Pinnacle West Capital Corp Valuation – March 2019 #PNW

Company Profile (excerpt from Reuters): Pinnacle West Capital Corporation, incorporated on February 20, 1985, is a holding company that operates through its subsidiaries. The Company operates through regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses and related activities, and includes electricity generation, transmission and distribution. The Company’s subsidiaries include Arizona Public Service Company (APS), which is a vertically-integrated electric utility that provides retail or wholesale electric service to the State of Arizona, with the exceptions of one-half of the Phoenix metropolitan area, the Tucson metropolitan area and Mohave County in northwestern Arizona.

PNW Chart

PNW data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PNW – 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 $10,824,428,063 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.56 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 39.65% Pass
6. Moderate PEmg Ratio PEmg < 20 21.58 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.03 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 0.56 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.41 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.47
MG Growth Estimate 3.33%
MG Value $67.81
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $64.84
MG Value based on 0% Growth $38.01
Market Implied Growth Rate 6.54%
Current Price $96.52
% of Intrinsic Value 142.35%

Pinnacle West Capital 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, high PEmg 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 Overvalued after growing its EPSmg (normalized earnings) from $3.66 in 2015 to an estimated $4.47 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.54% 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 Pinnacle West Capital Corporation revealed the company was trading above its Graham Number of $71.02. The company pays a dividend of $2.82 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.58, which was below the industry average of 23.71, 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 $-101.07.

Pinnacle West Capital 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) -$101.07
Graham Number $71.02
PEmg 21.58
Current Ratio 0.56
PB Ratio 2.03
Current Dividend $2.82
Dividend Yield 2.92%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $924,991,000
Total Current Liabilities $1,648,964,000
Long-Term Debt $4,638,232,000
Total Assets $17,664,202,000
Intangible Assets $262,902,000
Total Liabilities $12,315,497,000
Shares Outstanding (Diluted Average) 112,703,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.81
Dec2018 $4.54
Dec2017 $4.35
Dec2016 $3.95
Dec2015 $3.92
Dec2014 $3.58
Dec2013 $3.66
Dec2012 $3.45
Dec2011 $3.09
Dec2010 $3.27
Dec2009 $0.67
Dec2008 $2.40
Dec2007 $3.05
Dec2006 $3.27
Dec2005 $1.82
Dec2004 $2.66
Dec2003 $2.63
Dec2002 $1.76
Dec2001 $3.68
Dec2000 $3.56
Dec1999 $1.97

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.47
Dec2018 $4.22
Dec2017 $4.01
Dec2016 $3.80
Dec2015 $3.66
Dec2014 $3.49
Dec2013 $3.24
Dec2012 $2.88
Dec2011 $2.56
Dec2010 $2.37
Dec2009 $2.03
Dec2008 $2.69
Dec2007 $2.78
Dec2006 $2.58
Dec2005 $2.32
Dec2004 $2.67
Dec2003 $2.69

Recommended Reading:

Other ModernGraham posts about the company

Pinnacle West Capital Corp Valuation – June 2018 $PNW
Pinnacle West Corp Valuation – March 2017 $PNW
Pinnacle West Capital Corp Valuation – December 2015 Update $PNW
22 Companies in the Spotlight This Week – 11/29/14
Pinnacle West Capital Corporation Annual Valuation – 2014 $PNW

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Duke Energy Corp Valuation – March 2019 #DUK
Sempra Energy Valuation – March 2019 #SRE
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NextEra Energy Inc Valuation – February 2019 $NEE
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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.

Cincinnati Financial Corp Valuation – January 2019 $CINF

Company Profile (excerpt from Reuters): Cincinnati Financial Corporation, incorporated on March 4, 1992, is an insurance holding company. As of December 31, 2016, the Company was engaged in the business of property casualty insurance marketed through independent insurance agencies in 41 states. The Company operates through five segments: Commercial lines insurance, Personal lines insurance, Excess and surplus lines insurance, and Life insurance and Investments. The Company’s subsidiaries include The Cincinnati Insurance Company, CSU Producer Resources Inc. and CFC Investment Company. The Cincinnati Insurance Company owns four additional insurance subsidiaries. The Company’s market property casualty insurance group includes two of those subsidiaries: The Cincinnati Casualty Company and The Cincinnati Indemnity Company. This group writes a range of business, homeowner and auto policies. Other subsidiaries of The Cincinnati Insurance Company includes The Cincinnati Life Insurance Company, which provides life insurance, disability income policies and fixed annuities, and The Cincinnati Specialty Underwriters Insurance Company, which offers excess and surplus lines insurance products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CINF – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $39,190,000,000 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 151.17% Pass
5. Moderate PEmg Ratio PEmg < 20 16.06 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.52 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.82
MG Growth Estimate 11.84%
MG Value $155.08
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $69.89
MG Value based on 0% Growth $40.97
Market Implied Growth Rate 3.78%
Current Price $77.42
% of Intrinsic Value 49.92%

