Kennametal Inc Valuation – August 2018 $KMT

Company Profile (excerpt from Reuters): Kennametal Inc. (Kennametal), incorporated on June 25, 1943, is a supplier of tooling, engineered components and materials consumed in production processes. The Company operates through two segments: Industrial and Infrastructure. The Company provides wear-resistant products, application engineering and services backed by material science serving customers across diverse sectors of industrial production, transportation, earthworks, energy, construction, process industries and aerospace. Kennametal solutions are built across technology platforms, including precision-engineered metalworking tools and components, surface technologies and earth cutting tools that are mission-critical to customer operations battling conditions associated with wear fatigue, corrosion and high temperatures.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KMT – 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 $3,272,088,191 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.74 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 -14.51% Fail
6. Moderate PEmg Ratio PEmg < 20 35.65 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.62 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 1.74 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.90 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 $1.09
MG Growth Estimate 15.00%
MG Value $41.94
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $15.80
MG Value based on 0% Growth $9.26
Market Implied Growth Rate 13.57%
Current Price $38.83
% of Intrinsic Value 92.59%

Kennametal Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.15 in 2015 to an estimated $1.09 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 13.57% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Kennametal Inc. revealed the company was trading above its Graham Number of $31.63. The company pays a dividend of $0.8 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 35.65, which was above the industry average of 29.32. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.8.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.80
Graham Number $31.63
PEmg 35.65
Current Ratio 1.74
PB Ratio 2.62
Current Dividend $0.80
Dividend Yield 2.06%
Number of Consecutive Years of Dividend Growth 0

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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $1,546,166,000
Total Current Liabilities $886,531,000
Long-Term Debt $591,505,000
Total Assets $2,925,737,000
Intangible Assets $478,270,000
Total Liabilities $1,695,410,000
Shares Outstanding (Diluted Average) 83,038,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.04
Jun2018 $2.42
Jun2017 $0.61
Jun2016 -$2.83
Jun2015 -$4.71
Jun2014 $1.99
Jun2013 $2.52
Jun2012 $3.77
Jun2011 $2.76
Jun2010 $0.57
Jun2009 -$1.64
Jun2008 $2.15
Jun2007 $2.22
Jun2006 $3.24
Jun2005 $1.57
Jun2004 $1.01
Jun2003 $0.26
Jun2002 -$3.40
Jun2001 $0.87
Jun2000 $0.85
Jun1999 $0.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.09
Jun2018 -$0.09
Jun2017 -$1.06
Jun2016 -$1.21
Jun2015 $0.15
Jun2014 $2.50
Jun2013 $2.36
Jun2012 $2.03
Jun2011 $1.18
Jun2010 $0.69
Jun2009 $1.01
Jun2008 $2.23
Jun2007 $2.07
Jun2006 $1.51
Jun2005 $0.45
Jun2004 -$0.10
Jun2003 -$0.49

Recommended Reading:

Other ModernGraham posts about the company

Kennametal Inc Valuation – Initial Coverage $KMT

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Xylem Inc Valuation – May 2018 $XYL
Arconic Inc Valuation – April 2018 $ARNC

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.

Kennametal Inc Valuation – Initial Coverage $KMT

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 Kennametal Inc (KMT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kennametal Inc. is a supplier of tooling, engineered components and materials consumed in production processes. The Company operates through two segments: Industrial and Infrastructure. The Industrial segment generally serves customers that operate in industrial end markets, such as transportation, general engineering, aerospace and defense. The Infrastructure segment generally serves customers that operate in the earthworks and energy sectors supporting primary industries, such as oil and gas, power generation, underground, surface and hard-rock mining, highway construction and road maintenance. It provides wear-resistant products, application engineering and services backed by material science serving customers across various sectors. The Company’s product offerings include a selection of standard and customized technologies for metalworking, such as metal cutting tools, tooling systems and services, as well as materials, such as cemented tungsten carbide products and super alloys.

KMT Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of KMT – 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 $3,152,627,524 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.49 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -731.48% Fail
6. Moderate PEmg Ratio PEmg < 20 -38.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.49 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 2.49 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg -$1.02
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$14.84
MG Value based on 0% Growth -$8.70
Market Implied Growth Rate -23.25%
Current Price $38.89
% of Intrinsic Value N/A

Kennametal 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 or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.36 in 2013 to an estimated $-1.02 for 2017. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Kennametal Inc. revealed the company was trading above its Graham Number of $13.53. The company pays a dividend of $0.8 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -38, which was below the industry average of 22.25, 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 $-4.69.

