IDEXX Laboratories Inc Valuation – March 2019 #IDXX

Company Profile (excerpt from Reuters): IDEXX Laboratories, Inc., incorporated on December 19, 1983, develops, manufactures and distributes products and provides services primarily for the companion animal veterinary, livestock and poultry, dairy and water testing markets. The Company also sells a line of portable electrolytes and blood gas analyzers for the human point-of-care medical diagnostics market. Its segments include diagnostic and information technology-based products and services for the veterinary market, which the Company refers to as the Companion Animal Group (CAG); water quality products (Water); diagnostic products and services for livestock and poultry health, which the Company refers to as Livestock, Poultry and Dairy (LPD), and Other operating segment, which combines and presents products for the human point-of-care medical diagnostics market (OPTI Medical) with its pharmaceutical product line and its out-licensing arrangements. Its primary products and services are point-of-care veterinary diagnostic products, comprising instruments, consumables and rapid assay test kits; veterinary reference laboratory diagnostic and consulting services; practice management and diagnostic imaging systems and services used by veterinarians; biological materials testing, laboratory diagnostic instruments and services used by the biomedical research community; diagnostic, health-monitoring products for livestock, poultry and dairy; products that test water for certain microbiological contaminants, and point-of-care electrolytes and blood gas analyzers used in the human point-of-care medical diagnostics market.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IDXX – 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 $19,330,932,847 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.85 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 185.34% Pass
6. Moderate PEmg Ratio PEmg < 20 60.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -2,138.74 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.85 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.17 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 $3.74
MG Growth Estimate 15.00%
MG Value $144.09
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $54.27
MG Value based on 0% Growth $31.81
Market Implied Growth Rate 25.79%
Current Price $224.86
% of Intrinsic Value 156.05%

IDEXX Laboratories, 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 PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.81 in 2015 to an estimated $3.74 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 25.79% 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 IDEXX Laboratories, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 60.08, which was above the industry average of 53.13. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.16.

IDEXX Laboratories, 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) -$10.16
Graham Number $0.00
PEmg 60.08
Current Ratio 0.85
PB Ratio -2,138.74
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $654,172,000
Total Current Liabilities $770,444,000
Long-Term Debt $601,348,000
Total Assets $1,537,349,000
Intangible Assets $256,314,000
Total Liabilities $1,546,582,000
Shares Outstanding (Diluted Average) 87,819,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.67
Dec2018 $4.26
Dec2017 $2.94
Dec2016 $2.44
Dec2015 $2.05
Dec2014 $1.79
Dec2013 $1.74
Dec2012 $1.59
Dec2011 $1.39
Dec2010 $1.19
Dec2009 $1.01
Dec2008 $0.94
Dec2007 $0.73
Dec2006 $0.71
Dec2005 $0.58
Dec2004 $0.55
Dec2003 $0.40
Dec2002 $0.33
Dec2001 $0.27
Dec2000 $0.26
Dec1999 $0.21

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.74
Dec2018 $3.08
Dec2017 $2.40
Dec2016 $2.06
Dec2015 $1.81
Dec2014 $1.64
Dec2013 $1.51
Dec2012 $1.33
Dec2011 $1.15
Dec2010 $0.99
Dec2009 $0.86
Dec2008 $0.76
Dec2007 $0.65
Dec2006 $0.57
Dec2005 $0.48
Dec2004 $0.41
Dec2003 $0.32

Recommended Reading:

Other ModernGraham posts about the company

IDEXX Laboratories Inc Valuation – June 2018 $IDXX
IDEXX Laboratories Inc Valuation – Initial Coverage $IDXX

Other ModernGraham posts about related companies

Hologic Inc Valuation – March 2019 #HOLX
Mettler-Toledo International Inc Valuation – March 2019 #MTD
DaVita Inc Valuation – March 2019 #DVA
Danaher Corp Valuation – March 2019 #DHR
Agilent Technologies Inc Valuation – March 2019 #A
ResMed Inc Valuation – March 2019 #RMD
Cooper Companies Inc Valuation – March 2019 #COO
Edwards Lifesciences Corp Valuation – March 2019 $EW
Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX

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.

