Maxim Integrated Products Inc Valuation – April 2019 #MXIM

Company Profile (excerpt from Reuters): Maxim Integrated Products, Inc., incorporated on August 19, 1987, is engaged in designing, developing, manufacturing and marketing a range of linear and mixed-signal integrated circuits, referred to as analog circuits. The Company also provides a range of high-frequency process technologies and capabilities for use in custom designs. The Company caters to automotive, communications and data center, computing, consumer and industrial markets. The Company offers a range of products, such as switching regulators, battery management, isolated power, charge pumps, linear regulators, light emitting diode (LED) drivers, motor driver integrated circuits (ICs), monitors and sequencers, transceivers, controllers and expanders, level translators, signal line protection ICs, broadband switches, universal serial bus (USB) products, current loop products, powerline communications, real-time clocks, embedded security, microcontrollers, 1-Wire, iButton, data loggers, clock generation and distribution, memory products, optical, signal integrity, high-speed signaling, and display power and control.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MXIM – 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 $15,578,217,914 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.54 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 76.97% Pass
6. Moderate PEmg Ratio PEmg < 20 33.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.09 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 6.54 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.44 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 $1.73
MG Growth Estimate 7.55%
MG Value $40.74
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $25.03
MG Value based on 0% Growth $14.67
Market Implied Growth Rate 12.26%
Current Price $56.99
% of Intrinsic Value 139.88%

Maxim Integrated Products Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor 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 $1.15 in 2015 to an estimated $1.73 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.26% 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 Maxim Integrated Products Inc. revealed the company was trading above its Graham Number of $18.6. The company pays a dividend of $1.56 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 33.02, 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 $1.87.

Maxim Integrated Products 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) $1.87
Graham Number $18.60
PEmg 33.02
Current Ratio 6.54
PB Ratio 9.09
Current Dividend $1.56
Dividend Yield 2.74%
Number of Consecutive Years of Dividend Growth 8

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,657,918,000
Total Current Liabilities $406,480,000
Long-Term Debt $991,866,000
Total Assets $3,888,927,000
Intangible Assets $599,412,000
Total Liabilities $2,133,513,000
Shares Outstanding (Diluted Average) 280,008,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.22
Jun2018 $1.64
Jun2017 $1.98
Jun2016 $0.79
Jun2015 $0.71
Jun2014 $1.23
Jun2013 $1.52
Jun2012 $1.29
Jun2011 $1.61
Jun2010 $0.40
Jun2009 $0.03
Jun2008 $0.98
Jun2007 $0.87
Jun2006 $1.14
Jun2005 $1.35
Jun2004 $0.88
Jun2003 $0.70
Jun2002 $0.73
Jun2001 $0.93
Jun2000 $1.04
Jun1999 $0.64

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.73
Jun2018 $1.41
Jun2017 $1.28
Jun2016 $0.99
Jun2015 $1.15
Jun2014 $1.31
Jun2013 $1.23
Jun2012 $1.01
Jun2011 $0.84
Jun2010 $0.53
Jun2009 $0.69
Jun2008 $1.03
Jun2007 $1.03
Jun2006 $1.06
Jun2005 $0.98
Jun2004 $0.82
Jun2003 $0.80

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Other ModernGraham posts about the company

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

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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.

Cognizant Technology Solutions Corp Valuation – January 2019 $CTSH

Company Profile (excerpt from Reuters): Cognizant Technology Solutions Corporation, incorporated on April 6, 1988, is a professional services company. The Company operates through four segments: Financial Services, Healthcare, Manufacturing/Retail/Logistics, and Other. The Company’s services include consulting and technology services and outsourcing services. Its consulting and technology services include business, process, operations and technology consulting, application development and systems integrations, application testing, enterprise information management and software solutions and related services. Its outsourcing services include application maintenance, IT infrastructure services and business process services. The Company deploys a range of commercial and delivery models, including managed services, fixed bid, output and outcome based pricing and platforms to address the various needs of its customers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CTSH – 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 $39,333,372,216 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.24 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 146.00% Pass
6. Moderate PEmg Ratio PEmg < 20 23.65 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.59 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 3.24 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.10 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 $2.87
MG Growth Estimate 7.26%
MG Value $66.09
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $41.63
MG Value based on 0% Growth $24.41
Market Implied Growth Rate 7.58%
Current Price $67.92
% of Intrinsic Value 102.77%

