Consolidated Edison Inc Valuation – March 2019 #ED

Company Profile (excerpt from Reuters): Consolidated Edison, Inc. (Con Edison), incorporated on September 3, 1997, is a holding company. The Company operates through its subsidiaries, which include Consolidated Edison Company of New York, Inc. (CECONY), Orange and Rockland Utilities, Inc. (O&R), Con Edison Clean Energy Businesses, Inc. (the Clean Energy Businesses) and Con Edison Transmission, Inc. (Con Edison Transmission). CECONY’s principal business operations are its regulated electric, gas and steam delivery businesses. O&R’s principal business operations are its regulated electric and gas delivery businesses. The Clean Energy Businesses develop, own and operate renewable and energy infrastructure projects and provide energy-related products and services to wholesale and retail customers. Con Edison Transmission, through its subsidiaries, invests in electric and gas transmission projects.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ED – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $27,410,352,908 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.62 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 22.57% Fail
6. Moderate PEmg Ratio PEmg < 20 19.77 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.60 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 0.62 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.47 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.32
MG Growth Estimate 1.99%
MG Value $53.88
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $62.63
MG Value based on 0% Growth $36.71
Market Implied Growth Rate 5.64%
Current Price $85.40
% of Intrinsic Value 158.49%

Consolidated Edison, 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. 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 $3.81 in 2015 to an estimated $4.32 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.64% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Consolidated Edison, Inc. revealed the company was trading above its Graham Number of $69.52. The company pays a dividend of $2.86 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 19.77, which was below the industry average of 23.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-105.15.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$105.15
Graham Number $69.52
PEmg 19.77
Current Ratio 0.62
PB Ratio 1.60
Current Dividend $2.86
Dividend Yield 3.35%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,864,000,000
Total Current Liabilities $6,207,000,000
Long-Term Debt $17,495,000,000
Total Assets $53,920,000,000
Intangible Assets $2,094,000,000
Total Liabilities $37,081,000,000
Shares Outstanding (Diluted Average) 315,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.00
Dec2018 $4.42
Dec2017 $4.94
Dec2016 $4.12
Dec2015 $4.05
Dec2014 $3.71
Dec2013 $3.61
Dec2012 $3.86
Dec2011 $3.57
Dec2010 $3.47
Dec2009 $3.14
Dec2008 $4.37
Dec2007 $3.47
Dec2006 $2.95
Dec2005 $2.94
Dec2004 $2.27
Dec2003 $2.38
Dec2002 $3.02
Dec2001 $3.21
Dec2000 $2.74
Dec1999 $3.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.32
Dec2018 $4.40
Dec2017 $4.29
Dec2016 $3.93
Dec2015 $3.81
Dec2014 $3.68
Dec2013 $3.62
Dec2012 $3.64
Dec2011 $3.56
Dec2010 $3.53
Dec2009 $3.50
Dec2008 $3.52
Dec2007 $2.99
Dec2006 $2.74
Dec2005 $2.68
Dec2004 $2.61
Dec2003 $2.81

Recommended Reading:

Other ModernGraham posts about the company

Consolidated Edison Inc Valuation – June 2018 $ED
Consolidated Edison Inc Valuation – February 2017 $ED
Consolidated Edison Inc Valuation – August 2016 $ED
Consolidated Edison Analysis – 2015 Update $ED
21 Companies in the Spotlight This Week – June 14, 2014

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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.

Discover Financial Services Valuation – March 2019 $DFS

Company Profile (excerpt from Reuters): Discover Financial Services (DFS), incorporated on July 25, 1960, is a direct banking and payment services company. The Company is a bank holding company, as well as a financial holding company. The Company operates through two segments: Direct Banking and Payment Services. It provides direct banking products and services, and payment services through its subsidiaries. It offers its customers credit card loans, private student loans, personal loans, home equity loans and deposit products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DFS – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,591,292,141 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
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 122.38% Pass
5. Moderate PEmg Ratio PEmg < 20 10.13 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.17 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 $7.09
MG Growth Estimate 6.82%
MG Value $156.93
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $102.80
MG Value based on 0% Growth $60.26
Market Implied Growth Rate 0.82%
Current Price $71.84
% of Intrinsic Value 45.78%

