Broadridge Financial Solutions Inc Valuation – April 2019 #BR

Company Profile (excerpt from Reuters): Broadridge Financial Solutions, Inc. (Broadridge), incorporated on December 6, 2006, is a provider of investor communications and technology-driven solutions to banks, broker-dealers, mutual funds and corporate issuers. The Company’s segments include Investor Communication Solutions, and Global Technology and Operations. The Company’s services include investor and customer communications, securities processing, and data and analytics solutions. The Company delivers a range of solutions that helps its clients serve their retail and institutional customers across the entire investment lifecycle, including pre-trade, trade, and post-trade processing functionality. The Company serves a client base across four client groups: capital markets, asset management, wealth management and corporations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BR – April 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 $12,145,347,942 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.02 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 185.25% Pass
6. Moderate PEmg Ratio PEmg < 20 31.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.13 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 1.02 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 78.56 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.37
MG Growth Estimate 11.73%
MG Value $107.83
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $48.93
MG Value based on 0% Growth $28.68
Market Implied Growth Rate 11.29%
Current Price $104.87
% of Intrinsic Value 97.25%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.89 in 2015 to an estimated $3.37 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 11.29% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Broadridge Financial Solutions, Inc. revealed the company was trading above its Graham Number of $29.75. The company pays a dividend of $1.46 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 31.08, which was above the industry average of 21.66. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.65.

Broadridge Financial Solutions, 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) -$10.65
Graham Number $29.75
PEmg 31.08
Current Ratio 1.02
PB Ratio 11.13
Current Dividend $1.46
Dividend Yield 1.39%
Number of Consecutive Years of Dividend Growth 12

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $966,400,000
Total Current Liabilities $951,200,000
Long-Term Debt $1,194,100,000
Total Assets $3,357,600,000
Intangible Assets $1,699,700,000
Total Liabilities $2,235,000,000
Shares Outstanding (Diluted Average) 119,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.18
Jun2018 $3.56
Jun2017 $2.70
Jun2016 $2.53
Jun2015 $2.32
Jun2014 $2.12
Jun2013 $1.69
Jun2012 $0.97
Jun2011 $1.32
Jun2010 $1.37
Jun2009 $1.58
Jun2008 $1.36
Jun2007 $1.42
Jun2006 $1.20

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.37
Jun2018 $2.86
Jun2017 $2.43
Jun2016 $2.18
Jun2015 $1.89
Jun2014 $1.62
Jun2013 $1.37
Jun2012 $1.25
Jun2011 $1.40
Jun2010 $1.42
Jun2009 $1.33
Jun2008 $1.07
Jun2007 $0.79
Jun2006 $0.40

Recommended Reading:

Other ModernGraham posts about the company

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

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Disclaimer:

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

Darden Restaurants Inc Valuation – March 2019 #DRI

Company Profile (excerpt from Reuters): Darden Restaurants, Inc., incorporated on March 30, 1995, is a full-service restaurant company. The Company owned and operated 1,536 restaurants through its subsidiaries in the United States and Canada, as of May 29, 2016. The Company’s segments include Olive Garden, LongHorn Steakhouse, Fine Dining (which includes The Capital Grille, and Eddie V’s Prime Seafood and Wildfish Seafood Grille (Eddie V’s)) and Other Business (which includes Yard House, Seasons 52, Bahama Breeze, consumer-packaged goods and franchise revenues). As of May 29, 2016, the Company also had 50 restaurants operated by independent third parties pursuant to area development and franchise agreements.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DRI – 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 $13,739,140,896 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.41 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 44.08% Pass
6. Moderate PEmg Ratio PEmg < 20 23.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.22 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.41 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.12 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.64
MG Growth Estimate 3.67%
MG Value $73.44
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $67.22
MG Value based on 0% Growth $39.41
Market Implied Growth Rate 7.75%
Current Price $111.24
% of Intrinsic Value 151.48%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.72 in 2015 to an estimated $4.64 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.75% 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 Darden Restaurants, Inc. revealed the company was trading above its Graham Number of $47.27. The company pays a dividend of $2.52 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.99, which was below the industry average of 33.53, 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 $-21.76.

