Advance Auto Parts Inc Valuation – March 2019 #AAP

Company Profile (excerpt from Reuters): Advance Auto Parts, Inc., incorporated on August 1, 2001, provides automotive aftermarket parts in North America, serving do-it-for-me (Professional) and do-it-yourself (DIY), customers. The Company’s stores and branches offer a selection of brand name, original equipment manufacturer (OEM) and private label automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks. The Company serves its Professional and DIY customers through various channels ranging from traditional brick and mortar store locations to self-serving e-commerce sites. As of December 31, 2016, the Company operated 5,062 total stores and 127 branches primarily under the trade names Advance Auto Parts, Autopart International, Carquest and Worldpac. As of December 31, 2016, the Company’s Advance Auto Parts operations consisted of three geographic divisions, which included the operations of the stores operating under the Advance Auto Parts, Carquest and Autopart International trade names. The Company’s e-commerce platforms, primarily consisting of its online Websites and Professional ordering platforms, are part of its integrated operating approach of serving its Professional and DIY customers. The Company’s online Websites allow its DIY customers to pick up merchandise at a store or have their purchases shipped directly to them. The majority of the Company’s online DIY sales are picked up at store locations. Through the Company’s online ordering platforms, Professional customers can place orders with a designated store location for delivery to their places of business or pick-up.

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAP – 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 $12,221,885,012 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.57 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 39.57% Pass
6. Moderate PEmg Ratio PEmg < 20 25.61 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.52 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 1.57 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.48 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

EPSmg $6.66
MG Growth Estimate 1.58%
MG Value $77.67
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $96.55
MG Value based on 0% Growth $56.60
Market Implied Growth Rate 8.56%
Current Price $170.53
% of Intrinsic Value 219.56%

Advance Auto Parts, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. 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 Overvalued after growing its EPSmg (normalized earnings) from $6.02 in 2015 to an estimated $6.66 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.56% 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 Advance Auto Parts, Inc. revealed the company was trading above its Graham Number of $92.34. The company pays a dividend of $0.24 per share, for a yield of 0.1% Its PEmg (price over earnings per share – ModernGraham) was 25.61, which was above the industry average of 22.49. Finally, the company was trading above its Net Current Asset Value (NCAV) of $8.08.

Advance Auto Parts, 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) $8.08
Graham Number $92.34
PEmg 25.61
Current Ratio 1.57
PB Ratio 3.52
Current Dividend $0.24
Dividend Yield 0.14%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,082,454,000
Total Current Liabilities $3,885,950,000
Long-Term Debt $1,045,720,000
Total Assets $9,040,648,000
Intangible Assets $1,540,830,000
Total Liabilities $5,489,835,000
Shares Outstanding (Diluted Average) 73,328,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.78
Dec2018 $5.73
Dec2017 $6.42
Dec2016 $6.20
Dec2015 $6.40
Dec2014 $6.71
Dec2013 $5.32
Dec2012 $5.22
Dec2011 $5.11
Dec2010 $3.95
Dec2009 $2.83
Dec2008 $2.49
Dec2007 $2.28
Dec2006 $2.16
Dec2005 $2.13
Dec2004 $1.66
Dec2003 $1.11
Dec2002 $0.60
Dec2001 $0.13
Dec2000 $0.23
Dec1999 -$0.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.66
Dec2018 $6.16
Dec2017 $6.32
Dec2016 $6.17
Dec2015 $6.02
Dec2014 $5.64
Dec2013 $4.90
Dec2012 $4.44
Dec2011 $3.81
Dec2010 $3.02
Dec2009 $2.49
Dec2008 $2.26
Dec2007 $2.06
Dec2006 $1.81
Dec2005 $1.46
Dec2004 $1.00
Dec2003 $0.57

Recommended Reading:

Other ModernGraham posts about the company

Advance Auto Parts Inc Valuation – June 2018 $AAP
Advance Auto Parts Inc Valuation – August 2017 $AAP
Advance Auto Parts Inc Valuation – November 2016 $AAP
Advance Auto Parts Inc. Analysis – Initial Coverage $AAP

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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.

DaVita Inc Valuation – March 2019 #DVA

Company Profile (excerpt from Reuters): DaVita Inc., formerly DaVita HealthCare Partners Inc., incorporated on April 4, 1994, operates two divisions: DaVita Kidney Care (Kidney Care) and DaVita Medical Group (DMG). The Kidney Care division consists of the Company’s the United States dialysis and related lab services, its ancillary services and strategic initiatives, including its international operations, and its corporate administrative support. Its DMG division is a patient- and physician-focused integrated healthcare delivery and management company that provides medical services to members primarily through capitation contracts with some of the nation’s health plans. The Company’s segments include U.S. dialysis and related lab services, DMG, and Other-Ancillary services and strategic initiatives. Its U.S. dialysis and related lab services line of business provide kidney dialysis services in the United States for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD). In addition, as of December 31, 2016, the Company operated or provided administrative services to 154 outpatient dialysis centers serving patients located in 11 countries outside of the United States.

