Incyte Corp Valuation – February 2019 $INCY

Company Profile (excerpt from Reuters): Incyte Corporation, incorporated on April 8, 1991, is a biopharmaceutical company. The Company is focused on the discovery, development and commercialization of therapeutics. The Company’s portfolio includes compounds in various stages, ranging from preclinical to late-stage development, and commercialized products, such as JAKAFI (ruxolitinib) and ICLUSIG (ponatinib). The Company has initiated REACH1, a pivotal Phase II trial in steroid-refractory acute graft-versus-host-disease (GVHD) and the first in a registration program for ruxolitinib in GVHD. A proof-of-concept trial of itacitinib, a selective janus associated kinases 1 (JAK1) inhibitor, is ongoing for the treatment of patients with acute GVHD.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of INCY – 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 $17,967,189,642 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.31 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 -89.95% Fail
6. Moderate PEmg Ratio PEmg < 20 482.41 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.41 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.31 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.01 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.17
MG Growth Estimate 15.00%
MG Value $6.70
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $2.52
MG Value based on 0% Growth $1.48
Market Implied Growth Rate 236.96%
Current Price $83.94
% of Intrinsic Value 1253.02%

Incyte Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.32 in 2015 to an estimated $0.17 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 236.96% 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 Incyte Corporation revealed the company was trading above its Graham Number of $12.83. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 482.41, which was above the industry average of 39.51. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.15.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $5.15
Graham Number $12.83
PEmg 482.41
Current Ratio 4.31
PB Ratio 9.41
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 $1,832,254,000
Total Current Liabilities $425,277,000
Long-Term Debt $17,434,000
Total Assets $2,645,762,000
Intangible Assets $370,957,000
Total Liabilities $719,795,000
Shares Outstanding (Diluted Average) 215,992,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.81
Dec2018 $0.51
Dec2017 -$1.53
Dec2016 $0.54
Dec2015 $0.03
Dec2014 -$0.29
Dec2013 -$0.56
Dec2012 -$0.34
Dec2011 -$1.49
Dec2010 -$0.26
Dec2009 -$2.06
Dec2008 -$1.99
Dec2007 -$1.03
Dec2006 -$0.89
Dec2005 -$1.24
Dec2004 -$2.21
Dec2003 -$2.33
Dec2002 -$2.03
Dec2001 -$2.77
Dec2000 -$0.47
Dec1999 -$0.48

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.17
Dec2018 -$0.15
Dec2017 -$0.44
Dec2016 $0.03
Dec2015 -$0.32
Dec2014 -$0.53
Dec2013 -$0.75
Dec2012 -$0.97
Dec2011 -$1.31
Dec2010 -$1.23
Dec2009 -$1.62
Dec2008 -$1.43
Dec2007 -$1.28
Dec2006 -$1.52
Dec2005 -$1.92
Dec2004 -$2.16
Dec2003 -$1.97

Recommended Reading:

Other ModernGraham posts about the company

Incyte Corp Valuation – April 2018 $INCY

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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.

Regency Centers Corp Valuation – February 2019 $REG

Company Profile (excerpt from Reuters): Regency Centers Corporation, incorporated on July 8, 1993, is a real estate investment trust (REIT). The Company is the general partner of Regency Centers, L.P. (the Operating Partnership). The Company is engaged in the ownership, management, leasing, acquisition and development of retail shopping centers through the Operating Partnership. The Company’s properties include Palm Valley Marketplace, Shops at Arizona, Amerige Heights Town Center, Clayton Valley Shopping Center, Five Points Shopping Center, French Valley Village Center, Hasley Canyon Village, Pleasant Hill Shopping Center, Snell & Branham Plaza, Applewood Shopping Center, Kent Place, Black Rock, Spring Valley Shopping Center and Pebblebrook Plaza.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of REG – 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 $10,929,926,700 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.07 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 -815.09% Fail
6. Moderate PEmg Ratio PEmg < 20 49.29 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.67 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 1.07 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 222.37 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 $1.31
MG Growth Estimate 4.74%
MG Value $23.52
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $18.98
MG Value based on 0% Growth $11.12
Market Implied Growth Rate 20.40%
Current Price $64.51
% of Intrinsic Value 274.31%

Regency Centers Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. 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 $0.99 in 2014 to an estimated $1.31 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 20.4% 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 Regency Centers Corp revealed the company was trading above its Graham Number of $34.73. The company pays a dividend of $2.09 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 49.29, which was below the industry average of 81.61, 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 $-25.03.

