

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.

Henry Schein Inc Valuation – January 2019 $HSIC

Company Profile (excerpt from Reuters): Henry Schein, Inc., incorporated on December 23, 1992, is a provider of healthcare products and services primarily to office-based dental, animal health and medical practitioners. The Company operates through two segments: healthcare distribution, and technology and value-added services. The Company provides its services to dental practitioners and laboratories, animal health clinics and physician practices, as well as government, institutional healthcare clinics and other alternate care clinics. As of December 31, 2016, the Company operated in 33 countries, including the United States, Australia, Austria, Belgium, Brazil, Canada, Chile, China, the Czech Republic, Denmark, France, Germany, Hong Kong Special Administrative Region, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia, the Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, South Africa, Spain, Sweden, Switzerland, Thailand and the United Kingdom.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HSIC – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,356,631,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 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 71.93% Pass
6. Moderate PEmg Ratio PEmg < 20 24.03 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.35 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 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.04 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.10
MG Growth Estimate 4.56%
MG Value $54.64
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $44.95
MG Value based on 0% Growth $26.35
Market Implied Growth Rate 7.77%
Current Price $74.50
% of Intrinsic Value 136.35%

Henry Schein, 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 low current ratio, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.38 in 2014 to an estimated $3.1 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.77% 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 Henry Schein, Inc. revealed the company was trading above its Graham Number of $39.02. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 24.03, which was below the industry average of 52.7, 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 $-5.08.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.08
Graham Number $39.02
PEmg 24.03
Current Ratio 1.30
PB Ratio 3.35
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $4,193,952,000
Total Current Liabilities $3,229,785,000
Long-Term Debt $1,000,315,000
Total Assets $8,390,310,000
Intangible Assets $3,303,882,000
Total Liabilities $4,973,594,000
Shares Outstanding (Diluted Average) 153,614,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.70
Dec2017 $2.57
Dec2016 $3.10
Dec2015 $2.85
Dec2014 $2.72
Dec2013 $2.47
Dec2012 $2.16
Dec2011 $1.99
Dec2010 $1.75
Dec2009 $1.72
Dec2008 $1.32
Dec2007 $1.18
Dec2006 $0.91
Dec2005 $0.79
Dec2004 $0.33
Dec2003 $0.36
Dec2002 $0.31
Dec2001 $0.25
Dec2000 $0.34
Dec1999 $0.30
Dec1998 $0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.10
Dec2017 $2.78
Dec2016 $2.81
Dec2015 $2.59
Dec2014 $2.38
Dec2013 $2.14
Dec2012 $1.92
Dec2011 $1.73
Dec2010 $1.52
Dec2009 $1.33
Dec2008 $1.06
Dec2007 $0.86
Dec2006 $0.65
Dec2005 $0.48
Dec2004 $0.32
Dec2003 $0.32
Dec2002 $0.29

Recommended Reading:

Other ModernGraham posts about the company

Henry Schein Inc Valuation – March 2018 $HSIC
Henry Schein Inc Valuation – July 2016 $HSIC
Henry Schein Inc Valuation – February 2016 Update $HSIC
Henry Schein Inc. Valuation – October 2015 Update $HSIC
The Best Companies of the Medical Industry – September 2015

Other ModernGraham posts about related companies

UnitedHealth Group Inc Valuation – November 2018 $UNH
Luminex Corp Valuation – October 2018 $LMNX
LHC Group Inc Valuation – September 2018 $LHCG
Chartwell Retirement Residences Valuation – August 2018 $TSE:CSH.UN
STERIS PLC Valuation – August 2018 $STE
CryoLife Inc Valuation – August 2018 $CRY
Charles River Laboratories International Inc Valuation – August 2018 $CRL
Surmodics Inc Valuation – August 2018 $SRDX
Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC

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.