Darden Restaurants, 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) -$21.76
Graham Number $47.27
PEmg 23.99
Current Ratio 0.41
PB Ratio 6.22
Current Dividend $2.52
Dividend Yield 2.27%
Number of Consecutive Years of Dividend Growth 2

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 11/1/2018
Total Current Assets $561,200,000
Total Current Liabilities $1,385,300,000
Long-Term Debt $927,100,000
Total Assets $5,549,200,000
Intangible Assets $2,134,500,000
Total Liabilities $3,298,900,000
Shares Outstanding (Diluted Average) 125,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.59
May2018 $4.73
May2017 $3.80
May2016 $2.90
May2015 $5.47
May2014 $2.15
May2013 $3.13
May2012 $3.57
May2011 $3.39
May2010 $2.84
May2009 $2.65
May2008 $2.60
May2007 $1.35
May2006 $2.16
May2005 $1.78
May2004 $1.34
May2003 $1.27
May2002 $1.30
May2001 $1.06
May2000 $0.89
May1999 $0.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.64
May2018 $4.04
May2017 $3.63
May2016 $3.51
May2015 $3.72
May2014 $2.91
May2013 $3.23
May2012 $3.19
May2011 $2.85
May2010 $2.50
May2009 $2.25
May2008 $1.99
May2007 $1.65
May2006 $1.72
May2005 $1.45
May2004 $1.25
May2003 $1.15

Recommended Reading:

Other ModernGraham posts about the company

Darden Restaurants Inc Valuation – May 2018 $DRI
Darden Restaurants Inc Valuation – February 2017 $DRI
Darden Restaurants Inc. Analysis – September 2015 Update $DRI
5 Speculative and Overvalued Companies to Avoid – October 2014
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Disclaimer:

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

Alexandria Real Estate Equities Inc Valuation – November 2018 $ARE

Company Profile (excerpt from Reuters): Alexandria Real Estate Equities, Inc., incorporated on October 27, 1994, is a real estate investment (REIT). The Company is engaged in the business of providing space for lease to the life science and technology industries. The Company focuses on collaborative life science and technology campuses. It develops urban cluster campuses and ecosystems. As of December 31, 2016, the Company had 199 properties in North America. As of December 31, 2016, its asset base in North America consisted of 25.2 million square feet, including 19.9 million rentable square feet/foot (RSF) of operating properties, and development and redevelopment of under construction or pre-construction, as well as 5.3 million square feet of future ground-up development projects. As of December 31, 2016, the Company’s operating properties and development projects included nine properties that were held by consolidated real estate joint ventures and one property that was held by an unconsolidated real estate joint venture.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ARE – November 2018

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,231,149,935 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.48 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -71.23% Fail
6. Moderate PEmg Ratio PEmg < 20 113.72 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.75 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.83 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 $1.08
MG Growth Estimate -3.06%
MG Value $2.58
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $15.68
MG Value based on 0% Growth $9.19
Market Implied Growth Rate 52.61%
Current Price $122.97
% of Intrinsic Value 4762.03%

Alexandria Real Estate Equities 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 $1.36 in 2014 to an estimated $1.08 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 52.61% 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 Alexandria Real Estate Equities Inc revealed the company was trading above its Graham Number of $55.44. The company pays a dividend of $3.45 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 113.72, which was above the industry average of 80.08. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-59.02.

Alexandria Real Estate Equities 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) -$59.02
Graham Number $55.44
PEmg 113.72
Current Ratio 0.48
PB Ratio 1.75
Current Dividend $3.45
Dividend Yield 2.81%
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 $483,216,000
Total Current Liabilities $1,008,178,000
Long-Term Debt $5,684,004,000
Total Assets $14,105,566,000
Intangible Assets $0
Total Liabilities $6,702,953,000
Shares Outstanding (Diluted Average) 105,385,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.32
Dec2017 $1.58
Dec2016 -$1.99
Dec2015 $1.63
Dec2014 $1.01
Dec2013 $1.60
Dec2012 $1.09
Dec2011 $1.73
Dec2010 $2.19
Dec2009 $2.72
Dec2008 $2.86
Dec2007 $2.63
Dec2006 $2.25
Dec2005 $2.22
Dec2004 $2.33
Dec2003 $3.10
Dec2002 $1.76
Dec2001 $1.64
Dec2000 $1.77
Dec1999 $1.46
Dec1998 $1.58

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.08
Dec2017 $0.56
Dec2016 $0.26
Dec2015 $1.39
Dec2014 $1.36
Dec2013 $1.64
Dec2012 $1.82
Dec2011 $2.26
Dec2010 $2.53
Dec2009 $2.64
Dec2008 $2.56
Dec2007 $2.44
Dec2006 $2.34
Dec2005 $2.33
Dec2004 $2.29
Dec2003 $2.16
Dec2002 $1.68

Recommended Reading:

Other ModernGraham posts about the company

Alexandria Real Estate Equities Inc Valuation – February 2018 $ARE
Alexandria Real Estate Equities Inc. Analysis – Initial Coverage $ARE

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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.

