Hewlett Packard Enterprise Co Valuation – March 2019 #HPE

Company Profile (excerpt from Reuters): Hewlett Packard Enterprise Company, incorporated on February 25, 2015, is a provider of technology solutions. The Company’s segments include: Enterprise Group, Software, Financial Services and Corporate Investments. The Enterprise Group segment provides its customers with the technology infrastructure they need to optimize traditional information technology (IT). The Software segment allows its customers to automate IT operations to simplify, accelerate and secure business processes and drives the analytics that turn raw data into actionable knowledge. The Financial Services segment enables flexible IT consumption models, financial architectures and customized investment solutions for its customers. The Corporate Investments segment includes Hewlett Packard Labs and certain business incubation projects, among others. The Company’s customers range from small and medium-sized businesses (SMBs) to large global enterprises.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HPE – 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 $21,727,342,562 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.94 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 -137.37% Fail
6. Moderate PEmg Ratio PEmg < 20 12.98 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.22 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 0.94 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.01 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 $1.22
MG Growth Estimate 15.00%
MG Value $47.05
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $17.72
MG Value based on 0% Growth $10.39
Market Implied Growth Rate 2.24%
Current Price $15.86
% of Intrinsic Value 33.71%

Hewlett Packard Enterprise Co 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. 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 $-0.2 in 2015 to an estimated $1.22 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.24% 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 Hewlett Packard Enterprise Co revealed the company was trading below its Graham Number of $22.89. The company pays a dividend of $0.38 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 12.98, which was below the industry average of 35.5, 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 $-12.74.

Hewlett Packard Enterprise Co performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.74
Graham Number $22.89
PEmg 12.98
Current Ratio 0.94
PB Ratio 1.22
Current Dividend $0.38
Dividend Yield 2.36%
Number of Consecutive Years of Dividend Growth 3

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 1/1/2019
Total Current Assets $15,432,000,000
Total Current Liabilities $16,459,000,000
Long-Term Debt $10,280,000,000
Total Assets $51,758,000,000
Intangible Assets $18,334,000,000
Total Liabilities $33,423,000,000
Shares Outstanding (Diluted Average) 1,412,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.56
Oct2018 $1.23
Oct2017 $0.21
Oct2016 $1.82
Oct2015 $1.34
Oct2014 $0.75
Oct2013 $1.12
Oct2012 -$8.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.22
Oct2018 $1.06
Oct2017 $1.00
Oct2016 $0.73
Oct2015 -$0.20
Oct2014 -$1.06
Oct2013 -$1.77
Oct2012 -$2.68

Recommended Reading:

Other ModernGraham posts about the company

Hewlett Packard Enterprise Co Valuation – June 2018 $HPE
Hewlett Packard Enterprise Co Valuation – Initial Valuation $HPE

Other ModernGraham posts about related companies

Fortive Corp Valuation – March 2019 #FTV
Analog Devices Inc Valuation – March 2019 #ADI
IPG Photonics Corp Valuation – March 2019 #IPGP
Micron Technology Inc Valuation – March 2019 #MU
Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC
Texas Instruments Inc Valuation – March 2019 #TXN
Qualcomm Inc Valuation – March 2019 #QCOM
Ametek Inc Valuation – March 2019 #AME

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.

Hewlett Packard Enterprise Co Valuation – June 2018 $HPE

Company Profile (excerpt from Reuters): Hewlett Packard Enterprise Company, incorporated on February 25, 2015, is a provider of technology solutions. The Company’s segments include: Enterprise Group, Software, Financial Services and Corporate Investments. The Enterprise Group segment provides its customers with the technology infrastructure they need to optimize traditional information technology (IT). The Software segment allows its customers to automate IT operations to simplify, accelerate and secure business processes and drives the analytics that turn raw data into actionable knowledge. The Financial Services segment enables flexible IT consumption models, financial architectures and customized investment solutions for its customers. The Corporate Investments segment includes Hewlett Packard Labs and certain business incubation projects, among others. The Company’s customers range from small and medium-sized businesses (SMBs) to large global enterprises.

