Maxim Integrated Products Inc Valuation – April 2019 #MXIM

Company Profile (excerpt from Reuters): Maxim Integrated Products, Inc., incorporated on August 19, 1987, is engaged in designing, developing, manufacturing and marketing a range of linear and mixed-signal integrated circuits, referred to as analog circuits. The Company also provides a range of high-frequency process technologies and capabilities for use in custom designs. The Company caters to automotive, communications and data center, computing, consumer and industrial markets. The Company offers a range of products, such as switching regulators, battery management, isolated power, charge pumps, linear regulators, light emitting diode (LED) drivers, motor driver integrated circuits (ICs), monitors and sequencers, transceivers, controllers and expanders, level translators, signal line protection ICs, broadband switches, universal serial bus (USB) products, current loop products, powerline communications, real-time clocks, embedded security, microcontrollers, 1-Wire, iButton, data loggers, clock generation and distribution, memory products, optical, signal integrity, high-speed signaling, and display power and control.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MXIM – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,578,217,914 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.54 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 76.97% Pass
6. Moderate PEmg Ratio PEmg < 20 33.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.09 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 6.54 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.44 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 $1.73
MG Growth Estimate 7.55%
MG Value $40.74
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $25.03
MG Value based on 0% Growth $14.67
Market Implied Growth Rate 12.26%
Current Price $56.99
% of Intrinsic Value 139.88%

Maxim Integrated Products Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the 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 $1.15 in 2015 to an estimated $1.73 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.26% 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 Maxim Integrated Products Inc. revealed the company was trading above its Graham Number of $18.6. The company pays a dividend of $1.56 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 33.02, which was below the industry average of 35.4, 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 $1.87.

Maxim Integrated Products 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) $1.87
Graham Number $18.60
PEmg 33.02
Current Ratio 6.54
PB Ratio 9.09
Current Dividend $1.56
Dividend Yield 2.74%
Number of Consecutive Years of Dividend Growth 8

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ModernGraham tagged articles Morningstar
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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,657,918,000
Total Current Liabilities $406,480,000
Long-Term Debt $991,866,000
Total Assets $3,888,927,000
Intangible Assets $599,412,000
Total Liabilities $2,133,513,000
Shares Outstanding (Diluted Average) 280,008,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.22
Jun2018 $1.64
Jun2017 $1.98
Jun2016 $0.79
Jun2015 $0.71
Jun2014 $1.23
Jun2013 $1.52
Jun2012 $1.29
Jun2011 $1.61
Jun2010 $0.40
Jun2009 $0.03
Jun2008 $0.98
Jun2007 $0.87
Jun2006 $1.14
Jun2005 $1.35
Jun2004 $0.88
Jun2003 $0.70
Jun2002 $0.73
Jun2001 $0.93
Jun2000 $1.04
Jun1999 $0.64

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.73
Jun2018 $1.41
Jun2017 $1.28
Jun2016 $0.99
Jun2015 $1.15
Jun2014 $1.31
Jun2013 $1.23
Jun2012 $1.01
Jun2011 $0.84
Jun2010 $0.53
Jun2009 $0.69
Jun2008 $1.03
Jun2007 $1.03
Jun2006 $1.06
Jun2005 $0.98
Jun2004 $0.82
Jun2003 $0.80

Recommended Reading:

Other ModernGraham posts about the company

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

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IPG Photonics Corp Valuation – March 2019 #IPGP
Micron Technology Inc Valuation – March 2019 #MU
Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC

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.

United Rentals Inc Valuation – April 2019 #URI

Company Profile (excerpt from Reuters): United Rentals, Inc., incorporated on July 20, 1998, is a holding company. The Company is an equipment rental company, which operates throughout the United States and Canada. It operates through two segments: general rentals, and trench, power and pump. The general rentals segment includes the rental of construction, aerial, industrial and homeowner equipment and related services and activities. The trench, power and pump segment includes the rental of specialty construction products and related services. As of October 17, 2018, the Company had an integrated network of 1075 rental locations in North America and 11 in Europe. The Company conducts its operations through its subsidiaries, NES Rentals Holdings II, Inc., United Rentals (North America), Inc. (URNA) and subsidiaries of URNA.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of URI – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,549,825,287 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.83 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 2565.90% Pass
6. Moderate PEmg Ratio PEmg < 20 8.87 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.90 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 0.83 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -30.55 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 $13.67
MG Growth Estimate 15.00%
MG Value $526.14
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $198.16
MG Value based on 0% Growth $116.16
Market Implied Growth Rate 0.18%
Current Price $121.20
% of Intrinsic Value 23.04%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.32 in 2015 to an estimated $13.67 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.18% 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 United Rentals, Inc. revealed the company was trading below its Graham Number of $128.67. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 8.87, which was below the industry average of 32.68, 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 $-159.15.