Diamond Offshore Drilling Inc Valuation – June 2018 $DO

Company Profile (excerpt from Reuters): Diamond Offshore Drilling, Inc., incorporated on April 12, 1989, provides contract drilling services to the energy industry. As of December 31, 2016, the Company had a fleet of 24 offshore drilling rigs. As of December 31, 2016, its fleet consisted of four drillships, 19 semisubmersible rigs and one jack-up rig. Its fleet enables it to offer a range of services, primarily in the floater market, including ultra-deepwater, deepwater and mid-water. The principal markets for its offshore contract drilling services are the Gulf of Mexico, including the United States and Mexico; South America, principally offshore Brazil, and Trinidad and Tobago; Australia and Southeast Asia, including Malaysia, Indonesia and Vietnam; Europe, principally offshore the United Kingdom and Norway; East and West Africa; the Mediterranean, and the Middle East. The Company provides offshore drilling services to a customer base that includes independent oil and gas companies, and government-owned oil companies.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DO – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,938,364,489 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.51 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 -115.58% Fail
6. Moderate PEmg Ratio PEmg < 20 -21.84 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.76 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.51 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.88 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 -$0.96
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$13.85
MG Value based on 0% Growth -$8.12
Market Implied Growth Rate -15.17%
Current Price $20.86
% of Intrinsic Value N/A

Diamond Offshore Drilling 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 $4.41 in 2014 to an estimated $-0.96 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 Diamond Offshore Drilling 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 -21.84, which was below the industry average of 87.76, 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 $-11.15.

Diamond Offshore Drilling 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) -$11.15
Graham Number $0.00
PEmg -21.84
Current Ratio 4.51
PB Ratio 0.76
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $879,969,000
Total Current Liabilities $195,026,000
Long-Term Debt $1,972,638,000
Total Assets $6,193,083,000
Intangible Assets $0
Total Liabilities $2,413,451,000
Shares Outstanding (Diluted Average) 137,495,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.10
Dec2017 $0.13
Dec2016 -$2.72
Dec2015 -$2.00
Dec2014 $2.81
Dec2013 $3.95
Dec2012 $5.18
Dec2011 $6.92
Dec2010 $6.87
Dec2009 $9.89
Dec2008 $9.42
Dec2007 $6.12
Dec2006 $5.12
Dec2005 $1.91
Dec2004 -$0.06
Dec2003 -$0.37
Dec2002 $0.47
Dec2001 $1.26
Dec2000 $0.53
Dec1999 $1.11
Dec1998 $2.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.96
Dec2017 -$0.44
Dec2016 -$0.01
Dec2015 $2.02
Dec2014 $4.41
Dec2013 $5.66
Dec2012 $6.89
Dec2011 $7.78
Dec2010 $7.97
Dec2009 $7.84
Dec2008 $6.05
Dec2007 $3.75
Dec2006 $2.19
Dec2005 $0.69
Dec2004 $0.18
Dec2003 $0.40
Dec2002 $0.92

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – July 2016
Diamond Offshore Drilling Inc Valuation – July 2016 $DO
28 Companies in the Spotlight This Week – 2/28/15
Diamond Offshore Drilling Inc. Annual Valuation – 2015 $DO
22 Companies in the Spotlight This Week – 11/29/14

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Disclaimer:

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

Darden Restaurants Inc Valuation – May 2018 $DRI

Company Profile (excerpt from Reuters): Darden Restaurants, Inc., incorporated on March 30, 1995, is a full-service restaurant company. The Company owned and operated 1,536 restaurants through its subsidiaries in the United States and Canada, as of May 29, 2016. The Company’s segments include Olive Garden, LongHorn Steakhouse, Fine Dining (which includes The Capital Grille, and Eddie V’s Prime Seafood and Wildfish Seafood Grille (Eddie V’s)) and Other Business (which includes Yard House, Seasons 52, Bahama Breeze, consumer-packaged goods and franchise revenues). As of May 29, 2016, the Company also had 50 restaurants operated by independent third parties pursuant to area development and franchise agreements.

