Customers Bancorp Inc Valuation – September 2018 $CUBI

Company Profile (excerpt from Reuters): Customers Bancorp, Inc. (Customers Bancorp), incorporated on April 7, 2010, is a bank holding company engaged in banking activities through its subsidiary, Customers Bank (the Bank). The Bank provides financial products and services to small and middle market businesses, not-for-profits, and consumers through its branches and offices in Southeastern Pennsylvania (Bucks, Berks, Chester, Delaware and Philadelphia Counties), Rye Brook, Melville and New York, New York (Westchester, Suffolk and New York Counties), Hamilton, New Jersey (Mercer County), Providence, Rhode Island (Providence County), Portsmouth, New Hampshire (Rockingham County) and Boston, Massachusetts (Suffolk County). The Bank also provides liquidity to the mortgage market nationwide through the operation of its loans to mortgage banking companies. The Bank offers a range of traditional loan and deposit banking products, and financial services. Customers Bank offers a range of lending products, including small business loans, mortgage warehouse loans, multi-family and commercial real estate loans, residential mortgage loans and other consumer loans. Customers Bank also offers traditional deposit products, including commercial and consumer checking accounts, non-interest-bearing demand accounts, money market deposit accounts, savings accounts and time deposit accounts, and cash management services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CUBI – September 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $786,388,942 Fail
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 79.25% Pass
5. Moderate PEmg Ratio PEmg < 20 11.53 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.85 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 Fail
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.14
MG Growth Estimate 7.18%
MG Value $48.98
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $31.06
MG Value based on 0% Growth $18.21
Market Implied Growth Rate 1.52%
Current Price $24.70
% of Intrinsic Value 50.42%

Customers Bancorp 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, insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.45 in 2014 to an estimated $2.14 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.52% 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 Customers Bancorp Inc revealed the company was trading below its Graham Number of $34.58. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 11.53, which was below the industry average of 19.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Customers Bancorp Inc receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Graham Number $34.58
PEmg 11.53
PB Ratio 0.85
Dividend Yield 0.00%
TTM Dividend $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
Long-Term Debt & Capital Lease Obligation $2,685,614,000
Total Assets $11,092,846,000
Intangible Assets $17,150,000
Total Liabilities $10,156,619,000
Shares Outstanding (Diluted Average) 32,381,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.37
Dec2017 $1.97
Dec2016 $2.31
Dec2015 $1.96
Dec2014 $1.55
Dec2013 $1.30
Dec2012 $1.57
Dec2011 $0.36
Dec2010 $3.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.14
Dec2017 $1.96
Dec2016 $1.88
Dec2015 $1.56
Dec2014 $1.45
Dec2013 $1.37
Dec2012 $1.29
Dec2011 $1.01
Dec2010 $1.12

Recommended Reading:

Other ModernGraham posts about the company

Customers Bancorp Inc Valuation – Initial Coverage $CUBI

Other ModernGraham posts about related companies

Central Pacific Financial Corp Valuation – August 2018 $CPF
Synovus Financial Corp Valuation – August 2018 $SNV
Columbia Banking System Inc Valuation – August 2018 $COLB
Canadian Imperial Bank of Commerce Valuation – July 2018 $TSE:CM
ServisFirst Bancshares Inc Valuation – July 2018 $SFBS
Cullen/Frost Bankers Inc Valuation – July 2018 $CFR
Signature Bank Valuation – July 2018 $SBNY
City Holding Co Valuation – July 2018 $CHCO
Southside Bancshares Inc Valuation – July 2018 $SBSI
Independent Bank Corp Valuation – July 2018 $INDB

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.

Cubic Corp Valuation – September 2018 $CUB

Company Profile (excerpt from Reuters): Cubic Corporation (Cubic), incorporated on December 13, 1984, designs, integrates and operates systems, products and services that provide situational awareness for its customers in the transportation and defense industries. The Company operates in two business segments across the global transportation and defense markets, which include Cubic Transportation Systems (CTS) and Cubic Global Defense (CGD). The Company’s CTS segment is a systems integrator of payment and information technology and services for travel solutions. The Company’s CGD Systems is focused on two primary lines of business: training systems and secure communications (SC) products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CUB – September 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 $2,109,738,249 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.22 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 -99.03% Fail
6. Moderate PEmg Ratio PEmg < 20 228.01 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.07 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 2.22 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.67 Pass
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 $0.33
MG Growth Estimate -4.25%
MG Value $2.03
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $4.81
MG Value based on 0% Growth $2.82
Market Implied Growth Rate 109.76%
Current Price $75.70
% of Intrinsic Value 3720.84%

