Express Scripts Holding Co Valuation – April 2018 $ESRX

Company Profile (excerpt from Reuters): Express Scripts Holding Company, incorporated on July 15, 2011, is a pharmacy benefit management (PBM) company. The Company is engaged in providing healthcare management and administration services to its clients, including managed care organizations, health insurers, third-party administrators, employers, union-sponsored benefit plans, workers’ compensation plans and government health programs. The Company operates through two segments: PBM and Other Business Operations. The PBM segment includes its integrated PBM operations and specialty pharmacy operations. Its Other Business Operations segment includes its subsidiary, United BioSource Corporation (UBC), and its specialty distribution operations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ESRX – April 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 $39,206,101,300 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.67 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 251.12% Pass
6. Moderate PEmg Ratio PEmg < 20 10.34 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.19 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 0.67 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.54 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 $6.74
MG Growth Estimate 15.00%
MG Value $259.59
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $97.77
MG Value based on 0% Growth $57.31
Market Implied Growth Rate 0.92%
Current Price $69.72
% of Intrinsic Value 26.86%

Express Scripts Holding Company 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. 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 $2.31 in 2014 to an estimated $6.74 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.92% 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 Express Scripts Holding Company revealed the company was trading below its Graham Number of $79.82. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 10.34, which was below the industry average of 44.81, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-42.54.

Express Scripts Holding Company receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$42.54
Graham Number $79.82
PEmg 10.34
Current Ratio 0.67
PB Ratio 2.19
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 12/1/2017
Total Current Assets $11,957,100,000
Total Current Liabilities $17,846,400,000
Long-Term Debt $14,981,500,000
Total Assets $54,255,800,000
Intangible Assets $40,725,600,000
Total Liabilities $36,136,200,000
Shares Outstanding (Diluted Average) 568,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.85
Dec2017 $7.74
Dec2016 $5.39
Dec2015 $3.56
Dec2014 $2.64
Dec2013 $2.25
Dec2012 $1.76
Dec2011 $2.53
Dec2010 $2.17
Dec2009 $1.56
Dec2008 $1.54
Dec2007 $1.08
Dec2006 $0.84
Dec2005 $0.67
Dec2004 $0.45
Dec2003 $0.40
Dec2002 $0.32
Dec2001 $0.20
Dec2000 -$0.02
Dec1999 $0.25
Dec1998 $0.08

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.74
Dec2017 $5.23
Dec2016 $3.69
Dec2015 $2.74
Dec2014 $2.31
Dec2013 $2.12
Dec2012 $2.01
Dec2011 $2.01
Dec2010 $1.65
Dec2009 $1.30
Dec2008 $1.09
Dec2007 $0.80
Dec2006 $0.62
Dec2005 $0.48
Dec2004 $0.34
Dec2003 $0.27
Dec2002 $0.19

Recommended Reading:

Other ModernGraham posts about the company

Express Scripts Inc. Analysis – 2015 Update $ESRX
19 Companies in the Spotlight This Week – 7/26/14
Express Scripts Holding Company Annual Valuation – 2014 $ESRX

Other ModernGraham posts about related companies

Stryker Corp Valuation – April 2018 $SYK
Cerner Corporation Valuation – April 2018 $CERN
Quest Diagnostics Inc Valuation – April 2018 $DGX
Laboratory Corporation of America Holdings Valuation – March 2018 $LH
Intuitive Surgical Inc valuation – March 2018 $ISRG
PerkinElmer Inc Valuation – March 2018 $PKI
Cardinal Health Inc Valuation – March 2018 $CAH
Varian Medical Systems Inc Valuation – March 2018 $VAR
Zimmer Biomet Holdings Inc Valuation – March 2018 $ZBH
Henry Schein Inc Valuation – March 2018 $HSIC

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.

Express Scripts Holding Co Valuation – August 2016 $ESRX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Express Scripts Holding Co (ESRX) fares in the ModernGraham valuation model.

ESRX Chart

ESRX data by YCharts

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of ESRX – August 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 $46,081,613,300 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.55 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 179.52% Pass
6. Moderate PEmg Ratio PEmg < 20 19.73 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.03 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 0.55 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.39 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

ESRX value chart August 2016

EPSmg $3.72
MG Growth Estimate 12.80%
MG Value $126.80
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $53.91
MG Value based on 0% Growth $31.60
Market Implied Growth Rate 5.61%
Current Price $73.35
% of Intrinsic Value 57.85%

Express Scripts Holding Company 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 PB ratio. 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 $2.01 in 2012 to an estimated $3.72 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.61% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Express Scripts Holding Company revealed the company was trading above its Graham Number of $54.85. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 19.73, which was below the industry average of 40.07, 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 $-39.08.