DRI Chart

DRI data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DRI – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,921,395,378 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.39 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 27.48% Fail
6. Moderate PEmg Ratio PEmg < 20 21.78 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.16 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.39 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.03 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.01
MG Growth Estimate 5.67%
MG Value $79.50
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $58.09
MG Value based on 0% Growth $34.05
Market Implied Growth Rate 6.64%
Current Price $87.25
% of Intrinsic Value 109.74%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.91 in 2014 to an estimated $4.01 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.64% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Darden Restaurants, Inc. revealed the company was trading above its Graham Number of $41.74. The company pays a dividend of $2.24 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.78, which was below the industry average of 29.22, 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 $-21.96.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$21.96
Graham Number $41.74
PEmg 21.78
Current Ratio 0.39
PB Ratio 5.16
Current Dividend $2.24
Dividend Yield 2.57%
Number of Consecutive Years of Dividend Growth 1

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 2/1/2018
Total Current Assets $569,600,000
Total Current Liabilities $1,467,500,000
Long-Term Debt $926,400,000
Total Assets $5,454,700,000
Intangible Assets $2,132,200,000
Total Liabilities $3,329,800,000
Shares Outstanding (Diluted Average) 125,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.62
May2017 $3.80
May2016 $2.90
May2015 $5.47
May2014 $2.15
May2013 $3.13
May2012 $3.57
May2011 $3.39
May2010 $2.84
May2009 $2.65
May2008 $2.60
May2007 $1.35
May2006 $2.16
May2005 $1.78
May2004 $1.34
May2003 $1.27
May2002 $1.30
May2001 $1.06
May2000 $0.89
May1999 $0.66
May1998 $0.45

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.01
May2017 $3.63
May2016 $3.51
May2015 $3.72
May2014 $2.91
May2013 $3.23
May2012 $3.19
May2011 $2.85
May2010 $2.50
May2009 $2.25
May2008 $1.99
May2007 $1.65
May2006 $1.72
May2005 $1.45
May2004 $1.25
May2003 $1.15
May2002 $1.01

Recommended Reading:

Other ModernGraham posts about the company

Darden Restaurants Inc Valuation – February 2017 $DRI
Darden Restaurants Inc. Analysis – September 2015 Update $DRI
5 Speculative and Overvalued Companies to Avoid – October 2014
17 Companies in the Spotlight This Week – 9/27/2014
Darden Restaurants Inc. Annual Valuation – 2014 $DRI

Other ModernGraham posts about related companies

Yum Brands Inc Valuation – April 2018 $YUM
Starbucks Corporation Valuation – March 2018 $SBUX
McDonald’s Corporation Valuation – February 2018 $MCD
El Pollo LoCo Holdings Inc Valuation – Initial Coverage $LOCO
Chipotle Mexican Grill Inc Valuation – March 2017 $CMG
Sonic Corporation Valuation – Initial Coverage $SONC
Darden Restaurants Inc Valuation – February 2017 $DRI
Jack in the Box Inc Valuation – Initial Coverage $JACK
Chuy’s Holdings Inc Valuation – Initial Coverage $CHUY
Yum Brands Inc Valuation – December 2016 $YUM

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.

Alexandria Real Estate Equities Inc Valuation – February 2018 $ARE

Company Profile (obtained from Marketwatch): Alexandria Real Estate Equities, Inc. operates as a real estate investment trust, which engages in the development through ownership, operation, management, selective acquisition, development, and redevelopment of properties containing life science laboratory space. It also provides real estate, technical infrastructure, and services to the diverse life science industry. The company was founded by Joel S. Marcus and Jerry M. Sudarsky in June 1994 and is headquartered in Pasadena, CA.

ARE Chart

ARE data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ARE – February 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,233,702,988 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -76.36% Fail
5. Moderate PEmg Ratio PEmg < 20 124.83 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.95 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.97
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $14.04
MG Value based on 0% Growth $8.23
Market Implied Growth Rate 58.17%
Current Price $120.84
% of Intrinsic Value N/A

Alexandria Real Estate Equities 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 high PEmg ratio. The Enterprising Investor has concerns regarding 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 $1.36 in 2014 to an estimated $0.97 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 58.17% 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.

At the time of valuation, further research into Alexandria Real Estate Equities Inc revealed the company was trading above its Graham Number of $52.1. The company pays a dividend of $3.45 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 124.83, which was above the industry average of 51.63.

