Cleveland-Cliffs Inc Valuation – July 2018 $CLF

Company Profile (excerpt from Reuters): Cleveland-Cliffs Inc, formerly Cliffs Natural Resources Inc., incorporated on February 22, 1985, is a mining and natural resources company. The Company is a supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. The Company’s segments include U.S. Iron Ore and Asia Pacific Iron Ore. In addition, the Company operates an iron ore mining complex in Western Australia. In the United States, the Company owned four operational iron ore mines and one indefinitely idled mine, as of December 31, 2016.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CLF – 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 $3,185,660,788 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.26 Pass
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 -82.43% Fail
6. Moderate PEmg Ratio PEmg < 20 -3.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -10.49 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.26 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.14 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg -$2.85
MG Growth Estimate 12.04%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$41.28
MG Value based on 0% Growth -$24.20
Market Implied Growth Rate -6.12%
Current Price $10.67
% of Intrinsic Value N/A

Cleveland-Cliffs Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth 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 net current assets, and the lack of earnings stability over the last five years, 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 $-14.44 in 2014 to an estimated $-2.85 for 2018. 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 Cleveland-Cliffs Inc revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -3.75, which was below the industry average of 46.07, 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 $-6.01.

Cleveland-Cliffs 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) -$6.01
Graham Number $0.00
PEmg -3.75
Current Ratio 3.26
PB Ratio -10.49
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 6/1/2018
Total Current Assets $1,546,900,000
Total Current Liabilities $474,900,000
Long-Term Debt $2,297,000,000
Total Assets $3,051,500,000
Intangible Assets $49,300,000
Total Liabilities $3,357,800,000
Shares Outstanding (Diluted Average) 301,275,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.49
Dec2017 $1.26
Dec2016 $0.87
Dec2015 -$5.14
Dec2014 -$47.52
Dec2013 $2.37
Dec2012 -$6.32
Dec2011 $11.48
Dec2010 $7.49
Dec2009 $1.63
Dec2008 $4.76
Dec2007 $2.57
Dec2006 $2.60
Dec2005 $2.50
Dec2004 $2.95
Dec2003 -$0.40
Dec2002 -$2.33
Dec2001 -$0.29
Dec2000 $0.22
Dec1999 $0.05
Dec1998 $0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.85
Dec2017 -$6.55
Dec2016 -$10.69
Dec2015 -$13.99
Dec2014 -$14.44
Dec2013 $2.51
Dec2012 $2.99
Dec2011 $6.96
Dec2010 $4.40
Dec2009 $2.84
Dec2008 $3.32
Dec2007 $2.42
Dec2006 $1.91
Dec2005 $1.21
Dec2004 $0.39
Dec2003 -$0.78
Dec2002 -$0.76

Recommended Reading:

Other ModernGraham posts about the company

5 of the Worst Stocks to Invest In – January 2017
Cliffs Natural Resources Inc Valuation – January 2017 $CLF
Cliffs Natural Resources Inc. Analysis – August 2015 Update $CLF
18 Companies to Research This Week – 8/30/2014
Cliffs Natural Resources Inc. Annual Valuation – 2014 $CLF

Other ModernGraham posts about related companies

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Alliance Resource Partners LP Valuation – July 2018 $ARLP
Century Aluminum Co Valuation – July 2018 $CENX
Goldcorp Inc Valuation – July 2018 $GG
Freeport-McMoRan Inc Valuation – May 2018 $FCX
Newmont Mining Corp Valuation – March 2018 $NEM
Lucara Diamond Corp Valuation – March 2018 $TSE-LUC

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.

Mack-Cali Realty Corp Valuation – July 2018 $CLI

Company Profile (excerpt from Reuters): Mack-Cali Realty Corporation, incorporated on May 24, 1994, together with its subsidiaries, is a self-administered and self-managed real estate investment trust (REIT). The Company owns and operates a real estate portfolio of Class A office and office/flex properties located in the Northeast. The Company operates in three segments: commercial and other real estate, multi-family real estate and multi-family services. Its commercial and other real estate provides leasing, property management, acquisition, development, construction and tenant-related services for its commercial and other real estate, and multi-family real estate portfolio. Its multi-family services business also provides similar services for third parties. As of December 31, 2016, the Company owned or had interests in 248 properties, consisting of 119 office and 110 flex properties, totaling approximately 26.6 million square feet, leased to approximately 1,600 commercial tenants and 19 multi-family rental properties containing 5,614 residential units, plus developable land (collectively, the Properties). As of December 31, 2016, the Properties are located in six states, in the Northeast, and the District of Columbia.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CLI – 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 $1,736,979,953 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.12 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 -37.53% Fail
6. Moderate PEmg Ratio PEmg < 20 172.59 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.14 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 1.12 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 92.21 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 $0.11
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $1.62
MG Value based on 0% Growth $0.95
Market Implied Growth Rate 82.04%
Current Price $19.33
% of Intrinsic Value N/A

