California Water Service Group Valuation – October 2018 $CWT

Company Profile (excerpt from Reuters): California Water Service Group, incorporated on August 2, 1999, is a holding company. The Company operates through the supply and distribution of water and providing water-related utility services segment. The Company, through its subsidiaries, provides non-regulated services and non-regulated services to private companies and municipalities. The bulk of the business consists of the production, purchase, storage, treatment, testing, distribution and sale of water for domestic, industrial, public and irrigation uses, and for fire protection. It also provides non-regulated water-related services under agreements with municipalities and other private companies. The non-regulated services include water system operation, billing and meter reading services. Non-regulated operations also include the lease of communication antenna sites, lab services and promotion of other non-regulated services. Its subsidiaries include California Water Service Company (Cal Water), New Mexico Water Service Company (New Mexico Water), Washington Water Service Company (Washington Water), Hawaii Water Service Company, Inc. (Hawaii Water) and CWS Utility Services and HWS Utility Services LLC.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CWT – 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 $2,037,687,186 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.30 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 28.65% Fail
6. Moderate PEmg Ratio PEmg < 20 36.33 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.97 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 0.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -0.96 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.17
MG Growth Estimate 1.16%
MG Value $12.63
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $16.92
MG Value based on 0% Growth $9.92
Market Implied Growth Rate 13.92%
Current Price $42.39
% of Intrinsic Value 335.57%

California Water Service Group 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 PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.08 in 2014 to an estimated $1.17 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.92% 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 California Water Service Group revealed the company was trading above its Graham Number of $19.42. The company pays a dividend of $0.72 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 36.33, which was above the industry average of 22.78. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-39.81.

California Water Service Group 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) -$39.81
Graham Number $19.42
PEmg 36.33
Current Ratio 0.30
PB Ratio 2.97
Current Dividend $0.72
Dividend Yield 1.70%
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 6/1/2018
Total Current Assets $189,570,000
Total Current Liabilities $622,300,000
Long-Term Debt $414,530,000
Total Assets $2,789,514,000
Intangible Assets $2,615,000
Total Liabilities $2,103,582,000
Shares Outstanding (Diluted Average) 48,073,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.16
Dec2017 $1.40
Dec2016 $1.01
Dec2015 $0.94
Dec2014 $1.19
Dec2013 $1.02
Dec2012 $1.17
Dec2011 $0.90
Dec2010 $0.90
Dec2009 $0.98
Dec2008 $0.95
Dec2007 $0.75
Dec2006 $0.67
Dec2005 $0.74
Dec2004 $0.70
Dec2003 $0.57
Dec2002 $0.63
Dec2001 $0.49
Dec2000 $0.66
Dec1999 $0.72
Dec1998 $0.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.17
Dec2017 $1.15
Dec2016 $1.04
Dec2015 $1.05
Dec2014 $1.08
Dec2013 $1.02
Dec2012 $1.00
Dec2011 $0.91
Dec2010 $0.89
Dec2009 $0.87
Dec2008 $0.80
Dec2007 $0.71
Dec2006 $0.68
Dec2005 $0.66
Dec2004 $0.62
Dec2003 $0.59
Dec2002 $0.61

Recommended Reading:

Other ModernGraham posts about the company

California Water Service Group Valuation – Initial Coverage $CWT

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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.

California Water Service Group Valuation – Initial Coverage $CWT

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 California Water Service Group (CWT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): California Water Service Group is a holding company. The Company operates through the supply and distribution of water and providing water-related utility services segment. The Company, through its subsidiaries, provides non-regulated services and non-regulated services to private companies and municipalities. The bulk of the business consists of the production, purchase, storage, treatment, testing, distribution and sale of water for domestic, industrial, public and irrigation uses, and for fire protection. It also provides non-regulated water-related services. The non-regulated services include water system operation, billing and meter reading services. Non-regulated operations also include the lease of communication antenna sites, lab services and promotion of other non-regulated services. The Company under its non-regulated contract arrangements, operates municipally owned water systems, privately owned water and recycled water distribution systems.

CWT Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CWT – 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 $1,693,177,838 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.57 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 11.86% Fail
6. Moderate PEmg Ratio PEmg < 20 32.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.55 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 0.57 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -4.92 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.09
MG Growth Estimate 1.04%
MG Value $11.50
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $15.77
MG Value based on 0% Growth $9.24
Market Implied Growth Rate 11.87%
Current Price $35.05
% of Intrinsic Value 304.83%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.02 in 2013 to an estimated $1.09 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.87% 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 California Water Service Group revealed the company was trading above its Graham Number of $19.35. The company pays a dividend of $0.69 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 32.23, which was above the industry average of 23.36. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-33.58.