Downloadable PDF version of this valuation:

ModernGraham Valuation of DVA – 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 $8,919,039,746 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.72 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 17.39% Fail
6. Moderate PEmg Ratio PEmg < 20 18.25 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 2.31 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.94
MG Growth Estimate 3.21%
MG Value $43.95
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $42.70
MG Value based on 0% Growth $25.03
Market Implied Growth Rate 4.87%
Current Price $53.74
% of Intrinsic Value 122.29%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.43 in 2015 to an estimated $2.94 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.87% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Davita Inc revealed the company was trading above its Graham Number of $45.04. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 18.25, which was below the industry average of 53.13, 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 $-40.73.

Davita 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) -$40.73
Graham Number $45.04
PEmg 18.25
Current Ratio 1.72
PB Ratio 2.29
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $8,424,159,000
Total Current Liabilities $4,891,161,000
Long-Term Debt $8,172,847,000
Total Assets $19,110,252,000
Intangible Assets $6,960,806,000
Total Liabilities $15,201,854,000
Shares Outstanding (Diluted Average) 166,413,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.05
Dec2018 $0.92
Dec2017 $3.47
Dec2016 $4.29
Dec2015 $1.25
Dec2014 $3.33
Dec2013 $2.95
Dec2012 $2.74
Dec2011 $2.48
Dec2010 $1.97
Dec2009 $2.03
Dec2008 $1.77
Dec2007 $1.78
Dec2006 $1.37
Dec2005 $1.10
Dec2004 $1.08
Dec2003 $0.78
Dec2002 $0.61
Dec2001 $0.48
Dec2000 $0.05
Dec1999 -$0.60

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.94
Dec2018 $2.48
Dec2017 $3.19
Dec2016 $3.01
Dec2015 $2.43
Dec2014 $2.91
Dec2013 $2.61
Dec2012 $2.36
Dec2011 $2.11
Dec2010 $1.88
Dec2009 $1.76
Dec2008 $1.55
Dec2007 $1.37
Dec2006 $1.11
Dec2005 $0.92
Dec2004 $0.76
Dec2003 $0.48

Recommended Reading:

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DaVita Inc Valuation – June 2018 $DVA
Davita Inc Valuation – February 2017 $DVA
DaVita HealthCare Partners Inc Valuation – November 2015 Update $DVA
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DaVita Healthcare Partners Inc. Annual Valuation – 2014 $DVA

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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.

Advanced Micro Devices Inc Valuation – February 2019 $AMD

Company Profile (excerpt from Reuters): Advanced Micro Devices, Inc. (AMD), incorporated on May 1, 1969, is a global semiconductor company. The Company is engaged in offering x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs) and professional graphics, and, server and embedded processors and semi-custom System-on-Chip (SoC) products and technology for game consoles. The Company’s segments include the Computing and Graphics segment, and the Enterprise, Embedded and Semi-Custom segment. The Computing and Graphics segment primarily includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics. The Enterprise, Embedded and Semi-Custom segment primarily includes server and embedded processors, semi-custom SoC products, development services, technology for game consoles and licensing portions of its intellectual property portfolio. The Company sells its products through its direct sales force and through independent distributors and sales representatives in both domestic and international markets. Its microprocessor customers consist primarily of original equipment manufacturers (OEMs), original design manufacturers (ODMs), system builders and independent distributors in both domestic and international markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMD – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,489,084,253 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.78 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 -333.33% Fail
6. Moderate PEmg Ratio PEmg < 20 304.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 20.82 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 1.78 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.72 Pass
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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.08
MG Growth Estimate 15.00%
MG Value $3.08
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $1.16
MG Value based on 0% Growth $0.68
Market Implied Growth Rate 148.00%
Current Price $24.36
% of Intrinsic Value 790.91%