Discover Financial Services qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. 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 Undervalued after growing its EPSmg (normalized earnings) from $4.87 in 2015 to an estimated $7.09 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.82% 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 Discover Financial Services revealed the company was trading below its Graham Number of $77.91. The company pays a dividend of $1.5 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.13, which was below the industry average of 31.76, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Discover Financial Services fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $77.91
PEmg 10.13
PB Ratio 2.17
Dividend Yield 2.09%
TTM Dividend $1.50
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 12/1/2018
Long-Term Debt & Capital Lease Obligation $27,228,000,000
Total Assets $109,553,000,000
Intangible Assets $416,000,000
Total Liabilities $98,423,000,000
Shares Outstanding (Diluted Average) 336,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.45
Dec2018 $7.79
Dec2017 $5.42
Dec2016 $5.77
Dec2015 $5.13
Dec2014 $4.90
Dec2013 $4.96
Nov2012 $4.46
Nov2011 $4.06
Nov2010 $1.22
Nov2009 $2.38
Nov2008 $1.92
Nov2007 $1.23
Nov2006 $1.89
Nov2005 $1.21
Nov2004 $0.00
Nov2003 $1.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.09
Dec2018 $6.21
Dec2017 $5.36
Dec2016 $5.23
Dec2015 $4.87
Dec2014 $4.47
Dec2013 $3.98
Nov2012 $3.26
Nov2011 $2.49
Nov2010 $1.72
Nov2009 $1.88
Nov2008 $1.51
Nov2007 $1.25
Nov2006 $1.13
Nov2005 $0.68
Nov2004 $0.36
Nov2003 $0.45

Recommended Reading:

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10 Low PE Stock Picks for the Defensive Investor – June 2018
Discover Financial Services Valuation – May 2018 $DFS
10 Low PE Stock Picks for the Defensive Investor – August 2017
10 Low PE Stock Picks for the Defensive Investor – February 2017
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Discover Financial Services Valuation – August 2016 $DFS
Mastercard Inc Valuation – July 2016 $MA
Discover Financial Services Valuation – February 2016 $DFS
Mastercard Inc Valuation – January 2016 Update $MA
Discover Financial Services Inc. Valuation – November 2015 Update $DFS

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.

DISH Network Corp Valuation – February 2019 $DISH

Company Profile (excerpt from Reuters): DISH Network Corporation, incorporated on April 26, 1995, is a holding company. The Company operates through two segments: Pay-TV and Broadband, and Wireless. The Company offers pay-TV services under the DISH brand and the Sling brand (collectively Pay-TV services).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DISH – 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 $14,577,441,883 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.62 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 44.08% Pass
6. Moderate PEmg Ratio PEmg < 20 10.25 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.99 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 0.62 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.50 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.04
MG Growth Estimate 7.48%
MG Value $71.35
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $44.11
MG Value based on 0% Growth $25.86
Market Implied Growth Rate 0.87%
Current Price $31.17
% of Intrinsic Value 43.68%

DISH Network 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, poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.03 in 2014 to an estimated $3.04 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.87% 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 above the price.

At the time of valuation, further research into DISH Network Corp revealed the company was trading above its Graham Number of $31.04. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 10.25, which was below the industry average of 92.4, 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 $-35.85.

DISH Network Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$35.85
Graham Number $31.04
PEmg 10.25
Current Ratio 0.62
PB Ratio 1.99
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 9/1/2018
Total Current Assets $3,038,909,000
Total Current Liabilities $4,877,597,000
Long-Term Debt $13,790,114,000
Total Assets $30,137,410,000
Intangible Assets $24,487,077,000
Total Liabilities $21,894,372,000
Shares Outstanding (Diluted Average) 525,995,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.88
Dec2017 $4.07
Dec2016 $3.15
Dec2015 $1.73
Dec2014 $2.04
Dec2013 $1.76
Dec2012 $1.41
Dec2011 $3.39
Dec2010 $2.20
Dec2009 $1.42
Dec2008 $1.98
Dec2007 $1.68
Dec2006 $1.37
Dec2005 $3.22
Dec2004 $0.46
Dec2003 $0.46
Dec2002 -$0.86
Dec2001 -$0.45
Dec2000 -$1.38
Dec1999 -$1.92
Dec1998 -$0.82

