Juniper Networks Inc Valuation – January 2019 $JNPR

Company Profile (excerpt from Reuters): Juniper Networks, Inc. (Juniper Networks), incorporated on September 10, 1997, designs, develops and sells products and services for high-performance networks to enable customers to build networks for their businesses. The Company sells its products in over 100 countries in three geographic regions: Americas; Europe, the Middle East and Africa (EMEA), and Asia Pacific (APAC). The Company sells its high-performance network products and service offerings across routing, switching and security. Its products address network requirements for global service providers, cloud providers, national governments, research and public sector organizations, and other enterprises. The Company offers its customers various services, including technical support, professional services, education and training programs.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JNPR – January 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,709,181,730 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.47 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 82.41% Pass
6. Moderate PEmg Ratio PEmg < 20 23.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.12 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 2.47 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.70 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.22
MG Growth Estimate 15.00%
MG Value $46.94
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $17.68
MG Value based on 0% Growth $10.36
Market Implied Growth Rate 7.28%
Current Price $28.13
% of Intrinsic Value 59.92%

Juniper Networks, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor is only concerned with the lack of earnings stability 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 Undervalued after growing its EPSmg (normalized earnings) from $0.24 in 2014 to an estimated $1.22 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.28% 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 Juniper Networks, Inc. revealed the company was trading above its Graham Number of $21.54. The company pays a dividend of $0.4 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 23.07, which was below the industry average of 25.67, 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 $-0.45.

Juniper Networks, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.45
Graham Number $21.54
PEmg 23.07
Current Ratio 2.47
PB Ratio 2.12
Current Dividend $0.40
Dividend Yield 1.42%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $4,290,700,000
Total Current Liabilities $1,740,500,000
Long-Term Debt $1,788,600,000
Total Assets $9,100,300,000
Intangible Assets $3,209,300,000
Total Liabilities $4,449,400,000
Shares Outstanding (Diluted Average) 350,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.61
Dec2017 $0.80
Dec2016 $1.53
Dec2015 $1.59
Dec2014 -$0.73
Dec2013 $0.86
Dec2012 $0.35
Dec2011 $0.79
Dec2010 $1.15
Dec2009 $0.22
Dec2008 $0.93
Dec2007 $0.62
Dec2006 -$1.76
Dec2005 $0.58
Dec2004 $0.24
Dec2003 $0.07
Dec2002 -$0.34
Dec2001 -$0.04
Dec2000 $0.43
Dec1999 -$0.01
Dec1998 -$0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.22
Dec2017 $0.95
Dec2016 $0.93
Dec2015 $0.61
Dec2014 $0.24
Dec2013 $0.71
Dec2012 $0.65
Dec2011 $0.78
Dec2010 $0.59
Dec2009 $0.25
Dec2008 $0.22
Dec2007 -$0.11
Dec2006 -$0.40
Dec2005 $0.22
Dec2004 $0.05
Dec2003 -$0.02
Dec2002 -$0.05

Recommended Reading:

Other ModernGraham posts about the company

5 Companies for Enterprising Investors Near 52 Week Lows – April 2018
Juniper Networks Inc Valuation – March 2018 $JNPR
Juniper Networks Inc Valuation – June 2016 $JNPR
34 Companies in the Spotlight This Week – 2/7/15
Juniper Networks Inc. Annual Valuation – 2015 $JNPR

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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.

Juniper Networks Inc Valuation – March 2018 $JNPR

Company Profile (obtained from Marketwatch): Juniper Networks, Inc. engages in the design, development, and sale of products and services for high-performance networks. Its products address network requirements for global service provides, cloud providers, national governments, research and public sector organizations, and other enterprises. The company was founded by Pradeep S. Sindhu on February 6, 1996 and is headquartered in Sunnyvale, CA.

JNPR Chart

JNPR data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JNPR – 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 $9,823,121,353 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.41 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 77.78% Pass
6. Moderate PEmg Ratio PEmg < 20 22.09 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.11 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 2.41 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.87 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.19
MG Growth Estimate 15.00%
MG Value $45.66
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $17.20
MG Value based on 0% Growth $10.08
Market Implied Growth Rate 6.80%
Current Price $26.20
% of Intrinsic Value 57.38%

Juniper Networks, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor is only concerned with the lack of earnings stability 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 Undervalued after growing its EPSmg (normalized earnings) from $0.24 in 2014 to an estimated $1.19 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.8% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Juniper Networks, Inc. revealed the company was trading above its Graham Number of $20.86. The company pays a dividend of $0.4 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 22.09, which was below the industry average of 48.19, 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 $-2.57.