IDEXX Laboratories Inc Valuation – June 2018 $IDXX

Company Profile (excerpt from Reuters): IDEXX Laboratories, Inc., incorporated on December 19, 1983, develops, manufactures and distributes products and provides services primarily for the companion animal veterinary, livestock and poultry, dairy and water testing markets. The Company also sells a line of portable electrolytes and blood gas analyzers for the human point-of-care medical diagnostics market. Its segments include diagnostic and information technology-based products and services for the veterinary market, which the Company refers to as the Companion Animal Group (CAG); water quality products (Water); diagnostic products and services for livestock and poultry health, which the Company refers to as Livestock, Poultry and Dairy (LPD), and Other operating segment, which combines and presents products for the human point-of-care medical diagnostics market (OPTI Medical) with its pharmaceutical product line and its out-licensing arrangements. Its primary products and services are point-of-care veterinary diagnostic products, comprising instruments, consumables and rapid assay test kits; veterinary reference laboratory diagnostic and consulting services; practice management and diagnostic imaging systems and services used by veterinarians; biological materials testing, laboratory diagnostic instruments and services used by the biomedical research community; diagnostic, health-monitoring products for livestock, poultry and dairy; products that test water for certain microbiological contaminants, and point-of-care electrolytes and blood gas analyzers used in the human point-of-care medical diagnostics market.

IDXX Chart

IDXX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IDXX – 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 $19,085,590,100 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.96 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 162.85% Pass
6. Moderate PEmg Ratio PEmg < 20 73.05 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -398.98 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 0.96 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -22.45 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 $3.01
MG Growth Estimate 12.48%
MG Value $100.64
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $43.62
MG Value based on 0% Growth $25.57
Market Implied Growth Rate 32.27%
Current Price $219.72
% of Intrinsic Value 218.32%

IDEXX Laboratories, 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 PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.64 in 2014 to an estimated $3.01 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 32.27% 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 IDEXX Laboratories, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 73.05, which was above the industry average of 46.81. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.18.

IDEXX Laboratories, 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) -$9.18
Graham Number $0.00
PEmg 73.05
Current Ratio 0.96
PB Ratio -398.98
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $701,707,000
Total Current Liabilities $728,838,000
Long-Term Debt $609,005,000
Total Assets $1,469,492,000
Intangible Assets $242,915,000
Total Liabilities $1,518,474,000
Shares Outstanding (Diluted Average) 88,944,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.03
Dec2017 $2.94
Dec2016 $2.44
Dec2015 $2.05
Dec2014 $1.79
Dec2013 $1.74
Dec2012 $1.59
Dec2011 $1.39
Dec2010 $1.19
Dec2009 $1.01
Dec2008 $0.94
Dec2007 $0.73
Dec2006 $0.71
Dec2005 $0.58
Dec2004 $0.55
Dec2003 $0.40
Dec2002 $0.33
Dec2001 $0.27
Dec2000 $0.26
Dec1999 $0.21
Dec1998 -$0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.01
Dec2017 $2.40
Dec2016 $2.06
Dec2015 $1.81
Dec2014 $1.64
Dec2013 $1.51
Dec2012 $1.33
Dec2011 $1.15
Dec2010 $0.99
Dec2009 $0.86
Dec2008 $0.76
Dec2007 $0.65
Dec2006 $0.57
Dec2005 $0.48
Dec2004 $0.41
Dec2003 $0.32
Dec2002 $0.25

Recommended Reading:

Other ModernGraham posts about the company

IDEXX Laboratories Inc Valuation – Initial Coverage $IDXX

Other ModernGraham posts about related companies

Mettler-Toledo International Inc Valuation – June 2018 $MTD
Envision Healthcare Corp Valuation – June 2018 $EVHC
DaVita Inc Valuation – June 2018 $DVA
Danaher Corp Valuation – May 2018 $DHR
Agilent Technologies Inc Valuation – May 2018 $A
Cooper Companies Inc Valuation – May 2018 $COO
Edwards Lifesciences Corp Valuation – May 2018 $EW
Baxter International Inc Valuation – May 2018 $BAX
Boston Scientific Corp Valuation – May 2018 $BSX
Centene Corp Valuation – May 2018 $CNC

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.

IDEXX Laboratories Inc Valuation – Initial Coverage $IDXX

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 IDEXX Laboratories Inc (IDXX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): IDEXX Laboratories, Inc. develops, manufactures and distributes products and provides services for the companion animal veterinary, livestock and poultry, dairy and water testing markets. The Company’s segments include Companion Animal Group (CAG), which develops, designs, manufactures and distributes products and performs services for veterinarians and the bioresearch market; Water, which develops, designs, manufactures and distributes a range of products used in the detection of various microbiological parameters in water; Livestock, Poultry and Dairy (LPD), which develops, designs, manufactures and distributes diagnostic tests and related instrumentation, and performs services that are used to manage the health status of livestock and poultry and to expand bovine reproductive productivity, and Other, which develops, designs, manufactures and distributes point-of-care electrolyte and blood gas analyzers and related consumable products for the human medical diagnostics market.