Cincinnati Financial Corporation qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. 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 $2.69 in 2014 to an estimated $4.82 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.78% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Cincinnati Financial Corporation revealed the company was trading above its Graham Number of $76.19. The company pays a dividend of $2 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.06, which was below the industry average of 32.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Cincinnati Financial Corporation fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $76.19
PEmg 16.06
PB Ratio 1.52
Dividend Yield 2.58%
TTM Dividend $2.00
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $830,000,000
Total Assets $22,480,000,000
Intangible Assets $0
Total Liabilities $14,146,000,000
Shares Outstanding (Diluted Average) 164,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.13
Dec2017 $6.29
Dec2016 $3.55
Dec2015 $3.83
Dec2014 $3.18
Dec2013 $3.12
Dec2012 $2.57
Dec2011 $1.01
Dec2010 $2.30
Dec2009 $2.65
Dec2008 $2.62
Dec2007 $4.97
Dec2006 $5.30
Dec2005 $3.40
Dec2004 $3.28
Dec2003 $2.10
Dec2002 $1.32
Dec2001 $1.08
Dec2000 $0.66
Dec1999 $1.38
Dec1998 $1.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.82
Dec2017 $4.44
Dec2016 $3.43
Dec2015 $3.16
Dec2014 $2.69
Dec2013 $2.41
Dec2012 $2.11
Dec2011 $2.16
Dec2010 $3.01
Dec2009 $3.51
Dec2008 $3.93
Dec2007 $4.33
Dec2006 $3.70
Dec2005 $2.68
Dec2004 $2.10
Dec2003 $1.45
Dec2002 $1.13

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – August 2018
Best Dividend Paying Stocks for Dividend Growth Investors – June 2018
Best Dividend Paying Stocks for Dividend Growth Investors – April 2018
5 Great Stocks This Week – 3/5/18
Cincinnati Financial Corp Valuation – February 2018 $CINF

Other ModernGraham posts about related companies

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Stewart Information Services Corp Valuation – August 2018 $STC
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CNO Financial Group Inc Valuation – August 2018 $CNO
Sun Life Financial Inc Valuation – August 2018 $TSE-SLF
American Financial Group Inc Valuation – August 2018 $AFG
Selective Insurance Group Inc Valuation – July 2018 $SIGI
Genworth Financial Inc Valuation – June 2018 $GNW
Prudential Financial Inc Valuation – June 2018 $PRU

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.

Summit Hotel Properties Inc Valuation – July 2018 $INN

Company Profile (excerpt from Reuters): Summit Hotel Properties, Inc., incorporated on June 30, 2010, is a real estate investment trust (REIT). The Company is focused primarily on owning premium-branded, select-service hotels in the Upscale segment of the United States lodging industry. The Company’s portfolio consisted of 83 hotels with a total of 12,242 guestrooms located in 26 states. The Company’s hotels are located in markets, such as business and corporate headquarters, retail centers, airports and tourist attractions. The Company’s portfolio is located in urban and suburban markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of INN – 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 $1,471,771,055 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.19 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 -806.25% Fail
6. Moderate PEmg Ratio PEmg < 20 18.79 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 2.19 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 12.52 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 $0.74
MG Growth Estimate 15.00%
MG Value $28.34
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $10.67
MG Value based on 0% Growth $6.26
Market Implied Growth Rate 5.15%
Current Price $13.83
% of Intrinsic Value 48.81%

Summit Hotel Properties Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.07 in 2014 to an estimated $0.74 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.15% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Summit Hotel Properties Inc revealed the company was trading above its Graham Number of $11.37. The company pays a dividend of $0.67 per share, for a yield of 4.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.79, which was below the industry average of 49.54, 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 $-8.64.