California Water Service Group 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) -$33.58
Graham Number $19.35
PEmg 32.23
Current Ratio 0.57
PB Ratio 2.55
Current Dividend $0.69
Dividend Yield 1.97%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $142,069,000
Total Current Liabilities $250,230,000
Long-Term Debt $531,745,000
Total Assets $2,411,745,000
Intangible Assets $24,540,000
Total Liabilities $1,752,274,000
Shares Outstanding (Diluted Average) 47,956,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.21
Dec2016 $1.01
Dec2015 $0.94
Dec2014 $1.19
Dec2013 $1.02
Dec2012 $1.17
Dec2011 $0.90
Dec2010 $0.90
Dec2009 $0.98
Dec2008 $0.95
Dec2007 $0.75
Dec2006 $0.67
Dec2005 $0.74
Dec2004 $0.73
Dec2003 $0.61
Dec2002 $0.63
Dec2001 $0.49
Dec2000 $0.66
Dec1999 $0.72
Dec1998 $0.66
Dec1997 $0.92

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.09
Dec2016 $1.04
Dec2015 $1.05
Dec2014 $1.08
Dec2013 $1.02
Dec2012 $1.00
Dec2011 $0.91
Dec2010 $0.89
Dec2009 $0.87
Dec2008 $0.80
Dec2007 $0.71
Dec2006 $0.69
Dec2005 $0.68
Dec2004 $0.64
Dec2003 $0.60
Dec2002 $0.61
Dec2001 $0.63

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

Pinnacle West Corp Valuation – March 2017 $PNW
NiSource Inc Valuation – March 2017 $NI
Canadian Utilities Ltd Valuation – Initial Coverage $TSE:CU
American Electric Power Company Inc Valuation – March 2017 $AEP
American Water Works Company Inc Valuation – Initial Coverage $AWK
Alliant Energy Corp Valuation – Initial Coverage $LNT
Consolidated Edison Inc Valuation – February 2017 $ED
Duke Energy Corp Valuation – February 2017 $DUK
Spire Inc Valuation – Initial Coverage $SR
Ameren Corp Valuation – February 2017 $AEE

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.

NRG Energy Inc Valuation – January 2019 $NRG

Company Profile (excerpt from Reuters): NRG Energy, Inc. (NRG), incorporated on May 29, 1992, is an integrated power company. The Company is engaged in producing, selling and delivering electricity and related products and services in various markets in the United States. The Company’s segments include Generation, Retail and Corporate activities. The Generation segment includes generation and international. The Retail segment includes Mass customers and Business Solutions. The Company’s Business Solutions include commercial, industrial and governmental/institutional (C&I) customers, and other distributed and reliability products. The corporate activities segment includes residential solar and electric vehicle services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NRG – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,730,567,534 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.58 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 -235.64% Fail
6. Moderate PEmg Ratio PEmg < 20 -8.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -12.92 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 1.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.24 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 -$4.57
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$66.27
MG Value based on 0% Growth -$38.85
Market Implied Growth Rate -8.68%
Current Price $40.46
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.22 in 2014 to an estimated $-4.57 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into NRG Energy Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.12 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was -8.85, which was below the industry average of 21.62, 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 $-27.06.

NRG Energy 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) -$27.06
Graham Number $0.00
PEmg -8.85
Current Ratio 1.58
PB Ratio -12.92
Current Dividend $0.12
Dividend Yield 0.30%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $4,295,000,000
Total Current Liabilities $2,723,000,000
Long-Term Debt $6,658,000,000
Total Assets $11,450,000,000
Intangible Assets $1,141,000,000
Total Liabilities $12,386,000,000
Shares Outstanding (Diluted Average) 299,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.79
Dec2017 -$6.79
Dec2016 -$2.22
Dec2015 -$19.46
Dec2014 $0.23
Dec2013 -$1.22
Dec2012 $1.22
Dec2011 $0.78
Dec2010 $1.84
Dec2009 $3.44
Dec2008 $4.43
Dec2007 $2.01
Dec2006 $2.04
Dec2005 $0.38
Dec2004 $0.93
Dec2003 $6.98
Dec2002 -$8.71
Dec2001 $0.67
Dec2000 $0.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$4.57
Dec2017 -$6.80
Dec2016 -$5.96
Dec2015 -$6.45
Dec2014 $0.22
Dec2013 $0.55
Dec2012 $1.74
Dec2011 $2.16
Dec2010 $2.82
Dec2009 $3.03
Dec2008 $2.53
Dec2007 $1.88
Dec2006 $1.32
Dec2005 $0.65
Dec2004 $0.55
Dec2003 $0.20
Dec2002 -$2.63