Regency Centers 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) -$25.03
Graham Number $34.73
PEmg 49.29
Current Ratio 1.07
PB Ratio 1.67
Current Dividend $2.09
Dividend Yield 3.24%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $252,966,000
Total Current Liabilities $236,250,000
Long-Term Debt $3,717,208,000
Total Assets $11,057,030,000
Intangible Assets $731,363,000
Total Liabilities $4,504,787,000
Shares Outstanding (Diluted Average) 169,839,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.37
Dec2017 $1.00
Dec2016 $1.42
Dec2015 $1.36
Dec2014 $1.80
Dec2013 $1.40
Dec2012 -$0.08
Dec2011 $0.35
Dec2010 -$0.14
Dec2009 -$0.74
Dec2008 $1.66
Dec2007 $2.65
Dec2006 $2.89
Dec2005 $2.23
Dec2004 $2.03
Dec2003 $2.11
Dec2002 $1.81
Dec2001 $1.69
Dec2000 $1.08
Dec1999 $1.61
Dec1998 $1.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.31
Dec2017 $1.32
Dec2016 $1.38
Dec2015 $1.23
Dec2014 $0.99
Dec2013 $0.45
Dec2012 $0.05
Dec2011 $0.33
Dec2010 $0.63
Dec2009 $1.26
Dec2008 $2.27
Dec2007 $2.51
Dec2006 $2.37
Dec2005 $2.06
Dec2004 $1.90
Dec2003 $1.78
Dec2002 $1.60

Recommended Reading:

Other ModernGraham posts about the company

Regency Centers Corp Valuation – Initial Coverage $REG

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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.

Macy’s Inc Valuation – January 2019 $M

Company Profile (excerpt from Reuters): Macy’s, Inc., incorporated on December 13, 1985, is an omnichannel retail company operating stores, Websites and mobile applications under various brands, such as Macy’s, Bloomingdale’s and Bluemercury. The Company sells a range of merchandise, including apparel and accessories (men’s, women’s and children’s), cosmetics, home furnishings and other consumer goods. The Company’s subsidiaries provide various support functions to its retail operations on an integrated, company-wide basis. The Company’s bank subsidiary, FDS Bank, provides credit processing, certain collections, customer service and credit marketing services in respect of all credit card accounts that are owned either by Department Stores National Bank (DSNB), a subsidiary of Citibank N.A., or FDS Bank and that constitutes a part of the credit programs of the Company’s retail operations. Macy’s Systems and Technology, Inc. (MST), a subsidiary of the Company, provides operational electronic data processing and management information services to all of the Company’s operations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of M – 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 $7,941,872,586 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 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 88.38% Pass
6. Moderate PEmg Ratio PEmg < 20 7.01 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.42 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 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.46 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 $3.68
MG Growth Estimate 0.29%
MG Value $33.41
Opinion Fairly Valued
MG Grade A-
MG Value based on 3% Growth $53.30
MG Value based on 0% Growth $31.25
Market Implied Growth Rate -0.75%
Current Price $25.76
% of Intrinsic Value 77.11%

Macy’s Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current 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 feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.61 in 2015 to an estimated $3.68 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 0.75% annual earnings loss 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 Macy’s Inc revealed the company was trading below its Graham Number of $39.21. The company pays a dividend of $1.51 per share, for a yield of 5.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.01, which was below the industry average of 25.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.38.