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.04
Dec2017 $2.93
Dec2016 $2.25
Dec2015 $1.89
Dec2014 $2.03
Dec2013 $2.03
Dec2012 $2.14
Dec2011 $2.38
Dec2010 $1.82
Dec2009 $1.73
Dec2008 $1.84
Dec2007 $1.66
Dec2006 $1.41
Dec2005 $1.14
Dec2004 -$0.05
Dec2003 -$0.48
Dec2002 -$0.99

Recommended Reading:

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DISH Network Corp Valuation – Initial Coverage $DISH

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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.

Discovery Inc Valuation – February 2019 $DISCA

Company Profile (excerpt from Reuters): Discovery, Inc., formerly Discovery Communications, Inc., incorporated on April 28, 2008, is a global media company. The Company provides content across multiple distribution platforms, including pay-television (pay-TV), free-to-air (FTA) and broadcast television, Websites, digital distribution arrangements and content licensing agreements. The Company’s segments include U.S. Networks, which consists principally of domestic television networks and digital content services; International Networks, consisting primarily of international television networks and digital content services, and Education and Other, which consists principally of curriculum-based product and service offerings, and production studios.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DISCA – 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 $14,199,226,842 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.01 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 -15.77% Fail
6. Moderate PEmg Ratio PEmg < 20 32.05 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.05 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 1.01 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 293.13 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.88
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $12.80
MG Value based on 0% Growth $7.50
Market Implied Growth Rate 11.78%
Current Price $28.29
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.31 in 2014 to an estimated $0.88 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.78% 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 DISCOVERY COMMUNICATIONS INC. Common Stock revealed the company was trading above its Graham Number of $16.36. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 32.05, which was above the industry average of 31.72. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.9.

DISCOVERY COMMUNICATIONS INC. Common Stock 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) -$26.90
Graham Number $16.36
PEmg 32.05
Current Ratio 1.01
PB Ratio 2.05
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 9/1/2018
Total Current Assets $3,914,000,000
Total Current Liabilities $3,860,000,000
Long-Term Debt $15,829,000,000
Total Assets $32,912,000,000
Intangible Assets $26,294,000,000
Total Liabilities $23,093,000,000
Shares Outstanding (Diluted Average) 713,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.98
Dec2017 -$0.59
Dec2016 $1.96
Dec2015 $1.58
Dec2014 $1.66
Dec2013 $1.49
Dec2012 $0.62
Dec2011 $1.40
Dec2010 $0.76
Dec2009 $0.64
Dec2008 $0.49
Dec2007 -$0.12
Dec2006 -$0.08
Dec2005 $0.06
Dec2004 $0.12
Dec2003 -$0.10
Dec2002 -$0.23
Dec2001 -$1.09

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.88
Dec2017 $0.96
Dec2016 $1.65
Dec2015 $1.44
Dec2014 $1.31
Dec2013 $1.08
Dec2012 $0.85
Dec2011 $0.85
Dec2010 $0.50
Dec2009 $0.31
Dec2008 $0.13
Dec2007 -$0.04
Dec2006 -$0.01
Dec2005 -$0.07
Dec2004 -$0.18
Dec2003 -$0.31
Dec2002 -$0.37

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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.

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.