Recommended Reading:

Other ModernGraham posts about the company

NRG Energy Inc Valuation – March 2018 $NRG

Other ModernGraham posts about related companies

DTE Energy Co Valuation – January 2019 $DTE
AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX
WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO
CenterPoint Energy Inc Valuation – January 2019 $CNP
CMS Energy Corp Valuation – January 2019 $CMS
Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT

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.

DTE Energy Co Valuation – January 2019 $DTE

Company Profile (excerpt from Reuters): DTE Energy Company (DTE Energy), incorporated on January 26, 1995, is an energy company. The Company’s segments include Electric, Gas, Gas Storage and Pipelines, Power and Industrial Projects, Energy Trading, and Corporate and Other. DTE Energy’s utility operations consist of DTE Electric Company (DTE Electric) and DTE Gas Company (DTE Gas). DTE Energy also has three other segments that are engaged in a range of energy-related businesses. DTE Energy’s other businesses are involved in natural gas pipelines, gathering and storage; power and industrial projects, and energy marketing and trading operations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DTE – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,686,691,583 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.47 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 53.41% Pass
6. Moderate PEmg Ratio PEmg < 20 20.60 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.94 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 13.81 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 $5.52
MG Growth Estimate 4.63%
MG Value $98.04
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $80.06
MG Value based on 0% Growth $46.93
Market Implied Growth Rate 6.05%
Current Price $113.72
% of Intrinsic Value 115.99%

DTE Energy Co 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 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 $4.22 in 2014 to an estimated $5.52 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.05% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into DTE Energy Co revealed the company was trading above its Graham Number of $84.39. The company pays a dividend of $3.36 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.6, which was below the industry average of 21.62, 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 $-118.13.

DTE Energy Co 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) -$118.13
Graham Number $84.39
PEmg 20.60
Current Ratio 1.47
PB Ratio 1.94
Current Dividend $3.36
Dividend Yield 2.95%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,103,000,000
Total Current Liabilities $2,117,000,000
Long-Term Debt $13,620,000,000
Total Assets $35,292,000,000
Intangible Assets $3,157,000,000
Total Liabilities $24,602,000,000
Shares Outstanding (Diluted Average) 182,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.97
Dec2017 $6.32
Dec2016 $4.83
Dec2015 $4.05
Dec2014 $5.10
Dec2013 $3.76
Dec2012 $3.55
Dec2011 $4.18
Dec2010 $3.74
Dec2009 $3.24
Dec2008 $3.34
Dec2007 $5.70
Dec2006 $2.43
Dec2005 $3.05
Dec2004 $2.49
Dec2003 $2.50
Dec2002 $3.18
Dec2001 $1.44
Dec2000 $3.27
Dec1999 $3.33
Dec1998 $3.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.52
Dec2017 $5.14
Dec2016 $4.45
Dec2015 $4.21
Dec2014 $4.22
Dec2013 $3.75
Dec2012 $3.70
Dec2011 $3.86
Dec2010 $3.70
Dec2009 $3.64
Dec2008 $3.69
Dec2007 $3.66
Dec2006 $2.67
Dec2005 $2.70
Dec2004 $2.54
Dec2003 $2.63
Dec2002 $2.74

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2018
DTE Energy Co Valuation – March 2018 $DTE
DTE Energy Co Valuation – July 2016 $DTE
58 Companies in the Spotlight This Week – 1/31/15
5 Speculative and Overvalued Companies to Avoid – January 2015

Other ModernGraham posts about related companies

AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX
WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO
CenterPoint Energy Inc Valuation – January 2019 $CNP
CMS Energy Corp Valuation – January 2019 $CMS
Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU

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.