Express Scripts Holding Company receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

ESRX charts August 2016

Net Current Asset Value (NCAV) -$39.08
Graham Number $54.85
PEmg 19.73
Current Ratio 0.55
PB Ratio 3.03
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $10,614,500,000
Total Current Liabilities $19,136,500,000
Long-Term Debt $11,842,600,000
Total Assets $50,858,600,000
Intangible Assets $38,841,400,000
Total Liabilities $35,455,500,000
Shares Outstanding (Diluted Average) 635,700,000

Earnings Per Share History

Next Fiscal Year Estimate $5.47
Dec2015 $3.56
Dec2014 $2.64
Dec2013 $2.25
Dec2012 $1.76
Dec2011 $2.53
Dec2010 $2.17
Dec2009 $1.56
Dec2008 $1.54
Dec2007 $1.08
Dec2006 $0.84
Dec2005 $0.67
Dec2004 $0.45
Dec2003 $0.40
Dec2002 $0.32
Dec2001 $0.20
Dec2000 -$0.02
Dec1999 $0.25
Dec1998 $0.08
Dec1997 $0.06
Dec1996 $0.05

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.72
Dec2015 $2.74
Dec2014 $2.31
Dec2013 $2.12
Dec2012 $2.01
Dec2011 $2.01
Dec2010 $1.65
Dec2009 $1.30
Dec2008 $1.09
Dec2007 $0.80
Dec2006 $0.62
Dec2005 $0.48
Dec2004 $0.34
Dec2003 $0.27
Dec2002 $0.19
Dec2001 $0.13
Dec2000 $0.09

Recommended Reading:

Other ModernGraham posts about the company

Express Scripts Inc. Analysis – 2015 Update $ESRX
19 Companies in the Spotlight This Week – 7/26/14
Express Scripts Holding Company Annual Valuation – 2014 $ESRX

Other ModernGraham posts about related companies

Universal Health Services Inc Valuation – August 2016 $UHS
Endo International PLC Valuation – August 2016 $ENDP
C R Bard Inc Valuation – August 2016 $BCR
Psychemedics Corp Valuation – August 2016 $PMD
Patterson Companies Inc Valuation – August 2016 $PDCO
Edwards Lifesciences Corp Valuation – August 2016 $EW
Baxter International Inc Valuation – August 2016 $BAX
Cerner Corporation Valuation – August 2016 $CERN
Stryker Corporation Valuation – August 2016 $SYK
Henry Schein Inc Valuation – July 2016 $HSIC

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.

Express Scripts Inc. Analysis – 2015 Update $ESRX

220px-Express_Scripts_logo.svgExpress Scripts (ESRX) has several traits which may attract investors, including consistent earnings growth over the last few years. In addition, many qualitative factors make the company interesting to numerous investors. For example, Seeking Alpha contributor Insider Monkey recently wrote regarding the effect industry consolidation may have on the company’s margins. This is a great qualitative issue to consider, but one must first look at a quantitative analysis of the company.

In fact, Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to determine a potential investment’s merits. Here’s an updated look at how the company fares in the ModernGraham valuation model.

This model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using theModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

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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 – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – Earnings per share has increased by at least one-third over the last 10 years, using three-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) 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 – FAIL

Enterprising Investor – Must pass at least 4 of the following 5 tests to 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 – PASS
  4. Dividend Record – Currently pays a dividend – FAIL
  5. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $90.96
MG Value $95.42
MG Opinion Fairly Valued
Value Based on 3% Growth $48.58
Value Based on 0% Growth $28.48
Market Implied Growth Rate 9.32%
Net Current Asset Value (NCAV) -$30.09
PEmg 27.15
Current Ratio 0.62
PB Ratio 3.25

Balance Sheet – March 2015

Current Assets $9,172,000,000
Current Liabilities $14,900,000,000
Total Debt $10,741,000,000
Total Assets $51,905,000,000
Intangible Assets $41,097,000,000
Total Liabilities $31,300,000,000
Outstanding Shares 735,400,000

Earnings Per Share

2015 (estimate) $5.38
2014 $2.64
2013 $2.25
2012 $1.76
2011 $2.53
2010 $2.17
2009 $1.56
2008 $1.54
2007 $1.08
2006 $0.84
2005 $0.67

Earnings Per Share – ModernGraham

2015 (estimate) $3.35
2014 $2.31
2013 $2.12
2012 $2.01
2011 $2.01
2010 $1.65

Dividend History

Express Scripts does not pay a dividend.

