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Duke Energy Corp Valuation – March 2019 #DUK

Company Profile (excerpt from Reuters): Duke Energy Corporation (Duke Energy), incorporated on May 3, 2005, is an energy company. The Company operates through three segments: Electric Utilities and Infrastructure; Gas Utilities and Infrastructure, and Commercial Renewables. The Company operates in the United States through its direct and indirect subsidiaries. The Company’s subsidiaries include Duke Energy Carolinas, LLC (Duke Energy Carolinas), Progress Energy, Inc. (Progress Energy), Duke Energy Progress, LLC (Duke Energy Progress), Duke Energy Florida, LLC (Duke Energy Florida), Duke Energy Ohio, Inc. (Duke Energy Ohio), Duke Energy Indiana, LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DUK – 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 $65,576,389,981 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.65 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 31.52% Fail
6. Moderate PEmg Ratio PEmg < 20 21.51 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.48 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 0.65 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.53 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 $4.19
MG Growth Estimate 3.09%
MG Value $61.57
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $60.79
MG Value based on 0% Growth $35.64
Market Implied Growth Rate 6.51%
Current Price $90.20
% of Intrinsic Value 146.50%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.48 in 2015 to an estimated $4.19 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.51% 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 Duke Energy Corp revealed the company was trading above its Graham Number of $81.52. The company pays a dividend of $3.64 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.51, which was below the industry average of 23.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-128.09.

Duke Energy Corp scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$128.09
Graham Number $81.52
PEmg 21.51
Current Ratio 0.65
PB Ratio 1.48
Current Dividend $3.64
Dividend Yield 4.03%
Number of Consecutive Years of Dividend Growth 11

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $9,714,000,000
Total Current Liabilities $15,041,000,000
Long-Term Debt $50,788,000,000
Total Assets $145,392,000,000
Intangible Assets $19,303,000,000
Total Liabilities $101,558,000,000
Shares Outstanding (Diluted Average) 717,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.90
Dec2018 $3.76
Dec2017 $4.36
Dec2016 $3.11
Dec2015 $4.05
Dec2014 $2.66
Dec2013 $3.76
Dec2012 $3.07
Dec2011 $3.83
Dec2010 $3.00
Dec2009 $2.49
Dec2008 $3.21
Dec2007 $3.54
Dec2006 $4.71
Dec2005 $11.28
Dec2004 $4.62
Dec2003 -$4.44
Dec2002 $3.66
Dec2001 $7.32
Dec2000 $7.14
Dec1999 $6.09

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.19
Dec2018 $3.76
Dec2017 $3.70
Dec2016 $3.35
Dec2015 $3.48
Dec2014 $3.21
Dec2013 $3.40
Dec2012 $3.19
Dec2011 $3.24
Dec2010 $3.09
Dec2009 $3.77
Dec2008 $4.77
Dec2007 $5.01
Dec2006 $5.15
Dec2005 $5.08
Dec2004 $2.54
Dec2003 $2.32

Recommended Reading:

Other ModernGraham posts about the company

Most Undervalued Stocks of the S&P 500 – August 2018
Duke Energy Corp Valuation – May 2018 $DUK
Duke Energy Corp Valuation – February 2017 $DUK
Duke Energy Corporation Valuation – November 2015 Update $DUK
30 Companies in the Spotlight This Week – 11/15/14

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DTE Energy Co Valuation – January 2019 $DTE
AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX

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.

Duke Realty Corp Valuation – March 2019 $DRE

Company Profile (excerpt from Reuters): Duke Realty Corporation, incorporated on March 12, 1992, is a self-managed real estate investment trust (REIT). The Company and Duke Realty Limited Partnership (Partnership) collectively specialize in the ownership, management and development of bulk distribution (industrial) and medical office real estate. It operates through three segments, the first two of which consist of the ownership and rental of industrial and medical office real estate investments. The operations of its industrial and medical office properties, as well as its rental operations, are collectively referred to as Rental Operations. The third segment consists of various real estate services, such as property management, asset management, maintenance, leasing, development, general contracting and construction management to third-party property owners and joint ventures, and is collectively referred to as Service Operations. Its Service Operations segment also includes its taxable REIT subsidiary (TRS), through which certain of the segment’s operations are conducted. The Company maintains a Baa1 rating from Moody’s Investor Service, Inc. and a BBB+ rating from Standard & Poor’s Financial Services LLC.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DRE – 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 $10,579,736,074 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.51 Pass
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 -1477.27% Fail
6. Moderate PEmg Ratio PEmg < 20 18.69 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.28 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.51 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.68 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.58
MG Growth Estimate 15.00%
MG Value $60.68
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $22.85
MG Value based on 0% Growth $13.40
Market Implied Growth Rate 5.09%
Current Price $29.45
% of Intrinsic Value 48.54%

Duke Realty Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.79 in 2015 to an estimated $1.58 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.09% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Duke Realty Corp revealed the company was trading above its Graham Number of $11.21. The company pays a dividend of $0.82 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 18.69, which was below the industry average of 61.92, 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 $-7.22.

