Fortune Brands Home & Security Inc Valuation – March 2019 #FBHS

Company Profile (excerpt from Reuters): Fortune Brands Home & Security, Inc., incorporated on June 9, 1988, is a holding company. The Company is a home and security products company. The Company operates through four segments: Cabinets, Plumbing, Doors and Security. The Company sells its products through a range of sales channels, including kitchen and bath dealers, wholesalers oriented toward builders or professional remodelers, industrial and locksmith distributors, do-it-yourself remodeling-oriented home centers and other retail outlets. The Company’s subsidiaries include MasterBrand Cabinets, Inc., Moen Incorporated, Fortune Brands Global Plumbing Group LLC, Fortune Brands Doors, Inc. and Fortune Brands Storage & Security LLC.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FBHS – 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 $6,456,820,866 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.13 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 915.73% Pass
6. Moderate PEmg Ratio PEmg < 20 15.79 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.00 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 1.13 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.32 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 $2.91
MG Growth Estimate 15.00%
MG Value $112.04
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $42.20
MG Value based on 0% Growth $24.74
Market Implied Growth Rate 3.64%
Current Price $45.94
% of Intrinsic Value 41.01%

Fortune Brands Home & Security Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. 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 $1.24 in 2015 to an estimated $2.91 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.64% 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 above the price.

At the time of valuation, further research into Fortune Brands Home & Security Inc revealed the company was trading above its Graham Number of $34.08. The company pays a dividend of $0.8 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 15.79, which was below the industry average of 24.02, 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 $-14.73.

Fortune Brands Home & Security 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) -$14.73
Graham Number $34.08
PEmg 15.79
Current Ratio 1.13
PB Ratio 3.00
Current Dividend $0.80
Dividend Yield 1.74%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,686,100,000
Total Current Liabilities $1,492,100,000
Long-Term Debt $1,809,000,000
Total Assets $5,964,600,000
Intangible Assets $3,327,100,000
Total Liabilities $3,784,600,000
Shares Outstanding (Diluted Average) 142,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.35
Dec2018 $2.66
Dec2017 $3.03
Dec2016 $2.62
Dec2015 $1.93
Dec2014 $0.95
Dec2013 $1.34
Dec2012 $0.71
Dec2011 -$0.23
Dec2010 $0.41

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.91
Dec2018 $2.54
Dec2017 $2.31
Dec2016 $1.80
Dec2015 $1.24
Dec2014 $0.81
Dec2013 $0.64
Dec2012 $0.26
Dec2011 $0.03
Dec2010 $0.14

Recommended Reading:

Other ModernGraham posts about the company

Fortune Brands Home & Security Inc Valuation – June 2018 $FBHS
6 Best Stocks for Value Investors This Week – 3/11/17
Fortune Brands Home & Security Inc Valuation – Initial Coverage $FBHS

Other ModernGraham posts about related companies

Fortune Brands Home & Security Inc Valuation – June 2018 $FBHS
Tyco International PLC Valuation – November 2015 Update $TYC
ADT Stock Analysis – 2015 Annual Update $ADT
Tyco International Limited Annual Valuation – 2014 $TYC
ADT Corporation 2014 Annual Valuation $ADT

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.

Facebook Inc Valuation – January 2019 $FB

Company Profile (excerpt from Reuters): Facebook, Inc., incorporated on July 29, 2004, is focused on building products that enable people to connect and share through mobile devices, personal computers and other surfaces. The Company also enables people to discover and learn about what is going on in the world around them, enables people to share their opinions, ideas, photos and videos, and other activities with audiences ranging from their friends to the public, and stay connected by accessing its products. The Company’s products include Facebook, Instagram, Messenger, WhatsApp and Oculus. The Company also engages in selling advertising placements to marketers. Its advertisements let marketers reach people based on a range of factors, including age, gender, location, interests and behaviors. Marketers purchase advertisements that can appear in multiple places, including on Facebook, Instagram, and third-party applications and Websites.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FB – 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 $431,182,982,185 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 9.00 Pass
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 2059.46% Pass
6. Moderate PEmg Ratio PEmg < 20 31.61 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.44 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 9.00 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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 $4.75
MG Growth Estimate 15.00%
MG Value $182.77
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $68.84
MG Value based on 0% Growth $40.35
Market Implied Growth Rate 11.55%
Current Price $150.04
% of Intrinsic Value 82.09%

