Calavo Growers Inc Valuation – October 2018 $CVGW

Company Profile (excerpt from Reuters): Calavo Growers, Inc., incorporated on January 5, 2001, operates in the avocado industry. The Company provides value-added fresh food. The Company distributes its products both domestically and internationally. It operates in three business segments: Fresh products, Calavo Foods and Renaissance Food Group, LLC (RFG). The Company is engaged in marketing and distributing avocados, prepared avocados and other perishable foods, which allows it to deliver an array of fresh and prepared food products to food distributors, produce wholesalers, supermarkets, convenience stores, and restaurants on a worldwide basis. The Company procures avocados principally from California and Mexico. Through its various operating facilities, the Company sorts, packs, and/or ripens avocados, tomatoes and/or Hawaiian grown papayas; processes and packages fresh cut fruit and vegetables, salads, wraps, sandwiches, fresh snacking products and a range of behind-the-glass deli items, and produces and packages guacamole and salsa.

CVGW Chart

CVGW data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CVGW – October 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 $1,714,072,385 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.17 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 -42.51% Fail
6. Moderate PEmg Ratio PEmg < 20 107.77 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.31 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 15.37 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.91
MG Growth Estimate -3.45%
MG Value $1.44
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $13.13
MG Value based on 0% Growth $7.70
Market Implied Growth Rate 49.64%
Current Price $97.57
% of Intrinsic Value 6755.89%

Calavo Growers, 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. 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 $1.18 in 2014 to an estimated $0.91 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 49.64% 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 Calavo Growers, Inc. revealed the company was trading above its Graham Number of $7.89. The company pays a dividend of $0.2 per share, for a yield of 0.2% Its PEmg (price over earnings per share – ModernGraham) was 107.77, which was above the industry average of 25.8. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-13.61.

Calavo Growers, 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) -$13.61
Graham Number $7.89
PEmg 107.77
Current Ratio 1.17
PB Ratio 6.31
Current Dividend $0.20
Dividend Yield 0.20%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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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 $4,566,000,000
Total Current Liabilities $3,916,000,000
Long-Term Debt $9,992,000,000
Total Assets $40,299,000,000
Intangible Assets $2,272,000,000
Total Liabilities $21,296,000,000
Shares Outstanding (Diluted Average) 1,229,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.17
Dec2017 $3.05
Dec2016 -$0.65
Dec2015 $0.75
Dec2014 $0.98
Dec2013 $0.87
Dec2012 $1.31
Dec2011 $1.95
Dec2010 $1.43
Dec2009 $1.09
Dec2008 $3.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.91
Dec2017 $1.18
Dec2016 $0.38
Dec2015 $0.99
Dec2014 $1.18
Dec2013 $1.29
Dec2012 $1.64
Dec2011 $1.76
Dec2010 $1.53
Dec2009 $1.39
Dec2008 $1.28

Recommended Reading:

Other ModernGraham posts about the company

Calavo Growers Inc Valuation – Initial Coverage $CVGW

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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.

Convergys Corp Valuation – September 2018 $CVG

Company Profile (excerpt from Reuters): Convergys Corporation, incorporated on July 2, 1996, is engaged in customer experience outsourcing. The Company’s geographical segments include North America and Rest of World. The Company offers services across industries, including communications and media, technology, financial services, retail, government and healthcare. The Company helps businesses to create customer experiences across multiple interaction channels, such as voice, chat, e-mail and interactive voice response.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CVG – 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 $2,237,035,640 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.49 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 138.55% Pass
6. Moderate PEmg Ratio PEmg < 20 18.30 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.78 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 2.49 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.41 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 $1.34
MG Growth Estimate 4.51%
MG Value $23.50
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $19.46
MG Value based on 0% Growth $11.41
Market Implied Growth Rate 4.90%
Current Price $24.56
% of Intrinsic Value 104.51%

Convergys Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history. 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 $1.03 in 2014 to an estimated $1.34 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 4.9% 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 Convergys Corp revealed the company was trading above its Graham Number of $21.27. The company pays a dividend of $0.39 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 18.3, which was below the industry average of 28.37, 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 $-1.27.