IDXX Chart

IDXX data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of IDXX – 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 $13,035,063,265 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.90 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 136.48% Pass
6. Moderate PEmg Ratio PEmg < 20 61.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -123.37 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 0.90 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.67 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 $2.38
MG Growth Estimate 8.73%
MG Value $61.84
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $34.54
MG Value based on 0% Growth $20.25
Market Implied Growth Rate 26.62%
Current Price $147.08
% of Intrinsic Value 237.85%

IDEXX Laboratories, 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 PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.51 in 2013 to an estimated $2.38 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 26.62% 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 IDEXX Laboratories, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 61.75, which was above the industry average of 32.29. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-8.73.

IDEXX Laboratories, 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) -$8.73
Graham Number $0.00
PEmg 61.75
Current Ratio 0.90
PB Ratio -123.37
Current Dividend $0.00
Dividend Yield 0.00%
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 12/1/2016
Total Current Assets $845,584,000
Total Current Liabilities $934,568,000
Long-Term Debt $593,110,000
Total Assets $1,530,704,000
Intangible Assets $224,383,000
Total Liabilities $1,639,056,000
Shares Outstanding (Diluted Average) 90,884,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.90
Dec2016 $2.44
Dec2015 $2.05
Dec2014 $1.79
Dec2013 $1.74
Dec2012 $1.59
Dec2011 $1.39
Dec2010 $1.19
Dec2009 $1.01
Dec2008 $0.94
Dec2007 $0.73
Dec2006 $0.71
Dec2005 $0.58
Dec2004 $0.55
Dec2003 $0.40
Dec2002 $0.33
Dec2001 $0.27
Dec2000 $0.26
Dec1999 $0.21
Dec1998 -$0.10
Dec1997 -$0.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.38
Dec2016 $2.06
Dec2015 $1.81
Dec2014 $1.64
Dec2013 $1.51
Dec2012 $1.33
Dec2011 $1.15
Dec2010 $0.99
Dec2009 $0.86
Dec2008 $0.76
Dec2007 $0.65
Dec2006 $0.57
Dec2005 $0.48
Dec2004 $0.41
Dec2003 $0.32
Dec2002 $0.25
Dec2001 $0.18

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

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UnitedHealth Group Inc Valuation – February 2017 $UNH
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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.

Universal Health Services Inc Valuation – April 2019 #UHS

Company Profile (excerpt from Reuters): Universal Health Services, Inc. is a holding company. The Company’s principal business is owning and operating, through its subsidiaries, acute care hospitals and outpatient facilities, and behavioral healthcare facilities. The Company’s segments include Acute Care Hospital Services, Behavioral Health Services and Other. As of August 1, 2018, the Company owned and/or operated more than 326 inpatient facilities, and 32 outpatient and other facilities, located in 37 states, Washington, District of Columbia, the United Kingdom, Puerto Rico and the United States Virgin Islands. The Company’s hospitals provide a range of services, such as oncology, diagnostic care, coronary care, pediatric services, pharmacy services and/or behavioral health services. As of February 28, 2017, its acute care facilities located in the United States included 26 inpatient acute care hospitals; four free-standing emergency departments, and four outpatient surgery/cancer care centers and one surgical hospital.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of UHS – 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 $12,167,567,641 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 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 136.21% Pass
6. Moderate PEmg Ratio PEmg < 20 15.96 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.27 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 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.05 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.40
MG Growth Estimate 7.49%
MG Value $197.22
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $121.76
MG Value based on 0% Growth $71.38
Market Implied Growth Rate 3.73%
Current Price $134.03
% of Intrinsic Value 67.96%

Universal Health Services, Inc. Class B qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current 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 feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.6 in 2015 to an estimated $8.4 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.73% 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 Universal Health Services, Inc. Class B revealed the company was trading above its Graham Number of $112.47. The company pays a dividend of $0.4 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 15.96, which was below the industry average of 47.79, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-41.66.

Universal Health Services, Inc. Class B performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$41.66
Graham Number $112.47
PEmg 15.96
Current Ratio 1.34
PB Ratio 2.27
Current Dividend $0.40
Dividend Yield 0.30%
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 $1,937,802,000
Total Current Liabilities $1,448,738,000
Long-Term Debt $3,935,187,000
Total Assets $11,265,480,000
Intangible Assets $3,844,628,000
Total Liabilities $5,799,687,000
Shares Outstanding (Diluted Average) 92,706,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.65
Dec2018 $8.31
Dec2017 $7.81
Dec2016 $7.14
Dec2015 $6.76
Dec2014 $5.42
Dec2013 $5.14
Dec2012 $4.53
Dec2011 $4.04
Dec2010 $2.34
Dec2009 $2.64
Dec2008 $1.96
Dec2007 $1.59
Dec2006 $2.28
Dec2005 $2.00
Dec2004 $1.38
Dec2003 $1.60
Dec2002 $1.37
Dec2001 $0.80
Dec2000 $0.75
Dec1999 $0.61