Mack Cali Realty Corp 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 $0.31 in 2014 to an estimated $0.11 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 82.04% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Mack Cali Realty Corp revealed the company was trading above its Graham Number of $1.72. The company pays a dividend of $0.75 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 172.59, which was above the industry average of 49.54. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-28.36.

Mack Cali Realty Corp 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) -$28.36
Graham Number $1.72
PEmg 172.59
Current Ratio 1.12
PB Ratio 1.14
Current Dividend $0.75
Dividend Yield 3.88%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $261,908,000
Total Current Liabilities $233,548,000
Long-Term Debt $2,615,211,000
Total Assets $4,815,606,000
Intangible Assets $100,732,000
Total Liabilities $3,114,695,000
Shares Outstanding (Diluted Average) 100,604,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.01
Dec2017 $0.06
Dec2016 $1.30
Dec2015 -$1.41
Dec2014 $0.32
Dec2013 -$0.17
Dec2012 $0.47
Dec2011 $0.81
Dec2010 $0.67
Dec2009 $0.71
Dec2008 $0.79
Dec2007 $1.61
Dec2006 $2.28
Dec2005 $1.51
Dec2004 $1.65
Dec2003 $2.43
Dec2002 $2.43
Dec2001 $2.32
Dec2000 $3.10
Dec1999 $1.78
Dec1998 $2.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.11
Dec2017 $0.12
Dec2016 $0.13
Dec2015 -$0.30
Dec2014 $0.31
Dec2013 $0.37
Dec2012 $0.65
Dec2011 $0.80
Dec2010 $0.94
Dec2009 $1.17
Dec2008 $1.46
Dec2007 $1.83
Dec2006 $1.98
Dec2005 $1.91
Dec2004 $2.20
Dec2003 $2.45
Dec2002 $2.42

Recommended Reading:

Other ModernGraham posts about the company

Mack Cali Realty Corp Valuation – Initial Coverage $CLI

Other ModernGraham posts about related companies

Chesapeake Lodging Trust Valuation – July 2018 $CHSP
Alexander & Baldwin Inc Valuation – July 2018 $ALEX
Summit Hotel Properties Inc Valuation – July 2018 $INN
Sabra Health Care REIT Inc Valuation – July 2018 $SBRA
National Retail Properties Inc Valuation – July 2018 $NNN
Equinix Inc Valuation – June 2018 $EQIX
Kimco Realty Corp Valuation – June 2018 $KIM
Essex Property Trust Inc Valuation – June 2018 $ESS
Federal Realty Investment Trust Valuation – June 2018 $FRT
UDR Inc Valuation – June 2018 $UDR

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.

Cliffs Natural Resources Inc Valuation – January 2017 $CLF

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 – January 2017.  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 Cliffs Natural Resources Inc (CLF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cliffs Natural Resources Inc. is a mining and natural resources company. The Company is a supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. The Company’s segments include U.S. Iron Ore and Asia Pacific Iron Ore. The Company is a producer of iron ore pellets, primarily selling production from U.S. Iron Ore to integrated steel companies in the United States and Canada. The Company manages approximately five iron ore mines located in Michigan and Minnesota. In Michigan, it is operating over two iron ore mines, Empire mine and Tilden mine. In Minnesota, it is operating approximately one iron ore mine, Hibbing mine. The other two iron ore operations in Minnesota, United Taconite mine and Northshore mine. Its Asia Pacific Iron Ore operations are located in Western Australia and consist of its Koolyanobbing operation. The Company operates an iron ore mining complex in Western Australia.

CLF Chart

CLF 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 CLF – January 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,477,418,483 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.16 Pass
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 -681.14% Fail
6. Moderate PEmg Ratio PEmg < 20 -0.89 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -1.29 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 2.16 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.84 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg -$10.78
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$156.37
MG Value based on 0% Growth -$91.66
Market Implied Growth Rate -4.70%
Current Price $9.65
% of Intrinsic Value N/A

Cliffs Natural Resources Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years, 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 seeing its EPSmg (normalized earnings) decline from $2.99 in 2012 to an estimated $-10.78 for 2016. 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 Cliffs Natural Resources Inc revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -0.89, which was below the industry average of 35.02, 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 $-12.69.

