Keysight Technologies Inc Valuation – April 2019 #KEYS

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KEYS – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $16,693,423,773 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.82 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 17200.00% Pass
6. Moderate PEmg Ratio PEmg < 20 43.15 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.35 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.82 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.13 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.06
MG Growth Estimate 3.98%
MG Value $33.86
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $29.84
MG Value based on 0% Growth $17.49
Market Implied Growth Rate 17.32%
Current Price $88.80
% of Intrinsic Value 262.22%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.63 in 2015 to an estimated $2.06 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.32% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Keysight Technologies Inc revealed the company was trading above its Graham Number of $33.26. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 43.15, which was above the industry average of 35.4. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.08.

Keysight Technologies Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$4.08
Graham Number $33.26
PEmg 43.15
Current Ratio 1.82
PB Ratio 6.35
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $2,544,000,000
Total Current Liabilities $1,400,000,000
Long-Term Debt $1,291,000,000
Total Assets $5,978,000,000
Intangible Assets $1,775,000,000
Total Liabilities $3,320,000,000
Shares Outstanding (Diluted Average) 190,000,000

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

KeyCorp Valuation – January 2019 $KEY

Company Profile (excerpt from Reuters): KeyCorp, incorporated on December 31, 1958, is a bank holding company. The Company is a bank-based financial services company. The Company operates through its subsidiary, KeyBank National Association (KeyBank), which is engaged in providing banking services. Through KeyBank and other subsidiaries, the Company provides a range of retail and commercial banking, commercial leasing, investment management, consumer finance, commercial mortgage servicing and special servicing, and investment banking products and services to individual, corporate and institutional clients. The Company’s segments include Key Community Bank and Key Corporate Bank. Its Other Segments consist of corporate treasury, principal investing unit and various exit portfolios.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KEY – 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 $16,511,098,839 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
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 -455.34% Fail
5. Moderate PEmg Ratio PEmg < 20 12.83 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.10 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 $1.24
MG Growth Estimate 5.46%
MG Value $24.16
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $18.04
MG Value based on 0% Growth $10.57
Market Implied Growth Rate 2.16%
Current Price $15.96
% of Intrinsic Value 66.06%

KeyCorp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.91 in 2014 to an estimated $1.24 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.16% 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 KeyCorp revealed the company was trading below its Graham Number of $22.58. The company pays a dividend of $0.38 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.83, which was below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

KeyCorp fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $22.58
PEmg 12.83
PB Ratio 1.10
Dividend Yield 2.38%
TTM Dividend $0.38
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $13,849,000,000
Total Assets $138,805,000,000
Intangible Assets $2,854,000,000
Total Liabilities $123,595,000,000
Shares Outstanding (Diluted Average) 1,049,976,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.73
Dec2017 $1.13
Dec2016 $0.80
Dec2015 $1.05
Dec2014 $0.99
Dec2013 $0.97
Dec2012 $0.89
Dec2011 $0.87
Dec2010 $0.44
Dec2009 -$2.34
Dec2008 -$3.36
Dec2007 $2.32
Dec2006 $2.57
Dec2005 $2.73
Dec2004 $2.30
Dec2003 $2.12
Dec2002 $2.27
Dec2001 $0.31
Dec2000 $2.30
Dec1999 $2.45
Dec1998 $2.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.24
Dec2017 $1.00
Dec2016 $0.93
Dec2015 $0.98
Dec2014 $0.91
Dec2013 $0.64
Dec2012 $0.08
Dec2011 -$0.35
Dec2010 -$0.67
Dec2009 -$0.69
Dec2008 $0.53
Dec2007 $2.45
Dec2006 $2.48
Dec2005 $2.27
Dec2004 $1.98
Dec2003 $1.84
Dec2002 $1.77

Recommended Reading:

Other ModernGraham posts about the company

KeyCorp Valuation – March 2018 $KEY
9 Best Stocks For Value Investors This Week – 6/24/16
KeyCorp Valuation – June 2016 $KEY
Best Stocks to Invest In: the Bank Industry – August 2016
Stocks Trading Below Their Graham Number – July 2016

