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

Recommended Reading:

Other ModernGraham posts about the company

Discovery Inc Valuation – April 2018 $DISCA
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

Other ModernGraham posts about related companies

Comcast Corp Valuation – January 2019 $CMCSA
Viacom Inc Valuation – January 2019 $VIAB
Twenty-First Century Fox Inc Valuation – January 2019 $FOX
Walt Disney Co Valuation – November 2018 $DIS
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

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

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 $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

Other ModernGraham posts about related companies

Time Warner Inc Valuation – March 2018 $TWX
Comcast Corporation Valuation – March 2018 $CMCSA
Viacom Inc Valuation – March 2018 $VIAB
Twenty-First Century Fox Inc Valuation – March 2018 $FOXA
Walt Disney Co Valuation – February 2018 $DIS
Live Nation Entertainment Inc Valuation – Initial Coverage $LYV
Walt Disney Co Valuation – March 2017 $DIS
Tegna Inc Valuation – February 2017 $TGNA
E.W. Scripps Co Valuation – Initial Coverage $SSP
News Corp Valuation – February 2017 $NWSA

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 Communications Inc Valuation – August 2016 $DISCA

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 Companies Benjamin Graham Would Invest In Today – July 2016.  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 Discovery Communications Inc (DISCA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Discovery Communications, Inc., (Discovery) is a global media company. The Company provides content across multiple distribution platforms, including pay-television (pay-TV), free-to-air and broadcast television, Websites, digital distribution arrangements and content licensing agreements. Its segments are U.S. Networks, which consists principally of domestic television networks and Websites; International Networks, which consists primarily of international television networks and Websites; Education and Other, which consists principally of curriculum-based product and service offerings, and production studios, and Corporate and Inter-segment Eliminations. It distributes customized content in the United States, and over 220 other countries and territories in over 40 languages. The Company’s global portfolio of networks includes television brands, such as Discovery Channel, TLC, Animal Planet, Investigation Discovery, Science and Velocity (known as Turbo outside of the United States).

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DISCA Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of DISCA – August 2016

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 $9,852,566,755 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.94 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 392.16% Pass
6. Moderate PEmg Ratio PEmg < 20 15.22 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.91 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 1.94 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.16 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

DISCA value chart August 2016

EPSmg $1.63
MG Growth Estimate 8.07%
MG Value $40.10
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $23.60
MG Value based on 0% Growth $13.83
Market Implied Growth Rate 3.36%
Current Price $24.77
% of Intrinsic Value 61.77%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.06 in 2012 to an estimated $1.63 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.36% 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.

Discovery Communications Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

DISCA charts August 2016

Net Current Asset Value (NCAV) -$12.45
Graham Number $22.86
PEmg 15.22
Current Ratio 1.94
PB Ratio 2.91
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 3/1/2016
Total Current Assets $2,667,000,000
Total Current Liabilities $1,375,000,000
Long-Term Debt $7,965,000,000
Total Assets $15,878,000,000
Intangible Assets $11,954,000,000
Total Liabilities $10,512,000,000
Shares Outstanding (Diluted Average) 630,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.78
Dec2015 $1.58
Dec2014 $1.66
Dec2013 $1.49
Dec2012 $1.24
Dec2011 $1.40
Dec2010 $0.76
Dec2009 $0.65
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

Next Fiscal Year Estimate $1.63
Dec2015 $1.53
Dec2014 $1.43
Dec2013 $1.25
Dec2012 $1.06
Dec2011 $0.86
Dec2010 $0.50
Dec2009 $0.32
Dec2008 $0.13
Dec2007 -$0.04
Dec2006 -$0.01
Dec2005 -$0.07
Dec2004 -$0.18
Dec2003 -$0.31
Dec2002 -$0.37
Dec2001 -$0.36

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Scripps Networks Valuation – July 2016 $SNI
Cablevision Systems Corp Valuation – July 2016 $CVC
Time Warner Inc Valuation – July 2016 $TWX
Comcast Corporation Valuation – June 2016 $CMCSA
Viacom Inc Valuation – June 2016 $VIAB
CBS Corporation Valuation – May 2016 $CBS
Graham Holdings Company Valuation – May 2016 $GHC
Twenty-First Century Fox Inc Valuation – February 2016 Update $FOXA
Scripps Networks Interactive Inc Valuation – February 2016 Update $SNI
Walt Disney Co Valuation – December 2015 Update $DIS

