Honeywell International Inc Valuation – March 2019 #HON

Company Profile (excerpt from Reuters): Honeywell International Inc., incorporated on November 24, 1999, is a technology and manufacturing company. The Company operates through four segments: Aerospace, Home and Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HON – 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 $115,752,559,066 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.29 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 111.25% Pass
6. Moderate PEmg Ratio PEmg < 20 23.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.44 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 1.29 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.79 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.63
MG Growth Estimate 4.55%
MG Value $116.54
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $96.07
MG Value based on 0% Growth $56.32
Market Implied Growth Rate 7.74%
Current Price $158.92
% of Intrinsic Value 136.37%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $5.08 in 2015 to an estimated $6.63 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.74% 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 Honeywell International Inc. revealed the company was trading above its Graham Number of $66.13. The company pays a dividend of $3.06 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 23.99, which was below the industry average of 25.04, 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 $-20.23.

Honeywell International Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$20.23
Graham Number $66.13
PEmg 23.99
Current Ratio 1.29
PB Ratio 6.44
Current Dividend $3.06
Dividend Yield 1.92%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $24,362,000,000
Total Current Liabilities $18,924,000,000
Long-Term Debt $9,756,000,000
Total Assets $57,773,000,000
Intangible Assets $19,685,000,000
Total Liabilities $39,415,000,000
Shares Outstanding (Diluted Average) 744,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.80
Dec2018 $8.98
Dec2017 $2.00
Dec2016 $6.21
Dec2015 $6.04
Dec2014 $5.33
Dec2013 $4.92
Dec2012 $3.69
Dec2011 $2.61
Dec2010 $2.59
Dec2009 $2.05
Dec2008 $3.76
Dec2007 $3.16
Dec2006 $2.52
Dec2005 $1.92
Dec2004 $1.45
Dec2003 $1.52
Dec2002 -$0.31
Dec2001 -$0.12
Dec2000 $2.05
Dec1999 $1.90

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.63
Dec2018 $5.93
Dec2017 $4.57
Dec2016 $5.65
Dec2015 $5.08
Dec2014 $4.35
Dec2013 $3.63
Dec2012 $2.97
Dec2011 $2.68
Dec2010 $2.75
Dec2009 $2.78
Dec2008 $2.95
Dec2007 $2.40
Dec2006 $1.82
Dec2005 $1.28
Dec2004 $0.95
Dec2003 $0.80

Recommended Reading:

Other ModernGraham posts about the company

Honeywell International Inc Valuation – June 2018 $HON
Honeywell International Inc Valuation – July 2017 $HON
Honeywell International Inc Valuation – February 2016 $HON
7 Best Stocks For Value Investors This Week – 10/24/15
Honeywell International Inc. Valuation – October 2015 Update $HON

Other ModernGraham posts about related companies

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General Electric Co Valuation – November 2018 $GE
3M Co Valuation – November 2018 $MMM
ITT Inc Valuation – July 2018 $ITT
Illinois Tool Works Inc Valuation – June 2018 $ITW
Honeywell International Inc Valuation – June 2018 $HON
General Electric Co Valuation – February 2018 $GE
3M Company Valuation – February 2018 $MMM
Raven Industries Inc Valuation – September 2017 $RAVN
Illinois Tool Works Inc Valuation – August 2017 $ITW

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.

Marathon Petroleum Corp Valuation – February 2019 $MPC

Company Profile (excerpt from Reuters): Marathon Petroleum Corporation, incorporated on November 9, 2009, is engaged in petroleum product refining, marketing, retail and transportation businesses in the United States and the east of the Mississippi. The Company’s segments include Refining & Marketing, Speedway, and Midstream.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MPC – 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 $43,458,170,026 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.65 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 206.78% Pass
6. Moderate PEmg Ratio PEmg < 20 13.82 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.51 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 1.65 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.95 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.55
MG Growth Estimate 2.78%
MG Value $64.03
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $66.01
MG Value based on 0% Growth $38.70
Market Implied Growth Rate 2.66%
Current Price $62.91
% of Intrinsic Value 98.25%

Marathon Petroleum Corp 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, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $3.84 in 2014 to an estimated $4.55 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 2.66% 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 Marathon Petroleum Corp revealed the company was trading above its Graham Number of $50.91. The company pays a dividend of $1.52 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.82, which was below the industry average of 43.92, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-39.75.

