Edison International Valuation – January 2019 $EIX

Company Profile (excerpt from Reuters): Edison International, incorporated on April 20, 1987, is the holding company of Southern California Edison Company (SCE). As of December 31, 2016, SCE, a public utility, was primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. The Company is also the parent company of Edison Energy Group, Inc. (Edison Energy Group), a holding company for subsidiaries engaged in pursuing competitive business opportunities across energy services and distributed solar to commercial and industrial customers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EIX – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,880,508,028 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 51.19% Pass
6. Moderate PEmg Ratio PEmg < 20 16.81 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.26 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 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.95 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 $3.27
MG Growth Estimate 4.60%
MG Value $57.78
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $47.35
MG Value based on 0% Growth $27.76
Market Implied Growth Rate 4.15%
Current Price $54.88
% of Intrinsic Value 94.98%

Edison International 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. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.5 in 2014 to an estimated $3.27 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 4.15% 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 Edison International revealed the company was trading below its Graham Number of $55.49. The company pays a dividend of $2.23 per share, for a yield of 4.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.81, which was below the industry average of 21.62, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-109.76.

Edison International receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$109.76
Graham Number $55.49
PEmg 16.81
Current Ratio 0.72
PB Ratio 1.26
Current Dividend $2.23
Dividend Yield 4.07%
Number of Consecutive Years of Dividend Growth 15

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,383,000,000
Total Current Liabilities $4,719,000,000
Long-Term Debt $14,629,000,000
Total Assets $53,563,000,000
Intangible Assets $0
Total Liabilities $39,274,000,000
Shares Outstanding (Diluted Average) 327,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.82
Dec2017 $1.72
Dec2016 $3.97
Dec2015 $3.10
Dec2014 $4.89
Dec2013 $2.78
Dec2012 -$0.56
Dec2011 -$0.11
Dec2010 $3.82
Dec2009 $2.58
Dec2008 $3.68
Dec2007 $3.31
Dec2006 $3.57
Dec2005 $3.43
Dec2004 $2.77
Dec2003 $2.50
Dec2002 $3.28
Dec2001 $3.17
Dec2000 -$5.84
Dec1999 $1.79
Dec1998 $1.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.27
Dec2017 $3.09
Dec2016 $3.46
Dec2015 $2.81
Dec2014 $2.50
Dec2013 $1.44
Dec2012 $1.14
Dec2011 $2.21
Dec2010 $3.38
Dec2009 $3.21
Dec2008 $3.47
Dec2007 $3.28
Dec2006 $3.21
Dec2005 $3.03
Dec2004 $2.28
Dec2003 $1.68
Dec2002 $1.13

Recommended Reading:

Other ModernGraham posts about the company

Edison International Valuation – March 2018 $EIX
Edison International Valuation – July 2016 $EIX
47 Companies in the Spotlight This Week – 5/16/15
Edison International Annual Valuation – 2015 $EIX
16 Companies in the Spotlight This Week – 4/26/14

Other ModernGraham posts about related companies

WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO
CenterPoint Energy Inc Valuation – January 2019 $CNP
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Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU
Spire Inc Valuation – August 2018 $SR
Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB

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.

Edison International Valuation – March 2018 $EIX

Company Profile (excerpt from Reuters): Edison International, incorporated on April 20, 1987, is the holding company of Southern California Edison Company (SCE). As of December 31, 2016, SCE, a public utility, was primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. The Company is also the parent company of Edison Energy Group, Inc. (Edison Energy Group), a holding company for subsidiaries engaged in pursuing competitive business opportunities across energy services and distributed solar to commercial and industrial customers.

EIX Chart

EIX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EIX – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,500,042,498 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.53 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 52.15% Pass
6. Moderate PEmg Ratio PEmg < 20 19.15 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.76 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.53 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.49 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 $3.29
MG Growth Estimate 4.72%
MG Value $58.92
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $47.64
MG Value based on 0% Growth $27.93
Market Implied Growth Rate 5.33%
Current Price $62.92
% of Intrinsic Value 106.79%

Edison International 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. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.5 in 2014 to an estimated $3.29 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.33% 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 Edison International revealed the company was trading above its Graham Number of $55.92. The company pays a dividend of $2.23 per share, for a yield of 3.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.15, which was below the industry average of 24.93, 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 $-114.05.