Free Cash Flow

Conclusion

Express Scripts does not qualify for either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned by the low current ratio, lack of dividends, and the high PEmg and PB ratios, while the Enterprising Investor is concerned with the level of debt relative to the current assets and the lack of dividends. Therefore, all value investors should only proceed with the next stage of the analysis, which is a determination of an estimate of intrinsic value, with a speculative attitude in mind.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $2.01 in 2012 to an estimated $3.35 for 2016. This level of demonstrated growth supports the market’s implied estimate for earnings growth of 9.32% over the next 7-10 years.

The company’s recent earnings history shows an average annual growth in EPSmg of around 13.32%; however, the ModernGraham valuation model reduces such a rate to a more conservative figure, assuming some slowdown will occur. Even so, the model returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating Express Scripts is fairly valued at the present time.

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.

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Express Scripts Holding Company Annual Valuation – 2014 $ESRX

220px-Express_Scripts_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 Undervalued Companies to Research for the Enterprising 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 Express Scripts Holding Company (ESRX) fares in the ModernGraham valuation model.

ESRX Chart

ESRX data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  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 – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  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 – PASS
  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 – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $66.04
MG Value $102.23
MG Opinion Undervalued
Value Based on 3% Growth $44.35
Value Based on 0% Growth $26.00
Market Implied Growth Rate 6.55%
Net Current Asset Value (NCAV) -$29.39
PEmg 21.59
Current Ratio 0.60
PB Ratio 2.34

Balance Sheet – 3/31/2014

Current Assets $8,134,400,000
Current Liabilities $13,574,900,000
Total Debt $11,145,100,000
Total Assets $52,747,100,000
Intangible Assets $42,875,300,000
Total Liabilities $30,872,800,000
Outstanding Shares 773,600,000

Earnings Per Share

2014 (estimate) $4.80
2013 $2.31
2012 $1.79
2011 $2.53
2010 $2.21
2009 $1.56
2008 $1.55
2007 $1.14
2006 $0.84
2005 $0.67
2004 $0.45

Earnings Per Share – ModernGraham

2014 (estimate) $3.06
2013 $2.15
2012 $2.02
2011 $2.03
2010 $1.67
2009 $1.32

Conclusion:

Express Scripts is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has significant concerns with the low current ratio, the lack of dividend payments, and the high PEmg ratio.  Likewise, the Enterprising Investor has issues with the high level of debt relative to current assets and the lack of dividend payments.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through a review of ModernGraham’s valuation of United Health Group (UNH) and ModernGraham’s valuation of Cigna Corporation (CI).  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.67 in 2010 to an estimated $3.06 for 2014. This level of demonstrated growth outpaces the market’s implied estimate of 6.55% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above 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 Express Scripts (ESRX)?  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 Express Scripts (ESRX) or in any other 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.

Edwards Lifesciences Corp Valuation – May 2018 $EW

Company Profile (excerpt from Reuters): Edwards Lifesciences Corporation, incorporated on September 10, 1999, is a manufacturer of heart valve systems and repair products used to replace or repair a patient’s diseased or defective heart valve. The Company is globally engaged in patient-focused innovations for structural heart disease and critical care monitoring. Its segments include United States, Europe, Japan and Rest of World. Its products are categorized into three areas: Transcatheter Heart Valve Therapy, Surgical Heart Valve Therapy and Critical Care. It also develops hemodynamic monitoring systems that are used to measure a patient’s cardiovascular function in the hospital setting. The Company’s Transcatheter Heart Valve Therapy and Surgical Heart Valve Therapy products are manufactured in the United States, Singapore and Switzerland. Critical Care products are manufactured in its facilities located in Puerto Rico and the Dominican Republic. Its subsidiaries include Edwards Lifesciences Asset Management Corporation, Edwards Lifesciences CardiAQ LLC., Valtech Cardio Inc. and Red Hill Insurance Corporation.