Marathon Petroleum Corp performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$39.75
Graham Number $50.91
PEmg 13.82
Current Ratio 1.65
PB Ratio 1.51
Current Dividend $1.52
Dividend Yield 2.42%
Number of Consecutive Years of Dividend Growth 7

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 $15,873,000,000
Total Current Liabilities $9,634,000,000
Long-Term Debt $18,423,000,000
Total Assets $53,031,000,000
Intangible Assets $3,713,000,000
Total Liabilities $34,000,000,000
Shares Outstanding (Diluted Average) 456,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.99
Dec2017 $6.70
Dec2016 $2.21
Dec2015 $5.26
Dec2014 $4.39
Dec2013 $3.32
Dec2012 $4.95
Dec2011 $3.34
Dec2010 $0.87

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.55
Dec2017 $4.68
Dec2016 $3.79
Dec2015 $4.47
Dec2014 $3.84
Dec2013 $3.21
Dec2012 $2.71
Dec2011 $1.34
Dec2010 $0.29

Recommended Reading:

Other ModernGraham posts about the company

Marathon Petroleum Corp Valuation – April 2018 $MPC
10 Best Dividend Paying Stocks for the Enterprising Investor – December 2016
10 Best Dividend Paying Stocks for the Enterprising Investor – September 2016
7 Best Undervalued Stocks of the Week – 9/3/16
Marathon Petroleum Corp Valuation – August 2016 $MPC

Other ModernGraham posts about related companies

EOG Resources Inc Valuation – February 2019 $EOG
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Devon Energy Corp Valuation – January 2019 $DVN
Noble Energy Inc Valuation – January 2019 $NBL
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Marathon Oil Corp Valuation – January 2019 $MRO
HollyFrontier Corp Valuation – January 2019 $HFC
Hess Corp Valuation – January 2019 $HES
Cimarex Energy Co Valuation – January 2019 $XEC
EQT Corp Valuation – January 2019 $EQT

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.

Marathon Oil Corp Valuation – January 2019 $MRO

Company Profile (excerpt from Reuters): Marathon Oil Corporation, incorporated on May 30, 2001, is an exploration and production (E&P) company. The Company operates through two segments: United States E&P, International E&P. The United States E&P segment explores for, produces and markets crude oil and condensate, natural gas liquids (NGLs) and natural gas in the United States. The International E&P segment explores for, produces and markets crude oil and condensate, NGLs and natural gas outside of the United States, and produces and markets products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol, in Equatorial Guinea (E.G.).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MRO – 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 $13,312,884,632 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.43 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -186.73% Fail
6. Moderate PEmg Ratio PEmg < 20 -7.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.13 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 1.43 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.96 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$2.17
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth -$31.52
MG Value based on 0% Growth -$18.48
Market Implied Growth Rate -7.93%
Current Price $16.02
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.38 in 2014 to an estimated $-2.17 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 Marathon Oil Corporation revealed the company was trading below its Graham Number of $16.13. The company pays a dividend of $0.2 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was -7.37, which was below the industry average of 41.28, 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 $-7.86.

Marathon Oil Corporation receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.86
Graham Number $16.13
PEmg -7.37
Current Ratio 1.43
PB Ratio 1.13
Current Dividend $0.20
Dividend Yield 1.25%
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 9/1/2018
Total Current Assets $3,065,000,000
Total Current Liabilities $2,142,000,000
Long-Term Debt $5,498,000,000
Total Assets $21,778,000,000
Intangible Assets $97,000,000
Total Liabilities $9,734,000,000
Shares Outstanding (Diluted Average) 849,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.84
Dec2017 -$6.73
Dec2016 -$2.61
Dec2015 -$3.26
Dec2014 $4.46
Dec2013 $2.47
Dec2012 $2.23
Dec2011 $4.13
Dec2010 $3.61
Dec2009 $2.06
Dec2008 $4.95
Dec2007 $5.69
Dec2006 $7.25
Dec2005 $4.22
Dec2004 $1.86
Dec2003 $2.13
Dec2002 $0.83
Dec2001 $0.53
Dec2000 $0.68
Dec1999 $0.87
Dec1998 $0.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.17
Dec2017 -$2.83
Dec2016 -$0.37
Dec2015 $1.17
Dec2014 $3.38
Dec2013 $2.86
Dec2012 $3.17
Dec2011 $3.79
Dec2010 $3.98
Dec2009 $4.39
Dec2008 $5.30
Dec2007 $5.06
Dec2006 $4.25
Dec2005 $2.47
Dec2004 $1.47
Dec2003 $1.18
Dec2002 $0.72