Edison International receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$114.05
Graham Number $55.92
PEmg 19.15
Current Ratio 0.53
PB Ratio 1.76
Current Dividend $2.23
Dividend Yield 3.55%
Number of Consecutive Years of Dividend Growth 15

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $3,729,000,000
Total Current Liabilities $7,068,000,000
Long-Term Debt $11,642,000,000
Total Assets $52,580,000,000
Intangible Assets $0
Total Liabilities $40,909,000,000
Shares Outstanding (Diluted Average) 326,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.88
Dec2017 $1.72
Dec2016 $3.97
Dec2015 $3.10
Dec2014 $4.89
Dec2013 $2.78
Dec2012 -$0.56
Dec2011 -$0.11
Dec2010 $3.82
Dec2009 $2.58
Dec2008 $3.68
Dec2007 $3.31
Dec2006 $3.57
Dec2005 $3.43
Dec2004 $2.77
Dec2003 $2.50
Dec2002 $3.28
Dec2001 $3.17
Dec2000 -$5.84
Dec1999 $1.79
Dec1998 $1.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.29
Dec2017 $3.09
Dec2016 $3.46
Dec2015 $2.81
Dec2014 $2.50
Dec2013 $1.44
Dec2012 $1.14
Dec2011 $2.21
Dec2010 $3.38
Dec2009 $3.21
Dec2008 $3.47
Dec2007 $3.28
Dec2006 $3.21
Dec2005 $3.03
Dec2004 $2.28
Dec2003 $1.68
Dec2002 $1.13

Recommended Reading:

Other ModernGraham posts about the company

47 Companies in the Spotlight This Week – 5/16/15
Edison International Annual Valuation – 2015 $EIX
16 Companies in the Spotlight This Week – 4/26/14
Edison International (EIX) Annual Valuation – 2014

Other ModernGraham posts about related companies

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Atmos Energy Corp Valuation – Initial Coverage $ATO
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Public Service Enterprise Group Inc Valuation – July 2017 $PEG
Eversource Energy Valuation – July 2017 $ES
PPL Corp Valuation – June 2017 $PPL
Entergy Corp Valuation – April 2017 $ETR
California Water Service Group Valuation – Initial Coverage $CWT
TransAlta Corporation – Initial Coverage $TSE:TA

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.

Edison International Valuation – July 2016 $EIX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Edison International (EIX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Edison International is the parent holding company of Southern California Edison Company (SCE). SCE is engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. It is also the parent company of subsidiaries that are engaged in competitive businesses focused on providing energy services to commercial and industrial customers, including distributed resources, engaging in transmission opportunities, and exploring distributed water treatment and recycling. Its transmission and substation projects include Tehachapi, West of Devers and Mesa Substation. The Tehachapi Project consists of electric transmission lines and substations between eastern Kern County and San Bernardino County. The West of Devers Project upgrades SCE’s existing West of Devers transmission line system by replacing a portion of the existing 220 kilovolt transmission lines and structures with higher-capacity transmission lines and structures.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of EIX – July 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $25,292,725,963 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.57 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 23.41% Fail
6. Moderate PEmg Ratio PEmg < 20 22.76 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.23 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 0.57 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.23 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EIX value chart July 2016

EPSmg $3.41
MG Growth Estimate 15.00%
MG Value $131.34
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $49.46
MG Value based on 0% Growth $29.00
Market Implied Growth Rate 7.13%
Current Price $77.65
% of Intrinsic Value 59.12%

Edison International 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 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 Undervalued after growing its EPSmg (normalized earnings) from $1.14 in 2012 to an estimated $3.41 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.13% 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.

Edison International receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

EIX charts July 2016

Net Current Asset Value (NCAV) -$111.56
Graham Number $54.93
PEmg 22.76
Current Ratio 0.57
PB Ratio 2.23
Current Dividend $1.80
Dividend Yield 2.31%
Number of Consecutive Years of Dividend Growth 14

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $2,427,000,000
Total Current Liabilities $4,233,000,000
Long-Term Debt $11,243,000,000
Total Assets $50,459,000,000
Intangible Assets $0
Total Liabilities $39,020,000,000
Shares Outstanding (Diluted Average) 328,000,000