Facebook, Inc. Common Stock is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.61 in 2014 to an estimated $4.75 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.55% 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 Facebook, Inc. Common Stock revealed the company was trading above its Graham Number of $63.93. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 31.61, which was below the industry average of 91.28, 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 $12.71.

Facebook, Inc. Common Stock receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $12.71
Graham Number $63.93
PEmg 31.61
Current Ratio 9.00
PB Ratio 5.44
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 9/1/2018
Total Current Assets $49,147,000,000
Total Current Liabilities $5,462,000,000
Long-Term Debt $0
Total Assets $92,452,000,000
Intangible Assets $19,755,000,000
Total Liabilities $12,110,000,000
Shares Outstanding (Diluted Average) 2,913,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.10
Dec2017 $5.39
Dec2016 $3.49
Dec2015 $1.29
Dec2014 $1.10
Dec2013 $0.60
Dec2012 $0.01
Dec2011 $0.46
Dec2010 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.75
Dec2017 $3.17
Dec2016 $1.81
Dec2015 $0.88
Dec2014 $0.61
Dec2013 $0.33
Dec2012 $0.18
Dec2011 $0.23
Dec2010 $0.09

Recommended Reading:

Other ModernGraham posts about the company

Facebook Inc Valuation – March 2018 $FB
Facebook Inc Valuation – July 2016 $FB
Facebook Inc Valuation – January 2016 Update $FB
Facebook Inc. Analysis – August 2015 Update $FB
Facebook Stock Analysis – Quarterly Update May 2015 $FB

Other ModernGraham posts about related companies

Shutterstock Inc Valuation – August 2018 $SSTK
Twitter Inc Valuation – June 2018 $TWTR
Salesforce.com Inc Valuation – June 2018 $CRM
eBay Inc Valuation – May 2018 $EBAY
Facebook Inc Valuation – March 2018 $FB
Salesforce.com Inc Valuation – April 2017 $CRM
Paypal Holdings Inc Valuation – Initial Coverage $PYPL
Netflix Inc Valuation – February 2017 $NFLX
Shutterstock Inc Valuation – Initial Coverage $SSTK
Synchronoss Technologies Inc Valuation – Initial Coverage $SNCR

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.

ServisFirst Bancshares Inc Valuation – July 2018 $SFBS

Company Profile (excerpt from Reuters): ServisFirst Bancshares, Inc., incorporated on August 16, 2007, is a bank holding company whose business is conducted by its subsidiary, ServisFirst Bank (the Bank). The Company’s principal business is to accept deposits from the public and to make loans and other investments. The Company, through its bank, originates commercial, consumer and other loans; accept deposits; provides electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services, and provides correspondent banking services to other financial institutions. The Company offers a range of products and services, including round the clock telephone banking, direct deposit, Internet banking, mobile banking, traveler’s checks, safe deposit boxes, attorney trust accounts and automatic account transfers. It also participates in a shared network of automated teller machines and a debit card system. Additionally, it offers Visa credit cards.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SFBS – July 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,190,725,210 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 872.79% Pass
5. Moderate PEmg Ratio PEmg < 20 23.09 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.48 Fail
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.82
MG Growth Estimate 15.00%
MG Value $70.04
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $26.38
MG Value based on 0% Growth $15.46
Market Implied Growth Rate 7.30%
Current Price $42.01
% of Intrinsic Value 59.98%

ServisFirst Bancshares, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.85 in 2014 to an estimated $1.82 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.3% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into ServisFirst Bancshares, Inc. revealed the company was trading above its Graham Number of $25.28. The company pays a dividend of $0.2 per share, for a yield of 0.5% Its PEmg (price over earnings per share – ModernGraham) was 23.09, which was above the industry average of 20.05.