Macy’s Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$19.38
Graham Number $39.21
PEmg 7.01
Current Ratio 1.34
PB Ratio 1.42
Current Dividend $1.51
Dividend Yield 5.86%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2018
Total Current Assets $8,667,000,000
Total Current Liabilities $6,444,000,000
Long-Term Debt $5,469,000,000
Total Assets $20,361,000,000
Intangible Assets $4,389,000,000
Total Liabilities $14,716,000,000
Shares Outstanding (Diluted Average) 312,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.67
Jan2018 $5.04
Jan2017 $1.99
Jan2016 $3.22
Jan2015 $4.22
Jan2014 $3.86
Jan2013 $3.24
Jan2012 $2.92
Jan2011 $1.98
Jan2010 $0.78
Jan2009 -$11.40
Jan2008 $1.97
Jan2007 $1.81
Jan2006 $3.24
Jan2005 $1.93
Jan2004 $1.86
Jan2003 $2.06
Jan2002 -$0.71
Jan2001 -$0.45
Jan2000 $1.81
Jan1999 $1.48

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.68
Jan2018 $3.67
Jan2017 $3.10
Jan2016 $3.60
Jan2015 $3.61
Jan2014 $3.05
Jan2013 $1.60
Jan2012 $0.27
Jan2011 -$1.03
Jan2010 -$1.93
Jan2009 -$2.35
Jan2008 $2.17
Jan2007 $2.24
Jan2006 $2.19
Jan2005 $1.43
Jan2004 $1.09
Jan2003 $0.75

Recommended Reading:

Other ModernGraham posts about the company

10 Stocks for Using A Benjamin Graham Value Investing Strategy – May 2018
Macy’s Inc Valuation – April 2018 $M
Macy’s Inc Valuation – July 2016 $M
27 Companies in the Spotlight This Week – 2/14/15
Macy’s Inc. Annual Valuation – 2015 $M

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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.

Stericycle Inc Valuation – May 2018 $SRCL

Company Profile (excerpt from Reuters): Stericycle, Inc., incorporated on March 21, 1989, is a business-to-business services provider. The Company focuses on regulated and compliance solutions for healthcare, retail, and commercial businesses. The Company’s segments include Domestic and Canada Regulated Waste and Compliance Services (RCS), Domestic Communication and Related Services (CRS), International RCS and All other. The Domestic and Canada RCS and International RCS segments include medical waste disposal, pharmaceutical waste disposal, hazardous waste management, sustainability solutions for expired or unused inventory, secure information destruction of documents and e-media, training and consulting through its Steri-Safe and Clinical Services programs, and other regulatory compliance services. The Domestic CRS segment consists of inbound/outbound communication, automated patient reminders, online scheduling, notifications, product retrievals, product returns and quality audits.

SRCL Chart

SRCL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SRCL – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,461,921,199 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.81 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 -3.94% Fail
6. Moderate PEmg Ratio PEmg < 20 24.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.86 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 0.81 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -13.66 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.63
MG Growth Estimate -3.21%
MG Value $5.49
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $38.15
MG Value based on 0% Growth $22.37
Market Implied Growth Rate 7.88%
Current Price $63.83
% of Intrinsic Value 1161.96%

Stericycle 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 poor dividend history, 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, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.35 in 2014 to an estimated $2.63 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.88% 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 Stericycle Inc revealed the company was trading above its Graham Number of $58.44. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 24.26, which was below the industry average of 51.04, 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 $-38.05.