Advanced Micro Devices, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability 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 growing its EPSmg (normalized earnings) from $-0.61 in 2015 to an estimated $0.08 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 148% 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 Advanced Micro Devices, Inc. revealed the company was trading above its Graham Number of $3.42. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 304.5, which was above the industry average of 29.46. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.23.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.23
Graham Number $3.42
PEmg 304.50
Current Ratio 1.78
PB Ratio 20.82
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,540,000,000
Total Current Liabilities $1,984,000,000
Long-Term Debt $1,114,000,000
Total Assets $4,556,000,000
Intangible Assets $515,000,000
Total Liabilities $3,290,000,000
Shares Outstanding (Diluted Average) 1,082,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.41
Dec2018 $0.32
Dec2017 -$0.03
Dec2016 -$0.60
Dec2015 -$0.84
Dec2014 -$0.53
Dec2013 -$0.11
Dec2012 -$1.60
Dec2011 $0.66
Dec2010 $0.64
Dec2009 $0.45
Dec2008 -$5.15
Dec2007 -$6.06
Dec2006 -$0.34
Dec2005 $0.40
Dec2004 $0.25
Dec2003 -$0.79
Dec2002 -$3.81
Dec2001 -$0.18
Dec2000 $2.89
Dec1999 -$0.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.08
Dec2018 -$0.17
Dec2017 -$0.42
Dec2016 -$0.65
Dec2015 -$0.61
Dec2014 -$0.40
Dec2013 -$0.22
Dec2012 -$0.51
Dec2011 -$0.61
Dec2010 -$1.53
Dec2009 -$2.45
Dec2008 -$3.33
Dec2007 -$2.05
Dec2006 -$0.32
Dec2005 -$0.48
Dec2004 -$0.72
Dec2003 -$0.95

Recommended Reading:

Other ModernGraham posts about the company

Advanced Micro Devices Inc Valuation – May 2018 $AMD
Advanced Micro Devices Inc Valuation – January 2017 $AMD
Advanced Micro Devices Inc. Analysis – Initial Coverage $AMD
Valuation: Advanced Micro Devices (AMD)

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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.

Advance Auto Parts Inc Valuation – June 2018 $AAP

Company Profile (excerpt from Reuters): Advance Auto Parts, Inc., incorporated on August 1, 2001, provides automotive aftermarket parts in North America, serving do-it-for-me (Professional) and do-it-yourself (DIY), customers. The Company’s stores and branches offer a selection of brand name, original equipment manufacturer (OEM) and private label automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks. The Company serves its Professional and DIY customers through various channels ranging from traditional brick and mortar store locations to self-serving e-commerce sites. As of December 31, 2016, the Company operated 5,062 total stores and 127 branches primarily under the trade names Advance Auto Parts, Autopart International, Carquest and Worldpac. As of December 31, 2016, the Company’s Advance Auto Parts operations consisted of three geographic divisions, which included the operations of the stores operating under the Advance Auto Parts, Carquest and Autopart International trade names. The Company’s e-commerce platforms, primarily consisting of its online Websites and Professional ordering platforms, are part of its integrated operating approach of serving its Professional and DIY customers. The Company’s online Websites allow its DIY customers to pick up merchandise at a store or have their purchases shipped directly to them. The majority of the Company’s online DIY sales are picked up at store locations. Through the Company’s online ordering platforms, Professional customers can place orders with a designated store location for delivery to their places of business or pick-up.

AAP Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AAP – 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 $10,032,004,293 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.61 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 61.82% Pass
6. Moderate PEmg Ratio PEmg < 20 21.22 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.87 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 1.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.49 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

EPSmg $6.46
MG Growth Estimate 2.17%
MG Value $82.90
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $93.66
MG Value based on 0% Growth $54.90
Market Implied Growth Rate 6.36%
Current Price $137.07
% of Intrinsic Value 165.35%

Advance Auto Parts, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. 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 Overvalued after growing its EPSmg (normalized earnings) from $5.64 in 2014 to an estimated $6.46 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.36% 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 Advance Auto Parts, Inc. revealed the company was trading above its Graham Number of $82.94. The company pays a dividend of $0.24 per share, for a yield of 0.2% Its PEmg (price over earnings per share – ModernGraham) was 21.22, which was above the industry average of 17.9. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.4.

Advance Auto Parts, 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) $7.40
Graham Number $82.94
PEmg 21.22
Current Ratio 1.61
PB Ratio 2.87
Current Dividend $0.24
Dividend Yield 0.18%
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 4/1/2018
Total Current Assets $5,617,516,000
Total Current Liabilities $3,480,139,000
Long-Term Debt $1,044,755,000
Total Assets $8,614,953,000
Intangible Assets $1,576,807,000
Total Liabilities $5,068,332,000
Shares Outstanding (Diluted Average) 74,205,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.62
Dec2017 $6.42
Dec2016 $6.20
Dec2015 $6.40
Dec2014 $6.71
Dec2013 $5.32
Dec2012 $5.22
Dec2011 $5.11
Dec2010 $3.95
Dec2009 $2.83
Dec2008 $2.49
Dec2007 $2.28
Dec2006 $2.16
Dec2005 $2.13
Dec2004 $1.66
Dec2003 $1.11
Dec2002 $0.60
Dec2001 $0.13
Dec2000 $0.23
Dec1999 -$0.30
Dec1998 -$0.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.46
Dec2017 $6.32
Dec2016 $6.17
Dec2015 $6.02
Dec2014 $5.64
Dec2013 $4.90
Dec2012 $4.44
Dec2011 $3.81
Dec2010 $3.02
Dec2009 $2.49
Dec2008 $2.26
Dec2007 $2.06
Dec2006 $1.81
Dec2005 $1.46
Dec2004 $1.00
Dec2003 $0.57
Dec2002 $0.24