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.40
Dec2018 $7.54
Dec2017 $6.92
Dec2016 $6.25
Dec2015 $5.60
Dec2014 $4.78
Dec2013 $4.22
Dec2012 $3.54
Dec2011 $2.87
Dec2010 $2.24
Dec2009 $2.16
Dec2008 $1.89
Dec2007 $1.83
Dec2006 $1.87
Dec2005 $1.59
Dec2004 $1.32
Dec2003 $1.20

Recommended Reading:

Other ModernGraham posts about the company

Universal Health Services Inc Valuation – June 2018 $UHS
Universal Health Services Inc Valuation – August 2017 $UHS
Universal Health Services Inc Valuation – August 2016 $UHS
Universal Health Services Inc. Analysis – Initial Coverage $UHS

Other ModernGraham posts about related companies

Dentsply Sirona Inc Valuation – March 2019 #XRAY
McKesson Corp Valuation – March 2019 #MCK
IDEXX Laboratories Inc Valuation – March 2019 #IDXX
Hologic Inc Valuation – March 2019 #HOLX
Mettler-Toledo International Inc Valuation – March 2019 #MTD
DaVita Inc Valuation – March 2019 #DVA
Danaher Corp Valuation – March 2019 #DHR
Agilent Technologies Inc Valuation – March 2019 #A
ResMed Inc Valuation – March 2019 #RMD
Cooper Companies Inc Valuation – March 2019 #COO

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.

Dentsply Sirona Inc Valuation – March 2019 #XRAY

Company Profile (excerpt from Reuters): DENTSPLY SIRONA Inc., incorporated on February 15, 1983, is a manufacturer of professional dental products and technologies. The Company develops, manufactures, and markets solutions offering, including dental and oral health products, as well as other consumable medical devices. The Company operates through two segments: Dental and Healthcare Consumables, and Technologies. The dental industry encompasses the diagnosis, treatment and prevention of disease and ailments of the teeth, gums and supporting bone. The Company’s principal dental product categories are dental consumable products, dental laboratory products, dental specialty products and dental equipment. Additionally, the Company’s consumable medical device products are used for urological and surgical applications. These products are produced by the Company in the United States and internationally and are distributed throughout the world under various brand names, including ANKYLOS, AQUASIL ULTRA, ARTICADENT, ASTRA TECH, ATLANTIS, CALIBRA, CAULK, CAVITRON, CELTRA, CERAMCO, CERCON, CEREC, CEREC MCX, CITANEST, DAC, DELTON, DENTSPLY, DETREY, DYRACT, ESTHET.X, GALILEOS, INLAB, IN-OVATION, INTEGO, LOFRIC, MAILLEFER, MIDWEST, MTM, NUPRO, OMNICAM, ORAQIX, ORIGO, ORTHOPHOS, OSSEOSPEED, PALODENT PLUS, PEPGEN P-15, PORTRAIT, PRIME & BOND, PROFILE, PROGLIDER, PROTAPER, RECIPROC, RINN, SANI-TIP, SCHICK, SENSE, SENTALLOY, SINIUS, SIROLASER, SIRONA, SLIMLINE, STYLUS, SULTAN, SUREFIL, T1, T2, T3, T4, TENEO, THERMAFIL, TRIODENT MATRIX SYSTEMS, TRUBYTE, VIPI, WAVEONE, WELLSPECT, XENO, XIVE, XYLOCAINE and ZHERMACK.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of XRAY – 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 $10,991,254,694 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.86 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 -259.30% Fail
6. Moderate PEmg Ratio PEmg < 20 -33.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.13 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 1.86 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.79 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 -$1.45
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$21.01
MG Value based on 0% Growth -$12.31
Market Implied Growth Rate -21.24%
Current Price $49.24
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.02 in 2015 to an estimated $-1.45 for 2019. 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 DENTSPLY SIRONA Inc revealed the company was trading above its Graham Number of $33.67. The company pays a dividend of $0.35 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was -33.99, which was below the industry average of 53.13, 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 $-7.49.