Eastman Chemical Co Valuation – January 2019 $EMN

Company Profile (excerpt from Reuters): Eastman Chemical Company (Eastman), incorporated on July 29, 1993, is an advanced materials and specialty additives company that produces a range of advanced materials, specialty additives, chemicals, and fibers found in items people use every day. The Company operates through four segments: Additives & Functional Products (AFP), Advanced Materials (AM), Chemical Intermediates (CI), and Fibers. As of December 31, 2016, the Company had 49 manufacturing sites and equity interests in six manufacturing joint ventures in 14 countries that supplied products to customers throughout the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EMN – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,141,841,383 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.69 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 188.41% Pass
6. Moderate PEmg Ratio PEmg < 20 9.42 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.72 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.95 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 $7.69
MG Growth Estimate 7.98%
MG Value $188.07
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $111.52
MG Value based on 0% Growth $65.38
Market Implied Growth Rate 0.46%
Current Price $72.42
% of Intrinsic Value 38.51%

Eastman Chemical Company qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. 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 $5.02 in 2014 to an estimated $7.69 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.46% 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 Eastman Chemical Company revealed the company was trading below its Graham Number of $86.45. The company pays a dividend of $2.09 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.42, which was below the industry average of 20.47, 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 $-47.19.

Eastman Chemical Company fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$47.19
Graham Number $86.45
PEmg 9.42
Current Ratio 1.69
PB Ratio 1.72
Current Dividend $2.09
Dividend Yield 2.89%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,647,000,000
Total Current Liabilities $2,153,000,000
Long-Term Debt $5,898,000,000
Total Assets $16,362,000,000
Intangible Assets $6,740,000,000
Total Liabilities $10,367,000,000
Shares Outstanding (Diluted Average) 142,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.79
Dec2017 $9.47
Dec2016 $5.75
Dec2015 $5.66
Dec2014 $4.97
Dec2013 $7.44
Dec2012 $2.93
Dec2011 $4.52
Dec2010 $2.88
Dec2009 $0.93
Dec2008 $2.28
Dec2007 $1.79
Dec2006 $2.46
Dec2005 $3.41
Dec2004 $1.09
Dec2003 -$1.75
Dec2002 $0.40
Dec2001 -$1.14
Dec2000 $1.97
Dec1999 $0.31
Dec1998 $1.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.69
Dec2017 $6.98
Dec2016 $5.61
Dec2015 $5.39
Dec2014 $5.02
Dec2013 $4.61
Dec2012 $3.03
Dec2011 $2.88
Dec2010 $2.06
Dec2009 $1.83
Dec2008 $2.25
Dec2007 $1.96
Dec2006 $1.74
Dec2005 $1.05
Dec2004 -$0.05
Dec2003 -$0.42
Dec2002 $0.37

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Defensive Investor – March 2018
5 Great Stocks This Week – 3/5/18
Eastman Chemical Co Valuation – March 2018 $EMN
10 Low PE Stock Picks for the Defensive Investor – February 2017
10 Undervalued Companies for the Defensive Investor – February 2017

Other ModernGraham posts about related companies

DowDuPont Inc Valuation – November 2018 $DWDP
Chemtrade Logistics Income Fund Valuation – July 2018 $TSE:CHE.UN
PPG Industries Inc Valuation – May 2018 $PPG
Innospec Inc Valuation – April 2018 $IOSP
Innophos Holdings Inc Valuation – March 2018 $IPHS
Olin Corp Valuation – March 2018 $OLN
A Schulman Inc Valuation – March 2018 $SHLM
FMC Corp Valuation – March 2018 $FMC
Compass Minerals International Inc Valuation – March 2018 $CMP
Ashland Global Holdings Inc Valuation – March 2018 $ASH

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.

Chevron Corp Valuation – November 2018 $CVX

Company Profile (excerpt from Reuters): Chevron Corporation (Chevron), incorporated on January 27, 1926, manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to the United States and international subsidiaries that engage in integrated energy and chemicals operations. The Company operates through two business segments: Upstream and Downstream. Upstream operations consist primarily of exploring for, developing and producing crude oil and natural gas; liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transporting crude oil by international oil export pipelines; processing, transporting, storage and marketing of natural gas, and a gas-to-liquids plant. Downstream operations consist primarily of refining of crude oil into petroleum products; marketing of crude oil and refined products; transporting of crude oil and refined products by pipeline, marine vessel, motor equipment and rail car, and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CVX – November 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 $228,998,726,088 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.22 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 -53.76% Fail
6. Moderate PEmg Ratio PEmg < 20 23.64 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.48 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.22 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.66 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 $5.06
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $73.30
MG Value based on 0% Growth $42.97
Market Implied Growth Rate 7.57%
Current Price $119.51
% of Intrinsic Value N/A