Cubic Corporation 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 high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.45 in 2014 to an estimated $0.33 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 109.76% 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 Cubic Corporation revealed the company was trading above its Graham Number of $15.68. The company pays a dividend of $0.27 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 228.01, which was above the industry average of 48.73. Finally, the company was trading above its Net Current Asset Value (NCAV) of $2.03.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $2.03
Graham Number $15.68
PEmg 228.01
Current Ratio 2.22
PB Ratio 3.07
Current Dividend $0.27
Dividend Yield 0.36%
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 $613,904,000
Total Current Liabilities $276,826,000
Long-Term Debt $226,347,000
Total Assets $1,234,097,000
Intangible Assets $402,772,000
Total Liabilities $558,212,000
Shares Outstanding (Diluted Average) 27,374,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.43
Sep2017 -$0.41
Sep2016 $0.06
Sep2015 $0.85
Sep2014 $2.59
Sep2013 $0.94
Sep2012 $3.64
Sep2011 $3.22
Sep2010 $2.70
Sep2009 $2.36
Sep2008 $1.38
Sep2007 $1.56
Sep2006 $0.90
Sep2005 $0.44
Sep2004 $1.38
Sep2003 $1.37
Sep2002 $1.10
Sep2001 $0.78
Sep2000 $0.03
Sep1999 $0.52
Sep1998 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.33
Sep2017 $0.46
Sep2016 $1.13
Sep2015 $1.86
Sep2014 $2.45
Sep2013 $2.45
Sep2012 $3.02
Sep2011 $2.55
Sep2010 $2.07
Sep2009 $1.62
Sep2008 $1.21
Sep2007 $1.12
Sep2006 $0.95
Sep2005 $0.99
Sep2004 $1.15
Sep2003 $0.94
Sep2002 $0.65

Recommended Reading:

Other ModernGraham posts about the company

Cubic Corporation Valuation – Initial Coverage $CUB

Other ModernGraham posts about related companies

KLX Inc Valuation – August 2018 $KLXI
Kaman Corp Valuation – August 2018 $KAMN
Raytheon Co Valuation – June 2018 $RTN
General Dynamics Corp Valuation – June 2018 $GD
TransDigm Group Inc Valuation – June 2018 $TDG
Northrop Grumman Corp Valuation – May 2018 $NOC
Rockwell Collins Inc Valuation – May 2018 $COL
L3 Technologies Inc Valuation – March 2018 $LLL
Textron Inc Valuation – March 2018 $TXT
Lockheed Martin Corp Valuation – February 2018 $LMT

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.

Customers Bancorp Inc Valuation – Initial Coverage $CUBI

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 – March 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 Customers Bancorp Inc (CUBI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Customers Bancorp, Inc. (Customers Bancorp) is a bank holding company engaged in banking activities through its subsidiary, Customers Bank (the Bank). The Company operates in the community banking segment. The Bank provides financial products and services to small and middle market businesses, not-for-profits, and consumers. The Bank also provides liquidity to the mortgage market nationwide through the operation of its loans to mortgage banking companies. It offers a range of traditional loan and deposit banking products, and financial services. The Bank offers a range of lending products, including small business loans, mortgage warehouse loans, multi-family and commercial real estate loans, residential mortgage loans and other consumer loans. It also offers traditional deposit products, including commercial and consumer checking accounts, non-interest-bearing demand accounts, money market deposit accounts, savings accounts and time deposit accounts, and cash management services.

CUBI Chart

CUBI data by YCharts

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ModernGraham Valuation of CUBI – March 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,003,171,787 Fail
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 94.04% Pass
5. Moderate PEmg Ratio PEmg < 20 16.21 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.16 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 Fail
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.05
MG Growth Estimate 7.42%
MG Value $47.79
Opinion Undervalued
MG Grade D
MG Value based on 3% Growth $29.70
MG Value based on 0% Growth $17.41
Market Implied Growth Rate 3.86%
Current Price $33.20
% of Intrinsic Value 69.47%