DENTSPLY SIRONA 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) -$7.49
Graham Number $33.67
PEmg -33.99
Current Ratio 1.86
PB Ratio 2.13
Current Dividend $0.35
Dividend Yield 0.71%
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 $1,888,000,000
Total Current Liabilities $1,013,300,000
Long-Term Debt $1,564,900,000
Total Assets $8,687,000,000
Intangible Assets $5,851,600,000
Total Liabilities $3,554,000,000
Shares Outstanding (Diluted Average) 222,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.19
Dec2018 -$4.51
Dec2017 -$6.76
Dec2016 $1.94
Dec2015 $1.76
Dec2014 $2.24
Dec2013 $2.16
Dec2012 $2.18
Dec2011 $1.70
Dec2010 $1.82
Dec2009 $1.83
Dec2008 $1.87
Dec2007 $1.68
Dec2006 $1.41
Dec2005 $0.28
Dec2004 $1.55
Dec2003 $1.09
Dec2002 $0.93
Dec2001 $0.77
Dec2000 $0.65
Dec1999 $0.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.45
Dec2018 -$2.53
Dec2017 -$0.94
Dec2016 $2.00
Dec2015 $2.02
Dec2014 $2.11
Dec2013 $2.01
Dec2012 $1.91
Dec2011 $1.78
Dec2010 $1.79
Dec2009 $1.65
Dec2008 $1.49
Dec2007 $1.27
Dec2006 $1.06
Dec2005 $0.90
Dec2004 $1.14
Dec2003 $0.89

Recommended Reading:

Other ModernGraham posts about the company

Dentsply Sirona Inc Valuation – June 2018 $XRAY
Dentsply Sirona Inc Valuation – March 2017 $XRAY
Dentsply International Inc Valuation – November 2015 Update $XRAY
Dentsply International Inc. Analysis – August 2015 Update $XRAY
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Agilent Technologies Inc Valuation – March 2019 #A
ResMed Inc Valuation – March 2019 #RMD
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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.

Charles River Laboratories International Inc Valuation – August 2018 $CRL

Company Profile (excerpt from Reuters): Charles River Laboratories International, Inc., incorporated on February 3, 1994, is an early-stage contract research company. The Company is engaged in laboratory animal medicine and science (research model technologies) and develop a portfolio of discovery and safety assessment services, both good laboratory practice (GLP) and non-GLP, which supports its clients from target identification through non-clinical development. The Company operates in three segments: Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Support (Manufacturing). The RMS segment includes Research Models and Research Model Services. The DSA segment includes Discovery Services and Safety Assessment. The Manufacturing segment includes Microbial Solutions, Avian, Biologics and Contract Manufacturing. The Company also provides a suite of products and services to support its clients’ manufacturing activities.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CRL – August 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 $5,755,920,910 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.72 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 -820.67% Fail
6. Moderate PEmg Ratio PEmg < 20 33.52 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.99 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 1.72 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.84 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 $3.60
MG Growth Estimate 15.00%
MG Value $138.52
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $52.17
MG Value based on 0% Growth $30.58
Market Implied Growth Rate 12.51%
Current Price $120.59
% of Intrinsic Value 87.05%

Charles River Laboratories Intl. Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.78 in 2014 to an estimated $3.6 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 12.51% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Charles River Laboratories Intl. Inc revealed the company was trading above its Graham Number of $50. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 33.52, which was below the industry average of 44.66, 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 $-36.52.

Charles River Laboratories Intl. 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) -$36.52
Graham Number $50.00
PEmg 33.52
Current Ratio 1.72
PB Ratio 4.99
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $889,530,000
Total Current Liabilities $518,140,000
Long-Term Debt $1,796,451,000
Total Assets $3,865,883,000
Intangible Assets $1,903,580,000
Total Liabilities $2,680,678,000
Shares Outstanding (Diluted Average) 49,043,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.04
Dec2017 $2.54
Dec2016 $3.23
Dec2015 $3.13
Dec2014 $2.66
Dec2013 $2.12
Dec2012 $2.01
Dec2011 $2.14
Dec2010 -$5.38
Dec2009 $1.74
Dec2008 -$7.76
Dec2007 $2.25
Dec2006 -$0.81
Dec2005 $1.96
Dec2004 $1.67
Dec2003 $1.64
Dec2002 $1.06
Dec2001 $0.80
Dec2000 -$0.40
Dec1999 $0.86
Dec1998 $2.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.60
Dec2017 $2.83
Dec2016 $2.86
Dec2015 $2.59
Dec2014 $1.78
Dec2013 $1.07
Dec2012 -$0.12
Dec2011 -$1.26
Dec2010 -$2.64
Dec2009 -$1.02
Dec2008 -$1.78
Dec2007 $1.26
Dec2006 $0.88
Dec2005 $1.62
Dec2004 $1.29
Dec2003 $0.99
Dec2002 $0.75

Recommended Reading:

Other ModernGraham posts about the company

5 Best Stocks for Value Investors This Week – 2/25/17
Charles River Laboratories Intl Inc Valuation – Initial Coverage $CRL

Other ModernGraham posts about related companies

Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC
Select Medical Holdings Corp Valuation – July 2018 $SEM
Chemed Corp Valuation – July 2018 $CHE
Inogen Inc Valuation – July 2018 $INGN
Tenet Healthcare Corp Valuation – June 2018 $THC
Universal Health Services Inc Valuation – June 2018 $UHS
Dentsply Sirona Inc Valuation – June 2018 $XRAY
IDEXX Laboratories Inc Valuation – June 2018 $IDXX
Hologic Inc Valuation – June 2018 $HOLX

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.