Juniper Networks, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.57
Graham Number $20.86
PEmg 22.09
Current Ratio 2.41
PB Ratio 2.11
Current Dividend $0.40
Dividend Yield 1.53%
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 $4,184,500,000
Total Current Liabilities $1,738,200,000
Long-Term Debt $2,136,300,000
Total Assets $9,833,800,000
Intangible Assets $3,224,300,000
Total Liabilities $5,152,900,000
Shares Outstanding (Diluted Average) 377,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.51
Dec2017 $0.80
Dec2016 $1.53
Dec2015 $1.59
Dec2014 -$0.73
Dec2013 $0.86
Dec2012 $0.35
Dec2011 $0.79
Dec2010 $1.15
Dec2009 $0.22
Dec2008 $0.93
Dec2007 $0.62
Dec2006 -$1.76
Dec2005 $0.58
Dec2004 $0.24
Dec2003 $0.07
Dec2002 -$0.34
Dec2001 -$0.04
Dec2000 $0.43
Dec1999 -$0.05
Dec1998 -$0.40

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.19
Dec2017 $0.95
Dec2016 $0.93
Dec2015 $0.61
Dec2014 $0.24
Dec2013 $0.71
Dec2012 $0.65
Dec2011 $0.78
Dec2010 $0.59
Dec2009 $0.25
Dec2008 $0.22
Dec2007 -$0.11
Dec2006 -$0.40
Dec2005 $0.22
Dec2004 $0.05
Dec2003 -$0.02
Dec2002 -$0.07

Recommended Reading:

Other ModernGraham posts about the company

18 Companies in the Spotlight This Week – 10/25/14
34 Companies in the Spotlight This Week – 2/7/15
Juniper Networks Inc. Annual Valuation – 2015 $JNPR
Juniper Networks Quarterly Stock Valuation – October 2014 $JNPR
10 Companies in the Spotlight This Week – 7/12/14

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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.

Juniper Networks Inc Valuation – June 2016 $JNPR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – March 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 Juniper Networks Inc (JNPR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Juniper Networks, Inc. designs, develops and sells products and services for high-performance networks to enable customers to build networks for their businesses. The Company sells its products in over 100 countries in three geographic regions: Americas; Europe, Middle East, and Africa (EMEA), and Asia Pacific (APAC). It sells its high-performance network products and service offerings across routing, switching and security. Its products address network requirements for global service providers, cloud environments, enterprises, governments and research and public sector organizations. In addition to its products, the Company offers its customers across the world services, including technical support, professional services, education and training programs. Its Junos Platform enables its customers to expand network software into the application space, deploy software clients to control delivery. The Junos Platform includes a range of products, such as Junos OS, Junos Space and Contrail.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of JNPR – June 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 $8,926,736,985 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.16 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 53.11% Pass
6. Moderate PEmg Ratio PEmg < 20 22.49 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.95 Pass
Score
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 2.16 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.21 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

JNPR value chart June 2016

EPSmg $1.03
MG Growth Estimate 8.88%
MG Value $27.12
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $14.97
MG Value based on 0% Growth $8.78
Market Implied Growth Rate 6.99%
Current Price $23.22
% of Intrinsic Value 85.63%

Juniper Networks, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.65 in 2012 to an estimated $1.03 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 6.99% 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 within a margin of safety relative to the price.

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

Stage 3: Information for Further Research

JNPR charts June 2016

Net Current Asset Value (NCAV) -$2.58
Graham Number $22.36
PEmg 22.49
Current Ratio 2.16
PB Ratio 1.95
Current Dividend $0.40
Dividend Yield 1.72%
Number of Consecutive Years of Dividend Growth 3

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $3,274,200,000
Total Current Liabilities $1,515,300,000
Long-Term Debt $2,131,800,000
Total Assets $8,917,700,000
Intangible Assets $3,018,600,000
Total Liabilities $4,279,600,000
Shares Outstanding (Diluted Average) 389,300,000