EW Chart

EW data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EW – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $28,770,028,646 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.07 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 240.63% Pass
6. Moderate PEmg Ratio PEmg < 20 41.09 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.96 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 2.07 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.33 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.29
MG Growth Estimate 8.05%
MG Value $80.98
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $47.72
MG Value based on 0% Growth $27.98
Market Implied Growth Rate 16.29%
Current Price $135.23
% of Intrinsic Value 166.99%

Edwards Lifesciences Corp 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 lack of dividends. 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 $2.14 in 2014 to an estimated $3.29 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.29% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Edwards Lifesciences Corp revealed the company was trading above its Graham Number of $37.78. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 41.09, which was below the industry average of 42.49, 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 $0.64.

Edwards Lifesciences 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) $0.64
Graham Number $37.78
PEmg 41.09
Current Ratio 2.07
PB Ratio 8.96
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $2,716,900,000
Total Current Liabilities $1,314,500,000
Long-Term Debt $456,000,000
Total Assets $5,825,100,000
Intangible Assets $1,625,300,000
Total Liabilities $2,579,400,000
Shares Outstanding (Diluted Average) 215,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.50
Dec2017 $2.70
Dec2016 $2.61
Dec2015 $2.25
Dec2014 $3.74
Dec2013 $1.71
Dec2012 $1.23
Dec2011 $0.99
Dec2010 $0.92
Dec2009 $0.98
Dec2008 $0.55
Dec2007 $0.47
Dec2006 $0.53
Dec2005 $0.32
Dec2004 $0.01
Dec2003 $0.32
Dec2002 $0.23
Dec2001 -$0.05
Dec2000 -$1.16

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.29
Dec2017 $2.66
Dec2016 $2.53
Dec2015 $2.32
Dec2014 $2.14
Dec2013 $1.28
Dec2012 $1.02
Dec2011 $0.87
Dec2010 $0.77
Dec2009 $0.66
Dec2008 $0.46
Dec2007 $0.38
Dec2006 $0.32
Dec2005 $0.20
Dec2004 $0.05
Dec2003 $0.00
Dec2002 -$0.17

Recommended Reading:

Other ModernGraham posts about the company

12 Best Stocks for Value Investors This Week – 2/4/17
Edwards Lifesciences Corp Valuation – January 2017 $EW
Edwards Lifesciences Corp Valuation – August 2016 $EW
15 Best Stocks For Value Investors This Week – 2/13/16
Edwards Lifesciences Corp Valuation – February 2016 $EW

Other ModernGraham posts about related companies

Centene Corp Valuation – May 2018 $CNC
Abbott Laboratories Valuation – May 2018 $ABT
Becton Dickinson and Co Valuation – May 2018 $BDX
IQVIA Holdings Inc Valuation – Initial Coverage May 2018 $IQV
Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
Illumina Inc Valuation – April 2018 $ILMN
Waters Corp Valuation – April 2018 $WAT
Align Technology Inc Valuation – April 2018 $ALGN
HCA Healthcare Inc Valuation – April 2018 $HCA
Express Scripts Holding Co Valuation – April 2018 $ESRX

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.

Baxter International Inc Valuation – May 2018 $BAX

Company Profile (excerpt from Reuters): Baxter International Inc., incorporated on October 19, 1931, through its subsidiaries, provides a portfolio of essential renal and hospital products, including acute and chronic dialysis; sterile intravenous (IV) solutions; infusion systems and devices; parenteral nutrition therapies; premixed and oncolytic injectables; biosurgery products and anesthetics; drug reconstitution systems, and pharmacy automation, software and services. The Company operates through two segments: Hospital Products and Renal. The Company’s products are used by hospitals, kidney dialysis centers, nursing homes, rehabilitation centers, doctors’ offices and by patients at home under physician supervision. As of December 31, 2016, the Company manufactured products in over 20 countries and sold them in over 100 countries.

BAX Chart

BAX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BAX – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $37,753,169,007 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.57 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 32.05% Fail
6. Moderate PEmg Ratio PEmg < 20 19.30 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.24 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 2.57 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.79 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.59
MG Growth Estimate -1.56%
MG Value $19.31
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $52.07
MG Value based on 0% Growth $30.53
Market Implied Growth Rate 5.40%
Current Price $69.32
% of Intrinsic Value 358.99%

Baxter International Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PB ratio. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. 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 seeing its EPSmg (normalized earnings) decline from $4.01 in 2014 to an estimated $3.59 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.4% 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 Baxter International Inc revealed the company was trading above its Graham Number of $32.11. The company pays a dividend of $0.61 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 19.3, which was below the industry average of 42.49, 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 $-1.3.