Cognizant Technology Solutions Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.94 in 2014 to an estimated $2.87 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.58% 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 Cognizant Technology Solutions Corp revealed the company was trading above its Graham Number of $37.96. The company pays a dividend of $0.45 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 23.65, which was below the industry average of 44.74, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.64.

Cognizant Technology Solutions Corp receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.64
Graham Number $37.96
PEmg 23.65
Current Ratio 3.24
PB Ratio 3.59
Current Dividend $0.45
Dividend Yield 0.66%
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 9/1/2018
Total Current Assets $8,727,000,000
Total Current Liabilities $2,693,000,000
Long-Term Debt $624,000,000
Total Assets $15,274,000,000
Intangible Assets $4,058,000,000
Total Liabilities $4,296,000,000
Shares Outstanding (Diluted Average) 580,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.53
Dec2017 $2.53
Dec2016 $2.55
Dec2015 $2.65
Dec2014 $2.35
Dec2013 $2.02
Dec2012 $1.72
Dec2011 $1.43
Dec2010 $1.19
Dec2009 $0.89
Dec2008 $0.72
Dec2007 $0.58
Dec2006 $0.39
Dec2005 $0.28
Dec2004 $0.18
Dec2003 $0.11
Dec2002 $0.07
Dec2001 $0.05
Dec2000 $0.04
Dec1999 $0.02
Dec1998 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.87
Dec2017 $2.50
Dec2016 $2.41
Dec2015 $2.24
Dec2014 $1.94
Dec2013 $1.63
Dec2012 $1.36
Dec2011 $1.10
Dec2010 $0.88
Dec2009 $0.67
Dec2008 $0.52
Dec2007 $0.38
Dec2006 $0.26
Dec2005 $0.17
Dec2004 $0.11
Dec2003 $0.07
Dec2002 $0.05

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Cognizant Technology Solutions Corp – March 2018 $CTSH
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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:

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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

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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.

CTS Corporation Valuation – August 2018 $CTS

Company Profile (excerpt from Reuters): CTS Corporation, incorporated on February 8, 1929, is a global manufacturer of sensors, electronic components and actuators. The Company designs, manufactures and sells a line of sensors, electronic components and actuators primarily to original equipment manufacturers (OEMs) for the transportation, industrial, medical, information technology, defense and aerospace, and communications markets. The Company operates manufacturing facilities in North America, Asia and Europe. The Company’s products perform specific electronic functions for a given product family and are intended for use in customer assemblies. The Company’s products consist principally of sensors and actuators used in passenger or commercial vehicles; electronic components used in communications infrastructure, information technology and other high-speed applications; switches and potentiometers supplied to multiple markets, and fabricated piezoelectric materials and substrates used primarily in medical, industrial, defense and aerospace, and information technology markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CTS – August 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 $1,204,377,645 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.21 Pass
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 1177.27% Pass
6. Moderate PEmg Ratio PEmg < 20 42.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.36 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 2.21 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.45 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 $0.85
MG Growth Estimate 12.26%
MG Value $28.10
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $12.33
MG Value based on 0% Growth $7.23
Market Implied Growth Rate 17.17%
Current Price $36.45
% of Intrinsic Value 129.73%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.47 in 2014 to an estimated $0.85 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.17% 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 CTS Corporation revealed the company was trading above its Graham Number of $17.81. The company pays a dividend of $0.16 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 42.85, which was below the industry average of 53.7, 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 $1.59.