Earnings Per Share History

Next Fiscal Year Estimate $1.85
Dec2015 $1.59
Dec2014 -$0.73
Dec2013 $0.86
Dec2012 $0.35
Dec2011 $0.79
Dec2010 $1.15
Dec2009 $0.22
Dec2008 $0.93
Dec2007 $0.62
Dec2006 -$1.76
Dec2005 $0.59
Dec2004 $0.25
Dec2003 $0.10
Dec2002 -$0.34
Dec2001 -$0.04
Dec2000 $0.43
Dec1999 -$0.05
Dec1998 -$0.14

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.03
Dec2015 $0.61
Dec2014 $0.24
Dec2013 $0.71
Dec2012 $0.65
Dec2011 $0.78
Dec2010 $0.59
Dec2009 $0.25
Dec2008 $0.22
Dec2007 -$0.10
Dec2006 -$0.39
Dec2005 $0.24
Dec2004 $0.07
Dec2003 -$0.01
Dec2002 -$0.05
Dec2001 $0.07
Dec2000 $0.10

Recommended Reading:

Other ModernGraham posts about the company

34 Companies in the Spotlight This Week – 2/7/15
Juniper Networks Inc. Annual Valuation – 2015 $JNPR
18 Companies in the Spotlight This Week – 10/25/14
Juniper Networks Quarterly Stock Valuation – October 2014 $JNPR
10 Companies in the Spotlight This Week – 7/12/14

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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.

Juniper Networks Inc. Annual Valuation – 2015 $JNPR

145px-HP_New_Logo_2D.svgBenjamin 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 5 Most Undervalued Companies for the Defensive Investor – January 2015.  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 specific look at how Juniper Networks Inc. (JNPR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Juniper Networks, Inc. designs, develops, and sells products and services for high-performance networks, to customers. The Company’s routing, switching and security products address the networking requirements of global service providers, enterprises, governments, and research and public sector organizations. The Company does its business in three geographic regions: Americas, Europe, Middle East; Africa (EMEA), and Asia Pacific (APAC). The Company operates two segments: Platform Systems Division (PSD) and Software Solutions Division (SSD). Its PSD segment offers scalable routing and switching products that are used in service provider, enterprise, and public sector networks to control and direct network traffic between data centers, core, edge, aggregation, campus, Wide Area Networks (WANs), and consumer and business devices. Its SSD segment offers solutions focuses on network security and network services applications for both service providers and enterprise customers.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $22.73
MG Value $0.00
MG Opinion Overvalued
Value Based on 3% Growth $3.45
Value Based on 0% Growth $2.02
Market Implied Growth Rate 43.50%
Net Current Asset Value (NCAV) -$1.20
PEmg 95.50
Current Ratio 1.95
PB Ratio 1.97

Balance Sheet – December 2014

Current Assets $2,972,000,000
Current Liabilities $1,528,000,000
Total Debt $1,349,000,000
Total Assets $8,403,000,000
Intangible Assets $3,044,000,000
Total Liabilities $3,484,000,000
Outstanding Shares 426,100,000

Earnings Per Share

2014 -$0.73
2013 $0.86
2012 $0.35
2011 $0.79
2010 $1.15
2009 $0.22
2008 $0.93
2007 $0.62
2006 -$1.76
2005 $0.58
2004 $0.24

Earnings Per Share – ModernGraham

2014 $0.24
2013 $0.71
2012 $0.65
2011 $0.78
2010 $0.59
2009 $0.25

Dividend History

Conclusion:

Juniper Networks Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, short dividend history, and the high PEmg ratio.  The Enterprising Investor is concerned with the lack of earnings growth or stability over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $0.59 in 2010 to only an estimated $0.24 for 2014.  This level of growth does not support the market’s implied estimate of 43.5% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.

Be sure to check out previous ModernGraham valuations of Juniper Networks Inc. (JNPR) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Juniper Networks Inc. (JNPR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Juniper Networks Inc. (JNPR) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Juniper Networks Quarterly Stock Valuation – October 2014 $JNPR

220px-Juniper_Networks_logo.svg

Juniper Networks is an intriguing company worthy of consideration by Enterprising Investors, as the investor type’s only gripe with the company is the lack of dividends. However, the company should not attract Defensive Investors following the ModernGraham approach because of the poor earnings stability or growth over the last ten years, the high PEmg ratio and the lack of dividends. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

The company has grown its EPSmg (normalized earnings) from $0.59 in 2010 to an estimated $0.94 for 2014. This growth is in line with the market’s implied estimate of 6.13%, at least within a margin of safety of the figure. As a result, the ModernGraham valuation model churns out an estimate of intrinsic value falling within a margin of safety relative to the price indicating the company is fairly valued at the present time. Value investors are therefore encouraged to proceed with further research to determine whether Juniper Networks Inc. is suitable for their own individual portfolios.