Recommended Reading:

Other ModernGraham posts about the company

Marathon Oil Corp Valuation – March 2018 $MRO
Marathon Oil Corp Valuation – July 2016 $MRO
18 Companies in the Spotlight This Week – 3/21/15
Marathon Oil Corporation Annual Valuation – 2015 $MRO
19 Companies in the Spotlight This Week – 3/15/14

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CNX Resources Corp Valuation – September 2018 $CNX
Carbo Ceramics Inc Valuation – August 2018 $CRR
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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.

Honeywell International Inc Valuation – June 2018 $HON

Company Profile (excerpt from Reuters): Honeywell International Inc., incorporated on November 24, 1999, is a technology and manufacturing company. The Company operates through four segments: Aerospace, Home and Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions.

HON Chart

HON data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HON – 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 $107,565,365,180 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.36 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 124.28% Pass
6. Moderate PEmg Ratio PEmg < 20 25.66 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.17 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 1.36 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.86 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.61
MG Growth Estimate 4.36%
MG Value $96.64
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $81.36
MG Value based on 0% Growth $47.70
Market Implied Growth Rate 8.58%
Current Price $144.01
% of Intrinsic Value 149.01%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.35 in 2014 to an estimated $5.61 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.58% 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 Honeywell International Inc. revealed the company was trading above its Graham Number of $64.03. The company pays a dividend of $2.74 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 25.66, which was below the industry average of 30.55, 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 $-23.11.

Honeywell International Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$23.11
Graham Number $64.03
PEmg 25.66
Current Ratio 1.36
PB Ratio 6.17
Current Dividend $2.74
Dividend Yield 1.90%
Number of Consecutive Years of Dividend Growth 7

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 $25,587,000,000
Total Current Liabilities $18,755,000,000
Long-Term Debt $12,738,000,000
Total Assets $60,948,000,000
Intangible Assets $22,982,000,000
Total Liabilities $43,174,000,000
Shares Outstanding (Diluted Average) 761,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.92
Dec2017 $2.14
Dec2016 $6.20
Dec2015 $6.04
Dec2014 $5.33
Dec2013 $4.92
Dec2012 $3.69
Dec2011 $2.61
Dec2010 $2.59
Dec2009 $2.05
Dec2008 $3.76
Dec2007 $3.16
Dec2006 $2.52
Dec2005 $1.92
Dec2004 $1.45
Dec2003 $1.52
Dec2002 -$0.31
Dec2001 -$0.12
Dec2000 $2.05
Dec1999 $1.90
Dec1998 $2.34

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.61
Dec2017 $4.61
Dec2016 $5.65
Dec2015 $5.08
Dec2014 $4.35
Dec2013 $3.63
Dec2012 $2.97
Dec2011 $2.68
Dec2010 $2.75
Dec2009 $2.78
Dec2008 $2.95
Dec2007 $2.40
Dec2006 $1.82
Dec2005 $1.28
Dec2004 $0.95
Dec2003 $0.80
Dec2002 $0.68

Recommended Reading:

Other ModernGraham posts about the company

Honeywell International Inc Valuation – July 2017 $HON
Honeywell International Inc Valuation – February 2016 $HON
7 Best Stocks For Value Investors This Week – 10/24/15
Honeywell International Inc. Valuation – October 2015 Update $HON
The 16 Best Stocks For Value Investors This Week – 8/1/15

Other ModernGraham posts about related companies

General Electric Co Valuation – February 2018 $GE
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Raven Industries Inc Valuation – September 2017 $RAVN
Illinois Tool Works Inc Valuation – August 2017 $ITW
Honeywell International Inc Valuation – July 2017 $HON
Carlisle Companies Inc Valuation – Initial Coverage $CSL
ITT Inc Valuation – Initial Coverage $ITT
3M Co. Valuation – December 2016 $MMM
E I du Pont de Nemours & Co Valuation – August 2016 $DD
3M Company Valuation – August 2016 $MMM

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.