Kennametal 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) -$4.69
Graham Number $13.53
PEmg -38.00
Current Ratio 2.49
PB Ratio 3.49
Current Dividend $0.80
Dividend Yield 2.06%
Number of Consecutive Years of Dividend Growth 2

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $971,745,000
Total Current Liabilities $390,151,000
Long-Term Debt $0
Total Assets $2,254,781,000
Intangible Assets $489,219,000
Total Liabilities $1,351,975,000
Shares Outstanding (Diluted Average) 81,026,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.72
Jun2016 -$2.83
Jun2015 -$4.71
Jun2014 $1.99
Jun2013 $2.52
Jun2012 $3.77
Jun2011 $2.76
Jun2010 $0.57
Jun2009 -$1.64
Jun2008 $2.15
Jun2007 $2.22
Jun2006 $3.24
Jun2005 $1.57
Jun2004 $1.01
Jun2003 $0.26
Jun2002 -$3.35
Jun2001 $0.87
Jun2000 $0.85
Jun1999 $0.66
Jun1998 $1.29
Jun1997 $1.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.02
Jun2016 -$1.21
Jun2015 $0.15
Jun2014 $2.50
Jun2013 $2.36
Jun2012 $2.03
Jun2011 $1.18
Jun2010 $0.69
Jun2009 $1.01
Jun2008 $2.23
Jun2007 $2.07
Jun2006 $1.51
Jun2005 $0.45
Jun2004 -$0.09
Jun2003 -$0.48
Jun2002 -$0.54
Jun2001 $0.91

Recommended Reading:

Other ModernGraham posts about the company

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

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W. W. Grainger Inc Valuation – January 2017 $GWW
Allegion PLC Valuation – January 2017 $ALLE
Xylem Inc Valuation – January 2017 $XYL
Clarcor Inc Valuation – Initial Coverage $CLC

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.

Deere & Co Valuation – January 2019 $DE

Company Profile (excerpt from Reuters): Deere & Company, incorporated on April 25, 1958, is engaged in equipment operations. The Company is engaged in providing financial services. The Company operates through three business segments: agriculture and turf, construction and forestry, and financial services. The agriculture and turf segment manufactures and distributes a line of agriculture and turf equipment and related service parts. The construction and forestry segment provides a line of construction equipment, and forestry machines and attachments available in the world. The financial services segment primarily finances sales and leases by the Company dealers of new and used agriculture and turf equipment and construction and forestry equipment. Its products are marketed primarily through independent retail dealer networks and retail outlets. As of October 31, 2016, the Company’s operations consisted of two geographic areas: the United States and Canada, and outside the United States and Canada.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DE – 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 $50,630,764,289 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.84 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 34.71% Pass
6. Moderate PEmg Ratio PEmg < 20 19.76 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.55 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.84 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.30 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.01
MG Growth Estimate 1.01%
MG Value $84.33
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $116.14
MG Value based on 0% Growth $68.08
Market Implied Growth Rate 5.63%
Current Price $158.28
% of Intrinsic Value 187.69%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $7.5 in 2015 to an estimated $8.01 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.63% 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 Deere & Company revealed the company was trading above its Graham Number of $93.83. The company pays a dividend of $2.58 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 19.76, which was below the industry average of 23.62, 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 $-39.08.

Deere & Company receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$39.08
Graham Number $93.83
PEmg 19.76
Current Ratio 1.84
PB Ratio 4.55
Current Dividend $2.58
Dividend Yield 1.63%
Number of Consecutive Years of Dividend Growth 1

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 10/1/2018
Total Current Assets $46,132,700,000
Total Current Liabilities $25,130,300,000
Long-Term Debt $27,237,400,000
Total Assets $70,108,000,000
Intangible Assets $4,662,700,000
Total Liabilities $58,816,800,000
Shares Outstanding (Diluted Average) 324,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.15
Oct2018 $7.24
Oct2017 $6.68
Oct2016 $4.81
Oct2015 $5.77
Oct2014 $8.63
Oct2013 $9.09
Oct2012 $7.63
Oct2011 $6.63
Oct2010 $4.35
Oct2009 $2.06
Oct2008 $4.70
Oct2007 $4.00
Oct2006 $3.59
Oct2005 $2.94
Oct2004 $2.78
Oct2003 $1.32
Oct2002 $0.67
Oct2001 -$0.14
Oct2000 $1.03
Oct1999 $0.51