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 Communications Analysis – 2015 Annual Update $DISCA

200px-Discovery_Communications.svgBenjamin 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 5 Most Undervalued Companies for the Defensive Investor – May 2015.  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 Discovery Communications (DISCA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Discovery Communications, Inc. (Discovery) is a global media and entertainment company that provide programming across multiple distribution platforms around the world. The Company also has a diversified portfolio of Websites and other digital media services, develops and sells curriculum-based education products and services, and provides postproduction audio services. The Company operates through segments such as U.S. Networks and International Networks. The Company’s U.S. Networks, consists principally of domestic television networks and websites. Its International Networks consists principally of international television networks and websites. Discovery Holding Company (DHC) and Discovery Communications, LLC are the wholly-owned subsidiaries of the Company.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 2/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $33.96
MG Value $50.66
MG Opinion Undervalued
Value Based on 3% Growth $22.42
Value Based on 0% Growth $13.14
Market Implied Growth Rate 6.73%
Net Current Asset Value (NCAV) -$12.03
PEmg 21.97
Current Ratio 1.40
PB Ratio 4.28

Balance Sheet – March 2015

Current Assets $2,469,000,000
Current Liabilities $1,765,000,000
Total Debt $7,036,000,000
Total Assets $15,782,000,000
Intangible Assets $11,998,000,000
Total Liabilities $10,493,000,000
Outstanding Shares 667,000,000

Earnings Per Share

2015 (estimate) $1.64
2014 $1.66
2013 $1.49
2012 $1.24
2011 $1.40
2010 $0.76
2009 $0.64
2008 $0.49
2007 -$0.12
2006 -$0.08
2005 $0.06

Earnings Per Share – ModernGraham

2015 (estimate) $1.55
2014 $1.44
2013 $1.25
2012 $1.06
2011 $0.85
2010 $0.50

Dividend History
Discovery Communications does not pay a dividend.

Conclusion:

As this stock analysis shows, Discovery Communications is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the insufficient earnings stability over the last ten years, the lack of dividends and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the current assets and the lack of of dividends.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be undervalued after seeing its EPSmg (normalized earnings) grow from $0.85 in 2011 to an estimated $1.55 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.73% 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 well above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Discovery Communications (DISCA)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Discovery Communications 2014 Annual Valuation $DISCA

200px-Discovery_Communications.svgBenjamin 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 5 Lowest PEmg Companies for Enterprising Investors.  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 specific look at how Discovery Communications (DISCA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Discovery Communications, Inc. (Discovery) is a global nonfiction media and entertainment company that provide programming across multiple distribution platforms worldwide. Discovery operates in three segments: U.S. Networks, International Networks and Education and Other. The Company’s U.S. Networks, consists principally of domestic cable and satellite television networks, Websites and other digital media services. Its International Networks consists primarily of international cable and satellite television networks and Websites. It’s Education and other consists principally of curriculum-based education product and service offerings and postproduction audio services. In November 2013, the Company announced it has acquired Espresso Group Limited, provider of primary school digital education content in the United Kingdom. Effective March 3, 2014, Discovery Communications Inc acquired Raw TV Ltd.

DISCA Chart

DISCA data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $78.20
MG Value $112.88
MG Opinion Undervalued
Value Based on 3% Growth $42.51
Value Based on 0% Growth $24.92
Market Implied Growth Rate 9.09%
Net Current Asset Value (NCAV) -$27.64
PEmg 26.67
Current Ratio 2.19
PB Ratio 2.93

Balance Sheet – 3/31/2014

Current Assets $2,740,000,000
Current Liabilities $1,253,000,000
Total Debt $6,900,000,000
Total Assets $15,311,000,000
Intangible Assets $10,788,000,000
Total Liabilities $9,131,000,000
Outstanding Shares 231,200,000

Earnings Per Share

2014 (estimate) $3.50
2013 $2.97
2012 $2.51
2011 $2.80
2010 $1.47
2009 $1.30
2008 $0.85
2007 -$0.24
2006 -$0.16
2005 $0.12
2004 $0.24

Earnings Per Share – ModernGraham

2014 (estimate) $2.93
2013 $2.50
2012 $2.11
2011 $1.68
2010 $0.96
2009 $0.60

Conclusion:

Discovery Communications does not qualify for either the Defensive Investor or the Enterprising Investor.  The only Defensive Investor requirements the company satisfies are the market capitalization size and the current ratio.  Meanwhile, the Enterprising Investor has concerns with the high level of debt relative to the current assets and the lack of dividend payments.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through a review of ModernGraham’s valuation of Viacom (VIAB) and ModernGraham’s valuation of CBS Corporation (CBS).  From a valuation perspective, the company appears undervalued after growing its EPSmg (normalized earnings) from $0.96 in 2010 to an estimated $2.93 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of 9.09% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls well above the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Discovery Communications (DISCA)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Discovery Communications (DISCA) or 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.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

News Corp Valuation – March 2019 #NWSA

Company Profile (excerpt from Reuters): News Corporation, incorporated on December 11, 2012, is a global diversified media and information services company focused on creating and distributing content to consumers and businesses throughout the world. The Company’s operations are organized into five segments: News and Information Services; Book Publishing; Digital Real Estate Services; Cable Network Programming, and Other. The Company comprises businesses across a range of media, including news and information services, book publishing, digital real estate services, cable network programming in Australia and pay-television distribution in Australia, that are distributed under brands, including The Wall Street Journal, Dow Jones, The Australian, Herald Sun, The Sun, The Times, HarperCollins Publishers, FOX SPORTS Australia, realestate.com.au, realtor.com and Foxtel, among others. The Company also owns a stake in Foxtel, a pay-television provider in Australia, which is accounted for as an equity investment. The Company operates primarily in the United States, Australia and the United Kingdom, and its content is distributed and consumed across the world. The Company delivers its content to consumers across numerous distribution platforms consisting not only of traditional print and television, but also through an array of digital platforms, including Websites, applications for mobile devices and tablets, social media and e-book devices.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NWSA – 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 $7,577,227,483 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.19 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 46.47% Pass
6. Moderate PEmg Ratio PEmg < 20 -15.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.73 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 1.19 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.31 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 -$0.81
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$11.76
MG Value based on 0% Growth -$6.90
Market Implied Growth Rate -12.23%
Current Price $12.95
% of Intrinsic Value N/A

News Corp Class A does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history, and the high 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 $-0.2 in 2015 to an estimated $-0.81 for 2019. 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 News Corp Class A revealed the company was trading above its Graham Number of $11.04. The company pays a dividend of $0.2 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was -15.96, which was below the industry average of 35.38, 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 $-2.32.

News Corp Class A 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) -$2.32
Graham Number $11.04
PEmg -15.96
Current Ratio 1.19
PB Ratio 0.73
Current Dividend $0.20
Dividend Yield 1.54%
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 $4,429,000,000
Total Current Liabilities $3,712,000,000
Long-Term Debt $936,000,000
Total Assets $16,227,000,000
Intangible Assets $7,796,000,000
Total Liabilities $5,793,000,000
Shares Outstanding (Diluted Average) 587,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.34
Jun2018 -$2.60
Jun2017 -$1.27
Jun2016 $0.30
Jun2015 -$0.26
Jun2014 $0.41
Jun2013 $0.87
Jun2012 -$3.58
Jun2011 $1.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.81
Jun2018 -$1.15
Jun2017 -$0.28
Jun2016 -$0.01
Jun2015 -$0.20
Jun2014 -$0.19
Jun2013 -$0.43
Jun2012 -$0.88
Jun2011 $0.39

Recommended Reading:

Other ModernGraham posts about the company

News Corp Valuation – February 2017 $NWSA
5 Speculative and Overvalued Companies to Avoid – November 2015
News Corporation Valuation – November 2015 Update $NWSA
27 Companies in the Spotlight This Week – 11/8/14
News Corp Annual Valuation – 2014 $NWSA

Other ModernGraham posts about related companies

CBS Corp Valuation – February 2019 $CBS
Discovery Inc Valuation – February 2019 $DISCA
Comcast Corp Valuation – January 2019 $CMCSA
Viacom Inc Valuation – January 2019 $VIAB
Twenty-First Century Fox Inc Valuation – January 2019 $FOX
Walt Disney Co Valuation – November 2018 $DIS
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

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.