Other ModernGraham posts about related companies

Citigroup Inc Valuation – January 2019 $C
People’s United Financial Inc Valuation – January 2019 $PBCT
JPMorgan Chase & Co Valuation – November 2018 $JPM
CVB Financial Corp Valuation – September 2018 $CVBF
Customers Bancorp Inc Valuation – September 2018 $CUBI
Sterling Bancorp Valuation – August 2018 $STL
S&T Bancorp Inc Valuation – August 2018 $STBA
Central Pacific Financial Corp Valuation – August 2018 $CPF
Synovus Financial Corp Valuation – August 2018 $SNV
Columbia Banking System Inc Valuation – August 2018 $COLB

Disclaimer:

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

Keysight Technologies Inc Valuation – August 2018 $KEYS

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

KEYS Chart

KEYS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KEYS – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,179,503,421 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.30 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 16300.00% Pass
6. Moderate PEmg Ratio PEmg < 20 31.72 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.54 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 2.30 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.45 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.90
MG Growth Estimate 15.00%
MG Value $73.12
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $27.54
MG Value based on 0% Growth $16.14
Market Implied Growth Rate 11.61%
Current Price $60.25
% of Intrinsic Value 82.39%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.78 in 2014 to an estimated $1.9 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.61% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Keysight Technologies Inc revealed the company was trading above its Graham Number of $25.97. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 31.72, which was below the industry average of 53.7, 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 $-6.37.

Keysight Technologies 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) -$6.37
Graham Number $25.97
PEmg 31.72
Current Ratio 2.30
PB Ratio 4.54
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 4/1/2018
Total Current Assets $2,189,000,000
Total Current Liabilities $953,000,000
Long-Term Debt $1,789,000,000
Total Assets $5,923,000,000
Intangible Assets $2,645,000,000
Total Liabilities $3,400,000,000
Shares Outstanding (Diluted Average) 190,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.41
Oct2017 $0.56
Oct2016 $1.95
Oct2015 $3.00
Oct2014 $2.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.90
Oct2017 $1.62
Oct2016 $1.92
Oct2015 $1.63
Oct2014 $0.78

Recommended Reading:

Other ModernGraham posts about the company

Keysight Technologies Inc Valuation – Initial Coverage $KEYS

Other ModernGraham posts about related companies

Semtech Corp Valuation – August 2018 $SMTC
Cohu Inc Valuation – August 2018 $COHU
Coherent Inc Valuation – August 2018 $COHR
Teradata Corp Valuation – August 2018 $TDC
Silicon Laboratories Inc Valuation – August 2018 $SLAB
Itron Inc Valuation – July 2018 $ITRI
Celestica Inc Valuation – July 2018 $TSE-CLS
Ciena Corp Valuation – July 2018 $CIEN
iRobot Corp Valuation – July 2018 $IRBT
ScanSource Inc Valuation – July 2018 $SCSC

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.

KeyCorp Valuation – March 2018 $KEY

Company Profile (obtained from Marketwatch): KeyCorp operates as bank holding company. The company through its subsidiary, KeyBank National Association provides retail and commercial banking, commercial leasing, investment management, consumer finance and investment banking products and services to individual, corporate and institutional clients. It operates through two business segments: Key Community Bank and Key Corporate Bank. The Key Community Bank segment serves individuals and small to mid-sized businesses by offering a variety of deposit, investment, lending, and personalized wealth management products and services. The Key Corporate Bank segment focuses on serving the needs of middle market clients in six industry sectors: consumer, energy, healthcare, industrial, public sector and real estate. Key Corporate Bank delivers a broad product suite of banking and capital markets products to its clients, including syndicated finance, debt and equity capital markets, commercial payments, equipment finance, commercial mortgage banking, derivatives, foreign exchange, financial advisory and public finance. KeyCorp was founded in 1958 and is headquartered in Cleveland, OH.

KEY Chart

KEY data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KEY – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $22,178,972,954 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
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 -440.78% Fail
5. Moderate PEmg Ratio PEmg < 20 17.51 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 $1.19
MG Growth Estimate 4.64%
MG Value $21.22
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $17.31
MG Value based on 0% Growth $10.15
Market Implied Growth Rate 4.51%
Current Price $20.91
% of Intrinsic Value 98.52%

KeyCorp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.91 in 2014 to an estimated $1.19 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 4.51% 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.