Read the full valuation on Seeking Alpha!

JNPR Chart

JNPR data by YCharts

Juniper Networks Inc. Quarterly Valuation – July 2014 $JNPR

500px-Juniper_Networks_logo.svgBenjamin 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 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows.  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 specific look at how Juniper Networks Inc. (JNPR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Juniper Networks, Inc. (Juniper Networks) designs, develops, and sells products and services that together provide its customers with network infrastructure. It operates in two segments: Infrastructure and Service Layer Technologies (SLT). The Company’s Infrastructure segment primarily offers routing and switching products that are used to control and direct network traffic from the core, through the edge, aggregation, and the customer premise equipment level. Infrastructure products include its Internet protocol (IP) routing, carrier Ethernet routing portfolio, and Ethernet switching portfolio. Its SLT segment offers solutions that meet a range of its customers’ priorities, from protecting the users, applications and data on the network itself to providing network services across a distributed infrastructure. Effective September 13, 2013, Juniper Networks, Inc. acquired Contrail Networks Inc.JNPR Chart

JNPR data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $24.27
MG Value $19.65
MG Opinion Overvalued
Value Based on 3% Growth $12.63
Value Based on 0% Growth $7.41
Market Implied Growth Rate 9.68%
Net Current Asset Value (NCAV) $0.98
PEmg 27.85
Current Ratio 2.68
PB Ratio 1.82

Balance Sheet – 3/31/2014

Current Assets $3,879,800,000
Current Liabilities $1,446,300,000
Total Debt $1,348,900,000
Total Assets $9,723,600,000
Intangible Assets $4,195,900,000
Total Liabilities $3,414,100,000
Outstanding Shares 473,400,000

Earnings Per Share

2014 (estimate) $1.17
2013 $0.86
2012 $0.35
2011 $0.79
2010 $1.15
2009 $0.22
2008 $0.93
2007 $0.62
2006 -$1.76
2005 $0.59
2004 $0.25

Earnings Per Share – ModernGraham

2014 (estimate) $0.87
2013 $0.71
2012 $0.65
2011 $0.78
2010 $0.59
2009 $0.25

Conclusion:

Juniper Networks is suitable for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the insufficient earnings growth or stability over the last ten years, lack of dividend payments and the high PEmg ratio. The Enterprising Investor is concerned only by the lack of dividend payments. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities such as through a review of ModernGraham’s valuation of Cisco Systems (CSCO). From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.59 in 2010 to an estimated $0.87 for 2014. This level of demonstrated growth supports the market’s implied estimate of 9.68% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out the previous ModernGraham valuations of Juniper Networks Inc. (JNPR) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Juniper Networks Inc. (JNPR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Juniper Networks Inc. (JNPR) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Juniper Networks (JNPR) Quarterly Valuation – April 2014

500px-Juniper_Networks_logo.svgBenjamin 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.  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 specific look at how Juniper Networks fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Juniper Networks, Inc. (Juniper Networks) designs, develops, and sells products and services that together provide its customers with network infrastructure. It operates in two segments: Infrastructure and Service Layer Technologies (SLT). The Company’s Infrastructure segment primarily offers routing and switching products that are used to control and direct network traffic from the core, through the edge, aggregation, and the customer premise equipment level. Infrastructure products include its Internet protocol (IP) routing, carrier Ethernet routing portfolio, and Ethernet switching portfolio. Its SLT segment offers solutions that meet a range of its customers’ priorities, from protecting the users, applications and data on the network itself to providing network services across a distributed infrastructure. Effective September 13, 2013, Juniper Networks, Inc. acquired Contrail Networks Inc.