Netflix Inc Valuation – March 2019 #NFLX

Company Profile (excerpt from Reuters): Netflix, Inc., incorporated on August 29, 1997, is a provider an Internet television network. The Company operates through three segments: Domestic streaming, International streaming and Domestic DVD. The Domestic streaming segment includes services that streams content to its members in the United States. The International streaming segment includes services that streams content to its members outside the United States. The Domestic DVD segment includes services, such as digital optical disc (DVD)-by-mail.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NFLX – 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 $156,739,041,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.49 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 616.45% Pass
6. Moderate PEmg Ratio PEmg < 20 159.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 30.93 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 1.49 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.23 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 $2.26
MG Growth Estimate 15.00%
MG Value $86.91
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $32.73
MG Value based on 0% Growth $19.19
Market Implied Growth Rate 75.31%
Current Price $359.17
% of Intrinsic Value 413.28%

Netflix, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.36 in 2015 to an estimated $2.26 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 75.31% 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 Netflix, Inc. revealed the company was trading above its Graham Number of $31.39. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 159.11, which was above the industry average of 35.38. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.48.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.48
Graham Number $31.39
PEmg 159.11
Current Ratio 1.49
PB Ratio 30.93
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 $9,694,135,000
Total Current Liabilities $6,487,320,000
Long-Term Debt $10,360,058,000
Total Assets $25,974,400,000
Intangible Assets $0
Total Liabilities $20,735,635,000
Shares Outstanding (Diluted Average) 451,127,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.65
Dec2018 $2.68
Dec2017 $1.25
Dec2016 $0.43
Dec2015 $0.28
Dec2014 $0.62
Dec2013 $0.26
Dec2012 $0.04
Dec2011 $0.59
Dec2010 $0.42
Dec2009 $0.28
Dec2008 $0.19
Dec2007 $0.14
Dec2006 $0.10
Dec2005 $0.09
Dec2004 $0.05
Dec2003 $0.01
Dec2002 -$0.05
Dec2001 -$0.77
Dec2000 -$1.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.26
Dec2018 $1.39
Dec2017 $0.69
Dec2016 $0.38
Dec2015 $0.36
Dec2014 $0.39
Dec2013 $0.29
Dec2012 $0.31
Dec2011 $0.40
Dec2010 $0.28
Dec2009 $0.19
Dec2008 $0.14
Dec2007 $0.10
Dec2006 $0.06
Dec2005 -$0.01
Dec2004 -$0.19
Dec2003 -$0.36

Recommended Reading:

Other ModernGraham posts about the company

Netflix Inc Valuation – June 2018 $NFLX
Netflix Inc Valuation – February 2017 $NFLX
5 Speculative and Overvalued Companies to Avoid – November 2015
Netflix Inc Valuation – November 2015 Update $NFLX
5 Speculative and Overvalued Companies to Avoid – November 2014

Other ModernGraham posts about related companies

CBS Corp Valuation – February 2019 $CBS
Discovery Inc Valuation – February 2019 $DISCA
Comcast Corp Valuation – January 2019 $CMCSA
Viacom Inc Valuation – January 2019 $VIAB
Twenty-First Century Fox Inc Valuation – January 2019 $FOX
Walt Disney Co Valuation – November 2018 $DIS
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

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.

CBS Corp Valuation – February 2019 $CBS

Company Profile (excerpt from Reuters): CBS Corporation, incorporated on November 10, 1986, is a mass media company. The Company operates through four segment: Entertainment, Cable Networks, Publishing and Local Media. The Entertainment segment comprises the CBS Television Network; CBS Television Studios; CBS Studios International and CBS Television Distribution; CBS Interactive; CBS Films; and the Company’s digital streaming services, CBS All Access and CBSN. The Cable Networks segment comprises Showtime Networks, which operates its subscription program services, Showtime, The Movie Channel, and Flix. The Publishing segment comprises Simon & Schuster, which publishes and distributes consumer books under imprints, such as Simon & Schuster, Pocket Books, Scribner and Gallery Books. The Local Media segment comprises CBS TV Stations, and CBS Local Digital Media. Its businesses span the media and entertainment industries, including the CBS TV Network, cable networks, content production and distribution, television stations, Internet-based businesses, and consumer publishing. It focuses on exhibiting its content on multiple digital platforms, including digital streaming services, as well as third-party live television streaming offerings.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CBS – 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 $18,347,191,065 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.51 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 168.39% Pass
6. Moderate PEmg Ratio PEmg < 20 15.10 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.39 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 1.51 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.62 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.25
MG Growth Estimate -0.52%
MG Value $24.24
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $47.08
MG Value based on 0% Growth $27.60
Market Implied Growth Rate 3.30%
Current Price $49.02
% of Intrinsic Value 202.26%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.36 in 2014 to an estimated $3.25 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.3% 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 CBS Corporation Common Stock revealed the company was trading above its Graham Number of $24.44. The company pays a dividend of $0.72 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 15.1, which was below the industry average of 31.72, 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 $-33.02.