Earnings Per Share History

Next Fiscal Year Estimate $3.82
Dec2015 $3.10
Dec2014 $4.89
Dec2013 $2.78
Dec2012 -$0.56
Dec2011 -$0.11
Dec2010 $3.82
Dec2009 $2.58
Dec2008 $3.68
Dec2007 $3.31
Dec2006 $3.57
Dec2005 $3.43
Dec2004 $2.77
Dec2003 $2.50
Dec2002 $3.28
Dec2001 $3.17
Dec2000 -$5.84
Dec1999 $1.79
Dec1998 $1.84
Dec1997 $1.73
Dec1996 $1.64

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.41
Dec2015 $2.81
Dec2014 $2.50
Dec2013 $1.44
Dec2012 $1.14
Dec2011 $2.21
Dec2010 $3.38
Dec2009 $3.21
Dec2008 $3.47
Dec2007 $3.28
Dec2006 $3.21
Dec2005 $3.03
Dec2004 $2.28
Dec2003 $1.68
Dec2002 $1.13
Dec2001 $0.22
Dec2000 -$0.76

Recommended Reading:

Other ModernGraham posts about the company

47 Companies in the Spotlight This Week – 5/16/15
Edison International Annual Valuation – 2015 $EIX
16 Companies in the Spotlight This Week – 4/26/14
Edison International (EIX) Annual Valuation – 2014

Other ModernGraham posts about related companies

WEC Energy Group Inc Valuation – June 2016 $WEC
CenterPoint Energy Inc Valuation – June 2016 $CNP
Southern Company Valuation – June 2016 $SO
CMS Energy Corp Valuation – June 2016 $CMS
Xcel Energy Inc Valuation – May 2016 $XEL
PPL Corporation Valuation – January 2016 Update $PPL
Entergy Corp Valuation – January 2016 Update $ETR
PPL Corporation Valuation – January 2016 Update $PPL
Entergy Corp Valuation – January 2016 Update $ETR
Pinnacle West Capital Corp Valuation – December 2015 Update $PNW

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.

Edison International Annual Valuation – 2015 $EIX

500px-Edison_International_Logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – April 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Edison International (EIX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Edison International, is a parent holding company of Southern California Edison Company (SCE) and subsidiaries. The Company operates through its operating subsidiaries. SCE is a utility company primarily engaged in the business of supplying and delivering electricity in the United States. The Company is also the parent company of subsidiaries engaged in businesses related to the generation or use of electricity. The Company’s another subsidiary, Edison Capital, holds energy and infrastructure investments in the form of leveraged leases and partnership interests in housing projects in the United States. Another subsidiary, SoCore Energy, LLC, is a distributer of solar developer focused on commercial rooftop installations. The Company also has subsidiaries formed to hold equity interests and engage in businesses in emerging sectors of the electricity industry.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 2/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $60.67
MG Value $53.46
MG Opinion Overvalued
Value Based on 3% Growth $42.46
Value Based on 0% Growth $24.89
Market Implied Growth Rate 6.11%
Net Current Asset Value (NCAV) -$108.58
PEmg 20.72
Current Ratio 0.83
PB Ratio 1.80

Balance Sheet – March 2015

Current Assets $3,780,000,000
Current Liabilities $4,571,000,000
Total Debt $11,133,000,000
Total Assets $50,578,000,000
Intangible Assets $0
Total Liabilities $39,502,000,000
Outstanding Shares 329,000,000

Earnings Per Share

2015 (estimate) $3.45
2014 $4.89
2013 $2.78
2012 -$0.56
2011 -$0.11
2010 $3.82
2009 $2.58
2008 $3.68
2007 $3.31
2006 $3.57
2005 $3.43

Earnings Per Share – ModernGraham

2015 (estimate) $2.93
2014 $2.50
2013 $1.44
2012 $1.14
2011 $2.21
2010 $3.38

Dividend History

Conclusion:

Edison International is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, and the poor PEmg ratio.  The Enterprising Investor is concerned with the level of debt relative to the current assets and the lack of earnings stability over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.21 in 2011 to only an estimated $2.93 for 2015.  This level of growth does not support the market’s implied estimate of 6.11% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Edison International (EIX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author 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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Edison International (EIX) Annual Valuation – 2014

500px-Edison_International_Logo.svgBenjamin 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 5 Low PEmg Companies for the Defensive Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Edison International (EIX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Edison International, is a holding company of Southern California Edison Company (SCE). SCE is a public utility primarily engaged in the business of supplying electricity to an approximately 50,000 square-mile area of southern California. The SCE service territory contains a population of nearly 14 million people and SCE serves the population through approximately 5 million customer accounts. In August 2013, Edison International completed the acquisition of SoCore Energy, LLC.