ServisFirst Bancshares, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Graham Number $25.28
PEmg 23.09
PB Ratio 3.48
Dividend Yield 0.48%
TTM Dividend $0.20
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 6/1/2018
Long-Term Debt & Capital Lease Obligation $64,648,000
Total Assets $7,084,562,000
Intangible Assets $14,584,000
Total Liabilities $6,429,448,000
Shares Outstanding (Diluted Average) 54,196,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.48
Dec2017 $1.72
Dec2016 $1.52
Dec2015 $1.20
Dec2014 $1.05
Dec2013 $0.95
Dec2012 $0.83
Dec2011 $0.59

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.82
Dec2017 $1.42
Dec2016 $1.22
Dec2015 $1.02
Dec2014 $0.85
Dec2013 $0.65
Dec2012 $0.43
Dec2011 $0.20

Recommended Reading:

Other ModernGraham posts about the company

ServisFirst Bancshares Inc Valuation – Initial Coverage $SFBS

Other ModernGraham posts about related companies

Cullen/Frost Bankers Inc Valuation – July 2018 $CFR
Signature Bank Valuation – July 2018 $SBNY
City Holding Co Valuation – July 2018 $CHCO
Southside Bancshares Inc Valuation – July 2018 $SBSI
Independent Bank Corp Valuation – July 2018 $INDB
Wells Fargo & Co Valuation – June 2018 $WFC
SunTrust Banks Inc Valuation – June 2018 $STI
Comerica Inc Valuation – June 2018 $CMA
SVB Financial Group Valuation – June 2018 $SIVB
US Bancorp Valuation – May 2018 $USB

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.

Fortune Brands Home & Security Inc Valuation – June 2018 $FBHS

Company Profile (excerpt from Reuters): Fortune Brands Home & Security, Inc., incorporated on June 9, 1988, is a holding company. The Company is a home and security products company. The Company operates through four segments: Cabinets, Plumbing, Doors and Security. The Company sells its products through a range of sales channels, including kitchen and bath dealers, wholesalers oriented toward builders or professional remodelers, industrial and locksmith distributors, do-it-yourself remodeling-oriented home centers and other retail outlets. The Company’s subsidiaries include MasterBrand Cabinets, Inc., Moen Incorporated, Fortune Brands Global Plumbing Group LLC, Fortune Brands Doors, Inc. and Fortune Brands Storage & Security LLC.

FBHS Chart

FBHS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FBHS – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,451,843,675 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.44 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 5038.89% Pass
6. Moderate PEmg Ratio PEmg < 20 20.30 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.74 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 1.44 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.05 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.85
MG Growth Estimate 15.00%
MG Value $109.83
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $41.36
MG Value based on 0% Growth $24.25
Market Implied Growth Rate 5.90%
Current Price $57.92
% of Intrinsic Value 52.74%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.81 in 2014 to an estimated $2.85 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.9% 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 Fortune Brands Home & Security Inc revealed the company was trading above its Graham Number of $37.23. The company pays a dividend of $0.72 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 20.3, which was below the industry average of 26.05, 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 $-10.19.

Fortune Brands Home & Security 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) -$10.19
Graham Number $37.23
PEmg 20.30
Current Ratio 1.44
PB Ratio 3.74
Current Dividend $0.72
Dividend Yield 1.24%
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 3/1/2018
Total Current Assets $1,644,500,000
Total Current Liabilities $1,140,800,000
Long-Term Debt $1,538,000,000
Total Assets $5,552,000,000
Intangible Assets $3,069,900,000
Total Liabilities $3,193,700,000
Shares Outstanding (Diluted Average) 152,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.60
Dec2017 $3.03
Dec2016 $2.62
Dec2015 $1.93
Dec2014 $0.95
Dec2013 $1.34
Dec2012 $0.71
Dec2011 -$0.23
Dec2010 $0.41