Marathon Petroleum Corp Valuation – April 2018 $MPC

Company Profile (excerpt from Reuters): Marathon Petroleum Corporation, incorporated on November 9, 2009, is engaged in petroleum product refining, marketing, retail and transportation businesses in the United States and the east of the Mississippi. The Company’s segments include Refining & Marketing, Speedway, and Midstream.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MPC – 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 $35,114,403,425 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.28 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 182.05% Pass
6. Moderate PEmg Ratio PEmg < 20 17.60 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.61 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 1.28 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.22 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.21
MG Growth Estimate 1.43%
MG Value $47.77
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $60.99
MG Value based on 0% Growth $35.75
Market Implied Growth Rate 4.55%
Current Price $74.02
% of Intrinsic Value 154.97%

Marathon Petroleum Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability 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 Overvalued after growing its EPSmg (normalized earnings) from $3.84 in 2014 to an estimated $4.21 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.55% 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 below the price.

At the time of valuation, further research into Marathon Petroleum Corp revealed the company was trading above its Graham Number of $43.78. The company pays a dividend of $1.52 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 17.6, which was below the industry average of 85.36, 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 $-43.75.

Marathon Petroleum 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) -$43.75
Graham Number $43.78
PEmg 17.60
Current Ratio 1.28
PB Ratio 2.61
Current Dividend $1.52
Dividend Yield 2.05%
Number of Consecutive Years of Dividend Growth 7

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 $13,401,000,000
Total Current Liabilities $10,478,000,000
Long-Term Debt $12,322,000,000
Total Assets $49,047,000,000
Intangible Assets $3,586,000,000
Total Liabilities $35,014,000,000
Shares Outstanding (Diluted Average) 494,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.95
Dec2017 $6.70
Dec2016 $2.21
Dec2015 $5.26
Dec2014 $4.39
Dec2013 $3.32
Dec2012 $4.95
Dec2011 $3.34
Dec2010 $0.87

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.21
Dec2017 $4.68
Dec2016 $3.79
Dec2015 $4.47
Dec2014 $3.84
Dec2013 $3.21
Dec2012 $2.71
Dec2011 $1.34
Dec2010 $0.29

Recommended Reading:

Other ModernGraham posts about the company

Marathon Petroleum Corporation Analysis – 2015 Update $MPC
28 Companies in the Spotlight This Week – 11/1/14
Marathon Petroleum Corporation Annual Valuation – 2014 $MPC

Other ModernGraham posts about related companies

EOG Resources Inc Valuation – April 2018 $EOG
ConocoPhillips Valuation – April 2018 $COP
Devon Energy Corp Valuation – March 2018 $DVN
Noble Energy Inc Valuation – March 2018 $NBL
ONEOK Inc Valuation – March 2018 $OKE
Marathon Oil Corp Valuation – March 2018 $MRO
Hess Corp Valuation – March 2018 $HES
Cimarex Energy Co Valuation – Initial Coverage $XEC
EQT Corporation Valuation – March 2018 $EQT
Helmerich & Payne Inc Valuation – March 2018 $HP

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.

Marathon Oil Corp Valuation – March 2018 $MRO

Company Profile (excerpt from Reuters): Marathon Oil Corporation, incorporated on May 30, 2001, is an exploration and production (E&P) company. The Company operates through three segments: North America E&P, International E&P and Oil Sands Mining. The North America E&P segment explores for, produces and markets crude oil and condensate, natural gas liquids (NGLs) and natural gas in North America. The International E&P segment explores for, produces and markets crude oil and condensate, NGLs and natural gas outside of North America, and produces and markets products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol, in Equatorial Guinea (E.G.). The Oil Sands Mining segment mines, extracts and transports bitumen from oil sands deposits in Alberta, Canada, and upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil.

MRO Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of MRO – 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 $13,824,028,886 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -195.31% Fail
6. Moderate PEmg Ratio PEmg < 20 -6.63 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.18 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 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.19 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$2.45
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$35.58
MG Value based on 0% Growth -$20.86
Market Implied Growth Rate -7.56%
Current Price $16.27
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.38 in 2014 to an estimated $-2.45 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 Marathon Oil revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.2 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was -6.63, which was below the industry average of 104.43, 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 $-9.1.

