TransDigm Group Inc Valuation – March 2019 #TDG

Company Profile (excerpt from Reuters): TransDigm Group Incorporated, incorporated on July 8, 2003, is a global designer, producer and supplier of engineered aircraft components for commercial and military aircraft in service. Through its subsidiary, Skandia Inc., the Company provides seating foam, foam fabrication, flammability testing and acoustic solutions for the business jet market. The Company operates through three segments: Power & Control, Airframe and Non-aviation.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TDG – 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 $23,267,803,131 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.13 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 249.49% Pass
6. Moderate PEmg Ratio PEmg < 20 32.92 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -14.85 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 4.13 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.20 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $13.36
MG Growth Estimate 15.00%
MG Value $514.39
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $193.73
MG Value based on 0% Growth $113.57
Market Implied Growth Rate 12.21%
Current Price $439.87
% of Intrinsic Value 85.51%

TransDigm Group Incorporated does not satisfy the requirements of either the Enterprising Investor or 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 has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $4.94 in 2015 to an estimated $13.36 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 12.21% 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 within a margin of safety relative to the price.

At the time of valuation, further research into TransDigm Group Incorporated revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 32.92, which was below the industry average of 51.79, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-180.03.

TransDigm Group Incorporated 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) -$180.03
Graham Number $0.00
PEmg 32.92
Current Ratio 4.13
PB Ratio -14.85
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,926,618,000
Total Current Liabilities $951,266,000
Long-Term Debt $12,507,616,000
Total Assets $12,389,278,000
Intangible Assets $8,001,467,000
Total Liabilities $14,056,171,000
Shares Outstanding (Diluted Average) 56,266,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $16.67
Sep2018 $16.20
Sep2017 $7.88
Sep2016 $10.39
Sep2015 $7.84
Sep2014 $3.16
Sep2013 $2.39
Sep2012 $5.97
Sep2011 $3.17
Sep2010 $2.52
Sep2009 $3.10
Sep2008 $2.65
Sep2007 $1.83
Sep2006 $0.53
Sep2005 $0.75
Sep2004 $0.29
Sep2003 -$10.92
Sep2002 $221.95

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $13.36
Sep2018 $10.84
Sep2017 $7.55
Sep2016 $6.90
Sep2015 $4.94
Sep2014 $3.48
Sep2013 $3.57
Sep2012 $3.93
Sep2011 $2.82
Sep2010 $2.48
Sep2009 $2.23
Sep2008 $1.60
Sep2007 $0.21
Sep2006 $13.78
Sep2005 $27.74
Sep2004 $41.57
Sep2003 $55.55

Recommended Reading:

Other ModernGraham posts about the company

TransDigm Group Inc Valuation – June 2018 $TDG
TransDigm Group Inc Valuation – Initial Coverage $TDG

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

General Motors Co Valuation – February 2019 $GM

Company Profile (excerpt from Reuters): General Motors Company, incorporated on August 11, 2009, designs, builds and sells cars, trucks, crossovers and automobile parts. The Company’s segments include GM North America (GMNA), GM Europe (GME), GM International Operations (GMIO), GM South America (GMSA) and General Motors Financial Company, Inc. (GM Financial). The Company provides automotive financing services through General Motors Financial Company, Inc. The Company develops, manufactures and/or markets vehicles in North America under the brands, including Buick, Cadillac, Chevrolet and GMC. The Company also develops, manufactures and/or markets vehicles outside North America under the brands, including Buick, Cadillac, Chevrolet, GMC, Holden, Opel and Vauxhall.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GM – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $55,096,534,325 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.92 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -14.05% Fail
6. Moderate PEmg Ratio PEmg < 20 9.41 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.31 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 0.92 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.52 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.16
MG Growth Estimate 2.41%
MG Value $55.33
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $60.25
MG Value based on 0% Growth $35.32
Market Implied Growth Rate 0.45%
Current Price $39.09
% of Intrinsic Value 70.65%

General Motors 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, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.58 in 2015 to an estimated $4.16 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.45% 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 General Motors Company revealed the company was trading below its Graham Number of $61.47. The company pays a dividend of $1.52 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.41, which was below the industry average of 21.23, 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 $-76.36.