United Rentals, 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) -$159.15
Graham Number $128.67
PEmg 8.87
Current Ratio 0.83
PB Ratio 2.90
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 $1,761,000,000
Total Current Liabilities $2,116,000,000
Long-Term Debt $10,844,000,000
Total Assets $18,133,000,000
Intangible Assets $6,142,000,000
Total Liabilities $14,730,000,000
Shares Outstanding (Diluted Average) 81,487,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.27
Dec2018 $13.12
Dec2017 $15.73
Dec2016 $6.45
Dec2015 $6.07
Dec2014 $5.15
Dec2013 $3.64
Dec2012 $0.79
Dec2011 $1.38
Dec2010 -$0.44
Dec2009 -$1.02
Dec2008 -$12.62
Dec2007 $3.25
Dec2006 $2.06
Dec2005 $1.80
Dec2004 -$0.88
Dec2003 -$3.29
Dec2002 -$4.88
Dec2001 $1.18
Dec2000 $1.89
Dec1999 $1.53

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $13.67
Dec2018 $11.01
Dec2017 $9.11
Dec2016 $5.34
Dec2015 $4.32
Dec2014 $3.00
Dec2013 $1.57
Dec2012 -$0.43
Dec2011 -$1.33
Dec2010 -$2.37
Dec2009 -$2.66
Dec2008 -$2.75
Dec2007 $1.66
Dec2006 $0.23
Dec2005 -$0.86
Dec2004 -$1.86
Dec2003 -$1.81

Recommended Reading:

Other ModernGraham posts about the company

United Rentals Inc Valuation – June 2018 $URI
United Rentals Inc Valuation – September 2017 $URI
United Rentals Inc Valuation – August 2016 $URI
United Rentals Inc. Analysis – Initial Coverage $URI

Other ModernGraham posts about related companies

Verisk Analytics Inc Valuation – March 2019 #VRSK
Global Payments Inc Valuation – March 2019 #GPN
Robert Half International Inc Valuation – March 2019 #RHI
Alliance Data Systems Corp Valuation – March 2019 #ADS
IHS Markit Ltd Valuation – February 2019 $INFO
Automatic Data Processing Inc Valuation – February 2019 $ADP
Fiserv Inc Valuation – February 2019 $FISV
Rollins Inc Valuation – February 2019 $ROL
Iron Mountain Inc Valuation – February 2019 $IRM
Cintas Corp Valuation – February 2019 $CTAS

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.

5 Overvalued Dow Components – April 2019

There are so many great companies in the market today, but there are also many overvalued companies. By using the ModernGraham Valuation Model, I’ve selected five overvalued Dow Components reviewed by ModernGraham according to the ModernGraham approach.

Defensive Investors are defined as investors who need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to select companies that present a moderate (though still low) amount of risk. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.  Only speculators should pursue companies not suitable for either the Defensive Investor or the Enterprising Investor.

Chevron Corp (CVX)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $11.43 in 2014 to an estimated $5.06 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.57% 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 Chevron Corporation revealed the company was trading below its Graham Number of $121.52. The company pays a dividend of $4.32 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.64, which was below the industry average of 60.49, 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 $-34.6.

Chevron Corporation performs fairly well in the ModernGraham grading system, scoring a B-.  (Read the full valuation)

Exxon Mobil Corp (XOM)

Exxon Mobil Corporation 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, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $7.98 in 2014 to an estimated $4.14 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.28% 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 Exxon Mobil Corporation revealed the company was trading above its Graham Number of $67.18. The company pays a dividend of $3.06 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.07, which was below the industry average of 50.98, 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 $-24.31.

Exxon Mobil Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D+.  (Read the full valuation)

The Coca-Cola Company (KO)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.85 in 2014 to an estimated $1.36 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.04% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into The Coca-Cola Co revealed the company was trading above its Graham Number of $13.29. The company pays a dividend of $1.48 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 36.58, which was above the industry average of 25.8. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.75.