Summit Hotel Properties Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.64
Graham Number $11.37
PEmg 18.79
Current Ratio 2.19
PB Ratio 1.22
Current Dividend $0.67
Dividend Yield 4.87%
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 3/1/2018
Total Current Assets $143,614,000
Total Current Liabilities $65,689,000
Long-Term Debt $975,316,000
Total Assets $2,221,878,000
Intangible Assets $22,764,000
Total Liabilities $1,041,005,000
Shares Outstanding (Diluted Average) 103,899,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.47
Dec2017 $0.79
Dec2016 $1.00
Dec2015 $1.24
Dec2014 $0.05
Dec2013 -$0.12
Dec2012 -$0.17
Dec2011 -$0.12
Dec2010 -$0.11
Dec2009 -$0.09

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.74
Dec2017 $0.78
Dec2016 $0.65
Dec2015 $0.37
Dec2014 -$0.07
Dec2013 -$0.13
Dec2012 -$0.12
Dec2011 -$0.09
Dec2010 -$0.06
Dec2009 -$0.03

Recommended Reading:

Other ModernGraham posts about the company

Summit Hotel Properties Inc Valuation – Initial Coverage $INN

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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.

Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE

Company Profile (excerpt from Reuters): Innergex Renewable Energy Inc is a Canada-based renewable power producer. The Company is a developer, owner and operator of renewable power-generating facilities with a focus on hydroelectric, wind power and solar photovoltaic (PV) projects. It operates through four segments: hydroelectric generation, wind power generation, solar power generation and site development. Through its hydroelectric, wind power and solar power generation segments, it sells electricity produced by its hydroelectric, wind farm and solar facilities to publicly owned utilities or other creditworthy counterparties. Through its site development segment, it analyzes sites and develops hydroelectric, wind and solar facilities up to the commissioning stage. Its portfolio of assets consists of interests in approximately three groups of power-generating project. It has over 30 facilities with a net installed capacity of over 710 megawatts. The Company owns interests in approximately 30 hydroelectric facilities.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-INE – 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 $1,791,711,025 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.81 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 -167.57% Fail
6. Moderate PEmg Ratio PEmg < 20 583.29 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.57 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 0.81 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -64.21 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.02
MG Growth Estimate 15.00%
MG Value $0.90
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $0.34
MG Value based on 0% Growth $0.20
Market Implied Growth Rate 287.39%
Current Price $13.61
% of Intrinsic Value 1515.03%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.24 in 2014 to an estimated $0.02 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 287.39% 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 Innergex Renewable Energy Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.66 per share, for a yield of 4.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 583.29, which was above the industry average of 22.48. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-34.25.

Innergex Renewable Energy 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) -$34.25
Graham Number $0.00
PEmg 583.29
Current Ratio 0.81
PB Ratio 1.57
Current Dividend $0.66
Dividend Yield 4.85%
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 3/1/2018
Total Current Assets $240,073,000
Total Current Liabilities $294,926,000
Long-Term Debt $3,522,017,000
Total Assets $5,533,528,000
Intangible Assets $958,711,000
Total Liabilities $4,463,566,000
Shares Outstanding (Diluted Average) 123,312,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate
Dec2017 $0.22
Dec2016 $0.28
Dec2015 -$0.37
Dec2014 -$0.63
Dec2013 $0.43
Dec2012 $0.03
Dec2011 -$0.59
Dec2010 -$1.13
Dec2009 $0.61
Dec2008 -$1.52
Dec2007 $1.64
Dec2006 $0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.02
Dec2017 $0.02
Dec2016 -$0.07
Dec2015 -$0.24
Dec2014 -$0.24
Dec2013 -$0.08
Dec2012 -$0.39
Dec2011 -$0.47
Dec2010 -$0.29
Dec2009 $0.14
Dec2008 -$0.04
Dec2007 $0.58
Dec2006 $0.04

Recommended Reading:

Other ModernGraham posts about the company

Innergex Renewable Energy Inc Valuation – Initial Coverage $TSE:INE

Other ModernGraham posts about related companies

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PPL Corp Valuation – June 2018 $PPL
Entergy Corp Valuation – June 2018 $ETR
Pinnacle West Capital Corp Valuation – June 2018 $PNW
NiSource Inc Valuation – June 2018 $NI
American Electric Power Co Valuation – June 2018 $AEP
American Water Works Co Inc Valuation – June 2018 $AWK
Alliant Energy Corp Valuation – June 2018 $LNT

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.