JNPR Chart

JNPR data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $25.41
MG Value $27.18
MG Opinion Fairly Valued
Value Based on 3% Growth $10.24
Value Based on 0% Growth $6.00
Market Implied Growth Rate 13.75%
Net Current Asset Value (NCAV) $1.37
PEmg 35.99
Current Ratio 2.57
PB Ratio 1.72

Balance Sheet – 12/31/2013

Current Assets $3,703,900,000
Current Liabilities $1,441,400,000
Total Debt $999,300,000
Total Assets $10,326,000,000
Intangible Assets $4,164,600,000
Total Liabilities $3,023,800,000
Outstanding Shares 495,200,000

Earnings Per Share

2013 $0.86
2012 $0.35
2011 $0.79
2010 $1.15
2009 $0.22
2008 $0.93
2007 $0.62
2006 -$1.76
2005 $0.59
2004 $0.25

Earnings Per Share – ModernGraham

2013 $0.71
2012 $0.65
2011 $0.78
2010 $0.59
2009 $0.25
2008 $0.22

Conclusion:

Juniper Networks is suitable for the Enterprising Investor but not the Defensive Investor.  For the Defensive Investor, the company has shown insufficient earnings stability or growth over the ten year historical period, does not pay dividends, and is trading at a high PEmg ratio.  For the Enterprising Investor, the only qualm is the lack of dividend payments.  As a result, Enterprising Investors should feel comfortable proceeding with further research into the company and comparing it to other opportunities through a review of ModernGraham’s valuation of Cisco (CSCO) and ModernGraham’s valuation of International Business Machines (IBM).  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.25 in 2009 to $0.71 in 2013.  This demonstrated level of growth supports the market’s implied estimate of 13.75% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Juniper Networks (JNPR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Juniper Networks (JNPR) or any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

CenturyLink Inc Valuation – April 2019 #CTL

Company Profile (excerpt from Reuters): CenturyLink, Inc., incorporated on May 7, 1968, is an integrated communications company. The Company is engaged in providing an array of communications services to its residential and business customers. The Company’s segments include Enterprise and Consumer . Its communications services include local and long-distance voice, broadband, Multi-Protocol Label Switching (MPLS), private line (including special access), Ethernet, colocation, hosting (including cloud hosting and managed hosting), data integration, video, network, public access, Voice over Internet Protocol (VoIP), information technology and other ancillary services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CTL – 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 $13,378,511,740 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.69 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 -70.46% Fail
6. Moderate PEmg Ratio PEmg < 20 20.27 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.67 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 0.69 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -20.69 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.61
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $8.85
MG Value based on 0% Growth $5.19
Market Implied Growth Rate 5.88%
Current Price $12.37
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.05 in 2015 to an estimated $0.61 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.88% 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 Centurylink Inc revealed the company was trading below its Graham Number of $20.62. The company pays a dividend of $2.16 per share, for a yield of 17.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.26, which was below the industry average of 97.99, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-43.67.

Centurylink 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) -$43.67
Graham Number $20.62
PEmg 20.26
Current Ratio 0.69
PB Ratio 0.67
Current Dividend $2.16
Dividend Yield 17.46%
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 $3,820,000,000
Total Current Liabilities $5,531,000,000
Long-Term Debt $35,409,000,000
Total Assets $70,256,000,000
Intangible Assets $38,810,000,000
Total Liabilities $50,428,000,000
Shares Outstanding (Diluted Average) 1,067,234,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.03
Dec2018 -$1.63
Dec2017 $2.21
Dec2016 $1.16
Dec2015 $1.58
Dec2014 $1.36
Dec2013 -$0.40
Dec2012 $1.25
Dec2011 $1.07
Dec2010 $3.13
Dec2009 $3.23
Dec2008 $3.52
Dec2007 $3.72
Dec2006 $3.07
Dec2005 $2.49
Dec2004 $2.41
Dec2003 $2.35
Dec2002 $5.61
Dec2001 $1.05
Dec2000 $0.90
Dec1999 $1.70

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.61
Dec2018 $0.58
Dec2017 $1.52
Dec2016 $1.11
Dec2015 $1.05
Dec2014 $0.95
Dec2013 $1.05
Dec2012 $1.99
Dec2011 $2.55
Dec2010 $3.31
Dec2009 $3.33
Dec2008 $3.27
Dec2007 $3.03
Dec2006 $2.86
Dec2005 $2.76
Dec2004 $2.75
Dec2003 $2.72

Recommended Reading:

Other ModernGraham posts about the company

CenturyLink Inc Valuation – June 2018 $CTL
CenturyLink Inc Valuation – July 2017 $CTL
CenturyLink Inc Valuation – February 2016 $CTL
27 Companies in the Spotlight This Week – 12/20/14
CenturyLink Inc. Annual Valuation – 2014 $CTL

Other ModernGraham posts about related companies

American Tower Corp Valuation – March 2019 #AMT
Charter Communications Inc Valuation – February 2019 $CHTR
DISH Network Corp Valuation – February 2019 $DISH
AT&T Inc Valuation – January 2019 $T
Juniper Networks Inc Valuation – January 2019 $JNPR
SBA Communications Corp Valuation – January 2019 $SBAC
Harris Corp Valuation – December 2018 $HRS
Verizon Communications Inc Valuation – November 2018 $VZ
Lumentum Holdings Inc Valuation – October 2018 $LITE
Windstream Holdings Inc Valuation – September 2018 $WIN

Disclaimer:

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

American Tower Corp Valuation – March 2019 #AMT

Company Profile (excerpt from Reuters): American Tower Corporation (ATC), incorporated on September 24, 1996, is a holding company. The Company operates as a real estate investment trust (REIT), which owns, operates and develops multitenant communications real estate. Its segments include U.S. property; Asia property; Europe, Middle East and Africa (EMEA) property; Latin America property, and Services. Its primary business is property operations, which include the leasing of space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities, and tenants in various other industries. Its U.S. property segment includes operations in the United States. Its Asia property segment includes operations in India. The EMEA property segment includes operations in Germany, Ghana, Nigeria, South Africa and Uganda. The Latin America property segment includes operations in Brazil, Chile, Colombia, Costa Rica, Mexico and Peru. Its services segment includes tower-related services in the United States, including site acquisition, zoning and permitting and structural analysis, which primarily supports its site leasing business, including the addition of tenants and equipment on its sites.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMT – 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 $83,140,713,988 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 Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 149.29% Pass
6. Moderate PEmg Ratio PEmg < 20 68.93 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 14.20 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 0.51 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.99 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.73
MG Growth Estimate 11.31%
MG Value $85.09
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $39.64
MG Value based on 0% Growth $23.24
Market Implied Growth Rate 30.22%
Current Price $188.48
% of Intrinsic Value 221.51%

American Tower Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, 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. 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 $1.56 in 2015 to an estimated $2.73 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 30.22% 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 American Tower Corp revealed the company was trading above its Graham Number of $30.04. The company pays a dividend of $3.15 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 68.94, which was below the industry average of 93.05, 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 $-55.63.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$55.63
Graham Number $30.04
PEmg 68.94
Current Ratio 0.51
PB Ratio 14.20
Current Dividend $3.15
Dividend Yield 1.67%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,385,100,000
Total Current Liabilities $4,689,900,000
Long-Term Debt $18,405,100,000
Total Assets $33,010,400,000
Intangible Assets $16,676,200,000
Total Liabilities $27,110,800,000
Shares Outstanding (Diluted Average) 444,436,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.31
Dec2018 $2.77
Dec2017 $2.67
Dec2016 $1.98
Dec2015 $1.41
Dec2014 $2.00
Dec2013 $1.38
Dec2012 $1.60
Dec2011 $0.99
Dec2010 $0.92
Dec2009 $0.61
Dec2008 $0.84
Dec2007 $0.13
Dec2006 $0.06
Dec2005 -$0.60
Dec2004 -$1.10
Dec2003 -$1.56
Dec2002 -$5.95
Dec2001 -$2.35
Dec2000 -$1.15
Dec1999 -$0.34

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.73
Dec2018 $2.35
Dec2017 $2.06
Dec2016 $1.73
Dec2015 $1.56
Dec2014 $1.55
Dec2013 $1.25
Dec2012 $1.12
Dec2011 $0.82
Dec2010 $0.66
Dec2009 $0.42
Dec2008 $0.17
Dec2007 -$0.31
Dec2006 -$0.97
Dec2005 -$1.76
Dec2004 -$2.36
Dec2003 -$2.75

Recommended Reading:

Other ModernGraham posts about the company

American Tower Corp Valuation – June 2018 $AMT
American Tower Corp Valuation – February 2017 $AMT
American Tower Corp Valuation – November 2015 Update $AMT
26 Companies in the Spotlight This Week – 11/22/14
American Tower Corporation Annual Valuation – 2014 $AMT