Cliffs Natural Resources 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) -$12.69
Graham Number $0.00
PEmg -0.89
Current Ratio 2.16
PB Ratio -1.29
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $699,600,000
Total Current Liabilities $323,500,000
Long-Term Debt $2,195,900,000
Total Assets $1,772,900,000
Intangible Assets $0
Total Liabilities $3,317,200,000
Shares Outstanding (Diluted Average) 206,279,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.58
Dec2015 -$5.13
Dec2014 -$47.52
Dec2013 $2.37
Dec2012 -$6.32
Dec2011 $11.48
Dec2010 $7.49
Dec2009 $1.63
Dec2008 $4.76
Dec2007 $2.57
Dec2006 $2.60
Dec2005 $2.50
Dec2004 $2.95
Dec2003 -$0.40
Dec2002 -$2.33
Dec2001 -$0.29
Dec2000 $0.22
Dec1999 $0.05
Dec1998 $0.63
Dec1997 $0.60
Dec1996 $0.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$10.78
Dec2015 -$13.99
Dec2014 -$14.44
Dec2013 $2.51
Dec2012 $2.99
Dec2011 $6.96
Dec2010 $4.40
Dec2009 $2.84
Dec2008 $3.32
Dec2007 $2.42
Dec2006 $1.91
Dec2005 $1.21
Dec2004 $0.39
Dec2003 -$0.78
Dec2002 -$0.76
Dec2001 $0.10
Dec2000 $0.34

Recommended Reading:

Other ModernGraham posts about the company

Cliffs Natural Resources Inc. Analysis – August 2015 Update $CLF
18 Companies to Research This Week – 8/30/2014
Cliffs Natural Resources Inc. Annual Valuation – 2014 $CLF

Other ModernGraham posts about related companies

Nucor Corporation Valuation – December 2016 $NUE
Nucor Corp Valuation – August 2016 $NUE
United States Steel Corp Valuation – July 2016 $X
Nucor Corp Valuation – February 2016 Update $NUE
Allegheny Technologies Inc. Valuation – November 2015 Update $ATI
Nucor Corporation Analysis – September 2015 Update $NUE
Cliffs Natural Resources Inc. Analysis – August 2015 Update $CLF
Nucor Corporation Analysis – June 2015 Update $NUE
Nucor Corporation Quarterly Valuation – March 2015 $NUE
United States Steel Corporation Annual Valuation – 2015 $X

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.

Mack Cali Realty Corp Valuation – Initial Coverage $CLI

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Mack Cali Realty Corp (CLI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Mack-Cali Realty Corporation is a self-administered and self-managed real estate investment trust (REIT). The Company owns and operates a real estate portfolio of Class A office and office/flex properties located primarily in the Northeast. The Company’s segments include commercial and other real estate, multi-family real estate, multi-family services, and corporate & other. It provides leasing, property management, acquisition, development, construction and tenant-related services for its commercial and other real estate, and multi-family real estate portfolio. The Company owns or has interests in approximately 270 properties, consisting of approximately 150 office and over 110 flex properties, totaling approximately 29.9 million square feet, leased to approximately 1,900 commercial tenants and over 20 multi-family rental properties containing approximately 5,640 residential units, plus developable land (collectively, the Properties).

CLI Chart

CLI 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 CLI – January 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,555,293,052 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 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 -97.43% Fail
6. Moderate PEmg Ratio PEmg < 20 329.42 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.89 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 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -32.89 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 $0.09
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $1.26
MG Value based on 0% Growth $0.74
Market Implied Growth Rate 160.46%
Current Price $28.55
% of Intrinsic Value N/A

Mack Cali Realty Corp 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 $0.65 in 2012 to an estimated $0.09 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 160.46% 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 below the price.

At the time of valuation, further research into Mack Cali Realty Corp revealed the company was trading above its Graham Number of $21.09. The company pays a dividend of $0.6 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 329.42, which was above the industry average of 31.91. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-27.22.