AES Corp Valuation – January 2019 $AES

Company Profile (excerpt from Reuters): The AES Corporation, incorporated on January 28, 1981, is a holding company. The Company, through its subsidiaries and affiliates, operates a diversified portfolio of electricity generation and distribution businesses. The Company is organized into six strategic business units (SBUs): the United States; Andes; Brazil; Mexico, Central America and the Caribbean (MCAC); Europe, and Asia. Within these SBUs, the Company has two lines of business: generation and utilities. As of December 31, 2016, its United States SBU had 18 generation facilities and two integrated utilities in the United States. As of December 31, 2016, its Andes SBU had generation facilities in three countries, Chile, Colombia and Argentina. Its Brazil SBU has generation and distribution businesses, Eletropaulo and Tiete. As of December 31, 2016, its MCAC SBU had a portfolio of distribution businesses and generation facilities, including renewable energy, in five countries, with a total capacity of 3,239 megawatts (MW) and distribution networks. As of December 31, 2016, its Europe SBU had generation facilities in five countries with an installed capacity of 6,619 MW. As of December 31, 2016, its Asia SBU had generation facilities in three countries with an installed capacity of 2,300 MW.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AES – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,252,357,256 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.24 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 -246.23% Fail
6. Moderate PEmg Ratio PEmg < 20 -380.66 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.80 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 1.24 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 18.69 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 -$0.04
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$0.59
MG Value based on 0% Growth -$0.35
Market Implied Growth Rate -194.58%
Current Price $15.48
% of Intrinsic Value N/A

AES Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the 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 $0.16 in 2014 to an estimated $-0.04 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into AES Corp revealed the company was trading above its Graham Number of $12.73. The company pays a dividend of $0.48 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -380.66, which was below the industry average of 21.62, 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 $-32.73.

AES Corp scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$32.73
Graham Number $12.73
PEmg -380.66
Current Ratio 1.24
PB Ratio 1.80
Current Dividend $0.48
Dividend Yield 3.10%
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 $5,015,000,000
Total Current Liabilities $4,047,000,000
Long-Term Debt $18,088,000,000
Total Assets $32,489,000,000
Intangible Assets $1,459,000,000
Total Liabilities $26,780,000,000
Shares Outstanding (Diluted Average) 665,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.93
Dec2017 -$1.76
Dec2016 -$1.72
Dec2015 $0.44
Dec2014 $1.06
Dec2013 $0.15
Dec2012 -$1.21
Dec2011 $0.07
Dec2010 $0.01
Dec2009 $0.98
Dec2008 $1.82
Dec2007 -$0.14
Dec2006 $0.37
Dec2005 $0.83
Dec2004 $0.46
Dec2003 -$0.78
Dec2002 -$7.50
Dec2001 $0.36
Dec2000 $1.69
Dec1999 $0.58
Dec1998 $0.85

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.04
Dec2017 -$0.81
Dec2016 -$0.30
Dec2015 $0.30
Dec2014 $0.16
Dec2013 -$0.19
Dec2012 -$0.13
Dec2011 $0.46
Dec2010 $0.63
Dec2009 $0.89
Dec2008 $0.78
Dec2007 $0.23
Dec2006 -$0.17
Dec2005 -$0.73
Dec2004 -$1.39
Dec2003 -$1.92
Dec2002 -$1.93

Recommended Reading:

Other ModernGraham posts about the company

The AES Corp Valuation – March 2018 $AES
AES Corporation Valuation – July 2016 $AES
AES Corporation Annual Valuation – 2015 $AEP
14 Companies in the Spotlight This Week – 1/11/14
ModernGraham Valuation: AES Corp (AES)

Other ModernGraham posts about related companies

FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX
WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO
CenterPoint Energy Inc Valuation – January 2019 $CNP
CMS Energy Corp Valuation – January 2019 $CMS
Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU
Spire Inc Valuation – August 2018 $SR

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.