At the time of valuation, further research into KeyCorp revealed the company was trading below its Graham Number of $21.58. The company pays a dividend of $0.38 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 17.51, which was below the industry average of 24.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $21.58
PEmg 17.51
PB Ratio 1.50
Dividend Yield 1.82%
TTM Dividend $0.38
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $14,333,000,000
Total Assets $137,698,000,000
Intangible Assets $2,954,000,000
Total Liabilities $122,675,000,000
Shares Outstanding (Diluted Average) 1,079,407,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.58
Dec2017 $1.13
Dec2016 $0.80
Dec2015 $1.05
Dec2014 $0.99
Dec2013 $0.97
Dec2012 $0.89
Dec2011 $0.87
Dec2010 $0.44
Dec2009 -$2.34
Dec2008 -$3.36
Dec2007 $2.32
Dec2006 $2.57
Dec2005 $2.73
Dec2004 $2.30
Dec2003 $2.12
Dec2002 $2.27
Dec2001 $0.31
Dec2000 $2.30
Dec1999 $2.45
Dec1998 $2.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.19
Dec2017 $1.00
Dec2016 $0.93
Dec2015 $0.98
Dec2014 $0.91
Dec2013 $0.64
Dec2012 $0.08
Dec2011 -$0.35
Dec2010 -$0.67
Dec2009 -$0.69
Dec2008 $0.53
Dec2007 $2.45
Dec2006 $2.48
Dec2005 $2.27
Dec2004 $1.98
Dec2003 $1.84
Dec2002 $1.77

Recommended Reading:

Other ModernGraham posts about the company

Stocks Trading Below Their Graham Number – March 2016
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – January 2016
9 Best Stocks For Value Investors This Week – 11/28/15
KeyCorp Valuation – November 2015 Update $KEY
The Best Companies of the Banking Industry – October 2015

Other ModernGraham posts about related companies

Canadian Western Bank Valuation – March 2018 $TSE-CWB
Simmons First National Corp Valuation – March 2018 $SFNC
Citigroup Inc Valuation – March 2018 $C
People’s United Financial Inc Valuation – March 2018 $PBCT
JPMorgan Chase & Co Valuation – February 2018 $JPM
Opus Bank Valuation – Initial Coverage $OPB
Wells Fargo & Co Valuation – August 2017 $WFC
Old National Bancorp Valuation – Initial Coverage $ONB
Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB

Disclaimer:

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

Keysight Technologies Inc Valuation – Initial Coverage $KEYS

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

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

KEYS Chart

KEYS data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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.

Learn More About Premium Membership

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of KEYS – February 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 $6,271,279,391 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.88 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 24233.33% Pass
6. Moderate PEmg Ratio PEmg < 20 15.24 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.16 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 2.88 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.91 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.40
MG Growth Estimate 0.94%
MG Value $24.92
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $34.79
MG Value based on 0% Growth $20.39
Market Implied Growth Rate 3.37%
Current Price $36.57
% of Intrinsic Value 146.74%

Keysight Technologies 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, the poor dividend history, and the high PB ratio. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.26 in 2013 to an estimated $2.4 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.37% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Keysight Technologies Inc revealed the company was trading above its Graham Number of $21.71. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 15.24, which was below the industry average of 28.12, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.53.

Keysight Technologies 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) -$2.53
Graham Number $21.71
PEmg 15.24
Current Ratio 2.88
PB Ratio 4.16
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

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 10/1/2016
Total Current Assets $1,854,000,000
Total Current Liabilities $644,000,000
Long-Term Debt $1,100,000,000
Total Assets $3,803,000,000
Intangible Assets $944,000,000
Total Liabilities $2,290,000,000
Shares Outstanding (Diluted Average) 172,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.35
Oct2016 $1.95
Oct2015 $3.00
Oct2014 $2.35
Oct2013 $2.74
Oct2012 $5.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.40
Oct2016 $2.62
Oct2015 $2.85
Oct2014 $2.52
Oct2013 $2.26
Oct2012 $1.68

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Apple Inc Valuation – January 2017 $AAPL
Silicon Laboratories Valuation – Initial Coverage $SLAB
Itron Inc Valuation – Initial Coverage $ITRI
Celestica Inc Valuation – Initial Coverage $TSE:CLS
Intersil Corp Valuation – Initial Coverage $ISIL
iRobot Corp Valuation – Initial Coverage $IRBT
Advanced Micro Devices Inc Valuation – January 2017 $AMD
IPG Photonics Corp Valuation – Initial Coverage $IPGP
Ciena Corporation Valuation – Initial Coverage $CIEN
ScanSource Inc Valuation – Initial Coverage $SCSC

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.