Walt Disney Co Valuation – November 2018 $DIS

Company Profile (excerpt from Reuters): The Walt Disney Company, incorporated on July 28, 1995, is a worldwide entertainment company. The Company operates in four business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products & Interactive Media. The media networks segment includes cable and broadcast television networks, television production and distribution operations, domestic television stations, and radio networks and stations. The Company’s Walt Disney Imagineering unit designs and develops new theme park concepts and attractions, as well as resort properties. The studio entertainment segment produces and acquires live-action and animated motion pictures, direct-to-video content, musical recordings and live stage plays. The Company also develops and publishes games, primarily for mobile platforms, books, magazines and comic books.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DIS – November 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 $168,668,171,474 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.94 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 178.13% Pass
6. Moderate PEmg Ratio PEmg < 20 16.45 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.21 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.94 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -16.51 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 $6.89
MG Growth Estimate 10.66%
MG Value $205.58
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $99.97
MG Value based on 0% Growth $58.60
Market Implied Growth Rate 3.98%
Current Price $113.45
% of Intrinsic Value 55.19%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.03 in 2015 to an estimated $6.89 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.98% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Walt Disney Co revealed the company was trading above its Graham Number of $73.44. The company pays a dividend of $1.68 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 16.45, which was below the industry average of 31.19, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.33.

Walt Disney Co receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$19.33
Graham Number $73.44
PEmg 16.45
Current Ratio 0.94
PB Ratio 3.21
Current Dividend $1.68
Dividend Yield 1.48%
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 $16,825,000,000
Total Current Liabilities $17,860,000,000
Long-Term Debt $17,084,000,000
Total Assets $98,598,000,000
Intangible Assets $38,081,000,000
Total Liabilities $45,766,000,000
Shares Outstanding (Diluted Average) 1,497,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.31
Sep2018 $8.36
Sep2017 $5.69
Sep2016 $5.73
Sep2015 $4.90
Sep2014 $4.26
Sep2013 $3.38
Sep2012 $3.13
Sep2011 $2.52
Sep2010 $2.03
Sep2009 $1.76
Sep2008 $2.28
Sep2007 $2.25
Sep2006 $1.64
Sep2005 $1.19
Sep2004 $1.07
Sep2003 $0.59
Sep2002 $0.60
Sep2001 -$0.02
Sep2000 $0.57
Sep1999 $0.62

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.89
Sep2018 $6.39
Sep2017 $5.20
Sep2016 $4.73
Sep2015 $4.03
Sep2014 $3.42
Sep2013 $2.85
Sep2012 $2.51
Sep2011 $2.19
Sep2010 $2.01
Sep2009 $1.94
Sep2008 $1.92
Sep2007 $1.61
Sep2006 $1.20
Sep2005 $0.88
Sep2004 $0.67
Sep2003 $0.47

Recommended Reading:

Other ModernGraham posts about the company

Walt Disney Co Valuation – February 2018 $DIS
Walt Disney Co Valuation – March 2017 $DIS
Walt Disney Co Valuation – December 2015 Update $DIS
26 Companies in the Spotlight This Week – 11/22/14
The Walt Disney Company Annual Valuation – 2014 $DIS

Other ModernGraham posts about related companies

Tegna Inc Valuation – August 2018 $TGNA
E.W. Scripps Co Valuation – August 2018 $SSP
Cinemark Holdings Inc Valuation – August 2018 $CNK
Corus Entertainment Inc Valuation – July 2018 $TSE:CJR.B
AMC Networks Inc Valuation – July 2018 $AMCX
International Speedway Corp Valuation – July 2018 $ISCA
Cineplex Inc Valuation – July 2018 $TSE-CGX
Graham Holdings Co Valuation – July 2018 $GHC
News Corp Valuation – June 2018 $NWS
Netflix Inc Valuation – June 2018 $NFLX

Disclaimer:

The author held a long position in DIS but did not hold a position in any other 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.

Consolidated Edison Inc Valuation – June 2018 $ED

Company Profile (excerpt from Reuters): Consolidated Edison, Inc. (Con Edison), incorporated on September 3, 1997, is a holding company. The Company operates through its subsidiaries, which include Consolidated Edison Company of New York, Inc. (CECONY), Orange and Rockland Utilities, Inc. (O&R), Con Edison Clean Energy Businesses, Inc. (the Clean Energy Businesses) and Con Edison Transmission, Inc. (Con Edison Transmission). CECONY’s principal business operations are its regulated electric, gas and steam delivery businesses. O&R’s principal business operations are its regulated electric and gas delivery businesses. The Clean Energy Businesses develop, own and operate renewable and energy infrastructure projects and provide energy-related products and services to wholesale and retail customers. Con Edison Transmission, through its subsidiaries, invests in electric and gas transmission projects.