EIX Chart

EIX data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 1/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $56.74
MG Value $12.85
MG Opinion Overvalued
Value Based on 3% Growth $40.09
Value Based on 0% Growth $23.50
Market Implied Growth Rate 6.01%
Net Current Asset Value (NCAV) -$102.50
PEmg 20.52
Current Ratio 0.68
PB Ratio 1.86

Balance Sheet – 12/31/2013

Current Assets $3,312,000,000
Current Liabilities $4,881,000,000
Total Debt $9,825,000,000
Total Assets $46,646,000,000
Intangible Assets $0
Total Liabilities $36,708,000,000
Outstanding Shares 325,810,000

Earnings Per Share

2013 $2.67
2012 $4.55
2011 -$0.10
2010 $3.81
2009 $2.60
2008 $3.68
2007 $3.32
2006 $3.28
2005 $3.34
2004 $0.68

Earnings Per Share – ModernGraham

2013 $2.76
2012 $2.84
2011 $2.21
2010 $3.36
2009 $3.17
2008 $3.26

Dividend History

EIX Dividend Chart

EIX Dividend data by YCharts

Conclusion:

Edison International is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor’s concerns are the low current ratio, the lack of sufficient earnings stability or growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor has an issue with the high level of debt relative to the current assets, the lack of earnings growth and the lack of earnings stability.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through a review of ModernGraham Stocks & Screens and 5 Undervalued Companies for the Enterprising Investor.  From a valuation side of things, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $3.17 in 2009 to $2.76 for 2013.  This demonstrated drop in earnings does not support the market’s implied estimate of 6.01% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Edison International (EIX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Edison International (EIX) or any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

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

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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.

Duke Energy Corp Valuation – March 2019 #DUK

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DUK – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $65,576,389,981 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.65 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 31.52% Fail
6. Moderate PEmg Ratio PEmg < 20 21.51 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.48 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.65 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.53 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.19
MG Growth Estimate 3.09%
MG Value $61.57
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $60.79
MG Value based on 0% Growth $35.64
Market Implied Growth Rate 6.51%
Current Price $90.20
% of Intrinsic Value 146.50%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.48 in 2015 to an estimated $4.19 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Duke Energy Corp revealed the company was trading above its Graham Number of $81.52. The company pays a dividend of $3.64 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.51, which was below the industry average of 23.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-128.09.

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

Stage 3: Information for Further Research

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

Useful Links:

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

Most Recent Balance Sheet Figures

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

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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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.

Sempra Energy Valuation – March 2019 #SRE

Company Profile (excerpt from Reuters): Sempra Energy, incorporated on October 11, 1996, is a holding company. The Company’s principal operating units are Sempra Utilities, which includes its San Diego Gas & Electric Company (SDG&E), Southern California Gas Company (SoCalGas) and Sempra South American Utilities segments, and Sempra Infrastructure, which includes its Sempra Mexico, Sempra Renewables and Sempra LNG & Midstream segments. As of December 31, 2016, SDG&E’s service area covered 4,100 square miles.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SRE – 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 $33,514,994,996 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.48 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 -13.25% Fail
6. Moderate PEmg Ratio PEmg < 20 29.47 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.76 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.57 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.15
MG Growth Estimate -1.64%
MG Value $21.70
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $60.18
MG Value based on 0% Growth $35.28
Market Implied Growth Rate 10.48%
Current Price $122.30
% of Intrinsic Value 563.67%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.66 in 2015 to an estimated $4.15 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.48% 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 Sempra Energy revealed the company was trading above its Graham Number of $84.66. The company pays a dividend of $3.58 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 29.47, which was above the industry average of 23.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-136.52.