CBS Corporation Common Stock scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$33.02
Graham Number $24.44
PEmg 15.10
Current Ratio 1.51
PB Ratio 7.39
Current Dividend $0.72
Dividend Yield 1.47%
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 9/1/2018
Total Current Assets $6,040,000,000
Total Current Liabilities $3,993,000,000
Long-Term Debt $9,465,000,000
Total Assets $21,068,000,000
Intangible Assets $7,571,000,000
Total Liabilities $18,554,000,000
Shares Outstanding (Diluted Average) 379,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.14
Dec2017 $0.88
Dec2016 $2.81
Dec2015 $2.89
Dec2014 $5.27
Dec2013 $3.01
Dec2012 $2.39
Dec2011 $1.92
Dec2010 $1.04
Dec2009 $0.33
Dec2008 -$17.43
Dec2007 $1.73
Dec2006 $2.15
Dec2005 -$8.98
Dec2004 -$20.37
Dec2003 $1.61
Dec2002 $0.82
Dec2001 -$0.26
Dec2000 -$1.34
Dec1999 $0.90
Dec1998 -$0.42

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.25
Dec2017 $2.52
Dec2016 $3.32
Dec2015 $3.42
Dec2014 $3.36
Dec2013 $2.19
Dec2012 $0.40
Dec2011 -$1.23
Dec2010 -$2.68
Dec2009 -$4.50
Dec2008 -$7.47
Dec2007 -$3.25
Dec2006 -$5.48
Dec2005 -$8.01
Dec2004 -$6.32
Dec2003 $0.58
Dec2002 $0.03

Recommended Reading:

Other ModernGraham posts about the company

CBS Corporation Valuation – April 2018 $CBS
7 Best Undervalued Stocks of the Week – 9/3/16
CBS Corporation Valuation – August 2016 $CBS
6 Best Stocks For Value Investors This Week – 5/14/16
CBS Corporation Valuation – May 2016 $CBS

Other ModernGraham posts about related companies

Discovery Inc Valuation – February 2019 $DISCA
Comcast Corp Valuation – January 2019 $CMCSA
Viacom Inc Valuation – January 2019 $VIAB
Twenty-First Century Fox Inc Valuation – January 2019 $FOX
Walt Disney Co Valuation – November 2018 $DIS
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

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.

10 Most Overvalued Stocks of the S&P 500 – February 2019

There are a number of great companies in the market today, but there are also a number of companies that are vastly overvalued by the market. By using the ModernGraham Valuation Model, I’ve selected the ten most overvalued companies of the S&P 500 recently reviewed by ModernGraham.

All of these companies are not suitable for the Defensive Investor and/or the Enterprising Investor. Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

Autodesk, Inc. (ADSK)

Autodesk, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $0.82 in 2015 to an estimated $-1.47 for 2019. 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 Autodesk, Inc. 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 -103.19, which was below the industry average of 56.55, 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 $-11.52.

Autodesk, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.  (See the full valuation)

AES Corp (AES)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.16 in 2014 to an estimated $-0.04 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

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

AES Corp scores quite poorly in the ModernGraham grading system, with an overall grade of D+.  (See the full valuation)

ConocoPhillips (COP)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $6.85 in 2014 to an estimated $0.41 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 79.31% 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 ConocoPhillips revealed the company was trading above its Graham Number of $47.64. The company pays a dividend of $1.06 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 167.12, which was above the industry average of 43.92. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.26.

ConocoPhillips scores quite poorly in the ModernGraham grading system, with an overall grade of F.  (See the full valuation)

DISCOVERY COMMUNICATIONS INC. Common Stock (DISCA)

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.  (See the full valuation)

Devon Energy Corp (DVN)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.37 in 2014 to an estimated $-2.61 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 Devon Energy Corp revealed the company was trading below its Graham Number of $39.63. The company pays a dividend of $0.24 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was -10.16, which was below the industry average of 41.28, 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 $-13.33.