Duke Realty Corp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.22
Graham Number $11.21
PEmg 18.69
Current Ratio 2.51
PB Ratio 2.28
Current Dividend $0.82
Dividend Yield 2.77%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $456,336,000
Total Current Liabilities $181,799,000
Long-Term Debt $2,658,501,000
Total Assets $7,804,024,000
Intangible Assets $107,716,000
Total Liabilities $3,090,781,000
Shares Outstanding (Diluted Average) 364,953,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.43
Dec2018 $1.07
Dec2017 $4.56
Dec2016 $0.88
Dec2015 $1.77
Dec2014 $0.60
Dec2013 $0.47
Dec2012 -$0.48
Dec2011 $0.11
Dec2010 -$0.07
Dec2009 -$1.67
Dec2008 $0.33
Dec2007 $1.55
Dec2006 $1.07
Dec2005 $2.17
Dec2004 $1.06
Dec2003 $1.19
Dec2002 $1.14
Dec2001 $1.74
Dec2000 $1.66
Dec1999 $1.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.58
Dec2018 $2.02
Dec2017 $2.22
Dec2016 $0.92
Dec2015 $0.79
Dec2014 $0.24
Dec2013 -$0.07
Dec2012 -$0.35
Dec2011 -$0.17
Dec2010 -$0.12
Dec2009 $0.13
Dec2008 $1.10
Dec2007 $1.46
Dec2006 $1.38
Dec2005 $1.51
Dec2004 $1.24
Dec2003 $1.36

Recommended Reading:

Other ModernGraham posts about the company

10 Best Dividend Paying Stocks for the Enterprising Investor – May 2018
Duke Realty Corp Valuation – Initial Coverage $DRE

Other ModernGraham posts about related companies

Realty Income Corp Valuation – February 2019 $O
Ventas Inc Valuation – February 2019 $VTR
SL Green Realty Corp Valuation – February 2019 $SLG
Regency Centers Corp Valuation – February 2019 $REG
Host Hotels & Resorts Inc Valuation – February 2019 $HST
Vornado Realty Trust Valuation – January 2019 $VNO
Public Storage Valuation – January 2019 $PSA
Macerich Co Valuation – January 2019 $MAC
HCP Inc Valuation – January 2019 $HCP
Apartment Investment and Management Co Valuation – January 2019 $AIV

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.

Duke Energy Corp Valuation – May 2018 $DUK

Company Profile (excerpt from Reuters): Duke Energy Corporation (Duke Energy), incorporated on May 3, 2005, is an energy company. The Company operates through three segments: Electric Utilities and Infrastructure; Gas Utilities and Infrastructure, and Commercial Renewables. The Company operates in the United States through its direct and indirect subsidiaries. The Company’s subsidiaries include Duke Energy Carolinas, LLC (Duke Energy Carolinas), Progress Energy, Inc. (Progress Energy), Duke Energy Progress, LLC (Duke Energy Progress), Duke Energy Florida, LLC (Duke Energy Florida), Duke Energy Ohio, Inc. (Duke Energy Ohio), Duke Energy Indiana, LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont).

DUK Chart

DUK data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DUK – 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 $51,949,882,128 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.64 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 29.29% Fail
6. Moderate PEmg Ratio PEmg < 20 18.32 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.24 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 0.64 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.39 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 $4.03
MG Growth Estimate 3.80%
MG Value $64.88
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $58.42
MG Value based on 0% Growth $34.24
Market Implied Growth Rate 4.91%
Current Price $73.80
% of Intrinsic Value 113.75%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.21 in 2014 to an estimated $4.03 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.91% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Duke Energy Corp revealed the company was trading below its Graham Number of $78.39. The company pays a dividend of $3.49 per share, for a yield of 4.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.32, which was below the industry average of 23.55, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-126.21.

