Lithia Motors Inc Valuation – August 2018 $LAD

Company Profile (excerpt from Reuters): Lithia Motors, Inc. incorporated on December 23, 1968, is an operator of automotive franchises and a retailer of new and used vehicles and related services. As of February 28, 2017, it offered 30 brands of new vehicles and all brands of used vehicles in 154 stores in the United States and online at Lithia.com, DCHauto.com and CarboneCars.com. It operates through three segments: Domestic, Import and Luxury. Its Domestic segment consists of retail automotive franchises that sell new vehicles manufactured by Chrysler, General Motors and Ford. Its Import segment consists of retail automotive franchises that sell new vehicles manufactured primarily by Honda, Toyota, Subaru, Nissan and Volkswagen. Its Luxury segment consists of retail automotive franchises that sell new vehicles manufactured primarily by BMW, Mercedes-Benz and Lexus. The franchises in each segment also sell used vehicles, parts and automotive services, and automotive finance and insurance products. It sells new and used cars and replacement parts; provides vehicle maintenance, warranty, paint and repair services; arranges related financing, and sells vehicle service contracts, vehicle protection products and credit insurance. Its dealerships are located across the United States. It seeks domestic, import and luxury franchises in cities ranging from mid-sized regional markets to metropolitan markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LAD – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,076,632,934 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.20 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 748.73% Pass
6. Moderate PEmg Ratio PEmg < 20 10.12 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.84 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.20 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.69 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 $8.48
MG Growth Estimate 15.00%
MG Value $326.33
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $122.90
MG Value based on 0% Growth $72.05
Market Implied Growth Rate 0.81%
Current Price $85.79
% of Intrinsic Value 26.29%

Lithia Motors Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.78 in 2014 to an estimated $8.48 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.81% 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 above the price.

At the time of valuation, further research into Lithia Motors Inc revealed the company was trading below its Graham Number of $94.66. The company pays a dividend of $1.06 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 10.12, which was below the industry average of 18.51, 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 $-44.61.

Lithia Motors 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) -$44.61
Graham Number $94.66
PEmg 10.12
Current Ratio 1.20
PB Ratio 1.84
Current Dividend $1.06
Dividend Yield 1.24%
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 6/1/2018
Total Current Assets $2,893,329,000
Total Current Liabilities $2,412,211,000
Long-Term Debt $1,295,077,000
Total Assets $5,164,162,000
Intangible Assets $478,065,000
Total Liabilities $4,003,294,000
Shares Outstanding (Diluted Average) 24,882,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.18
Dec2017 $9.75
Dec2016 $7.72
Dec2015 $6.91
Dec2014 $5.26
Dec2013 $4.05
Dec2012 $3.07
Dec2011 $2.21
Dec2010 $0.52
Dec2009 $0.41
Dec2008 -$12.51
Dec2007 $1.06
Dec2006 $1.77
Dec2005 $2.54
Dec2004 $2.27
Dec2003 $1.93
Dec2002 $1.80
Dec2001 $1.60
Dec2000 $1.76
Dec1999 $1.60
Dec1998 $1.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.48
Dec2017 $7.66
Dec2016 $6.21
Dec2015 $5.07
Dec2014 $3.78
Dec2013 $2.71
Dec2012 $0.94
Dec2011 -$0.64
Dec2010 -$1.96
Dec2009 -$2.58
Dec2008 -$3.04
Dec2007 $1.76
Dec2006 $2.10
Dec2005 $2.18
Dec2004 $1.96
Dec2003 $1.78
Dec2002 $1.67

Recommended Reading:

Other ModernGraham posts about the company

Lithia Motors Inc Valuation – Initial Coverage $LAD

Other ModernGraham posts about related companies

Cooper-Standard Holdings Inc Valuation – August 2018 $CPS
Copart Inc Valuation – August 2018 $CPRT
Standard Motor Products Inc Valuation – August 2018 $SMP
Harley-Davidson Inc Valuation – June 2018 $HOG
Advance Auto Parts Inc Valuation – June 2018 $AAP
LKQ Corporation – June 2018 $LKQ
Aptiv PLC Valuation – Initial Coverage May 2018 $APTV
BorgWarner Inc Valuation – April 2018 $BWA
CarMax Inc Valuation – April 2018 $KMX
Ford Motor Company Valuation – April 2018 $F

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.