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.01
Oct2018 $6.50
Oct2017 $6.42
Oct2016 $6.59
Oct2015 $7.50
Oct2014 $8.00
Oct2013 $7.11
Oct2012 $5.77
Oct2011 $4.68
Oct2010 $3.71
Oct2009 $3.41
Oct2008 $3.93
Oct2007 $3.34
Oct2006 $2.76
Oct2005 $2.06
Oct2004 $1.46
Oct2003 $0.76

Recommended Reading:

Other ModernGraham posts about the company

Deere & Co Valuation – March 2018 $DE
Deere & Company Valuation – June 2016 $DE
Deere & Company Valuation – January 2016 Update $DE
10 Undervalued Companies for the Defensive Dividend Stock Investor – December 2015
10 Low PE Stocks for the Defensive Investor – December 2015

Other ModernGraham posts about related companies

A.O. Smith Corp Valuation – January 2019 $AOS
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Lindsay Corp Valuation – October 2018 $LNN
Lennox International Inc Valuation – October 2018 $LII
Standex International Corp Valuation – September 2018 $SXI
Lincoln Electric Holdings Inc Valuation – August 2018 $LECO
Regal Beloit Corp Valuation – August 2018 $RBC
Kennametal Inc Valuation – August 2018 $KMT

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.

A.O. Smith Corp Valuation – January 2019 $AOS

Company Profile (excerpt from Reuters): Robert Half International Inc. is engaged in providing specialized staffing and risk consulting services. The Company provides staffing and risk consulting services through the divisions: Accountemps, Robert Half Finance & Accounting, OfficeTeam, Robert Half Technology, Robert Half Management Resources, Robert Half Legal, The Creative Group and Protiviti. The Company operates through three segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. The temporary and consultant segment provides specialized staffing in the accounting and finance, administrative and office, information technology, legal, advertising, marketing and Web design fields. The permanent placement segment provides full-time personnel in the accounting, finance, administrative and office, and information technology fields. The risk consulting segment provides business and technology risk consulting and internal audit services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AOS – 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 $6,620,378,658 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.16 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 114.11% Pass
6. Moderate PEmg Ratio PEmg < 20 23.59 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.51 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 2.16 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.22 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.95
MG Growth Estimate 12.75%
MG Value $66.31
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $28.28
MG Value based on 0% Growth $16.58
Market Implied Growth Rate 7.55%
Current Price $46.01
% of Intrinsic Value 69.39%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.05 in 2014 to an estimated $1.95 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.55% 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 A. O. Smith Corp revealed the company was trading above its Graham Number of $23.34. The company pays a dividend of $0.56 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 23.59, which was below the industry average of 23.62, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.92.

A. O. Smith Corp performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.92
Graham Number $23.34
PEmg 23.59
Current Ratio 2.16
PB Ratio 4.51
Current Dividend $0.56
Dividend Yield 1.22%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,598,700,000
Total Current Liabilities $738,900,000
Long-Term Debt $193,300,000
Total Assets $3,025,200,000
Intangible Assets $812,600,000
Total Liabilities $1,269,000,000
Shares Outstanding (Diluted Average) 172,085,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.52
Dec2017 $1.70
Dec2016 $1.85
Dec2015 $1.58
Dec2014 $1.14
Dec2013 $0.92
Dec2012 $0.86
Dec2011 $1.64
Dec2010 $0.61
Dec2009 $0.59
Dec2008 $0.45
Dec2007 $0.48
Dec2006 $0.41
Dec2005 $0.26
Dec2004 $0.20
Dec2003 $0.29
Dec2002 $0.31
Dec2001 $0.10
Dec2000 $0.21
Dec1999 $0.30
Dec1998 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.95
Dec2017 $1.59
Dec2016 $1.45
Dec2015 $1.24
Dec2014 $1.05
Dec2013 $0.98
Dec2012 $0.95
Dec2011 $0.92
Dec2010 $0.54
Dec2009 $0.48
Dec2008 $0.41
Dec2007 $0.37
Dec2006 $0.31
Dec2005 $0.24
Dec2004 $0.23
Dec2003 $0.25
Dec2002 $0.23

Recommended Reading:

Other ModernGraham posts about the company

A.O. Smith Corp Valuation – March 2018 $AOS
Best Dividend Paying Stocks for Dividend Growth Investors – August 2017
Best Dividend Paying Stocks for Dividend Growth Investors – March 2017
Best Dividend Paying Stocks for Dividend Growth Investors – February 2017
Best Dividend Paying Stocks for Dividend Growth Investors – January 2017

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Standex International Corp Valuation – September 2018 $SXI
Lincoln Electric Holdings Inc Valuation – August 2018 $LECO
Regal Beloit Corp Valuation – August 2018 $RBC
Kennametal Inc Valuation – August 2018 $KMT
SPX Corp Valuation – August 2018 $SPXC

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.