The Coca-Cola Co receives an average overall rating in the ModernGraham grading system, scoring a C-.  (Read the full valuation)

Merck & Co (MRK)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.44 in 2014 to an estimated $1.86 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.16% 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 Merck & Co., Inc. revealed the company was trading above its Graham Number of $27.34. The company pays a dividend of $1.89 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 40.82, which was above the industry average of 36.89. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.57.

Merck & Co., Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.  (Read the full valuation)

Caterpillar Inc. (CAT)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $5.79 in 2014 to an estimated $4.86 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.81% 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 Caterpillar Inc. revealed the company was trading above its Graham Number of $75.93. The company pays a dividend of $3.1 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 26.12, which was below the industry average of 31.29, 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 $-39.81.

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

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.

Federal Realty Investment Trust Valuation – March 2019 #FRT

Company Profile (excerpt from Reuters): Federal Realty Investment Trust, incorporated on May 21, 1999, is an equity real estate investment trust (REIT). The Company specializes in the ownership, management and redevelopment of retail and mixed-use properties located primarily in affluent communities in selected metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as in California and South Florida. As of December 31, 2016, the Company owned or had an interest in community and neighborhood shopping centers and mixed-use properties, which operated as 96 retail real estate projects and included approximately 22.6 million square feet. As of December 31, 2016, its 96 retail shopping center and mixed-use properties were located in 12 states and the District of Columbia. As of December 31, 2016, there were approximately 2,900 leases with tenants providing a range of retail products and services. These tenants range from sole proprietorships to national retailers, or corporate group of tenants.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FRT – 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 $9,809,619,332 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.83 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 52.19% Pass
6. Moderate PEmg Ratio PEmg < 20 40.21 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.95 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 1.83 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 13.82 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 $3.28
MG Growth Estimate 3.85%
MG Value $53.18
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $47.57
MG Value based on 0% Growth $27.89
Market Implied Growth Rate 15.85%
Current Price $131.91
% of Intrinsic Value 248.06%

Federal Realty Investment Trust 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 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 Overvalued after growing its EPSmg (normalized earnings) from $2.61 in 2015 to an estimated $3.28 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.85% 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 Federal Realty Investment Trust revealed the company was trading above its Graham Number of $43.9. The company pays a dividend of $4.04 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 40.21, 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 $-44.98.

Federal Realty Investment Trust performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$44.98
Graham Number $43.90
PEmg 40.21
Current Ratio 1.83
PB Ratio 3.95
Current Dividend $4.04
Dividend Yield 3.06%
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 $502,456,000
Total Current Liabilities $274,004,000
Long-Term Debt $3,157,685,000
Total Assets $6,289,644,000
Intangible Assets $0
Total Liabilities $3,822,314,000
Shares Outstanding (Diluted Average) 73,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.91
Dec2018 $3.18
Dec2017 $3.97
Dec2016 $3.50
Dec2015 $3.03
Dec2014 $2.41
Dec2013 $2.46
Dec2012 $2.35
Dec2011 $2.28
Dec2010 $1.98
Dec2009 $1.63
Dec2008 $2.19
Dec2007 $3.45
Dec2006 $1.92
Dec2005 $1.94
Dec2004 $1.41
Dec2003 $1.59
Dec2002 $0.85
Dec2001 $1.09
Dec2000 $1.35
Dec1999 $1.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.28
Dec2018 $3.38
Dec2017 $3.35
Dec2016 $2.94
Dec2015 $2.61
Dec2014 $2.37
Dec2013 $2.28
Dec2012 $2.15
Dec2011 $2.14
Dec2010 $2.12
Dec2009 $2.20
Dec2008 $2.39
Dec2007 $2.34
Dec2006 $1.71
Dec2005 $1.53
Dec2004 $1.30
Dec2003 $1.22

Recommended Reading:

Other ModernGraham posts about the company

Federal Realty Investment Trust Valuation – June 2018 $FRT
Federal Realty Investment Trust Valuation – Initial Coverage $FRT

Other ModernGraham posts about related companies

UDR Inc Valuation – March 2019 #UDR
Mid-America Apartment Communities Inc Valuation – March 2019 #MAA
Extra Space Storage Inc Valuation – March 2019 #EXR
Digital Realty Trust Inc Valuation – March 2019 #DLR
Equity Residential Valuation – March 2019 #EQR
Prologis Inc Valuation – March 2019 #PLD
Duke Realty Corp Valuation – March 2019 $DRE
Realty Income Corp Valuation – February 2019 $O
Ventas Inc Valuation – February 2019 $VTR
SL Green Realty Corp Valuation – February 2019 $SLG

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.