Mack Cali Realty Corp 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) -$27.22
Graham Number $21.09
PEmg 329.42
Current Ratio 0.72
PB Ratio 1.89
Current Dividend $0.60
Dividend Yield 2.10%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $191,835,000
Total Current Liabilities $266,486,000
Long-Term Debt $2,455,309,000
Total Assets $4,435,619,000
Intangible Assets $80,601,000
Total Liabilities $2,920,372,000
Shares Outstanding (Diluted Average) 100,253,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.17
Dec2015 -$1.41
Dec2014 $0.32
Dec2013 -$0.17
Dec2012 $0.47
Dec2011 $0.81
Dec2010 $0.67
Dec2009 $0.71
Dec2008 $0.79
Dec2007 $1.61
Dec2006 $2.28
Dec2005 $1.51
Dec2004 $1.65
Dec2003 $2.43
Dec2002 $2.43
Dec2001 $2.32
Dec2000 $3.10
Dec1999 $1.78
Dec1998 $2.07
Dec1997 $0.04
Dec1996 $1.71

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.09
Dec2015 -$0.30
Dec2014 $0.31
Dec2013 $0.37
Dec2012 $0.65
Dec2011 $0.80
Dec2010 $0.94
Dec2009 $1.17
Dec2008 $1.46
Dec2007 $1.83
Dec2006 $1.98
Dec2005 $1.91
Dec2004 $2.20
Dec2003 $2.45
Dec2002 $2.42
Dec2001 $2.24
Dec2000 $2.04

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

Chesapeake Lodging Trust Valuation – December 2016 $CHSP
Summit Hotel Properties Inc Valuation – Initial Coverage $INN
Sabra Health Care REIT Inc Valuation – Initial Coverage $SBRA
National Retail Properties Inc Valuation – November 2016 $NNN
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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.

Cliffs Natural Resources Inc. Analysis – August 2015 Update $CLF

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Cliffs Natural Resources Inc. (CLF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cliffs Natural Resources Inc. is a mining and natural resources company. The Company is a supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. The Company also produces low-volatile metallurgical coal in the United States from its mines located in Alabama and West Virginia. In addition, it operates an iron ore mining complex in Western Australia and owns two non-operating iron ore mines in Eastern Canada. The Company operates in segments: U.S. Iron Ore, Asia Pacific Iron Ore and North American Coal. In the United States, it operates five iron ore mines in Michigan and Minnesota and two metallurgical coal operations located in Alabama and West Virginia. Its Asia Pacific operations consist of its Koolyanobbing iron ore mining complex in Western Australia.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CLF – 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 Fail
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 Fail
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 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 -14.13
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Value based on 3% Growth -$204.82
MG Value based on 0% Growth -$120.07
Market Implied Growth Rate -4.36%
Current Price $3.16
% of Intrinsic Value N/A

Cliffs Natural Resources Inc. does not qualify for 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 and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the net current assets as well as the lack of earnings stability or growth over the last five years.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $6.96 in 2011 to an estimated loss of $14.13 for 2015.  This level of earnings growth does not support a positive valuation, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below 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 Cliffs Natural Resources Inc. (CLF)?  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

CLF charts August 2015

Net Current Asset Value (NCAV) -$20.56
PEmg -0.22
Current Ratio 1.82
PB Ratio -0.25
Dividend Yield 14.33%
Number of Consecutive Years of Dividend Growth 0

 

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Useful Links:

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

Most Recent Balance Sheet Figures

Total Current Assets $1,382,200,000
Total Current Liabilities $758,400,000
Long-Term Debt $2,887,400,000
Total Assets $2,609,400,000
Intangible Assets $0
Total Liabilities $4,533,200,000
Shares Outstanding (Diluted Average) 153,232,000

Earnings Per Share History

Next Fiscal Year Estimate -$5.55
Dec14 -$47.52
Dec13 $2.37
Dec12 -$6.32
Dec11 $11.48
Dec10 $7.49
Dec09 $1.63
Dec08 $4.76
Dec07 $2.57
Dec06 $2.60
Dec05 $2.50
Dec04 $2.95
Dec03 -$0.40
Dec02 -$2.33
Dec01 -$0.29
Dec00 $0.22
Dec99 $0.05
Dec98 $0.63
Dec97 $0.60
Dec96 $0.65
Dec95 $0.60

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate -$14.13
Dec14 -$14.44
Dec13 $2.51
Dec12 $2.99
Dec11 $6.96
Dec10 $4.40
Dec09 $2.84
Dec08 $3.32
Dec07 $2.42
Dec06 $1.91
Dec05 $1.21
Dec04 $0.39
Dec03 -$0.78
Dec02 -$0.76
Dec01 $0.10
Dec00 $0.34
Dec99 $0.43