Recommended Reading:

Other ModernGraham posts about the company

Advance Auto Parts Inc Valuation – August 2017 $AAP
Advance Auto Parts Inc Valuation – November 2016 $AAP
Advance Auto Parts Inc. Analysis – Initial Coverage $AAP

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LKQ Corporation – June 2018 $LKQ
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Ford Motor Company Valuation – April 2018 $F
General Motors Co Valuation – April 2018 $GM
O’Reilly Automotive Inc Valuation – April 2018 $ORLY
Goodyear Tire & Rubber Co Valuation – March 2018 $GT
Genuine Parts Co Valuation – March 2018 $GPC
AutoZone Inc Valuation – February 2018 $AZO

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.

DaVita Inc Valuation – June 2018 $DVA

Company Profile (excerpt from Reuters): DaVita Inc., formerly DaVita HealthCare Partners Inc., incorporated on April 4, 1994, operates two divisions: DaVita Kidney Care (Kidney Care) and DaVita Medical Group (DMG). The Kidney Care division consists of the Company’s the United States dialysis and related lab services, its ancillary services and strategic initiatives, including its international operations, and its corporate administrative support. Its DMG division is a patient- and physician-focused integrated healthcare delivery and management company that provides medical services to members primarily through capitation contracts with some of the nation’s health plans. The Company’s segments include U.S. dialysis and related lab services, DMG, and Other-Ancillary services and strategic initiatives. Its U.S. dialysis and related lab services line of business provide kidney dialysis services in the United States for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD). In addition, as of December 31, 2016, the Company operated or provided administrative services to 154 outpatient dialysis centers serving patients located in 11 countries outside of the United States.

DVA Chart

DVA data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DVA – 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 $11,707,204,361 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.94 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 80.25% Pass
6. Moderate PEmg Ratio PEmg < 20 19.29 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.55 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 2.94 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.62 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.48
MG Growth Estimate 2.95%
MG Value $50.11
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $50.44
MG Value based on 0% Growth $29.57
Market Implied Growth Rate 5.39%
Current Price $67.09
% of Intrinsic Value 133.90%

Davita Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.91 in 2014 to an estimated $3.48 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.39% 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 Davita Inc revealed the company was trading above its Graham Number of $47.61. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 19.29, which was below the industry average of 46.81, 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 $-30.17.

Davita 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) -$30.17
Graham Number $47.61
PEmg 19.29
Current Ratio 2.94
PB Ratio 2.55
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 $8,673,555,000
Total Current Liabilities $2,947,523,000
Long-Term Debt $9,279,885,000
Total Assets $18,942,372,000
Intangible Assets $6,751,958,000
Total Liabilities $14,160,291,000
Shares Outstanding (Diluted Average) 181,835,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.92
Dec2017 $3.47
Dec2016 $4.29
Dec2015 $1.25
Dec2014 $3.33
Dec2013 $2.95
Dec2012 $2.74
Dec2011 $2.48
Dec2010 $1.97
Dec2009 $2.03
Dec2008 $1.77
Dec2007 $1.78
Dec2006 $1.37
Dec2005 $1.10
Dec2004 $1.08
Dec2003 $0.78
Dec2002 $0.61
Dec2001 $0.48
Dec2000 $0.05
Dec1999 -$0.60
Dec1998 -$0.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.48
Dec2017 $3.19
Dec2016 $3.01
Dec2015 $2.43
Dec2014 $2.91
Dec2013 $2.61
Dec2012 $2.36
Dec2011 $2.11
Dec2010 $1.88
Dec2009 $1.76
Dec2008 $1.55
Dec2007 $1.37
Dec2006 $1.11
Dec2005 $0.92
Dec2004 $0.76
Dec2003 $0.48
Dec2002 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Davita Inc Valuation – February 2017 $DVA
DaVita HealthCare Partners Inc Valuation – November 2015 Update $DVA
30 Companies in the Spotlight This Week – 11/15/14
DaVita Healthcare Partners Inc. Annual Valuation – 2014 $DVA

Other ModernGraham posts about related companies

Danaher Corp Valuation – May 2018 $DHR
Agilent Technologies Inc Valuation – May 2018 $A
Cooper Companies Inc Valuation – May 2018 $COO
Edwards Lifesciences Corp Valuation – May 2018 $EW
Baxter International Inc Valuation – May 2018 $BAX
Boston Scientific Corp Valuation – May 2018 $BSX
Centene Corp Valuation – May 2018 $CNC
Abbott Laboratories Valuation – May 2018 $ABT
Becton Dickinson and Co Valuation – May 2018 $BDX
IQVIA Holdings Inc Valuation – Initial Coverage May 2018 $IQV

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.