General Motors Company performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$76.36
Graham Number $61.47
PEmg 9.41
Current Ratio 0.92
PB Ratio 1.31
Current Dividend $1.52
Dividend Yield 3.89%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $75,293,000,000
Total Current Liabilities $82,237,000,000
Long-Term Debt $73,060,000,000
Total Assets $227,339,000,000
Intangible Assets $5,579,000,000
Total Liabilities $184,562,000,000
Shares Outstanding (Diluted Average) 1,431,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.05
Dec2018 $5.53
Dec2017 -$2.65
Dec2016 $6.00
Dec2015 $5.91
Dec2014 $1.65
Dec2013 $2.38
Dec2012 $2.92
Dec2011 $4.58
Dec2010 $2.89
Dec2009 $113.18
Dec2008 -$53.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.16
Dec2018 $3.23
Dec2017 $2.28
Dec2016 $4.42
Dec2015 $3.58
Dec2014 $2.57
Dec2013 $10.42
Dec2012 $14.30
Dec2011 $17.80
Dec2010 $20.45
Dec2009 $23.47
Dec2008 -$17.82

Recommended Reading:

Other ModernGraham posts about the company

General Motors Co Valuation – April 2018 $GM
General Motors Company Valuation – November 2016 $GM
General Motors Company Analysis – 2015 Update $GM
17 Companies in the Spotlight This Week – 8/2/14
General Motors Co. Annual Valuation – 2014 $GM

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

MGM Resorts International Valuation – January 2019 $MGM

Company Profile (excerpt from Reuters): MGM Resorts International, incorporated on January 29, 1986, is a holding company. The Company, through its subsidiaries, owns and operates casino resorts. The Company operates in two segments: domestic resorts and MGM China. Its domestic resorts segment consists of non-gaming operations, including hotel, food and beverage, entertainment and other non-gaming amenities. Its MGM China’s operations consist of the MGM Macau resort and casino (MGM Macau), and the development of an integrated casino, hotel and entertainment resort on the Cotai Strip in Macau (MGM Cotai). Under its resort operation, the Company’s casino resorts offer gaming, hotel, convention, dining, entertainment, retail and other resort amenities. It makes investments in its resorts through remodeled hotel rooms, restaurants, entertainment and nightlife offerings, as well as other features and amenities. Its subsidiaries include Blue Tarp reDevelopment, LLC, Mandalay Resort Group and MGM CC, LLC.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MGM – 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 $13,976,019,100 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.74 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 -723.68% Fail
6. Moderate PEmg Ratio PEmg < 20 18.56 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.33 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 0.74 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -19.05 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.43
MG Growth Estimate 15.00%
MG Value $54.98
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $20.71
MG Value based on 0% Growth $12.14
Market Implied Growth Rate 5.03%
Current Price $26.51
% of Intrinsic Value 48.22%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.38 in 2014 to an estimated $1.43 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.03% 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 MGM Resorts International revealed the company was trading above its Graham Number of $15.96. The company pays a dividend of $0.44 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 18.56, which was above the industry average of 16.98. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-31.49.

MGM Resorts International 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) -$31.49
Graham Number $15.96
PEmg 18.56
Current Ratio 0.74
PB Ratio 1.33
Current Dividend $0.44
Dividend Yield 1.66%
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 9/1/2018
Total Current Assets $2,208,024,000
Total Current Liabilities $2,977,590,000
Long-Term Debt $14,663,972,000
Total Assets $29,973,515,000
Intangible Assets $5,813,972,000
Total Liabilities $19,227,336,000
Shares Outstanding (Diluted Average) 540,396,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.84
Dec2017 $3.35
Dec2016 $1.92
Dec2015 -$0.82
Dec2014 -$0.31
Dec2013 -$0.35
Dec2012 -$3.62
Dec2011 $5.62
Dec2010 -$3.19
Dec2009 -$3.41
Dec2008 -$3.06
Dec2007 $5.31
Dec2006 $2.22
Dec2005 $1.50
Dec2004 $1.43
Dec2003 $0.80
Dec2002 $0.92
Dec2001 $0.53
Dec2000 $0.55
Dec1999 $0.36
Dec1998 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.43
Dec2017 $1.40
Dec2016 $0.07
Dec2015 -$0.53
Dec2014 -$0.38
Dec2013 -$0.61
Dec2012 -$1.00
Dec2011 $0.29
Dec2010 -$1.73
Dec2009 -$0.49
Dec2008 $1.14
Dec2007 $2.91
Dec2006 $1.59
Dec2005 $1.20
Dec2004 $0.98
Dec2003 $0.71
Dec2002 $0.62