Marathon Oil 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) -$9.10
Graham Number $0.00
PEmg -6.63
Current Ratio 1.30
PB Ratio 1.18
Current Dividend $0.20
Dividend Yield 1.23%
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 $2,566,000,000
Total Current Liabilities $1,968,000,000
Long-Term Debt $5,494,000,000
Total Assets $22,012,000,000
Intangible Assets $115,000,000
Total Liabilities $10,304,000,000
Shares Outstanding (Diluted Average) 850,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.00
Dec2017 -$6.73
Dec2016 -$2.61
Dec2015 -$3.26
Dec2014 $4.46
Dec2013 $2.47
Dec2012 $2.23
Dec2011 $4.13
Dec2010 $3.61
Dec2009 $2.06
Dec2008 $4.95
Dec2007 $5.69
Dec2006 $7.25
Dec2005 $4.22
Dec2004 $1.86
Dec2003 $2.13
Dec2002 $0.83
Dec2001 $0.53
Dec2000 $0.68
Dec1999 $0.87
Dec1998 $0.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.45
Dec2017 -$2.83
Dec2016 -$0.37
Dec2015 $1.17
Dec2014 $3.38
Dec2013 $2.86
Dec2012 $3.17
Dec2011 $3.79
Dec2010 $3.98
Dec2009 $4.39
Dec2008 $5.30
Dec2007 $5.06
Dec2006 $4.25
Dec2005 $2.47
Dec2004 $1.47
Dec2003 $1.18
Dec2002 $0.72

Recommended Reading:

Other ModernGraham posts about the company

18 Companies in the Spotlight This Week – 3/21/15
Marathon Oil Corporation Annual Valuation – 2015 $MRO
19 Companies in the Spotlight This Week – 3/15/14
Marathon Oil Corp (MRO) Annual Valuation

Other ModernGraham posts about related companies

EQT Corporation Valuation – March 2018 $EQT
Helmerich & Payne Inc Valuation – March 2018 $HP
Chesapeake Energy Corp Valuation – March 2018 $CHK
Williams Companies Inc Valuation – March 2018 $WMB
Exxon Mobil Corp Valuation – February 2018 $XOM
Chevron Corp Valuation – February 2018 $CVX
Seven Generations Energy Ltd Valuation – Initial Coverage $TSE:VII
Pioneer Natural Resources Valuation – September 2017 $PXD
Gulfport Energy Corp Valuation – Initial Coverage $GPOR
Schlumberger Limited Valuation – July 2017 $SLB

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.

Honeywell International Inc Valuation – July 2017 $HON

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 Honeywell International Inc (HON) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Honeywell International Inc. is a technology and manufacturing company. The Company operates through four segments: Aerospace, Home and Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions. The Company’s Aerospace segment supplies products, software and services for aircraft and vehicles that it sells to original equipment manufacturers (OEMs) and other customers. The Home and Building Technologies segment provides products, software, solutions and technologies that help owners of homes stay connected and in control of their comfort, security and energy use. The Performance Materials and Technologies segment is engaged in developing and manufacturing materials, process technologies and automation solutions. The Safety and Productivity Solutions segment is engaged in providing products, software and connected solutions to customers that manage productivity, workplace safety and asset performance.

HON Chart

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ModernGraham Valuation of HON – July 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 $102,628,052,608 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.36 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 130.83% Pass
6. Moderate PEmg Ratio PEmg < 20 21.52 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.15 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 1.36 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.78 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $6.28
MG Growth Estimate 10.98%
MG Value $191.37
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $91.11
MG Value based on 0% Growth $53.41
Market Implied Growth Rate 6.51%
Current Price $135.19
% of Intrinsic Value 70.64%

Honeywell International Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the  low current ratio, 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 $3.63 in 2013 to an estimated $6.28 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.51% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Honeywell International Inc. revealed the company was trading above its Graham Number of $64.  The company pays a dividend of $2.45 per share, for a yield of 1.8%  Its PEmg (price over earnings per share – ModernGraham) was 21.52, which was below the industry average of 26.48, 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 $-14.05.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$14.05
Graham Number $64.00
PEmg 21.52
Current Ratio 1.36
PB Ratio 5.15
Current Dividend $2.45
Dividend Yield 1.81%
Number of Consecutive Years of Dividend Growth 6