Advanced Micro Devices Inc Valuation – May 2018 $AMD

Company Profile (excerpt from Reuters): Advanced Micro Devices, Inc. (AMD), incorporated on May 1, 1969, is a global semiconductor company. The Company is engaged in offering x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs) and professional graphics, and, server and embedded processors and semi-custom System-on-Chip (SoC) products and technology for game consoles. The Company’s segments include the Computing and Graphics segment, and the Enterprise, Embedded and Semi-Custom segment. The Computing and Graphics segment primarily includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics. The Enterprise, Embedded and Semi-Custom segment primarily includes server and embedded processors, semi-custom SoC products, development services, technology for game consoles and licensing portions of its intellectual property portfolio. The Company sells its products through its direct sales force and through independent distributors and sales representatives in both domestic and international markets. Its microprocessor customers consist primarily of original equipment manufacturers (OEMs), original design manufacturers (ODMs), system builders and independent distributors in both domestic and international markets.

AMD Chart

AMD data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMD – 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 $10,631,372,090 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.62 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 -113.71% Fail
6. Moderate PEmg Ratio PEmg < 20 -73.13 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 15.94 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 1.62 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.11 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.15
MG Growth Estimate 9.31%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$2.18
MG Value based on 0% Growth -$1.28
Market Implied Growth Rate -40.82%
Current Price $10.97
% of Intrinsic Value N/A

Advanced Micro Devices, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability 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 growing its EPSmg (normalized earnings) from $-0.4 in 2014 to an estimated $-0.15 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 Advanced Micro Devices, Inc. revealed the company was trading above its Graham Number of $2.13. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -73.13, which was below the industry average of 49.78, 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 $-0.29.

Advanced Micro Devices, 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) -$0.29
Graham Number $2.13
PEmg -73.13
Current Ratio 1.62
PB Ratio 15.94
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 $2,751,000,000
Total Current Liabilities $1,697,000,000
Long-Term Debt $1,165,000,000
Total Assets $3,763,000,000
Intangible Assets $289,000,000
Total Liabilities $3,048,000,000
Shares Outstanding (Diluted Average) 1,039,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.32
Dec2017 $0.04
Dec2016 -$0.60
Dec2015 -$0.84
Dec2014 -$0.53
Dec2013 -$0.11
Dec2012 -$1.60
Dec2011 $0.66
Dec2010 $0.64
Dec2009 $0.45
Dec2008 -$5.15
Dec2007 -$6.06
Dec2006 -$0.34
Dec2005 $0.40
Dec2004 $0.25
Dec2003 -$0.79
Dec2002 -$3.81
Dec2001 -$0.18
Dec2000 $2.89
Dec1999 -$0.30
Dec1998 -$0.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.15
Dec2017 -$0.39
Dec2016 -$0.65
Dec2015 -$0.61
Dec2014 -$0.40
Dec2013 -$0.22
Dec2012 -$0.51
Dec2011 -$0.61
Dec2010 -$1.53
Dec2009 -$2.45
Dec2008 -$3.33
Dec2007 -$2.05
Dec2006 -$0.32
Dec2005 -$0.48
Dec2004 -$0.72
Dec2003 -$0.95
Dec2002 -$0.80

Recommended Reading:

Other ModernGraham posts about the company

Advanced Micro Devices Inc Valuation – January 2017 $AMD
Advanced Micro Devices Inc. Analysis – Initial Coverage $AMD
Valuation: Advanced Micro Devices (AMD)

Other ModernGraham posts about related companies

Ametek Inc Valuation – April 2018 $AME
Qorvo Inc Valuation – April 2018 $QRVO
FLIR Systems Inc Valuation – April 2018 $FLIR
NetApp Inc Valuation – April 2018 $NTAP
Applied Materials Inc Valuation – April 2018 $AMAT
Broadcom Inc Valuation – April 2018 $AVGO
Microchip Technology Inc Valuation – April 2018 $MCHP
KLA-Tencor Corp Valuation – March 2018 $KLAC
TE Connectivity Ltd Valuation – March 2018 $TEL
Juniper Networks Inc Valuation – March 2018 $JNPR

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.