Recommended Reading:

Other ModernGraham posts about the company

18 Companies to Research This Week – 8/30/2014
Cliffs Natural Resources Inc. Annual Valuation – 2014 $CLF

Other ModernGraham posts about related companies

Nucor Corporation Analysis – June 2015 Update $NUE
Nucor Corporation Quarterly Valuation – March 2015 $NUE
United States Steel Corporation Annual Valuation – 2015 $X
Nucor Corporation Quarterly Valuation – December 2014 $NUE
Allegheny Technologies Inc. Annual Valuation – 2014 $ATI
Cliffs Natural Resources Inc. Annual Valuation – 2014 $CLF

Disclaimer:

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

Cliffs Natural Resources Inc. Annual Valuation – 2014 $CLF

220px-Cliffs_Natural_Resources_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Enterprising Investor.  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 Cliffs Natural Resources Inc. (CLF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cliffs Natural Resources Inc. is an international mining and natural resources company. The Company is an iron ore producer and a producer of metallurgical coal. The Company’s operations are organized according to product category and geographic location: U.S. Iron Ore, Eastern Canadian Iron Ore, North American Coal, Asia Pacific Iron Ore, Asia Pacific Coal, Latin American Iron Ore, Ferroalloys, and its Global Exploration Group. The Company operates in four segments: U.S. Iron Ore, Eastern Canadian Iron Ore, North American Coal and Asia Pacific Iron Ore. In the United States, it operates five iron ore mines in Michigan and Minnesota, five metallurgical coal mines located in West Virginia and Alabama and one thermal coal mine located in West Virginia. It also operates two iron ore mines in Eastern Canada that primarily provide iron ore to the seaborne market for Asian steel producers. On May 12, 2011, the Company completed the acquisition of Consolidated Thompson Iron Mining Limited.
CLF Chart

CLF data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  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 – PASS

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

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – 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 – FAIL
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $15.81
MG Value $0.00
MG Opinion Overvalued
Value Based on 3% Growth $15.51
Value Based on 0% Growth $9.09
Market Implied Growth Rate 3.14%
Net Current Asset Value (NCAV) -$35.32
PEmg 14.78
Current Ratio 1.60
PB Ratio 0.40

Balance Sheet – 6/30/2014

Current Assets $1,663,800,000
Current Liabilities $1,037,500,000
Total Debt $3,293,000,000
Total Assets $13,102,400,000
Intangible Assets $0
Total Liabilities $7,074,800,000
Outstanding Shares 153,180,000

Earnings Per Share

2014 (estimate) -$0.88
2013 $2.36
2012 -$6.57
2011 $11.61
2010 $7.49
2009 $1.63
2008 $4.76
2007 $2.57
2006 $2.60
2005 $2.45
2004 $2.92

Earnings Per Share – ModernGraham

2014 (estimate) $1.07
2013 $2.46
2012 $2.94
2011 $7.00
2010 $4.40
2009 $2.84

Dividend History

CLF Dividend Chart

CLF Dividend data by YCharts

Conclusion:

Cliffs Natural Resources does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio, and the lack of earnings stability or growth over the last ten years.  The Enterprising Investor has similar concerns with the high level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation side of things, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $4.40 in 2010 to an estimated $1.07 for 2014.  This demonstrated drop in earnings clearly does not support the market’s implied estimate of 3.14% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below 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 Cliffs Natural Resources (CLF)?  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 held a long position in Cliffs Natural Resources (CLF) but did not hold a position 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.

Intel Corporation Valuation – April 2019 #INTC

Company Profile (excerpt from Reuters): Intel Corporation, incorporated on March 1, 1989, is engaged in designing and manufacturing products and technologies, such as the cloud. The Company’s segments are Client Computing Group (CCG), Data Center Group (DCG), Internet of Things Group (IOTG), Non-Volatile Memory Solutions Group (NSG), Intel Security Group (ISecG), Programmable Solutions Group (PSG), All Other and New Technology Group (NTG). The Company delivers computer, networking and communications platforms to a set of customers, including original equipment manufacturers (OEMs), original design manufacturers (ODMs), cloud and communications service providers, as well as industrial, communications and automotive equipment manufacturers. It offers platforms to integrate various components and technologies, including a microprocessor and chipset, a stand-alone System-on-Chip (SoC), or a multichip package. Its platforms are managed by additional hardware, software and services offered by Intel.