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2017
Total Current Assets $23,580,000,000
Total Current Liabilities $17,281,000,000
Long-Term Debt $11,181,000,000
Total Assets $54,779,000,000
Intangible Assets $22,419,000,000
Total Liabilities $34,456,000,000
Shares Outstanding (Diluted Average) 773,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.15
Dec2016 $6.20
Dec2015 $6.04
Dec2014 $5.33
Dec2013 $4.92
Dec2012 $3.69
Dec2011 $2.61
Dec2010 $2.59
Dec2009 $2.05
Dec2008 $3.76
Dec2007 $3.16
Dec2006 $2.52
Dec2005 $1.92
Dec2004 $1.45
Dec2003 $1.52
Dec2002 -$0.31
Dec2001 -$0.12
Dec2000 $2.05
Dec1999 $1.90
Dec1998 $2.34
Dec1997 $2.00

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.28
Dec2016 $5.65
Dec2015 $5.08
Dec2014 $4.35
Dec2013 $3.63
Dec2012 $2.97
Dec2011 $2.68
Dec2010 $2.75
Dec2009 $2.78
Dec2008 $2.95
Dec2007 $2.40
Dec2006 $1.82
Dec2005 $1.28
Dec2004 $0.95
Dec2003 $0.80
Dec2002 $0.68
Dec2001 $1.33

Recommended Reading:

Other ModernGraham posts about the company

Honeywell International Inc Valuation – February 2016 $HON
7 Best Stocks For Value Investors This Week – 10/24/15
Honeywell International Inc. Valuation – October 2015 Update $HON
The 16 Best Stocks For Value Investors This Week – 8/1/15
Honeywell International Inc. Analysis – July 2015 Update $HON

Other ModernGraham posts about related companies

E I du Pont de Nemours & Co Valuation – August 2016 $DD
3M Company Valuation – August 2016 $MMM
General Electric Co Valuation – July 2016 $GE
Illinois Tool Works Inc Valuation – July 2016 $ITW
Raven Industries Inc Valuation – July 2016 $RAVN
E.I. du Pont de Nemours Valuation – February 2016 $DD
Honeywell International Inc Valuation – February 2016 $HON
3M Company Valuation – February 2016 Update $MMM
Raven Industries Inc Valuation – January 2016 Update $RAVN
Illinois Tool Works Inc Valuation – January 2016 Update $ITW

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.

Telephone & Data Systems Inc Valuation – Initial Coverage $TDS

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 Telephone & Data Systems Inc (TDS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Telephone and Data Systems, Inc. is a diversified telecommunications company. The Company is engaged in conducting its Wireless operations through its subsidiary, United States Cellular Corporation (U.S. Cellular), as well as providing its wireline services, cable services, and hosted and managed services (HMS), through its subsidiary, TDS Telecommunications Corporation (TDS Telecom). It operates through four business segments: U.S. Cellular, Wireline, Cable, and Hosted and Managed Services. U.S. Cellular provides service to postpaid and prepaid customers. Wireline operations provide retail telecommunications services to both residential and commercial customers. Wireline offers services, including broadband, video, voice and network access services. Cable offers broadband, video and voice services under TDS and BendBroadband brand names. It provides a range of information technology (IT) services, including colocation, and cloud and hosting solutions through its HMS business.

TDS Chart

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ModernGraham Valuation of TDS – 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 $2,977,875,621 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.32 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -30.26% Fail
6. Moderate PEmg Ratio PEmg < 20 57.16 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.72 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 2.32 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.08 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 Fail

Stage 2: Determination of Intrinsic Value

EPSmg $0.47
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $6.83
MG Value based on 0% Growth $4.01
Market Implied Growth Rate 24.33%
Current Price $26.94
% of Intrinsic Value N/A

Telephone & Data Systems, 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, and the high PEmg ratio. 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. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.28 in 2013 to an estimated $0.47 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 24.33% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Telephone & Data Systems, Inc. revealed the company was trading above its Graham Number of $11.65. The company pays a dividend of $0.59 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 57.16, which was above the industry average of 37.96. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-29.21.