Pinnacle West Capital Corp Valuation – June 2018 $PNW

Company Profile (excerpt from Reuters): Pinnacle West Capital Corporation, incorporated on February 20, 1985, is a holding company that operates through its subsidiaries. The Company operates through regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses and related activities, and includes electricity generation, transmission and distribution. The Company’s subsidiaries include Arizona Public Service Company (APS), which is a vertically-integrated electric utility that provides retail or wholesale electric service to the State of Arizona, with the exceptions of one-half of the Phoenix metropolitan area, the Tucson metropolitan area and Mohave County in northwestern Arizona.

PNW Chart

PNW data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PNW – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,763,247,982 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.51 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 80.65% Pass
6. Moderate PEmg Ratio PEmg < 20 18.74 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.71 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 0.51 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -4.68 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.18
MG Growth Estimate 2.96%
MG Value $60.25
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $60.58
MG Value based on 0% Growth $35.51
Market Implied Growth Rate 5.12%
Current Price $78.29
% of Intrinsic Value 129.94%

Pinnacle West Capital Corporation 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 Overvalued after growing its EPSmg (normalized earnings) from $3.49 in 2014 to an estimated $4.18 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.12% 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 Pinnacle West Capital Corporation revealed the company was trading above its Graham Number of $66.6. The company pays a dividend of $2.66 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.74, which was below the industry average of 22.69, 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 $-98.11.

Pinnacle West Capital Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$98.11
Graham Number $66.60
PEmg 18.74
Current Ratio 0.51
PB Ratio 1.71
Current Dividend $2.66
Dividend Yield 3.40%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $957,404,000
Total Current Liabilities $1,874,391,000
Long-Term Debt $4,290,533,000
Total Assets $17,148,306,000
Intangible Assets $262,523,000
Total Liabilities $11,994,635,000
Shares Outstanding (Diluted Average) 112,493,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.40
Dec2017 $4.35
Dec2016 $3.95
Dec2015 $3.92
Dec2014 $3.58
Dec2013 $3.66
Dec2012 $3.45
Dec2011 $3.09
Dec2010 $3.27
Dec2009 $0.67
Dec2008 $2.40
Dec2007 $3.05
Dec2006 $3.27
Dec2005 $1.82
Dec2004 $2.66
Dec2003 $2.63
Dec2002 $1.76
Dec2001 $3.68
Dec2000 $3.56
Dec1999 $1.97
Dec1998 $2.85

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.18
Dec2017 $4.01
Dec2016 $3.80
Dec2015 $3.66
Dec2014 $3.49
Dec2013 $3.24
Dec2012 $2.88
Dec2011 $2.56
Dec2010 $2.37
Dec2009 $2.03
Dec2008 $2.69
Dec2007 $2.78
Dec2006 $2.58
Dec2005 $2.32
Dec2004 $2.67
Dec2003 $2.69
Dec2002 $2.73

Recommended Reading:

Other ModernGraham posts about the company

Pinnacle West Corp Valuation – March 2017 $PNW
Pinnacle West Capital Corp Valuation – December 2015 Update $PNW
22 Companies in the Spotlight This Week – 11/29/14
Pinnacle West Capital Corporation Annual Valuation – 2014 $PNW

Other ModernGraham posts about related companies

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American Water Works Co Inc Valuation – June 2018 $AWK
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Duke Energy Corp Valuation – May 2018 $DUK
Sempra Energy Valuation – May 2018 $SRE
Ameren Corp Valuation – May 2018 $AEE
NextEra Energy Inc Valuation – May 2018 $NEE
PG&E Corp Valuation – April 2018 $PCG

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.

Innospec Inc Valuation – April 2018 $IOSP

Company Profile (excerpt from Reuters): Innospec Inc., incorporated on January 13, 2006, is a specialty chemicals company. The Company is engaged in developing, manufacturing, blending, marketing and supplying of specialty chemicals for use as fuel additives and ingredients for personal care, home care, agrochemical, mining and other applications and oilfield chemicals. The Company operates through four business segments: Fuel Specialties, Performance Chemicals, Oilfield Services and Octane Additives. Its Oilfield Services business supplies drilling, completion and production chemicals. Its other specialty chemicals provide technology-based solutions. Its Octane Additives business manufactures a fuel additive for use in automotive gasoline and provides services in respect of environmental remediation.