Recommended Reading:

Other ModernGraham posts about the company

MGM Resorts International Valuation – Initial Coverage $MGM

Other ModernGraham posts about related companies

Scientific Games Corp Valuation – July 2018 $SGMS
Wynn Resorts Ltd Valuation – June 2018 $WYNN
MGM Resorts International Valuation – Initial Coverage $MGM
Wynn Resorts Ltd Valuation – March 2017 $WYNN
Intertain Group Corp Valuation – Initial Coverage $TSE:IT
Scientific Games Corp Valuation – Initial Coverage $SGMS
Wynn Resorts Limited Valuation – August 2016 $WYNN
Wynn Resorts Ltd Valuation – February 2016 $WYNN
Wynn Resorts Limited Analysis – September 2015 Update $WYNN
Wyndham Worldwide Corporation Analysis – August 2015 Update $WYN

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.

Scientific Games Corp Valuation – July 2018 $SGMS

Company Profile (excerpt from Reuters): Scientific Games Corporation, incorporated on July 2, 1984, is a developer of technology-based products and services and associated content for the gaming, lottery and interactive gaming industries. The Company’s segments include Gaming, Lottery and Interactive. The Company’s portfolio includes gaming machines and game content, casino management systems, table game products and services, instant and draw-based lottery games, server-based gaming and lottery systems, sports betting technology, lottery content and services, loyalty and rewards programs, interactive gaming and social casino solutions. The Company’s games are available on Facebook, Amazon.com, the Apple app store and Android app on Google play.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SGMS – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $4,364,172,914 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.00 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 -139.08% Fail
6. Moderate PEmg Ratio PEmg < 20 -36.64 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.32 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 4.00 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.27 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$1.30
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$18.86
MG Value based on 0% Growth -$11.06
Market Implied Growth Rate -22.57%
Current Price $47.65
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.65 in 2014 to an estimated $-1.3 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Scientific Games Corp revealed the company was trading above its Graham Number of $36.89. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -36.64, which was below the industry average of 24.74, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.52.

Scientific Games Corp scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.52
Graham Number $36.89
PEmg -36.64
Current Ratio 4.00
PB Ratio 1.32
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 6/1/2018
Total Current Assets $555,187,000
Total Current Liabilities $138,759,000
Long-Term Debt $530,909,000
Total Assets $1,655,924,000
Intangible Assets $59,672,000
Total Liabilities $838,088,000
Shares Outstanding (Diluted Average) 22,588,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.74
Dec2017 $3.31
Dec2016 -$12.76
Dec2015 -$3.94
Dec2014 $4.71
Dec2013 $1.82
Dec2012 $2.95
Dec2011 $1.91
Dec2010 $11.25
Dec2009 $6.57
Dec2008 $9.25
Dec2007 $9.04
Dec2006 $8.44
Dec2005 $6.95
Dec2004 $1.08
Dec2003 $0.63
Dec2002 $2.28
Dec2001 $3.43
Dec2000 $1.92
Dec1999 $1.69
Dec1998 $5.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.30
Dec2017 -$2.34
Dec2016 -$3.92
Dec2015 $0.83
Dec2014 $3.65
Dec2013 $3.71
Dec2012 $5.24
Dec2011 $6.79
Dec2010 $9.12
Dec2009 $8.05
Dec2008 $8.18
Dec2007 $6.84
Dec2006 $5.12
Dec2005 $3.26
Dec2004 $1.57
Dec2003 $1.87
Dec2002 $2.65

Recommended Reading:

Other ModernGraham posts about the company

Scientific Games Corp Valuation – Initial Coverage $SGMS

Other ModernGraham posts about related companies

Wynn Resorts Ltd Valuation – June 2018 $WYNN
MGM Resorts International Valuation – Initial Coverage $MGM
Wynn Resorts Ltd Valuation – March 2017 $WYNN
Intertain Group Corp Valuation – Initial Coverage $TSE:IT
Scientific Games Corp Valuation – Initial Coverage $SGMS
Wynn Resorts Limited Valuation – August 2016 $WYNN
Wynn Resorts Ltd Valuation – February 2016 $WYNN
Wynn Resorts Limited Analysis – September 2015 Update $WYNN
Wyndham Worldwide Corporation Analysis – August 2015 Update $WYN
Wynn Resorts Analysis – June 2015 Update $WYNN

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.

IGM Financial Inc Valuation – July 2018 $TSE-IGM

Company Profile (excerpt from Reuters): IGM Financial Inc. is a Canada-based financial services company. The Company’s principal businesses are Investors Group Inc. and Mackenzie Financial Corporation, which operate within the advice segment of the financial services market. It operates in three segments: Investors Group, Mackenzie Investments, and Corporate and Other. The Investors Group provides a range of financial and investment planning services through its network of consultants across the country, and its products and services include Personal Financial Planner, Symphony Strategic Investment Planning Program and Mutual Funds. The Mackenzie Investments segment is engaged in the provision of investment management and related services offered through diversified investment solutions, distributed through multiple distribution channels. The Corporate and Other segment includes share of earnings of its affiliate, Great-West Lifeco Inc. (Lifeco) and operating results for Investment Planning Counsel Inc.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-IGM – 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 $9,342,275,260 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 4.98% Fail
5. Moderate PEmg Ratio PEmg < 20 19.87 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.07 Pass
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 Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.92
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $27.81
MG Value based on 0% Growth $16.30
Market Implied Growth Rate 5.68%
Current Price $38.11
% of Intrinsic Value N/A

IGM Financial Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.01 in 2014 to an estimated $1.92 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.68% 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.

At the time of valuation, further research into IGM Financial Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $2.25 per share, for a yield of 5.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.87, which was below the industry average of 21.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

IGM Financial Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Graham Number $0.00
PEmg 19.87
PB Ratio 2.07
Dividend Yield 5.90%
TTM Dividend $2.25
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
Long-Term Debt & Capital Lease Obligation $2,025,000,000
Total Assets $15,695,480,000
Intangible Assets $3,844,736,000
Total Liabilities $11,262,545,000
Shares Outstanding (Diluted Average) 241,081,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate
Dec2017 $2.50
Dec2016 $3.19
Dec2015 $3.11
Dec2014 $2.98
Dec2013 $3.02
Dec2012 $2.97
Dec2011 $3.24
Dec2010 $2.77
Dec2009 $2.12
Dec2008 $2.76
Dec2007 $3.29
Dec2006 $2.90
Dec2005 $2.56
Dec2004 $2.24
Dec2003 $2.03
Dec2002 $1.85
Dec2001 $1.05
Dec2000 $1.35
Dec1999 $1.12
Dec1998 $0.89

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.92
Dec2017 $2.90
Dec2016 $3.09
Dec2015 $3.05
Dec2014 $3.01
Dec2013 $2.96
Dec2012 $2.87
Dec2011 $2.83
Dec2010 $2.67
Dec2009 $2.66
Dec2008 $2.87
Dec2007 $2.82
Dec2006 $2.49
Dec2005 $2.17
Dec2004 $1.89
Dec2003 $1.64
Dec2002 $1.38

Recommended Reading:

Other ModernGraham posts about the company

IGM Financial Inc Valuation – Initial Coverage $IGM

Other ModernGraham posts about related companies

T. Rowe Price Group Inc Valuation – June 2018 $TROW
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Charles Schwab Corp Valuation – June 2018 $SCHW
Willis Towers Watson PLC Valuation – Initial Coverage June 2018 $WLTW
PayPal Holdings Inc Valuation – June 2018 $PYPL
Synchrony Financial Valuation – June 2018 $SYF
CBRE Group Inc Valuation – June 2018 $CBRE
Franklin Resources Inc Valuation – May 2018 $BEN
S&P Global Inc Valuation – May 2018 $SPGI
Equifax Inc Valuation – May 2018 $EFX

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.