CTS 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) $1.59
Graham Number $17.81
PEmg 42.85
Current Ratio 2.21
PB Ratio 3.36
Current Dividend $0.16
Dividend Yield 0.44%
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 $232,060,000
Total Current Liabilities $105,146,000
Long-Term Debt $57,000,000
Total Assets $542,553,000
Intangible Assets $134,614,000
Total Liabilities $178,793,000
Shares Outstanding (Diluted Average) 33,564,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.35
Dec2017 $0.43
Dec2016 $1.03
Dec2015 $0.21
Dec2014 $0.78
Dec2013 -$0.12
Dec2012 $0.59
Dec2011 $0.60
Dec2010 $0.63
Dec2009 -$1.01
Dec2008 $0.81
Dec2007 $0.66
Dec2006 $0.63
Dec2005 $0.53
Dec2004 $0.53
Dec2003 $0.36
Dec2002 -$0.54
Dec2001 -$1.61
Dec2000 $2.92
Dec1999 $1.80
Dec1998 $1.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.85
Dec2017 $0.56
Dec2016 $0.58
Dec2015 $0.37
Dec2014 $0.47
Dec2013 $0.25
Dec2012 $0.40
Dec2011 $0.32
Dec2010 $0.23
Dec2009 $0.13
Dec2008 $0.68
Dec2007 $0.59
Dec2006 $0.47
Dec2005 $0.21
Dec2004 $0.14
Dec2003 $0.16
Dec2002 $0.30

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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.

Sonoco Products Co Valuation – August 2018 $SON

Company Profile (excerpt from Reuters): Sonoco Products Company (Sonoco), incorporated on May 10, 1899, is a manufacturer of industrial and consumer packaging products and a provider of packaging services. The Company operates in four segments: Consumer Packaging, Paper and Industrial Converted Products, Display and Packaging, and Protective Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SON – August 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 $5,542,806,488 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.53 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 39.00% Pass
6. Moderate PEmg Ratio PEmg < 20 21.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.17 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.53 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.34 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 $2.57
MG Growth Estimate 3.66%
MG Value $40.69
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $37.27
MG Value based on 0% Growth $21.85
Market Implied Growth Rate 6.67%
Current Price $56.16
% of Intrinsic Value 138.02%

Sonoco Products Co 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 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 Overvalued after growing its EPSmg (normalized earnings) from $2.07 in 2014 to an estimated $2.57 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.67% 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 Sonoco Products Co revealed the company was trading above its Graham Number of $35.27. The company pays a dividend of $1.54 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 21.85, which was above the industry average of 21.21. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.45.

Sonoco Products Co performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.45
Graham Number $35.27
PEmg 21.85
Current Ratio 1.53
PB Ratio 3.17
Current Dividend $1.54
Dividend Yield 2.74%
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 6/1/2018
Total Current Assets $1,574,968,000
Total Current Liabilities $1,030,072,000
Long-Term Debt $1,274,325,000
Total Assets $4,622,968,000
Intangible Assets $1,638,254,000
Total Liabilities $2,832,703,000
Shares Outstanding (Diluted Average) 101,040,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.22
Dec2017 $1.74
Dec2016 $2.81
Dec2015 $2.44
Dec2014 $2.19
Dec2013 $2.03
Dec2012 $1.90
Dec2011 $2.13
Dec2010 $1.96
Dec2009 $1.50
Dec2008 $1.63
Dec2007 $2.10
Dec2006 $1.92
Dec2005 $1.61
Dec2004 $1.53
Dec2003 $1.43
Dec2002 $1.39
Dec2001 $0.96
Dec2000 $1.66
Dec1999 $1.83
Dec1998 $1.73

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.57
Dec2017 $2.24
Dec2016 $2.42
Dec2015 $2.20
Dec2014 $2.07
Dec2013 $1.97
Dec2012 $1.90
Dec2011 $1.89
Dec2010 $1.79
Dec2009 $1.72
Dec2008 $1.80
Dec2007 $1.83
Dec2006 $1.66
Dec2005 $1.48
Dec2004 $1.41
Dec2003 $1.38
Dec2002 $1.41

Recommended Reading:

Other ModernGraham posts about the company

Sonoco Products Co Valuation – Initial Coverage $SON

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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.