Duke Energy 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) -$126.21
Graham Number $78.39
PEmg 18.32
Current Ratio 0.64
PB Ratio 1.24
Current Dividend $3.49
Dividend Yield 4.73%
Number of Consecutive Years of Dividend Growth 10

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 $8,279,000,000
Total Current Liabilities $12,998,000,000
Long-Term Debt $49,030,000,000
Total Assets $138,541,000,000
Intangible Assets $19,396,000,000
Total Liabilities $96,749,000,000
Shares Outstanding (Diluted Average) 701,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.58
Dec2017 $4.36
Dec2016 $3.11
Dec2015 $4.05
Dec2014 $2.66
Dec2013 $3.76
Dec2012 $3.07
Dec2011 $3.83
Dec2010 $3.00
Dec2009 $2.49
Dec2008 $3.21
Dec2007 $3.54
Dec2006 $4.71
Dec2005 $11.28
Dec2004 $4.62
Dec2003 -$4.44
Dec2002 $3.66
Dec2001 $7.32
Dec2000 $7.14
Dec1999 $6.09
Dec1998 $5.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.03
Dec2017 $3.70
Dec2016 $3.35
Dec2015 $3.48
Dec2014 $3.21
Dec2013 $3.40
Dec2012 $3.19
Dec2011 $3.24
Dec2010 $3.09
Dec2009 $3.77
Dec2008 $4.77
Dec2007 $5.01
Dec2006 $5.15
Dec2005 $5.08
Dec2004 $2.54
Dec2003 $2.32
Dec2002 $5.75

Recommended Reading:

Other ModernGraham posts about the company

Duke Energy Corp Valuation – February 2017 $DUK
Duke Energy Corporation Valuation – November 2015 Update $DUK
30 Companies in the Spotlight This Week – 11/15/14
Duke Energy Corporation Annual Valuation – 2014 $DUK

Other ModernGraham posts about related companies

NextEra Energy Inc Valuation – May 2018 $NEE
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Dominion Energy Inc Valuation – April 2018 $D
Exelon Corp Valuation – March 2018 $EXC
NRG Energy Inc Valuation – March 2018 $NRG
DTE Energy Co Valuation – March 2018 $DTE
The AES Corp Valuation – March 2018 $AES
FirstEnergy Corp Valuation – March 2018 $FE
Edison International Valuation – March 2018 $EIX
WEC Energy Group Inc Valuation – March 2018 $WEC

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.

Duke Realty Corp Valuation – Initial Coverage $DRE

Company Profile (excerpt from Reuters): Duke Realty Corporation, incorporated on March 12, 1992, is a self-managed real estate investment trust (REIT). The Company and Duke Realty Limited Partnership (Partnership) collectively specialize in the ownership, management and development of bulk distribution (industrial) and medical office real estate. It operates through three segments, the first two of which consist of the ownership and rental of industrial and medical office real estate investments. The operations of its industrial and medical office properties, as well as its rental operations, are collectively referred to as Rental Operations. The third segment consists of various real estate services, such as property management, asset management, maintenance, leasing, development, general contracting and construction management to third-party property owners and joint ventures, and is collectively referred to as Service Operations. Its Service Operations segment also includes its taxable REIT subsidiary (TRS), through which certain of the segment’s operations are conducted. The Company maintains a Baa1 rating from Moody’s Investor Service, Inc. and a BBB+ rating from Standard & Poor’s Financial Services LLC.

DRE Chart

DRE data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DRE – 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 $10,253,987,617 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.72 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -453.99% Fail
6. Moderate PEmg Ratio PEmg < 20 16.14 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.29 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 1.72 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 18.67 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.78
MG Growth Estimate 15.00%
MG Value $68.45
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $25.78
MG Value based on 0% Growth $15.11
Market Implied Growth Rate 3.82%
Current Price $28.70
% of Intrinsic Value 41.93%

Duke Realty Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.24 in 2014 to an estimated $1.78 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.82% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Duke Realty Corp revealed the company was trading above its Graham Number of $9.72. The company pays a dividend of $0.77 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.14, which was below the industry average of 46.75, 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 $-7.03.