Stericycle 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) -$38.05
Graham Number $58.44
PEmg 24.26
Current Ratio 0.81
PB Ratio 1.86
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 3/1/2018
Total Current Assets $810,600,000
Total Current Liabilities $999,900,000
Long-Term Debt $2,586,200,000
Total Assets $7,015,700,000
Intangible Assets $5,396,400,000
Total Liabilities $4,075,700,000
Shares Outstanding (Diluted Average) 85,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.48
Dec2017 $0.27
Dec2016 $2.08
Dec2015 $2.98
Dec2014 $3.79
Dec2013 $3.56
Dec2012 $3.08
Dec2011 $2.69
Dec2010 $2.39
Dec2009 $2.03
Dec2008 $1.68
Dec2007 $1.32
Dec2006 $1.16
Dec2005 $0.74
Dec2004 $0.85
Dec2003 $0.72
Dec2002 $0.51
Dec2001 $0.18
Dec2000 $0.18
Dec1999 $0.23
Dec1998 $0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.63
Dec2017 $1.98
Dec2016 $2.93
Dec2015 $3.31
Dec2014 $3.35
Dec2013 $3.00
Dec2012 $2.60
Dec2011 $2.25
Dec2010 $1.93
Dec2009 $1.59
Dec2008 $1.30
Dec2007 $1.06
Dec2006 $0.88
Dec2005 $0.69
Dec2004 $0.61
Dec2003 $0.45
Dec2002 $0.29

Recommended Reading:

Other ModernGraham posts about the company

Stericycle Inc Valuation – February 2017 $SRCL
Stericycle Inc. Analysis – October 2015 Update $SRCL
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Stericycle Inc. Annual Stock Valuation – 2014 $SRCL

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Waste Management Inc. Analysis – 2015 Update $WM

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.

Incyte Corp Valuation – April 2018 $INCY

Company Profile (excerpt from Reuters): Incyte Corporation, incorporated on April 8, 1991, is a biopharmaceutical company. The Company is focused on the discovery, development and commercialization of therapeutics. The Company’s portfolio includes compounds in various stages, ranging from preclinical to late-stage development, and commercialized products, such as JAKAFI (ruxolitinib) and ICLUSIG (ponatinib). The Company has initiated REACH1, a pivotal Phase II trial in steroid-refractory acute graft-versus-host-disease (GVHD) and the first in a registration program for ruxolitinib in GVHD. A proof-of-concept trial of itacitinib, a selective janus associated kinases 1 (JAK1) inhibitor, is ongoing for the treatment of patients with acute GVHD.

INCY Chart

INCY data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of INCY – April 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 $14,431,968,195 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.01 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 -57.22% Fail
6. Moderate PEmg Ratio PEmg < 20 -128.89 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.82 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.01 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.01 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.53
MG Growth Estimate 0.04%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$7.67
MG Value based on 0% Growth -$4.49
Market Implied Growth Rate -68.70%
Current Price $68.14
% of Intrinsic Value N/A

Incyte Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.53 in 2014 to an estimated $-0.53 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 Incyte Corporation revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -128.89, which was below the industry average of 29.14, 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 $3.95.

Incyte Corporation 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) $3.95
Graham Number $0.00
PEmg -128.89
Current Ratio 4.01
PB Ratio 8.82
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Yahoo Finance Seeking Alpha
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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $1,504,854,000
Total Current Liabilities $375,396,000
Long-Term Debt $16,608,000
Total Assets $2,302,582,000
Intangible Assets $392,494,000
Total Liabilities $671,953,000
Shares Outstanding (Diluted Average) 211,123,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.64
Dec2017 -$1.53
Dec2016 $0.54
Dec2015 $0.03
Dec2014 -$0.29
Dec2013 -$0.56
Dec2012 -$0.34
Dec2011 -$1.49
Dec2010 -$0.26
Dec2009 -$2.06
Dec2008 -$1.99
Dec2007 -$1.03
Dec2006 -$0.89
Dec2005 -$1.24
Dec2004 -$2.21
Dec2003 -$2.33
Dec2002 -$2.03
Dec2001 -$2.77
Dec2000 -$0.47
Dec1999 -$0.48
Dec1998 $0.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.53
Dec2017 -$0.44
Dec2016 $0.03
Dec2015 -$0.32
Dec2014 -$0.53
Dec2013 -$0.75
Dec2012 -$0.97
Dec2011 -$1.31
Dec2010 -$1.23
Dec2009 -$1.62
Dec2008 -$1.43
Dec2007 -$1.28
Dec2006 -$1.52
Dec2005 -$1.92
Dec2004 -$2.16
Dec2003 -$1.97
Dec2002 -$1.57