Convergys 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) -$1.27
Graham Number $21.27
PEmg 18.30
Current Ratio 2.49
PB Ratio 1.78
Current Dividend $0.39
Dividend Yield 1.59%
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 6/1/2018
Total Current Assets $730,400,000
Total Current Liabilities $293,100,000
Long-Term Debt $177,900,000
Total Assets $2,204,700,000
Intangible Assets $1,206,500,000
Total Liabilities $854,400,000
Shares Outstanding (Diluted Average) 97,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.34
Dec2017 $1.22
Dec2016 $1.40
Dec2015 $1.61
Dec2014 $1.13
Dec2013 $0.56
Dec2012 $0.86
Dec2011 $2.72
Dec2010 -$0.43
Dec2009 -$0.63
Dec2008 -$0.75
Dec2007 $1.23
Dec2006 $1.17
Dec2005 $0.86
Dec2004 $0.77
Dec2003 $1.15
Dec2002 $0.88
Dec2001 $0.80
Dec2000 $1.09
Dec1999 $0.81
Dec1998 $0.52

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.34
Dec2017 $1.29
Dec2016 $1.25
Dec2015 $1.25
Dec2014 $1.03
Dec2013 $0.86
Dec2012 $0.79
Dec2011 $0.65
Dec2010 -$0.22
Dec2009 $0.05
Dec2008 $0.48
Dec2007 $1.07
Dec2006 $0.99
Dec2005 $0.89
Dec2004 $0.92
Dec2003 $0.98
Dec2002 $0.87

Recommended Reading:

Other ModernGraham posts about the company

6 Best Stocks for Value Investors This Week – 3/26/17
Convergys Corp Valuation – Initial Coverage $CVG

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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.

Calavo Growers Inc Valuation – Initial Coverage $CVGW

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 Calavo Growers Inc (CVGW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Calavo Growers, Inc. operates in the avocado industry. The Company provides value-added fresh food. The Company distributes its products both domestically and internationally and internationally. It operates in three business segments: Fresh products, Calavo Foods and Renaissance Food Group, LLC (RFG). The Company is engaged in marketing and distributing avocados, prepared avocados and other perishable foods, which allows it to deliver an array of fresh and prepared food products to food distributors, produce wholesalers, supermarkets, convenience stores and restaurants on a worldwide basis. The Company procures avocados principally from California and Mexico. Through its various operating facilities, the Company sorts, packs, and/or ripens avocados, tomatoes and/or Hawaiian grown papayas; processes and packages fresh cut fruit and vegetables, salads, wraps, sandwiches, fresh snacking products and a range of behind-the-glass deli items, and produces and packages guacamole and salsa.

CVGW Chart

CVGW 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.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of CVGW – 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 $988,471,705 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.00 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 121.19% Pass
6. Moderate PEmg Ratio PEmg < 20 36.44 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.72 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 1.00 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -0.70 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.62
MG Growth Estimate 15.00%
MG Value $62.45
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $23.52
MG Value based on 0% Growth $13.79
Market Implied Growth Rate 13.97%
Current Price $59.10
% of Intrinsic Value 94.64%

Calavo Growers, 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 over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.62 in 2013 to an estimated $1.62 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 13.97% 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 Calavo Growers, Inc. revealed the company was trading above its Graham Number of $24.83. The company pays a dividend of $0.9 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 36.47, which was above the industry average of 24.74. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.29.

Calavo Growers, 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) -$0.29
Graham Number $24.83
PEmg 36.47
Current Ratio 1.00
PB Ratio 4.72
Current Dividend $0.90
Dividend Yield 1.52%
Number of Consecutive Years of Dividend Growth 5

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2017
Total Current Assets $123,777,000
Total Current Liabilities $124,374,000
Long-Term Debt $417,000
Total Assets $347,025,000
Intangible Assets $21,338,000
Total Liabilities $128,794,000
Shares Outstanding (Diluted Average) 17,430,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.20
Oct2016 $2.18
Oct2015 $1.57
Oct2014 $0.01
Oct2013 -$0.12
Oct2012 $1.05
Oct2011 $0.75
Oct2010 $1.22
Oct2009 $0.94
Oct2008 $0.53
Oct2007 $0.51
Oct2006 $0.40
Oct2005 $0.24
Oct2004 $0.46
Oct2003 $0.55
Oct2002 $0.60
Oct2001 $0.37
Oct2000 $0.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.62
Oct2016 $1.20
Oct2015 $0.69
Oct2014 $0.36
Oct2013 $0.62
Oct2012 $0.95
Oct2011 $0.87
Oct2010 $0.86
Oct2009 $0.63
Oct2008 $0.46
Oct2007 $0.42
Oct2006 $0.40
Oct2005 $0.42
Oct2004 $0.50
Oct2003 $0.47
Oct2002 $0.38
Oct2001 $0.24