Duke Realty Corp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.03
Graham Number $9.72
PEmg 16.14
Current Ratio 1.72
PB Ratio 2.29
Current Dividend $0.77
Dividend Yield 2.68%
Number of Consecutive Years of Dividend Growth 3

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 $309,879,000
Total Current Liabilities $180,102,000
Long-Term Debt $2,422,891,000
Total Assets $7,388,196,000
Intangible Assets $88,653,000
Total Liabilities $2,855,352,000
Shares Outstanding (Diluted Average) 362,203,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.33
Dec2017 $4.56
Dec2016 $0.88
Dec2015 $1.77
Dec2014 $0.60
Dec2013 $0.47
Dec2012 -$0.48
Dec2011 $0.11
Dec2010 -$0.07
Dec2009 -$1.67
Dec2008 $0.33
Dec2007 $1.55
Dec2006 $1.07
Dec2005 $2.17
Dec2004 $1.06
Dec2003 $1.19
Dec2002 $1.14
Dec2001 $1.74
Dec2000 $1.66
Dec1999 $1.32
Dec1998 $1.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.78
Dec2017 $2.22
Dec2016 $0.92
Dec2015 $0.79
Dec2014 $0.24
Dec2013 -$0.07
Dec2012 -$0.35
Dec2011 -$0.17
Dec2010 -$0.12
Dec2009 $0.13
Dec2008 $1.10
Dec2007 $1.46
Dec2006 $1.38
Dec2005 $1.51
Dec2004 $1.24
Dec2003 $1.36
Dec2002 $1.43

Recommended Reading:

Other ModernGraham posts about the company

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

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Regency Centers Corp Valuation – Initial Coverage $REG
Host Hotels & Resorts Inc Valuation – April 2018 $HST
Vornado Realty Trust Valuation – April 2018 $VNO
Public Storage Valuation – March 2018 $PSA
Macerich Co Valuation – March 2018 $MAC
HCP Inc Valuation – March 2018 $HCP
Apartment Investment & Management Co Valuation – March 2018 $AIV

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.

Duke Energy Corp Valuation – February 2017 $DUK

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 – February 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 Duke Energy Corp (DUK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Duke Energy Corporation (Duke Energy) is an energy company. The Company’s segments include Regulated Utilities, International Energy and Commercial Portfolio. Duke Energy’s subsidiaries include its subsidiary registrants: Duke Energy Carolinas, LLC; Progress Energy, Inc.; Duke Energy Progress, LLC; Duke Energy Florida, LLC; Duke Energy Ohio, Inc. , and Duke Energy Indiana, Inc. (Duke Energy Indiana). Its Regulated Utilities segment conducts operations through Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Indiana and Duke Energy Ohio. Its International Energy segment operates and manages power generation facilities and engages in sales and marketing of electric power, natural gas, and natural gas liquids. The Company’s Commercial Portfolio’s renewable energy includes utility-scale wind and solar generation assets which total approximately 2,400 megawatts across over 10 states from approximately 20 wind farms and over 50 commercial solar farms.

DUK Chart

DUK data by YCharts

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ModernGraham Valuation of DUK – 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 $54,039,262,472 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.12 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 18.18% Fail
6. Moderate PEmg Ratio PEmg < 20 20.92 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.33 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 1.12 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 30.15 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 $3.72
MG Growth Estimate 2.49%
MG Value $50.20
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $53.96
MG Value based on 0% Growth $31.63
Market Implied Growth Rate 6.21%
Current Price $77.85
% of Intrinsic Value 155.08%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.19 in 2012 to an estimated $3.72 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.21% 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 Duke Energy Corp revealed the company was trading above its Graham Number of $74.61. The company pays a dividend of $3.33 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.93, which was below the industry average of 23.36, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-109.5.

Duke Energy Corp scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$109.50
Graham Number $74.61
PEmg 20.93
Current Ratio 1.12
PB Ratio 1.33
Current Dividend $3.33
Dividend Yield 4.28%
Number of Consecutive Years of Dividend Growth 9

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Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $13,534,000,000
Total Current Liabilities $12,076,000,000
Long-Term Debt $43,964,000,000
Total Assets $129,686,000,000
Intangible Assets $16,354,000,000
Total Liabilities $89,197,000,000
Shares Outstanding (Diluted Average) 691,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.21
Dec2015 $4.05
Dec2014 $2.66
Dec2013 $3.76
Dec2012 $3.07
Dec2011 $3.83
Dec2010 $3.00
Dec2009 $2.49
Dec2008 $3.21
Dec2007 $3.54
Dec2006 $4.71
Dec2005 $11.28
Dec2004 $4.62
Dec2003 -$4.44
Dec2002 $3.66
Dec2001 $7.32
Dec2000 $7.14
Dec1999 $6.09
Dec1998 $5.10
Dec1997 $3.75
Dec1996 $4.25

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.72
Dec2015 $3.48
Dec2014 $3.21
Dec2013 $3.40
Dec2012 $3.19
Dec2011 $3.24
Dec2010 $3.09
Dec2009 $3.77
Dec2008 $4.77
Dec2007 $5.01
Dec2006 $5.15
Dec2005 $5.08
Dec2004 $2.54
Dec2003 $2.32
Dec2002 $5.75
Dec2001 $6.49
Dec2000 $5.81

