Dover Corp Valuation – January 2019 $DOV

Company Profile (excerpt from Reuters): Dover Corporation, incorporated on April 22, 1947, is a diversified global manufacturer, delivering equipment and components, specialty systems, consumable supplies, software and digital solutions and support services. The Company operates through four segments: Energy, Engineered Systems, Fluids and Refrigeration & Food Equipment. The Company’s customers include businesses supplying the waste and recycling, agricultural, defense, energy, automotive and commercial refrigeration industries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DOV – January 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,506,709,846 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 20.29% Fail
6. Moderate PEmg Ratio PEmg < 20 16.29 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.91 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.24 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 $4.41
MG Growth Estimate -1.32%
MG Value $25.84
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $63.91
MG Value based on 0% Growth $37.46
Market Implied Growth Rate 3.90%
Current Price $71.80
% of Intrinsic Value 277.84%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.83 in 2014 to an estimated $4.41 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.9% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Dover Corp revealed the company was trading above its Graham Number of $50.79. The company pays a dividend of $1.82 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.29, which was below the industry average of 23.62, 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 $-21.78.

Dover 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) -$21.78
Graham Number $50.79
PEmg 16.29
Current Ratio 1.30
PB Ratio 3.91
Current Dividend $1.82
Dividend Yield 2.53%
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 9/1/2018
Total Current Assets $2,459,049,000
Total Current Liabilities $1,890,305,000
Long-Term Debt $2,981,923,000
Total Assets $8,461,770,000
Intangible Assets $4,915,448,000
Total Liabilities $5,713,836,000
Shares Outstanding (Diluted Average) 149,457,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.05
Dec2017 $5.15
Dec2016 $3.25
Dec2015 $5.46
Dec2014 $4.59
Dec2013 $5.78
Dec2012 $4.41
Dec2011 $4.74
Dec2010 $3.70
Dec2009 $1.91
Dec2008 $3.12
Dec2007 $3.26
Dec2006 $2.74
Dec2005 $2.50
Dec2004 $2.02
Dec2003 $1.44
Dec2002 -$0.60
Dec2001 $1.22
Dec2000 $2.54
Dec1999 $4.41
Dec1998 $1.69

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.41
Dec2017 $4.67
Dec2016 $4.52
Dec2015 $5.10
Dec2014 $4.83
Dec2013 $4.67
Dec2012 $3.94
Dec2011 $3.58
Dec2010 $2.98
Dec2009 $2.65
Dec2008 $2.93
Dec2007 $2.68
Dec2006 $2.14
Dec2005 $1.66
Dec2004 $1.27
Dec2003 $1.20
Dec2002 $1.33

Recommended Reading:

Other ModernGraham posts about the company

Dover Corp Valuation – March 2018 $DOV
Dover Corporation Valuation – July 2016 $DOV
Dividend Growth Stocks for Intelligent Investors – June 2016
Dividend Growth Stocks for Intelligent Investors – February 2016
13 Best Stocks For Value Investors This Week – 12/12/15

Other ModernGraham posts about related companies

Caterpillar Inc Valuation – November 2018 $CAT
Lindsay Corp Valuation – October 2018 $LNN
Lennox International Inc Valuation – October 2018 $LII
Standex International Corp Valuation – September 2018 $SXI
Lincoln Electric Holdings Inc Valuation – August 2018 $LECO
Regal Beloit Corp Valuation – August 2018 $RBC
Kennametal Inc Valuation – August 2018 $KMT
SPX Corp Valuation – August 2018 $SPXC
AGCO Corp Valuation – August 2018 $AGCO
John Bean Technologies Corp Valuation – August 2018 $JBT

Disclaimer:

The author held a long position in DOV 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.

Dover Corp Valuation – March 2018 $DOV

Company Profile (obtained from Marketwatch): Dover Corp. engages in the manufacture of equipment, components, and specialty systems. It also provides supporting engineering, testing, and other similar services. It operates through the following segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment. The Energy segment services include drilling and production; bearings and compression; and automation end markets. The Engineered Systems segment comprises of platforms the printing and identification as well as industrials; and is focused on the design, manufacture, and service of critical equipment and components. The Fluids segment services involves fluid transfer and pumps end markets. The Refrigeration & Food Equipment segment provides energy equipment and systems serving the commercial refrigeration; and food service industries. The company was founded by George L. Ohrstrom in 1947 and is headquartered in Downers Grove, IL.