ED Chart

ED data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ED – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,472,581,046 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.67 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 30.35% Fail
6. Moderate PEmg Ratio PEmg < 20 17.44 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.50 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 0.67 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.84 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.33
MG Growth Estimate 2.66%
MG Value $59.90
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $62.81
MG Value based on 0% Growth $36.82
Market Implied Growth Rate 4.47%
Current Price $75.54
% of Intrinsic Value 126.10%

Consolidated Edison, 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. 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 $3.68 in 2014 to an estimated $4.33 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.47% 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 Consolidated Edison, Inc. revealed the company was trading above its Graham Number of $68.64. The company pays a dividend of $2.76 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 17.44, which was below the industry average of 22.69, 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 $-94.56.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$94.56
Graham Number $68.64
PEmg 17.44
Current Ratio 0.67
PB Ratio 1.50
Current Dividend $2.76
Dividend Yield 3.65%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $3,773,000,000
Total Current Liabilities $5,651,000,000
Long-Term Debt $14,730,000,000
Total Assets $48,900,000,000
Intangible Assets $557,000,000
Total Liabilities $33,239,000,000
Shares Outstanding (Diluted Average) 311,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.21
Dec2017 $4.94
Dec2016 $4.12
Dec2015 $4.05
Dec2014 $3.71
Dec2013 $3.61
Dec2012 $3.86
Dec2011 $3.57
Dec2010 $3.47
Dec2009 $3.14
Dec2008 $4.37
Dec2007 $3.47
Dec2006 $2.95
Dec2005 $2.94
Dec2004 $2.27
Dec2003 $2.38
Dec2002 $3.02
Dec2001 $3.21
Dec2000 $2.74
Dec1999 $3.13
Dec1998 $3.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.33
Dec2017 $4.29
Dec2016 $3.93
Dec2015 $3.81
Dec2014 $3.68
Dec2013 $3.62
Dec2012 $3.64
Dec2011 $3.56
Dec2010 $3.53
Dec2009 $3.50
Dec2008 $3.52
Dec2007 $2.99
Dec2006 $2.74
Dec2005 $2.68
Dec2004 $2.61
Dec2003 $2.81
Dec2002 $3.03

Recommended Reading:

Other ModernGraham posts about the company

Consolidated Edison Inc Valuation – February 2017 $ED
Consolidated Edison Inc Valuation – August 2016 $ED
Consolidated Edison Analysis – 2015 Update $ED
21 Companies in the Spotlight This Week – June 14, 2014
Consolidated Edison Annual Valuation – 2014 $ED

Other ModernGraham posts about related companies

Duke Energy Corp Valuation – May 2018 $DUK
Sempra Energy Valuation – May 2018 $SRE
Ameren Corp Valuation – May 2018 $AEE
NextEra Energy Inc Valuation – May 2018 $NEE
PG&E Corp Valuation – April 2018 $PCG
Dominion Energy Inc Valuation – April 2018 $D
Exelon Corp Valuation – March 2018 $EXC
NRG Energy Inc Valuation – March 2018 $NRG
DTE Energy Co Valuation – March 2018 $DTE
The AES Corp Valuation – March 2018 $AES

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.

Discover Financial Services Valuation – May 2018 $DFS

Company Profile (excerpt from Reuters): Discover Financial Services (DFS), incorporated on July 25, 1960, is a direct banking and payment services company. The Company is a bank holding company, as well as a financial holding company. The Company operates through two segments: Direct Banking and Payment Services. It provides direct banking products and services, and payment services through its subsidiaries. It offers its customers credit card loans, private student loans, personal loans, home equity loans and deposit products.