Mettler-Toledo International Inc Valuation – March 2019 #MTD

Company Profile (excerpt from Reuters): Mettler-Toledo International Inc., incorporated on December 6, 1991, is a supplier of precision instruments and services. The Company operates through five segments: U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations and Other. The Company manufactures weighing instruments for use in laboratory, industrial, packaging, logistics and food retailing applications. The Company is also a provider of analytical instruments for use in life science, reaction engineering and real-time analytic systems used in drug and chemical compound development, and process analytics instruments used for in-line measurement in production processes. In addition, the Company is also a supplier of end-of-line inspection systems used in production and packaging for food, pharmaceutical and other industries. The Company serves food and beverage producers; food retailers; chemical, specialty chemicals and cosmetics companies, and the transportation and logistics industry, among others.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MTD – 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 $17,570,648,912 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.42 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 134.87% Pass
6. Moderate PEmg Ratio PEmg < 20 38.42 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 30.56 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 1.42 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.16 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $18.41
MG Growth Estimate 10.18%
MG Value $531.23
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $266.95
MG Value based on 0% Growth $156.49
Market Implied Growth Rate 14.96%
Current Price $707.41
% of Intrinsic Value 133.17%

Mettler-Toledo International 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 $10.97 in 2015 to an estimated $18.41 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.96% 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 Mettler-Toledo International Inc. revealed the company was trading above its Graham Number of $109.73. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 38.42, 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 $-38.56.

Mettler-Toledo International 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) -$38.56
Graham Number $109.73
PEmg 38.42
Current Ratio 1.42
PB Ratio 30.56
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 $1,045,860,000
Total Current Liabilities $734,434,000
Long-Term Debt $985,021,000
Total Assets $2,618,847,000
Intangible Assets $752,088,000
Total Liabilities $2,028,784,000
Shares Outstanding (Diluted Average) 25,491,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $22.60
Dec2018 $19.88
Dec2017 $14.24
Dec2016 $14.22
Dec2015 $12.48
Dec2014 $11.44
Dec2013 $9.96
Dec2012 $9.14
Dec2011 $8.21
Dec2010 $6.80
Dec2009 $5.03
Dec2008 $5.79
Dec2007 $4.70
Dec2006 $3.86
Dec2005 $2.52
Dec2004 $2.37
Dec2003 $2.11
Dec2002 $2.21
Dec2001 $1.68
Dec2000 $1.66
Dec1999 $1.16

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $18.41
Dec2018 $15.69
Dec2017 $13.22
Dec2016 $12.29
Dec2015 $10.97
Dec2014 $9.85
Dec2013 $8.64
Dec2012 $7.65
Dec2011 $6.64
Dec2010 $5.65
Dec2009 $4.84
Dec2008 $4.45
Dec2007 $3.56
Dec2006 $2.86
Dec2005 $2.30
Dec2004 $2.13
Dec2003 $1.93

Recommended Reading:

Other ModernGraham posts about the company

Mettler-Toledo International Inc Valuation – June 2018 $MTD
Mettler-Toledo International Inc Valuation – Initial Coverage $MTD

Other ModernGraham posts about related companies

DaVita Inc Valuation – March 2019 #DVA
Danaher Corp Valuation – March 2019 #DHR
Agilent Technologies Inc Valuation – March 2019 #A
ResMed Inc Valuation – March 2019 #RMD
Cooper Companies Inc Valuation – March 2019 #COO
Edwards Lifesciences Corp Valuation – March 2019 $EW
Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX
Centene Corp Valuation – March 2019 $CNC
Abbott Laboratories Valuation – February 2019 $ABT

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.

5 Undervalued Midcap Stocks For Value Investors – March 2019

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve screened the 800+ companies reviewed by ModernGraham to select five midcap undervalued companies for value investors.

 

Each company has been determined to be suitable for either the Defensive Investor or the Enterprising Investor according to the ModernGraham approach. Defensive Investors are defined as investors who need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able select companies that present a moderate (though still low) amount of risk.