Parker-Hannifin Corp Valuation – January 2019 $PH

Company Profile (excerpt from Reuters): Parker-Hannifin Corporation, incorporated on December 30, 1938, is a manufacturer of motion and control technologies and systems, providing precision engineered solutions for a range of mobile, industrial and aerospace markets. The Company operates through segments: Diversified Industrial and Aerospace Systems. The Diversified Industrial Segment is an aggregation of several business units, which manufacture motion-control and fluid power system components for builders and users of various types of manufacturing, packaging, processing, transportation, agricultural, construction, and military vehicles and equipment. The Aerospace Systems Segment produces hydraulic, fuel, pneumatic and electro-mechanical systems and components, which are utilized on domestic commercial, military and general aviation aircrafts.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PH – 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 $20,028,374,412 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.60 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 48.03% Pass
6. Moderate PEmg Ratio PEmg < 20 18.33 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.34 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.60 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.17 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.26
MG Growth Estimate 3.15%
MG Value $122.19
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $119.74
MG Value based on 0% Growth $70.19
Market Implied Growth Rate 4.91%
Current Price $151.33
% of Intrinsic Value 123.84%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $6.83 in 2015 to an estimated $8.26 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.91% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Parker-Hannifin Corp revealed the company was trading above its Graham Number of $101.81. The company pays a dividend of $2.74 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 18.33, which was below the industry average of 23.62, 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 $-29.85.

Parker-Hannifin Corp performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$29.85
Graham Number $101.81
PEmg 18.33
Current Ratio 1.60
PB Ratio 3.34
Current Dividend $2.74
Dividend Yield 1.81%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $5,298,082,000
Total Current Liabilities $3,308,521,000
Long-Term Debt $4,313,221,000
Total Assets $15,425,042,000
Intangible Assets $7,441,245,000
Total Liabilities $9,317,936,000
Shares Outstanding (Diluted Average) 134,664,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.41
Jun2018 $7.83
Jun2017 $7.25
Jun2016 $5.89
Jun2015 $6.97
Jun2014 $6.87
Jun2013 $6.26
Jun2012 $7.45
Jun2011 $6.37
Jun2010 $3.40
Jun2009 $3.13
Jun2008 $5.53
Jun2007 $4.68
Jun2006 $3.71
Jun2005 $3.35
Jun2004 $1.94
Jun2003 $1.12
Jun2002 $0.75
Jun2001 $1.97
Jun2000 $2.21
Jun1999 $1.89

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.26
Jun2018 $7.11
Jun2017 $6.71
Jun2016 $6.53
Jun2015 $6.83
Jun2014 $6.53
Jun2013 $6.01
Jun2012 $5.65
Jun2011 $4.71
Jun2010 $3.95
Jun2009 $4.17
Jun2008 $4.41
Jun2007 $3.55
Jun2006 $2.72
Jun2005 $2.09
Jun2004 $1.50
Jun2003 $1.39

Recommended Reading:

Other ModernGraham posts about the company

Parker-Hannifin Corp Valuation – March 2018 $PH
Parker-Hannifin Corp Valuation – July 2016 $PH
Parker Hannifin Corp Valuation – January 2016 Update $PH
Dividend Growth Stocks for the Intelligent Investor – November 2015
Dividend Growth Stocks for the Intelligent Investor – October 2015

Other ModernGraham posts about related companies

Caterpillar Inc Valuation – November 2018 $CAT
Lindsay Corp Valuation – October 2018 $LNN
Lennox International Inc Valuation – October 2018 $LII
Standex International Corp Valuation – September 2018 $SXI
Lincoln Electric Holdings Inc Valuation – August 2018 $LECO
Regal Beloit Corp Valuation – August 2018 $RBC
Kennametal Inc Valuation – August 2018 $KMT
SPX Corp Valuation – August 2018 $SPXC
AGCO Corp Valuation – August 2018 $AGCO
John Bean Technologies Corp Valuation – August 2018 $JBT

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.