Surmodics Inc Valuation – August 2018 $SRDX

Company Profile (excerpt from Reuters): Surmodics, Inc., incorporated on June 27, 1979, is a provider of medical device and in vitro diagnostic technologies to the healthcare industry. The Company operates through two segments: Medical Device and In Vitro Diagnostics. The Company’s business segments partner with medical device, diagnostic and life science companies to develop and commercialize products designed to improve patient diagnosis and treatment. As of September 30, 2016, the Company had over 150 licensed product classes (customer products utilizing Surmodics technology) in the market generating royalties and over 100 customer product classes incorporating its technology in various stages of pre-commercialization.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SRDX – August 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 $918,403,843 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.50 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 -750.00% Fail
6. Moderate PEmg Ratio PEmg < 20 222.01 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.55 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.50 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.32
MG Growth Estimate -4.25%
MG Value $2.09
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $4.60
MG Value based on 0% Growth $2.70
Market Implied Growth Rate 106.75%
Current Price $70.45
% of Intrinsic Value 3369.63%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.46 in 2014 to an estimated $0.32 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 106.75% 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 SurModics, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 222.01, which was above the industry average of 44.66. Finally, the company was trading above its Net Current Asset Value (NCAV) of $2.09.

SurModics, 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) $2.09
Graham Number $0.00
PEmg 222.01
Current Ratio 2.50
PB Ratio 8.55
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $78,846,000
Total Current Liabilities $31,585,000
Long-Term Debt $0
Total Assets $159,987,000
Intangible Assets $45,562,000
Total Liabilities $51,242,000
Shares Outstanding (Diluted Average) 13,203,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.27
Sep2017 $0.29
Sep2016 $0.76
Sep2015 $0.90
Sep2014 $0.87
Sep2013 $1.03
Sep2012 $0.59
Sep2011 -$1.06
Sep2010 -$1.21
Sep2009 $2.15
Sep2008 $0.80
Sep2007 $0.18
Sep2006 $1.09
Sep2005 -$0.45
Sep2004 $0.41
Sep2003 $0.78
Sep2002 $0.44
Sep2001 $0.29
Sep2000 $0.25
Sep1999 $0.14
Sep1998 $0.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.32
Sep2017 $0.66
Sep2016 $0.84
Sep2015 $0.75
Sep2014 $0.46
Sep2013 $0.27
Sep2012 $0.01
Sep2011 -$0.13
Sep2010 $0.43
Sep2009 $1.08
Sep2008 $0.50
Sep2007 $0.37
Sep2006 $0.46
Sep2005 $0.19
Sep2004 $0.49
Sep2003 $0.48
Sep2002 $0.30

Recommended Reading:

Other ModernGraham posts about the company

5 Best Stocks for Value Investors This Week – 2/18/17
SurModics Inc Valuation – Initial Coverage $SRDX

Other ModernGraham posts about related companies

Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC
Select Medical Holdings Corp Valuation – July 2018 $SEM
Chemed Corp Valuation – July 2018 $CHE
Inogen Inc Valuation – July 2018 $INGN
Tenet Healthcare Corp Valuation – June 2018 $THC
Universal Health Services Inc Valuation – June 2018 $UHS
Dentsply Sirona Inc Valuation – June 2018 $XRAY
IDEXX Laboratories Inc Valuation – June 2018 $IDXX
Hologic Inc Valuation – June 2018 $HOLX

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.

Conmed Corp Valuation – August 2018 $CNMD

Company Profile (excerpt from Reuters): CONMED Corporation, incorporated on February 10, 1970, is a medical technology company. The Company is engaged in the development, manufacturing and sale on a global basis of surgical devices and related equipment. The Company provides surgical devices and equipment for minimally invasive procedures. The Company’s products are used by surgeons and physicians in a range of specialties, including orthopedics, general surgery, gynecology, neurosurgery and gastroenterology. The Company’s product lines consist of orthopedic surgery, general surgery and surgical visualization. As of December 31, 2016, the Company’s products are distributed domestically directly to over 6,000 hospitals, surgery centers and other healthcare institutions, as well as through medical specialty distributors.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CNMD – August 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 $2,187,212,094 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.15 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 210.00% Pass
6. Moderate PEmg Ratio PEmg < 20 51.15 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.57 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.15 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.42 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 $1.57
MG Growth Estimate 6.75%
MG Value $34.59
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $22.79
MG Value based on 0% Growth $13.36
Market Implied Growth Rate 21.32%
Current Price $80.40
% of Intrinsic Value 232.42%

CONMED 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 PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.08 in 2014 to an estimated $1.57 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 21.32% 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 CONMED Corporation revealed the company was trading above its Graham Number of $33.13. The company pays a dividend of $0.8 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 51.15, which was above the industry average of 44.66. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.78.