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.85
Dec2017 $2.31
Dec2016 $1.80
Dec2015 $1.24
Dec2014 $0.81
Dec2013 $0.64
Dec2012 $0.26
Dec2011 $0.03
Dec2010 $0.14

Recommended Reading:

Other ModernGraham posts about the company

6 Best Stocks for Value Investors This Week – 3/11/17
Fortune Brands Home & Security Inc Valuation – Initial Coverage $FBHS

Other ModernGraham posts about related companies

Tyco International PLC Valuation – November 2015 Update $TYC
ADT Stock Analysis – 2015 Annual Update $ADT
Tyco International Limited Annual Valuation – 2014 $TYC
ADT Corporation 2014 Annual Valuation $ADT

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.

Facebook Inc Valuation – March 2018 $FB

Company Profile (excerpt from Reuters): Facebook, Inc., incorporated on July 29, 2004, is focused on building products that enable people to connect and share through mobile devices, personal computers and other surfaces. The Company also enables people to discover and learn about what is going on in the world around them, enables people to share their opinions, ideas, photos and videos, and other activities with audiences ranging from their friends to the public, and stay connected by accessing its products. The Company’s products include Facebook, Instagram, Messenger, WhatsApp and Oculus. The Company also engages in selling advertising placements to marketers. Its advertisements let marketers reach people based on a range of factors, including age, gender, location, interests and behaviors. Marketers purchase advertisements that can appear in multiple places, including on Facebook, Instagram, and third-party applications and Websites.

FB Chart

FB data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FB – 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 $479,005,594,319 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 12.92 Pass
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 3200.00% Pass
6. Moderate PEmg Ratio PEmg < 20 36.80 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.57 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 12.92 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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 $4.48
MG Growth Estimate 15.00%
MG Value $172.51
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $64.97
MG Value based on 0% Growth $38.09
Market Implied Growth Rate 14.15%
Current Price $164.89
% of Intrinsic Value 95.59%

Facebook Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.59 in 2014 to an estimated $4.48 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 14.15% 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 Facebook Inc revealed the company was trading above its Graham Number of $60.22. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 36.8, which was below the industry average of 163.14, 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 $12.96.

Facebook 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) $12.96
Graham Number $60.22
PEmg 36.80
Current Ratio 12.92
PB Ratio 6.57
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 $48,563,000,000
Total Current Liabilities $3,760,000,000
Long-Term Debt $0
Total Assets $84,524,000,000
Intangible Assets $20,105,000,000
Total Liabilities $10,177,000,000
Shares Outstanding (Diluted Average) 2,962,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.30
Dec2017 $5.39
Dec2016 $3.49
Dec2015 $1.29
Dec2014 $1.10
Dec2013 $0.60
Dec2012 $0.01
Dec2011 $0.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.48
Dec2017 $3.17
Dec2016 $1.81
Dec2015 $0.88
Dec2014 $0.59
Dec2013 $0.29
Dec2012 $0.13
Dec2011 $0.15

Recommended Reading:

Other ModernGraham posts about the company

Facebook Inc Valuation – January 2016 Update $FB
Facebook Inc. Analysis – August 2015 Update $FB
Facebook Stock Analysis – Quarterly Update May 2015 $FB
28 Companies in the Spotlight This Week – 2/28/15
Facebook Inc. Quarterly Valuation – February 2015 $FB

Other ModernGraham posts about related companies

Salesforce.com Inc Valuation – April 2017 $CRM
Paypal Holdings Inc Valuation – Initial Coverage $PYPL
Netflix Inc Valuation – February 2017 $NFLX
Shutterstock Inc Valuation – Initial Coverage $SSTK
Synchronoss Technologies Inc Valuation – Initial Coverage $SNCR
eBay Inc Valuation – December 2016 $EBAY
Facebook Inc Valuation – July 2016 $FB
Salesforce.com Valuation – January 2016 Update $CRM
Facebook Inc Valuation – January 2016 Update $FB
Netflix Inc Valuation – November 2015 Update $NFLX

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.