Alexandria Real Estate Equities Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Graham Number $52.10
PEmg 124.83
PB Ratio 1.95
Dividend Yield 2.86%
TTM Dividend $3.45
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 12/1/2017
Long-Term Debt & Capital Lease Obligation $1,319,003,000
Total Assets $12,103,953,000
Intangible Assets $0
Total Liabilities $6,154,287,000
Shares Outstanding (Diluted Average) 95,954,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.98
Dec2017 $1.58
Dec2016 -$1.99
Dec2015 $1.63
Dec2014 $1.01
Dec2013 $1.60
Dec2012 $1.09
Dec2011 $1.73
Dec2010 $2.19
Dec2009 $2.72
Dec2008 $2.86
Dec2007 $2.63
Dec2006 $2.25
Dec2005 $2.22
Dec2004 $2.33
Dec2003 $3.10
Dec2002 $1.76
Dec2001 $1.64
Dec2000 $1.77
Dec1999 $1.46
Dec1998 $1.58

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.97
Dec2017 $0.56
Dec2016 $0.26
Dec2015 $1.39
Dec2014 $1.36
Dec2013 $1.64
Dec2012 $1.82
Dec2011 $2.26
Dec2010 $2.53
Dec2009 $2.64
Dec2008 $2.56
Dec2007 $2.44
Dec2006 $2.34
Dec2005 $2.33
Dec2004 $2.29
Dec2003 $2.16
Dec2002 $1.68

Recommended Reading:

Other ModernGraham posts about the company

Alexandria Real Estate Equities Inc. Analysis – Initial Coverage $ARE

Other ModernGraham posts about related companies

Education Realty Trust Inc Valuation – Initial Coverage $EDR
American Campus Communities Inc Valuation – September 2017 $ACC
First Industrial Realty Trust Inc Valuation – Initial Coverage $FR
Saul Centers Inc Valuation – Initial Coverage $BFS
Douglas Emmett Inc Valuation – Initial Coverage $DEI
Lexington Realty Trust Valuation – Initial Coverage $LXP
LTC Properties Inc Valuation – Initial Coverage $LTC
REIT Industry Review – April 2017
Starwood Property Trust Inc Valuation – April 2017 $STWD
Dream Office REIT – Initial Coverage $TSE:D.UN

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.

Darden Restaurants Inc Valuation – February 2017 $DRI

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Darden Restaurants Inc (DRI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Darden Restaurants, Inc. is a full-service restaurant company. The Company owned and operated 1,536 restaurants through its subsidiaries in the United States and Canada, as of May 29, 2016. The Company’s segments include Olive Garden, LongHorn Steakhouse, Fine Dining (which includes The Capital Grille, and Eddie V’s Prime Seafood and Wildfish Seafood Grille (Eddie V’s)) and Other Business (which includes Yard House, Seasons 52, Bahama Breeze, consumer-packaged goods and franchise revenues). As of May 29, 2016, the Company also had 50 restaurants operated by independent third parties pursuant to area development and franchise agreements. Olive Garden’s menu includes a range of authentic Italian foods featuring fresh ingredients and a selection of imported Italian wines. LongHorn Steakhouse restaurants feature a range of menu items, including fresh steaks and chicken, as well as salmon, shrimp, ribs, pork chops, burgers and prime rib.

DRI Chart

DRI data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of DRI – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,843,423,843 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.59 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 50.19% Pass
6. Moderate PEmg Ratio PEmg < 20 19.81 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.84 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.59 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -0.94 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

EPSmg $3.62
MG Growth Estimate 1.83%
MG Value $44.06
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $52.53
MG Value based on 0% Growth $30.79
Market Implied Growth Rate 5.66%
Current Price $71.77
% of Intrinsic Value 162.91%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.23 in 2013 to an estimated $3.62 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.66% 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 Darden Restaurants, Inc. revealed the company was trading above its Graham Number of $35.63. The company pays a dividend of $2.12 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.81, which was below the industry average of 31.3, 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 $-15.41.

Darden Restaurants, 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) -$15.41
Graham Number $35.63
PEmg 19.81
Current Ratio 0.59
PB Ratio 4.84
Current Dividend $2.12
Dividend Yield 2.95%
Number of Consecutive Years of Dividend Growth 1

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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 11/1/2016
Total Current Assets $683,400,000
Total Current Liabilities $1,151,300,000
Long-Term Debt $440,500,000
Total Assets $4,461,900,000
Intangible Assets $1,447,500,000
Total Liabilities $2,608,500,000
Shares Outstanding (Diluted Average) 124,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.78
May2016 $2.90
May2015 $5.47
May2014 $2.15
May2013 $3.13
May2012 $3.57
May2011 $3.39
May2010 $2.84
May2009 $2.65
May2008 $2.60
May2007 $1.35
May2006 $2.16
May2005 $1.78
May2004 $1.34
May2003 $1.27
May2002 $1.30
May2001 $1.06
May2000 $0.89
May1999 $0.66
May1998 $0.45
May1997 -$0.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.62
May2016 $3.51
May2015 $3.72
May2014 $2.91
May2013 $3.23
May2012 $3.19
May2011 $2.85
May2010 $2.50
May2009 $2.25
May2008 $1.99
May2007 $1.65
May2006 $1.72
May2005 $1.45
May2004 $1.25
May2003 $1.15
May2002 $1.01
May2001 $0.76