Dover Corp Valuation – January 2019 $DOV

Company Profile (excerpt from Reuters): Dover Corporation, incorporated on April 22, 1947, is a diversified global manufacturer, delivering equipment and components, specialty systems, consumable supplies, software and digital solutions and support services. The Company operates through four segments: Energy, Engineered Systems, Fluids and Refrigeration & Food Equipment. The Company’s customers include businesses supplying the waste and recycling, agricultural, defense, energy, automotive and commercial refrigeration industries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DOV – 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 $10,506,709,846 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 20.29% Fail
6. Moderate PEmg Ratio PEmg < 20 16.29 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.91 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.24 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.41
MG Growth Estimate -1.32%
MG Value $25.84
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $63.91
MG Value based on 0% Growth $37.46
Market Implied Growth Rate 3.90%
Current Price $71.80
% of Intrinsic Value 277.84%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.83 in 2014 to an estimated $4.41 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.9% 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 Dover Corp revealed the company was trading above its Graham Number of $50.79. The company pays a dividend of $1.82 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.29, which was below the industry average of 23.62, 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 $-21.78.

Dover Corp receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$21.78
Graham Number $50.79
PEmg 16.29
Current Ratio 1.30
PB Ratio 3.91
Current Dividend $1.82
Dividend Yield 2.53%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,459,049,000
Total Current Liabilities $1,890,305,000
Long-Term Debt $2,981,923,000
Total Assets $8,461,770,000
Intangible Assets $4,915,448,000
Total Liabilities $5,713,836,000
Shares Outstanding (Diluted Average) 149,457,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.05
Dec2017 $5.15
Dec2016 $3.25
Dec2015 $5.46
Dec2014 $4.59
Dec2013 $5.78
Dec2012 $4.41
Dec2011 $4.74
Dec2010 $3.70
Dec2009 $1.91
Dec2008 $3.12
Dec2007 $3.26
Dec2006 $2.74
Dec2005 $2.50
Dec2004 $2.02
Dec2003 $1.44
Dec2002 -$0.60
Dec2001 $1.22
Dec2000 $2.54
Dec1999 $4.41
Dec1998 $1.69

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.41
Dec2017 $4.67
Dec2016 $4.52
Dec2015 $5.10
Dec2014 $4.83
Dec2013 $4.67
Dec2012 $3.94
Dec2011 $3.58
Dec2010 $2.98
Dec2009 $2.65
Dec2008 $2.93
Dec2007 $2.68
Dec2006 $2.14
Dec2005 $1.66
Dec2004 $1.27
Dec2003 $1.20
Dec2002 $1.33

Recommended Reading:

Other ModernGraham posts about the company

Dover Corp Valuation – March 2018 $DOV
Dover Corporation Valuation – July 2016 $DOV
Dividend Growth Stocks for Intelligent Investors – June 2016
Dividend Growth Stocks for Intelligent Investors – February 2016
13 Best Stocks For Value Investors This Week – 12/12/15

Other ModernGraham posts about related companies

Caterpillar Inc Valuation – November 2018 $CAT
Lindsay Corp Valuation – October 2018 $LNN
Lennox International Inc Valuation – October 2018 $LII
Standex International Corp Valuation – September 2018 $SXI
Lincoln Electric Holdings Inc Valuation – August 2018 $LECO
Regal Beloit Corp Valuation – August 2018 $RBC
Kennametal Inc Valuation – August 2018 $KMT
SPX Corp Valuation – August 2018 $SPXC
AGCO Corp Valuation – August 2018 $AGCO
John Bean Technologies Corp Valuation – August 2018 $JBT

Disclaimer:

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

Caterpillar Inc Valuation – November 2018 $CAT

Company Profile (excerpt from Reuters): Caterpillar Inc. (Caterpillar), incorporated on March 12, 1986, is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The Company operates through segments, including Construction Industries, Resource Industries, Energy & Transportation, Financial Products segment and All Other operating segments. The Company’s products are sold primarily under the brands Caterpillar, CAT, design versions of CAT and Caterpillar, EMD, FG Wilson, MaK, MWM, Perkins, Progress Rail, SEM and Solar Turbines. As of December 31, 2016, the Company’s machines were distributed principally through an organization of dealers (dealer network), 49 located in the United States and 123 located outside the United States, serving 190 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CAT – November 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 $74,890,444,093 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.48 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 -5.01% Fail
6. Moderate PEmg Ratio PEmg < 20 26.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.79 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 1.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.05 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 $4.86
MG Growth Estimate -2.42%
MG Value $17.78
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $70.44
MG Value based on 0% Growth $41.29
Market Implied Growth Rate 8.81%
Current Price $126.91
% of Intrinsic Value 713.89%