Standard Motor Products Inc Valuation – August 2018 $SMP

Company Profile (excerpt from Reuters): Standard Motor Products, Inc., incorporated on December 30, 1926, is an independent manufacturer and distributor of replacement parts for motor vehicles in the automotive aftermarket industry with a complementary focus on heavy duty, industrial equipment and the original equipment service market. The Company’s segments include Engine Management Segment and Temperature Control Segment. The Engine Management Segment manufactures and remanufactures ignition and emission parts, ignition wires, battery cables, fuel system parts and sensors for vehicle systems. The Temperature Control Segment manufactures and remanufactures air conditioning compressors, air conditioning and heating parts, engine cooling system parts, power window accessories and windshield washer system parts. The Company sells its products primarily to warehouse distributors, large retail chains, original equipment manufacturers and original equipment service part operations in the United States, Canada, Latin America and Europe.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SMP – August 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 $1,096,709,825 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.63 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 71.43% Pass
6. Moderate PEmg Ratio PEmg < 20 22.39 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.37 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 1.63 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.13
MG Growth Estimate 1.07%
MG Value $22.65
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $30.89
MG Value based on 0% Growth $18.11
Market Implied Growth Rate 6.94%
Current Price $47.69
% of Intrinsic Value 210.59%

Standard Motor Products, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, poor dividend history, and the high PEmg ratio. 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 $1.99 in 2014 to an estimated $2.13 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.94% 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 Standard Motor Products, Inc. revealed the company was trading above its Graham Number of $32.57. The company pays a dividend of $0.76 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 22.39, which was above the industry average of 18.51. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.36.

Standard Motor Products, 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) $7.36
Graham Number $32.57
PEmg 22.39
Current Ratio 1.63
PB Ratio 2.37
Current Dividend $0.76
Dividend Yield 1.59%
Number of Consecutive Years of Dividend Growth 8

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 6/1/2018
Total Current Assets $558,591,000
Total Current Liabilities $341,753,000
Long-Term Debt $34,000
Total Assets $851,945,000
Intangible Assets $119,576,000
Total Liabilities $389,575,000
Shares Outstanding (Diluted Average) 22,958,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.34
Dec2017 $1.64
Dec2016 $2.62
Dec2015 $1.99
Dec2014 $1.85
Dec2013 $2.21
Dec2012 $1.79
Dec2011 $2.70
Dec2010 $0.97
Dec2009 $0.18
Dec2008 -$1.24
Dec2007 $0.12
Dec2006 $0.51
Dec2005 -$0.18
Dec2004 -$0.74
Dec2003 -$0.10
Dec2002 -$2.57
Dec2001 -$0.21
Dec2000 $0.81
Dec1999 $0.58
Dec1998 $1.69

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.13
Dec2017 $2.04
Dec2016 $2.19
Dec2015 $2.02
Dec2014 $1.99
Dec2013 $1.90
Dec2012 $1.45
Dec2011 $1.04
Dec2010 $0.17
Dec2009 -$0.19
Dec2008 -$0.35
Dec2007 $0.03
Dec2006 -$0.21
Dec2005 -$0.63
Dec2004 -$0.76
Dec2003 -$0.61
Dec2002 -$0.56

Recommended Reading:

Other ModernGraham posts about the company

12 Best Stocks for Value Investors This Week – 2/4/17
Standard Motor Products Inc Valuation – Initial Coverage $SMP

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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.