IOSP Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of IOSP – April 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,647,087,682 Fail
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 97.09% Pass
6. Moderate PEmg Ratio PEmg < 20 18.63 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.07 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.15 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.68 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 $3.64
MG Growth Estimate 3.22%
MG Value $54.42
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $52.85
MG Value based on 0% Growth $30.98
Market Implied Growth Rate 5.06%
Current Price $67.90
% of Intrinsic Value 124.78%

Innospec Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, poor dividend history. 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 $3 in 2014 to an estimated $3.64 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.06% 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 Innospec Inc. revealed the company was trading above its Graham Number of $56.41. The company pays a dividend of $0.77 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 18.63, which was below the industry average of 29.39, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.26.

Innospec 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) -$2.26
Graham Number $56.41
PEmg 18.63
Current Ratio 2.15
PB Ratio 2.07
Current Dividend $0.77
Dividend Yield 1.13%
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 12/1/2017
Total Current Assets $561,500,000
Total Current Liabilities $261,600,000
Long-Term Debt $202,600,000
Total Assets $1,410,200,000
Intangible Assets $525,100,000
Total Liabilities $616,300,000
Shares Outstanding (Diluted Average) 24,237,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.30
Dec2017 $2.52
Dec2016 $3.33
Dec2015 $4.86
Dec2014 $3.38
Dec2013 $3.22
Dec2012 $2.81
Dec2011 $1.92
Dec2010 $2.97
Dec2009 $0.26
Dec2008 $0.51
Dec2007 $1.19
Dec2006 $0.45
Dec2005 -$5.00
Dec2004 $0.24
Dec2003 $2.06
Dec2002 $2.08
Dec2001 $0.23
Dec2000 $0.71
Dec1999 $1.53
Dec1998 $2.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.64
Dec2017 $3.37
Dec2016 $3.70
Dec2015 $3.67
Dec2014 $3.00
Dec2013 $2.62
Dec2012 $2.11
Dec2011 $1.63
Dec2010 $1.35
Dec2009 $0.19
Dec2008 -$0.07
Dec2007 -$0.31
Dec2006 -$0.72
Dec2005 -$0.90
Dec2004 $1.12
Dec2003 $1.48
Dec2002 $1.26

Recommended Reading:

Other ModernGraham posts about the company

10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017
8 Best Stocks for Value Investors This Week – 12/27/16
Innospec Inc Valuation – Initial Coverage $IOSP

Other ModernGraham posts about related companies

Innophos Holdings Inc Valuation – March 2018 $IPHS
Olin Corp Valuation – March 2018 $OLN
A Schulman Inc Valuation – March 2018 $SHLM
FMC Corp Valuation – March 2018 $FMC
Compass Minerals International Inc Valuation – March 2018 $CMP
Ashland Global Holdings Inc Valuation – March 2018 $ASH
Air Products & Chemicals Inc Valuation – March 2018 $APD
Koppers Holdings Inc Valuation – March 2018 $KOP
Kraton Corp Valuation – March 2018 $KRA
Quaker Chemical Corp Valuation – March 2018 $KWR

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.

Innophos Holdings Inc Valuation – March 2018 $IPHS

Company Profile (obtained from Marketwatch): Innophos Holdings, Inc. engages in the production of specialty ingredients solutions for the food, health, nutrition, and industrial markets. It operates through three segments: Specialty Phosphates U.S. & Canada, Specialty Phosphates Mexico, and GTSP & Other. The Specialty Phosphates are categorized into Specialty Ingredients which includes specialty phosphate salts, specialty phosphoric acids, and other mineral, enzyme and botanical-based specialty ingredients; Food and Technical Grade Purified Phosphoric Acid (PPA) refers to high purity forms of PPA used in fertilizer production; and Sodium Tripolyphosphate and Detergent Grade PPA which are used in cleaners, and automatic dishwashing and consumer laundry detergents. The GTSP & Other segment comprises fertilizer co-products Granular Triple Super Phosphate, and other non-specialty phosphates products, which is used agricultural sector to increase crop yeilds. Innophos Holdings was founded on August15, 2004 and is headquartered in Cranbury, NJ.