Baxter International 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) -$1.30
Graham Number $32.11
PEmg 19.30
Current Ratio 2.57
PB Ratio 4.24
Current Dividend $0.61
Dividend Yield 0.88%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $7,263,000,000
Total Current Liabilities $2,821,000,000
Long-Term Debt $3,509,000,000
Total Assets $17,111,000,000
Intangible Assets $4,473,000,000
Total Liabilities $7,987,000,000
Shares Outstanding (Diluted Average) 558,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.72
Dec2017 $1.29
Dec2016 $9.01
Dec2015 $1.76
Dec2014 $4.56
Dec2013 $3.66
Dec2012 $4.18
Dec2011 $3.88
Dec2010 $2.39
Dec2009 $3.59
Dec2008 $3.16
Dec2007 $2.61
Dec2006 $2.13
Dec2005 $1.52
Dec2004 $0.63
Dec2003 $1.50
Dec2002 $1.66
Dec2001 $1.09
Dec2000 $1.25
Dec1999 $1.35
Dec1998 $0.55

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.59
Dec2017 $4.04
Dec2016 $5.15
Dec2015 $3.35
Dec2014 $4.01
Dec2013 $3.67
Dec2012 $3.60
Dec2011 $3.24
Dec2010 $2.88
Dec2009 $2.95
Dec2008 $2.42
Dec2007 $1.93
Dec2006 $1.55
Dec2005 $1.27
Dec2004 $1.17
Dec2003 $1.42
Dec2002 $1.31

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Defensive Investor – August 2017
10 Low PE Stock Picks for the Defensive Investor – February 2017
10 Undervalued Companies for the Defensive Investor – February 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017
10 Low PE Stock Picks for the Defensive Investor – January 2017

Other ModernGraham posts about related companies

Centene Corp Valuation – May 2018 $CNC
Abbott Laboratories Valuation – May 2018 $ABT
Becton Dickinson and Co Valuation – May 2018 $BDX
IQVIA Holdings Inc Valuation – Initial Coverage May 2018 $IQV
Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
Illumina Inc Valuation – April 2018 $ILMN
Waters Corp Valuation – April 2018 $WAT
Align Technology Inc Valuation – April 2018 $ALGN
HCA Healthcare Inc Valuation – April 2018 $HCA
Express Scripts Holding Co Valuation – April 2018 $ESRX

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.

Boston Scientific Corp Valuation – May 2018 $BSX

Company Profile (excerpt from Reuters): Boston Scientific Corporation, incorporated on June 22, 1979, is a developer, manufacturer and marketer of medical devices that are used in a range of interventional medical specialties. The Company offers its products by seven businesses: interventional cardiology, cardiac rhythm management, endoscopy, peripheral interventions, urology and pelvic health, neuromodulation, and electrophysiology. It operates through three segments: Cardiovascular, Rhythm Management, and MedSurg. Its Cardiovascular segment consists of Interventional Cardiology and Peripheral Interventions businesses. Rhythm Management consists of Cardiac Rhythm Management and Electrophysiology businesses. MedSurg consists of Endoscopy, Urology and Pelvic Health, and Neuromodulation businesses. It sells ACURATE TA and ACURATE neo /TF valve systems in Europe and in other geographies outside of the United States.

BSX Chart

BSX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BSX – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $41,311,529,905 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.82 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 -255.96% Fail
6. Moderate PEmg Ratio PEmg < 20 59.90 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.93 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 0.82 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.29 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.50
MG Growth Estimate 15.00%
MG Value $19.17
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $7.22
MG Value based on 0% Growth $4.23
Market Implied Growth Rate 25.70%
Current Price $29.83
% of Intrinsic Value 155.58%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.64 in 2014 to an estimated $0.5 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 25.7% 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 Boston Scientific Corporation revealed the company was trading above its Graham Number of $12.54. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 59.9, which was above the industry average of 42.49. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.79.