CONMED 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) -$12.78
Graham Number $33.13
PEmg 51.15
Current Ratio 2.15
PB Ratio 3.57
Current Dividend $0.80
Dividend Yield 1.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $342,378,000
Total Current Liabilities $159,300,000
Long-Term Debt $442,408,000
Total Assets $1,350,034,000
Intangible Assets $821,515,000
Total Liabilities $707,406,000
Shares Outstanding (Diluted Average) 28,573,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.16
Dec2017 $1.97
Dec2016 $0.52
Dec2015 $1.09
Dec2014 $1.16
Dec2013 $1.28
Dec2012 $1.41
Dec2011 $0.03
Dec2010 $1.05
Dec2009 $0.42
Dec2008 $1.37
Dec2007 $1.43
Dec2006 -$0.45
Dec2005 $1.08
Dec2004 $1.11
Dec2003 $1.10
Dec2002 $1.23
Dec2001 $1.00
Dec2000 $0.83
Dec1999 $1.17
Dec1998 $0.77

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.57
Dec2017 $1.25
Dec2016 $0.96
Dec2015 $1.12
Dec2014 $1.08
Dec2013 $0.98
Dec2012 $0.84
Dec2011 $0.65
Dec2010 $0.90
Dec2009 $0.80
Dec2008 $0.97
Dec2007 $0.79
Dec2006 $0.59
Dec2005 $1.11
Dec2004 $1.10
Dec2003 $1.08
Dec2002 $1.05

Recommended Reading:

Other ModernGraham posts about the company

CONMED Corporation Valuation – Initial Coverage $CNMD

Other ModernGraham posts about related companies

Invacare Corp Valuation – July 2018 $IVC
Select Medical Holdings Corp Valuation – July 2018 $SEM
Chemed Corp Valuation – July 2018 $CHE
Inogen Inc Valuation – July 2018 $INGN
Tenet Healthcare Corp Valuation – June 2018 $THC
Universal Health Services Inc Valuation – June 2018 $UHS
Dentsply Sirona Inc Valuation – June 2018 $XRAY
IDEXX Laboratories Inc Valuation – June 2018 $IDXX
Hologic Inc Valuation – June 2018 $HOLX
Mettler-Toledo International Inc Valuation – June 2018 $MTD

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.

Invacare Corp Valuation – July 2018 $IVC

Company Profile (excerpt from Reuters): Invacare Corporation, incorporated on March 23, 1971, is a manufacturer and distributor for medical equipment used in non-acute care settings. The Company designs, manufactures and distributes medical devices help people to move, breathe, rest and perform essential hygiene. The Company’s geographical segments are Europe, North America and Asia/Pacific. The Company provides medical device solutions for congenital (cerebral palsy, muscular dystrophy and spina bifida), acquired (stroke, spinal cord injury, traumatic brain injury, post-acute recovery and pressure ulcers) and degenerative (amyotrophic lateral sclerosis, multiple sclerosis, chronic obstructive pulmonary disease (COPD), elderly and bariatric) ailments. The Company sells its products to home medical equipment providers with retail and e-commerce channels, residential living operators, distributors and government health services in the United States, Europe, Canada, New Zealand, Australia and Asia.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IVC – July 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $577,072,545 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.10 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 -370.62% Fail
6. Moderate PEmg Ratio PEmg < 20 -10.65 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.40 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.10 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.05 Pass
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 -$1.64
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$23.82
MG Value based on 0% Growth -$13.96
Market Implied Growth Rate -9.58%
Current Price $17.50
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $-0.26 in 2014 to an estimated $-1.64 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 Invacare Corporation revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.05 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was -10.65, which was below the industry average of 39.79, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.9.