Enterprise Products Partners LP Valuation – July 2018 $EPD

Company Profile (excerpt from Reuters): Enterprise Products Partners L.P. (Enterprise), incorporated on April 9, 1998, is a provider of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals and refined products in North America. The Company’s segments include NGL Pipelines & Services; Crude Oil Pipelines & Services; Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services. The Company owns and operates certain NGLs related businesses of Enterprise Products Company (EPCO). The Company’s midstream energy operations include natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage, and import and export terminals, including liquefied petroleum gas (LPG); crude oil gathering, transportation, storage and terminals; petrochemical and refined products transportation, storage, export and import terminals, and related services, and a marine transportation business that operates primarily on the United States inland and Intracoastal Waterway systems.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EPD – 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 $60,574,911,153 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.77 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 75.66% Pass
6. Moderate PEmg Ratio PEmg < 20 20.61 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.62 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.77 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.24 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 $1.34
MG Growth Estimate 0.11%
MG Value $11.70
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $19.47
MG Value based on 0% Growth $11.41
Market Implied Growth Rate 6.05%
Current Price $27.67
% of Intrinsic Value 236.40%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.33 in 2014 to an estimated $1.34 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.05% 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 Enterprise Products Partners L.P. revealed the company was trading above its Graham Number of $18.58. The company pays a dividend of $1.67 per share, for a yield of 6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.61, which was below the industry average of 49.12, 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 $-11.82.

Enterprise Products Partners L.P. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.82
Graham Number $18.58
PEmg 20.61
Current Ratio 0.77
PB Ratio 2.62
Current Dividend $1.67
Dividend Yield 6.03%
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 3/1/2018
Total Current Assets $6,791,000,000
Total Current Liabilities $8,839,600,000
Long-Term Debt $23,016,400,000
Total Assets $55,482,300,000
Intangible Assets $9,481,600,000
Total Liabilities $32,517,400,000
Shares Outstanding (Diluted Average) 2,177,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.47
Dec2017 $1.30
Dec2016 $1.20
Dec2015 $1.26
Dec2014 $1.47
Dec2013 $1.41
Dec2012 $1.35
Dec2011 $1.19
Dec2010 $0.58
Dec2009 $0.50
Dec2008 $0.92
Dec2007 $0.48
Dec2006 $0.61
Dec2005 $0.46
Dec2004 $0.44
Dec2003 $0.21
Dec2002 $0.24
Dec2001 $0.70
Dec2000 $0.66
Dec1999 $0.41
Dec1998 $0.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.34
Dec2017 $1.30
Dec2016 $1.31
Dec2015 $1.35
Dec2014 $1.33
Dec2013 $1.18
Dec2012 $1.01
Dec2011 $0.80
Dec2010 $0.61
Dec2009 $0.62
Dec2008 $0.65
Dec2007 $0.49
Dec2006 $0.46
Dec2005 $0.39
Dec2004 $0.38
Dec2003 $0.39
Dec2002 $0.46

Recommended Reading:

Other ModernGraham posts about the company

Enterprise Products Partners LP Valuation – August 2016 $EPD
Enterprise Products Partners LP Analysis – Initial Coverage $EPD

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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.

Avon Products Inc Valuation – June 2018 $AVP

Company Profile (excerpt from Reuters): Avon Products, Inc., incorporated on January 27, 1916, is a manufacturer and marketer of beauty and related products. The Company’s segments include Europe, Middle East & Africa; South Latin America; North Latin America, and Asia Pacific. Its product categories are Beauty, and Fashion and Home. Beauty consists of skincare (which includes personal care), fragrance and color (cosmetics). Fashion and Home consists of fashion jewelry, watches, apparel, footwear, accessories, gift and decorative products, housewares, entertainment and leisure products, children’s products and nutritional products. The Company’s products include Anew Ultimate Supreme Advanced Performance Creme, Anew Vitale Visible Perfection Blurring Treatment, Big & Multiplied Volume Mascara, Avon True Perfectly Matte Lipstick, Avon Life for Him and for Her Fragrances, Far Away Infinity Fragrance and Avon Nutra Effects body collection with Active Seed Complex.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AVP – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $702,271,701 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.23 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 -105.55% Fail
6. Moderate PEmg Ratio PEmg < 20 -3.68 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -2.62 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 4.09 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 -$0.44
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$6.39
MG Value based on 0% Growth -$3.75
Market Implied Growth Rate -6.09%
Current Price $1.62
% of Intrinsic Value N/A

Avon Products, Inc. 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 poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years, 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 $-0.1 in 2014 to an estimated $-0.44 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 Avon Products, 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 -3.68, which was below the industry average of 68.19, 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 $-4.