Boston Scientific Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.79
Graham Number $12.54
PEmg 59.90
Current Ratio 0.82
PB Ratio 5.93
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $4,080,000,000
Total Current Liabilities $4,988,000,000
Long-Term Debt $4,802,000,000
Total Assets $19,202,000,000
Intangible Assets $12,698,000,000
Total Liabilities $12,172,000,000
Shares Outstanding (Diluted Average) 1,396,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.37
Dec2017 $0.08
Dec2016 $0.25
Dec2015 -$0.18
Dec2014 -$0.09
Dec2013 -$0.09
Dec2012 -$2.89
Dec2011 $0.29
Dec2010 -$0.70
Dec2009 -$0.68
Dec2008 -$1.36
Dec2007 -$0.33
Dec2006 -$2.81
Dec2005 $0.75
Dec2004 $1.24
Dec2003 $0.56
Dec2002 $0.45
Dec2001 -$0.07
Dec2000 $0.46
Dec1999 $0.45
Dec1998 -$0.34

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.50
Dec2017 $0.04
Dec2016 -$0.19
Dec2015 -$0.47
Dec2014 -$0.64
Dec2013 -$0.88
Dec2012 -$1.21
Dec2011 -$0.43
Dec2010 -$0.92
Dec2009 -$0.98
Dec2008 -$0.92
Dec2007 -$0.51
Dec2006 -$0.38
Dec2005 $0.75
Dec2004 $0.67
Dec2003 $0.38
Dec2002 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Most Overvalued Stocks of the S&P 500 – March 2017
Boston Scientific Corp Valuation – January 2017 $BSX
Boston Scientific Inc. Analysis – September 2015 Update $BSX
23 Companies to Research This Week – 9/13/14
Boston Scientific Corporation Annual Stock Valuation – 2014 $BSX

Other ModernGraham posts about related companies

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Abbott Laboratories Valuation – May 2018 $ABT
Becton Dickinson and Co Valuation – May 2018 $BDX
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Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
Illumina Inc Valuation – April 2018 $ILMN
Waters Corp Valuation – April 2018 $WAT
Align Technology Inc Valuation – April 2018 $ALGN
HCA Healthcare Inc Valuation – April 2018 $HCA
Express Scripts Holding Co Valuation – April 2018 $ESRX

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.

Centene Corp Valuation – May 2018 $CNC

Company Profile (excerpt from Reuters): Centene Corporation, incorporated on September 26, 2001, is a healthcare company. The Company provides a portfolio of services to government sponsored healthcare programs, focusing on under-insured and uninsured individuals. The Company operates through two segments: Managed Care and Specialty Services. It provides member-focused services through locally based staff by assisting in accessing care, coordinating referrals to related health and social services and addressing member concerns and questions. It also provides education and outreach programs to inform and assist members in accessing appropriate healthcare services. The Managed Care segment consists of the Company’s health plans, including all of the functions needed to operate them. The Specialty Services segment consists of the Company’s specialty companies, offering auxiliary healthcare services and products.

CNC Chart

CNC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CNC – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,333,704,667 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.01 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 410.02% Pass
6. Moderate PEmg Ratio PEmg < 20 24.21 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.74 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 1.01 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 60.14 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 $4.77
MG Growth Estimate 15.00%
MG Value $183.67
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $69.17
MG Value based on 0% Growth $40.55
Market Implied Growth Rate 7.85%
Current Price $115.49
% of Intrinsic Value 62.88%

Centene 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, 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 Undervalued after growing its EPSmg (normalized earnings) from $1.35 in 2014 to an estimated $4.77 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.85% 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 above the price.

At the time of valuation, further research into Centene Corp revealed the company was trading above its Graham Number of $78.3. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 24.21, which was below the industry average of 42.49, 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 $-37.66.

Centene 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) -$37.66
Graham Number $78.30
PEmg 24.21
Current Ratio 1.01
PB Ratio 2.74
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $10,976,000,000
Total Current Liabilities $10,890,000,000
Long-Term Debt $5,172,000,000
Total Assets $25,170,000,000
Intangible Assets $6,814,000,000
Total Liabilities $17,667,000,000
Shares Outstanding (Diluted Average) 177,690,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.90
Dec2017 $4.69
Dec2016 $3.43
Dec2015 $2.88
Dec2014 $2.25
Dec2013 $1.47
Dec2012 $0.02
Dec2011 $1.06
Dec2010 $0.94
Dec2009 $0.95
Dec2008 $0.94
Dec2007 $0.82
Dec2006 -$0.51
Dec2005 $0.62
Dec2004 $0.51
Dec2003 $0.44
Dec2002 $0.37
Dec2001 $0.27
Dec2000 $0.19
Dec1999 -$1.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.77
Dec2017 $3.45
Dec2016 $2.56
Dec2015 $1.93
Dec2014 $1.35
Dec2013 $0.90
Dec2012 $0.67
Dec2011 $0.97
Dec2010 $0.83
Dec2009 $0.70
Dec2008 $0.55
Dec2007 $0.36
Dec2006 $0.18
Dec2005 $0.50
Dec2004 $0.41
Dec2003 $0.20
Dec2002 -$0.01