Recommended Reading:

Other ModernGraham posts about the company

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

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General Mills Inc Valuation – January 2017 $GIS
Coca-Cola European Partners PLC Valuation – January 2017 $CCE
Archer Daniels Midland Company Valuation – January 2017 $ADM

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.

Convergys Corp Valuation – Initial Coverage $CVG

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 Convergys Corp (CVG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Convergys Corporation is engaged in customer experience outsourcing. The Company’s geographical segments include North America and Rest of World. The Company offers services across industries, including communications and media, technology, financial services, retail, government and healthcare. The Company helps businesses to create customer experiences across multiple interaction channels, such as voice, chat, e-mail and interactive voice response. The Company provides solutions across the customer lifecycle, including sales, customer service, technical support, customer retention and collections. Its omni-channel contact center technology solutions include multichannel interaction solutions, cross-channel integration framework and robotic process automation. It offers analytics and consulting, and software solutions, including integrated customer experience analytics, post-contact surveys, relational loyalty research, and customer segmentation and profiling.

CVG Chart

CVG data by YCharts

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

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

Learn More About Premium Membership

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of CVG – 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 $1,971,758,311 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.26 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -367.78% Fail
6. Moderate PEmg Ratio PEmg < 20 14.23 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.65 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 2.26 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.14 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 $1.49
MG Growth Estimate 10.89%
MG Value $45.02
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $21.56
MG Value based on 0% Growth $12.64
Market Implied Growth Rate 2.86%
Current Price $21.15
% of Intrinsic Value 46.98%

Convergys Corp 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 or growth over the last ten years, and the poor dividend history. 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 Undervalued after growing its EPSmg (normalized earnings) from $0.86 in 2013 to an estimated $1.49 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.86% 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 Convergys Corp revealed the company was trading below its Graham Number of $23.7. The company pays a dividend of $0.35 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 14.23, which was below the industry average of 38.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.64.

Convergys Corp performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.64
Graham Number $23.70
PEmg 14.23
Current Ratio 2.26
PB Ratio 1.65
Current Dividend $0.35
Dividend Yield 1.65%
Number of Consecutive Years of Dividend Growth 6

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $784,800,000
Total Current Liabilities $347,600,000
Long-Term Debt $61,300,000
Total Assets $2,371,800,000
Intangible Assets $1,224,500,000
Total Liabilities $1,055,900,000
Shares Outstanding (Diluted Average) 102,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.81
Dec2016 $1.40
Dec2015 $1.61
Dec2014 $1.13
Dec2013 $0.56
Dec2012 $0.86
Dec2011 $2.72
Dec2010 -$0.43
Dec2009 -$0.62
Dec2008 -$0.75
Dec2007 $1.23
Dec2006 $1.17
Dec2005 $0.86
Dec2004 $0.77
Dec2003 $1.15
Dec2002 $0.88
Dec2001 $0.80
Dec2000 $1.09
Dec1999 $0.81
Dec1998 $0.52
Dec1997 $0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.49
Dec2016 $1.25
Dec2015 $1.25
Dec2014 $1.03
Dec2013 $0.86
Dec2012 $0.79
Dec2011 $0.65
Dec2010 -$0.22
Dec2009 $0.05
Dec2008 $0.48
Dec2007 $1.07
Dec2006 $0.99
Dec2005 $0.89
Dec2004 $0.92
Dec2003 $0.98
Dec2002 $0.87
Dec2001 $0.83

Recommended Reading:

Other ModernGraham posts about the company

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

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Qualcomm Inc Valuation – February 2017 $QCOM
Verisign Inc Valuation – February 2017 $VRSN
Jack Henry & Associates Inc Valuation – Initial Coverage $JKHY
Super Micro Computer Inc Valuation – Initial Coverage $SMCI
Teradata Corp Valuation – January 2017 $TDC
Akamai Technologies Inc Valuation – January 2017 $AKAM