Recommended Reading:

Other ModernGraham posts about the company

Darden Restaurants Inc. Analysis – September 2015 Update $DRI
5 Speculative and Overvalued Companies to Avoid – October 2014
17 Companies in the Spotlight This Week – 9/27/2014
Darden Restaurants Inc. Annual Valuation – 2014 $DRI

Other ModernGraham posts about related companies

Jack in the Box Inc Valuation – Initial Coverage $JACK
Chuy’s Holdings Inc Valuation – Initial Coverage $CHUY
Yum Brands Inc Valuation – December 2016 $YUM
McDonald’s Corp Valuation – November 2016 $MCD
Chipotle Mexican Grill Inc Valuation – August 2016 $CMG
Yum! Brands Inc Valuation – August 2016 $YUM
Starbucks Corp Valuation – June 2016 $SBUX
McDonald’s Corporation Valuation – May 2016 $MCD
Chipotle Mexican Grill Inc Stock Valuation – February 2016 $CMG
McDonald’s Corporation – November 2015 Update $MCD

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.

Diamond Offshore Drilling Inc Valuation – July 2016 $DO

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 Diamond Offshore Drilling Inc (DO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Diamond Offshore Drilling, Inc. is engaged in offshore drilling and providing contract drilling services to the energy industry. The Company has a fleet of approximately 30 offshore drilling rigs, such as semisubmersibles, jack-ups and dynamically positioned (DP) drillships. Its fleet offers a range of services around the world in the floater market (ultra-deepwater, deepwater and mid-water). Its Jack-up rigs are mobile, self-elevating drilling platforms equipped with legs that are lowered to the ocean floor. Its jack-ups are used for drilling in water depths from 20 feet to 350 feet. All of its jack-up rigs are equipped with a cantilever system that enables the rig to extend its drilling package over the aft end of the rig. Its drillships and semisubmersible rigs include Ocean Greatwhite, Ocean Valor, Ocean Courage, Ocean BlackHornet, Ocean BlackRhino and others. It provides offshore drilling services to oils and gas companies and government-owned oil companies.

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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 DO – 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 $3,703,279,779 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.61 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -95.24% Fail
6. Moderate PEmg Ratio PEmg < 20 24.41 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.83 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 1.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.46 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

DO value chart July 2016

EPSmg $1.03
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $14.99
MG Value based on 0% Growth $8.79
Market Implied Growth Rate 7.96%
Current Price $25.24
% of Intrinsic Value N/A

Diamond Offshore Drilling 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 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 $6.89 in 2012 to an estimated $1.03 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.96% 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.

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

Stage 3: Information for Further Research

DO charts July 2016

Net Current Asset Value (NCAV) -$15.56
Graham Number $16.59
PEmg 24.41
Current Ratio 1.61
PB Ratio 0.83
Current Dividend $0.50
Dividend Yield 1.98%
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 $615,034,000
Total Current Liabilities $380,987,000
Long-Term Debt $1,980,049,000
Total Assets $6,944,599,000
Intangible Assets $0
Total Liabilities $2,749,819,000
Shares Outstanding (Diluted Average) 137,206,000

Earnings Per Share History

Next Fiscal Year Estimate $0.40
Dec2015 -$2.00
Dec2014 $2.81
Dec2013 $3.95
Dec2012 $5.18
Dec2011 $6.92
Dec2010 $6.87
Dec2009 $9.89
Dec2008 $9.43
Dec2007 $6.12
Dec2006 $5.12
Dec2005 $1.91
Dec2004 -$0.06
Dec2003 -$0.37
Dec2002 $0.47
Dec2001 $1.26
Dec2000 $0.53
Dec1999 $1.11
Dec1998 $2.66
Dec1997 $1.93
Dec1996 $1.18

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.03
Dec2015 $2.02
Dec2014 $4.41
Dec2013 $5.66
Dec2012 $6.89
Dec2011 $7.78
Dec2010 $7.97
Dec2009 $7.85
Dec2008 $6.05
Dec2007 $3.75
Dec2006 $2.19
Dec2005 $0.69
Dec2004 $0.18
Dec2003 $0.40
Dec2002 $0.92
Dec2001 $1.27
Dec2000 $1.34

Recommended Reading:

Other ModernGraham posts about the company

28 Companies in the Spotlight This Week – 2/28/15
Diamond Offshore Drilling Inc. Annual Valuation – 2015 $DO
22 Companies in the Spotlight This Week – 11/29/14
Diamond Offshore Drilling Inc. Quarterly Valuation – November 2014 $DO
18 Companies to Research This Week – 8/30/2014