Customers Bancorp 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, insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.37 in 2013 to an estimated $2.05 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.86% 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 Customers Bancorp Inc revealed the company was trading above its Graham Number of $32.59. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 16.21, which was below the industry average of 21.43, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $32.59
PEmg 16.21
PB Ratio 1.16
Dividend Yield 0.00%
TTM Dividend $0.00
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 12/1/2016
Long-Term Debt & Capital Lease Obligation $1,064,706,000
Total Assets $9,382,736,000
Intangible Assets $3,639,000
Total Liabilities $8,526,864,000
Shares Outstanding (Diluted Average) 30,014,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.24
Dec2016 $2.31
Dec2015 $1.96
Dec2014 $1.55
Dec2013 $1.30
Dec2012 $1.57
Dec2011 $0.36
Dec2010 $3.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.05
Dec2016 $1.88
Dec2015 $1.56
Dec2014 $1.45
Dec2013 $1.37
Dec2012 $1.29
Dec2011 $1.01
Dec2010 $1.12

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

Comerica Inc Valuation – March 2017 $CMA
Sterling Bancorp Valuation – Initial Coverage $STL
S&T Bancorp Inc Valuation – Initial Coverage $STBA
Central Pacific Financial Corp Valuation – Initial Coverage $CPF
Synovus Financial Corp Valuation – Initial Coverage $SNV
U.S. Bancorp Valuation – February 2017 $USB
Columbia Banking System Inc Valuation – Initial Coverage $COLB
Canadian Imperial Bank of Commerce Valuation – Initial Coverage $TSE:CM
SVB Financial Group Valuation – Initial Coverage $SIVB
Bank of New York Mellon Corp Valuation – January 2017 $BK

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.

Cubic Corporation Valuation – Initial Coverage $CUB

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 – February 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 Cubic Corporation (CUB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cubic Corporation (Cubic) designs, integrates and operates systems, products and services that provide situational awareness for its customers in the transportation and defense industries. The Company operates in three business segments across the global transportation and defense markets, which include Cubic Transportation Systems (CTS), Cubic Global Defense (CGD) and Cubic Global Defense Services (CGD Services). The Company’s CTS segment is a systems integrator of payment and information technology and services for travel solutions. The Company’s CGD Systems is focused on two primary lines of business: training systems and secure communications (SC) products. The Company’s CGD Services segment is a provider of training, operations, intelligence, maintenance, technical and other support services to the United States government and its agencies and allied nations. It also provides cross-domain hardware solutions to address multi-level security challenges across common networks.

CUB Chart

CUB data by YCharts

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

Learn More About Premium Membership

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CUB – March 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 $1,352,610,516 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.50 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 -77.95% Fail
6. Moderate PEmg Ratio PEmg < 20 66.36 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.06 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 1.50 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.83 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 Fail

Stage 2: Determination of Intrinsic Value

EPSmg $0.76
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $11.08
MG Value based on 0% Growth $6.49
Market Implied Growth Rate 28.93%
Current Price $50.70
% of Intrinsic Value N/A

Cubic Corporation 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 growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the low current ratio, 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 $2.45 in 2013 to an estimated $0.76 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 28.93% 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 Cubic Corporation revealed the company was trading above its Graham Number of $16.8. The company pays a dividend of $0.27 per share, for a yield of 0.5% Its PEmg (price over earnings per share – ModernGraham) was 66.36, which was above the industry average of 22.93. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.16.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.16
Graham Number $16.80
PEmg 66.36
Current Ratio 1.50
PB Ratio 2.06
Current Dividend $0.27
Dividend Yield 0.53%
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 12/1/2016
Total Current Assets $730,588,000
Total Current Liabilities $488,082,000
Long-Term Debt $200,165,000
Total Assets $1,455,297,000
Intangible Assets $526,384,000
Total Liabilities $789,206,000
Shares Outstanding (Diluted Average) 27,086,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.51
Sep2016 $0.06
Sep2015 $0.85
Sep2014 $2.59
Sep2013 $0.94
Sep2012 $3.64
Sep2011 $3.22
Sep2010 $2.70
Sep2009 $2.36
Sep2008 $1.38
Sep2007 $1.56
Sep2006 $0.90
Sep2005 $0.44
Sep2004 $1.38
Sep2003 $1.37
Sep2002 $1.10
Sep2001 $0.78
Sep2000 $0.03
Sep1999 $0.52
Sep1998 $0.03
Sep1997 $0.45