HPE Chart

HPE data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HPE – 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 $24,866,810,356 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.04 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 13733.33% Pass
6. Moderate PEmg Ratio PEmg < 20 11.73 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.06 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 1.04 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 14.08 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 $1.37
MG Growth Estimate 15.00%
MG Value $52.57
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $19.80
MG Value based on 0% Growth $11.61
Market Implied Growth Rate 1.61%
Current Price $16.01
% of Intrinsic Value 30.46%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.3 in 2014 to an estimated $1.37 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.61% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Hewlett Packard Enterprise Co revealed the company was trading below its Graham Number of $26.29. The company pays a dividend of $0.26 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 11.73, which was below the industry average of 55.37, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.19.

Hewlett Packard Enterprise Co receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$10.19
Graham Number $26.29
PEmg 11.73
Current Ratio 1.04
PB Ratio 1.06
Current Dividend $0.26
Dividend Yield 1.62%
Number of Consecutive Years of Dividend Growth 2

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 $19,792,000,000
Total Current Liabilities $19,084,000,000
Long-Term Debt $9,970,000,000
Total Assets $59,876,000,000
Intangible Assets $18,444,000,000
Total Liabilities $35,910,000,000
Shares Outstanding (Diluted Average) 1,582,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.12
Oct2017 $0.21
Oct2016 $1.82
Oct2015 $1.34
Oct2014 $0.90

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.37
Oct2017 $0.94
Oct2016 $1.14
Oct2015 $0.69
Oct2014 $0.30

Recommended Reading:

Other ModernGraham posts about the company

Hewlett Packard Enterprise Co Valuation – Initial Valuation $HPE

Other ModernGraham posts about related companies

Fortive Corp Valuation – June 2018 $FTV
Analog Devices Inc Valuation – June 2018 $ADI
IPG Photonics Corp Valuation – June 2018 $IPGP
Micron Technology Inc Valuation – May 2018 $MU
Amphenol Corp Valuation – May 2018 $APH
Xilinx Inc Valuation – May 2018 $XLNX
Western Digital Corp Valuation – May 2018 $WDC
Texas Instruments Inc Valuation – May 2018 $TXN
Qualcomm Inc Valuation – May 2018 $QCOM
Advanced Micro Devices Inc Valuation – May 2018 $AMD

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.

Hewlett Packard Enterprise Co Valuation – Initial Valuation $HPE

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

Company Profile (obtained from Google Finance): Hewlett Packard Enterprise Company is a provider of technology solutions. The Company operates through five segments: Enterprise Group, Software, Enterprise Services, Financial Services and Corporate Investments. The Enterprise Group segment provides its customers with the technology infrastructure they need to optimize traditional information technology (IT). The Software segment allows its customers to automate IT operations to simplify, accelerate and secure business processes and drives the analytics that turn raw data into actionable knowledge. The Enterprise Services segment brings all of its solutions together through its consulting and support professionals. The Financial Services segment enables flexible IT consumption models, financial architectures and customized investment solutions for its customers. The Corporate Investments segment includes Hewlett Packard Labs and certain business incubation projects, among others.

HPE Chart

HPE 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 HPE – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $38,574,688,072 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.18 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 25249900.00% Pass
6. Moderate PEmg Ratio PEmg < 20 15.35 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.25 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 1.18 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.20 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 $1.50
MG Growth Estimate 15.00%
MG Value $57.88
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $21.80
MG Value based on 0% Growth $12.78
Market Implied Growth Rate 3.42%
Current Price $23.07
% of Intrinsic Value 39.86%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0 in 2013 to an estimated $1.5 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.42% 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 Hewlett Packard Enterprise Co revealed the company was trading below its Graham Number of $28.37. The company pays a dividend of $0.23 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 15.35, which was below the industry average of 28.12, 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 $-11.55.