DFS Chart

DFS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DFS – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $25,500,576,543 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
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 142.69% Pass
5. Moderate PEmg Ratio PEmg < 20 12.20 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.42 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 $6.08
MG Growth Estimate 5.39%
MG Value $117.14
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $88.11
MG Value based on 0% Growth $51.65
Market Implied Growth Rate 1.85%
Current Price $74.12
% of Intrinsic Value 63.28%

Discover Financial Services qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. 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 Undervalued after growing its EPSmg (normalized earnings) from $4.47 in 2014 to an estimated $6.08 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.85% 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 Discover Financial Services revealed the company was trading above its Graham Number of $69.32. The company pays a dividend of $1.3 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 12.2, which was below the industry average of 27.85, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Discover Financial Services performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Graham Number $69.32
PEmg 12.20
PB Ratio 2.42
Dividend Yield 1.75%
TTM Dividend $1.30
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 3/1/2018
Long-Term Debt & Capital Lease Obligation $26,244,000,000
Total Assets $101,967,000,000
Intangible Assets $417,000,000
Total Liabilities $91,096,000,000
Shares Outstanding (Diluted Average) 355,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.40
Dec2017 $5.42
Dec2016 $5.77
Dec2015 $5.13
Dec2014 $4.90
Dec2013 $4.96
Nov2012 $4.46
Nov2011 $4.06
Nov2010 $1.22
Nov2009 $2.38
Nov2008 $1.92
Nov2007 $1.23
Nov2006 $1.89
Nov2005 $1.21
Nov2004 $0.00
Nov2003 $1.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.08
Dec2017 $5.36
Dec2016 $5.23
Dec2015 $4.87
Dec2014 $4.47
Dec2013 $3.98
Nov2012 $3.26
Nov2011 $2.49
Nov2010 $1.72
Nov2009 $1.88
Nov2008 $1.51
Nov2007 $1.25
Nov2006 $1.13
Nov2005 $0.68
Nov2004 $0.36
Nov2003 $0.45

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Defensive Investor – August 2017
10 Low PE Stock Picks for the Defensive Investor – February 2017
12 Best Stocks for Value Investors This Week – 2/4/17
10 Low PE Stock Picks for the Defensive Investor – January 2017
Discover Financial Services Valuation – January 2017 $DFS

Other ModernGraham posts about related companies

Mastercard Inc Valuation – March 2018 $MA
Discover Financial Services Valuation – January 2017 $DFS
Discover Financial Services Valuation – August 2016 $DFS
Mastercard Inc Valuation – July 2016 $MA
Discover Financial Services Valuation – February 2016 $DFS
Mastercard Inc Valuation – January 2016 Update $MA
Discover Financial Services Inc. Valuation – November 2015 Update $DFS
MasterCard Inc. Analysis – October 2015 Update $MA
Discover Financial Services Analysis – August 2015 Update $DFS
Mastercard Inc. Analysis – June 2015 Update $MA

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.

DISH Network Corp Valuation – Initial Coverage $DISH

Company Profile (excerpt from Reuters): DISH Network Corporation, incorporated on April 26, 1995, is a holding company. The Company operates through two segments: Pay-TV and Broadband, and Wireless. The Company offers pay-TV services under the DISH brand and the Sling brand (collectively Pay-TV services).

DISH Chart

DISH data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DISH – 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 $17,970,869,211 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.68 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 30.67% Fail
6. Moderate PEmg Ratio PEmg < 20 14.11 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.92 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 0.68 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.81 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.73
MG Growth Estimate 5.16%
MG Value $51.37
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $39.57
MG Value based on 0% Growth $23.19
Market Implied Growth Rate 2.81%
Current Price $38.51
% of Intrinsic Value 74.97%

DISH Network 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 growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.03 in 2014 to an estimated $2.73 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.81% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into DISH Network Corp revealed the company was trading above its Graham Number of $25.48. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 14.11, which was below the industry average of 41.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-37.21.