Alliance Data Systems Corporation (ADS)

Alliance Data Systems Corporation 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 no initial concerns. 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 Undervalued after growing its EPSmg (normalized earnings) from $7.77 in 2015 to an estimated $15.71 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.19% 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 Alliance Data Systems Corporation revealed the company was trading above its Graham Number of $138.66. The company pays a dividend of $2.28 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 10.89, which was below the industry average of 32.74, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-61.7.

Alliance Data Systems Corporation performs fairly well in the ModernGraham grading system, scoring a B.  (See the full valuation)

Unum Group (UNM)

Unum Group qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. 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 Undervalued after growing its EPSmg (normalized earnings) from $2.71 in 2015 to an estimated $4.02 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Unum Group revealed the company was trading below its Graham Number of $68.83. The company pays a dividend of $0.98 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 8.85, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Unum Group fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

PVH Corp (PVH)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.95 in 2015 to an estimated $7.54 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.47% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into PVH Corp revealed the company was trading below its Graham Number of $122.25. The company pays a dividend of $0.15 per share, for a yield of 0.1% Its PEmg (price over earnings per share – ModernGraham) was 15.44, which was below the industry average of 44.2, 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 $-36.86.

PVH Corp fares extremely well in the ModernGraham grading system, scoring an A-.  (See the full valuation)

Packaging Corp Of America (PKG)

Packaging Corp Of America qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.21 in 2014 to an estimated $6.28 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.21% 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 above the price.

At the time of valuation, further research into Packaging Corp Of America revealed the company was trading above its Graham Number of $63.49. The company pays a dividend of $2.52 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 14.93, which was below the industry average of 15.32, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.74.

Packaging Corp Of America performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Zions Bancorporation NA (ZION)

Zions Bancorp 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 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 Undervalued after growing its EPSmg (normalized earnings) from $1.12 in 2014 to an estimated $2.67 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.39% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Zions Bancorp revealed the company was trading below its Graham Number of $56.43. The company pays a dividend of $0.44 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 17.29, which was above the industry average of 14.65.

Zions Bancorp performs fairly well in the ModernGraham grading system, scoring a B.  (See the full valuation)

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

Disclaimer: 

The author 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 and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions.  Please also read our full disclaimer.

Consolidated Edison Inc Valuation – March 2019 #ED

Company Profile (excerpt from Reuters): Consolidated Edison, Inc. (Con Edison), incorporated on September 3, 1997, is a holding company. The Company operates through its subsidiaries, which include Consolidated Edison Company of New York, Inc. (CECONY), Orange and Rockland Utilities, Inc. (O&R), Con Edison Clean Energy Businesses, Inc. (the Clean Energy Businesses) and Con Edison Transmission, Inc. (Con Edison Transmission). CECONY’s principal business operations are its regulated electric, gas and steam delivery businesses. O&R’s principal business operations are its regulated electric and gas delivery businesses. The Clean Energy Businesses develop, own and operate renewable and energy infrastructure projects and provide energy-related products and services to wholesale and retail customers. Con Edison Transmission, through its subsidiaries, invests in electric and gas transmission projects.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ED – 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 $27,410,352,908 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.62 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 22.57% Fail
6. Moderate PEmg Ratio PEmg < 20 19.77 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.60 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 0.62 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.47 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 $4.32
MG Growth Estimate 1.99%
MG Value $53.88
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $62.63
MG Value based on 0% Growth $36.71
Market Implied Growth Rate 5.64%
Current Price $85.40
% of Intrinsic Value 158.49%

Consolidated Edison, 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. 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 $3.81 in 2015 to an estimated $4.32 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.64% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Consolidated Edison, Inc. revealed the company was trading above its Graham Number of $69.52. The company pays a dividend of $2.86 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.77, 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 $-105.15.