Recommended Reading:

Other ModernGraham posts about the company

Duke Energy Corporation Valuation – November 2015 Update $DUK
30 Companies in the Spotlight This Week – 11/15/14
Duke Energy Corporation Annual Valuation – 2014 $DUK

Other ModernGraham posts about related companies

Spire Inc Valuation – Initial Coverage $SR
Ameren Corp Valuation – February 2017 $AEE
Sempra Energy Valuation – February 2017 $SRE
Capital Power Corp Valuation – Initial Coverage $TSE:CPX
Superior Plus Corp Valuation – Initial Coverage $TSE:SPB
Energy Company of Minas Valuation – Initial Coverage $CIG
NextEra Energy Inc Valuation – December 2016 $NEE
Westar Energy Inc Valuation – August 2016 $WR
Eversource Energy Valuation – August 2016 $ES
Public Service Enterprise Group Inc Valuation – August 2016 $PEG

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.

Duke Energy Corporation Valuation – November 2015 Update $DUK

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 – October 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 Duke Energy Corporation (DUK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Duke Energy Corporation is an energy company. Duke Energy conducts its operations in three business segments: Regulated Utilities, International Energy and Commercial Power. The Company’s Regulated Utilities segment conducts operations primarily through Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Indiana and Duke Energy Ohio. The Company’s International Energy segment principally operates and manages power generation facilities and engages in sales and marketing of electric power, natural gas, and natural gas liquids outside the United States. The Company’s Commercial Power builds, develops and operates wind and solar renewable generation and energy transmission projects throughout the continental United States. Duke Energy operates in the United States and Latin America primarily through its direct and indirect subsidiaries.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of DUK – November 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 $49,622,822,416 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.00 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 -7.33% Fail
6. Moderate PEmg Ratio PEmg < 20 20.25 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.25 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 1.00 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -766.56 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

DUK value Chart November 2015

EPSmg $3.53
MG Growth Estimate 1.33%
MG Value $39.36
Opinion Overvalued
MG Value based on 3% Growth $51.13
MG Value based on 0% Growth $29.97
Market Implied Growth Rate 5.87%
Current Price $71.39
% of Intrinsic Value 181.40%

Duke Energy Corporation does not qualify for 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 ratio.  The Enterprising Investor is concerned by 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 at this time or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.24 in 2011 to an estimated $3.53 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 5.87% 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 Duke Energy Corporation (DUK)?  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

DUK Charts November 2015

Net Current Asset Value (NCAV) -$100.28
Graham Number $73.73
PEmg 20.25
Current Ratio 1.00
PB Ratio 1.25
Dividend Yield 4.45%
Number of Consecutive Years of Dividend Growth 8

 

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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 $9,598,000,000
Total Current Liabilities $9,646,000,000
Long-Term Debt $36,795,000,000
Total Assets $118,575,000,000
Intangible Assets $16,328,000,000
Total Liabilities $78,995,000,000
Shares Outstanding (Diluted Average) 692,000,000

Earnings Per Share History

Next Fiscal Year Estimate $4.20
Dec14 $2.66
Dec13 $3.76
Dec12 $3.07
Dec11 $3.83
Dec10 $3.00
Dec09 $2.49
Dec08 $3.21
Dec07 $3.54
Dec06 $4.71
Dec05 $11.28
Dec04 $4.62
Dec03 -$4.44
Dec02 $3.66
Dec01 $7.32
Dec00 $7.14
Dec99 $6.09
Dec98 $5.10
Dec97 $3.75
Dec96 $4.25
Dec95 $4.88

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.53
Dec14 $3.21
Dec13 $3.40
Dec12 $3.19
Dec11 $3.24
Dec10 $3.09
Dec09 $3.77
Dec08 $4.77
Dec07 $5.01
Dec06 $5.15
Dec05 $5.08
Dec04 $2.54
Dec03 $2.32
Dec02 $5.75
Dec01 $6.49
Dec00 $5.81
Dec99 $5.03

Recommended Reading:

Other ModernGraham posts about the company

30 Companies in the Spotlight This Week – 11/15/14
Duke Energy Corporation Annual Valuation – 2014 $DUK

Other ModernGraham posts about related companies

Sempra Energy Valuation – October 2015 Update $SRE
Xcel Energy Inc. Analysis – September 2015 Update $XEL
NextEra Energy Inc. Analysis – August 2015 Update $NEE
Westar Energy Inc. Analysis – Initial Coverage $WR
Eversource Energy Analysis – Initial Coverage $ES
Public Service Enterprise Group Inc. Analysis – 2015 Update $PEG
Xcel Energy Analysis – June 2015 Update $XEL
Consolidated Edison Analysis – 2015 Update $ED
Ameren Corporation Analysis – 2015 Update $AEE
NextEra Energy Inc. Quarterly Valuation – May 2015 $NEE

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.