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 Mills Inc Valuation – February 2019 $GIS

Company Profile (excerpt from Reuters): General Mills, Inc., incorporated on June 20, 1928, is a manufacturer and marketer of branded consumer foods and pet food products sold through retail stores. The Company is a supplier of branded and unbranded consumer food products to the North American foodservice and commercial baking industries. It also provides pet food products through its subsidiary Blue Buffalo Pet Products Inc. The Company has four segments: U.S. Retail, International, Pet operating, and Convenience Stores and Foodservice. The Company offers a range of food products with a focus on categories, including ready-to-eat cereal; convenient meals, including meal kits, ethnic meals, pizza, soup, side dish mixes, frozen breakfast and frozen entrees; snacks, including grain, fruit and savory snacks, nutrition bars and frozen hot snacks; yogurt, and super-premium ice cream. The Company’s other product categories include baking mixes and ingredients, and refrigerated and frozen dough. The Company’s products are marketed under various brands, which include Annie’s, Betty Crocker, Bisquick, Bugles, Cascadian Farm, Cheerios, Chex, Cinnamon Toast Crunch, Cocoa Puffs, Cookie Crisp, Fiber One, Food Should Taste Good, Fruit by the Foot, Fruit Gushers, Fruit Roll-Ups, Gardetto’s, Go-Gurt, Gold Medal, Golden Grahams, Haagen-Dazs, Helpers, Jeno’s, Jus-Rol, Kitano, Kix, La Saltena, Larabar, Latina, Liberte, Lucky Charms, Muir Glen, Nature Valley, Oatmeal Crisp, Old El Paso, Pillsbury, Progresso, Raisin Nut Bran, Total, Totino’s, Trix, Wanchai Ferry, Wheaties, Yoki and Yoplait. It also provides food products for dogs and cats through its subsidiary.

Downloadable PDF version of this valuation:

ModernGraham Valuation of GIS – 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 $27,927,852,744 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.58 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 24.28% Fail
6. Moderate PEmg Ratio PEmg < 20 16.09 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.05 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 0.58 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.98 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 $2.91
MG Growth Estimate 2.72%
MG Value $40.53
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $42.18
MG Value based on 0% Growth $24.72
Market Implied Growth Rate 3.79%
Current Price $46.80
% of Intrinsic Value 115.48%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.46 in 2015 to an estimated $2.91 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.79% 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 General Mills, Inc. revealed the company was trading above its Graham Number of $24.85. The company pays a dividend of $1.96 per share, for a yield of 4.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.09, which was below the industry average of 26.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-31.71.

General Mills, 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) -$31.71
Graham Number $24.85
PEmg 16.09
Current Ratio 0.58
PB Ratio 4.05
Current Dividend $1.96
Dividend Yield 4.19%
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 11/1/2018
Total Current Assets $4,233,800,000
Total Current Liabilities $7,298,100,000
Long-Term Debt $12,208,600,000
Total Assets $30,384,000,000
Intangible Assets $21,221,000,000
Total Liabilities $23,404,600,000
Shares Outstanding (Diluted Average) 604,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.65
May2018 $3.64
May2017 $2.77
May2016 $2.77
May2015 $1.97
May2014 $2.83
May2013 $2.79
May2012 $2.35
May2011 $2.70
May2010 $2.24
May2009 $1.90
May2008 $1.86
May2007 $1.59
May2006 $1.45
May2005 $1.54
May2004 $1.30
May2003 $1.22
May2002 $0.67
May2001 $1.14
May2000 $1.00
May1999 $0.85

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.91
May2018 $2.96
May2017 $2.62
May2016 $2.54
May2015 $2.46
May2014 $2.67
May2013 $2.52
May2012 $2.33
May2011 $2.23
May2010 $1.93
May2009 $1.74
May2008 $1.62
May2007 $1.48
May2006 $1.36
May2005 $1.27
May2004 $1.11
May2003 $1.00

Recommended Reading:

Other ModernGraham posts about the company

General Mills Inc Valuation – May 2018 $GIS
General Mills Inc Valuation – January 2017 $GIS
General Mills Inc Valuation – August 2016 $GIS
27 Companies in the Spotlight This Week – 4/4/15
General Mills Inc. Annual Valuation – 2015 $GIS

Other ModernGraham posts about related companies

McCormick & Co Valuation – February 2019 $MKC
Archer-Daniels Midland Co Valuation – February 2019 $ADM
Conagra Brands Inc Valuation – February 2019 $CAG
Monster Beverage Corp Valuation – February 2019 $MNST
Campbell Soup Co Valuation – January 2019 $CPB
Kellogg Co Valuation – January 2019 $K
PepsiCo Inc Valuation – January 2019 $PEP
The Hershey Co Valuation – January 2019 $HSY
Coca-Cola Co Valuation – November 2018 $KO
Calavo Growers Inc Valuation – October 2018 $CVGW

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.