DISH Network Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$37.21
Graham Number $25.48
PEmg 14.11
Current Ratio 0.68
PB Ratio 2.92
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 12/1/2017
Total Current Assets $3,285,023,000
Total Current Liabilities $4,828,004,000
Long-Term Debt $15,134,441,000
Total Assets $29,773,766,000
Intangible Assets $23,725,789,000
Total Liabilities $22,836,352,000
Shares Outstanding (Diluted Average) 525,467,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.94
Dec2017 $4.07
Dec2016 $3.15
Dec2015 $1.73
Dec2014 $2.04
Dec2013 $1.76
Dec2012 $1.41
Dec2011 $3.39
Dec2010 $2.20
Dec2009 $1.42
Dec2008 $1.98
Dec2007 $1.68
Dec2006 $1.37
Dec2005 $3.22
Dec2004 $0.46
Dec2003 $0.46
Dec2002 -$0.86
Dec2001 -$0.45
Dec2000 -$1.38
Dec1999 -$1.92
Dec1998 -$0.82

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.73
Dec2017 $2.93
Dec2016 $2.25
Dec2015 $1.89
Dec2014 $2.03
Dec2013 $2.03
Dec2012 $2.14
Dec2011 $2.38
Dec2010 $1.82
Dec2009 $1.73
Dec2008 $1.84
Dec2007 $1.66
Dec2006 $1.41
Dec2005 $1.14
Dec2004 -$0.05
Dec2003 -$0.48
Dec2002 -$0.99

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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.

Discovery Inc Valuation – April 2018 $DISCA

Company Profile (excerpt from Reuters): Discovery, Inc., formerly Discovery Communications, Inc., incorporated on April 28, 2008, is a global media company. The Company provides content across multiple distribution platforms, including pay-television (pay-TV), free-to-air (FTA) and broadcast television, Websites, digital distribution arrangements and content licensing agreements. The Company’s segments include U.S. Networks, which consists principally of domestic television networks and digital content services; International Networks, consisting primarily of international television networks and digital content services, and Education and Other, which consists principally of curriculum-based product and service offerings, and production studios.

DISCA Chart

DISCA data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DISCA – 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 $11,170,821,952 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.34 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 6.81% Fail
6. Moderate PEmg Ratio PEmg < 20 20.70 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.75 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 5.34 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.82 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 $1.09
MG Growth Estimate -2.51%
MG Value $3.80
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $15.84
MG Value based on 0% Growth $9.29
Market Implied Growth Rate 6.10%
Current Price $22.62
% of Intrinsic Value 595.15%

Discovery Inc 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 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 $1.31 in 2014 to an estimated $1.09 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.1% 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 Discovery Inc revealed the company was trading above its Graham Number of $20.96. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 20.7, which was below the industry average of 32.74, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.18.

Discovery 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) -$14.18
Graham Number $20.96
PEmg 20.70
Current Ratio 5.34
PB Ratio 2.75
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $9,991,000,000
Total Current Liabilities $1,871,000,000
Long-Term Debt $14,755,000,000
Total Assets $22,555,000,000
Intangible Assets $11,056,000,000
Total Liabilities $17,945,000,000
Shares Outstanding (Diluted Average) 561,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.61
Dec2017 -$0.59
Dec2016 $1.96
Dec2015 $1.58
Dec2014 $1.66
Dec2013 $1.49
Dec2012 $0.63
Dec2011 $1.40
Dec2010 $0.76
Dec2009 $0.64
Dec2008 $0.49
Dec2007 -$0.12
Dec2006 -$0.08
Dec2005 $0.06
Dec2004 $0.12
Dec2003 -$0.10
Dec2002 -$0.23
Dec2001 -$1.09

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.09
Dec2017 $0.96
Dec2016 $1.65
Dec2015 $1.44
Dec2014 $1.31
Dec2013 $1.09
Dec2012 $0.85
Dec2011 $0.85
Dec2010 $0.50
Dec2009 $0.31
Dec2008 $0.13
Dec2007 -$0.04
Dec2006 -$0.01
Dec2005 -$0.07
Dec2004 -$0.18
Dec2003 -$0.31
Dec2002 -$0.37

Recommended Reading:

Other ModernGraham posts about the company

Discovery Communications Inc Valuation – August 2016 $DISCA
Discovery Communications Analysis – 2015 Annual Update $DISCA
15 Companies in the Spotlight This Week – 5/31/14
Discovery Communications 2014 Annual Valuation $DISCA

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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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