Fortune Brands Home & Security Inc Valuation – Initial Coverage $FBHS

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Fortune Brands Home & Security Inc (FBHS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fortune Brands Home & Security, Inc. is a holding company. The Company is a home and security products company with a portfolio of branded products used for residential home repair, remodeling, new construction and security applications. The Company operates through four segments: Cabinets, Plumbing, Doors and Security. The Cabinets segment offers stock cabinetry, as well as vanities. The Plumbing segment offers faucets, accessories and kitchen sinks in North America and China. The Company operates Global Plumbing Group (GPG) platform in its plumbing segment, which provides infrastructure to support a multi-brand, channel and geography plumbing business. It offers Moen and Riobel brands under the GPG platform. The Doors segment provides fiberglass and steel entry door systems under the Therma-Tru brand and urethane millwork product lines under the Fypon brand. The Security segment provides a range of security and safety products under Master Lock and SentrySafe brands.

FBHS Chart

FBHS data by YCharts

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

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

Learn More About Premium Membership

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of FBHS – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,094,978,393 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.71 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 1734.15% Pass
6. Moderate PEmg Ratio PEmg < 20 25.63 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.92 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.71 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.38 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 $2.29
MG Growth Estimate 15.00%
MG Value $88.19
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $33.21
MG Value based on 0% Growth $19.47
Market Implied Growth Rate 8.57%
Current Price $58.72
% of Intrinsic Value 66.58%

Fortune Brands Home & Security Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.64 in 2013 to an estimated $2.29 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.57% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Fortune Brands Home & Security Inc revealed the company was trading above its Graham Number of $31.98. The company pays a dividend of $0.64 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 25.63, which was below the industry average of 28.49, 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 $-8.38.

Fortune Brands Home & Security Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.38
Graham Number $31.98
PEmg 25.63
Current Ratio 1.71
PB Ratio 3.92
Current Dividend $0.64
Dividend Yield 1.09%
Number of Consecutive Years of Dividend Growth 5

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $1,445,200,000
Total Current Liabilities $842,800,000
Long-Term Debt $1,431,100,000
Total Assets $5,128,500,000
Intangible Assets $2,940,800,000
Total Liabilities $2,767,000,000
Shares Outstanding (Diluted Average) 157,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.97
Dec2016 $2.62
Dec2015 $1.93
Dec2014 $0.95
Dec2013 $1.34
Dec2012 $0.71
Dec2011 -$0.23
Dec2010 $0.41

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.29
Dec2016 $1.80
Dec2015 $1.24
Dec2014 $0.81
Dec2013 $0.64
Dec2012 $0.26
Dec2011 $0.03
Dec2010 $0.14

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Quanta Services Inc Valuation – August 2016 $PWR
Jacobs Engineering Group Inc Valuation – August 2016 $JEC
PPG Industries Inc Valuation – August 2016 $PPG
D.R. Horton Inc Valuation – August 2016 $DHI
Martin Marietta Materials Inc Valuation – August 2016 $MLM
Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI

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.

ServisFirst Bancshares Inc Valuation – Initial Coverage $SFBS

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

Company Profile (obtained from Google Finance): ServisFirst Bancshares, Inc. is a bank holding company. The Company, through its subsidiary, ServisFirst Bank (the Bank), operates approximately 18 banking offices. Through its bank, the Company originates commercial, consumer and other loans and accepts deposits, provides electronic banking services, such as online and mobile banking, including remote deposit capture, delivers treasury and cash management services, and provides correspondent banking services to other financial institutions. The Company also offers a range of products and services, including around the clock telephone banking, direct deposit, Internet banking, mobile banking, traveler’s checks, safe deposit boxes, attorney trust accounts and automatic account transfers. The Company also participates in a shared network of automated teller machines (ATMs) and a debit card system that its customers are able to use throughout Alabama and in other states. Additionally, the Company offers Visa credit cards.