McCormick & Co Valuation – February 2019 $MKC

Company Profile (excerpt from Reuters): McCormick & Company, Incorporated, incorporated on November 30, 1915, is engaged in manufacturing, marketing and distributing spices, seasoning mixes, condiments and other flavorful products to the food industry, including retailers, food manufacturers and foodservice businesses. The Company’s segments include consumer and industrial. The Company is involved in the manufacturing and sales of flavorful products. The Company’s sales, distribution and production facilities are located in North America, Europe and China. Its additional facilities are based in Australia, Mexico, India, Singapore, Central America, Thailand and South Africa.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MKC – 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 $17,588,659,997 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.74 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 85.31% Pass
6. Moderate PEmg Ratio PEmg < 20 26.45 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.60 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 0.74 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.77 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 $5.04
MG Growth Estimate 9.37%
MG Value $137.16
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $73.03
MG Value based on 0% Growth $42.81
Market Implied Growth Rate 8.97%
Current Price $133.20
% of Intrinsic Value 97.12%

MCCORMICK & CO /SH NV 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 Fairly Valued after growing its EPSmg (normalized earnings) from $3.1 in 2015 to an estimated $5.04 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 8.97% 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 MCCORMICK & CO /SH NV revealed the company was trading above its Graham Number of $52.98. The company pays a dividend of $2.08 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 26.45, which was below the industry average of 26.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-41.81.

MCCORMICK & CO /SH NV receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$41.81
Graham Number $52.98
PEmg 26.45
Current Ratio 0.74
PB Ratio 5.60
Current Dividend $2.08
Dividend Yield 1.56%
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 11/1/2018
Total Current Assets $1,479,900,000
Total Current Liabilities $2,001,700,000
Long-Term Debt $4,052,900,000
Total Assets $10,256,400,000
Intangible Assets $7,401,200,000
Total Liabilities $7,074,200,000
Shares Outstanding (Diluted Average) 133,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.18
Nov2018 $7.00
Nov2017 $3.72
Nov2016 $3.69
Nov2015 $3.11
Nov2014 $3.34
Nov2013 $2.91
Nov2012 $3.04
Nov2011 $2.79
Nov2010 $2.75
Nov2009 $2.27
Nov2008 $1.94
Nov2007 $1.73
Nov2006 $1.50
Nov2005 $1.56
Nov2004 $1.52
Nov2003 $1.48
Nov2002 $1.26
Nov2001 $0.53
Nov2000 $0.99
Nov1999 $0.72

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.04
Nov2018 $4.70
Nov2017 $3.49
Nov2016 $3.32
Nov2015 $3.10
Nov2014 $3.05
Nov2013 $2.86
Nov2012 $2.74
Nov2011 $2.49
Nov2010 $2.24
Nov2009 $1.92
Nov2008 $1.72
Nov2007 $1.59
Nov2006 $1.50
Nov2005 $1.42
Nov2004 $1.29
Nov2003 $1.11

Recommended Reading:

Other ModernGraham posts about the company

McCormick & Co Inc Valuation – May 2018 $MKC
McCormick & Company Valuation – January 2017 $MKC
McCormick & Company Inc. Analysis – August 2015 Update $MKC
20 Companies in the Spotlight This Week – 8/16/14
McCormick & Company Inc. Annual Valuation – 2014 $MKC

Other ModernGraham posts about related companies

Monster Beverage Corp Valuation – February 2019 $MNST
Campbell Soup Co Valuation – January 2019 $CPB
Kellogg Co Valuation – January 2019 $K
PepsiCo Inc Valuation – January 2019 $PEP
The Hershey Co Valuation – January 2019 $HSY
Coca-Cola Co Valuation – November 2018 $KO
Calavo Growers Inc Valuation – October 2018 $CVGW
Lancaster Colony Corp Valuation – August 2018 $LANC
SpartanNash Co Valuation – August 2018 $SPTN
Core-Mark Holding Co Inc Valuation – August 2018 $CORE