Hewlett Packard Enterprise Co receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.55
Graham Number $28.37
PEmg 15.35
Current Ratio 1.18
PB Ratio 1.25
Current Dividend $0.23
Dividend Yield 1.00%
Number of Consecutive Years of Dividend Growth 2

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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 1/1/2017
Total Current Assets $25,525,000,000
Total Current Liabilities $21,686,000,000
Long-Term Debt $12,270,000,000
Total Assets $76,662,000,000
Intangible Assets $25,416,000,000
Total Liabilities $45,161,000,000
Shares Outstanding (Diluted Average) 1,700,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.89
Oct2016 $1.82
Oct2015 $1.34
Oct2014 $0.90

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.50
Oct2016 $1.14
Oct2015 $0.69
Oct2014 $0.30

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

Analog Devices Inc Valuation – February 2017 $ADI
Micron Technology Inc Valuation – February 2017 $MU
Amphenol Corp Valuation – February 2017 $APH
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Western Digital Corporation Valuation – February 2017 $WDC
Texas Instruments Inc Valuation – February 2017 $TXN
Knowles Corp Valuation – Initial Coverage $KN
Cree Inc Valuation – Initial Coverage $CREE
Cray Inc Valuation – Initial Coverage $CRAY

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.

Intel Corporation Valuation – April 2019 #INTC

Company Profile (excerpt from Reuters): Intel Corporation, incorporated on March 1, 1989, is engaged in designing and manufacturing products and technologies, such as the cloud. The Company’s segments are Client Computing Group (CCG), Data Center Group (DCG), Internet of Things Group (IOTG), Non-Volatile Memory Solutions Group (NSG), Intel Security Group (ISecG), Programmable Solutions Group (PSG), All Other and New Technology Group (NTG). The Company delivers computer, networking and communications platforms to a set of customers, including original equipment manufacturers (OEMs), original design manufacturers (ODMs), cloud and communications service providers, as well as industrial, communications and automotive equipment manufacturers. It offers platforms to integrate various components and technologies, including a microprocessor and chipset, a stand-alone System-on-Chip (SoC), or a multichip package. Its platforms are managed by additional hardware, software and services offered by Intel.

Downloadable PDF version of this valuation:

ModernGraham Valuation of INTC – April 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 $249,631,094,870 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.73 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 61.87% Pass
6. Moderate PEmg Ratio PEmg < 20 16.34 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.42 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 1.73 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.06 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 PassModernGraham Valuation of INTC – April 2019

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.40
MG Growth Estimate 8.02%
MG Value $83.35
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $49.26
MG Value based on 0% Growth $28.88
Market Implied Growth Rate 3.91%
Current Price $55.45
% of Intrinsic Value 66.53%

Intel Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.21 in 2015 to an estimated $3.4 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.91% 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 Intel Corporation revealed the company was trading above its Graham Number of $39.14. The company pays a dividend of $1.2 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 16.32, which was below the industry average of 35.4, 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 $-5.24.

Intel Corporation performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.24
Graham Number $39.14
PEmg 16.32
Current Ratio 1.73
PB Ratio 3.42
Current Dividend $1.20
Dividend Yield 2.16%
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 12/1/2018
Total Current Assets $28,787,000,000
Total Current Liabilities $16,626,000,000
Long-Term Debt $25,098,000,000
Total Assets $127,963,000,000
Intangible Assets $36,349,000,000
Total Liabilities $52,981,000,000
Shares Outstanding (Diluted Average) 4,620,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.10
Dec2018 $4.48
Dec2017 $1.99
Dec2016 $2.12
Dec2015 $2.33
Dec2014 $2.31
Dec2013 $1.89
Dec2012 $2.13
Dec2011 $2.39
Dec2010 $2.01
Dec2009 $0.77
Dec2008 $0.92
Dec2007 $1.18
Dec2006 $0.86
Dec2005 $1.40
Dec2004 $1.16
Dec2003 $0.85
Dec2002 $0.46
Dec2001 $0.19
Dec2000 $1.51
Dec1999 $1.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.40
Dec2018 $2.91
Dec2017 $2.13
Dec2016 $2.18
Dec2015 $2.21
Dec2014 $2.15
Dec2013 $2.00
Dec2012 $1.91
Dec2011 $1.69
Dec2010 $1.27
Dec2009 $0.95
Dec2008 $1.06
Dec2007 $1.11
Dec2006 $1.04
Dec2005 $1.02
Dec2004 $0.83
Dec2003 $0.72

Recommended Reading:

Other ModernGraham posts about the company

Intel Corp Valuation – November 2018 $INTC
Intel Corp Valuation – February 2018 $INTC
5 Overvalued Dow Components – July 2016
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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.