Recommended Reading:

Other ModernGraham posts about the company

Centene Corp Valuation – Initial Coverage $CNC

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Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
Illumina Inc Valuation – April 2018 $ILMN
Waters Corp Valuation – April 2018 $WAT
Align Technology Inc Valuation – April 2018 $ALGN
HCA Healthcare Inc Valuation – April 2018 $HCA
Express Scripts Holding Co Valuation – April 2018 $ESRX
Stryker Corp Valuation – April 2018 $SYK
Cerner Corporation Valuation – April 2018 $CERN
Quest Diagnostics Inc Valuation – April 2018 $DGX
Laboratory Corporation of America Holdings Valuation – March 2018 $LH

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.

Abbott Laboratories Valuation – May 2018 $ABT

Company Profile (excerpt from Reuters): Abbott Laboratories, incorporated on March 6, 1900, is engaged in the discovery, development, manufacture and sale of a range of healthcare products. The Company operates through four segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products and Vascular Products. The Company, through St. Jude Medical, Inc., also offers a range of products, such as rhythm management products, electrophysiology products, heart failure related products, vascular products, structural heart products and neuromodulation products.

ABT Chart

ABT data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ABT – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $102,164,005,792 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.66 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 -57.97% Fail
6. Moderate PEmg Ratio PEmg < 20 34.92 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.34 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.66 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.55 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 $1.70
MG Growth Estimate -3.78%
MG Value $1.59
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $24.63
MG Value based on 0% Growth $14.44
Market Implied Growth Rate 13.21%
Current Price $59.32
% of Intrinsic Value 3730.29%

Abbott Laboratories 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 net 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 $2.27 in 2014 to an estimated $1.7 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.21% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Abbott Laboratories revealed the company was trading above its Graham Number of $33.71. The company pays a dividend of $1.06 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 34.92, which was below the industry average of 42.49, 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 $-13.9.

Abbott Laboratories 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) -$13.90
Graham Number $33.71
PEmg 34.92
Current Ratio 1.66
PB Ratio 3.34
Current Dividend $1.06
Dividend Yield 1.79%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $14,964,000,000
Total Current Liabilities $9,010,000,000
Long-Term Debt $21,154,000,000
Total Assets $70,908,000,000
Intangible Assets $45,170,000,000
Total Liabilities $39,509,000,000
Shares Outstanding (Diluted Average) 1,765,278,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.85
Dec2017 $0.27
Dec2016 $0.94
Dec2015 $2.92
Dec2014 $1.49
Dec2013 $1.62
Dec2012 $3.72
Dec2011 $3.01
Dec2010 $2.96
Dec2009 $3.69
Dec2008 $3.12
Dec2007 $2.31
Dec2006 $1.12
Dec2005 $2.16
Dec2004 $2.06
Dec2003 $1.75
Dec2002 $1.78
Dec2001 $0.99
Dec2000 $1.78
Dec1999 $1.57
Dec1998 $1.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.70
Dec2017 $1.23
Dec2016 $1.85
Dec2015 $2.39
Dec2014 $2.27
Dec2013 $2.77
Dec2012 $3.33
Dec2011 $3.10
Dec2010 $2.98
Dec2009 $2.82
Dec2008 $2.31
Dec2007 $1.89
Dec2006 $1.71
Dec2005 $1.92
Dec2004 $1.76
Dec2003 $1.60
Dec2002 $1.52

Recommended Reading:

Other ModernGraham posts about the company

Abbott Laboratories Valuation – January 2017 $ABT
Abbott Laboratories Valuation – August 2016 $ABT
5 Speculative and Overvalued Companies to Avoid – March 2015
18 Companies in the Spotlight This Week – 3/21/15
Abbott Laboratories Annual Valuation – 2015 $ABT

Other ModernGraham posts about related companies

Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
Illumina Inc Valuation – April 2018 $ILMN
Waters Corp Valuation – April 2018 $WAT
Align Technology Inc Valuation – April 2018 $ALGN
HCA Healthcare Inc Valuation – April 2018 $HCA
Express Scripts Holding Co Valuation – April 2018 $ESRX
Stryker Corp Valuation – April 2018 $SYK
Cerner Corporation Valuation – April 2018 $CERN
Quest Diagnostics Inc Valuation – April 2018 $DGX
Laboratory Corporation of America Holdings Valuation – March 2018 $LH

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.