Telephone & Data Systems, 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) -$29.21
Graham Number $11.65
PEmg 57.16
Current Ratio 2.32
PB Ratio 0.72
Current Dividend $0.59
Dividend Yield 2.20%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $2,059,000,000
Total Current Liabilities $887,000,000
Long-Term Debt $2,433,000,000
Total Assets $9,446,000,000
Intangible Assets $2,938,000,000
Total Liabilities $5,301,000,000
Shares Outstanding (Diluted Average) 111,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.16
Dec2016 $0.39
Dec2015 $1.98
Dec2014 -$1.26
Dec2013 $1.29
Dec2012 $0.75
Dec2011 $1.83
Dec2010 $1.31
Dec2009 $1.58
Dec2008 $0.74
Dec2007 $2.96
Dec2006 $1.26
Dec2005 $5.12
Dec2004 -$2.03
Dec2003 -$3.38
Dec2002 -$7.56
Dec2001 -$1.42
Dec2000 $16.96
Dec1999 $1.69
Dec1998 $0.47
Dec1997 -$0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.47
Dec2016 $0.63
Dec2015 $0.80
Dec2014 $0.41
Dec2013 $1.28
Dec2012 $1.26
Dec2011 $1.57
Dec2010 $1.48
Dec2009 $1.83
Dec2008 $1.83
Dec2007 $1.85
Dec2006 $0.43
Dec2005 -$0.61
Dec2004 -$2.15
Dec2003 -$1.05
Dec2002 $0.75
Dec2001 $4.44

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

Windstream Holdings Inc Valuation – August 2016 $WIN
Verizon Communications Inc Valuation – July 2016 $VZ
AT&T Inc Valuation – July 2016 $T
Harris Corporation Valuation – February 2016 $HRS
CenturyLink Inc Valuation – February 2016 $CTL
Frontier Communications Corp Valuation – November 2015 Update $FTR
Harris Corporation Analysis – September 2015 Update $HRS
Arris Group Inc. Analysis – Initial Coverage $ARRS
Level 3 Communications Inc. Analysis – Initial Coverage $LVLT
Windstream Holdings Analysis – 2015 Update $WIN

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.

Marathon Petroleum Corp Valuation – August 2016 $MPC

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

Company Profile (obtained from Google Finance): Marathon Petroleum Corporation is engaged in petroleum product refining, marketing, retail and transportation businesses in the United States and the east of the Mississippi. The Company’s segments include Refining & Marketing, Speedway, and Midstream. Its Refining & Marketing segment refines crude oil and other feedstocks at its approximately seven refineries in the Gulf Coast and Midwest regions of the United States, purchases ethanol and refined products for resale and distributes refined products. It sells refined products to wholesale marketing customers domestically and internationally, buyers on the spot market, its Speedway business segment and to independent entrepreneurs operating Marathon retail outlets. The Speedway segment sells transportation fuels and convenience products in the retail market in the Midwest, East Coast and Southeast. The Midstream segment gathers, processes and transports natural gas, and transports and stores crude oil and refined products.

MPC Chart

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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.

[/level-free]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of MPC – August 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $22,334,570,734 Pass
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 38243.33% Pass
6. Moderate PEmg Ratio PEmg < 20 11.52 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.66 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 3.13 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

MPC value chart August 2016

EPSmg $3.67
MG Growth Estimate 5.30%
MG Value $70.15
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $53.22
MG Value based on 0% Growth $31.20
Market Implied Growth Rate 1.51%
Current Price $42.29
% of Intrinsic Value 60.29%

Marathon Petroleum Corp 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, 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 $2.71 in 2012 to an estimated $3.67 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Marathon Petroleum Corp revealed the company was trading above its Graham Number of $32.64. The company pays a dividend of $1.28 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.52, which was below the industry average of 55.24, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-38.3.

Marathon Petroleum Corp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

MPC charts August 2016

Net Current Asset Value (NCAV) -$38.30
Graham Number $32.64
PEmg 11.52
Current Ratio 1.52
PB Ratio 1.66
Current Dividend $1.28
Dividend Yield 3.03%
Number of Consecutive Years of Dividend Growth 6

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ModernGraham tagged articles Morningstar
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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $10,304,000,000
Total Current Liabilities $6,782,000,000
Long-Term Debt $11,032,000,000
Total Assets $44,133,000,000
Intangible Assets $3,648,000,000
Total Liabilities $30,643,000,000
Shares Outstanding (Diluted Average) 531,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.85
Dec2015 $5.26
Dec2014 $4.39
Dec2013 $3.32
Dec2012 $4.95
Dec2011 $3.34
Dec2010 $0.87