FirstEnergy Corp Valuation – January 2019 $FE

Company Profile (excerpt from Reuters): FirstEnergy Corp., incorporated on September 17, 1996, is a holding company. The Company is engaged in holding, directly or indirectly, all of the outstanding equity of its principal subsidiaries, which include Ohio Edison Company (OE), The Cleveland Electric Illuminating Company (CEI), The Toledo Edison Company (TE), Pennsylvania Power Company (Penn), Jersey Central Power & Light Company (JCP&L), Metropolitan Edison Company (ME), Pennsylvania Electric Company (PN), FirstEnergy Service Company (FESC), FirstEnergy Solutions Corp. (FES) and its principal subsidiaries (FirstEnergy Generation, LLC (FG) and FirstEnergy Nuclear Generation, LLC (NG)), Allegheny Energy Supply Company, LLC (AE Supply), Monongahela Power Company (MP), The Potomac Edison Company (PE), West Penn Power Company (WP), FirstEnergy Transmission, LLC (FET) and its principal subsidiaries (American Transmission Systems, Incorporated (ATSI) and Trans-Allegheny Interstate Line Company (TrAIL)), and Allegheny Energy Service Corporation (AESC). The Company’s segments include Regulated Distribution, Regulated Transmission, Competitive Energy Services (CES) and Corporate/Other.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FE – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $19,879,878,264 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.45 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 -303.91% Fail
6. Moderate PEmg Ratio PEmg < 20 -13.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.86 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.45 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.18 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 -$2.96
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$42.96
MG Value based on 0% Growth -$25.18
Market Implied Growth Rate -10.81%
Current Price $38.87
% of Intrinsic Value N/A

FirstEnergy Corp. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg 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 $1.31 in 2014 to an estimated $-2.96 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into FirstEnergy Corp. revealed the company was trading above its Graham Number of $20.98. The company pays a dividend of $1.44 per share, for a yield of 3.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -13.12, which was below the industry average of 21.62, 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 $-59.35.

FirstEnergy Corp. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$59.35
Graham Number $20.98
PEmg -13.12
Current Ratio 0.45
PB Ratio 2.86
Current Dividend $1.44
Dividend Yield 3.70%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,596,000,000
Total Current Liabilities $5,800,000,000
Long-Term Debt $16,608,000,000
Total Assets $39,443,000,000
Intangible Assets $5,618,000,000
Total Liabilities $32,570,000,000
Shares Outstanding (Diluted Average) 505,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.22
Dec2017 -$3.88
Dec2016 -$14.49
Dec2015 $1.37
Dec2014 $0.71
Dec2013 $0.94
Dec2012 $1.84
Dec2011 $2.21
Dec2010 $2.42
Dec2009 $3.29
Dec2008 $4.38
Dec2007 $4.22
Dec2006 $3.81
Dec2005 $2.61
Dec2004 $2.67
Dec2003 $1.39
Dec2002 $1.88
Dec2001 $2.81
Dec2000 $2.69
Dec1999 $2.50
Dec1998 $1.82

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.96
Dec2017 -$4.73
Dec2016 -$4.07
Dec2015 $1.23
Dec2014 $1.31
Dec2013 $1.79
Dec2012 $2.42
Dec2011 $2.91
Dec2010 $3.38
Dec2009 $3.79
Dec2008 $3.87
Dec2007 $3.39
Dec2006 $2.81
Dec2005 $2.30
Dec2004 $2.19
Dec2003 $2.05
Dec2002 $2.37

Recommended Reading:

Other ModernGraham posts about the company

FirstEnergy Corp Valuation – March 2018 $FE
FirstEnergy Corp Valuation – July 2016 $FE
47 Companies in the Spotlight This Week – 5/16/15
FirstEnergy Corporation Annual Valuation – 2015 $FE
16 Companies in the Spotlight This Week – 4/26/14

Other ModernGraham posts about related companies

WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO
CenterPoint Energy Inc Valuation – January 2019 $CNP
CMS Energy Corp Valuation – January 2019 $CMS
Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU
Spire Inc Valuation – August 2018 $SR
Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB

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.

Edison International Valuation – January 2019 $EIX

Company Profile (excerpt from Reuters): Edison International, incorporated on April 20, 1987, is the holding company of Southern California Edison Company (SCE). As of December 31, 2016, SCE, a public utility, was primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. The Company is also the parent company of Edison Energy Group, Inc. (Edison Energy Group), a holding company for subsidiaries engaged in pursuing competitive business opportunities across energy services and distributed solar to commercial and industrial customers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EIX – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,880,508,028 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 51.19% Pass
6. Moderate PEmg Ratio PEmg < 20 16.81 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.26 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.95 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.27
MG Growth Estimate 4.60%
MG Value $57.78
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $47.35
MG Value based on 0% Growth $27.76
Market Implied Growth Rate 4.15%
Current Price $54.88
% of Intrinsic Value 94.98%

Edison International 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. 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 $2.5 in 2014 to an estimated $3.27 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 4.15% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Edison International revealed the company was trading below its Graham Number of $55.49. The company pays a dividend of $2.23 per share, for a yield of 4.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.81, which was below the industry average of 21.62, 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 $-109.76.