Becton Dickinson and Co Valuation – May 2018 $BDX

Company Profile (excerpt from Reuters): Becton, Dickinson and Company (BD), incorporated in November 1906, is a global medical technology company engaged in the development, manufacture and sale of a range of medical supplies, devices, laboratory equipment and diagnostic products. The Company operates through two segments: BD Medical and BD Life Sciences. It provides customer solutions that are focused on managing medication management and patient safety; supporting infection prevention practices; equipping surgical and interventional procedures; managing drug delivery; aiding anesthesiology care; managing the diagnosis of infectious diseases and cancers; advancing cellular research and applications, and supporting the management of diabetes. The Company caters to markets, such as healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. The Company’s subsidiaries include Accuri Cytometers, Inc., BD Norge AS, CareFusion Canada 307 ULC, Vital Signs Hong Kong Limited and Dantor S.A.

BDX Chart

BDX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BDX – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $59,814,032,039 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.54 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 24.47% Fail
6. Moderate PEmg Ratio PEmg < 20 33.93 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.43 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.54 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.35 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 $6.62
MG Growth Estimate 1.66%
MG Value $78.27
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $96.00
MG Value based on 0% Growth $56.28
Market Implied Growth Rate 12.72%
Current Price $224.66
% of Intrinsic Value 287.04%

Becton Dickinson and Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg ratio. 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 $5.96 in 2014 to an estimated $6.62 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.72% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Becton Dickinson and Co revealed the company was trading above its Graham Number of $118.29. The company pays a dividend of $2.92 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 33.93, which was below the industry average of 42.49, 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 $-115.52.

Becton Dickinson and Co performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$115.52
Graham Number $118.29
PEmg 33.93
Current Ratio 1.54
PB Ratio 2.43
Current Dividend $2.92
Dividend Yield 1.30%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $7,542,000,000
Total Current Liabilities $4,895,000,000
Long-Term Debt $22,095,000,000
Total Assets $55,363,000,000
Intangible Assets $41,377,000,000
Total Liabilities $34,116,000,000
Shares Outstanding (Diluted Average) 230,038,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.95
Sep2017 $4.60
Sep2016 $4.49
Sep2015 $3.35
Sep2014 $5.99
Sep2013 $6.49
Sep2012 $5.59
Sep2011 $5.62
Sep2010 $5.49
Sep2009 $4.99
Sep2008 $4.46
Sep2007 $3.49
Sep2006 $2.93
Sep2005 $2.77
Sep2004 $1.77
Sep2003 $2.07
Sep2002 $1.79
Sep2001 $1.49
Sep2000 $1.49
Sep1999 $1.04
Sep1998 $0.90

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.62
Sep2017 $4.63
Sep2016 $4.83
Sep2015 $5.13
Sep2014 $5.96
Sep2013 $5.84
Sep2012 $5.42
Sep2011 $5.16
Sep2010 $4.71
Sep2009 $4.13
Sep2008 $3.49
Sep2007 $2.87
Sep2006 $2.46
Sep2005 $2.15
Sep2004 $1.80
Sep2003 $1.73
Sep2002 $1.49

Recommended Reading:

Other ModernGraham posts about the company

5 of the Worst Stocks to Invest In – January 2017
Becton Dickinson and Co Valuation – January 2017 $BDX
Becton Dickinson & Company Analysis – August 2015 Update $BDX
30 Companies in the Spotlight This Week – 5/23/15
Becton Dickinson and Company Quarterly Valuation – May 2015 $BDX

Other ModernGraham posts about related companies

Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
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Waters Corp Valuation – April 2018 $WAT
Align Technology Inc Valuation – April 2018 $ALGN
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Express Scripts Holding Co Valuation – April 2018 $ESRX
Stryker Corp Valuation – April 2018 $SYK
Cerner Corporation Valuation – April 2018 $CERN
Quest Diagnostics Inc Valuation – April 2018 $DGX
Laboratory Corporation of America Holdings Valuation – March 2018 $LH

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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