KeyCorp Valuation – June 2016 $KEY

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how KeyCorp (KEY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): KeyCorp is a bank holding company. The Bank operates through its subsidiary, KeyBank National Association (KeyBank), which is engaged in providing banking services. Through KeyBank and other subsidiaries, the Company provides a range of retail and commercial banking, commercial leasing, investment management, consumer finance, commercial mortgage servicing and special servicing, and investment banking products and services to individual, corporate and institutional clients. Its segments include Key Community Bank and Key Corporate Bank. Key Community Bank serves individuals and small to mid-sized businesses by offering a range of deposit, investment, lending, credit card, and personalized wealth management products and business advisory services. Key Corporate Bank is a full-service corporate and investment bank focused on serving the needs of middle market clients in industry sectors, which include consumer, energy, healthcare, industrial, public sector, real estate and technology.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of KEY – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,663,573,935 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
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 -190.24% Fail
5. Moderate PEmg Ratio PEmg < 20 11.03 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.84 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

KEY value chart June 2016

EPSmg $1.00
MG Growth Estimate 15.00%
MG Value $38.63
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $14.55
MG Value based on 0% Growth $8.53
Market Implied Growth Rate 1.27%
Current Price $11.07
% of Intrinsic Value 28.66%

KeyCorp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.08 in 2012 to an estimated $1 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.27% 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.

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

Stage 3: Information for Further Research

KEY charts June 2016

Graham Number $17.05
PEmg 11.03
PB Ratio 0.84
Dividend Yield 2.71%
Number of Consecutive Years of Dividend Growth 6

[/not-level-free]

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
Long-Term Debt $10,760,000,000
Total Assets $98,402,000,000
Intangible Assets $1,117,000,000
Total Liabilities $87,336,000,000
Shares Outstanding (Diluted Average) 835,060,000

Earnings Per Share History

Next Fiscal Year Estimate $1.01
Dec2015 $1.05
Dec2014 $0.99
Dec2013 $0.97
Dec2012 $0.89
Dec2011 $0.87
Dec2010 $0.44
Dec2009 -$2.34
Dec2008 -$3.36
Dec2007 $2.32
Dec2006 $2.57
Dec2005 $2.73
Dec2004 $2.30
Dec2003 $2.12
Dec2002 $2.27
Dec2001 $0.31
Dec2000 $2.30
Dec1999 $2.45
Dec1998 $2.23
Dec1997 $2.07
Dec1996 $1.69

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.00
Dec2015 $0.98
Dec2014 $0.91
Dec2013 $0.64
Dec2012 $0.08
Dec2011 -$0.35
Dec2010 -$0.67
Dec2009 -$0.69
Dec2008 $0.53
Dec2007 $2.45
Dec2006 $2.48
Dec2005 $2.27
Dec2004 $1.98
Dec2003 $1.84
Dec2002 $1.77
Dec2001 $1.64
Dec2000 $2.25

Recommended Reading:

Other ModernGraham posts about the company

Stocks Trading Below Their Graham Number – March 2016
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – January 2016
9 Best Stocks For Value Investors This Week – 11/28/15
KeyCorp Valuation – November 2015 Update $KEY
KeyCorp Valuation – November 2015 Update $KEY

Other ModernGraham posts about related companies

PNC Financial Services Group Inc Valuation – June 2016 $PNC
People’s United Financial Inc Valuation – June 2016 $PBCT
BB&T Corporation Valuation – May 2016 $BBT
SunTrust Banks Inc Valuation – February 2016 $STI
Comerica Inc Stock Valuation – February 2016 $CMA
U.S. Bancorp Valuation – February 2016 $USB
JP Morgan Chase Valuation – January 2016 Update $JPM
Comerica Inc Stock Valuation – February 2016 $CMA
U.S. Bancorp Valuation – February 2016 $USB
JP Morgan Chase Valuation – January 2016 Update $JPM

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.