DOV Chart

DOV data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DOV – March 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 $15,128,959,930 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.40 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 28.21% Fail
6. Moderate PEmg Ratio PEmg < 20 20.93 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.54 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 1.40 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.29 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 $4.68
MG Growth Estimate -0.47%
MG Value $35.39
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $67.87
MG Value based on 0% Growth $39.79
Market Implied Growth Rate 6.22%
Current Price $97.97
% of Intrinsic Value 276.85%

Dover 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 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 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 $4.83 in 2014 to an estimated $4.68 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.22% 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 Dover Corp revealed the company was trading above its Graham Number of $55.52. The company pays a dividend of $1.82 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 20.93, which was below the industry average of 24.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.38.

Dover 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) -$19.38
Graham Number $55.52
PEmg 20.93
Current Ratio 1.40
PB Ratio 3.54
Current Dividend $1.82
Dividend Yield 1.86%
Number of Consecutive Years of Dividend Growth 20

 

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $3,207,120,000
Total Current Liabilities $2,298,193,000
Long-Term Debt $2,986,702,000
Total Assets $10,657,653,000
Intangible Assets $6,201,839,000
Total Liabilities $6,274,473,000
Shares Outstanding (Diluted Average) 158,281,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.87
Dec2017 $5.15
Dec2016 $3.25
Dec2015 $5.46
Dec2014 $4.59
Dec2013 $5.78
Dec2012 $4.41
Dec2011 $4.74
Dec2010 $3.70
Dec2009 $1.91
Dec2008 $3.12
Dec2007 $3.26
Dec2006 $2.74
Dec2005 $2.50
Dec2004 $2.02
Dec2003 $1.44
Dec2002 -$0.60
Dec2001 $1.22
Dec2000 $2.54
Dec1999 $4.41
Dec1998 $1.69

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.68
Dec2017 $4.67
Dec2016 $4.52
Dec2015 $5.10
Dec2014 $4.83
Dec2013 $4.67
Dec2012 $3.94
Dec2011 $3.58
Dec2010 $2.98
Dec2009 $2.65
Dec2008 $2.93
Dec2007 $2.68
Dec2006 $2.14
Dec2005 $1.66
Dec2004 $1.27
Dec2003 $1.20
Dec2002 $1.33

Recommended Reading:

Other ModernGraham posts about the company

Dover Corporation Valuation – July 2016 $DOV
Dividend Growth Stocks for Intelligent Investors – June 2016
Dividend Growth Stocks for Intelligent Investors – February 2016
13 Best Stocks For Value Investors This Week – 12/12/15
Dover Corp Valuation – December 2015 Update $DOV

Other ModernGraham posts about related companies

Briggs & Stratton Corp Valuation – Initial Coverage $BGG
Albany International Corp Valuation – Initial Coverage $AIN
Terex Corporation Valuation – Initial Coverage $TEX
Donaldson Co Inc Valuation – Initial Coverage $DCI
Stanley Black & Decker Inc Valuation – April 2017 $SWK
Lindsay Corp Valuation – Initial Coverage $LNN
Lennox International Inc Valuation – Initial Coverage $LII
Standex Int’l Corp Valuation – Initial Coverage $SXI
Pentair PLC Valuation – March 2017 $PNR
Lincoln Electric Holdings Inc Valuation – Initial Coverage $LECO

Disclaimer:

The author held a long position in DOV 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.