Consolidated Edison, 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) -$105.15
Graham Number $69.52
PEmg 19.77
Current Ratio 0.62
PB Ratio 1.60
Current Dividend $2.86
Dividend Yield 3.35%
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 $3,864,000,000
Total Current Liabilities $6,207,000,000
Long-Term Debt $17,495,000,000
Total Assets $53,920,000,000
Intangible Assets $2,094,000,000
Total Liabilities $37,081,000,000
Shares Outstanding (Diluted Average) 315,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.00
Dec2018 $4.42
Dec2017 $4.94
Dec2016 $4.12
Dec2015 $4.05
Dec2014 $3.71
Dec2013 $3.61
Dec2012 $3.86
Dec2011 $3.57
Dec2010 $3.47
Dec2009 $3.14
Dec2008 $4.37
Dec2007 $3.47
Dec2006 $2.95
Dec2005 $2.94
Dec2004 $2.27
Dec2003 $2.38
Dec2002 $3.02
Dec2001 $3.21
Dec2000 $2.74
Dec1999 $3.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.32
Dec2018 $4.40
Dec2017 $4.29
Dec2016 $3.93
Dec2015 $3.81
Dec2014 $3.68
Dec2013 $3.62
Dec2012 $3.64
Dec2011 $3.56
Dec2010 $3.53
Dec2009 $3.50
Dec2008 $3.52
Dec2007 $2.99
Dec2006 $2.74
Dec2005 $2.68
Dec2004 $2.61
Dec2003 $2.81

Recommended Reading:

Other ModernGraham posts about the company

Consolidated Edison Inc Valuation – June 2018 $ED
Consolidated Edison Inc Valuation – February 2017 $ED
Consolidated Edison Inc Valuation – August 2016 $ED
Consolidated Edison Analysis – 2015 Update $ED
21 Companies in the Spotlight This Week – June 14, 2014

Other ModernGraham posts about related companies

Sempra Energy Valuation – March 2019 #SRE
Ameren Corp Valuation – March 2019 #AEE
NextEra Energy Inc Valuation – February 2019 $NEE
Dominion Energy Inc Valuation – February 2019 $D
Exelon Corp Valuation – January 2019 $EXC
NRG Energy Inc Valuation – January 2019 $NRG
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.

United Parcel Service Inc Valuation – March 2019 #UPS

Company Profile (excerpt from Reuters): United Parcel Service, Inc. (UPS), incorporated on July 15, 1999, is a package delivery company. The Company is a provider of global supply chain management solutions. The Company operates through three segments: U.S. Domestic Package operations, International Package operations, and Supply Chain & Freight operations. As of December 31, 2016, the Company delivered packages in over 220 countries and territories. WorldShip, a desktop shipping application of UPS, provides middle-market and customers with shipping capabilities. Customers can create custom labels, set up shipment alerts, create and upload customs documentation, track and export shipments, create reports and integrate with their enterprise resource planning and accounting systems to streamline shipping with real-time connectivity. UPS marketplace shipping, which integrates www.ups.com with eBay, Amazon, Etsy and BigCommerce, allows marketplace sellers to ship their orders through www.ups.com or WorldShip. UPS marketplace shipping provides shipment processing, multiple payment options (including PayPal), order and shipment history and automatic tracking updates. The Company serves the global market for logistics services, which include transportation, distribution, contract logistics, ground freight, ocean freight, air freight, customs brokerage, insurance and financing.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of UPS – 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 $74,248,106,732 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.15 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 130.38% Pass
6. Moderate PEmg Ratio PEmg < 20 18.08 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 30.56 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 1.15 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.20 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.90
MG Growth Estimate 7.42%
MG Value $137.71
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $85.54
MG Value based on 0% Growth $50.14
Market Implied Growth Rate 4.79%
Current Price $106.68
% of Intrinsic Value 77.47%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.95 in 2015 to an estimated $5.9 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 4.79% 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 within a margin of safety relative to the price.

At the time of valuation, further research into United Parcel Service, Inc. revealed the company was trading above its Graham Number of $24.06. The company pays a dividend of $3.64 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.08, which was below the industry average of 18.91, 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 $-35.37.