Edison International receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$109.76
Graham Number $55.49
PEmg 16.81
Current Ratio 0.72
PB Ratio 1.26
Current Dividend $2.23
Dividend Yield 4.07%
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 9/1/2018
Total Current Assets $3,383,000,000
Total Current Liabilities $4,719,000,000
Long-Term Debt $14,629,000,000
Total Assets $53,563,000,000
Intangible Assets $0
Total Liabilities $39,274,000,000
Shares Outstanding (Diluted Average) 327,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.82
Dec2017 $1.72
Dec2016 $3.97
Dec2015 $3.10
Dec2014 $4.89
Dec2013 $2.78
Dec2012 -$0.56
Dec2011 -$0.11
Dec2010 $3.82
Dec2009 $2.58
Dec2008 $3.68
Dec2007 $3.31
Dec2006 $3.57
Dec2005 $3.43
Dec2004 $2.77
Dec2003 $2.50
Dec2002 $3.28
Dec2001 $3.17
Dec2000 -$5.84
Dec1999 $1.79
Dec1998 $1.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.27
Dec2017 $3.09
Dec2016 $3.46
Dec2015 $2.81
Dec2014 $2.50
Dec2013 $1.44
Dec2012 $1.14
Dec2011 $2.21
Dec2010 $3.38
Dec2009 $3.21
Dec2008 $3.47
Dec2007 $3.28
Dec2006 $3.21
Dec2005 $3.03
Dec2004 $2.28
Dec2003 $1.68
Dec2002 $1.13

Recommended Reading:

Other ModernGraham posts about the company

Edison International Valuation – March 2018 $EIX
Edison International Valuation – July 2016 $EIX
47 Companies in the Spotlight This Week – 5/16/15
Edison International Annual Valuation – 2015 $EIX
16 Companies in the Spotlight This Week – 4/26/14

Other ModernGraham posts about related companies

WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO
CenterPoint Energy Inc Valuation – January 2019 $CNP
CMS Energy Corp Valuation – January 2019 $CMS
Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU
Spire Inc Valuation – August 2018 $SR
Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB

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.

WEC Energy Group Inc Valuation – January 2019 $WEC

Company Profile (excerpt from Reuters): WEC Energy Group, Inc., incorporated on June 26, 1981, was a diversified holding company with natural gas and electric utility operations (serving customers in Wisconsin, Illinois, Michigan, and Minnesota), an approximately 60% equity ownership interest in American Transmission Company LLC (ATC) (a federally regulated electric transmission company), and non-utility electric operations through its We Power business, as of December 31, 2016. The Company’s segments include Wisconsin; Illinois; Other States; Electric Transmission; We Power, and Corporate and Other.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WEC – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $22,291,919,446 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.51 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 73.58% Pass
6. Moderate PEmg Ratio PEmg < 20 22.17 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.27 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 0.51 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.17 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 $3.19
MG Growth Estimate 4.67%
MG Value $56.89
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $46.22
MG Value based on 0% Growth $27.09
Market Implied Growth Rate 6.83%
Current Price $70.65
% of Intrinsic Value 124.18%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.43 in 2014 to an estimated $3.19 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.83% 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 WEC Energy Group Inc revealed the company was trading above its Graham Number of $47.26. The company pays a dividend of $2.08 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 22.17, which was above the industry average of 21.62. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-65.89.

WEC Energy Group 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) -$65.89
Graham Number $47.26
PEmg 22.17
Current Ratio 0.51
PB Ratio 2.27
Current Dividend $2.08
Dividend Yield 2.94%
Number of Consecutive Years of Dividend Growth 2

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 $1,839,700,000
Total Current Liabilities $3,602,500,000
Long-Term Debt $9,119,000,000
Total Assets $32,562,400,000
Intangible Assets $3,052,800,000
Total Liabilities $22,719,700,000
Shares Outstanding (Diluted Average) 316,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.30
Dec2017 $3.79
Dec2016 $2.96
Dec2015 $2.34
Dec2014 $2.59
Dec2013 $2.51
Dec2012 $2.35
Dec2011 $2.24
Dec2010 $1.93
Dec2009 $1.62
Dec2008 $1.52
Dec2007 $1.42
Dec2006 $1.34
Dec2005 $1.31
Dec2004 $1.29
Dec2003 $1.03
Dec2002 $0.59
Dec2001 $0.93
Dec2000 $0.64
Dec1999 $0.90
Dec1998 $0.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.19
Dec2017 $3.03
Dec2016 $2.62
Dec2015 $2.44
Dec2014 $2.43
Dec2013 $2.28
Dec2012 $2.08
Dec2011 $1.88
Dec2010 $1.66
Dec2009 $1.49
Dec2008 $1.41
Dec2007 $1.33
Dec2006 $1.23
Dec2005 $1.12
Dec2004 $0.99
Dec2003 $0.83
Dec2002 $0.74