SFBS Chart

SFBS data by YCharts

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of SFBS – December 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,943,280,971 Fail
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 12216566.67% Pass
5. Moderate PEmg Ratio PEmg < 20 31.60 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.97 Fail
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.18
MG Growth Estimate 15.00%
MG Value $45.61
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $17.18
MG Value based on 0% Growth $10.07
Market Implied Growth Rate 11.55%
Current Price $37.44
% of Intrinsic Value 82.09%

ServisFirst Bancshares, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.43 in 2012 to an estimated $1.18 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 11.55% 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 within a margin of safety relative to the price.

At the time of valuation, further research into ServisFirst Bancshares, Inc. revealed the company was trading above its Graham Number of $17.59. The company pays a dividend of $0.15 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 31.6, which was above the industry average of 21.43.

ServisFirst Bancshares, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Graham Number $17.59
PEmg 31.60
PB Ratio 3.97
Dividend Yield 0.40%
TTM Dividend $0.15
Number of Consecutive Years of Dividend Growth 3

[/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 9/1/2016
Long-Term Debt & Capital Lease Obligation $55,356,000
Total Assets $6,002,621,000
Intangible Assets $15,073,000
Total Liabilities $5,495,132,000
Shares Outstanding (Diluted Average) 53,879,000

Earnings Per Share History

Next Fiscal Year Estimate $1.43
Dec2015 $1.20
Dec2014 $1.05
Dec2013 $0.95
Dec2012 $0.83
Dec2011 $0.59

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.18
Dec2015 $1.02
Dec2014 $0.85
Dec2013 $0.66
Dec2012 $0.43
Dec2011 $0.20

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Ingredion Inc Valuation – Initial Coverage $INGR
City Holding Company Valuation – Initial Coverage $CHCO
Southside Bancshares Inc Valuation – Initial Coverage $SBSI
Independent Bank Corp Valuation – Initial Coverage $INDB
Cullen/Frost Bankers Inc Valuation – Initial Coverage $CFR
Signature Bank Valuation – Initial Coverage $SBNY
Cardinal Financial Corp Valuation – Initial Coverage $CFNL
Citizens Financial Group Inc Valuation – Initial Coverage $CFG
BB&T Corporation Valuation – November 2016 $BBT
SunTrust Banks Inc Valuation – August 2016 $STI

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.

Facebook Inc Valuation – July 2016 $FB

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 Facebook Inc (FB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Facebook, Inc. builds products that enable people to connect and share through mobile devices and personal computers. The Company enables people to share their opinions, ideas, photos and videos, and other activities. Its products include Facebook, Instagram, Messenger, WhatsApp and Oculus. Facebook is a mobile application and Website that enables people to connect, share, discover and communicate with each other on mobile devices and personal computers. Instagram is a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them to friends. Messenger is a messaging application available for mobile and Web on various platforms and devices. WhatsApp Messenger is a mobile messaging application that is used by people around the world. Oculus virtual reality technology and content platform allows people to play games, consume content and connect with others.

[level-free]

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of FB – 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 $333,242,211,820 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 13.16 Pass
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 16500.00% Pass
6. Moderate PEmg Ratio PEmg < 20 77.39 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.15 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 13.16 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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

FB value chart July 2016

EPSmg $1.51
MG Growth Estimate 15.00%
MG Value $58.06
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $21.87
MG Value based on 0% Growth $12.82
Market Implied Growth Rate 34.44%
Current Price $116.70
% of Intrinsic Value 201.01%

Facebook Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and 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 $0.12 in 2012 to an estimated $1.51 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 34.44% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

Facebook Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

FB charts July 2016

Net Current Asset Value (NCAV) $6.54
Graham Number $31.05
PEmg 77.39
Current Ratio 13.16
PB Ratio 7.15
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 3/1/2016
Total Current Assets $23,812,000,000
Total Current Liabilities $1,809,000,000
Long-Term Debt $0
Total Assets $52,075,000,000
Intangible Assets $21,096,000,000
Total Liabilities $4,925,000,000
Shares Outstanding (Diluted Average) 2,888,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.59
Dec2015 $1.29
Dec2014 $1.10
Dec2013 $0.60
Dec2012 $0.01
Dec2011 $0.43