United Parcel Service, 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) -$35.37
Graham Number $24.06
PEmg 18.08
Current Ratio 1.15
PB Ratio 30.56
Current Dividend $3.64
Dividend Yield 3.41%
Number of Consecutive Years of Dividend Growth 9

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 $16,210,000,000
Total Current Liabilities $14,087,000,000
Long-Term Debt $19,537,000,000
Total Assets $50,016,000,000
Intangible Assets $5,887,000,000
Total Liabilities $46,979,000,000
Shares Outstanding (Diluted Average) 870,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.31
Dec2018 $5.51
Dec2017 $5.61
Dec2016 $3.86
Dec2015 $5.35
Dec2014 $3.28
Dec2013 $4.61
Dec2012 $0.83
Dec2011 $3.84
Dec2010 $3.33
Dec2009 $2.14
Dec2008 $2.94
Dec2007 $0.36
Dec2006 $3.86
Dec2005 $3.47
Dec2004 $2.93
Dec2003 $2.55
Dec2002 $2.81
Dec2001 $2.10
Dec2000 $2.50
Dec1999 $0.77

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.90
Dec2018 $5.04
Dec2017 $4.71
Dec2016 $4.04
Dec2015 $3.95
Dec2014 $3.22
Dec2013 $3.11
Dec2012 $2.45
Dec2011 $3.01
Dec2010 $2.57
Dec2009 $2.32
Dec2008 $2.51
Dec2007 $2.40
Dec2006 $3.33
Dec2005 $2.96
Dec2004 $2.67
Dec2003 $2.40

Recommended Reading:

Other ModernGraham posts about the company

United Parcel Service Inc Valuation – May 2018 $UPS
United Parcel Service Inc Valuation – February 2017 $UPS
United Parcel Service Inc. Valuation – October 2015 Update $UPS
27 Companies in the Spotlight This Week – 11/8/14
United Parcel Service Inc. Annual Valuation – 2014 $UPS

Other ModernGraham posts about related companies

JB Hunt Transport Services Inc Valuation – February 2019 $JBHT
C.H. Robinson Worldwide Inc Valuation – February 2019 $CHRW
FedEx Corporation Valuation – January 2019 $FDX
Expeditors International of Washington Inc Valuation – January 2019 $EXPD
Kirby Corp Valuation – September 2018 $KEX
Knight-Swift Transportation Holdings Inc Valuation – August 2018 $KNX
Saia Inc Valuation – July 2018 $SAIA
Ryder System Inc Valuation – June 2018 $R
United Parcel Service Inc Valuation – May 2018 $UPS
JB Hunt Transport Services Inc Valuation – May 2018 $JBHT

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.

ResMed Inc Valuation – March 2019 #RMD

Company Profile (excerpt from Reuters): ResMed Inc., incorporated on March 31, 1994, is a holding company. The Company is engaged in the development, manufacturing, distribution and marketing of medical devices and cloud-based software applications that diagnose, treat and manage respiratory disorders, including sleep disordered breathing (SDB), chronic obstructive pulmonary disease (COPD), neuromuscular disease and other diseases. SDB includes obstructive sleep apnea (OSA) and other respiratory disorders that occur during sleep. The Company’s cloud-based software digital health applications, along with its devices, are designed to provide connected care to improve patient outcomes. The Company offers a treatment, nasal Continuous Positive Airway Pressure (CPAP), for OSA. CPAP systems deliver pressurized air, typically through a nasal mask, to prevent collapse of the upper airway during sleep. Its manufacturing operations are located in Australia, Singapore, Malaysia, France and the United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RMD – 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 $14,454,671,393 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.44 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 74.20% Pass
6. Moderate PEmg Ratio PEmg < 20 39.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.46 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 2.44 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.89 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 $2.57
MG Growth Estimate 2.51%
MG Value $34.82
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $37.32
MG Value based on 0% Growth $21.88
Market Implied Growth Rate 15.38%
Current Price $101.06
% of Intrinsic Value 290.28%

ResMed Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. 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 Overvalued after growing its EPSmg (normalized earnings) from $2.2 in 2015 to an estimated $2.57 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.38% 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 ResMed Inc. revealed the company was trading above its Graham Number of $31.42. The company pays a dividend of $1.4 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 39.26, 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 $-5.82.

ResMed 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) -$5.82
Graham Number $31.42
PEmg 39.26
Current Ratio 2.44
PB Ratio 7.46
Current Dividend $1.40
Dividend Yield 1.39%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