Dover Corporation Valuation – July 2016 $DOV

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 – June 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 Dover Corporation (DOV) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Dover Corporation (Dover) is engaged in the manufacturing of equipment, components and specialty systems. The Company also provides supporting engineering, testing and other services. The Company operates through four segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment. The Energy segment provides solutions and services for production and processing of fuels across the world. Its Fluids segment is focused on the handling of critical fluids across the retail fueling, chemical, hygienic, oil and gas, and industrial markets. Dover’s Engineered Systems segment is focused on the design, manufacture and service of critical equipment and components. Its Refrigeration & Food Equipment segment provides equipment and systems serving the commercial refrigeration and food service markets. The Company’s businesses are based in the United States and Europe with manufacturing and other operations across the world.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of DOV – July 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 $11,156,647,429 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.42 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 61.64% Pass
6. Moderate PEmg Ratio PEmg < 20 15.44 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.97 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 1.42 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.75 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

DOV value chart July 2016

EPSmg $4.56
MG Growth Estimate 2.36%
MG Value $60.20
Opinion Overvalued
MG Grade B+
MG Value based on 3% Growth $66.05
MG Value based on 0% Growth $38.72
Market Implied Growth Rate 3.47%
Current Price $70.34
% of Intrinsic Value 116.85%

Dover Corp qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.94 in 2012 to an estimated $4.56 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.47% 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 below the price.

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

Stage 3: Information for Further Research

DOV charts July 2016

Net Current Asset Value (NCAV) -$18.81
Graham Number $42.39
PEmg 15.44
Current Ratio 1.42
PB Ratio 2.97
Current Dividend $1.66
Dividend Yield 2.36%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $2,345,756,000
Total Current Liabilities $1,648,809,000
Long-Term Debt $2,610,642,000
Total Assets $8,980,895,000
Intangible Assets $5,578,017,000
Total Liabilities $5,282,762,000
Shares Outstanding (Diluted Average) 156,161,000

Earnings Per Share History

Next Fiscal Year Estimate $3.35
Dec2015 $5.46
Dec2014 $4.59
Dec2013 $5.78
Dec2012 $4.41
Dec2011 $4.74
Dec2010 $3.70
Dec2009 $1.91
Dec2008 $3.12
Dec2007 $3.26
Dec2006 $2.73
Dec2005 $2.50
Dec2004 $2.02
Dec2003 $1.44
Dec2002 -$0.60
Dec2001 $1.22
Dec2000 $2.54
Dec1999 $4.41
Dec1998 $1.69
Dec1997 $1.79
Dec1996 $1.71

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.56
Dec2015 $5.10
Dec2014 $4.83
Dec2013 $4.67
Dec2012 $3.94
Dec2011 $3.58
Dec2010 $2.98
Dec2009 $2.65
Dec2008 $2.92
Dec2007 $2.68
Dec2006 $2.13
Dec2005 $1.66
Dec2004 $1.27
Dec2003 $1.20
Dec2002 $1.33
Dec2001 $2.31
Dec2000 $2.71

Recommended Reading:

Other ModernGraham posts about the company

Dividend Growth Stocks for Intelligent Investors – June 2016
Dividend Growth Stocks for Intelligent Investors – February 2016
13 Best Stocks For Value Investors This Week – 12/12/15
Dover Corp Valuation – December 2015 Update $DOV
Dividend Growth Stocks for the Intelligent Investor – November 2015

Other ModernGraham posts about related companies

Fastenal Company Valuation – July 2016 $FAST
Deere & Company Valuation – June 2016 $DE
A.O.Smith Corporation Valuation – June 2016 $AOS
Ingersoll-Rand PLC Valuation – May 2016 $IR
Snap-on Inc Valuation – February 2016 $SNA
AGCO Corporation Valuation – February 2016 $AGCO
Joy Global Inc Valuation – February 2016 $JOY
Allegion PLC Valuation – February 2016 Update $ALLE
Rockwell Automation Inc Valuation – February 2016 Update $ROK
Parker Hannifin Corp Valuation – January 2016 Update $PH

Disclaimer:

The author held a long position in Dover Corporation 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.