KeyCorp Valuation – November 2015 Update $KEY

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 Most Undervalued Companies for the Defensive Investor – November 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 stock analysis showing a specific look at how KeyCorp (KEY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): KeyCorp is a bank holding company. The Bank operates through its subsidiary, KeyBank National Association, which is engaged in providing banking services. Through KeyBank and other subsidiaries, the Bank provides a range of retail and commercial banking, commercial leasing, investment management, consumer finance, commercial mortgage servicing and special servicing, and investment banking products and services. The Bank provides these services to individual, corporate and institutional clients. The Bank operates in two segments: Key Community Bank, which serves individuals and small to mid-sized businesses by offering a variety of deposit, investment, lending, credit card, and personalized wealth management products and business advisory services, and Key Corporate Bank, is a full-service corporate and investment bank focused on serving the needs of middle market clients in seven industry sectors: consumer, energy, healthcare, industrial, public sector, real estate and technology.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of KEY

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 $10,943,343,208 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
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 96.08% Pass
5. Moderate PEmg Ratio PEmg < 20 13.36 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.03 Pass
Score
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

KEY value chart November 2015

EPSmg $0.98
MG Growth Estimate 15.00%
MG Value $37.78
Opinion Undervalued
MG Value based on 3% Growth $14.23
MG Value based on 0% Growth $8.34
Market Implied Growth Rate 2.43%
Current Price $13.11
% of Intrinsic Value 34.70%

KeyCorp qualifies 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.  The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $0.35 in 2011 to an estimated gain of $0.98 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.43% 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.

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 KeyCorp (KEY)?  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.

Stage 3: Information for Further Research

KEY charts November 2015

Graham Number $17.03
PEmg 13.36
PB Ratio 1.03
Dividend Yield 2.14%
Number of Consecutive Years of Dividend Growth 5

 

[/not-level-free]

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 Sep15
Long-Term Debt $10,310,000,000
Total Assets $95,422,000,000
Intangible Assets $1,134,000,000
Total Liabilities $84,717,000,000
Shares Outstanding (Diluted Average) 838,880,000

Earnings Per Share History

Next Fiscal Year Estimate $1.04
Dec14 $0.99
Dec13 $0.97
Dec12 $0.89
Dec11 $0.87
Dec10 $0.44
Dec09 -$2.34
Dec08 -$3.36
Dec07 $2.32
Dec06 $2.57
Dec05 $2.73
Dec04 $2.30
Dec03 $2.12
Dec02 $2.27
Dec01 $0.31
Dec00 $2.30
Dec99 $2.45
Dec98 $2.23
Dec97 $2.07
Dec96 $1.69
Dec95 $1.71

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.98
Dec14 $0.91
Dec13 $0.64
Dec12 $0.08
Dec11 -$0.35
Dec10 -$0.67
Dec09 -$0.69
Dec08 $0.53
Dec07 $2.45
Dec06 $2.48
Dec05 $2.27
Dec04 $1.98
Dec03 $1.84
Dec02 $1.77
Dec01 $1.64
Dec00 $2.25
Dec99 $2.16

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Banking Industry – October 2015
19 Best Stocks For Value Investors This Week – 8/29/15
KeyCorp Analysis – August 2015 Update $KEY
The 12 Best Stocks For Value Investors This Week – 5/30/15
A Glimpse at the Banking Industry – May 2015

Other ModernGraham posts about related companies

BB&T Corporation Valuation – November 2015 Update $BBT
PNC Financial Services Group Valuation – November 2015 Update $PNC
SunTrust Banks Inc. Valuation – November 2015 Update $STI
U.S. Bancorp Valuation – November 2015 Update $USB
Starwood Property Trust Inc. Valuation – October 2015 Update $STWD
The Best Companies of the Banking Industry – October 2015
Comerica Inc. Valuation – October 2015 Update $CMA
Bank of New York Mellon Corporation Analysis – October 2015 Update $BK
Fifth Third Bancorp Analysis – October 2015 Update $FITB
Huntington Bancshares Inc. Analysis – October 2015 Update $HBAN

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.