Duke Energy Corporation Annual Valuation – 2014 $DUK

220px-Duke_Energy_logo.svg

Duke Energy Corporation presents a speculative situation, as it does not qualify for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is concerned with the low current ratio, an insufficient level of earnings growth over the last ten years, and the high PEmg ratio. The Enterprising Investor takes issue with the level of debt relative to the current assets. As a result, any purchase of Duke Energy stock is made with a speculative nature behind it. That said, any speculator interested in pursuing the company should still proceed to the next part of the analysis, which is a determination of the company’s intrinsic value.

With regard to that intrinsic value, the company has grown its EPSmg (normalized earnings) from $3.09 in 2010 to only an estimated $3.79 for 2014. This level of demonstrated growth does not support the market’s implied estimate for earnings growth of 6.50% over the next 7-10 years. The ModernGraham valuation model therefore returns an estimate of intrinsic value below the current price, indicating the company is overvalued at the present time.

Read the full valuation on Seeking Alpha!

DUK Chart

DUK data by YCharts

PPL Corp Valuation – March 2019 #PPL

Company Profile (excerpt from Reuters): PPL Corporation (PPL), incorporated on March 15, 1994, is a utility holding company. Through its subsidiaries, PPL delivers electricity to customers in the United Kingdom, Pennsylvania, Kentucky, Virginia and Tennessee; delivers natural gas to customers in Kentucky, and generates electricity from power plants in Kentucky. PPL operates through U.K. Regulated Segment, Kentucky Regulated Segment and Pennsylvania Regulated Segment.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PPL – 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 $22,781,609,475 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.53 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 -11.38% Fail
6. Moderate PEmg Ratio PEmg < 20 14.01 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.97 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 0.53 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.42 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 $2.26
MG Growth Estimate 2.70%
MG Value $31.35
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $32.70
MG Value based on 0% Growth $19.17
Market Implied Growth Rate 2.76%
Current Price $31.60
% of Intrinsic Value 100.80%

PPL 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. 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 $1.91 in 2015 to an estimated $2.26 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 2.76% 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 PPL Corp revealed the company was trading above its Graham Number of $29.56. The company pays a dividend of $1.64 per share, for a yield of 5.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.01, which was below the industry average of 23.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-40.28.

PPL 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) -$40.28
Graham Number $29.56
PEmg 14.01
Current Ratio 0.53
PB Ratio 1.97
Current Dividend $1.64
Dividend Yield 5.19%
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 12/1/2018
Total Current Assets $2,432,000,000
Total Current Liabilities $4,563,000,000
Long-Term Debt $20,069,000,000
Total Assets $43,396,000,000
Intangible Assets $3,879,000,000
Total Liabilities $31,739,000,000
Shares Outstanding (Diluted Average) 727,561,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.40
Dec2018 $2.58
Dec2017 $1.64
Dec2016 $2.79
Dec2015 $1.01
Dec2014 $2.61
Dec2013 $1.76
Dec2012 $2.60
Dec2011 $2.70
Dec2010 $2.17
Dec2009 $1.08
Dec2008 $2.47
Dec2007 $3.35
Dec2006 $2.24
Dec2005 $1.65
Dec2004 $1.87
Dec2003 $2.18
Dec2002 $0.68
Dec2001 $0.61
Dec2000 $1.72
Dec1999 $1.42

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.26
Dec2018 $2.16
Dec2017 $1.96
Dec2016 $2.13
Dec2015 $1.91
Dec2014 $2.36
Dec2013 $2.18
Dec2012 $2.33
Dec2011 $2.25
Dec2010 $2.10
Dec2009 $2.10
Dec2008 $2.51
Dec2007 $2.44
Dec2006 $1.90
Dec2005 $1.62
Dec2004 $1.54
Dec2003 $1.35

Recommended Reading:

Other ModernGraham posts about the company

PPL Corp Valuation – June 2018 $PPL
PPL Corp Valuation – June 2017 $PPL
PPL Corporation Valuation – January 2016 Update $PPL
26 Companies in the Spotlight This Week – 12/13/14
PPL Corporation Annual Valuation – 2014 $PPL