GameStop Corp Valuation – June 2018 $GME

Company Profile (excerpt from Reuters): GameStop Corp., incorporated on April 13, 2005, is an omnichannel video game retailer. The Company sells video game hardware, physical and digital video game software, video game accessories, as well as mobile and consumer electronics products and other merchandise through its GameStop, EB Games and Micromania stores. The Company operates its business in five segments, which consists of four Video Game Brands segments: United States, Canada, Australia and Europe, and Technology Brands segment. Each of the Video Game Brands segments consists primarily of retail operations, with all stores engaged in the sale of new and pre-owned video game systems, software and accessories, which it refers to as video game products. Its Video Game Brands stores sell various types of digital products, including downloadable content, network points cards, prepaid digital, prepaid subscription cards and digitally downloadable software, and also sell certain mobile and consumer electronics products and collectible products. Its Technology Brands segment includes its Spring Mobile and Simply Mac businesses.

GME Chart

GME data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GME – 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 $1,476,108,941 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.52 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 -9.99% Fail
6. Moderate PEmg Ratio PEmg < 20 5.91 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.68 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 1.52 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.29 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 $2.45
MG Growth Estimate 3.16%
MG Value $36.34
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $35.56
MG Value based on 0% Growth $20.85
Market Implied Growth Rate -1.30%
Current Price $14.49
% of Intrinsic Value 39.87%

GameStop Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history. 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 $2.03 in 2015 to an estimated $2.45 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.3% annual earnings loss 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 GameStop Corp. revealed the company was trading below its Graham Number of $37.34. The company pays a dividend of $1.52 per share, for a yield of 10.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 5.91, which was below the industry average of 37.1, 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 $-2.68.

GameStop Corp. fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.68
Graham Number $37.34
PEmg 5.91
Current Ratio 1.52
PB Ratio 0.68
Current Dividend $1.52
Dividend Yield 10.49%
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 4/1/2018
Total Current Assets $1,851,600,000
Total Current Liabilities $1,214,700,000
Long-Term Debt $818,600,000
Total Assets $4,308,400,000
Intangible Assets $1,659,200,000
Total Liabilities $2,124,900,000
Shares Outstanding (Diluted Average) 102,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.84
Jan2018 $0.34
Jan2017 $3.40
Jan2016 $3.78
Jan2015 $3.47
Jan2014 $2.99
Jan2013 -$2.13
Jan2012 $2.41
Jan2011 $2.65
Jan2010 $2.25
Jan2009 $2.38
Jan2008 $1.75
Jan2007 $1.00
Jan2006 $0.81
Jan2005 $0.53
Jan2004 $0.53
Jan2003 $0.44
Jan2002 $0.09
Jan2001 -$0.17
Jan2000 $0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.45
Jan2018 $2.44
Jan2017 $3.09
Jan2016 $2.66
Jan2015 $2.03
Jan2014 $1.41
Jan2013 $0.92
Jan2012 $2.39
Jan2011 $2.26
Jan2010 $1.92
Jan2009 $1.60
Jan2008 $1.12
Jan2007 $0.75
Jan2006 $0.58
Jan2005 $0.40
Jan2004 $0.30
Jan2003 $0.15

Recommended Reading:

Other ModernGraham posts about the company

10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017
GameStop Corp Valuation – July 2016 $GME
5 Speculative and Overvalued Companies to Avoid – June 2015
GameStop Corporation Annual Valuation – 2015 $GME
5 Speculative and Overvalued Companies to Avoid – November 2014

Other ModernGraham posts about related companies

Ulta Beauty Inc Valuation – June 2018 $ULTA
Kohl’s Corporation Valuation – June 2018 $KSS
Dollar Tree Inc Valuation – May 2018 $DLTR
TJX Companies Inc Valuation – May 2018 $TJX
Tractor Supply Co Valuation – April 2018 $TSCO
Tapestry Inc Valuation – April 2018 $TPR
Dollar General Corp Valuation – April 2018 $DG
Tiffany & Co. Valuation – April 2018 $TIF
Best Buy Co Inc Valuation – April 2018 $BBY
Macy’s Inc Valuation – April 2018 $M

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.