Dover Corp Valuation – December 2015 Update $DOV

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 Most Undervalued Companies for the Defensive Investor – November 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 Dover Corp (DOV) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Dover Corporation (Dover) is engaged in the manufacturing of equipment, components and specialty systems. The Company also provides supporting engineering, testing and other services. The Company operates through four business segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment. The Energy segment serves the Drilling & Production, Bearings & Compression and Automation end markets, and provides solutions and services for production and processing of oil, natural gas liquids and gas around the world. The Engineered Systems segment manages its products and services through two business platforms, Printing & Identification and Industrials. The Fluids segment is focused on the handling of critical fluids across the retail fueling, chemical, hygienic and industrial markets. The Refrigeration & Food Equipment segment provides equipment and systems serving the commercial refrigeration and food service industries.

[level-free]

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of DOV – December 2015

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 $9,837,857,380 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.69 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 72.59% Pass
6. Moderate PEmg Ratio PEmg < 20 12.26 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.73 Pass
Score
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 1.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.94 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

DOV value Chart December 2015

EPSmg $5.07
MG Growth Estimate 6.25%
MG Value $106.53
Opinion Undervalued
MG Value based on 3% Growth $73.57
MG Value based on 0% Growth $43.13
Market Implied Growth Rate 1.88%
Current Price $62.22
% of Intrinsic Value 58.40%

 

Dover Corp qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the low current ratio and the Enterprising Investor’s only concern is the level of debt relative to the net current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.58 in 2011 to an estimated $5.07 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.88% 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.

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 Dover Corp (DOV)?  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.

Stage 3: Information for Further Research

DOV Charts December 2015

Net Current Asset Value (NCAV) -$13.40
Graham Number $52.73
PEmg 12.26
Current Ratio 1.69
PB Ratio 2.73
Dividend Yield 2.60%
Number of Consecutive Years of Dividend Growth 20

 

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Total Current Assets $2,814,829,000
Total Current Liabilities $1,668,699,000
Long-Term Debt $2,224,943,000
Total Assets $8,478,820,000
Intangible Assets $4,672,092,000
Total Liabilities $4,912,516,000
Shares Outstanding (Diluted Average) 156,560,000

Earnings Per Share History

Next Fiscal Year Estimate $5.37
Dec14 $4.59
Dec13 $5.78
Dec12 $4.41
Dec11 $4.74
Dec10 $3.70
Dec09 $1.91
Dec08 $3.12
Dec07 $3.26
Dec06 $2.74
Dec05 $2.50
Dec04 $2.02
Dec03 $1.44
Dec02 -$0.60
Dec01 $1.22
Dec00 $2.54
Dec99 $4.41
Dec98 $1.69
Dec97 $1.79
Dec96 $1.69
Dec95 $1.23

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.07
Dec14 $4.83
Dec13 $4.67
Dec12 $3.94
Dec11 $3.58
Dec10 $2.98
Dec09 $2.65
Dec08 $2.93
Dec07 $2.68
Dec06 $2.14
Dec05 $1.66
Dec04 $1.27
Dec03 $1.20
Dec02 $1.33
Dec01 $2.31
Dec00 $2.71
Dec99 $2.59

Recommended Reading:

Other ModernGraham posts about the company

Dividend Growth Stocks for the Intelligent Investor – November 2015
Dividend Growth Stocks for the Intelligent Investor – October 2015
Dividend Growth Stocks for the Intelligent Investor – September 2015
My Personal Holdings: Dover Corporation – September 2015 Update $DOV
Dover Corporation Analysis – May 2015 Quarterly Update $DOV

Other ModernGraham posts about related companies

Fastenal Co Valuation – November 2015 Update $FAST
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AGCO Corporation Valuation – November 2015 Update $AGCO
Snap-on Inc. Valuation – November 2015 Update $SNA
Joy Global Inc. Valuation – November 2015 Update $JOY
Rockwell Automation Inc. Valuation – October 2015 Update $ROK
Paccar Inc. Analysis – October 2015 Update $PCAR
W.W. Grainger Inc. Analysis – October 2015 Update $GWW

Disclaimer:

The author held a long position in Dover Corp 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.

My Personal Holdings: Dover Corporation – September 2015 Update $DOV

Personal Holdings

I am often asked if I utilize the methods I teach here on ModernGraham, and the answer is yes.  I fully believe that Benjamin Graham’s methodology can be used in the market today, especially after taking time to analyze each one of his ideas and modernize it as needed.  The ModernGraham method can be a great way to narrow down investment opportunities to the strongest companies, and then a little bit of further research can help one determine in which companies to invest.