Other ModernGraham posts about related companies

Evergy Inc Valuation – March 2019 #EVRG
Entergy Corp Valuation – March 2019 #ETR
Pinnacle West Capital Corp Valuation – March 2019 #PNW
NiSource Inc Valuation – March 2019 #NI
American Electric Power Company Inc Valuation – March 2019 #AEP
American Water Works Co Inc Valuation – March 2019 #AWK
Alliant Energy Corp Valuation – March 2019 #LNT
Consolidated Edison Inc Valuation – March 2019 #ED
Duke Energy Corp Valuation – March 2019 #DUK
Sempra Energy Valuation – March 2019 #SRE

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.

Eversource Energy Valuation – March 2019 #ES

Company Profile (excerpt from Reuters): Eversource Energy, incorporated on January 15, 1927, is a utility holding company. The Company is engaged in the energy delivery business. It operates through three segments: electric distribution, electric transmission and natural gas distribution. It operates through its utility subsidiaries, which include The Connecticut Light and Power Company (CL&P), an electric utility that serves residential, commercial and industrial customers in parts of Connecticut; NSTAR Electric Company (NSTAR Electric), an electric utility that serves residential, commercial and industrial customers in parts of eastern Massachusetts; Public Service Company of New Hampshire (PSNH), an electric utility that serves residential, commercial and industrial customers in parts of New Hampshire, and owns generation assets used to serve customers; Western Massachusetts Electric Company (WMECO), an electric utility that serves residential, commercial and industrial customers in parts of western Massachusetts, and owns solar generating assets; NSTAR Gas Company (NSTAR Gas), a natural gas utility that serves residential, commercial and industrial customers in parts of Massachusetts, and Yankee Gas Services Company (Yankee Gas), a natural gas utility that serves residential, commercial and industrial customers in parts of Connecticut. CL&P, NSTAR Electric, PSNH and WMECO also serve New England customers through the Company’s electric transmission business.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ES – 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 $22,452,304,349 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.56 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 55.56% Pass
6. Moderate PEmg Ratio PEmg < 20 22.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.96 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 0.56 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.05 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 $3.21
MG Growth Estimate 4.24%
MG Value $54.56
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $46.60
MG Value based on 0% Growth $27.32
Market Implied Growth Rate 6.76%
Current Price $70.76
% of Intrinsic Value 129.69%

Eversource Energy 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 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 $2.51 in 2015 to an estimated $3.21 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.76% 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 Eversource Energy revealed the company was trading above its Graham Number of $52.97. The company pays a dividend of $2.02 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 22.02, which was below the industry average of 23.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-76.89.

Eversource Energy receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$76.89
Graham Number $52.97
PEmg 22.02
Current Ratio 0.56
PB Ratio 1.96
Current Dividend $2.02
Dividend Yield 2.85%
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 12/1/2018
Total Current Assets $2,292,224,000
Total Current Liabilities $4,112,882,000
Long-Term Debt $12,832,074,000
Total Assets $38,241,256,000
Intangible Assets $4,427,266,000
Total Liabilities $26,754,439,000
Shares Outstanding (Diluted Average) 318,130,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.44
Dec2018 $3.25
Dec2017 $3.11
Dec2016 $2.96
Dec2015 $2.76
Dec2014 $2.58
Dec2013 $2.49
Dec2012 $1.89
Dec2011 $2.22
Dec2010 $2.19
Dec2009 $1.91
Dec2008 $1.67
Dec2007 $1.59
Dec2006 $3.05
Dec2005 -$1.93
Dec2004 $0.91
Dec2003 $0.91
Dec2002 $1.18
Dec2001 $1.74
Dec2000 -$0.20
Dec1999 $0.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.21
Dec2018 $3.04
Dec2017 $2.89
Dec2016 $2.70
Dec2015 $2.51
Dec2014 $2.34
Dec2013 $2.20
Dec2012 $2.03
Dec2011 $2.03
Dec2010 $1.99
Dec2009 $1.68
Dec2008 $1.39
Dec2007 $1.14
Dec2006 $0.88
Dec2005 $0.05
Dec2004 $1.00
Dec2003 $0.96

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – June 2018
Eversource Energy Valuation – June 2018 $ES
Eversource Energy Valuation – July 2017 $ES
Eversource Energy Valuation – August 2016 $ES
Eversource Energy Analysis – Initial Coverage $ES

Other ModernGraham posts about related companies

Evergy Inc Valuation – March 2019 #EVRG
Entergy Corp Valuation – March 2019 #ETR
Pinnacle West Capital Corp Valuation – March 2019 #PNW
NiSource Inc Valuation – March 2019 #NI
American Electric Power Company Inc Valuation – March 2019 #AEP
American Water Works Co Inc Valuation – March 2019 #AWK
Alliant Energy Corp Valuation – March 2019 #LNT
Consolidated Edison Inc Valuation – March 2019 #ED
Duke Energy Corp Valuation – March 2019 #DUK
Sempra Energy Valuation – March 2019 #SRE

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.