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.76
Sep2016 $1.13
Sep2015 $1.86
Sep2014 $2.45
Sep2013 $2.45
Sep2012 $3.02
Sep2011 $2.55
Sep2010 $2.07
Sep2009 $1.62
Sep2008 $1.21
Sep2007 $1.12
Sep2006 $0.95
Sep2005 $0.99
Sep2004 $1.15
Sep2003 $0.94
Sep2002 $0.65
Sep2001 $0.41

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

Northrop Grumman Corp Valuation – February 2017 $NOC
Rockwell Collins Inc Valuation – January 2017 $COL
Raytheon Company Valuation – August 2016 $RTN
Rockwell Collins Inc Valuation – August 2016 $COL
L-3 Communications Holdings Inc Valuation – July 2016 $LLL
Lockheed Martin Corporation Valuation – June 2016 $LMT
United Technologies Corporation Valuation – May 2016 $UTX
Raytheon Co Valuation – February 2016 $RTN
Rockwell Collins Inc Valuation – January 2016 Update $COL
General Dynamics Corporation Valuation – January 2016 Update $GD

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.

Raytheon Co Valuation – March 2019 #RTN

Company Profile (excerpt from Reuters): Raytheon Company, incorporated on December 17, 1953, is a technology company, which specializes in defense and other government markets. The Company develops integrated products, services and solutions in various markets, including sensing; effects; command, control, communications, computers, cyber and intelligence; mission support, and cybersecurity. The Company operates through five segments: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS), and Forcepoint. The Company serves both domestic and international customers, primarily as a prime contractor or subcontractor on a range of defense and related programs for government customers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RTN – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $50,836,887,301 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.46 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 80.90% Pass
6. Moderate PEmg Ratio PEmg < 20 19.17 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.47 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 1.46 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.24 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 $9.40
MG Growth Estimate 6.50%
MG Value $202.10
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $136.26
MG Value based on 0% Growth $79.88
Market Implied Growth Rate 5.33%
Current Price $180.12
% of Intrinsic Value 89.12%

Raytheon 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, high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $6.56 in 2015 to an estimated $9.4 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 5.33% 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 Raytheon Company revealed the company was trading above its Graham Number of $102.6. The company pays a dividend of $3.47 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 19.17, which was below the industry average of 51.79, 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 $-29.

Raytheon 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) -$29.00
Graham Number $102.60
PEmg 19.17
Current Ratio 1.46
PB Ratio 4.47
Current Dividend $3.47
Dividend Yield 1.93%
Number of Consecutive Years of Dividend Growth 14

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 $12,136,000,000
Total Current Liabilities $8,288,000,000
Long-Term Debt $4,755,000,000
Total Assets $31,864,000,000
Intangible Assets $15,486,000,000
Total Liabilities $20,392,000,000
Shares Outstanding (Diluted Average) 284,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.50
Dec2018 $10.15
Dec2017 $6.95
Dec2016 $7.55
Dec2015 $6.91
Dec2014 $7.18
Dec2013 $6.16
Dec2012 $5.65
Dec2011 $5.28
Dec2010 $4.88
Dec2009 $4.89
Dec2008 $3.92
Dec2007 $5.79
Dec2006 $2.85
Dec2005 $1.92
Dec2004 $0.94
Dec2003 $0.88
Dec2002 -$1.59
Dec2001 -$2.12
Dec2000 $0.41
Dec1999 $1.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.40
Dec2018 $8.15
Dec2017 $7.08
Dec2016 $6.99
Dec2015 $6.56
Dec2014 $6.20
Dec2013 $5.59
Dec2012 $5.18
Dec2011 $4.95
Dec2010 $4.68
Dec2009 $4.34
Dec2008 $3.74
Dec2007 $3.26
Dec2006 $1.66
Dec2005 $0.71
Dec2004 -$0.03
Dec2003 -$0.42

Recommended Reading:

Other ModernGraham posts about the company

Raytheon Co Valuation – June 2018 $RTN
Raytheon Company Valuation – April 2017 $RTN
Raytheon Company Valuation – August 2016 $RTN
Raytheon Co Valuation – February 2016 $RTN
10 Best Stocks For Value Investors This Week – 10/31/15