Advance Auto Parts Inc Valuation – August 2017 $AAP

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 Undervalued Stocks for the Enterprising Investor – August 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 Advance Auto Parts Inc (AAP) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Advance Auto Parts, Inc. provides automotive aftermarket parts in North America, serving do-it-for-me (Professional) and do-it-yourself (DIY), customers. The Company’s stores and branches offer a selection of brand name, original equipment manufacturer (OEM) and private label automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks. It serves through various channels ranging from traditional brick and mortar store locations to self-serving e-commerce sites. As of December 31, 2016, it operated 5,062 total stores and 127 branches primarily under the trade names Advance Auto Parts, Autopart International, Carquest and Worldpac. As of December 31, 2016, its Advance Auto Parts operations consisted of three geographic divisions, which included the operations of the stores operating under the Advance Auto Parts, Carquest and Autopart International trade names.

AAP Chart

AAP 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 AAP – August 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 $7,076,036,443 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.48 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 91.48% Pass
6. Moderate PEmg Ratio PEmg < 20 16.24 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.27 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 1.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.60 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

EPSmg $5.90
MG Growth Estimate 3.05%
MG Value $86.12
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $85.54
MG Value based on 0% Growth $50.14
Market Implied Growth Rate 3.87%
Current Price $95.80
% of Intrinsic Value 111.24%

Advance Auto Parts, Inc. qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is only initially concerned with the  low current ratio. The Enterprising Investor is only concerned with the low current ratio.  As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.9 in 2013 to an estimated $5.9 for 2017.  This level of demonstrated earnings growth does not support the market’s implied estimate of 3.87% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Advance Auto Parts, Inc. revealed the company was trading above its Graham Number of $67.69.  The company pays a dividend of $0.24 per share, for a yield of 0.3%  Its PEmg (price over earnings per share – ModernGraham) was 16.24, which was below the industry average of 18.18, 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 $0.23.

Advance Auto Parts, 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) $0.23
Graham Number $67.69
PEmg 16.24
Current Ratio 1.48
PB Ratio 2.27
Current Dividend $0.24
Dividend Yield 0.25%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $5,326,215,000
Total Current Liabilities $3,598,327,000
Long-Term Debt $1,043,690,000
Total Assets $8,437,413,000
Intangible Assets $1,612,795,000
Total Liabilities $5,309,136,000
Shares Outstanding (Diluted Average) 74,093,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.15
Dec2016 $6.20
Dec2015 $6.40
Dec2014 $6.71
Dec2013 $5.32
Dec2012 $5.22
Dec2011 $5.11
Dec2010 $3.95
Dec2009 $2.83
Dec2008 $2.49
Dec2007 $2.28
Dec2006 $2.16
Dec2005 $2.13
Dec2004 $1.66
Dec2003 $1.11
Dec2002 $0.60
Dec2001 $0.13
Dec2000 $0.23
Dec1999 -$0.30
Dec1998 -$0.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.90
Dec2016 $6.17
Dec2015 $6.02
Dec2014 $5.64
Dec2013 $4.90
Dec2012 $4.44
Dec2011 $3.81
Dec2010 $3.02
Dec2009 $2.49
Dec2008 $2.26
Dec2007 $2.06
Dec2006 $1.81
Dec2005 $1.46
Dec2004 $1.00
Dec2003 $0.57
Dec2002 $0.24
Dec2001 $0.04

Recommended Reading:

Other ModernGraham posts about the company

Advance Auto Parts Inc Valuation – November 2016 $AAP
Advance Auto Parts Inc. Analysis – Initial Coverage $AAP

Other ModernGraham posts about related companies

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Monro Muffler Brake Inc Valuation – Initial Coverage $MNRO
Group 1 Automotive Inc Valuation – Initial Coverage $GPI
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Linamar Corp Valuation – Initial Coverage $TSE:LNR
AutoNation Inc Valuation – March 2017 $AN
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Canadian Tire Corp Limited Valuation – Initial Coverage $TSE:CTC.A
LKQ Corporation Valuation – Initial Coverage $LKQ
Lithia Motors Inc Valuation – Initial Coverage $LAD

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.

Davita Inc Valuation – February 2017 $DVA

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 Davita Inc (DVA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): DaVita Inc., formerly DaVita HealthCare Partners Inc., is a provider of kidney care services. The Company operates Kidney Care division and HealthCare Partners (HCP) division. The Company’s segments include U.S. dialysis and related lab services, HCP and Other-Ancillary services and strategic initiatives. The Company’s Kidney Care division is a provider of dialysis services in the United States, treating patients with chronic kidney failure and end stage renal disease (ESRD). HCP division is a patient and physician-focused integrated health care delivery and management company.

DVA Chart

DVA data by YCharts

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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.