IPHS Chart

IPHS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IPHS – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $831,935,072 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.64 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 -27.52% Fail
6. Moderate PEmg Ratio PEmg < 20 20.56 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 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 2.64 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.66 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 $2.07
MG Growth Estimate -4.15%
MG Value $0.41
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $30.04
MG Value based on 0% Growth $17.61
Market Implied Growth Rate 6.03%
Current Price $42.60
% of Intrinsic Value 10338.87%

Innophos Holdings, 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 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 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 $2.86 in 2014 to an estimated $2.07 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.03% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Innophos Holdings, Inc. revealed the company was trading above its Graham Number of $32.51. The company pays a dividend of $1.92 per share, for a yield of 4.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.56, which was below the industry average of 31.55, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.63.

Innophos Holdings, 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) -$7.63
Graham Number $32.51
PEmg 20.56
Current Ratio 2.64
PB Ratio 2.53
Current Dividend $1.92
Dividend Yield 4.51%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $300,256,000
Total Current Liabilities $113,533,000
Long-Term Debt $310,005,000
Total Assets $785,169,000
Intangible Assets $257,069,000
Total Liabilities $451,610,000
Shares Outstanding (Diluted Average) 19,847,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.75
Dec2017 $1.13
Dec2016 $2.44
Dec2015 $1.29
Dec2014 $2.91
Dec2013 $2.21
Dec2012 $3.30
Dec2011 $3.83
Dec2010 $2.02
Dec2009 $2.87
Dec2008 $9.54
Dec2007 -$0.27
Dec2006 -$1.01
Dec2005 -$0.95
Dec2004 -$0.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.07
Dec2017 $1.82
Dec2016 $2.25
Dec2015 $2.34
Dec2014 $2.86
Dec2013 $2.84
Dec2012 $3.54
Dec2011 $3.64
Dec2010 $3.24
Dec2009 $3.25
Dec2008 $2.78
Dec2007 -$0.55
Dec2006 -$0.59
Dec2005 -$0.32
Dec2004 -$0.01

Recommended Reading:

Other ModernGraham posts about the company

Innophos Holdings Inc Valuation – Initial Coverage $IPHS

Other ModernGraham posts about related companies

Praxair Inc Valuation – March 2018 $PX
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PolyOne Corp Valuation – March 2018 $POL
Green Plains Inc Valuation – March 2018 $GPRE
Eastman Chemical Co Valuation – March 2018 $EMN
LyondellBasell Industries NV Valuation – March 2018 $LYB
DowDuPont Inc Valuation – February 2018 $DWDP
Green Plains Inc Valuation – Initial Coverage $GPRE
PolyOne Corp Valuation – Initial Coverage $POL
Ingevity Corp Valuation – Initial Coverage $NGVT

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.

Cincinnati Financial Corp Valuation – February 2018 $CINF

Company Profile (obtained from Marketwatch): Cincinnati Financial Corp. engages in the provision of property casualty and life insurance services. It operates its business through following segments: Commercial Lines Insurance; Personal Lines Insurance; Excess and Surplus Lines Insurance; Life Insurance; and Investments. The Commercial Lines Insurance segment includes commercial casualty, commercial property, commercial auto, worker’s compensation, and other commercial lines insurance. The Personal Lines Insurance segment manages personal auto, homeowner, and other personal lines insurance. The Excess and Surplus Lines Insurance segment covers business risks such as the nature of the business or its claim history, that are difficult to profitably insure in the standard commercial lines market. The Life Insurance segment offers term life insurance, universal life insurance, worksite products, and whole life insurance services. The Investment segment generates revenue from the fixed-maturity investment and equity investment. The company was founded by John Jack Schiff Sr., Robert Cleveland Schiff, and Harry M. Turner in 1968 and is headquartered in Fairfield, OH.

CINF Chart

CINF data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CINF – February 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,231,884,533 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 115.44% Pass
5. Moderate PEmg Ratio PEmg < 20 18.15 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.50 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.11
MG Growth Estimate 7.88%
MG Value $99.74
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $59.60
MG Value based on 0% Growth $34.94
Market Implied Growth Rate 4.82%
Current Price $74.59
% of Intrinsic Value 74.78%