Other ModernGraham posts about related companies

Nabors Industries Ltd Valuation – July 2016 $NBR
Transocean Ltd Valuation – July 2016 $RIG
ONEOK Inc Valuation – July 2016 $OKE
Marathon Oil Corp Valuation – July 2016 $MRO
Hess Corp Valuation – July 2016 $HES
EQT Corporation Valuation – July 2016 $EQT
QEP Resources Inc Valuation – July 2016 $QEP
Suburban Propane Partners Valuation – June 2016 $SPH
Spectra Energy Corp Valuation – June 2016 $SE
Helmerich & Payne Inc Valuation – June 2016 $HP

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.

Darden Restaurants Inc. Analysis – September 2015 Update $DRI

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 Darden Restaurants Inc. (DRI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Darden Restaurants, Inc. is a full service restaurant company. The Company owns and operates more than 1,500 restaurants. The Company’s restaurant brands include Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V’s Prime Seafood, Wildfish Seafood Grill and Yard House. Through subsidiaries, the Company owns and operates all of its restaurants in the United States and Canada, except for three restaurants located in Florida and three restaurants in California, which are owned jointly by the Company and third parties, and managed by the Company, seven franchised restaurants in Puerto Rico and one Atlanta, Georgia airport location.

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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]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of DRI – September 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 $9,064,004,130 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.05 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 62.90% Pass
6. Moderate PEmg Ratio PEmg < 20 19.86 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.70 Fail
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 1.05 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 23.19 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

DRI value Chart September 2015

EPSmg $3.56
MG Growth Estimate 1.77%
MG Value $42.85
Opinion Overvalued
MG Value based on 3% Growth $51.63
MG Value based on 0% Growth $30.27
Market Implied Growth Rate 5.68%
Current Price $70.72
% of Intrinsic Value 165.03%

Darden Restaurants Inc. does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, and the high PB ratio.  The Enterprising Investor is concerned with the level of debt relative to the current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.19 in 2012 to an estimated $3.56 for 2016.  This level of demonstrated earnings growth does not support the market’s implied estimate of 5.68% 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.

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 Darden Restaurants Inc. (DRI)?  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

DRI Charts September 2015

EPSmg $3.56
MG Growth Estimate 1.77%
MG Value $42.85
Opinion Overvalued
MG Value based on 3% Growth $51.63
MG Value based on 0% Growth $30.27
Market Implied Growth Rate 5.68%
Current Price $70.72
% of Intrinsic Value 165.03%

 

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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

Total Current Assets $1,204,600,000
Total Current Liabilities $1,142,600,000
Long-Term Debt $1,437,600,000
Total Assets $6,026,500,000
Intangible Assets $1,447,000,000
Total Liabilities $3,602,400,000
Shares Outstanding (Diluted Average) 126,670,000

Earnings Per Share History

Next Fiscal Year Estimate $3.05
May15 $5.47
May14 $2.15
May13 $3.13
May12 $3.57
May11 $3.39
May10 $2.84
May09 $2.65
May08 $2.55
May07 $1.35
May06 $2.16
May05 $1.78
May04 $1.36
May03 $1.31
May02 $1.30
May01 $1.06
May00 $0.89
May99 $0.66
May98 $0.45
May97 -$0.39
May96 $0.31

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.56
May15 $3.72
May14 $2.91
May13 $3.23
May12 $3.19
May11 $2.85
May10 $2.49
May09 $2.24
May08 $1.97
May07 $1.65
May06 $1.73
May05 $1.46
May04 $1.26
May03 $1.16
May02 $1.01
May01 $0.76
May00 $0.53

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – October 2014
17 Companies in the Spotlight This Week – 9/27/2014
Darden Restaurants Inc. Annual Valuation – 2014 $DRI

Other ModernGraham posts about related companies

Chipotle Mexican Grill Inc. Analysis – August 2015 Update $CMG
Chipolte Mexican Grill Inc. Quarterly Valuation – May 2015 $CMG
Yum! Brands Inc. Annual Valuation – 2015 $YUM
Starbucks Corporation Annual Valuation – 2015 $SBUX
Chipotle Mexican Grill Inc. Quarterly Valuation – February 2015 $CMG
McDonald’s Corporation Annual Valuation – 2014 $MCD
Chipotle Mexican Grill Inc. Quarterly Valuation – October 2014 $CMG
Darden Restaurants Inc. Annual Valuation – 2014 $DRI
Yum! Brands Inc. Annual Valuation – 2015 $YUM
Starbucks Corporation Annual Valuation – 2015 $SBUX

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 read our full disclaimer.