Recommended Reading:

Other ModernGraham posts about the company

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

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Disclaimer:

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

Regency Centers Corp Valuation – Initial Coverage $REG

Company Profile (excerpt from Reuters): Regency Centers Corporation, incorporated on July 8, 1993, is a real estate investment trust (REIT). The Company is the general partner of Regency Centers, L.P. (the Operating Partnership). The Company is engaged in the ownership, management, leasing, acquisition and development of retail shopping centers through the Operating Partnership. The Company’s properties include Palm Valley Marketplace, Shops at Arizona, Amerige Heights Town Center, Clayton Valley Shopping Center, Five Points Shopping Center, French Valley Village Center, Hasley Canyon Village, Pleasant Hill Shopping Center, Snell & Branham Plaza, Applewood Shopping Center, Kent Place, Black Rock, Spring Valley Shopping Center and Pebblebrook Plaza.

REG Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of REG – April 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 $9,909,273,268 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.94 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 -811.32% Fail
6. Moderate PEmg Ratio PEmg < 20 45.62 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.52 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 0.94 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -258.52 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 $1.30
MG Growth Estimate 4.63%
MG Value $23.14
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $18.88
MG Value based on 0% Growth $11.07
Market Implied Growth Rate 18.56%
Current Price $59.40
% of Intrinsic Value 256.74%

Regency Centers Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. 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 $0.99 in 2014 to an estimated $1.3 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 18.56% 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 Regency Centers Corp revealed the company was trading above its Graham Number of $34.44. The company pays a dividend of $2.09 per share, for a yield of 3.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 45.62, which was above the industry average of 44.79. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.72.

Regency Centers 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) -$24.72
Graham Number $34.44
PEmg 45.62
Current Ratio 0.94
PB Ratio 1.52
Current Dividend $2.09
Dividend Yield 3.52%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $220,366,000
Total Current Liabilities $234,272,000
Long-Term Debt $3,594,977,000
Total Assets $11,145,717,000
Intangible Assets $478,826,000
Total Liabilities $4,453,665,000
Shares Outstanding (Diluted Average) 171,270,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.35
Dec2017 $1.00
Dec2016 $1.42
Dec2015 $1.36
Dec2014 $1.80
Dec2013 $1.40
Dec2012 -$0.08
Dec2011 $0.35
Dec2010 -$0.14
Dec2009 -$0.74
Dec2008 $1.66
Dec2007 $2.65
Dec2006 $2.89
Dec2005 $2.23
Dec2004 $2.03
Dec2003 $2.11
Dec2002 $1.81
Dec2001 $1.69
Dec2000 $1.08
Dec1999 $1.61
Dec1998 $1.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.30
Dec2017 $1.32
Dec2016 $1.38
Dec2015 $1.23
Dec2014 $0.99
Dec2013 $0.45
Dec2012 $0.05
Dec2011 $0.33
Dec2010 $0.63
Dec2009 $1.26
Dec2008 $2.27
Dec2007 $2.51
Dec2006 $2.37
Dec2005 $2.06
Dec2004 $1.90
Dec2003 $1.78
Dec2002 $1.60

Recommended Reading:

Other ModernGraham posts about the company

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

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Disclaimer:

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

Macy’s Inc Valuation – April 2018 $M

Company Profile (excerpt from Reuters): Macy’s, Inc., incorporated on December 13, 1985, is an omnichannel retail company operating stores, Websites and mobile applications under various brands, such as Macy’s, Bloomingdale’s and Bluemercury. The Company sells a range of merchandise, including apparel and accessories (men’s, women’s and children’s), cosmetics, home furnishings and other consumer goods. The Company’s subsidiaries provide various support functions to its retail operations on an integrated, company-wide basis. The Company’s bank subsidiary, FDS Bank, provides credit processing, certain collections, customer service and credit marketing services in respect of all credit card accounts that are owned either by Department Stores National Bank (DSNB), a subsidiary of Citibank N.A., or FDS Bank and that constitutes a part of the credit programs of the Company’s retail operations. Macy’s Systems and Technology, Inc. (MST), a subsidiary of the Company, provides operational electronic data processing and management information services to all of the Company’s operations.

M Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of M – April 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 $9,057,803,923 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 83.45% Pass
6. Moderate PEmg Ratio PEmg < 20 8.30 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.61 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 2.47 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 $3.58
MG Growth Estimate -0.09%
MG Value $29.78
Opinion Fairly Valued
MG Grade A-
MG Value based on 3% Growth $51.95
MG Value based on 0% Growth $30.45
Market Implied Growth Rate -0.10%
Current Price $29.74
% of Intrinsic Value 99.88%

Macy’s Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current 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 feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after seeing its EPSmg (normalized earnings) decline from $3.61 in 2015 to an estimated $3.58 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 0.1% annual earnings loss 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 Macy’s Inc revealed the company was trading below its Graham Number of $37.56. The company pays a dividend of $1.51 per share, for a yield of 5.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.3, which was below the industry average of 34.38, 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 $-20.38.

Macy’s Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$20.38
Graham Number $37.56
PEmg 8.30
Current Ratio 1.47
PB Ratio 1.61
Current Dividend $1.51
Dividend Yield 5.08%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2018
Total Current Assets $7,444,000,000
Total Current Liabilities $5,075,000,000
Long-Term Debt $5,861,000,000
Total Assets $19,381,000,000
Intangible Assets $4,385,000,000
Total Liabilities $13,708,000,000
Shares Outstanding (Diluted Average) 307,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.39
Jan2018 $5.04
Jan2017 $1.99
Jan2016 $3.22
Jan2015 $4.22
Jan2014 $3.86
Jan2013 $3.24
Jan2012 $2.92
Jan2011 $1.98
Jan2010 $0.78
Jan2009 -$11.40
Jan2008 $1.97
Jan2007 $1.81
Jan2006 $3.24
Jan2005 $1.93
Jan2004 $1.86
Jan2003 $2.06
Jan2002 -$0.71
Jan2001 -$0.45
Jan2000 $1.81
Jan1999 $1.48

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.58
Jan2018 $3.67
Jan2017 $3.10
Jan2016 $3.60
Jan2015 $3.61
Jan2014 $3.05
Jan2013 $1.60
Jan2012 $0.27
Jan2011 -$1.03
Jan2010 -$1.93
Jan2009 -$2.35
Jan2008 $2.17
Jan2007 $2.24
Jan2006 $2.19
Jan2005 $1.43
Jan2004 $1.09
Jan2003 $0.75

Recommended Reading:

Other ModernGraham posts about the company

27 Companies in the Spotlight This Week – 2/14/15
Macy’s Inc. Annual Valuation – 2015 $M
15 Companies in the Spotlight This Week – 2/8/14
Macy’s, Inc. (M) Annual Valuation

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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.

LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB

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 LegacyTexas Financial Group Inc (LTXB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): LegacyTexas Financial Group, Inc. is a bank holding company. LegacyTexas Bank (the Bank) is the Company’s principal operating subsidiary, which is a commercial bank that is focused on meeting the needs of businesses and consumers in the North Texas area. Its principal business consists of attracting retail deposits from general public and business community and investing those funds, along with borrowed funds, in commercial real estate loans, secured and unsecured commercial and industrial loans, as well as permanent loans secured by first and second mortgages on one- to four-family residences and consumer loans. Its Warehouse Purchase Program allows mortgage banking company customers to close one- to four-family real estate loans in their own name and manage its cash flow needs until the loans are sold to investors. It offers title services, as well as brokerage services for purchase and sale of non-deposit investment and insurance products through a third-party brokerage arrangement.