Disclaimer:

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

Archer-Daniels Midland Co Valuation – February 2019 $ADM

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ADM – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,798,182,550 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.75 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 15.81% Fail
6. Moderate PEmg Ratio PEmg < 20 14.26 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.27 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.75 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.87 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

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

Archer Daniels Midland Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.77 in 2015 to an estimated $2.98 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.88% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Archer Daniels Midland Co revealed the company was trading below its Graham Number of $49.76. The company pays a dividend of $1.34 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.26, which was below the industry average of 26.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.2.

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

Stage 3: Information for Further Research

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

Useful Links:

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

Most Recent Balance Sheet Figures

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

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Monster Beverage Corp Valuation – February 2019 $MNST
Campbell Soup Co Valuation – January 2019 $CPB
Kellogg Co Valuation – January 2019 $K
PepsiCo Inc Valuation – January 2019 $PEP
The Hershey Co Valuation – January 2019 $HSY
Coca-Cola Co Valuation – November 2018 $KO
Calavo Growers Inc Valuation – October 2018 $CVGW
Lancaster Colony Corp Valuation – August 2018 $LANC
SpartanNash Co Valuation – August 2018 $SPTN
Core-Mark Holding Co Inc Valuation – August 2018 $CORE

Disclaimer:

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

Conagra Brands Inc Valuation – February 2019 $CAG

Company Profile (excerpt from Reuters): Conagra Brands, Inc., formerly ConAgra Foods, Inc., incorporated on December 5, 1975, operates as a packaged food company. The Company operates through two segments: Consumer Foods and Commercial Foods. The Company sells branded and customized food products, as well as commercially branded foods. It also supplies vegetable, spice and grain products to a range of restaurants, foodservice operators and commercial customers. Conagra Foodservice offers products to restaurants, retailers, commercial customers and other foodservice suppliers. The Company also operates in the countries outside the United States, such as Canada and Mexico. Its brands include Marie Callender’s, Healthy Choice, Slim Jim, Hebrew National, Orville Redenbacher’s, Peter Pan, Reddi-wip, PAM, Snack Pack, Banquet, Chef Boyardee, Egg Beaters, Rosarita, Fleischmann’s and Hunt’s. The Company sells its products in grocery, convenience, mass merchandise and club stores.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CAG – 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 $11,354,309,552 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.47 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 8.44% Fail
6. Moderate PEmg Ratio PEmg < 20 21.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.35 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.47 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 11.09 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.09
MG Growth Estimate 10.99%
MG Value $33.35
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $15.86
MG Value based on 0% Growth $9.30
Market Implied Growth Rate 6.44%
Current Price $23.38
% of Intrinsic Value 70.10%

Conagra Brands 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 or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 Undervalued after growing its EPSmg (normalized earnings) from $0.63 in 2015 to an estimated $1.09 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.44% 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 Conagra Brands Inc revealed the company was trading above its Graham Number of $18.23. The company pays a dividend of $0.85 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.37, which was below the industry average of 26.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-29.46.

Conagra Brands 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) -$29.46
Graham Number $18.23
PEmg 21.37
Current Ratio 1.47
PB Ratio 1.35
Current Dividend $0.85
Dividend Yield 3.64%
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 11/1/2018
Total Current Assets $3,275,400,000
Total Current Liabilities $2,234,500,000
Long-Term Debt $11,545,400,000
Total Assets $23,006,800,000
Intangible Assets $16,299,400,000
Total Liabilities $15,703,500,000
Shares Outstanding (Diluted Average) 421,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.57
May2018 $1.98
May2017 $1.46
May2016 -$1.57
May2015 -$0.60
May2014 $0.70
May2013 $1.85
May2012 $1.12
May2011 $1.88
May2010 $1.62
May2009 $2.15
May2008 $1.90
May2007 $1.51
May2006 $1.03
May2005 $1.23
May2004 $1.53
May2003 $1.44
May2002 $1.47
May2001 $1.25
May2000 $0.80
May1999 $0.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.09
May2018 $0.70
May2017 $0.16
May2016 -$0.22
May2015 $0.63
May2014 $1.31
May2013 $1.65
May2012 $1.61
May2011 $1.84
May2010 $1.76
May2009 $1.74
May2008 $1.51
May2007 $1.32
May2006 $1.27
May2005 $1.39
May2004 $1.41
May2003 $1.27