Apple Inc Valuation – April 2019 #AAPL

Company Profile (excerpt from Reuters): Apple Inc., incorporated on January 3, 1977, designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players. The Company sells a range of related software, services, accessories, networking solutions and third-party digital content and applications. The Company’s segments include the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. The Americas segment includes both North and South America. The Europe segment includes European countries, India, the Middle East and Africa. The Greater China segment includes China, Hong Kong and Taiwan. The Rest of Asia Pacific segment includes Australia and the Asian countries not included in the Company’s other operating segments. The Company’s products and services include iPhone, iPad, Mac, iPod, Apple Watch, Apple TV, a portfolio of consumer and professional software applications, iPhone OS (iOS), OS X and watchOS operating systems, iCloud, Apple Pay and a range of accessory, service and support offerings.

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAPL – April 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 $928,509,329,542 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 151.37% Pass
6. Moderate PEmg Ratio PEmg < 20 19.47 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.97 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 2.86 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 $10.11
MG Growth Estimate 6.57%
MG Value $218.81
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $146.65
MG Value based on 0% Growth $85.97
Market Implied Growth Rate 5.48%
Current Price $196.89
% of Intrinsic Value 89.98%

Apple 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, poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $7.03 in 2015 to an estimated $10.11 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 5.48% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Apple Inc. revealed the company was trading above its Graham Number of $71.63. The company pays a dividend of $2.72 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 19.47, which was below the industry average of 35.4, 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 $-24.09.

Apple 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) -$24.09
Graham Number $71.63
PEmg 19.47
Current Ratio 1.30
PB Ratio 7.97
Current Dividend $2.72
Dividend Yield 1.38%
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 12/1/2018
Total Current Assets $140,828,000,000
Total Current Liabilities $108,283,000,000
Long-Term Debt $92,989,000,000
Total Assets $373,719,000,000
Intangible Assets $0
Total Liabilities $255,827,000,000
Shares Outstanding (Diluted Average) 4,773,252,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.12
Sep2018 $11.91
Sep2017 $9.21
Sep2016 $8.31
Sep2015 $9.22
Sep2014 $6.45
Sep2013 $5.68
Sep2012 $6.31
Sep2011 $3.95
Sep2010 $2.16
Sep2009 $1.30
Sep2008 $0.97
Sep2007 $0.56
Sep2006 $0.32
Sep2005 $0.22
Sep2004 $0.05
Sep2003 $0.01
Sep2002 $0.01
Sep2001 -$0.01
Sep2000 $0.16
Sep1999 $0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.11
Sep2018 $9.75
Sep2017 $8.37
Sep2016 $7.70
Sep2015 $7.03
Sep2014 $5.60
Sep2013 $4.74
Sep2012 $3.83
Sep2011 $2.32
Sep2010 $1.36
Sep2009 $0.86
Sep2008 $0.57
Sep2007 $0.32
Sep2006 $0.18
Sep2005 $0.09
Sep2004 $0.03
Sep2003 $0.04

Recommended Reading:

Other ModernGraham posts about the company

Apple Inc Valuation – November 2018 $AAPL
Apple Inc Valuation – February 2018 $AAPL
Apple Inc Valuation – January 2017 $AAPL
Apple Inc Valuation – August 2016 $AAPL
Apple Inc Valuation – February 2016 $AAPL

Other ModernGraham posts about related companies

Maxim Integrated Products Inc Valuation – April 2019 #MXIM
Keysight Technologies Inc Valuation – April 2019 #KEYS
Lam Research Corp Valuation – April 2019 #LRCX
Emerson Electric Co Valuation – April 2019 #EMR
Skyworks Solutions Inc Valuation – March 2019 #SWKS
Garmin Ltd Valuation – March 2019 #GRMN
Hewlett Packard Enterprise Co Valuation – March 2019 #HPE
Fortive Corp Valuation – March 2019 #FTV
Analog Devices Inc Valuation – March 2019 #ADI
IPG Photonics Corp Valuation – March 2019 #IPGP

Disclaimer:

The author held a long position in AAPL but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  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.