Downloadable PDF version of this valuation:

ModernGraham Valuation of INTC – 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 $249,631,094,870 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.73 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 61.87% Pass
6. Moderate PEmg Ratio PEmg < 20 16.34 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.42 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 1.73 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.06 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 PassModernGraham Valuation of INTC – April 2019

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.40
MG Growth Estimate 8.02%
MG Value $83.35
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $49.26
MG Value based on 0% Growth $28.88
Market Implied Growth Rate 3.91%
Current Price $55.45
% of Intrinsic Value 66.53%

Intel Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, 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 $2.21 in 2015 to an estimated $3.4 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.91% 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 Intel Corporation revealed the company was trading above its Graham Number of $39.14. The company pays a dividend of $1.2 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.32, which was below the industry average of 35.4, 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 $-5.24.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.24
Graham Number $39.14
PEmg 16.32
Current Ratio 1.73
PB Ratio 3.42
Current Dividend $1.20
Dividend Yield 2.16%
Number of Consecutive Years of Dividend Growth 4

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 $28,787,000,000
Total Current Liabilities $16,626,000,000
Long-Term Debt $25,098,000,000
Total Assets $127,963,000,000
Intangible Assets $36,349,000,000
Total Liabilities $52,981,000,000
Shares Outstanding (Diluted Average) 4,620,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.10
Dec2018 $4.48
Dec2017 $1.99
Dec2016 $2.12
Dec2015 $2.33
Dec2014 $2.31
Dec2013 $1.89
Dec2012 $2.13
Dec2011 $2.39
Dec2010 $2.01
Dec2009 $0.77
Dec2008 $0.92
Dec2007 $1.18
Dec2006 $0.86
Dec2005 $1.40
Dec2004 $1.16
Dec2003 $0.85
Dec2002 $0.46
Dec2001 $0.19
Dec2000 $1.51
Dec1999 $1.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.40
Dec2018 $2.91
Dec2017 $2.13
Dec2016 $2.18
Dec2015 $2.21
Dec2014 $2.15
Dec2013 $2.00
Dec2012 $1.91
Dec2011 $1.69
Dec2010 $1.27
Dec2009 $0.95
Dec2008 $1.06
Dec2007 $1.11
Dec2006 $1.04
Dec2005 $1.02
Dec2004 $0.83
Dec2003 $0.72

Recommended Reading:

Other ModernGraham posts about the company

Intel Corp Valuation – November 2018 $INTC
Intel Corp Valuation – February 2018 $INTC
5 Overvalued Dow Components – July 2016
Intel Corporation Valuation – May 2016 $INTC
11 Best Stocks For Value Investors This Week – 11/21/15

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Arista Networks Inc Valuation – April 2019 #ANET
Maxim Integrated Products Inc Valuation – April 2019 #MXIM
Keysight Technologies Inc Valuation – April 2019 #KEYS
Lam Research Corp Valuation – April 2019 #LRCX
Emerson Electric Co Valuation – April 2019 #EMR
Skyworks Solutions Inc Valuation – March 2019 #SWKS
Garmin Ltd Valuation – March 2019 #GRMN
Hewlett Packard Enterprise Co Valuation – March 2019 #HPE
Fortive Corp Valuation – March 2019 #FTV

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.

International Business Machines Corp Valuation – April 2019 #IBM

Company Profile (excerpt from Reuters): International Business Machines Corporation (IBM), incorporated on June 16, 1911, is a technology company. The Company operates through five segments: Cognitive Solutions, Global Business Services (GBS), Technology Services & Cloud Platforms, Systems and Global Financing.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IBM – 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 $127,277,532,893 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.29 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 -24.36% Fail
6. Moderate PEmg Ratio PEmg < 20 13.11 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.65 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 1.29 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.26 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 $10.91
MG Growth Estimate -2.80%
MG Value $31.55
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $158.22
MG Value based on 0% Growth $92.75
Market Implied Growth Rate 2.30%
Current Price $143.03
% of Intrinsic Value 453.39%

IBM 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, insufficient earnings growth over the last ten years, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $13.42 in 2015 to an estimated $10.91 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.3% 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 IBM Common Stock revealed the company was trading above its Graham Number of $75.75. The company pays a dividend of $6.21 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.11, which was below the industry average of 46.57, 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 $-63.31.