Recommended Reading:

Other ModernGraham posts about the company

Conagra Brands Inc Valuation – May 2018 $CAG
Conagra Brands Inc Valuation – December 2016 $CAG
ConAgra Foods Inc. Analysis – August 2015 Update $CAG
5 Speculative and Overvalued Companies to Avoid – November 2014
20 Companies in the Spotlight This Week – 8/16/14

Other ModernGraham posts about related companies

Monster Beverage Corp Valuation – February 2019 $MNST
Campbell Soup Co Valuation – January 2019 $CPB
Kellogg Co Valuation – January 2019 $K
PepsiCo Inc Valuation – January 2019 $PEP
The Hershey Co Valuation – January 2019 $HSY
Coca-Cola Co Valuation – November 2018 $KO
Calavo Growers Inc Valuation – October 2018 $CVGW
Lancaster Colony Corp Valuation – August 2018 $LANC
SpartanNash Co Valuation – August 2018 $SPTN
Core-Mark Holding Co Inc Valuation – August 2018 $CORE

Disclaimer:

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

Automatic Data Processing Inc Valuation – February 2019 $ADP

Company Profile (excerpt from Reuters): Automatic Data Processing, Inc. (ADP), incorporated on June 12, 1961, is a provider of human capital management (HCM) solutions to employers, offering solutions to businesses of various sizes. The Company also provides business process outsourcing solutions. Its segments include Employer Services and Professional Employer Organization (PEO) Services. The Company markets its solutions primarily through its direct sales force. Employer Services also markets its solutions through indirect sales channels, such as marketing relationships with banks and certified public accountants, among others.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ADP – 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 $65,200,741,302 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.05 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 63.57% Pass
6. Moderate PEmg Ratio PEmg < 20 36.51 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 13.76 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 1.05 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.44 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 $4.10
MG Growth Estimate 5.66%
MG Value $81.26
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $59.44
MG Value based on 0% Growth $34.84
Market Implied Growth Rate 14.01%
Current Price $149.67
% of Intrinsic Value 184.18%

Automatic Data Processing 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 $2.98 in 2015 to an estimated $4.1 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.01% 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 Automatic Data Processing revealed the company was trading above its Graham Number of $30.23. The company pays a dividend of $2.52 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 36.51, which was above the industry average of 29.23. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.39.

Automatic Data Processing scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.39
Graham Number $30.23
PEmg 36.51
Current Ratio 1.05
PB Ratio 13.76
Current Dividend $2.52
Dividend Yield 1.68%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $31,682,600,000
Total Current Liabilities $30,296,900,000
Long-Term Debt $2,002,300,000
Total Assets $38,806,300,000
Intangible Assets $3,248,100,000
Total Liabilities $34,042,400,000
Shares Outstanding (Diluted Average) 438,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.15
Jun2018 $3.66
Jun2017 $3.85
Jun2016 $3.25
Jun2015 $3.05
Jun2014 $3.14
Jun2013 $2.89
Jun2012 $2.82
Jun2011 $2.52
Jun2010 $2.40
Jun2009 $2.63
Jun2008 $2.34
Jun2007 $2.04
Jun2006 $2.68
Jun2005 $1.32
Jun2004 $1.18
Jun2003 $1.34
Jun2002 $1.75
Jun2001 $1.44
Jun2000 $1.31
Jun1999 $1.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.10
Jun2018 $3.51
Jun2017 $3.37
Jun2016 $3.10
Jun2015 $2.98
Jun2014 $2.88
Jun2013 $2.71
Jun2012 $2.60
Jun2011 $2.45
Jun2010 $2.42
Jun2009 $2.35
Jun2008 $2.11
Jun2007 $1.91
Jun2006 $1.78
Jun2005 $1.35
Jun2004 $1.38
Jun2003 $1.45

Recommended Reading:

Other ModernGraham posts about the company

Automatic Data Processing Inc Valuation – April 2018 $ADP
Automatic Data Processing Valuation – November 2016 $ADP
Automatic Data Processing Valuation – May 2016 $ADP
Automatic Data Processing Analysis – September 2015 Update $ADP
Automatic Data Processing Analysis – June 2015 Update $ADP

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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.