Sempra Energy 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) -$136.52
Graham Number $84.66
PEmg 29.47
Current Ratio 0.48
PB Ratio 1.76
Current Dividend $3.58
Dividend Yield 2.93%
Number of Consecutive Years of Dividend Growth 8

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 $3,645,000,000
Total Current Liabilities $7,523,000,000
Long-Term Debt $21,611,000,000
Total Assets $60,638,000,000
Intangible Assets $2,645,000,000
Total Liabilities $41,390,000,000
Shares Outstanding (Diluted Average) 276,476,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.85
Dec2018 $3.42
Dec2017 $1.01
Dec2016 $5.46
Dec2015 $5.37
Dec2014 $4.63
Dec2013 $4.01
Dec2012 $3.48
Dec2011 $5.51
Dec2010 $2.86
Dec2009 $4.52
Dec2008 $4.43
Dec2007 $4.16
Dec2006 $5.38
Dec2005 $3.65
Dec2004 $0.92
Dec2003 $3.03
Dec2002 $2.87
Dec2001 $2.52
Dec2000 $2.06
Dec1999 $1.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.15
Dec2018 $3.53
Dec2017 $3.75
Dec2016 $4.94
Dec2015 $4.66
Dec2014 $4.23
Dec2013 $4.05
Dec2012 $4.10
Dec2011 $4.37
Dec2010 $3.96
Dec2009 $4.48
Dec2008 $4.21
Dec2007 $3.88
Dec2006 $3.55
Dec2005 $2.62
Dec2004 $2.16
Dec2003 $2.66

Recommended Reading:

Other ModernGraham posts about the company

Sempra Energy Valuation – May 2018 $SRE
Sempra Energy Valuation – February 2017 $SRE
Sempra Energy Valuation – October 2015 Update $SRE
Sempra Energy Annual Valuation – October 2014 $SRE

Other ModernGraham posts about related companies

NextEra Energy Inc Valuation – February 2019 $NEE
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DTE Energy Co Valuation – January 2019 $DTE
AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX
WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO

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.

Ameren Corp Valuation – March 2019 #AEE

Company Profile (excerpt from Reuters): Ameren Corporation (Ameren), incorporated on August 7, 1995, is a utility holding company. The Company’s primary assets are its equity interests in its subsidiaries, including Ameren Missouri, Ameren Illinois and Ameren Transmission Company (ATXI). The Company operates through four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas and Ameren Transmission. The Ameren Missouri segment includes all of the operations of Ameren Missouri. The Ameren Illinois Electric Distribution segment consists of the electric distribution business of Ameren Illinois. The Ameren Illinois Natural Gas segment consists of the natural gas business of Ameren Illinois. The ATXI segment is primarily composed of the aggregated electric transmission businesses of Ameren Illinois and ATXI.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AEE – 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 $17,540,601,213 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.57 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -780.47% Fail
6. Moderate PEmg Ratio PEmg < 20 24.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.28 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.57 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.81 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 $2.93
MG Growth Estimate 15.00%
MG Value $112.68
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $42.44
MG Value based on 0% Growth $24.88
Market Implied Growth Rate 8.00%
Current Price $71.70
% of Intrinsic Value 63.63%

Ameren Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings 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. 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 $1.35 in 2015 to an estimated $2.93 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8% 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 Ameren Corp revealed the company was trading above its Graham Number of $47.77. The company pays a dividend of $1.85 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.5, which was above the industry average of 23.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-72.59.

Ameren Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$72.59
Graham Number $47.77
PEmg 24.50
Current Ratio 0.57
PB Ratio 2.28
Current Dividend $1.85
Dividend Yield 2.58%
Number of Consecutive Years of Dividend Growth 5

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 $1,533,000,000
Total Current Liabilities $2,687,000,000
Long-Term Debt $7,859,000,000
Total Assets $27,215,000,000
Intangible Assets $411,000,000
Total Liabilities $19,442,000,000
Shares Outstanding (Diluted Average) 246,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.25
Dec2018 $3.32
Dec2017 $2.14
Dec2016 $2.68
Dec2015 $2.59
Dec2014 $2.40
Dec2013 $1.18
Dec2012 -$4.01
Dec2011 $2.15
Dec2010 $0.58
Dec2009 $2.78
Dec2008 $2.88
Dec2007 $2.98
Dec2006 $2.66
Dec2005 $3.02
Dec2004 $2.84
Dec2003 $3.25
Dec2002 $2.61
Dec2001 $3.40
Dec2000 $3.33
Dec1999 $2.81

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.93
Dec2018 $2.72
Dec2017 $2.34
Dec2016 $1.95
Dec2015 $1.35
Dec2014 $0.64
Dec2013 $0.02
Dec2012 -$0.08
Dec2011 $2.01
Dec2010 $2.09
Dec2009 $2.85
Dec2008 $2.88
Dec2007 $2.90
Dec2006 $2.87
Dec2005 $2.99
Dec2004 $3.01
Dec2003 $3.09

Recommended Reading:

Other ModernGraham posts about the company

Ameren Corp Valuation – May 2018 $AEE
Ameren Corp Valuation – February 2017 $AEE
Ameren Corp Valuation – August 2016 $AEE
Ameren Corporation Analysis – 2015 Update $AEE
21 Companies in the Spotlight This Week – June 14, 2014

Other ModernGraham posts about related companies

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
WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO

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.