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.67
Dec2015 $4.47
Dec2014 $3.84
Dec2013 $3.21
Dec2012 $2.71
Dec2011 $1.34
Dec2010 $0.29

Recommended Reading:

Other ModernGraham posts about the company

Marathon Petroleum Corporation Analysis – 2015 Update $MPC
28 Companies in the Spotlight This Week – 11/1/14
Marathon Petroleum Corporation Annual Valuation – 2014 $MPC

Other ModernGraham posts about related companies

Magellan Midstream Partners LP Valuation – August 2016 $MMP
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Occidental Petroleum Corp Valuation – August 2016 $OXY
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Exxon Mobil Corporation Valuation – August 2016 $XOM
National-Oilwell Varco Inc Valuation – August 2016 $NOV
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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.

Marathon Oil Corp Valuation – July 2016 $MRO

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 Marathon Oil Corp (MRO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Marathon Oil Corporation is an exploration and production company with operations in North America, Europe and Africa. The Company operates through three segments: North America E&P (N.A. E&P), International E&P (Int’l E&P), and Oil Sands Mining (OSM). The N.A. E&P segment explores for, produces and markets crude oil and condensate, natural gas liquids (NGLs) and natural gas in North America. It is engaged in oil and gas exploration, development and production activities. The Int’l E&P segment explores for, produces and markets crude oil and condensate, NGLs and natural gas outside of North America, and produces and markets products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol, in Egypt. It is engaged in oil and gas exploration, development and production activities. The OSM segment mines, extracts and transports bitumen from oil sands deposits in Alberta, Canada, and upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of MRO – 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 $13,002,773,459 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.14 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -101.89% Fail
6. Moderate PEmg Ratio PEmg < 20 753.87 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.59 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 2.14 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.18 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 Fail

Stage 2: Determination of Intrinsic Value

MRO value chart July 2016

EPSmg $0.02
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $0.30
MG Value based on 0% Growth $0.18
Market Implied Growth Rate 372.69%
Current Price $15.58
% of Intrinsic Value N/A

Marathon Oil Corporation 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 high PEmg ratio. 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. 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 $3.17 in 2012 to an estimated $0.02 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 372.69% 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.

Marathon Oil Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

MRO charts July 2016

Net Current Asset Value (NCAV) -$14.04
Graham Number $0.00
PEmg 753.87
Current Ratio 2.14
PB Ratio 0.59
Current Dividend $0.52
Dividend Yield 3.34%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $3,268,000,000
Total Current Liabilities $1,526,000,000
Long-Term Debt $7,280,000,000
Total Assets $32,868,000,000
Intangible Assets $115,000,000
Total Liabilities $13,517,000,000
Shares Outstanding (Diluted Average) 730,000,000

Earnings Per Share History

Next Fiscal Year Estimate -$1.44
Dec2015 -$3.26
Dec2014 $4.46
Dec2013 $2.47
Dec2012 $2.23
Dec2011 $4.13
Dec2010 $3.61
Dec2009 $2.06
Dec2008 $4.95
Dec2007 $5.69
Dec2006 $7.25
Dec2005 $4.22
Dec2004 $1.87
Dec2003 $2.13
Dec2002 $0.83
Dec2001 $0.20
Dec2000 $0.70
Dec1999 $0.87
Dec1998 $0.86
Dec1997 $1.25
Dec1996 $1.18

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.02
Dec2015 $1.17
Dec2014 $3.38
Dec2013 $2.86
Dec2012 $3.17
Dec2011 $3.79
Dec2010 $3.98
Dec2009 $4.39
Dec2008 $5.30
Dec2007 $5.06
Dec2006 $4.25
Dec2005 $2.45
Dec2004 $1.43
Dec2003 $1.12
Dec2002 $0.64
Dec2001 $0.62
Dec2000 $0.88

Recommended Reading:

Other ModernGraham posts about the company

18 Companies in the Spotlight This Week – 3/21/15
Marathon Oil Corporation Annual Valuation – 2015 $MRO
19 Companies in the Spotlight This Week – 3/15/14
Marathon Oil Corp (MRO) Annual Valuation

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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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