Cincinnati Financial Corporation qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. 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 $2.69 in 2014 to an estimated $4.11 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.82% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Cincinnati Financial Corporation revealed the company was trading above its Graham Number of $58.26. The company pays a dividend of $2 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 18.15, which was below the industry average of 20.16, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Cincinnati Financial Corporation performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $58.26
PEmg 18.15
PB Ratio 1.50
Dividend Yield 2.68%
TTM Dividend $2.00
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $851,000,000
Total Assets $21,843,000,000
Intangible Assets $0
Total Liabilities $13,600,000,000
Shares Outstanding (Diluted Average) 165,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.00
Dec2017 $6.29
Dec2016 $3.55
Dec2015 $3.83
Dec2014 $3.18
Dec2013 $3.12
Dec2012 $2.57
Dec2011 $1.01
Dec2010 $2.30
Dec2009 $2.65
Dec2008 $2.62
Dec2007 $4.97
Dec2006 $5.30
Dec2005 $3.40
Dec2004 $3.28
Dec2003 $2.10
Dec2002 $1.32
Dec2001 $1.08
Dec2000 $0.66
Dec1999 $1.38
Dec1998 $1.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.11
Dec2017 $4.44
Dec2016 $3.43
Dec2015 $3.16
Dec2014 $2.69
Dec2013 $2.41
Dec2012 $2.11
Dec2011 $2.16
Dec2010 $3.01
Dec2009 $3.51
Dec2008 $3.93
Dec2007 $4.33
Dec2006 $3.70
Dec2005 $2.68
Dec2004 $2.10
Dec2003 $1.45
Dec2002 $1.13

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – August 2017
Best Dividend Paying Stocks for Dividend Growth Investors – March 2017
Best Dividend Paying Stocks for Dividend Growth Investors – February 2017
Best Dividend Paying Stocks for Dividend Growth Investors – January 2017
Best Dividend Paying Stocks for Dividend Growth Investors – December 2016

Other ModernGraham posts about related companies

Aon PLC Valuation – February 2018 $AON
Travelers Companies Inc Valuation – February 2018 $TRV
Hanover Insurance Group Valuation – Initial Coverage $THG
Prudential Financial Inc Valuation – July 2017 $PRU
Assurant Inc Valuation – March 2017 $AIZ
American International Group Inc Valuation – March 2017 $AIG
Torchmark Corporation Valuation – March 2017 $TMK
Humana Inc Valuation – Initial Coverage $HUM
Chubb Ltd Valuation – March 2017 $CB
Stewart Information Services Corp Valuation – Initial Coverage $STC

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.

Pinnacle West Corp Valuation – March 2017 $PNW

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

Company Profile (obtained from Google Finance): Pinnacle West Capital Corporation is a holding company that operates through its subsidiaries. The Company operates through regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses and related activities, and includes electricity generation, transmission and distribution. It owned and leased 6,236 megawatt (MW) of regulated generation capacity and the Company held a mix of both long-term and short-term purchased power agreements for additional capacity, including agreements for the purchase of renewable energy, as of December 31, 2016. Its subsidiaries include Arizona Public Service Company, which is a vertically-integrated electric utility that provides retail or wholesale electric service to the State of Arizona, with the exceptions of about one-half of the Phoenix metropolitan area, the Tucson metropolitan area and Mohave County in northwestern Arizona.

PNW Chart

PNW 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 PNW – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,225,828,808 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.64 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 90.22% Pass
6. Moderate PEmg Ratio PEmg < 20 21.04 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.94 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 0.64 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -8.54 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 $3.96
MG Growth Estimate 3.32%
MG Value $59.88
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $57.35
MG Value based on 0% Growth $33.62
Market Implied Growth Rate 6.27%
Current Price $83.23
% of Intrinsic Value 139.00%

Pinnacle West Capital 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, high PEmg 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 Overvalued after growing its EPSmg (normalized earnings) from $3.24 in 2013 to an estimated $3.96 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.27% 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 Pinnacle West Capital Corporation revealed the company was trading above its Graham Number of $63.78. The company pays a dividend of $2.53 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.04, which was below the industry average of 23.36, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-92.63.