This series of posts looks at each of my personal holdings, putting them through a full ModernGraham valuation and adding a level of further research to provide rationale as to why I selected the company for my portfolio.  Here’s a page with more information about my portfolio, including my thoughts and goals on asset allocation and an overview of my current holdings.

The first step in my analysis is to put the company through a full ModernGraham valuation.  For readers who may be new to the site, here on ModernGraham I cover the full S&P 500, putting each company through an individual valuation like this every quarter if it qualifies for either the Defensive Investor or Enterprising Investor, or every year if it does not qualify for either investor type.  Premium members have access to every valuation on the site, for only $4.99/month.

ModernGraham Valuation

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 Most Undervalued Companies for the Defensive Investor – August 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 Dover Corporation (DOV) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Dover Corporation (Dover) is engaged in the manufacturing of equipment, components and specialty systems. The Company also provides supporting engineering, testing and other services. The Company operates through four business segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment. The Energy segment serves the Drilling & Production, Bearings & Compression and Automation end markets, and provides solutions and services for production and processing of oil, natural gas liquids and gas around the world. The Engineered Systems segment manages its products and services through two business platforms, Printing & Identification and Industrials. The Fluids segment is focused on the handling of critical fluids across the retail fueling, chemical, hygienic and industrial markets. The Refrigeration & Food Equipment segment provides equipment and systems serving the commercial refrigeration and food service industries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DOV – August 2015

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 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 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 Pass
6. Moderate PEmg Ratio PEmg < 20 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Pass
Score
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 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $5.03
MG Growth Estimate 6.07%
MG Value $103.80
Opinion Undervalued
MG Value based on 3% Growth $72.94
MG Value based on 0% Growth $42.76
Market Implied Growth Rate 1.72%
Current Price $60.04
% of Intrinsic Value 57.84%

Dover Corporation qualifies for both the Defensive Investor and the Enterprising Investor.  Both investor types are only initially concerned with the low current ratio. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.58 in 2011 to an estimated $5.03 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.72% 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.

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 Dover Corporation (DOV)?  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.

Stage 3: Information for Further Research

DOV Charts August 2015

Net Current Asset Value (NCAV) -$13.32
Graham Number $51.39
PEmg 11.93
Current Ratio 1.70
PB Ratio 2.68
Dividend Yield 2.66%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Total Current Assets $2,737,125,000
Total Current Liabilities $1,613,705,000
Long-Term Debt $2,225,063,000
Total Assets $8,466,817,000
Intangible Assets $4,731,832,000
Total Liabilities $4,874,335,000
Shares Outstanding (Diluted Average) 160,398,000

Earnings Per Share History

Next Fiscal Year Estimate $5.24
Dec14 $4.59
Dec13 $5.78
Dec12 $4.41
Dec11 $4.74
Dec10 $3.70
Dec09 $1.91
Dec08 $3.12
Dec07 $3.26
Dec06 $2.74
Dec05 $2.50
Dec04 $2.02
Dec03 $1.44
Dec02 -$0.60
Dec01 $1.22
Dec00 $2.54
Dec99 $4.41
Dec98 $1.69
Dec97 $1.79
Dec96 $1.69
Dec95 $1.23

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.03
Dec14 $4.83
Dec13 $4.67
Dec12 $3.94
Dec11 $3.58
Dec10 $2.98
Dec09 $2.65
Dec08 $2.93
Dec07 $2.68
Dec06 $2.14
Dec05 $1.66
Dec04 $1.27
Dec03 $1.20
Dec02 $1.33
Dec01 $2.31
Dec00 $2.71
Dec99 $2.59

Recommended Reading:

Other ModernGraham posts about the company

Dover Corporation Analysis – May 2015 Quarterly Update $DOV
5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – March 2015
28 Companies in the Spotlight This Week – 2/28/15
Dover Corporation Quarterly Valuation – February 2015 $DOV
5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – January 2015

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Rationale & Outlook

After putting the company through a ModernGraham valuation, the next step is to look at the company to analyze its business.  I like to utilize Warren Buffett’s business tenets, which are very helpful in determining the business’s strengths and weaknesses.  Let’s put Dover Corporation through that analysis:

Is the business simple and understandable?