Other ModernGraham posts about related companies

TransDigm Group Inc Valuation – March 2019 #TDG
Northrop Grumman Corp Valuation – March 2019 #NOC
Huntington Ingalls Industries Inc Valuation – February 2019 $HII
L3 Technologies Inc Valuation – January 2019 $LLL
Textron Inc Valuation – January 2019 $TXT
Lockheed Martin Corp Valuation – January 2019 $LMT
United Technologies Corp Valuation – November 2018 $UTX
Boeing Co Valuation – November 2018 $BA
Axon Enterprises Inc Valuation – October 2018 $AAXN
Cubic Corp Valuation – September 2018 $CUB

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 Dynamics Corp Valuation – March 2019 #GD

Company Profile (excerpt from Reuters): General Dynamics Corporation, incorporated on February 21, 1952, is a global aerospace and defense company. The Company offers a portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; information technology (IT) services and C4ISR (command, control, communications, computers, intelligence, surveillance and reconnaissance) solutions, and shipbuilding and ship repair. The Company operates through four business groups: Aerospace, Combat Systems, Information Systems and Technology, and Marine Systems.

GD Chart

GD data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GD – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $48,068,656,138 Pass
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 Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 153.85% Pass
6. Moderate PEmg Ratio PEmg < 20 15.88 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.21 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 3.32 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 $10.48
MG Growth Estimate 8.33%
MG Value $263.73
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $152.03
MG Value based on 0% Growth $89.12
Market Implied Growth Rate 3.69%
Current Price $166.49
% of Intrinsic Value 63.13%

General Dynamics Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability 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. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $6.74 in 2015 to an estimated $10.48 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.69% 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 General Dynamics Corporation revealed the company was trading above its Graham Number of $102.99. The company pays a dividend of $3.63 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 15.88, which was below the industry average of 51.79, 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 $-52.25.

General Dynamics 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) -$52.25
Graham Number $102.99
PEmg 15.88
Current Ratio 1.23
PB Ratio 4.21
Current Dividend $3.63
Dividend Yield 2.18%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $18,189,000,000
Total Current Liabilities $14,739,000,000
Long-Term Debt $11,444,000,000
Total Assets $45,408,000,000
Intangible Assets $22,179,000,000
Total Liabilities $33,676,000,000
Shares Outstanding (Diluted Average) 296,406,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.60
Dec2018 $11.18
Dec2017 $9.56
Dec2016 $8.29
Dec2015 $9.29
Dec2014 $7.42
Dec2013 $6.67
Dec2012 -$0.94
Dec2011 $6.87
Dec2010 $6.81
Dec2009 $6.17
Dec2008 $6.17
Dec2007 $5.08
Dec2006 $4.56
Dec2005 $3.61
Dec2004 $3.05
Dec2003 $2.52
Dec2002 $2.26
Dec2001 $2.33
Dec2000 $2.24
Dec1999 $2.18

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.48
Dec2018 $9.67
Dec2017 $8.69
Dec2016 $7.55
Dec2015 $6.74
Dec2014 $5.43
Dec2013 $4.67
Dec2012 $4.11
Dec2011 $6.50
Dec2010 $6.13
Dec2009 $5.57
Dec2008 $5.01
Dec2007 $4.21
Dec2006 $3.58
Dec2005 $2.98
Dec2004 $2.60
Dec2003 $2.35

Recommended Reading:

Other ModernGraham posts about the company

5 Companies for Enterprising Investors Near 52 Week Lows – September 2018
5 Companies for Enterprising Investors Near 52 Week Lows – July 2018
General Dynamics Corp Valuation – June 2018 $GD
General Dynamics Corp Valuation – March 2017 $GD
General Dynamics Corporation Valuation – January 2016 Update $GD

Other ModernGraham posts about related companies

TransDigm Group Inc Valuation – March 2019 #TDG
Northrop Grumman Corp Valuation – March 2019 #NOC
Huntington Ingalls Industries Inc Valuation – February 2019 $HII
L3 Technologies Inc Valuation – January 2019 $LLL
Textron Inc Valuation – January 2019 $TXT
Lockheed Martin Corp Valuation – January 2019 $LMT
United Technologies Corp Valuation – November 2018 $UTX
Boeing Co Valuation – November 2018 $BA
Axon Enterprises Inc Valuation – October 2018 $AAXN
Cubic Corp Valuation – September 2018 $CUB

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.