Chevron 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, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings 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 $11.43 in 2014 to an estimated $5.06 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.57% 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 Chevron Corporation revealed the company was trading below its Graham Number of $121.52. The company pays a dividend of $4.32 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.64, which was below the industry average of 60.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-34.6.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$34.60
Graham Number $121.52
PEmg 23.64
Current Ratio 1.22
PB Ratio 1.48
Current Dividend $4.32
Dividend Yield 3.61%
Number of Consecutive Years of Dividend Growth 20

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 $35,583,000,000
Total Current Liabilities $29,183,000,000
Long-Term Debt $29,854,000,000
Total Assets $256,606,000,000
Intangible Assets $4,518,000,000
Total Liabilities $101,933,000,000
Shares Outstanding (Diluted Average) 1,917,474,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.44
Dec2017 $4.85
Dec2016 -$0.27
Dec2015 $2.45
Dec2014 $10.14
Dec2013 $11.09
Dec2012 $13.32
Dec2011 $13.44
Dec2010 $9.48
Dec2009 $5.24
Dec2008 $11.67
Dec2007 $8.77
Dec2006 $7.80
Dec2005 $6.54
Dec2004 $6.28
Dec2003 $3.48
Dec2002 $0.53
Dec2001 $1.55
Dec2000 $3.99
Dec1999 $1.57
Dec1998 $1.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.06
Dec2017 $4.13
Dec2016 $4.96
Dec2015 $8.41
Dec2014 $11.43
Dec2013 $11.55
Dec2012 $11.40
Dec2011 $10.20
Dec2010 $8.58
Dec2009 $8.09
Dec2008 $9.08
Dec2007 $7.38
Dec2006 $6.10
Dec2005 $4.72
Dec2004 $3.60
Dec2003 $2.25
Dec2002 $1.66

Recommended Reading:

Other ModernGraham posts about the company

5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018
Chevron Corp Valuation – February 2018 $CVX
Chevron Corporation Valuation – March 2017 $CVX
5 Overvalued Dow Components – February 2017

Other ModernGraham posts about related companies

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Suncor Energy Inc Valuation – August 2018 $TSE:SU
Tidewater Inc Valuation – August 2018 $TDW
Carrizo Oil & Gas Inc Valuation – August 2018 $CRZO
Denbury Resources Inc Valuation – August 2018 $DNR
California Resources Corp Valuation – August 2018 $CRC
Crew Energy Inc Valuation – August 2018 $TSE-CR

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.

Chesapeake Lodging Trust Valuation – July 2018 $CHSP

Company Profile (excerpt from Reuters): Chesapeake Lodging Trust, incorporated on June 12, 2009, is a real estate investment trust. The Company is focused on investments primarily in upper-upscale hotels in various business and convention markets and, on a selective basis, select-service hotels in urban settings or other locations in the United States. The Company operates through the hotel ownership segment. The Company conducts its operations primarily though Chesapeake Lodging, L.P., its operating partnership (the Operating Partnership).

CHSP Chart

CHSP data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CHSP – July 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 $1,889,031,633 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.29 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 1352.17% Pass
6. Moderate PEmg Ratio PEmg < 20 28.62 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.80 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.29 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 43.13 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 $1.09
MG Growth Estimate 8.28%
MG Value $27.24
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $15.77
MG Value based on 0% Growth $9.24
Market Implied Growth Rate 10.06%
Current Price $31.12
% of Intrinsic Value 114.23%

Chesapeake Lodging Trust does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg ratio. 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 $0.7 in 2014 to an estimated $1.09 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.06% 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 Chesapeake Lodging Trust revealed the company was trading above its Graham Number of $20.81. The company pays a dividend of $1.6 per share, for a yield of 5.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 28.62, which was below the industry average of 49.54, 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 $-14.13.