Avon Products, 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) -$4.00
Graham Number $0.00
PEmg -3.68
Current Ratio 1.23
PB Ratio -2.62
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $2,149,500,000
Total Current Liabilities $1,750,800,000
Long-Term Debt $1,629,600,000
Total Assets $3,640,400,000
Intangible Assets $186,700,000
Total Liabilities $3,913,200,000
Shares Outstanding (Diluted Average) 440,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.07
Dec2017 $0.00
Dec2016 -$0.29
Dec2015 -$2.60
Dec2014 -$0.88
Dec2013 -$0.13
Dec2012 -$0.10
Dec2011 $1.18
Dec2010 $1.39
Dec2009 $1.45
Dec2008 $2.03
Dec2007 $1.21
Dec2006 $1.06
Dec2005 $1.81
Dec2004 $1.77
Dec2003 $1.39
Dec2002 $1.11
Dec2001 $0.93
Dec2000 $1.00
Dec1999 $0.55
Dec1998 $0.51

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.44
Dec2017 -$0.72
Dec2016 -$0.99
Dec2015 -$1.06
Dec2014 -$0.10
Dec2013 $0.45
Dec2012 $0.89
Dec2011 $1.41
Dec2010 $1.49
Dec2009 $1.53
Dec2008 $1.57
Dec2007 $1.38
Dec2006 $1.45
Dec2005 $1.56
Dec2004 $1.37
Dec2003 $1.11
Dec2002 $0.92

Recommended Reading:

Other ModernGraham posts about the company

Avon Products Inc Valuation – July 2016 $AVP
58 Companies in the Spotlight This Week – 1/31/15
Avon Products Inc. Annual Valuation – 2015 $AVP
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ModernGraham Valuation: Avon Products Inc. (AVP)

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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.

Cognizant Technology Solutions Corp – March 2018 $CTSH

Company Profile (excerpt from Reuters): Cognizant Technology Solutions Corporation, incorporated on April 6, 1988, is a professional services company. The Company operates through four segments: Financial Services, Healthcare, Manufacturing/Retail/Logistics, and Other. The Company’s services include consulting and technology services and outsourcing services. Its consulting and technology services include business, process, operations and technology consulting, application development and systems integrations, application testing, enterprise information management and software solutions and related services. Its outsourcing services include application maintenance, IT infrastructure services and business process services. The Company deploys a range of commercial and delivery models, including managed services, fixed bid, output and outcome based pricing and platforms to address the various needs of its customers.

CTSH Chart

CTSH data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CTSH – March 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 $49,284,578,017 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.21 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 168.00% Pass
6. Moderate PEmg Ratio PEmg < 20 26.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.65 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 3.21 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.11 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 $3.13
MG Growth Estimate 9.25%
MG Value $84.44
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $45.36
MG Value based on 0% Growth $26.59
Market Implied Growth Rate 9.15%
Current Price $83.81
% of Intrinsic Value 99.25%

Cognizant Technology Solutions Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.94 in 2014 to an estimated $3.13 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 9.15% 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 Cognizant Technology Solutions Corp revealed the company was trading above its Graham Number of $41.9. The company pays a dividend of $0.45 per share, for a yield of 0.5% Its PEmg (price over earnings per share – ModernGraham) was 26.79, which was below the industry average of 43.34, 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 $7.7.