Caterpillar Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $5.79 in 2014 to an estimated $4.86 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.81% 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 Caterpillar Inc. revealed the company was trading above its Graham Number of $75.93. The company pays a dividend of $3.1 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 26.12, which was below the industry average of 31.29, 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 $-39.81.

Caterpillar 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) -$39.81
Graham Number $75.93
PEmg 26.12
Current Ratio 1.48
PB Ratio 4.79
Current Dividend $3.10
Dividend Yield 2.44%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $38,454,000,000
Total Current Liabilities $26,033,000,000
Long-Term Debt $25,441,000,000
Total Assets $78,209,000,000
Intangible Assets $8,209,000,000
Total Liabilities $62,319,000,000
Shares Outstanding (Diluted Average) 599,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.18
Dec2017 $1.26
Dec2016 -$0.11
Dec2015 $4.18
Dec2014 $3.90
Dec2013 $5.75
Dec2012 $8.48
Dec2011 $7.40
Dec2010 $4.15
Dec2009 $1.43
Dec2008 $5.66
Dec2007 $5.37
Dec2006 $5.17
Dec2005 $4.04
Dec2004 $2.88
Dec2003 $1.56
Dec2002 $1.15
Dec2001 $1.16
Dec2000 $1.51
Dec1999 $1.32
Dec1998 $2.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.86
Dec2017 $2.13
Dec2016 $3.19
Dec2015 $5.21
Dec2014 $5.79
Dec2013 $6.31
Dec2012 $6.20
Dec2011 $4.97
Dec2010 $3.96
Dec2009 $4.02
Dec2008 $5.08
Dec2007 $4.46
Dec2006 $3.66
Dec2005 $2.66
Dec2004 $1.86
Dec2003 $1.35
Dec2002 $1.31

Recommended Reading:

Other ModernGraham posts about the company

5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018
Caterpillar Inc Valuation – February 2018 $CAT
5 Overvalued Dow Components – February 2017
Caterpillar Inc Valuation – August 2016 $CAT

Other ModernGraham posts about related companies

Lindsay Corp Valuation – October 2018 $LNN
Lennox International Inc Valuation – October 2018 $LII
Standex International Corp Valuation – September 2018 $SXI
Lincoln Electric Holdings Inc Valuation – August 2018 $LECO
Regal Beloit Corp Valuation – August 2018 $RBC
Kennametal Inc Valuation – August 2018 $KMT
SPX Corp Valuation – August 2018 $SPXC
AGCO Corp Valuation – August 2018 $AGCO
John Bean Technologies Corp Valuation – August 2018 $JBT
Stanley Black & Decker Inc Valuation – June 2018 $SWK

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.

Lindsay Corp Valuation – October 2018 $LNN

Company Profile (excerpt from Reuters): Lindsay Corporation, incorporated on January 7, 1974, along with its subsidiaries, provides a range of water management and road infrastructure products and services. The Company operates through two segments: Irrigation Segment and Infrastructure Segment. The Irrigation Segment includes the manufacture and marketing of center pivot, lateral move, and hose reel irrigation systems, which are used primarily in the agricultural industry. The Infrastructure Segment includes the manufacture and marketing of moveable barriers, specialty barriers, crash cushions and end terminals, road marking and road safety equipment, large diameter steel tubing, and railroad signals and structures.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LNN – October 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,106,605,126 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.55 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 1.34% Fail
6. Moderate PEmg Ratio PEmg < 20 46.87 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.00 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.55 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.46 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.19
MG Growth Estimate -4.25%
MG Value $9.98
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $31.82
MG Value based on 0% Growth $18.65
Market Implied Growth Rate 19.19%
Current Price $102.87
% of Intrinsic Value 1030.26%

Lindsay Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.99 in 2014 to an estimated $2.19 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 19.19% 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 Lindsay Corporation revealed the company was trading above its Graham Number of $34.12. The company pays a dividend of $1.17 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 46.87, which was above the industry average of 31.29. Finally, the company was trading above its Net Current Asset Value (NCAV) of $9.98.