Arista Networks Inc Valuation – April 2019 #ANET

Company Profile (excerpt from Reuters): Arista Networks, Inc., incorporated on December 2, 2011, is a supplier of cloud networking solutions that use software innovations to address the needs of Internet companies, cloud service providers and data centers for enterprise support. The Company develops, markets and sells cloud networking solutions, which consist of its Gigabit Ethernet switches and related software. The Company’s cloud networking solutions consist of its Extensible Operating System (EOS), a set of network applications and its Ethernet switching and routing platforms. The programmability of EOS has allowed the Company to create a set of software applications that address the requirements of cloud networking, including workflow automation, network visibility and analytics, and has also allowed it to integrate with a range of third-party applications for virtualization, management, automation, orchestration and network services. EOS supports cloud and virtualization solutions, including VMware NSX, Microsoft System Center, OpenStack and other cloud management frameworks.

Downloadable PDF version of this valuation:

ModernGraham Valuation of ANET – April 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 $23,736,366,775 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.48 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 2711.11% Pass
6. Moderate PEmg Ratio PEmg < 20 58.38 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.81 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 4.48 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.36
MG Growth Estimate 15.00%
MG Value $206.51
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $77.78
MG Value based on 0% Growth $45.59
Market Implied Growth Rate 24.94%
Current Price $313.17
% of Intrinsic Value 151.65%

Arista Networks Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.09 in 2015 to an estimated $5.36 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 24.94% 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 Arista Networks Inc revealed the company was trading above its Graham Number of $72.85. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 58.38, which was above the industry average of 35.4. Finally, the company was trading above its Net Current Asset Value (NCAV) of $21.97.

Arista Networks 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) $21.97
Graham Number $72.85
PEmg 58.38
Current Ratio 4.48
PB Ratio 11.81
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,714,802,000
Total Current Liabilities $606,504,000
Long-Term Debt $0
Total Assets $3,081,983,000
Intangible Assets $112,294,000
Total Liabilities $938,594,000
Shares Outstanding (Diluted Average) 80,844,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.30
Dec2018 $4.06
Dec2017 $5.35
Dec2016 $2.50
Dec2015 $1.67
Dec2014 $1.29
Dec2013 $0.73
Dec2012 $0.00
Dec2011 $0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.36
Dec2018 $3.59
Dec2017 $3.00
Dec2016 $1.63
Dec2015 $1.09
Dec2014 $0.71
Dec2013 $0.37
Dec2012 $0.17
Dec2011 $0.21

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

Maxim Integrated Products Inc Valuation – April 2019 #MXIM
Keysight Technologies Inc Valuation – April 2019 #KEYS
Lam Research Corp Valuation – April 2019 #LRCX
Emerson Electric Co Valuation – April 2019 #EMR
Skyworks Solutions Inc Valuation – March 2019 #SWKS
Garmin Ltd Valuation – March 2019 #GRMN
Hewlett Packard Enterprise Co Valuation – March 2019 #HPE
Fortive Corp Valuation – March 2019 #FTV
Analog Devices Inc Valuation – March 2019 #ADI
IPG Photonics Corp Valuation – March 2019 #IPGP

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.

Maxim Integrated Products Inc Valuation – April 2019 #MXIM

Company Profile (excerpt from Reuters): Maxim Integrated Products, Inc., incorporated on August 19, 1987, is engaged in designing, developing, manufacturing and marketing a range of linear and mixed-signal integrated circuits, referred to as analog circuits. The Company also provides a range of high-frequency process technologies and capabilities for use in custom designs. The Company caters to automotive, communications and data center, computing, consumer and industrial markets. The Company offers a range of products, such as switching regulators, battery management, isolated power, charge pumps, linear regulators, light emitting diode (LED) drivers, motor driver integrated circuits (ICs), monitors and sequencers, transceivers, controllers and expanders, level translators, signal line protection ICs, broadband switches, universal serial bus (USB) products, current loop products, powerline communications, real-time clocks, embedded security, microcontrollers, 1-Wire, iButton, data loggers, clock generation and distribution, memory products, optical, signal integrity, high-speed signaling, and display power and control.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MXIM – April 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 $15,578,217,914 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.54 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 76.97% Pass
6. Moderate PEmg Ratio PEmg < 20 33.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.09 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 6.54 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.44 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.73
MG Growth Estimate 7.55%
MG Value $40.74
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $25.03
MG Value based on 0% Growth $14.67
Market Implied Growth Rate 12.26%
Current Price $56.99
% of Intrinsic Value 139.88%

Maxim Integrated Products Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.15 in 2015 to an estimated $1.73 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.26% 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 Maxim Integrated Products Inc. revealed the company was trading above its Graham Number of $18.6. The company pays a dividend of $1.56 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 33.02, which was below the industry average of 35.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.87.