TransDigm Group Inc Valuation – March 2019 #TDG

Company Profile (excerpt from Reuters): TransDigm Group Incorporated, incorporated on July 8, 2003, is a global designer, producer and supplier of engineered aircraft components for commercial and military aircraft in service. Through its subsidiary, Skandia Inc., the Company provides seating foam, foam fabrication, flammability testing and acoustic solutions for the business jet market. The Company operates through three segments: Power & Control, Airframe and Non-aviation.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TDG – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,267,803,131 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.13 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 249.49% Pass
6. Moderate PEmg Ratio PEmg < 20 32.92 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -14.85 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 4.13 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.20 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $13.36
MG Growth Estimate 15.00%
MG Value $514.39
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $193.73
MG Value based on 0% Growth $113.57
Market Implied Growth Rate 12.21%
Current Price $439.87
% of Intrinsic Value 85.51%

TransDigm Group Incorporated does not satisfy the requirements of either the Enterprising Investor or 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 concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $4.94 in 2015 to an estimated $13.36 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 12.21% 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 TransDigm Group Incorporated 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 32.92, which was below the industry average of 51.79, 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 $-180.03.

TransDigm Group Incorporated 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) -$180.03
Graham Number $0.00
PEmg 32.92
Current Ratio 4.13
PB Ratio -14.85
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 12/1/2018
Total Current Assets $3,926,618,000
Total Current Liabilities $951,266,000
Long-Term Debt $12,507,616,000
Total Assets $12,389,278,000
Intangible Assets $8,001,467,000
Total Liabilities $14,056,171,000
Shares Outstanding (Diluted Average) 56,266,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $16.67
Sep2018 $16.20
Sep2017 $7.88
Sep2016 $10.39
Sep2015 $7.84
Sep2014 $3.16
Sep2013 $2.39
Sep2012 $5.97
Sep2011 $3.17
Sep2010 $2.52
Sep2009 $3.10
Sep2008 $2.65
Sep2007 $1.83
Sep2006 $0.53
Sep2005 $0.75
Sep2004 $0.29
Sep2003 -$10.92
Sep2002 $221.95

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $13.36
Sep2018 $10.84
Sep2017 $7.55
Sep2016 $6.90
Sep2015 $4.94
Sep2014 $3.48
Sep2013 $3.57
Sep2012 $3.93
Sep2011 $2.82
Sep2010 $2.48
Sep2009 $2.23
Sep2008 $1.60
Sep2007 $0.21
Sep2006 $13.78
Sep2005 $27.74
Sep2004 $41.57
Sep2003 $55.55

Recommended Reading:

Other ModernGraham posts about the company

TransDigm Group Inc Valuation – June 2018 $TDG
TransDigm Group Inc Valuation – Initial Coverage $TDG

Other ModernGraham posts about related companies

Huntington Ingalls Industries Inc Valuation – February 2019 $HII
L3 Technologies Inc Valuation – January 2019 $LLL
Textron Inc Valuation – January 2019 $TXT
Lockheed Martin Corp Valuation – January 2019 $LMT
United Technologies Corp Valuation – November 2018 $UTX
Boeing Co Valuation – November 2018 $BA
Axon Enterprises Inc Valuation – October 2018 $AAXN
Cubic Corp Valuation – September 2018 $CUB
KLX Inc Valuation – August 2018 $KLXI
Kaman Corp Valuation – August 2018 $KAMN

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.

Northrop Grumman Corp Valuation – March 2019 #NOC

Company Profile (excerpt from Reuters): Northrop Grumman Corporation, incorporated on August 4, 2010, is a global security company. The Company provides products, systems and solutions in autonomous systems; cyber; command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR); strike, and logistics and modernization. The Company’s segments include Aerospace Systems, Mission Systems and Technology Services. The Company participates in a range of defense and government programs in the United States and abroad. The Company also conducts business with foreign, state and local governments, as well as commercial customers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NOC – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $47,326,350,403 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.17 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 138.28% Pass
6. Moderate PEmg Ratio PEmg < 20 17.02 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.88 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 1.17 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.87 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 $16.38
MG Growth Estimate 11.49%
MG Value $515.91
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $237.57
MG Value based on 0% Growth $139.26
Market Implied Growth Rate 4.26%
Current Price $278.82
% of Intrinsic Value 54.04%

Northrop Grumman Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the 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 Undervalued after growing its EPSmg (normalized earnings) from $9.28 in 2015 to an estimated $16.38 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.26% 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 above the price.

At the time of valuation, further research into Northrop Grumman Corporation revealed the company was trading above its Graham Number of $139.21. The company pays a dividend of $4.7 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 17.02, which was below the industry average of 51.79, 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 $-114.5.