IBM Common Stock receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$63.31
Graham Number $75.75
PEmg 13.11
Current Ratio 1.29
PB Ratio 7.65
Current Dividend $6.21
Dividend Yield 4.34%
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 $49,146,000,000
Total Current Liabilities $38,227,000,000
Long-Term Debt $35,605,000,000
Total Assets $123,382,000,000
Intangible Assets $39,353,000,000
Total Liabilities $106,453,000,000
Shares Outstanding (Diluted Average) 905,242,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.80
Dec2018 $9.52
Dec2017 $6.14
Dec2016 $12.38
Dec2015 $13.42
Dec2014 $11.90
Dec2013 $14.94
Dec2012 $14.37
Dec2011 $13.06
Dec2010 $11.52
Dec2009 $10.01
Dec2008 $8.89
Dec2007 $7.15
Dec2006 $6.11
Dec2005 $4.87
Dec2004 $4.38
Dec2003 $3.74
Dec2002 $2.06
Dec2001 $3.69
Dec2000 $4.44
Dec1999 $4.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.91
Dec2018 $9.87
Dec2017 $10.61
Dec2016 $13.04
Dec2015 $13.42
Dec2014 $13.33
Dec2013 $13.63
Dec2012 $12.50
Dec2011 $11.09
Dec2010 $9.65
Dec2009 $8.28
Dec2008 $7.03
Dec2007 $5.82
Dec2006 $4.85
Dec2005 $4.06
Dec2004 $3.66
Dec2003 $3.40

Recommended Reading:

Other ModernGraham posts about the company

International Business Machines Corp Valuation – November 2018 $IBM
International Business Machines Corp Valuation – February 2018 $IBM
International Business Machines Corp Valuation – March 2017 $IBM
International Business Machines Corp Valuation – November 2015 Update $IBM
30 Companies in the Spotlight This Week – 11/15/14

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International Business Machines Corp Valuation – November 2018 $IBM
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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.

Goldman Sachs Group Inc Valuation – April 2019 #GS

Company Profile (excerpt from Reuters): The Goldman Sachs Group, Inc., incorporated on July 21, 1998, is an investment banking, securities and investment management company that provides a range of financial services to corporations, financial institutions, governments and individuals. The Company operates in four business segments: Investment Banking, Institutional Client Services, Investing & Lending, and Investment Management. As of December 2016, it had offices in over 30 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GS – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $74,225,517,968 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 62.01% Pass
5. Moderate PEmg Ratio PEmg < 20 11.71 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.86 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $17.28
MG Growth Estimate 3.68%
MG Value $274.01
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $250.54
MG Value based on 0% Growth $146.87
Market Implied Growth Rate 1.61%
Current Price $202.38
% of Intrinsic Value 73.86%

Goldman Sachs Group Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $13.88 in 2015 to an estimated $17.28 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.61% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Goldman Sachs Group Inc revealed the company was trading below its Graham Number of $287.24. The company pays a dividend of $3.15 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 11.71, which was below the industry average of 21.66, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Goldman Sachs Group Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $287.24
PEmg 11.71
PB Ratio 0.86
Dividend Yield 1.56%
TTM Dividend $3.15
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 12/1/2018
Long-Term Debt & Capital Lease Obligation $245,582,000,000
Total Assets $931,796,000,000
Intangible Assets $4,082,000,000
Total Liabilities $841,611,000,000
Shares Outstanding (Diluted Average) 383,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.27
Dec2018 $25.27
Dec2017 $9.01
Dec2016 $16.29
Dec2015 $12.14
Dec2014 $17.07
Dec2013 $15.46
Dec2012 $14.13
Dec2011 $4.51
Dec2010 $13.18
Dec2009 $22.13
Nov2008 $4.47
Nov2007 $24.73
Nov2006 $19.69
Nov2005 $11.21
Nov2004 $8.92
Nov2003 $5.87
Nov2002 $4.03
Nov2001 $4.26
Nov2000 $6.00
Nov1999 $5.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $17.28
Dec2018 $16.84
Dec2017 $13.08
Dec2016 $15.08
Dec2015 $13.88
Dec2014 $14.12
Dec2013 $13.06
Dec2012 $11.80
Dec2011 $11.69
Dec2010 $15.80
Dec2009 $16.89
Nov2008 $14.11
Nov2007 $17.32
Nov2006 $12.39
Nov2005 $8.11
Nov2004 $6.31
Nov2003 $5.05

Recommended Reading:

Other ModernGraham posts about the company

Goldman Sachs Group Inc Valuation – November 2018 $GS
Goldman Sachs Group Inc Valuation – February 2018 $GS
Goldman Sachs Group Inc Valuation – June 2016 $GS
10 Low PE Stocks for the Enterprising Investor – June 2016
Stocks Trading Below Their Graham Number – May 2016

Other ModernGraham posts about related companies

American Express Co Valuation – April 2019 #AXP
Broadridge Financial Solutions Inc Valuation – April 2019 #BR
T.Rowe Price Group Inc Valuation – March 2019 #TROW
Moody’s Corp Valuation – March 2019 #MCO
Charles Schwab Corp Valuation – March 2019 #SCHW
Willis Towers Watson PLC Valuation – March 2019 #WLTW
Paypal Holdings Inc Valuation – March 2019 #PYPL
Synchrony Financial Valuation – March 2019 #SYF
CBRE Group Inc Valuation – March 2019 #CBRE
Franklin Resources Inc Valuation – March 2019 #BEN

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.

General Electric Co Valuation – April 2019 #GE

Company Profile (excerpt from Reuters): General Electric Company (GE), incorporated on April 15, 1892, is a global digital industrial company. The Company’s products and services range from aircraft engines, power generation, and oil and gas production equipment to medical imaging, financing and industrial products. The Company’s segments include Power, Renewable Energy, Oil & Gas, Aviation, Healthcare, Transportation, Energy Connections & Lighting, and Capital. As of December 31, 2016, the Company served customers in approximately 180 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GE – 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 $87,183,478,373 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.81 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 -186.59% Fail
6. Moderate PEmg Ratio PEmg < 20 -15.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.69 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 1.81 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.75 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 -$0.66
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$9.61
MG Value based on 0% Growth -$5.63
Market Implied Growth Rate -11.80%
Current Price $10.01
% of Intrinsic Value N/A

General Electric Company 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 net 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 $0.7 in 2015 to an estimated $-0.66 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 General Electric Company revealed the company was trading above its Graham Number of $6.64. The company pays a dividend of $0.37 per share, for a yield of 3.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -15.11, which was below the industry average of 24.48, 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 $-15.42.

General Electric Company 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) -$15.42
Graham Number $6.64
PEmg -15.11
Current Ratio 1.81
PB Ratio 1.69
Current Dividend $0.37
Dividend Yield 3.70%
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 $123,547,000,000
Total Current Liabilities $68,269,000,000
Long-Term Debt $96,883,000,000
Total Assets $309,129,000,000
Intangible Assets $77,770,000,000
Total Liabilities $257,648,000,000
Shares Outstanding (Diluted Average) 8,697,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.55
Dec2018 -$2.62
Dec2017 -$1.03
Dec2016 $0.75
Dec2015 -$0.62
Dec2014 $1.50
Dec2013 $1.27
Dec2012 $1.29
Dec2011 $1.23
Dec2010 $1.06
Dec2009 $1.01
Dec2008 $1.72
Dec2007 $2.17
Dec2006 $2.00
Dec2005 $1.57
Dec2004 $1.64
Dec2003 $1.51
Dec2002 $1.41
Dec2001 $1.37
Dec2000 $1.27
Dec1999 $1.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.66
Dec2018 -$0.98
Dec2017 $0.02
Dec2016 $0.64
Dec2015 $0.70
Dec2014 $1.33
Dec2013 $1.22
Dec2012 $1.22
Dec2011 $1.27
Dec2010 $1.39
Dec2009 $1.60
Dec2008 $1.87
Dec2007 $1.89
Dec2006 $1.71
Dec2005 $1.54
Dec2004 $1.50
Dec2003 $1.39

Recommended Reading:

Other ModernGraham posts about the company

General Electric Co Valuation – November 2018 $GE
5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018
General Electric Co Valuation – February 2018 $GE
5 Overvalued Dow Components – February 2017

Other ModernGraham posts about related companies

3M Co Valuation – April 2019 #MMM
Illinois Tool Works Inc Valuation – April 2019 #ITW
Honeywell International Inc Valuation – March 2019 #HON
Ingersoll-Rand PLC Valuation – January 2019 $IR
General Electric Co Valuation – November 2018 $GE
3M Co Valuation – November 2018 $MMM
ITT Inc Valuation – July 2018 $ITT
Illinois Tool Works Inc Valuation – June 2018 $ITW
Honeywell International Inc Valuation – June 2018 $HON
General Electric Co Valuation – February 2018 $GE

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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