Devon Energy Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.  (See the full valuation)

EOG Resources Inc (EOG)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.35 in 2014 to an estimated $1.82 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 22.22% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into EOG Resources Inc revealed the company was trading above its Graham Number of $58.15. The company pays a dividend of $0.67 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 52.95, which was above the industry average of 43.92. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.68.

EOG Resources Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.  (See the full valuation)

FirstEnergy Corp. (FE)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.31 in 2014 to an estimated $-2.96 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

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

FirstEnergy Corp. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.  (See the full valuation)

Flowserve Corp (FLS)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.21 in 2014 to an estimated $1.04 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.04% 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 Flowserve Corp revealed the company was trading above its Graham Number of $16.73. The company pays a dividend of $0.76 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 36.58, which was above the industry average of 20.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.95.

Flowserve Corp scores quite poorly in the ModernGraham grading system, with an overall grade of F.  (See the full valuation)

FleetCor Technologies, Inc. (FLT)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.21 in 2014 to an estimated $1.76 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 48.63% 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 FleetCor Technologies, Inc. revealed the company was trading above its Graham Number of $29.9. The company pays a dividend of $0.76 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 105.76, which was above the industry average of 25.74. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.95.

FleetCor Technologies, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.  (See the full valuation)

HCP, Inc. (HCP)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.85 in 2014 to an estimated $0.67 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.91% 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 HCP, Inc. revealed the company was trading above its Graham Number of $12.24. The company pays a dividend of $1.48 per share, for a yield of 5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 44.33, which was below the industry average of 70.5, 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 $-14.6.

HCP, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.  (See the full valuation)

What do you think?  Are these companies a good value for Defensive Investors?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:

The author held a long position in WestRock Co (WRK) 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 read our full disclaimer.

E.W. Scripps Co Valuation – August 2018 $SSP

Company Profile (excerpt from Reuters): The E. W. Scripps Company, incorporated on December 1, 1987, is a media enterprise with interests in television and radio broadcasting, as well as local and national digital media brands. The Company’s segments include television, radio, digital, and syndication and other. The Company serves audiences and businesses through a portfolio of television, radio and digital media brands. It also has a collection of local and national digital journalism and information businesses. It also produces television programming, investigative reporting newsroom in Washington, District of Columbia (D.C.) and serves educational program, the Scripps National Spelling Bee.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SSP – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,170,375,912 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.83 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 -144.60% Fail
6. Moderate PEmg Ratio PEmg < 20 155.91 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.28 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.83 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.86 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 $0.09
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $1.32
MG Value based on 0% Growth $0.78
Market Implied Growth Rate 73.71%
Current Price $14.24
% of Intrinsic Value N/A

E. W. Scripps Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability 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 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 $0.29 in 2014 to an estimated $0.09 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 73.71% 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 E. W. Scripps Co revealed the company was trading above its Graham Number of $8.95. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 155.91, which was above the industry average of 38.97. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.43.

E. W. Scripps Co 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) -$7.43
Graham Number $8.95
PEmg 155.91
Current Ratio 2.83
PB Ratio 1.28
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 6/1/2018
Total Current Assets $569,556,000
Total Current Liabilities $201,372,000
Long-Term Debt $686,659,000
Total Assets $2,089,925,000
Intangible Assets $1,172,864,000
Total Liabilities $1,178,061,000
Shares Outstanding (Diluted Average) 81,852,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.31
Dec2017 -$0.16
Dec2016 $0.80
Dec2015 -$1.06
Dec2014 $0.18
Dec2013 -$0.01
Dec2012 $0.69
Dec2011 -$0.27
Dec2010 $2.03
Dec2009 -$3.89
Dec2008 -$8.81
Dec2007 -$0.03
Dec2006 $6.42
Dec2005 $4.53
Dec2004 $5.88
Dec2003 $5.25
Dec2002 $3.48
Dec2001 $2.60
Dec2000 $3.06
Dec1999 $2.73
Dec1998 $2.37

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.09
Dec2017 -$0.03
Dec2016 $0.06
Dec2015 -$0.23
Dec2014 $0.29
Dec2013 $0.14
Dec2012 -$0.54
Dec2011 -$1.50
Dec2010 -$1.70
Dec2009 -$2.49
Dec2008 -$0.66
Dec2007 $3.74
Dec2006 $5.46
Dec2005 $4.77
Dec2004 $4.61
Dec2003 $3.79
Dec2002 $2.99

Recommended Reading:

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E.W. Scripps Co Valuation – Initial Coverage $SSP

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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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