Maxim Integrated Products Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.87
Graham Number $18.60
PEmg 33.02
Current Ratio 6.54
PB Ratio 9.09
Current Dividend $1.56
Dividend Yield 2.74%
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 $2,657,918,000
Total Current Liabilities $406,480,000
Long-Term Debt $991,866,000
Total Assets $3,888,927,000
Intangible Assets $599,412,000
Total Liabilities $2,133,513,000
Shares Outstanding (Diluted Average) 280,008,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.22
Jun2018 $1.64
Jun2017 $1.98
Jun2016 $0.79
Jun2015 $0.71
Jun2014 $1.23
Jun2013 $1.52
Jun2012 $1.29
Jun2011 $1.61
Jun2010 $0.40
Jun2009 $0.03
Jun2008 $0.98
Jun2007 $0.87
Jun2006 $1.14
Jun2005 $1.35
Jun2004 $0.88
Jun2003 $0.70
Jun2002 $0.73
Jun2001 $0.93
Jun2000 $1.04
Jun1999 $0.64

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.73
Jun2018 $1.41
Jun2017 $1.28
Jun2016 $0.99
Jun2015 $1.15
Jun2014 $1.31
Jun2013 $1.23
Jun2012 $1.01
Jun2011 $0.84
Jun2010 $0.53
Jun2009 $0.69
Jun2008 $1.03
Jun2007 $1.03
Jun2006 $1.06
Jun2005 $0.98
Jun2004 $0.82
Jun2003 $0.80

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

Skyworks Solutions Inc Valuation – March 2019 #SWKS
Garmin Ltd Valuation – March 2019 #GRMN
Hewlett Packard Enterprise Co Valuation – March 2019 #HPE
Fortive Corp Valuation – March 2019 #FTV
Analog Devices Inc Valuation – March 2019 #ADI
IPG Photonics Corp Valuation – March 2019 #IPGP
Micron Technology Inc Valuation – March 2019 #MU
Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC

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.

Keysight Technologies Inc Valuation – April 2019 #KEYS

Company Profile (excerpt from Reuters): Keysight Technologies, Inc. (Keysight), incorporated on December 6, 2013, is a measurement company engaged in providing electronic design and test solutions to communications and electronics industries. The Company provides electronic design and test instruments and systems and related software, software design tools and related services that are used in the design, development, manufacture, installation, deployment and operation of electronics equipment. The Company operates through three segments: Communications Solutions Group (CSG), Electronic Industrial Solutions Group (EISG) and Services Solutions Group (SSG). The CSG and EISG segments provide electronic design and test software, instruments, and systems used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment. The SSG segment provides integrated service solutions, including repair and calibration services, professional services and remanufactured equipment.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KEYS – April 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 $16,693,423,773 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.82 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 17200.00% Pass
6. Moderate PEmg Ratio PEmg < 20 43.15 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.35 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 1.82 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.13 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 $2.06
MG Growth Estimate 3.98%
MG Value $33.86
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $29.84
MG Value based on 0% Growth $17.49
Market Implied Growth Rate 17.32%
Current Price $88.80
% of Intrinsic Value 262.22%

Keysight Technologies Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the 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 Overvalued after growing its EPSmg (normalized earnings) from $1.63 in 2015 to an estimated $2.06 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.32% 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 Keysight Technologies Inc revealed the company was trading above its Graham Number of $33.26. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 43.15, which was above the industry average of 35.4. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.08.