Invacare Corporation 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) -$5.90
Graham Number $0.00
PEmg -10.65
Current Ratio 2.10
PB Ratio 1.40
Current Dividend $0.05
Dividend Yield 0.29%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $445,273,000
Total Current Liabilities $212,340,000
Long-Term Debt $244,366,000
Total Assets $1,067,282,000
Intangible Assets $440,678,000
Total Liabilities $644,610,000
Shares Outstanding (Diluted Average) 33,799,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.59
Dec2017 -$2.34
Dec2016 -$1.32
Dec2015 -$0.81
Dec2014 -$1.75
Dec2013 $1.03
Dec2012 $0.06
Dec2011 -$0.13
Dec2010 $0.78
Dec2009 $1.29
Dec2008 $1.09
Dec2007 $0.04
Dec2006 -$10.00
Dec2005 $1.51
Dec2004 $2.33
Dec2003 $2.25
Dec2002 $2.05
Dec2001 $1.11
Dec2000 $1.95
Dec1999 $1.36
Dec1998 $1.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.64
Dec2017 -$1.46
Dec2016 -$0.86
Dec2015 -$0.53
Dec2014 -$0.26
Dec2013 $0.52
Dec2012 $0.39
Dec2011 $0.57
Dec2010 $0.16
Dec2009 -$0.50
Dec2008 -$1.27
Dec2007 -$1.89
Dec2006 -$2.03
Dec2005 $1.92
Dec2004 $2.06
Dec2003 $1.87
Dec2002 $1.65

Recommended Reading:

Other ModernGraham posts about the company

Invacare Corporation Valuation – Initial Coverage $IVC

Other ModernGraham posts about related companies

Chemed Corp Valuation – July 2018 $CHE
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Tenet Healthcare Corp Valuation – June 2018 $THC
Universal Health Services Inc Valuation – June 2018 $UHS
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IDEXX Laboratories Inc Valuation – June 2018 $IDXX
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Mettler-Toledo International Inc Valuation – June 2018 $MTD
Envision Healthcare Corp Valuation – June 2018 $EVHC
DaVita Inc Valuation – June 2018 $DVA

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.

Select Medical Holdings Corp Valuation – July 2018 $SEM

Company Profile (excerpt from Reuters): Select Medical Holdings Corporation, incorporated on October 14, 2004, is an operator of specialty hospitals, outpatient rehabilitation clinics and occupational medicine centers in the United States. The Company’s segments include specialty hospitals, outpatient rehabilitation, Concentra and Other. As of December 31, 2016, it had operations in 46 states and the District of Columbia. As of December 31, 2016, it operated 123 specialty hospitals in 27 states, and 1,611 outpatient rehabilitation clinics in 37 states and the District of Columbia.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SEM – July 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,711,073,425 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.66 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 78.89% Pass
6. Moderate PEmg Ratio PEmg < 20 19.65 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.80 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.66 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.37 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 $1.06
MG Growth Estimate 3.54%
MG Value $16.54
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $15.39
MG Value based on 0% Growth $9.02
Market Implied Growth Rate 5.57%
Current Price $20.85
% of Intrinsic Value 126.09%

Select Medical Holdings 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, poor dividend history, and the high PB ratio. 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 $0.86 in 2014 to an estimated $1.06 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.57% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Select Medical Holdings Corporation revealed the company was trading above its Graham Number of $11.87. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 19.65, which was below the industry average of 39.79, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-30.52.

Select Medical Holdings Corporation 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) -$30.52
Graham Number $11.87
PEmg 19.65
Current Ratio 1.66
PB Ratio 2.80
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,041,341,000
Total Current Liabilities $625,731,000
Long-Term Debt $3,478,021,000
Total Assets $5,968,643,000
Intangible Assets $3,743,258,000
Total Liabilities $5,003,366,000
Shares Outstanding (Diluted Average) 129,816,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.02
Dec2017 $1.33
Dec2016 $0.87
Dec2015 $0.99
Dec2014 $0.91
Dec2013 $0.82
Dec2012 $1.05
Dec2011 $0.71
Dec2010 $0.48
Dec2009 $0.61
Dec2008 -$0.04
Dec2007 $0.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.06
Dec2017 $1.05
Dec2016 $0.92
Dec2015 $0.92
Dec2014 $0.86
Dec2013 $0.80
Dec2012 $0.71
Dec2011 $0.48
Dec2010 $0.32
Dec2009 $0.20
Dec2008 $0.00
Dec2007 $0.02

Recommended Reading:

Other ModernGraham posts about the company

Select Medical Holdings Corp Valuation – Initial Coverage $SEM

Other ModernGraham posts about related companies

Chemed Corp Valuation – July 2018 $CHE
Inogen Inc Valuation – July 2018 $INGN
Tenet Healthcare Corp Valuation – June 2018 $THC
Universal Health Services Inc Valuation – June 2018 $UHS
Dentsply Sirona Inc Valuation – June 2018 $XRAY
IDEXX Laboratories Inc Valuation – June 2018 $IDXX
Hologic Inc Valuation – June 2018 $HOLX
Mettler-Toledo International Inc Valuation – June 2018 $MTD
Envision Healthcare Corp Valuation – June 2018 $EVHC
DaVita Inc Valuation – June 2018 $DVA

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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