Dover Corporation’s business is very straightforward and understandable.  The company is engaged in the manufacture of equipment that is used in a wide variety of industries.  Specifically, the company focuses on four main segments:  Energy, Engineered Systems, Fluids, and Refrigeration.  In each of these areas, Dover strives to build equipment to meet customer needs in a safe and sustainable manner.

Buffett prefers to have companies with a simple business model because it is key for the investor to be able to know what the company is doing.  There are some caveats to this in that it isn’t necessary for the investor to understand the details of how the product works, but rather the goal that the product achieves.  Here, I do not know how to make machinery or understand how some of Dover’s pumps or sensors work, but I do understand the need for such products.  As a result, I am able to understand Dover’s business in a simple manner.

 

Does the business have a consistent operating history?

Dover has been in operation since 1955, and throughout that time the company’s operations have remained consistent.  The overall strategy of the company remains to “build the company by acquiring strong businesses with solid fundamentals and market leading positions” (as stated on the company website).  This approach allows Dover to focus on growing its manufacturing into additional segments if the opportunity arises, but the company does seem to remain interested solely in the broader manufacturing arena.

In addition, the company has a long history of consistent dividends and dividend growth.  In fact, Dover’s dividends have grown annually for at least the last twenty years from $0.28/share in 1995 to $1.60/share today.  Dividend growth is a key element in a long-term investing strategy, as it can provide a solid yield on investment over a large period of time.

Does the company have favorable long-term prospects?

As mentioned, Dover’s business model is broken into four different segments, which together help to provide consistency and favorable long-term prospects.  The company has done a great job at focusing on areas which will be needed long into the future and diversifying into areas that should smooth any business cycle.

The world will always need to draw from each of the four segments, and even if at times the need for equipment by one segment may lessen, some of the other segments are likely to pick up in need.  For example, if there is a downturn in the economy, the need for refrigeration systems may drop as less people might eat at restaurants but the need for engineered systems may increase as those same people might hold onto their vehicles longer with additional servicing needs.

 

Is management rational?

Dover’s management has a clear strategy that is focused on long-term growth.  As such, that management appears to be very rational in my opinion.  In addition, the company has some Sustainability initiatives which is a key concept for management to address as the world increasingly turns to awareness of climate change.  In particular, as millennials become decision makers, I predict that more companies will need to put more effort into environmentally friendly programs in order to attract business from leaders from the millennial generation and beyond.

 

Is management candid with shareholders?

Management candor is a key tenet, and the easiest way for management to be candid in today’s environment is to post informative statements on the company website, including links to earnings calls or transcripts of those calls.  Dover’s investor information page is very easy to navigate and includes all of the information one would expect to see.

General Thoughts and Outlook

My position in Dover right now has been limited in that I have not added to the position for some time.  I’ve held Dover for a few years now, and during my last valuation it was found to be fairly valued.  Since the price has come down approximately 20% in the last few months, it now would appear to be undervalued again.  As a result, it may be time to add to the position in general.  I do like the company’s long-term approach to its management and especially like the consistent dividend growth.  At the very least, I will be continuing to hold Dover at this time.

Disclaimer:

The author held a long position in Dover 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.  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 also take a moment to read our full disclaimer.

Dover Corporation Analysis – May 2015 Quarterly Update $DOV

Dover-co-logoDover Corporation (DOV) may intrigue many investors simply because it has trailed the market over the last year, making it somewhat attractive based on its price alone. That said, Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to determine a potential investment’s merits. Here’s an updated look at how Dover fares in the ModernGraham valuation model.