Equinix Inc Valuation – March 2019 #EQIX

Company Profile (excerpt from Reuters): Equinix, Inc. (Equinix), incorporated on June 22, 1998, operates as a real estate investment trust (REIT). The Company connects various companies directly to their customers and partners inside interconnected data centers. The Company operates through three segments: Americas, EMEA and Asia-Pacific. The Company’s platform Equinix, combines a global footprint of International Business Exchange (IBX) data centers, a range of interconnection solutions, ecosystems and support. Its customers include carriers, mobile and other bandwidth providers, cloud and information technology (IT) services providers, content providers, financial companies and enterprises. It provides each customer access to a choice of business partners and solutions based on their colocation, interconnection and managed IT service needs. Its colocation offerings include operations space, storage space, cabinets and power for customers’ colocation needs inside Equinix’s IBX data centers. Its interconnection offerings include Equinix Cloud Exchange, which enables simultaneous, direct and secure connections to multiple clouds from a single port; Equinix Performance Hub, which takes enterprise IT inside any one of its global data centers, and Equinix Data Hub, which enables secure, compliant access to business-critical data and analytics wherever users are located around the globe.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EQIX – 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 $37,512,444,147 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.00 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 138.03% Pass
6. Moderate PEmg Ratio PEmg < 20 111.84 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.05 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 1.00 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 15,449.18 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 $4.03
MG Growth Estimate 15.00%
MG Value $154.98
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $58.37
MG Value based on 0% Growth $34.22
Market Implied Growth Rate 51.67%
Current Price $450.19
% of Intrinsic Value 290.49%

Equinix Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history, 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 Overvalued after growing its EPSmg (normalized earnings) from $0.62 in 2015 to an estimated $4.03 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 51.67% 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 Equinix Inc revealed the company was trading above its Graham Number of $103.19. The company pays a dividend of $9.12 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 111.84, which was above the industry average of 61.92. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-142.24.

Equinix 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) -$142.24
Graham Number $103.19
PEmg 111.84
Current Ratio 1.00
PB Ratio 5.05
Current Dividend $9.12
Dividend Yield 2.03%
Number of Consecutive Years of Dividend Growth 4

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,515,682,000
Total Current Liabilities $1,515,071,000
Long-Term Debt $9,439,448,000
Total Assets $20,244,638,000
Intangible Assets $7,169,684,000
Total Liabilities $13,025,359,000
Shares Outstanding (Diluted Average) 80,920,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.27
Dec2018 $4.56
Dec2017 $3.00
Dec2016 $1.79
Dec2015 $3.21
Dec2014 -$4.96
Dec2013 $1.89
Dec2012 $2.83
Dec2011 $1.74
Dec2010 $0.82
Dec2009 $1.75
Dec2008 $2.79
Dec2007 -$0.16
Dec2006 -$0.22
Dec2005 -$1.78
Dec2004 -$3.87
Dec2003 -$8.76
Dec2002 -$7.23
Dec2001 -$76.62
Dec2000 -$111.18
Dec1999 -$159.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.03
Dec2018 $2.78
Dec2017 $1.58
Dec2016 $0.90
Dec2015 $0.62
Dec2014 -$0.30
Dec2013 $1.96
Dec2012 $1.99
Dec2011 $1.51
Dec2010 $1.26
Dec2009 $1.15
Dec2008 $0.35
Dec2007 -$1.57
Dec2006 -$2.97
Dec2005 -$9.45
Dec2004 -$22.70
Dec2003 -$45.60

Recommended Reading:

Other ModernGraham posts about the company

Equinix Inc Valuation – June 2018 $EQIX
Equinix Inc Valuation – July 2017 $EQIX
5 of the Worst Stocks to Invest In – December 2016
Equinix Inc Valuation – August 2016 $EQIX
Equinix Inc. Analysis – Initial Coverage $EQIX

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Disclaimer:

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

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