 

Sigma-Aldrich Corporation Analysis – September 2015 Update $SIAL

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 Sigma-Aldrich Corporation (SIAL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Sigma-Aldrich Corporation is a life science and high technology company. The Company develops, manufactures, purchases and distributes a range of biochemical and organic chemical products, kits and services that are used in scientific research. It manufactures and distributes around 250,000 chemicals, biochemical and other essential products and approximately 46,000 equipment products. Its business unit structure is aligned into three business units: Research, Applied and SAFC Commercial. Its brands include Sigma-Aldrich, Sigma, Aldrich, Fluka, Riedel-de Haen, Supelco, SAFC, SAFC Biosciences, SAFC Hitech, Genosys, Proligo, Pharmorphix, Cerilliant, Vetec, BioReliance and Cell Marque. It offers its products and services to research and applied labs, pharmaceutical companies, universities, commercial laboratories, industrial companies, biotechnology companies and non-profit organizations, among others. It operates in around 37 countries and sells into approximately 160 countries.

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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 SIAL – September 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 $16,715,011,480 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.59 Pass
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 75.43% Pass
6. Moderate PEmg Ratio PEmg < 20 34.47 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.15 Fail
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 5.59 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.15 Pass
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

SIAL value Chart September 2015

EPSmg $4.05
MG Growth Estimate 4.33%
MG Value $69.46
Opinion Overvalued
MG Value based on 3% Growth $58.70
MG Value based on 0% Growth $34.41
Market Implied Growth Rate 12.98%
Current Price $139.52
% of Intrinsic Value 200.87%

Sigma-Aldrich Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  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 overvalued after growing its EPSmg (normalized earnings) from $3.14 in 2011 to an estimated $4.05 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 12.98% 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.

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 Sigma-Aldrich Corporation (SIAL)?  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

SIAL Charts September 2015

Net Current Asset Value (NCAV) $11.24
Graham Number $50.59
PEmg 34.47
Current Ratio 5.59
PB Ratio 5.15
Dividend Yield 0.66%
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

Total Current Assets $2,369,000,000
Total Current Liabilities $424,000,000
Long-Term Debt $300,000,000
Total Assets $4,306,000,000
Intangible Assets $1,035,000,000
Total Liabilities $998,000,000
Shares Outstanding (Diluted Average) 122,000,000

Earnings Per Share History

Next Fiscal Year Estimate $4.12
Dec14 $4.17
Dec13 $4.06
Dec12 $3.77
Dec11 $3.72
Dec10 $3.12
Dec09 $2.80
Dec08 $2.65
Dec07 $2.34
Dec06 $2.05
Dec05 $1.88
Dec04 $1.67
Dec03 $1.36
Dec02 $0.89
Dec01 $0.94
Dec00 $1.92
Dec99 $0.86
Dec98 $0.82
Dec97 $0.81
Dec96 $0.74
Dec95 $0.66

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.05
Dec14 $3.93
Dec13 $3.71
Dec12 $3.42
Dec11 $3.14
Dec10 $2.77
Dec09 $2.51
Dec08 $2.28
Dec07 $2.02
Dec06 $1.76
Dec05 $1.52
Dec04 $1.35
Dec03 $1.19
Dec02 $1.10
Dec01 $1.16
Dec00 $1.19
Dec99 $0.81

Recommended Reading:

Other ModernGraham posts about the company

Sigma-Aldrich Corporation Analysis – June 2015 Update $SIAL
18 Companies in the Spotlight This Week – 3/15/15
Sigma-Aldrich Corporation Quarterly Valuation – March 2015 $SIAL
32 Companies in the Spotlight This Week – 12/6/14
Sigma-Aldrich Corporation Quarterly Valuation – December 2014 $SIAL

Other ModernGraham posts about related companies

FMC Corporation Analysis – September 2015 Update $FMC
Eastman Chemical Company Analysis – September 2015 Update $EMN
Ashland Inc. Analysis – Initial Coverage $ASH
The Best Companies of the Chemicals Industry – August 2015
LyondellBasell Industries Analysis – August 2015 Update $LYB
Albemarle Corporation Analysis – Initial Coverage $ALB
E I Du Pont de Nemours & Company Analysis – August 2015 Update $DD
Dow Chemical Analysis – July 2015 Update $DOW
Sigma-Aldrich Corporation Analysis – June 2015 Update $SIAL
Eastman Chemical Company Analysis – June 2015 Quarterly Update $EMN

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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