TransDigm Group Inc Valuation – June 2018 $TDG

Company Profile (excerpt from Reuters): TransDigm Group Incorporated, incorporated on July 8, 2003, is a global designer, producer and supplier of engineered aircraft components for commercial and military aircraft in service. The Company operates through three segments: Power & Control, Airframe and Non-aviation.

TDG Chart

TDG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TDG – 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 $17,632,347,924 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.04 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 288.96% Pass
6. Moderate PEmg Ratio PEmg < 20 31.31 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -8.10 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 3.04 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.86 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 $10.74
MG Growth Estimate 15.00%
MG Value $413.57
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $155.76
MG Value based on 0% Growth $91.31
Market Implied Growth Rate 11.40%
Current Price $336.30
% of Intrinsic Value 81.32%

TransDigm Group Incorporated does not satisfy the requirements of either the Enterprising Investor or 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 has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.48 in 2014 to an estimated $10.74 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.4% 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 within a margin of safety relative to the price.

At the time of valuation, further research into TransDigm Group Incorporated revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 31.31, which was below the industry average of 51.81, 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 $-184.05.

TransDigm Group Incorporated 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) -$184.05
Graham Number $0.00
PEmg 31.31
Current Ratio 3.04
PB Ratio -8.10
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 $2,470,104,000
Total Current Liabilities $812,835,000
Long-Term Debt $11,365,790,000
Total Assets $10,394,677,000
Intangible Assets $7,458,844,000
Total Liabilities $12,704,014,000
Shares Outstanding (Diluted Average) 55,605,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $15.92
Sep2017 $7.88
Sep2016 $10.39
Sep2015 $7.84
Sep2014 $3.16
Sep2013 $2.39
Sep2012 $5.97
Sep2011 $3.17
Sep2010 $2.52
Sep2009 $3.10
Sep2008 $2.65
Sep2007 $1.83
Sep2006 $0.53
Sep2005 $0.75
Sep2004 $0.29
Sep2003 -$10.92
Sep2002 $221.95

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.74
Sep2017 $7.55
Sep2016 $6.90
Sep2015 $4.94
Sep2014 $3.48
Sep2013 $3.57
Sep2012 $3.93
Sep2011 $2.82
Sep2010 $2.48
Sep2009 $2.23
Sep2008 $1.60
Sep2007 $0.21
Sep2006 $13.78
Sep2005 $27.74
Sep2004 $41.57
Sep2003 $55.55
Sep2002 $73.98

Recommended Reading:

Other ModernGraham posts about the company

TransDigm Group Inc Valuation – Initial Coverage $TDG

Other ModernGraham posts about related companies

Northrop Grumman Corp Valuation – May 2018 $NOC
Rockwell Collins Inc Valuation – May 2018 $COL
L3 Technologies Inc Valuation – March 2018 $LLL
Textron Inc Valuation – March 2018 $TXT
Lockheed Martin Corp Valuation – February 2018 $LMT
United Technologies Corp Valuation – February 2018 $UTX
Triumph Group Inc Valuation – Initial Coverage $TGI
Raytheon Company Valuation – April 2017 $RTN
General Dynamics Corp Valuation – March 2017 $GD
TASER International Inc Valuation – Initial Coverage $TASR

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.

General Motors Co Valuation – April 2018 $GM

Company Profile (excerpt from Reuters): General Motors Company, incorporated on August 11, 2009, designs, builds and sells cars, trucks, crossovers and automobile parts. The Company’s segments include GM North America (GMNA), GM Europe (GME), GM International Operations (GMIO), GM South America (GMSA) and General Motors Financial Company, Inc. (GM Financial). The Company provides automotive financing services through General Motors Financial Company, Inc. The Company develops, manufactures and/or markets vehicles in North America under the brands, including Buick, Cadillac, Chevrolet and GMC. The Company also develops, manufactures and/or markets vehicles outside North America under the brands, including Buick, Cadillac, Chevrolet, GMC, Holden, Opel and Vauxhall.