Learn More About Premium Membership

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of DVA – 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 $13,449,572,943 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.48 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 54.03% Pass
6. Moderate PEmg Ratio PEmg < 20 21.93 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.92 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 1.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.97 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.15
MG Growth Estimate 3.11%
MG Value $46.31
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $45.65
MG Value based on 0% Growth $26.76
Market Implied Growth Rate 6.72%
Current Price $69.04
% of Intrinsic Value 149.07%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.61 in 2013 to an estimated $3.15 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.72% 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 Davita Inc revealed the company was trading above its Graham Number of $42.37. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 21.93, which was below the industry average of 32.29, 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 $-51.4.

Davita 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) -$51.40
Graham Number $42.37
PEmg 21.93
Current Ratio 1.48
PB Ratio 2.92
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $3,980,228,000
Total Current Liabilities $2,696,445,000
Long-Term Debt $8,947,327,000
Total Assets $18,741,257,000
Intangible Assets $10,935,084,000
Total Liabilities $14,093,210,000
Shares Outstanding (Diluted Average) 196,743,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.34
Dec2016 $4.29
Dec2015 $1.25
Dec2014 $3.33
Dec2013 $2.95
Dec2012 $2.74
Dec2011 $2.48
Dec2010 $1.97
Dec2009 $2.03
Dec2008 $1.77
Dec2007 $1.78
Dec2006 $1.37
Dec2005 $1.10
Dec2004 $1.08
Dec2003 $0.78
Dec2002 $0.61
Dec2001 $0.48
Dec2000 $0.05
Dec1999 -$0.60
Dec1998 -$0.04
Dec1997 $0.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.15
Dec2016 $3.01
Dec2015 $2.43
Dec2014 $2.91
Dec2013 $2.61
Dec2012 $2.36
Dec2011 $2.11
Dec2010 $1.88
Dec2009 $1.76
Dec2008 $1.55
Dec2007 $1.37
Dec2006 $1.11
Dec2005 $0.92
Dec2004 $0.76
Dec2003 $0.48
Dec2002 $0.26
Dec2001 $0.06

Recommended Reading:

Other ModernGraham posts about the company

DaVita HealthCare Partners Inc Valuation – November 2015 Update $DVA
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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.

Advanced Micro Devices Inc Valuation – January 2017 $AMD

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 – December 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 Advanced Micro Devices Inc (AMD) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Advanced Micro Devices, Inc. is a global semiconductor company. The Company is engaged in offering x86 microprocessors, as a standalone central processing unit (CPU) or as incorporated into an accelerated processing unit (APU), chipsets, and discrete graphics processing units (GPUs) for the consumer, commercial and professional graphics markets, and server and embedded CPUs, GPUs and APUs, and semi-custom System-on-Chip (SoC) products and technology for game consoles. It operates in two segments: the Computing and Graphics segment, which includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics, and the Enterprise, Embedded and Semi-Custom segment, which includes server and embedded processors, dense servers, semi-custom SoC products, engineering services and royalties. Its desktop PC product brands for microprocessors are AMD A-Series, AMD E-Series, AMD FX CPU, AMD Athlon CPU and APU.

AMD Chart

AMD data by YCharts

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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. 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 AMD – January 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 $10,743,585,982 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.92 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 -81.78% Fail
6. Moderate PEmg Ratio PEmg < 20 -17.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 24.34 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 1.92 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.21 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 -$0.65
MG Growth Estimate -3.96%
MG Value -$0.38
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$9.40
MG Value based on 0% Growth -$5.51
Market Implied Growth Rate -13.12%
Current Price $11.50
% of Intrinsic Value N/A

Advanced Micro Devices, 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, 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 $-0.51 in 2012 to an estimated $-0.65 for 2016. 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 Advanced Micro Devices, 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 -17.75, which was below the industry average of 28.12, 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 $-0.5.

Advanced Micro Devices, 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) -$0.50
Graham Number $0.00
PEmg -17.72
Current Ratio 1.92
PB Ratio 24.30
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $2,824,000,000
Total Current Liabilities $1,473,000,000
Long-Term Debt $1,632,000,000
Total Assets $3,616,000,000
Intangible Assets $524,000,000
Total Liabilities $3,231,000,000
Shares Outstanding (Diluted Average) 815,000,000

Earnings Per Share History

Next Fiscal Year Estimate -$0.59
Dec2015 -$0.84
Dec2014 -$0.53
Dec2013 -$0.11
Dec2012 -$1.60
Dec2011 $0.66
Dec2010 $0.64
Dec2009 $0.45
Dec2008 -$5.15
Dec2007 -$6.06
Dec2006 -$0.34
Dec2005 $0.40
Dec2004 $0.25
Dec2003 -$0.79
Dec2002 -$3.81
Dec2001 -$0.18
Dec2000 $2.89
Dec1999 -$0.30
Dec1998 -$0.36
Dec1997 -$0.08
Dec1996 -$0.26