KeyCorp Analysis – August 2015 Update $KEY

In the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.

We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.

In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  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 KeyCorp (KEY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): KeyCorp is a bank holding company. The Bank operates through its subsidiary, KeyBank National Association, which is engaged in providing banking services. Through KeyBank and other subsidiaries, the Bank provides a range of retail and commercial banking, commercial leasing, investment management, consumer finance, commercial mortgage servicing and special servicing, and investment banking products and services. The Bank provides these services to individual, corporate and institutional clients. The Bank operates in two segments: Key Community Bank, which serves individuals and small to mid-sized businesses by offering a variety of deposit, investment, lending, credit card, and personalized wealth management products and business advisory services, and Key Corporate Bank, is a full-service corporate and investment bank focused on serving the needs of middle market clients in seven industry sectors: consumer, energy, healthcare, industrial, public sector, real estate and technology.
[level-free]

To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of KEY

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 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
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 Pass
5. Moderate PEmg Ratio PEmg < 20 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Pass
Score
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 0.99
MG Growth Estimate 15.00%
MG Value $38.04
Opinion Undervalued
MG Value based on 3% Growth $14.33
MG Value based on 0% Growth $8.40
Market Implied Growth Rate 2.73%
Current Price $13.79
% of Intrinsic Value 36.25%

KeyCorp qualifies 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.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $0.35 in 2011 to an estimated gain of $0.99 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.73% 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.

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 KeyCorp (KEY)?  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.

Stage 3: Information for Further Research

KEY Charts - August 2015

PEmg 13.96
PB Ratio 1.10
Dividend Yield 1.96%
Number of Consecutive Years of Dividend Growth 5

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

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

Most Recent Balance Sheet Figures

Long-Term Debt $10,267,000,000
Total Assets $94,606,000,000
Intangible Assets $1,140,000,000
Total Liabilities $84,016,000,000
Shares Outstanding (Diluted Average) 846,312,000

Earnings Per Share History

Next Fiscal Year Estimate $1.06
Dec14 $0.99
Dec13 $0.97
Dec12 $0.89
Dec11 $0.87
Dec10 $0.44
Dec09 -$2.34
Dec08 -$3.36
Dec07 $2.32
Dec06 $2.57
Dec05 $2.73
Dec04 $2.30
Dec03 $2.12
Dec02 $2.27
Dec01 $0.31
Dec00 $2.30
Dec99 $2.45
Dec98 $2.23
Dec97 $2.07
Dec96 $1.69
Dec95 $1.71

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.99
Dec14 $0.91
Dec13 $0.64
Dec12 $0.08
Dec11 -$0.35
Dec10 -$0.67
Dec09 -$0.69
Dec08 $0.53
Dec07 $2.45
Dec06 $2.48
Dec05 $2.27
Dec04 $1.98
Dec03 $1.84
Dec02 $1.77
Dec01 $1.64
Dec00 $2.25
Dec99 $2.16

Recommended Reading:

Other ModernGraham posts about the company

The 12 Best Stocks For Value Investors This Week – 5/30/15
A Glimpse at the Banking Industry – May 2015
KeyCorp Quarterly Valuation – May 2015 $KEY
28 Companies in the Spotlight This Week – 2/28/15
KeyCorp Quarterly Valuation – February 2015 $KEY

Other ModernGraham posts about related companies

State Street Corporation Analysis – August 2015 Update $STT
BB&T Corporation Analysis – August 2015 Update $BBT
PNC Financial Services Group Inc. Analysis – August 2015 Update $PNC
US Bancorp Analysis – August 2015 Update $USB
Comerica Incorporated Analysis – July 2015 Update $CMA
Starwood Property Trust Inc. Analysis – Initial Coverage $STWD
Fifth Third Bancorp Analysis – July 2015 Update $FITB
Huntington Bancshares Analysis – June 2015 Update $HBAN
JPMorgan Chase Analysis – June 2015 Update $JPM
Wells Fargo Stock Analysis – May 2015 Quarterly Update $WFC

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.  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.