GM Chart

GM data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GM – 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 $54,928,567,932 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.89 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 -92.48% Fail
6. Moderate PEmg Ratio PEmg < 20 11.89 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.62 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 0.89 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.35 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.30
MG Growth Estimate 4.23%
MG Value $55.96
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $47.82
MG Value based on 0% Growth $28.03
Market Implied Growth Rate 1.70%
Current Price $39.22
% of Intrinsic Value 70.08%

General Motors 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, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.57 in 2014 to an estimated $3.3 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.7% 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 above the price.

At the time of valuation, further research into General Motors Company revealed the company was trading below its Graham Number of $56.31. The company pays a dividend of $1.52 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.89, which was below the industry average of 17.88, 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 $-75.15.

General Motors Company performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$75.15
Graham Number $56.31
PEmg 11.89
Current Ratio 0.89
PB Ratio 1.62
Current Dividend $1.52
Dividend Yield 3.88%
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 12/1/2017
Total Current Assets $68,744,000,000
Total Current Liabilities $76,890,000,000
Long-Term Debt $10,987,000,000
Total Assets $212,482,000,000
Intangible Assets $5,849,000,000
Total Liabilities $177,481,000,000
Shares Outstanding (Diluted Average) 1,447,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.72
Dec2017 -$2.65
Dec2016 $6.00
Dec2015 $5.91
Dec2014 $1.65
Dec2013 $2.38
Dec2012 $2.92
Dec2011 $4.58
Dec2010 $2.89
Dec2009 $113.18
Dec2008 -$53.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.30
Dec2017 $2.28
Dec2016 $4.42
Dec2015 $3.58
Dec2014 $2.57
Dec2013 $10.42
Dec2012 $14.30
Dec2011 $17.80
Dec2010 $20.45
Dec2009 $23.47
Dec2008 -$17.82

Recommended Reading:

Other ModernGraham posts about the company

General Motors Company Valuation – November 2016 $GM
General Motors Company Analysis – 2015 Update $GM
17 Companies in the Spotlight This Week – 8/2/14
General Motors Co. Annual Valuation – 2014 $GM

Other ModernGraham posts about related companies

O’Reilly Automotive Inc Valuation – April 2018 $ORLY
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Thor Industries Inc Valuation – Initial Coverage $THO
Titan International Inc Valuation – Initial Coverage $TWI
Harley-Davidson Inc Valuation – August 2017 $HOG
Wabash National Corp Valuation – Initial Coverage $WNC
Advance Auto Parts Inc Valuation – August 2017 $AAP
Fox Factory Holding Corp Valuation – Initial Coverage $FOXF

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.

MGM Resorts International Valuation – Initial Coverage $MGM

Company Profile (obtained from Marketwatch): MGM Resorts International is a holding company that engages in the ownership and operations of casino resorts, which offers gaming, hotel, convention, dining, entertainment, retail, and other resort amenities. It operates through Wholly Owned Domestic Resorts, and MGM China segments. The Wholly Owned Domestic Resorts segment is the resorts owned by the company in the United States. The MGM China Segment is consist of operations of MGM Macau Resort and development of MGM Cotai. The company was founded by Kerkor Kerkorian on January 29, 1986 and is headquartered in Las Vegas, NV.

MGM Chart

MGM data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MGM – 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 $19,163,775,717 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.77 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 -747.96% Fail
6. Moderate PEmg Ratio PEmg < 20 22.46 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.55 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 0.77 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -17.77 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.51
MG Growth Estimate 15.00%
MG Value $58.03
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $21.86
MG Value based on 0% Growth $12.81
Market Implied Growth Rate 6.98%
Current Price $33.85
% of Intrinsic Value 58.33%