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate -$0.65
Dec2015 -$0.61
Dec2014 -$0.40
Dec2013 -$0.22
Dec2012 -$0.51
Dec2011 -$0.61
Dec2010 -$1.53
Dec2009 -$2.45
Dec2008 -$3.33
Dec2007 -$2.05
Dec2006 -$0.32
Dec2005 -$0.48
Dec2004 -$0.72
Dec2003 -$0.95
Dec2002 -$0.80
Dec2001 $0.60
Dec2000 $0.78

Recommended Reading:

Other ModernGraham posts about the company

Advanced Micro Devices Inc. Analysis – Initial Coverage $AMD
Valuation: Advanced Micro Devices (AMD)

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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.

Advance Auto Parts Inc Valuation – November 2016 $AAP

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 – August 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 Advance Auto Parts Inc (AAP) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Advance Auto Parts, Inc. provides automotive aftermarket parts in North America, serving do-it-for-me (commercial) and do-it-yourself (DIY), customers, as well as independently owned operators. The Company’s stores and branches offer a selection of brand name, original equipment manufacturer (OEM) and private label automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks. The Company also offers other miscellaneous offerings, including e-services. The Company operates approximately 5,170 total stores and over 120 branches, which operate in the United States, Canada, Puerto Rico and the United States Virgin Islands under the names Advance Auto Parts, Autopart International (AI), Carquest and Worldpac. The Company serves its commercial customers and DIY customers through various channels ranging from traditional brick and mortar store locations to self-serving e-commerce sites.

AAP Chart

AAP data by YCharts

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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-aap-november-2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,703,896,847 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.37 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 156.45% Pass
6. Moderate PEmg Ratio PEmg < 20 26.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.20 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 1.37 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.73 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

aap-value-chart-november-2016

EPSmg $6.23
MG Growth Estimate 6.08%
MG Value $128.71
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $90.37
MG Value based on 0% Growth $52.98
Market Implied Growth Rate 8.79%
Current Price $162.57
% of Intrinsic Value 126.31%

Advance Auto Parts, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the low current ratio. 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 Overvalued after growing its EPSmg (normalized earnings) from $4.44 in 2012 to an estimated $6.23 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.79% 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 Advance Auto Parts, Inc. revealed the company was trading above its Graham Number of $74.61. The company pays a dividend of $0.24 per share, for a yield of 0.1% Its PEmg (price over earnings per share – ModernGraham) was 26.08, which was above the industry average of 17.79. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.02.

Advance Auto Parts, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

aap-charts-november-2016

Net Current Asset Value (NCAV) -$4.02
Graham Number $74.61
PEmg 26.08
Current Ratio 1.37
PB Ratio 4.20
Current Dividend $0.24
Dividend Yield 0.15%
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 9/1/2016
Total Current Assets $5,262,126,000
Total Current Liabilities $3,837,351,000
Long-Term Debt $1,042,633,000
Total Assets $8,414,645,000
Intangible Assets $1,643,753,000
Total Liabilities $5,558,924,000
Shares Outstanding (Diluted Average) 73,860,000

Earnings Per Share History

Next Fiscal Year Estimate $6.38
Dec2015 $6.40
Dec2014 $6.71
Dec2013 $5.32
Dec2012 $5.22
Dec2011 $5.11
Dec2010 $3.95
Dec2009 $2.83
Dec2008 $2.49
Dec2007 $2.28
Dec2006 $2.16
Dec2005 $2.13
Dec2004 $1.66
Dec2003 $1.11
Dec2002 $0.60
Dec2001 $0.13
Dec2000 $0.23
Dec1999 -$0.30
Dec1998 -$0.04

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $6.23
Dec2015 $6.02
Dec2014 $5.64
Dec2013 $4.90
Dec2012 $4.44
Dec2011 $3.81
Dec2010 $3.02
Dec2009 $2.49
Dec2008 $2.26
Dec2007 $2.06
Dec2006 $1.81
Dec2005 $1.46
Dec2004 $1.00
Dec2003 $0.57
Dec2002 $0.24
Dec2001 $0.04
Dec2000 -$0.01

Recommended Reading:

Other ModernGraham posts about the company

Advance Auto Parts Inc. Analysis – Initial Coverage $AAP

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Genuine Parts Co Valuation – July 2016 $GPC
Johnson Controls Inc Valuation – July 2016 $JCI
Goodyear Tire & Rubber Co Valuation – July 2016 $GT
Harley-Davidson Inc Valuation – June 2016 $HOG
Autozone Inc Valuation – June 2016 $AZO

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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