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.51
Dec2015 $0.87
Dec2014 $0.59
Dec2013 $0.29
Dec2012 $0.12
Dec2011 $0.14

Recommended Reading:

Other ModernGraham posts about the company

Facebook Inc Valuation – January 2016 Update $FB
Facebook Inc. Analysis – August 2015 Update $FB
Facebook Inc. Analysis – August 2015 Update $FB
Facebook Stock Analysis – Quarterly Update May 2015 $FB
28 Companies in the Spotlight This Week – 2/28/15

Other ModernGraham posts about related companies

Salesforce.com Valuation – January 2016 Update $CRM
Facebook Inc Valuation – January 2016 Update $FB
Netflix Inc Valuation – November 2015 Update $NFLX
Facebook Inc Valuation – January 2016 Update $FB
Netflix Inc Valuation – November 2015 Update $NFLX
Facebook Inc. Analysis – August 2015 Update $FB
Ebay Inc. Analysis – August 2015 Update $EBAY
Facebook Stock Analysis – Quarterly Update May 2015 $FB
eBay Inc. Quarterly Valuation – May 2015 $EBAY
Facebook Inc. Quarterly Valuation – February 2015 $FB

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.

Facebook Inc Valuation – January 2016 Update $FB

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Facebook Inc (FB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Facebook, Inc. is a social networking company. The Company is engaged in developing products that enables users to connect and share through mobile devices and personal computers. It offers various services focused on people, marketers and developers. It offers various platforms for people to share their opinions, ideas, photos and videos, and to engage in other activities. Its products include Facebook, Instagram, Messenger and WhatsApp. The Facebook mobile app and Website enables people to connect, share, discover and communicate with each other on mobile devices and personal computers. Its Messenger is a mobile-to-mobile messaging application available on iOS and Android phones. Instagram is a mobile application and Website that enables people to take photos or videos, and share them with friends and followers. WhatsApp Messenger is a cross-platform mobile messaging application and allows people to exchange messages on iOS, Android, BlackBerry, Windows Phone and Nokia devices.

[level-free]

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of FB – January 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 $311,615,350,369 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 11.25 Pass
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 15526.67% Pass
6. Moderate PEmg Ratio PEmg < 20 78.64 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.16 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 11.25 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.01 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

FB value Chart January 2016

EPSmg $1.43
MG Growth Estimate 15.00%
MG Value $55.09
Opinion Overvalued
MG Value based on 3% Growth $20.75
MG Value based on 0% Growth $12.16
Market Implied Growth Rate 35.07%
Current Price $112.52
% of Intrinsic Value 204.26%

Facebook Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short history as a publicly traded company, the lack of dividends, and the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.13 in 2012 to an estimated $1.43 for 2016.  This level of demonstrated earnings growth does not support the market’s implied estimate of 35.07% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

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

Stage 3: Information for Further Research

FB Charts January 2016

Net Current Asset Value (NCAV) $5.85
Graham Number $30.32
PEmg 78.64
Current Ratio 11.25
PB Ratio 7.16
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 Dec2015
Total Current Assets $21,652,000,000
Total Current Liabilities $1,925,000,000
Long-Term Debt $107,000,000
Total Assets $49,407,000,000
Intangible Assets $21,272,000,000
Total Liabilities $5,189,000,000
Shares Outstanding (Diluted Average) 2,814,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.60
Dec2015 $0.99
Dec2014 $1.10
Dec2013 $0.60
Dec2012 $0.01
Dec2011 $0.46

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.43
Dec2015 $0.77
Dec2014 $0.59
Dec2013 $0.29
Dec2012 $0.13
Dec2011 $0.15

Recommended Reading:

Other ModernGraham posts about the company

Facebook Inc. Analysis – August 2015 Update $FB
Facebook Stock Analysis – Quarterly Update May 2015 $FB
28 Companies in the Spotlight This Week – 2/28/15
Facebook Inc. Quarterly Valuation – February 2015 $FB
22 Companies in the Spotlight This Week – 11/29/14