Other ModernGraham posts about related companies

Charter Communications Inc Valuation – February 2019 $CHTR
DISH Network Corp Valuation – February 2019 $DISH
AT&T Inc Valuation – January 2019 $T
Juniper Networks Inc Valuation – January 2019 $JNPR
SBA Communications Corp Valuation – January 2019 $SBAC
Harris Corp Valuation – December 2018 $HRS
Verizon Communications Inc Valuation – November 2018 $VZ
Lumentum Holdings Inc Valuation – October 2018 $LITE
Windstream Holdings Inc Valuation – September 2018 $WIN
Sierra Wireless Inc Valuation – September 2018 $TSE:SW

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.

Charter Communications Inc Valuation – February 2019 $CHTR

Company Profile (excerpt from Reuters): Charter Communications, Inc., incorporated on July 9, 2003, is a holding company. The Company is a cable operator in the United States and a broadband communications services company. The Company operates in cable services segment. As of December 31, 2016, the Company was engaged in providing video, Internet and voice services to approximately 26.2 million residential and business customers. In addition, it sells video and online advertising inventory to local, regional and national advertising customers and fiber-delivered communications and managed information technology (IT) solutions to enterprise customers. The Company also owns and operates regional sports networks and local sports, news and lifestyle channels and sells security and home management services to the residential marketplace.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CHTR – February 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $78,923,408,111 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.23 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 -562.00% Fail
6. Moderate PEmg Ratio PEmg < 20 30.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.82 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 0.23 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.43 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $11.58
MG Growth Estimate 15.00%
MG Value $445.83
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $167.91
MG Value based on 0% Growth $98.43
Market Implied Growth Rate 10.88%
Current Price $350.44
% of Intrinsic Value 78.60%

Charter Communications 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 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, 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 $-2.46 in 2015 to an estimated $11.58 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 10.88% 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 Charter Communications Inc revealed the company was trading above its Graham Number of $124.38. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 30.26, which was below the industry average of 92.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-430.86.

Charter Communications 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) -$430.86
Graham Number $124.38
PEmg 30.26
Current Ratio 0.23
PB Ratio 1.82
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,730,000,000
Total Current Liabilities $12,095,000,000
Long-Term Debt $69,537,000,000
Total Assets $146,130,000,000
Intangible Assets $106,914,000,000
Total Liabilities $101,858,000,000
Shares Outstanding (Diluted Average) 230,069,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.27
Dec2018 $5.22
Dec2017 $34.09
Dec2016 $15.94
Dec2015 -$2.68
Dec2014 -$1.88
Dec2013 -$1.83
Dec2012 -$3.37
Dec2011 -$3.75
Dec2010 -$2.31
Dec2009 $0.00
Dec2008 -$7.26
Dec2007 -$4.61
Dec2006 -$4.57
Dec2005 -$3.46
Dec2004 -$16.00
Dec2003 -$0.91
Dec2002 -$9.46
Dec2001 -$4.79
Dec2000 -$4.20
Dec1999 -$2.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $11.58
Dec2018 $13.54
Dec2017 $14.71
Dec2016 $3.75
Dec2015 -$2.46
Dec2014 -$2.44
Dec2013 -$2.57
Dec2012 -$3.07
Dec2011 -$3.14
Dec2010 -$3.14
Dec2009 -$3.70
Dec2008 -$6.09
Dec2007 -$5.64
Dec2006 -$6.40
Dec2005 -$7.18
Dec2004 -$8.39
Dec2003 -$4.51

Recommended Reading:

Other ModernGraham posts about the company

Charter Communications Inc Valuation – May 2018 $CHTR
Charter Communications Inc Valuation – Initial Coverage $CHTR

Other ModernGraham posts about related companies

DISH Network Corp Valuation – February 2019 $DISH
AT&T Inc Valuation – January 2019 $T
Juniper Networks Inc Valuation – January 2019 $JNPR
SBA Communications Corp Valuation – January 2019 $SBAC
Harris Corp Valuation – December 2018 $HRS
Verizon Communications Inc Valuation – November 2018 $VZ
Lumentum Holdings Inc Valuation – October 2018 $LITE
Windstream Holdings Inc Valuation – September 2018 $WIN
Sierra Wireless Inc Valuation – September 2018 $TSE:SW
Frontier Communications Corp Valuation – August 2018 $FTR

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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