LTXB Chart

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ModernGraham Valuation of LTXB – July 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,805,433,977 Fail
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 893.22% Pass
5. Moderate PEmg Ratio PEmg < 20 21.28 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.97 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.77
MG Growth Estimate 15.00%
MG Value $68.27
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $25.71
MG Value based on 0% Growth $15.07
Market Implied Growth Rate 6.39%
Current Price $37.74
% of Intrinsic Value 55.28%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.79 in 2013 to an estimated $1.77 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.39% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into LegacyTexas Financial Group Inc revealed the company was trading above its Graham Number of $30.53.  The company pays a dividend of $0.58 per share, for a yield of 1.5%  Its PEmg (price over earnings per share – ModernGraham) was 21.28, which was above the industry average of 20.84.

LegacyTexas Financial Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Graham Number $30.53
PEmg 21.28
PB Ratio 1.97
Dividend Yield 1.54%
TTM Dividend $0.58
Number of Consecutive Years of Dividend Growth 3

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2017
Long-Term Debt & Capital Lease Obligation $964,350,000
Total Assets $8,436,542,000
Intangible Assets $178,559,000
Total Liabilities $7,536,625,000
Shares Outstanding (Diluted Average) 47,060,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.24
Dec2016 $2.09
Dec2015 $1.53
Dec2014 $0.81
Dec2013 $0.83
Dec2012 $0.98
Dec2011 $0.81
Dec2010 $0.59
Dec2009 $0.10
Dec2008 -$0.10
Dec2007 $0.14
Dec2006 $0.06
Dec2005 $1.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.77
Dec2016 $1.44
Dec2015 $1.08
Dec2014 $0.83
Dec2013 $0.79
Dec2012 $0.67
Dec2011 $0.44
Dec2010 $0.23
Dec2009 $0.14
Dec2008 $0.21
Dec2007 $0.35
Dec2006 $0.40
Dec2005 $0.48

Recommended Reading:

Other ModernGraham posts about the company

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

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S&T Bancorp Inc Valuation – Initial Coverage $STBA

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.

Community Health Systems Valuation – Initial Coverage $CYH

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 Community Health Systems (CYH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Community Health Systems, Inc. is an operator of general acute care hospitals and outpatient facilities in communities across the country. The Company operates through hospital operations segment, which includes its general acute care hospitals and related healthcare entities that provide inpatient and outpatient healthcare services. The Company provides healthcare services through the hospitals that it owns and operates and affiliated businesses in non-urban and selected urban markets throughout the United States. The services provided through its hospitals and affiliated businesses include general acute care, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic, psychiatric and rehabilitation services. The Company also provides additional outpatient services at urgent care centers, occupational medicine clinics, imaging centers, cancer centers, ambulatory surgery centers, and home health and hospice agencies.

CYH Chart

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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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Downloadable PDF version of this valuation:

ModernGraham Valuation of CYH – April 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 $1,007,026,170 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.62 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 -276.10% Fail
6. Moderate PEmg Ratio PEmg < 20 -2.44 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.61 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 1.62 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.31 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg -$3.63
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$52.59
MG Value based on 0% Growth -$30.83
Market Implied Growth Rate -5.47%
Current Price $8.86
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.32 in 2013 to an estimated $-3.63 for 2017. 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 Community Health Systems revealed the company was trading above its Graham Number of $5.65. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -2.44, which was below the industry average of 37.66, 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 $-141.45.

Community Health Systems 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) -$141.45
Graham Number $5.65
PEmg -2.44
Current Ratio 1.62
PB Ratio 0.61
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $4,666,000,000
Total Current Liabilities $2,887,000,000
Long-Term Debt $14,789,000,000
Total Assets $21,944,000,000
Intangible Assets $6,521,000,000
Total Liabilities $20,329,000,000
Shares Outstanding (Diluted Average) 110,731,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.10
Dec2016 -$15.54
Dec2015 $1.37
Dec2014 $0.82
Dec2013 $1.51
Dec2012 $2.96
Dec2011 $2.23
Dec2010 $3.01
Dec2009 $2.66
Dec2008 $2.32
Dec2007 $0.32
Dec2006 $1.75
Dec2005 $1.79
Dec2004 $1.51
Dec2003 $1.30
Dec2002 $1.00
Dec2001 $0.50
Dec2000 $0.14
Dec1999 -$0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$3.63
Dec2016 -$4.25
Dec2015 $1.52
Dec2014 $1.77
Dec2013 $2.32
Dec2012 $2.69
Dec2011 $2.41
Dec2010 $2.34
Dec2009 $1.92
Dec2008 $1.55
Dec2007 $1.22
Dec2006 $1.60
Dec2005 $1.43
Dec2004 $1.13
Dec2003 $0.80
Dec2002 $0.45
Dec2001 $0.14