Lindsay Corporation receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $9.98
Graham Number $34.12
PEmg 46.87
Current Ratio 3.55
PB Ratio 4.00
Current Dividend $1.17
Dividend Yield 1.14%
Number of Consecutive Years of Dividend Growth 15

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 5/1/2018
Total Current Assets $350,406,000
Total Current Liabilities $98,671,000
Long-Term Debt $116,622,000
Total Assets $520,228,000
Intangible Assets $93,379,000
Total Liabilities $242,719,000
Shares Outstanding (Diluted Average) 10,785,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.05
Aug2017 $2.17
Aug2016 $1.85
Aug2015 $2.22
Aug2014 $4.00
Aug2013 $5.47
Aug2012 $3.38
Aug2011 $2.90
Aug2010 $1.98
Aug2009 $1.11
Aug2008 $3.20
Aug2007 $1.31
Aug2006 $1.00
Aug2005 $0.41
Aug2004 $0.78
Aug2003 $1.08
Aug2002 $0.76
Aug2001 $0.67
Aug2000 $1.06
Aug1999 $0.96
Aug1998 $1.61

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.19
Aug2017 $2.56
Aug2016 $2.96
Aug2015 $3.54
Aug2014 $3.99
Aug2013 $3.64
Aug2012 $2.66
Aug2011 $2.23
Aug2010 $1.84
Aug2009 $1.65
Aug2008 $1.72
Aug2007 $0.96
Aug2006 $0.79
Aug2005 $0.71
Aug2004 $0.86
Aug2003 $0.90
Aug2002 $0.88

Recommended Reading:

Other ModernGraham posts about the company

Lindsay Corp Valuation – Initial Coverage $LNN

Other ModernGraham posts about related companies

Standex International Corp Valuation – September 2018 $SXI
Lincoln Electric Holdings Inc Valuation – August 2018 $LECO
Regal Beloit Corp Valuation – August 2018 $RBC
Kennametal Inc Valuation – August 2018 $KMT
SPX Corp Valuation – August 2018 $SPXC
AGCO Corp Valuation – August 2018 $AGCO
John Bean Technologies Corp Valuation – August 2018 $JBT
Stanley Black & Decker Inc Valuation – June 2018 $SWK
Pentair PLC Valuation – June 2018 $PNR
Snap-on Inc Valuation – May 2018 $SNA

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.

Lennox International Inc Valuation – October 2018 $LII

Company Profile (excerpt from Reuters): Lennox International Inc., incorporated on August 13, 1991, is a provider of climate control solutions. The Company designs, manufactures and markets a range of products for the heating, ventilation, air conditioning and refrigeration (HVACR) markets. The Company operates through three segments: Residential Heating & Cooling, Commercial Heating & Cooling, and Refrigeration. The Company sells its products and services through a combination of direct sales, distributors, and company-owned parts and supplies stores. Its products and services are sold through various distribution channels under various brand names.

LII Chart

LII data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LII – October 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,770,827,357 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.86 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 371.49% Pass
6. Moderate PEmg Ratio PEmg < 20 32.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -49.69 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.86 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.04 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 $6.79
MG Growth Estimate 15.00%
MG Value $261.24
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $98.39
MG Value based on 0% Growth $57.68
Market Implied Growth Rate 11.81%
Current Price $217.88
% of Intrinsic Value 83.40%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.02 in 2014 to an estimated $6.79 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.81% 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 Lennox International Inc. revealed the company was trading above its Graham Number of $15.02. The company pays a dividend of $1.96 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 32.11, which was above the industry average of 31.29. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-21.75.