Northrop Grumman 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) -$114.50
Graham Number $139.21
PEmg 17.02
Current Ratio 1.17
PB Ratio 5.88
Current Dividend $4.70
Dividend Yield 1.69%
Number of Consecutive Years of Dividend Growth 15

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 $9,680,000,000
Total Current Liabilities $8,274,000,000
Long-Term Debt $13,883,000,000
Total Assets $37,653,000,000
Intangible Assets $20,044,000,000
Total Liabilities $29,466,000,000
Shares Outstanding (Diluted Average) 172,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.95
Dec2018 $18.49
Dec2017 $16.34
Dec2016 $11.32
Dec2015 $10.39
Dec2014 $9.75
Dec2013 $8.35
Dec2012 $7.81
Dec2011 $7.52
Dec2010 $6.82
Dec2009 $5.21
Dec2008 -$3.77
Dec2007 $5.12
Dec2006 $4.37
Dec2005 $3.85
Dec2004 $2.97
Dec2003 $2.09
Dec2002 $1.84
Dec2001 $2.37
Dec2000 $4.29
Dec1999 $3.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $16.38
Dec2018 $14.82
Dec2017 $12.40
Dec2016 $10.13
Dec2015 $9.28
Dec2014 $8.50
Dec2013 $7.63
Dec2012 $6.42
Dec2011 $5.21
Dec2010 $3.88
Dec2009 $2.59
Dec2008 $1.69
Dec2007 $4.18
Dec2006 $3.48
Dec2005 $2.90
Dec2004 $2.52
Dec2003 $2.46

Recommended Reading:

Other ModernGraham posts about the company

Northrop Grumman Corp Valuation – May 2018 $NOC
Northrop Grumman Corp Valuation – February 2017 $NOC
Northrop Grumman Corporation Valuation – November 2015 Update $NOC
30 Companies in the Spotlight This Week – 11/15/14
Northrop Grumman Corporation Annual Valuation – 2014 $NOC

Other ModernGraham posts about related companies

Huntington Ingalls Industries Inc Valuation – February 2019 $HII
L3 Technologies Inc Valuation – January 2019 $LLL
Textron Inc Valuation – January 2019 $TXT
Lockheed Martin Corp Valuation – January 2019 $LMT
United Technologies Corp Valuation – November 2018 $UTX
Boeing Co Valuation – November 2018 $BA
Axon Enterprises Inc Valuation – October 2018 $AAXN
Cubic Corp Valuation – September 2018 $CUB
KLX Inc Valuation – August 2018 $KLXI
Kaman Corp Valuation – August 2018 $KAMN

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.

Huntington Ingalls Industries Inc Valuation – February 2019 $HII

Company Profile (excerpt from Reuters): Huntington Ingalls Industries, Inc., incorporated on August 4, 2010, is a military shipbuilding company and a provider of professional services to partners in government and industry. The Company’s business consists of the design, construction, repair and maintenance of nuclear-powered ships and non-nuclear ships for the United States Navy and coastal defense surface ships for the United States Coast Guard, as well as the refueling and overhaul and inactivation of nuclear-powered ships for the United States Navy. The Company operates through three segments: Ingalls Shipbuilding (Ingalls), Newport News Shipbuilding (Newport News) and Technical Solutions. The Company’s Ingalls segment includes its non-nuclear ship design, construction, repair and maintenance businesses. The Company’s Newport News includes all of its nuclear ship design, construction, overhaul, refueling, and repair and maintenance businesses. The Company’s Technical Solutions segment provides a range of professional services, including fleet support, integrated missions solutions, and nuclear and environmental and oil and gas services, to the governmental, energy, and oil and gas markets. The Company conducts majority of its business with the United States Government, principally the Department of Defense (DoD).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HII – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,109,897,923 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.14 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 6282.54% Pass
6. Moderate PEmg Ratio PEmg < 20 17.17 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.16 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 1.14 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.62 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $12.66
MG Growth Estimate 15.00%
MG Value $487.38
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $183.56
MG Value based on 0% Growth $107.60
Market Implied Growth Rate 4.34%
Current Price $217.42
% of Intrinsic Value 44.61%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.16 in 2014 to an estimated $12.66 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.34% 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 Huntington Ingalls Industries Inc revealed the company was trading above its Graham Number of $124.28. The company pays a dividend of $2.52 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 17.17, which was below the industry average of 53.93, 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 $-58.08.