NextEra Energy Inc Valuation – February 2019 $NEE

Company Profile (excerpt from Reuters): NextEra Energy, Inc. (NEE), incorporated on September 10, 1984, is a holding company. The Company is an electric power companies in North America and, through its subsidiary NextEra Energy Resources, LLC (NEER) and its affiliated entities, is the generator of renewable energy from the wind and sun. NEE also owns and/or operates generation, transmission and distribution facilities to support its services to retail and wholesale customers, and has investments in gas infrastructure assets. Its segments include FPL and NEER. NEE also provides risk management services related to power and gas consumption related to its own generation assets and for a limited number of wholesale customers in selected markets. As of December 31, 2016, NEE’s business included approximately 45,900 megawatts (MW) of generating capacity with electric generation facilities located in 30 states in the United States, four provinces in Canada and in Spain; approximately 16% of the installed base of the United States wind power production capacity; approximately 11% of the installed base of the United States universal solar power production capacity; fleets of nuclear power stations in the United States, with eight reactors at five sites located in four states, representing approximately 6% of U.S. nuclear power electric generating capacity; more than 5.4 million retail and wholesale electric customer accounts, and approximately 14,700 people employed, primarily in the United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NEE – 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 $89,957,748,174 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.36 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 141.32% Pass
6. Moderate PEmg Ratio PEmg < 20 18.88 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.42 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 0.36 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.40 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 $9.97
MG Growth Estimate 13.09%
MG Value $345.61
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $144.50
MG Value based on 0% Growth $84.71
Market Implied Growth Rate 5.19%
Current Price $188.13
% of Intrinsic Value 54.43%

NextEra Energy 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 has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.32 in 2015 to an estimated $9.97 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.19% 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 NextEra Energy Inc revealed the company was trading above its Graham Number of $115.16. The company pays a dividend of $4.44 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 18.88, which was below the industry average of 22.79, 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 $-124.47.

NextEra Energy Inc fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$124.47
Graham Number $115.16
PEmg 18.88
Current Ratio 0.36
PB Ratio 2.42
Current Dividend $4.44
Dividend Yield 2.36%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,393,000,000
Total Current Liabilities $17,563,000,000
Long-Term Debt $26,782,000,000
Total Assets $103,702,000,000
Intangible Assets $1,599,000,000
Total Liabilities $66,289,000,000
Shares Outstanding (Diluted Average) 481,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.25
Dec2018 $13.88
Dec2017 $11.39
Dec2016 $6.24
Dec2015 $6.06
Dec2014 $5.60
Dec2013 $4.47
Dec2012 $4.56
Dec2011 $4.59
Dec2010 $4.74
Dec2009 $3.97
Dec2008 $4.07
Dec2007 $3.27
Dec2006 $3.23
Dec2005 $2.34
Dec2004 $1.24
Dec2003 $1.27
Dec2002 $0.69
Dec2001 $1.16
Dec2000 $2.07
Dec1999 $2.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.97
Dec2018 $10.09
Dec2017 $7.72
Dec2016 $5.72
Dec2015 $5.32
Dec2014 $4.90
Dec2013 $4.52
Dec2012 $4.49
Dec2011 $4.35
Dec2010 $4.10
Dec2009 $3.65
Dec2008 $3.27
Dec2007 $2.67
Dec2006 $2.16
Dec2005 $1.53
Dec2004 $1.18
Dec2003 $1.25

Recommended Reading:

Other ModernGraham posts about the company

NextEra Energy Inc Valuation – May 2018 $NEE
NextEra Energy Inc Valuation – December 2016 $NEE
NextEra Energy Inc. Analysis – August 2015 Update $NEE
47 Companies in the Spotlight This Week – 5/16/15
NextEra Energy Inc. Quarterly Valuation – May 2015 $NEE

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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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