Lennox International Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$21.75
Graham Number $15.02
PEmg 32.11
Current Ratio 1.86
PB Ratio -49.69
Current Dividend $1.96
Dividend Yield 0.90%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $1,385,800,000
Total Current Liabilities $744,100,000
Long-Term Debt $1,307,100,000
Total Assets $2,099,400,000
Intangible Assets $186,800,000
Total Liabilities $2,279,600,000
Shares Outstanding (Diluted Average) 41,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.37
Dec2017 $7.14
Dec2016 $6.32
Dec2015 $4.09
Dec2014 $4.23
Dec2013 $3.39
Dec2012 $1.75
Dec2011 $1.65
Dec2010 $2.08
Dec2009 $0.90
Dec2008 $2.11
Dec2007 $2.43
Dec2006 $2.26
Dec2005 $2.11
Dec2004 -$2.24
Dec2003 $1.36
Dec2002 -$3.52
Dec2001 -$0.83
Dec2000 $0.79
Dec1999 $1.63
Dec1998 $1.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.79
Dec2017 $5.67
Dec2016 $4.61
Dec2015 $3.51
Dec2014 $3.02
Dec2013 $2.26
Dec2012 $1.70
Dec2011 $1.73
Dec2010 $1.83
Dec2009 $1.79
Dec2008 $1.94
Dec2007 $1.63
Dec2006 $0.81
Dec2005 -$0.15
Dec2004 -$1.15
Dec2003 -$0.44
Dec2002 -$0.92

Recommended Reading:

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Lennox International Inc Valuation – Initial Coverage $LII

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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.

Standex International Corp Valuation – September 2018 $SXI

Company Profile (excerpt from Reuters): Standex International Corporation, incorporated on May 22, 1975, is a diversified manufacturing company. The Company is a manufacturer of a range of products and services for diverse commercial and industrial market segments. The Company has 11 operating segments, aggregated and organized into five segments: Food Service Equipment, Engraving, Engineering Technologies, Electronics and Hydraulics. The Company has operations in the United States, Europe, Asia, Africa and Latin America.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SXI – September 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,409,622,698 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.38 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 64.56% Pass
6. Moderate PEmg Ratio PEmg < 20 25.93 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.12 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 2.38 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.87 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.24
MG Growth Estimate 3.03%
MG Value $61.70
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $61.45
MG Value based on 0% Growth $36.02
Market Implied Growth Rate 8.72%
Current Price $109.90
% of Intrinsic Value 178.13%

Standex Int’l Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.53 in 2015 to an estimated $4.24 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.72% 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 Standex Int’l Corp. revealed the company was trading above its Graham Number of $67.74. The company pays a dividend of $0.7 per share, for a yield of 0.6% Its PEmg (price over earnings per share – ModernGraham) was 25.93, which was below the industry average of 31.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-6.42.

Standex Int’l Corp. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$6.42
Graham Number $67.74
PEmg 25.93
Current Ratio 2.38
PB Ratio 3.12
Current Dividend $0.70
Dividend Yield 0.64%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $383,959,000
Total Current Liabilities $161,341,000
Long-Term Debt $193,772,000
Total Assets $916,937,000
Intangible Assets $349,837,000
Total Liabilities $466,142,000
Shares Outstanding (Diluted Average) 12,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.75
Jun2018 $2.86
Jun2017 $3.65
Jun2016 $4.08
Jun2015 $4.27
Jun2014 $3.35
Jun2013 $3.51
Jun2012 $2.42
Jun2011 $2.77
Jun2010 $2.26
Jun2009 -$0.44
Jun2008 $1.49
Jun2007 $1.71
Jun2006 $1.85
Jun2005 $1.91
Jun2004 $0.86
Jun2003 $1.16
Jun2002 $1.35
Jun2001 $2.02
Jun2000 $2.17
Jun1999 $2.41

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.24
Jun2018 $3.54
Jun2017 $3.84
Jun2016 $3.80
Jun2015 $3.53
Jun2014 $3.06
Jun2013 $2.64
Jun2012 $2.04
Jun2011 $1.75
Jun2010 $1.29
Jun2009 $0.97
Jun2008 $1.63
Jun2007 $1.64
Jun2006 $1.54
Jun2005 $1.41
Jun2004 $1.28
Jun2003 $1.60

Recommended Reading:

Other ModernGraham posts about the company

5 Best Stocks for Value Investors This Week – 3/18/17
Standex Int’l Corp Valuation – Initial Coverage $SXI

Other ModernGraham posts about related companies

Lincoln Electric Holdings Inc Valuation – August 2018 $LECO
Regal Beloit Corp Valuation – August 2018 $RBC
Kennametal Inc Valuation – August 2018 $KMT
SPX Corp Valuation – August 2018 $SPXC
AGCO Corp Valuation – August 2018 $AGCO
John Bean Technologies Corp Valuation – August 2018 $JBT
Stanley Black & Decker Inc Valuation – June 2018 $SWK
Pentair PLC Valuation – June 2018 $PNR
Snap-on Inc Valuation – May 2018 $SNA
Paccar Inc Valuation – May 2018 $PCAR

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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