Recommended Reading:

Other ModernGraham posts about the company

WEC Energy Group Inc Valuation – March 2018 $WEC
WEC Energy Group Inc Valuation – June 2016 $WEC
Wisconsin Energy Corporation Annual Valuation – 2015 $WEC
16 Companies in the Spotlight this Week – 4/19/14
Wisconsin Energy Corp (WEC) Annual Valuation – 2014

Other ModernGraham posts about related companies

CMS Energy Corp Valuation – January 2019 $CMS
Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU
Spire Inc Valuation – August 2018 $SR
Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB
Just Energy Group Inc Valuation – August 2018 $TSE:JE
South Jersey Industries Inc Valuation – July 2018 $SJI
Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE

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.

Southern Co Valuation – January 2019 $SO

Company Profile (excerpt from Reuters): The Southern Company (Southern Company), incorporated on November 9, 1945, is a holding company. The Company owns all of the stock of the traditional electric operating companies and the parent entities of Southern Power Company (Southern Power) and Southern Company Gas, and owns other direct and indirect subsidiaries. The Company owns all of the outstanding common stock of Alabama Power Company (Alabama Power), Georgia Power Company (Georgia Power), and Mississippi Power Company (Mississippi Power), each of which is an operating public utility company. The primary business of the Southern Company system is electricity sales by the traditional electric operating companies and Southern Power and the distribution of natural gas by Southern Company Gas. The Company’s segments include Gas distribution operations, Gas marketing services, Wholesale gas services, Gas midstream operations and All other.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SO – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $48,326,917,585 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 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 -22.24% Fail
6. Moderate PEmg Ratio PEmg < 20 24.70 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.70 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.57 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.90
MG Growth Estimate -2.36%
MG Value $7.18
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $27.57
MG Value based on 0% Growth $16.16
Market Implied Growth Rate 8.10%
Current Price $46.97
% of Intrinsic Value 654.19%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.26 in 2014 to an estimated $1.9 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.1% 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 Southern Co revealed the company was trading above its Graham Number of $33.1. The company pays a dividend of $2.3 per share, for a yield of 4.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.7, which was above the industry average of 21.62. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-71.86.

Southern Co 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) -$71.86
Graham Number $33.10
PEmg 24.70
Current Ratio 0.72
PB Ratio 1.70
Current Dividend $2.30
Dividend Yield 4.90%
Number of Consecutive Years of Dividend Growth 17

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 $9,384,000,000
Total Current Liabilities $12,965,000,000
Long-Term Debt $41,425,000,000
Total Assets $111,717,000,000
Intangible Assets $5,989,000,000
Total Liabilities $83,328,000,000
Shares Outstanding (Diluted Average) 1,029,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.03
Dec2017 $0.84
Dec2016 $2.55
Dec2015 $2.59
Dec2014 $2.18
Dec2013 $1.87
Dec2012 $2.67
Dec2011 $2.55
Dec2010 $2.36
Dec2009 $2.06
Dec2008 $2.25
Dec2007 $2.28
Dec2006 $2.10
Dec2005 $2.13
Dec2004 $2.06
Dec2003 $2.02
Dec2002 $1.85
Dec2001 $1.82
Dec2000 $2.01
Dec1999 $1.86
Dec1998 $1.40

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.90
Dec2017 $1.89
Dec2016 $2.40
Dec2015 $2.34
Dec2014 $2.26
Dec2013 $2.30
Dec2012 $2.47
Dec2011 $2.34
Dec2010 $2.23
Dec2009 $2.16
Dec2008 $2.20
Dec2007 $2.16
Dec2006 $2.07
Dec2005 $2.03
Dec2004 $1.97
Dec2003 $1.92
Dec2002 $1.85

Recommended Reading:

Other ModernGraham posts about the company

Southern Co Valuation – March 2018 $SO
Southern Company Valuation – June 2016 $SO
58 Companies in the Spotlight This Week – 1/31/15
Southern Company Annual Valuation – 2015 $SO
14 Companies in the Spotlight This Week – 1/25/14

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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.