Keysight Technologies 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) -$4.08
Graham Number $33.26
PEmg 43.15
Current Ratio 1.82
PB Ratio 6.35
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 1/1/2019
Total Current Assets $2,544,000,000
Total Current Liabilities $1,400,000,000
Long-Term Debt $1,291,000,000
Total Assets $5,978,000,000
Intangible Assets $1,775,000,000
Total Liabilities $3,320,000,000
Shares Outstanding (Diluted Average) 190,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.77
Oct2018 $0.86
Oct2017 $0.56
Oct2016 $1.95
Oct2015 $3.00
Oct2014 $2.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.06
Oct2018 $1.38
Oct2017 $1.62
Oct2016 $1.92
Oct2015 $1.63
Oct2014 $0.78

Recommended Reading:

Other ModernGraham posts about the company

Keysight Technologies Inc Valuation – August 2018 $KEYS
Keysight Technologies Inc Valuation – Initial Coverage $KEYS

Other ModernGraham posts about related companies

Skyworks Solutions Inc Valuation – March 2019 #SWKS
Garmin Ltd Valuation – March 2019 #GRMN
Hewlett Packard Enterprise Co Valuation – March 2019 #HPE
Fortive Corp Valuation – March 2019 #FTV
Analog Devices Inc Valuation – March 2019 #ADI
IPG Photonics Corp Valuation – March 2019 #IPGP
Micron Technology Inc Valuation – March 2019 #MU
Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC

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.

Lam Research Corp Valuation – April 2019 #LRCX

Company Profile (excerpt from Reuters): Lam Research Corporation, incorporated on October 8, 1989, is a supplier of wafer fabrication equipment and services to the semiconductor industry. The Company designs, manufactures, markets, refurbishes and services semiconductor processing systems that are used in the fabrication of integrated circuits (ICs). The Company operates through manufacturing and servicing of wafer processing semiconductor manufacturing equipment segment. The Company’s products are designed to enable its customers build a range of devices that are used in a range of electronic products, including cell phones, tablets, computers, storage devices and networking equipment. The Company’s customer base includes semiconductor memory, foundry and integrated device manufacturers (IDMs) that make products, such as dynamic random-access memory (DRAM), negative-AND (NAND) memory and logic devices. The Company offers a portfolio of products that are used in several areas of the semiconductor manufacturing process flow, including thin film deposition, plasma etch and single-wafer clean. The Company also offers a range of services, including customer service, spares, upgrades, and refurbishment of its deposition, etch and clean products. The Company also provides refurbished legacy products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LRCX – April 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 $29,332,951,738 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.39 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 259.29% Pass
6. Moderate PEmg Ratio PEmg < 20 18.10 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.34 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.39 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.35 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $10.63
MG Growth Estimate 15.00%
MG Value $409.23
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $154.13
MG Value based on 0% Growth $90.35
Market Implied Growth Rate 4.80%
Current Price $192.35
% of Intrinsic Value 47.00%

Lam Research Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.9 in 2015 to an estimated $10.63 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.8% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Lam Research Corporation revealed the company was trading above its Graham Number of $110.67. The company pays a dividend of $2.55 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 18.1, which was below the industry average of 35.4, 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 $14.98.

Lam Research Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $14.98
Graham Number $110.67
PEmg 18.10
Current Ratio 3.39
PB Ratio 5.34
Current Dividend $2.55
Dividend Yield 1.33%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $7,355,845,000
Total Current Liabilities $2,166,837,000
Long-Term Debt $1,813,190,000
Total Assets $10,768,458,000
Intangible Assets $1,736,468,000
Total Liabilities $4,927,086,000
Shares Outstanding (Diluted Average) 162,170,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.98
Jun2018 $13.17
Jun2017 $9.24
Jun2016 $5.22
Jun2015 $3.70
Jun2014 $3.62
Jun2013 $0.66
Jun2012 $1.35
Jun2011 $5.79
Jun2010 $2.71
Jun2009 -$2.41
Jun2008 $3.47
Jun2007 $4.85
Jun2006 $2.33
Jun2005 $2.09
Jun2004 $0.54
Jun2003 -$0.06
Jun2002 -$0.71
Jun2001 $0.39
Jun2000 $1.53
Jun1999 -$0.98

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.63
Jun2018 $8.63
Jun2017 $5.74
Jun2016 $3.63
Jun2015 $2.90
Jun2014 $2.61
Jun2013 $1.94
Jun2012 $2.45
Jun2011 $2.96
Jun2010 $1.76
Jun2009 $1.54
Jun2008 $3.23
Jun2007 $2.72
Jun2006 $1.39
Jun2005 $0.76
Jun2004 $0.18
Jun2003 $0.01

Recommended Reading:

Other ModernGraham posts about the company

Lam Research Corp Valuation – June 2018 $LRCX
Lam Research Corp Valuation – September 2017 $LRCX
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Amphenol Corp Valuation – March 2019 #APH
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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.