Chesapeake Lodging Trust 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) -$14.13
Graham Number $20.81
PEmg 28.62
Current Ratio 1.29
PB Ratio 1.80
Current Dividend $1.60
Dividend Yield 5.14%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $85,249,000
Total Current Liabilities $65,968,000
Long-Term Debt $831,684,000
Total Assets $1,964,199,000
Intangible Assets $35,112,000
Total Liabilities $929,090,000
Shares Outstanding (Diluted Average) 59,719,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.10
Dec2017 $1.11
Dec2016 $1.13
Dec2015 $0.99
Dec2014 $1.00
Dec2013 $0.75
Dec2012 $0.66
Dec2011 $0.30
Dec2010 -$0.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.09
Dec2017 $1.05
Dec2016 $0.98
Dec2015 $0.85
Dec2014 $0.70
Dec2013 $0.48
Dec2012 $0.29
Dec2011 $0.08
Dec2010 -$0.02

Recommended Reading:

Other ModernGraham posts about the company

10 Best Dividend Paying Stocks for the Enterprising Investor – February 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017
10 Best Dividend Paying Stocks for the Enterprising Investor – January 2017
8 Best Stocks for Value Investors This Week – 12/27/16
Chesapeake Lodging Trust Valuation – December 2016 $CHSP

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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.

Chemtrade Logistics Income Fund Valuation – July 2018 $TSE:CHE.UN

Company Profile (excerpt from Reuters): Chemtrade Logistics Income Fund (Chemtrade) provides industrial chemicals and services. Chemtrade operates in four business segments: Sulphur Products & Performance Chemicals (SPPC), Water Solutions & Specialty Chemicals (WSSC), International (Intl) and Corporate (Corp). Its SPPC segment markets, removes and produces merchant, regenerated sulfuric acid, liquid sulfur dioxide, sodium hydrosulfite, elemental sulfur, hydrogen sulfide, and sodium bisulfite and other processing services. Its WSSC segment manufactures and markets a range of inorganic coagulants used in water treatment, including aluminum sulfate, aluminum chlorohydrate, polyaluminum chloride and ferric sulfate, and various specialty chemicals. The Company’s Intl segment provides removal and marketing services for elemental sulfur and sulfuric acid. Its Corp segment provides centralized services, such as treasury, finance, information technology, human resources, legal and risk management.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-CHE.UN – July 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 $1,335,163,418 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.47 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 -45.92% Fail
6. Moderate PEmg Ratio PEmg < 20 28.39 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.20 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.47 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 11.62 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 $0.53
MG Growth Estimate -1.79%
MG Value $2.59
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $7.64
MG Value based on 0% Growth $4.48
Market Implied Growth Rate 9.94%
Current Price $14.95
% of Intrinsic Value 576.79%

Chemtrade Logistics Income Fund does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings 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 $0.6 in 2014 to an estimated $0.53 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.94% 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 Chemtrade Logistics Income Fund revealed the company was trading above its Graham Number of $12.05. The company pays a dividend of $1.2 per share, for a yield of 8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 28.39, which was below the industry average of 30.34, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.93.

Chemtrade Logistics Income Fund 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) -$15.93
Graham Number $12.05
PEmg 28.39
Current Ratio 1.47
PB Ratio 1.20
Current Dividend $1.20
Dividend Yield 8.03%
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 $349,530,000
Total Current Liabilities $237,384,000
Long-Term Debt $1,303,484,000
Total Assets $2,976,182,000
Intangible Assets $1,269,955,000
Total Liabilities $1,824,792,000
Shares Outstanding (Diluted Average) 92,596,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.52
Dec2017 $1.53
Dec2016 $0.07
Dec2015 -$0.69
Dec2014 $0.35
Dec2013 $0.13
Dec2012 $0.94
Dec2011 $1.48
Dec2010 $0.92
Dec2009 $1.52
Dec2008 $1.21
Dec2007 $0.61
Dec2006 $0.11
Dec2005 $0.48
Dec2004 $0.71
Dec2003 $0.81
Dec2002 $0.91
Dec2001 $0.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.53
Dec2017 $0.45
Dec2016 -$0.01
Dec2015 $0.11
Dec2014 $0.60
Dec2013 $0.81
Dec2012 $1.18
Dec2011 $1.24
Dec2010 $1.04
Dec2009 $1.00
Dec2008 $0.70
Dec2007 $0.48
Dec2006 $0.48
Dec2005 $0.66
Dec2004 $0.70
Dec2003 $0.60
Dec2002 $0.43

Recommended Reading:

Other ModernGraham posts about the company

Chemtrade Logistics Income Fund Valuation – Initial Coverage $TSE:CHE.UN

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Disclaimer:

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

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