CenterPoint Energy Inc Valuation – January 2019 $CNP

Company Profile (excerpt from Reuters): CenterPoint Energy, Inc., incorporated on August 31, 2001, is a public utility holding company. The Company’s operating subsidiaries own and operate electric transmission and distribution facilities, and natural gas distribution facilities, and own interests in Enable Midstream Partners, LP (Enable). The Company’s segments include Electric Transmission & Distribution, Natural Gas Distribution, Energy Services, Midstream Investments and Other Operations. Its Electric Transmission & Distribution segment provides electric transmission and distribution services to retail electric providers (REPs). Its Natural Gas Distribution segment offers intrastate natural gas sales to and natural gas transportation and distribution for residential, commercial and industrial customers. Its Energy Services segment includes non-rate regulated gas sales to, and transportation and storage services for, commercial and industrial customers. Its Midstream Investments segment includes equity investment in Enable that owns, operates and develops natural gas and crude oil assets. Its Other Operations segment includes office buildings and other real estate used in its business operations and other corporate operations, which support all of its business operations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CNP – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,689,922,597 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.06 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 13.14% Fail
6. Moderate PEmg Ratio PEmg < 20 20.20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.31 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 1.06 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 50.01 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 $1.45
MG Growth Estimate 1.09%
MG Value $15.49
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $21.04
MG Value based on 0% Growth $12.34
Market Implied Growth Rate 5.85%
Current Price $29.31
% of Intrinsic Value 189.23%

CenterPoint Energy, 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 Overvalued after growing its EPSmg (normalized earnings) from $1.35 in 2014 to an estimated $1.45 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.85% 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 CenterPoint Energy, Inc. revealed the company was trading above its Graham Number of $14.08. The company pays a dividend of $1.07 per share, for a yield of 3.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.2, which was below the industry average of 21.62, 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 $-32.17.

CenterPoint Energy, 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) -$32.17
Graham Number $14.08
PEmg 20.20
Current Ratio 1.06
PB Ratio 2.31
Current Dividend $1.07
Dividend Yield 3.65%
Number of Consecutive Years of Dividend Growth 12

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 $2,726,000,000
Total Current Liabilities $2,581,000,000
Long-Term Debt $7,252,000,000
Total Assets $22,228,000,000
Intangible Assets $934,000,000
Total Liabilities $16,720,000,000
Shares Outstanding (Diluted Average) 435,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.81
Dec2017 $4.13
Dec2016 $1.00
Dec2015 -$1.61
Dec2014 $1.42
Dec2013 $0.72
Dec2012 $0.97
Dec2011 $3.17
Dec2010 $1.07
Dec2009 $1.01
Dec2008 $1.30
Dec2007 $1.17
Dec2006 $1.33
Dec2005 $0.75
Dec2004 -$2.94
Dec2003 $1.46
Dec2002 -$13.16
Dec2001 $3.35
Dec2000 $1.56
Dec1999 $5.18
Dec1998 -$0.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.45
Dec2017 $1.56
Dec2016 $0.35
Dec2015 $0.33
Dec2014 $1.35
Dec2013 $1.34
Dec2012 $1.60
Dec2011 $1.80
Dec2010 $1.13
Dec2009 $1.14
Dec2008 $0.92
Dec2007 $0.60
Dec2006 -$0.63
Dec2005 -$1.77
Dec2004 -$2.67
Dec2003 -$1.80
Dec2002 -$2.52

Recommended Reading:

Other ModernGraham posts about the company

CenterPoint Energy Inc Valuation – March 2018 $CNP
CenterPoint Energy Inc Valuation – June 2016 $CNP
18 Companies in the Spotlight This Week – 3/15/15
CenterPoint Energy Inc. Annual Valuation – 2015 $CNP
26 Companies in the Spotlight This Week – 11/22/14

Other ModernGraham posts about related companies

CMS Energy Corp Valuation – January 2019 $CMS
Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU
Spire Inc Valuation – August 2018 $SR
Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB
Just Energy Group Inc Valuation – August 2018 $TSE:JE
South Jersey Industries Inc Valuation – July 2018 $SJI
Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE

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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