Fiserv Inc Valuation – February 2019 $FISV

Company Profile (excerpt from Reuters): Fiserv, Inc., incorporated on February 19, 1992, is a provider of financial services technology. The Company provides account processing systems; electronic payments processing products and services, such as electronic bill payment and presentment services, card-based transaction processing and network services, automated clearing house (ACH) transaction processing, account-to-account transfers, and person-to-person payments; Internet and mobile banking systems, and related services, including document and payment card production and distribution, check processing and imaging, source capture systems, and lending and risk management products and services. The Company operates through two segments: Payments and Industry Products (Payments) and the Financial Institution Services (Financial). The Payments segment provides electronic bill payment and presentment services, Internet and mobile banking software and services, person-to-person payment services, debit and credit card processing and other electronic payments software and services. The Financial segment provides banks, thrifts, credit unions, and leasing and finance companies with account processing services, item processing and source capture services, loan origination and servicing products, cash management and consulting services, and other products and services. The Company serves banks, thrifts, credit unions, investment management firms, leasing and finance companies, retailers, merchants, mutual savings banks and building societies.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FISV – 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 $33,052,344,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.11 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 157.29% Pass
6. Moderate PEmg Ratio PEmg < 20 29.55 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 14.91 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 1.11 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 27.83 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 $2.86
MG Growth Estimate 15.00%
MG Value $110.10
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $41.47
MG Value based on 0% Growth $24.31
Market Implied Growth Rate 10.52%
Current Price $84.50
% of Intrinsic Value 76.75%

Fiserv Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $1.4 in 2015 to an estimated $2.86 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 10.52% 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 Fiserv Inc revealed the company was trading above its Graham Number of $21.04. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 29.55, which was above the industry average of 29.23. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.67.

Fiserv 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) -$16.67
Graham Number $21.04
PEmg 29.55
Current Ratio 1.11
PB Ratio 14.91
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 $2,224,000,000
Total Current Liabilities $2,010,000,000
Long-Term Debt $5,955,000,000
Total Assets $11,262,000,000
Intangible Assets $7,845,000,000
Total Liabilities $8,969,000,000
Shares Outstanding (Diluted Average) 404,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.42
Dec2018 $2.87
Dec2017 $2.89
Dec2016 $2.08
Dec2015 $1.50
Dec2014 $1.49
Dec2013 $1.22
Dec2012 $1.11
Dec2011 $1.64
Dec2010 $0.82
Dec2009 $0.77
Dec2008 $0.87
Dec2007 $0.65
Dec2006 $0.64
Dec2005 $0.68
Dec2004 $0.48
Dec2003 $0.40
Dec2002 $0.34
Dec2001 $0.27
Dec2000 $0.23
Dec1999 $0.18

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.86
Dec2018 $2.44
Dec2017 $2.10
Dec2016 $1.63
Dec2015 $1.40
Dec2014 $1.32
Dec2013 $1.19
Dec2012 $1.13
Dec2011 $1.08
Dec2010 $0.78
Dec2009 $0.75
Dec2008 $0.71
Dec2007 $0.61
Dec2006 $0.56
Dec2005 $0.50
Dec2004 $0.39
Dec2003 $0.32

Recommended Reading:

Other ModernGraham posts about the company

Fiserv Inc Valuation – April 2018 $FISV
Fiserv Inc Valuation – August 2016 $FISV
Fiserv Inc. Analysis – 2015 Annual Update $FISV
15 Companies in the Spotlight This Week – 5/31/14
Fiserv Inc. 2014 Annual Valuation $FISV

Other ModernGraham posts about related companies

Rollins Inc Valuation – February 2019 $ROL
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Avery Dennison Corp Valuation – January 2019 $AVY
Paychex Inc Valuation – January 2019 $PAYX
Fleetcor Technologies Inc Valuation – January 2019 $FLT
TrueBlue Inc Valuation – October 2018 $TBI
Convergys Corp Valuation – September 2018 $CVG
Strategic Education Inc Valuation – August 2018 $STRA

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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