Huntington Ingalls Industries 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) -$58.08
Graham Number $124.28
PEmg 17.17
Current Ratio 1.14
PB Ratio 5.16
Current Dividend $2.52
Dividend Yield 1.16%
Number of Consecutive Years of Dividend Growth 6

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 $1,859,000,000
Total Current Liabilities $1,631,000,000
Long-Term Debt $1,282,000,000
Total Assets $6,199,000,000
Intangible Assets $1,697,000,000
Total Liabilities $4,374,000,000
Shares Outstanding (Diluted Average) 43,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.61
Dec2017 $10.46
Dec2016 $12.14
Dec2015 $8.36
Dec2014 $6.86
Dec2013 $5.18
Dec2012 $2.91
Dec2011 -$2.05
Dec2010 $2.68

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.66
Dec2017 $9.66
Dec2016 $8.53
Dec2015 $5.90
Dec2014 $4.16
Dec2013 $2.45
Dec2012 $0.96
Dec2011 $0.03
Dec2010 $0.89

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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.

EOG Resources Inc Valuation – February 2019 $EOG

Company Profile (excerpt from Reuters): EOG Resources, Inc. (EOG), incorporated on June 12, 1985, together with its subsidiaries, explores for, develops, produces and markets crude oil and natural gas in major producing basins in the United States, The Republic of Trinidad and Tobago (Trinidad), the United Kingdom, The People’s Republic of China (China), Canada and, from time to time, select other international areas. The Company’s operations are all crude oil and natural gas exploration and production related. As of December 31, 2016, the Company’s total estimated net proved reserves were 2,147 million barrels of oil equivalent (MMBoe), of which 1178 million barrels (MMBbl) were crude oil and condensate reserves, 416 MMBbl were natural gas liquids (NGLs) reserves and 3318 billion cubic feet, or 553 MMBoe were natural gas reserves.

Downloadable PDF version of this valuation:

ModernGraham Valuation of EOG – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $55,966,430,117 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.09 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 126.67% Pass
6. Moderate PEmg Ratio PEmg < 20 52.95 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.03 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 1.09 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 13.20 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 $1.82
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $26.43
MG Value based on 0% Growth $15.49
Market Implied Growth Rate 22.22%
Current Price $96.51
% of Intrinsic Value N/A

EOG 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 low current ratio, insufficient earnings stability over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 $3.35 in 2014 to an estimated $1.82 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 22.22% 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 EOG Resources Inc revealed the company was trading above its Graham Number of $58.15. The company pays a dividend of $0.67 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 52.95, which was above the industry average of 43.92. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.68.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.68
Graham Number $58.15
PEmg 52.95
Current Ratio 1.09
PB Ratio 3.03
Current Dividend $0.67
Dividend Yield 0.69%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $4,817,092,000
Total Current Liabilities $4,425,147,000
Long-Term Debt $5,171,949,000
Total Assets $33,637,736,000
Intangible Assets $0
Total Liabilities $15,099,266,000
Shares Outstanding (Diluted Average) 581,559,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.34
Dec2017 $4.46
Dec2016 -$1.98
Dec2015 -$8.29
Dec2014 $5.32
Dec2013 $4.02
Dec2012 $1.05
Dec2011 $2.05
Dec2010 $0.32
Dec2009 $1.09
Dec2008 $4.86
Dec2007 $2.19
Dec2006 $2.62
Dec2005 $2.57
Dec2004 $1.29
Dec2003 $0.90
Dec2002 $0.16
Dec2001 $0.83
Dec2000 $0.81
Dec1999 $1.00
Dec1998 $0.09

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.82
Dec2017 $0.28
Dec2016 -$1.20
Dec2015 -$0.26
Dec2014 $3.35
Dec2013 $2.14
Dec2012 $1.43
Dec2011 $1.78
Dec2010 $1.83
Dec2009 $2.62
Dec2008 $3.15
Dec2007 $2.17
Dec2006 $1.95
Dec2005 $1.46
Dec2004 $0.87
Dec2003 $0.68
Dec2002 $0.58

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Other ModernGraham posts about the company

EOG Resources Inc Valuation – April 2018 $EOG
EOG Resources Inc Valuation – July 2016 $EOG
EOG Resources Analysis – 2015 Annual Update $EOG
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EOG Resources Inc. 2014 Annual Valuation $EOG

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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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