Recommended Reading:

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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.

Cypress Semiconductor Corp Valuation – Initial Coverage $CY

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 Cypress Semiconductor Corp (CY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cypress Semiconductor Corporation manufactures embedded system solutions for automotive, industrial, home automation and appliances, consumer electronics and medical products. The Company’s segments include Microcontroller and Connectivity Division (MCD), and Memory Products Division (MPD). MCD focuses on microcontroller (MCU), analog and wireless and wired connectivity solutions. MPD focuses on parallel and serial NOR flash memories, NAND flash memories, static random access memory (SRAM), ferroelectric-random access memory (F-RAM) ferroelectric memory devices and other specialty memories. The Company’s products include Traveo MCUs and Flexible MCUs; PSoC 1, PSoC 3, PSoC 4 and PSoC 5LP; CapSense, and TrueTouch Analog Power Management integrated circuits (PMICs) and energy harvesting solutions.

CY Chart

CY data by YCharts

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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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Downloadable PDF version of this valuation:

ModernGraham Valuation of CY – April 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 $4,363,256,211 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.27 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 10.71% Fail
6. Moderate PEmg Ratio PEmg < 20 -21.56 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.28 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 1.27 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.24 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 -$0.63
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$9.09
MG Value based on 0% Growth -$5.33
Market Implied Growth Rate -15.03%
Current Price $13.51
% of Intrinsic Value N/A

Cypress Semiconductor Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $0.02 in 2013 to an estimated $-0.63 for 2017. 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 Cypress Semiconductor Corporation revealed the company was trading above its Graham Number of $8.97. The company pays a dividend of $0.44 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -21.56, which was below the industry average of 41.95, 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 $-3.4.

Cypress Semiconductor Corporation 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) -$3.40
Graham Number $8.97
PEmg -21.56
Current Ratio 1.27
PB Ratio 2.28
Current Dividend $0.44
Dividend Yield 3.26%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $893,943,000
Total Current Liabilities $702,457,000
Long-Term Debt $1,194,979,000
Total Assets $3,871,871,000
Intangible Assets $2,358,531,000
Total Liabilities $1,980,043,000
Shares Outstanding (Diluted Average) 319,522,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.61
Dec2016 -$2.15
Dec2015 -$1.25
Dec2014 $0.11
Dec2013 -$0.32
Dec2012 -$0.16
Dec2011 $0.90
Dec2010 $0.40
Dec2009 -$1.03
Dec2008 -$1.89
Dec2007 $2.23
Dec2006 $0.25
Dec2005 -$0.69
Dec2004 $0.17
Dec2003 -$0.04
Dec2002 -$2.02
Dec2001 -$3.28
Dec2000 $2.03
Dec1999 $0.76
Dec1998 -$1.03
Dec1997 $0.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.63
Dec2016 -$1.08
Dec2015 -$0.41
Dec2014 $0.07
Dec2013 $0.02
Dec2012 $0.00
Dec2011 $0.10
Dec2010 -$0.21
Dec2009 -$0.41
Dec2008 -$0.07
Dec2007 $0.69
Dec2006 -$0.21
Dec2005 -$0.68
Dec2004 -$0.66
Dec2003 -$0.89
Dec2002 -$1.11
Dec2001 -$0.53

Recommended Reading:

Other ModernGraham posts about the company

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

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Disclaimer:

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

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