This model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

DOV Chart

DOV data by YCharts

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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 5/7

  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 – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – Earnings per share has increased by at least one-third over the last 10 years, using three-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) ratio – PEmg is less than 20 – PASS
  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 – 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 – PASS
  5. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $76.57
MG Value $76.51
MG Opinion Fairly Valued
Value Based on 3% Growth $66.23
Value Based on 0% Growth $38.82
Market Implied Growth Rate 4.13%
NCAV -$14.67
PEmg 16.76
Current Ratio 1.50
PB Ratio 3.49

Balance Sheet – March 2015

Current Assets $2,672,000,000
Current Liabilities $1,782,000,000
Total Debt $2,218,000,000
Total Assets $8,647,000,000
Intangible Assets $4,773,000,000
Total Liabilities $5,068,000,000
Outstanding Shares 163,300,000

Earnings Per Share

2015 (estimate) $3.85
2014 $4.59
2013 $5.78
2012 $4.41
2011 $4.74
2010 $3.70
2009 $1.91
2008 $3.12
2007 $3.26
2006 $2.74
2005 $2.50

Earnings Per Share – ModernGraham

2015 (estimate) $4.57
2014 $4.83
2013 $4.67
2012 $3.94
2011 $3.58
2010 $2.98

Dividend History

DOV Dividend Chart

DOV Dividend data by YCharts

Conclusion

Dover is not suitable for either the Enterprising Investor or the Defensive Investor. The Defensive Investor is concerned by the low current ratio and the high PB ratio, while the Enterprising Investor is concerned with the level of debt relative to the current assets. Therefore, all value investors should explore other opportunities at this time, or proceed with a speculative understanding.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $3.58 in 2011 to an estimated $4.57 for 2015. This level of demonstrated growth is in line with the market’s implied estimate for earnings growth of 4.13% over the next 7-10 years.

The company’s recent earnings history shows an average annual growth in EPSmg of around 5.5%. The ModernGraham valuation model reduces such a rate to a more conservative figure, assuming some slowdown will occur, but still returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating Dover is fairly valued at the present time.

Disclaimer:  The author held a long position in Dover Corporation (DOV) 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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Dover Corporation Quarterly Valuation – February 2015 $DOV

Dover-co-logo

Dover Corporation passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The only issue the Defensive Investor has with the company is the low current ratio, while the Enterprising Investor is only initially concerned with the level of debt relative to the current assets. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $2.98 in 2010 to $4.83 for 2014. This is a very strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of only 3.35% over the next 7-10 years. In fact, the historical growth is around 12.39% per year, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.

Be sure to check out previous ModernGraham valuations of Dover Corporation (DOV) for greater perspective!

Read the full valuation on Seeking Alpha!

DOV Chart

DOV data by YCharts

Disclaimer:  The author held a long position in Dover Corporation (DOV) 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.

Dover Corporation Quarterly Valuation – November 2014 $DOV

Dover-co-logoDover Corporation passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The Defensive Investor’s only concern is the high PB ratio, while the Enterprising Investor is only worried about the level of debt relative to the net current assets. As a result, value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $2.98 in 2010 to an estimated $4.88 for 2014. This is a fairly strong level of demonstrated growth which is well above the market’s implied estimate for earnings growth of 4.2% over the next 7-10 years. In fact, the historical growth is around 12.7% per year, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, and therefore returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.

Be sure to check out previous ModernGraham valuations of Dover Corporation for better perspective.

Read the full valuation on Seeking Alpha!

DOV Chart

DOV data by YCharts

Disclaimer:  The author held a long position in Dover Corporation (DOV) 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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Dover Corporation Quarterly Valuation – August 2014 $DOV

Dover-co-logoBenjamin 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 Undervalued Companies for the Enterprising Investor.  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 Dover Corporation (DOV) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Dover Corporation (Dover), manufactures a range of specialized products and components and also offers related services and consumables. The Company operates in four segments: Communication Technologies, Energy, Engineered Systems, and Printing & Identification. In July 2014, the Company announced that it has completed the sale of DEK Printing Machines unit (DEK). In July 2014, Dover acquired The WellMark Company.
DOV Chart

DOV data by YCharts

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

  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 – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  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 – PASS
  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 = 4/5

  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 – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $88.88
MG Value $119.04
MG Opinion Undervalued
Value Based on 3% Growth $70.10
Value Based on 0% Growth $41.09
Market Implied Growth Rate 4.94%
NCAV -$11.98
PEmg 18.38
Current Ratio 2.36
PB Ratio 3.80