Pinnacle West Capital 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) -$92.63
Graham Number $63.78
PEmg 21.04
Current Ratio 0.64
PB Ratio 1.94
Current Dividend $2.53
Dividend Yield 3.04%
Number of Consecutive Years of Dividend Growth 6

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ModernGraham tagged articles Morningstar
Google Finance MSN Money
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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $822,219,000
Total Current Liabilities $1,292,946,000
Long-Term Debt $4,021,785,000
Total Assets $16,004,253,000
Intangible Assets $90,022,000
Total Liabilities $11,200,631,000
Shares Outstanding (Diluted Average) 112,046,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.19
Dec2016 $3.95
Dec2015 $3.92
Dec2014 $3.58
Dec2013 $3.66
Dec2012 $3.45
Dec2011 $3.09
Dec2010 $3.27
Dec2009 $0.67
Dec2008 $2.40
Dec2007 $3.05
Dec2006 $3.27
Dec2005 $1.82
Dec2004 $2.66
Dec2003 $2.63
Dec2002 $1.76
Dec2001 $3.68
Dec2000 $3.56
Dec1999 $1.97
Dec1998 $2.85
Dec1997 $2.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.96
Dec2016 $3.80
Dec2015 $3.66
Dec2014 $3.49
Dec2013 $3.24
Dec2012 $2.88
Dec2011 $2.56
Dec2010 $2.37
Dec2009 $2.03
Dec2008 $2.69
Dec2007 $2.78
Dec2006 $2.58
Dec2005 $2.32
Dec2004 $2.67
Dec2003 $2.69
Dec2002 $2.73
Dec2001 $3.13

Recommended Reading:

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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.

Innophos Holdings Inc Valuation – Initial Coverage $IPHS

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

Company Profile (obtained from Google Finance): Innophos Holdings, Inc. is a producer of nutritional specialty ingredients with applications in food, beverage, dietary supplements, pharmaceutical, oral care and industrial end markets. The Company also provides bioactive mineral and nutritional ingredients. Its segments include Specialty Phosphates US & Canada, Specialty Phosphates Mexico, and GTSP & Other. The Specialty Phosphates US & Canada segment and Specialty Phosphates Mexico segment comprises product lines, such as Specialty Ingredients; Food and Technical Grade Purified Phosphoric Acid (PPA), and Technical Grade Sodium Tripolyphosphate (STPP) & Detergent Grade PPA. The GTSP & Other segment includes fertilizer co-product Granular Triple Super Phosphate (GTSP) and other non-specialty phosphate products. It produces a range of botanical, enzyme and mineral-based ingredients through various production processes, including spray drying, roller compactions, grinding, wet granulations, solvent extractions and custom blending.

IPHS Chart

IPHS 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 IPHS – December 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,020,098,738 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.22 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 -45.39% Fail
6. Moderate PEmg Ratio PEmg < 20 23.55 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.02 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 3.22 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.04 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 Fail

Stage 2: Determination of Intrinsic Value

EPSmg $2.25
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $32.63
MG Value based on 0% Growth $19.13
Market Implied Growth Rate 7.52%
Current Price $53.00
% of Intrinsic Value N/A

Innophos Holdings, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. 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 seeing its EPSmg (normalized earnings) decline from $3.54 in 2012 to an estimated $2.25 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.53% 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 Innophos Holdings, Inc. revealed the company was trading above its Graham Number of $31.17. The company pays a dividend of $1.92 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.56, which was above the industry average of 22.46. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.33.

Innophos Holdings, 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) -$1.33
Graham Number $31.17
PEmg 23.56
Current Ratio 3.22
PB Ratio 3.02
Current Dividend $1.92
Dividend Yield 3.62%
Number of Consecutive Years of Dividend Growth 6

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $273,370,000
Total Current Liabilities $84,863,000
Long-Term Debt $195,170,000
Total Assets $644,813,000
Intangible Assets $132,328,000
Total Liabilities $299,444,000
Shares Outstanding (Diluted Average) 19,670,000

Earnings Per Share History

Next Fiscal Year Estimate $2.43
Dec2015 $1.29
Dec2014 $2.91
Dec2013 $2.21
Dec2012 $3.30
Dec2011 $3.83
Dec2010 $2.02
Dec2009 $2.87
Dec2008 $9.54
Dec2007 -$0.27
Dec2006 -$1.01
Dec2005 -$0.95
Dec2004 -$0.02

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.25
Dec2015 $2.34
Dec2014 $2.86
Dec2013 $2.84
Dec2012 $3.54
Dec2011 $3.64
Dec2010 $3.24
Dec2009 $3.25
Dec2008 $2.78
Dec2007 -$0.55
Dec2006 -$0.59
Dec2005 -$0.32
Dec2004 -$0.01

Recommended Reading:

Other ModernGraham posts about the company

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

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Disclaimer:

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

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