KeyCorp Quarterly Valuation – May 2015 $KEY

KeyBankIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  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 KeyCorp (KEY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): KeyCorp is a bank holding company. KeyCorp is the parent holding company for KeyBank National Association (KeyBank), its principal subsidiary, through which most of its banking services are provided. Through KeyBank and certain other subsidiaries, it provides a range of retail and commercial banking, commercial leasing, investment management, consumer finance, commercial mortgage servicing and special servicing, and investment banking products and services to individual, corporate, and institutional clients through two major business segments: Key Community Bank and Key Corporate Bank. These services were provided across the country through KeyBank’s approximately 1,028 full-service retail banking branches and a network of approximately 1,335 automated teller machines (ATMs) in 12 states, as well as additional offices, online and mobile banking capabilities, and a telephone banking call center.

Defensive Investor – must pass all 6 of the following tests: Score = 5/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. 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 – PASS
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

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

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $14.90
MG Value $37.78
MG Opinion Undervalued
Value Based on 3% Growth $14.23
Value Based on 0% Growth $8.34
Market Implied Growth Rate 3.34%
PEmg 15.18
PB Ratio 1.20

Balance Sheet – March 2015

Total Debt $8,713,000,000
Total Assets $94,206,000,000
Intangible Assets $1,149,000,000
Total Liabilities $83,603,000,000
Outstanding Shares 857,100,000

Earnings Per Share

2015 (estimate) $1.04
2014 $0.99
2013 $0.97
2012 $0.89
2011 $0.87
2010 $0.44
2009 -$2.34
2008 -$3.36
2007 $2.32
2006 $2.57
2005 $2.73

Earnings Per Share – ModernGraham 

2015 (estimate) $0.98
2014 $0.91
2013 $0.64
2012 $0.08
2011 -$0.35
2010 -$0.67

Dividend History

Conclusion

KeyCorp qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability over the last ten years, while the company passes all of the Enterprising Investor’s requirements.  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.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from a loss of $0.35 in 2011 to an estimated gain of $0.98 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 3.34% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above 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 KeyCorp (KEY)?  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 any of the companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

KeyCorp Quarterly Valuation – February 2015 $KEY

KeyBankIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  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 KeyCorp (KEY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): KeyCorp is a bank holding company. KeyCorp is the parent holding company for KeyBank National Association (KeyBank), its principal subsidiary, through which most of its banking services are provided. Through KeyBank and certain other subsidiaries, it provides a range of retail and commercial banking, commercial leasing, investment management, consumer finance, commercial mortgage servicing and special servicing, and investment banking products and services to individual, corporate, and institutional clients through two major business segments: Key Community Bank and Key Corporate Bank. These services were provided across the country through KeyBank’s approximately 1,028 full-service retail banking branches and a network of approximately 1,335 automated teller machines (ATMs) in 12 states, as well as additional offices, online and mobile banking capabilities, and a telephone banking call center.

Defensive Investor – must pass all 6 of the following tests: Score = 4/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. 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
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

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

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $14.02
MG Value $35.11
MG Opinion Undervalued
Value Based on 3% Growth $13.22
Value Based on 0% Growth $7.75
Market Implied Growth Rate 3.44%
PEmg 15.37
PB Ratio 1.18

Balance Sheet – December 2014

Total Debt $7,875,000,000
Total Assets $93,821,000,000
Intangible Assets $1,158,000,000
Total Liabilities $83,291,000,000
Outstanding Shares 886,200,000

Earnings Per Share

2014 $0.99
2013 $0.97
2012 $0.89
2011 $0.87
2010 $0.44
2009 -$2.34
2008 -$3.36
2007 $2.32
2006 $2.57
2005 $2.73
2004 $2.30

Earnings Per Share – ModernGraham 

2014 $0.91
2013 $0.64
2012 $0.08
2011 -$0.35
2010 -$0.67
2009 -$0.69

Dividend History

Conclusion:

KeyCorp qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability or growth over the last ten years, while the company passes all of the Enterprising Investor’s requirements.  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.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from a loss of $0.67 in 2010 to a gain of $0.91 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 3.44% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

Be sure to check out previous ModernGraham valuations of KeyCorp (KEY) 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 KeyCorp (KEY)?  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 KeyCorp (KEY) or in any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

Back To Top