Balance Sheet – 6/30/2014

Current Assets $2,903,500,000
Current Liabilities $1,231,700,000
Total Debt $2,596,300,000
Total Assets $8,795,100,000
Intangible Assets $4,630,200,000
Total Liabilities $4,898,400,000
Outstanding Shares 166,550,000

Earnings Per Share

2014 (estimate) $4.79
2013 $5.57
2012 $4.53
2011 $4.48
2010 $3.74
2009 $1.99
2008 $3.67
2007 $3.30
2006 $2.90
2005 $2.12
2004 $1.77

Earnings Per Share – ModernGraham

2014 (estimate) $4.83
2013 $4.59
2012 $3.96
2011 $3.60
2010 $3.14
2009 $2.83

Dividend History

DOV Dividend Chart

DOV Dividend data by YCharts

Conclusion:

Dover Corporation qualifies for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor’s only concern is the high PB ratio, and the Enterprising Investor’s only issue is with the high level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.14 in 2010 to an estimated $4.83 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.94% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out the previous ModernGraham valuations of Dover Corporation (DOV) for more perspective!

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 Dover Corporation (DOV)?  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 held a long position in Dover Corporation (DOV) 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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Dover Corp May 2014 Quarterly Valuation $DOV

Dover-co-logoBenjamin 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 Comapnies for Defensive 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 Dover Corp (DOV) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Dover Corporation (Dover) manufactures a range of specialized products and components and also offers related services and consumables. The Company operates in four segments: Communication Technologies, Energy, Engineered Systems, and Printing & Identification. In July 2011, it acquired Sound Solutions from NXP Semiconductors N.V. In November 2011, the Company realigned into four business segments, which includes Communication Technologies, Energy, Engineered Systems and Printing & Identification. In December 2011, the Company sold Heil Trailer International. In March 2012, the Company acquired Maag Group (Maag). In November 2013, Dover Corp announced that it had completed the acquisition of Finder Pompe S.p.A. In December 2013, LTX-Credence Corp completed its acquisition of the Multitest and Everett Charles Technologies (ECT) businesses of Dover Corporation.

DOV Chart

DOV data by YCharts

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

  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 – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  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 – PASS
  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 = 4/5

  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 – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $87.01
MG Value $118.10
MG Opinion Undervalued
Value Based on 3% Growth $69.91
Value Based on 0% Growth $40.98
Market Implied Growth Rate 4.77%
NCAV -$13.30
PEmg 18.05
Current Ratio 2.19
PB Ratio 3.86

Balance Sheet – 3/31/2014

Current Assets $2,701,700,000
Current Liabilities $1,231,400,000
Total Debt $2,602,300,000
Total Assets $8,664,400,000
Intangible Assets $4,641,900,000
Total Liabilities $4,916,300,000
Outstanding Shares 166,490,000

Earnings Per Share

2014 (estimate) $4.75
2013 $5.57
2012 $4.53
2011 $4.48
2010 $3.74
2009 $1.99
2008 $3.67
2007 $3.30
2006 $2.90
2005 $2.12
2004 $1.77

Earnings Per Share – ModernGraham

2014 (estimate) $4.82
2013 $4.59
2012 $3.96
2011 $3.60
2010 $3.14
2009 $2.83

Dividend History

DOV Dividend Chart

DOV Dividend data by YCharts

Conclusion:

Dover Corp qualifies for both Defensive Investors and Enterprising Investors.  The Defensive Investor’s only concern is the high PB ratio, while the Enterprising Investor’s only issue is with the level of debt relative to net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors by exploring the ModernGraham Valuation Index.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $3.14 in 2010 to an estimated $4.82 for 2014.  This solid level of demonstrated growth outpaces the market’s implied estimate of 4.77% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is 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 Dover Corp (DOV)?  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.

Be sure to check out the previous ModernGraham valuations of Dover Corp as well as dig through the Valuation Index to find other companies!

Disclaimer:  The author held a long position in Dover Corp (DOV) 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.

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