Cognizant Technology Solutions Corp receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.70
Graham Number $41.90
PEmg 26.79
Current Ratio 3.21
PB Ratio 4.65
Current Dividend $0.45
Dividend Yield 0.54%
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 12/1/2017
Total Current Assets $9,111,000,000
Total Current Liabilities $2,839,000,000
Long-Term Debt $698,000,000
Total Assets $15,221,000,000
Intangible Assets $3,685,000,000
Total Liabilities $4,552,000,000
Shares Outstanding (Diluted Average) 592,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.30
Dec2017 $2.53
Dec2016 $2.55
Dec2015 $2.65
Dec2014 $2.35
Dec2013 $2.02
Dec2012 $1.72
Dec2011 $1.43
Dec2010 $1.19
Dec2009 $0.89
Dec2008 $0.72
Dec2007 $0.58
Dec2006 $0.39
Dec2005 $0.28
Dec2004 $0.18
Dec2003 $0.11
Dec2002 $0.07
Dec2001 $0.05
Dec2000 $0.04
Dec1999 $0.02
Dec1998 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.13
Dec2017 $2.50
Dec2016 $2.41
Dec2015 $2.24
Dec2014 $1.94
Dec2013 $1.63
Dec2012 $1.36
Dec2011 $1.10
Dec2010 $0.88
Dec2009 $0.67
Dec2008 $0.52
Dec2007 $0.38
Dec2006 $0.26
Dec2005 $0.17
Dec2004 $0.11
Dec2003 $0.07
Dec2002 $0.05

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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 – March 2018 $APD

Company Profile (obtained from Marketwatch): Air Products & Chemicals, Inc. engages in the manufacture and distribution of atmospheric gases. It operates through the following segments: Industrial Gases-Americas; Industrial Gases-EMEA (Europe, Middle East, and Africa); Industrial Gases-Asia; Industrial Gases-Global; Materials Technologies; and Corporate and Other. The Industrial Gases segment, which covers Americas, EMEA, Asia, and Global markets, produces atmospheric gases such as oxygen, nitrogen, argon, and rare gases; process gases such as hydrogen, helium, carbon dioxide, carbon monoxide, syngas, and specialty gases; and equipment for the production and processing of gases such as air separation units and non-cryogenic generators. The Materials Technologies segment comprises of performance, and electronic materials. The Corporate and Other segment includes liquefied natural gas, and helium container businesses. The company was founded by Leonard Parker Pool on September 30, 1940 and is headquartered in Allentown, PA.

APD Chart

APD data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of APD – March 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 $36,559,974,167 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.92 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 76.97% Pass
6. Moderate PEmg Ratio PEmg < 20 21.81 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.60 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 2.92 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.97 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 $7.66
MG Growth Estimate 8.26%
MG Value $191.64
Opinion Fairly Valued
MG Grade B+
MG Value based on 3% Growth $111.06
MG Value based on 0% Growth $65.10
Market Implied Growth Rate 6.66%
Current Price $167.08
% of Intrinsic Value 87.18%

Air Products & Chemicals, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor 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 Fairly Valued after growing its EPSmg (normalized earnings) from $4.94 in 2014 to an estimated $7.66 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.66% 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 $85.6. The company pays a dividend of $3.71 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 21.81, which was below the industry average of 31.55, 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 $-11.97.

Air Products & Chemicals, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.97
Graham Number $85.60
PEmg 21.81
Current Ratio 2.92
PB Ratio 3.60
Current Dividend $3.71
Dividend Yield 2.22%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $5,355,500,000
Total Current Liabilities $1,831,600,000
Long-Term Debt $3,414,900,000
Total Assets $18,208,800,000
Intangible Assets $1,219,900,000
Total Liabilities $7,993,500,000
Shares Outstanding (Diluted Average) 220,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.05
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
Sep1998 $2.48

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.66
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
Sep2002 $1.91

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Other ModernGraham posts about the company

Air Products & Chemicals Inc Valuation – February 2016 $APD
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Air Products & Chemicals Inc. Annual Valuation – 2014 $APD

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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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