MGM Resorts International does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the 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. 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 $-0.38 in 2014 to an estimated $1.51 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.98% 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 MGM Resorts International revealed the company was trading above its Graham Number of $18.07. The company pays a dividend of $0.44 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 22.46, which was below the industry average of 47.43, 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 $-33.5.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$33.50
Graham Number $18.07
PEmg 22.46
Current Ratio 0.77
PB Ratio 2.55
Current Dividend $0.44
Dividend Yield 1.30%
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 $2,374,627,000
Total Current Liabilities $3,092,382,000
Long-Term Debt $12,751,052,000
Total Assets $29,159,178,000
Intangible Assets $5,684,491,000
Total Liabilities $21,546,526,000
Shares Outstanding (Diluted Average) 572,357,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.08
Dec2017 $3.35
Dec2016 $1.92
Dec2015 -$0.82
Dec2014 -$0.31
Dec2013 -$0.35
Dec2012 -$3.62
Dec2011 $5.62
Dec2010 -$3.19
Dec2009 -$3.41
Dec2008 -$3.06
Dec2007 $5.31
Dec2006 $2.22
Dec2005 $1.50
Dec2004 $1.43
Dec2003 $0.80
Dec2002 $0.92
Dec2001 $0.53
Dec2000 $0.55
Dec1999 $0.36
Dec1998 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.51
Dec2017 $1.40
Dec2016 $0.07
Dec2015 -$0.53
Dec2014 -$0.38
Dec2013 -$0.61
Dec2012 -$1.00
Dec2011 $0.29
Dec2010 -$1.73
Dec2009 -$0.49
Dec2008 $1.14
Dec2007 $2.91
Dec2006 $1.59
Dec2005 $1.20
Dec2004 $0.98
Dec2003 $0.71
Dec2002 $0.62

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

LogMeIn Inc Valuation – Initial Coverage $LOGM

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 – March 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 LogMeIn Inc (LOGM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): LogMeIn, Inc. provides a portfolio of cloud-based service offerings, which helps people and businesses to connect to their workplace, colleagues and customers. The Company’s core cloud-based services are categorized into four business lines: Communications and Collaboration; Engagement and Support; Identity and Access, and Additional Service Offerings. The Company’s communication and collaboration services include GoToMeeting; GoToTraining; GoToWebinar; join.me, join.me pro and join.me enterprise; OpenVoice, and Grasshopper. The Company’s customer engagement and support services include BoldChat; GoToAssist, GoToAssist Corporate and GoToAssist Seeit; LogMeIn Rescue, Rescue Lens and LogMeIn Rescue+Mobile, and Xively. Its identity and access management services include LogMeIn Central, GoToMyPC, LogMeIn Pro and LastPass. Its additional service offerings include LogMeIn Backup, LogMeIn Hamachi and RemotelyAnywhere.

LOGM Chart

LOGM 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 LOGM – April 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 $5,429,654,673 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.10 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 -674.67% Fail
6. Moderate PEmg Ratio PEmg < 20 73.00 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 13.39 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 1.10 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.41 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 $1.38
MG Growth Estimate 15.00%
MG Value $52.95
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $19.94
MG Value based on 0% Growth $11.69
Market Implied Growth Rate 32.25%
Current Price $100.40
% of Intrinsic Value 189.61%

LogMeIn Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $0.11 in 2013 to an estimated $1.38 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 32.25% 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 LogMeIn Inc revealed the company was trading above its Graham Number of $25.11. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 73, which was above the industry average of 34.38. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.73.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.73
Graham Number $25.11
PEmg 73.00
Current Ratio 1.10
PB Ratio 13.39
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $228,090,000
Total Current Liabilities $206,859,000
Long-Term Debt $30,000,000
Total Assets $443,293,000
Intangible Assets $184,270,000
Total Liabilities $247,177,000
Shares Outstanding (Diluted Average) 26,164,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.65
Dec2016 $0.10
Dec2015 $0.56
Dec2014 $0.31
Dec2013 -$0.32
Dec2012 $0.14
Dec2011 $0.23
Dec2010 $0.85
Dec2009 $0.37
Dec2008 -$1.97
Dec2007 -$7.45
Dec2006 -$2.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.38
Dec2016 $0.21
Dec2015 $0.24
Dec2014 $0.13
Dec2013 $0.11
Dec2012 $0.20
Dec2011 -$0.38
Dec2010 -$1.17
Dec2009 -$2.22
Dec2008 -$3.14
Dec2007 -$3.14
Dec2006 -$0.82

Recommended Reading:

Other ModernGraham posts about the company

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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