Emerson Electric Co Valuation – April 2019 #EMR

Company Profile (excerpt from Reuters): Emerson Electric Co., incorporated on September 24, 1890, is a diversified global manufacturing company, which provides solutions to customers by bringing technology and engineering together in the industrial, commercial and consumer markets around the world. The Company operates through four segments based on the nature of the products and services rendered: Process Management, Industrial Automation, Climate Technologies and Commercial & Residential Solutions. The Company’s principal production operations are electronics assembly, metal stamping, forming, casting, machining, welding, plating, heat treating, painting and assembly. In addition, the Company uses specialized production operations, including automatic and semiautomatic testing, automated material handling and storage, ferrous and nonferrous machining, and special furnaces for heat treating and foundry applications.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EMR – April 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 $42,765,260,725 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.88 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 7.18% Fail
6. Moderate PEmg Ratio PEmg < 20 21.78 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.28 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 0.88 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.99 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.19
MG Growth Estimate -0.32%
MG Value $25.12
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $46.32
MG Value based on 0% Growth $27.15
Market Implied Growth Rate 6.64%
Current Price $69.58
% of Intrinsic Value 277.00%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.26 in 2015 to an estimated $3.19 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.64% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Emerson Electric Co. revealed the company was trading above its Graham Number of $33.94. The company pays a dividend of $1.94 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.78, which was below the industry average of 35.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-8.75.

Emerson Electric Co. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.75
Graham Number $33.94
PEmg 21.78
Current Ratio 0.88
PB Ratio 5.28
Current Dividend $1.94
Dividend Yield 2.79%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,658,000,000
Total Current Liabilities $7,540,000,000
Long-Term Debt $2,641,000,000
Total Assets $20,429,000,000
Intangible Assets $9,182,000,000
Total Liabilities $12,153,000,000
Shares Outstanding (Diluted Average) 627,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.60
Sep2018 $3.46
Sep2017 $2.35
Sep2016 $2.52
Sep2015 $3.99
Sep2014 $3.03
Sep2013 $2.76
Sep2012 $2.67
Sep2011 $3.27
Sep2010 $2.84
Sep2009 $2.27
Sep2008 $3.06
Sep2007 $2.66
Sep2006 $2.24
Sep2005 $1.70
Sep2004 $1.49
Sep2003 $1.30
Sep2002 $0.15
Sep2001 $1.20
Sep2000 $1.65
Sep1999 $1.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.19
Sep2018 $3.02
Sep2017 $2.84
Sep2016 $3.06
Sep2015 $3.26
Sep2014 $2.91
Sep2013 $2.82
Sep2012 $2.84
Sep2011 $2.89
Sep2010 $2.67
Sep2009 $2.52
Sep2008 $2.50
Sep2007 $2.11
Sep2006 $1.68
Sep2005 $1.32
Sep2004 $1.14
Sep2003 $1.03

Recommended Reading:

Other ModernGraham posts about the company

Emerson Electric Co Valuation – June 2018 $EMR
Emerson Electric Co Valuation – August 2017 $EMR
Emerson Electric Co Valuation – February 2016 $EMR
5 Speculative and Overvalued Companies to Avoid – January 2015
15 Companies in the Spotlight This Week – 12/27/14

Other ModernGraham posts about related companies

Garmin Ltd Valuation – March 2019 #GRMN
Hewlett Packard Enterprise Co Valuation – March 2019 #HPE
Fortive Corp Valuation – March 2019 #FTV
Analog Devices Inc Valuation – March 2019 #ADI
IPG Photonics Corp Valuation – March 2019 #IPGP
Micron Technology Inc Valuation – March 2019 #MU
Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC
Texas Instruments Inc Valuation – March 2019 #TXN

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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