Other ModernGraham posts about related companies

Netflix Inc Valuation – November 2015 Update $NFLX
Facebook Inc. Analysis – August 2015 Update $FB
Ebay Inc. Analysis – August 2015 Update $EBAY
Facebook Stock Analysis – Quarterly Update May 2015 $FB
eBay Inc. Quarterly Valuation – May 2015 $EBAY
Facebook Inc. Quarterly Valuation – February 2015 $FB
Salesforce.com Inc. Annual Valuation – 2014 $CRM
Facebook Inc. Quarterly Valuation – November 2014 $FB
Netflix Inc. Annual Valuation – 2014 $NFLX
Facebook Inc. Quarterly Valuation – August 2014 $FB

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.

Facebook Inc. Analysis – August 2015 Update $FB

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Facebook Inc. (FB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Facebook, Inc. is a social networking company. The Company is engaged in developing products that enables users to connect and share through mobile devices and personal computers. It offers various services focused on people, marketers and developers. It offers various platforms for people to share their opinions, ideas, photos and videos, and to engage in other activities. Its products include Facebook, Instagram, Messenger and WhatsApp. The Facebook mobile app and Website enables people to connect, share, discover and communicate with each other on mobile devices and personal computers. Its Messenger is a mobile-to-mobile messaging application available on iOS and Android phones. Instagram is a mobile application and Website that enables people to take photos or videos, and share them with friends and followers. WhatsApp Messenger is a cross-platform mobile messaging application and allows people to exchange messages on iOS, Android, BlackBerry, Windows Phone and Nokia devices.

[level-free]

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of FB – August 2015

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 Pass
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 Pass
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 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 $0.93
MG Growth Estimate 15.00%
MG Value $35.93
Opinion Overvalued
MG Value based on 3% Growth $13.53
MG Value based on 0% Growth $7.93
Market Implied Growth Rate 44.29%
Current Price $90.61
% of Intrinsic Value 252.16%

Facebook Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short history as a publicly traded company, lack of dividends as well as the high PEmg and PB ratios.  The Enterprising Investor is only concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.14 in 2011 to an estimated $0.93 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 44.29% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

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

Stage 3: Information for Further Research

FB Charts August 2015

Net Current Asset Value (NCAV) $4.31
Graham Number $21.40
PEmg 97.08
Current Ratio 9.01
PB Ratio 6.55
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

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

Most Recent Balance Sheet Figures

Total Current Assets $16,951,000,000
Total Current Liabilities $1,881,000,000
Long-Term Debt $110,000,000
Total Assets $44,130,000,000
Intangible Assets $21,630,000,000
Total Liabilities $4,678,000,000
Shares Outstanding (Diluted Average) 2,850,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.47
Dec14 $1.10
Dec13 $0.60
Dec12 $0.01
Dec11 $0.43

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.93
Dec14 $0.59
Dec13 $0.29
Dec12 $0.12
Dec11 $0.14

Recommended Reading:

Other ModernGraham posts about the company

Facebook Stock Analysis – Quarterly Update May 2015 $FB
28 Companies in the Spotlight This Week – 2/28/15
Facebook Inc. Quarterly Valuation – February 2015 $FB
22 Companies in the Spotlight This Week – 11/29/14
Facebook Inc. Quarterly Valuation – November 2014 $FB

Other ModernGraham posts about related companies

Ebay Inc. Analysis – August 2015 Update $EBAY
Facebook Stock Analysis – Quarterly Update May 2015 $FB
eBay Inc. Quarterly Valuation – May 2015 $EBAY
Facebook Inc. Quarterly Valuation – February 2015 $FB
Salesforce.com Inc. Annual Valuation – 2014 $CRM
Facebook Inc. Quarterly Valuation – November 2014 $FB
Netflix Inc. Annual Valuation – 2014 $NFLX
Facebook Inc. Quarterly Valuation – August 2014 $FB
Netflix Inc. Quarterly Valuation – August 2014 $NFLX
Facebook Inc. (FB) Quarterly Valuation – May 2014

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.  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.

Back To Top