ModernGraham tagged articles Morningstar
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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,063,539,000
Total Current Liabilities $436,443,000
Long-Term Debt $1,185,500,000
Total Assets $3,859,816,000
Intangible Assets $2,243,971,000
Total Liabilities $1,903,772,000
Shares Outstanding (Diluted Average) 144,349,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.04
Jun2018 $2.19
Jun2017 $2.40
Jun2016 $2.49
Jun2015 $2.47
Jun2014 $2.39
Jun2013 $2.10
Jun2012 $1.71
Jun2011 $1.44
Jun2010 $1.23
Jun2009 $0.95
Jun2008 $0.70
Jun2007 $0.43
Jun2006 $0.58
Jun2005 $0.46
Jun2004 $0.41
Jun2003 $0.33
Jun2002 $0.28
Jun2001 $0.09
Jun2000 $0.17
Jun1999 $0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.57
Jun2018 $2.36
Jun2017 $2.42
Jun2016 $2.36
Jun2015 $2.20
Jun2014 $1.97
Jun2013 $1.67
Jun2012 $1.37
Jun2011 $1.12
Jun2010 $0.90
Jun2009 $0.70
Jun2008 $0.55
Jun2007 $0.46
Jun2006 $0.46
Jun2005 $0.37
Jun2004 $0.30
Jun2003 $0.23

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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.

Expedia Group Inc Valuation – March 2019 #EXPE

Company Profile (excerpt from Reuters): Expedia Group, Inc., formerly Expedia, Inc., incorporated on April 18, 2005, is an online travel company. The Company operates through four segments: Core Online Travel Agencies (Core OTA), trivago, Egencia and HomeAway. It has created a global travel marketplace used by a range of leisure and corporate travelers, offline retail travel agents and travel service providers. The Company offers travel and non-travel advertisers access to a source of incremental traffic and transactions through its media and advertising offerings on its transaction-based Websites. The Company’s Core OTA segment provides a range of travel and advertising services to its customers across the world, through a range of brands, including Expedia.com and Hotels.com in the United States, and localized Expedia and Hotels.com Websites throughout the world, Orbitz.com, Expedia Affiliate Network, Hotwire.com, Travelocity, Wotif Group, CarRentals.com and Classic Vacations. The Company’s trivago segment sends referrals to online travel companies and travel service providers from its hotel metasearch Websites. Its Egencia segment, which also includes Orbitz Worldwide (Orbitz) for Business, provides managed travel services to corporate customers across the world. The Company’s HomeAway segment operates an online marketplace for the vacation rental industry.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EXPE – 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 $18,501,820,260 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 Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 32.73% Fail
6. Moderate PEmg Ratio PEmg < 20 32.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.37 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.64 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.30 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 $3.81
MG Growth Estimate 1.23%
MG Value $41.76
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $55.29
MG Value based on 0% Growth $32.41
Market Implied Growth Rate 12.23%
Current Price $125.67
% of Intrinsic Value 300.94%

Expedia Group 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, 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 $3.53 in 2015 to an estimated $3.81 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.23% 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 Expedia Group Inc revealed the company was trading above its Graham Number of $61.37. The company pays a dividend of $1.24 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 32.96, which was below the industry average of 41.58, 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 $-47.47.

Expedia Group 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) -$47.47
Graham Number $61.37
PEmg 32.96
Current Ratio 0.64
PB Ratio 3.37
Current Dividend $1.24
Dividend Yield 0.99%
Number of Consecutive Years of Dividend Growth 6

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 $5,197,000,000
Total Current Liabilities $8,060,000,000
Long-Term Debt $3,717,000,000
Total Assets $18,033,000,000
Intangible Assets $10,112,000,000
Total Liabilities $12,382,000,000
Shares Outstanding (Diluted Average) 151,344,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.00
Dec2018 $2.65
Dec2017 $2.42
Dec2016 $1.82
Dec2015 $5.70
Dec2014 $2.99
Dec2013 $1.67
Dec2012 $2.00
Dec2011 $3.41
Dec2010 $2.93
Dec2009 $2.06
Dec2008 -$17.60
Dec2007 $1.88
Dec2006 $1.40
Dec2005 $1.30
Dec2004 $0.00
Dec2003 $0.66
Dec2002 $0.46
Dec2001 $0.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.81
Dec2018 $2.85
Dec2017 $2.94
Dec2016 $3.08
Dec2015 $3.53
Dec2014 $2.49
Dec2013 $2.30
Dec2012 $1.26
Dec2011 $0.11
Dec2010 -$1.65
Dec2009 -$3.36
Dec2008 -$4.91
Dec2007 $1.30
Dec2006 $0.93
Dec2005 $0.63
Dec2004 $0.28
Dec2003 $0.35

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Expedia Inc. Annual Stock Valuation – 2014 $EXPE

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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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