Lithia Motors Inc Valuation – Initial Coverage $LAD

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 Lithia Motors Inc (LAD) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Lithia Motors, Inc. is an operator of automotive franchises and a retailer of new and used vehicles and services. The Company operates in three segments: Domestic, Import and Luxury. Its Domestic segment consists of retail automotive franchises that sell new vehicles of Chrysler, General Motors and Ford. Its Import segment consists of retail automotive franchises that sell new vehicles manufactured primarily by Honda, Toyota, Subaru, Nissan and Volkswagen. Its Luxury segment consists of retail automotive franchises that sell new vehicles of BMW, Mercedes-Benz and Lexus. Its franchises in each segment sell used vehicles, parts and automotive services, and automotive finance and insurance products. Its operations involve the use, handling, storage and contracting for recycling and disposal of materials, such as motor oil and filters, transmission fluids, antifreeze, refrigerants, paints, thinners, batteries, cleaning products, lubricants, degreasing agents, tires and fuel.

LAD Chart

LAD data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LAD – 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 $2,511,996,603 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.17 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 -277.17% Fail
6. Moderate PEmg Ratio PEmg < 20 16.15 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.88 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.17 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.44 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 $6.10
MG Growth Estimate 15.00%
MG Value $234.95
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $88.49
MG Value based on 0% Growth $51.87
Market Implied Growth Rate 3.82%
Current Price $98.53
% of Intrinsic Value 41.94%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.94 in 2012 to an estimated $6.1 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.82% 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 Lithia Motors Inc revealed the company was trading above its Graham Number of $75.64. The company pays a dividend of $0.9 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 16.15, which was below the industry average of 18.47, 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 $-26.29.

Lithia Motors 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) -$26.29
Graham Number $75.64
PEmg 16.15
Current Ratio 1.17
PB Ratio 2.88
Current Dividend $0.90
Dividend Yield 0.91%
Number of Consecutive Years of Dividend Growth 3

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $2,032,698,000
Total Current Liabilities $1,735,179,000
Long-Term Debt $727,191,000
Total Assets $3,563,606,000
Intangible Assets $382,241,000
Total Liabilities $2,697,516,000
Shares Outstanding (Diluted Average) 25,290,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.39
Dec2015 $6.91
Dec2014 $5.26
Dec2013 $4.05
Dec2012 $3.07
Dec2011 $2.21
Dec2010 $0.52
Dec2009 $0.41
Dec2008 -$12.51
Dec2007 $1.06
Dec2006 $1.77
Dec2005 $2.54
Dec2004 $2.27
Dec2003 $1.93
Dec2002 $1.80
Dec2001 $1.60
Dec2000 $1.76
Dec1999 $1.60
Dec1998 $1.14
Dec1997 $0.82
Dec1996 $0.81

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.10
Dec2015 $5.07
Dec2014 $3.78
Dec2013 $2.71
Dec2012 $0.94
Dec2011 -$0.64
Dec2010 -$1.96
Dec2009 -$2.58
Dec2008 -$3.04
Dec2007 $1.76
Dec2006 $2.10
Dec2005 $2.18
Dec2004 $1.96
Dec2003 $1.78
Dec2002 $1.67
Dec2001 $1.53
Dec2000 $1.40

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

Cooper-Standard Holdings Inc Valuation – Initial Coverage $CPS
Copart Inc Valuation – Initial Coverage $CPRT
Standard Motor Products Inc Valuation – Initial Coverage $SMP
Harman International Industries Inc Valuation – January 2017 $HAR
BorgWarner Inc Valuation – December 2016 $BWA
Ford Motor Company Valuation – November 2016 $F
CarMax Inc Valuation – November 2016 $KMX
Advance Auto Parts Inc Valuation – November 2016 $AAP
General Motors Company Valuation – November 2016 $GM
Delphi Automotive PLC Valuation – August 2016 $DLPH

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.

Celadon Group Inc Valuation – Initial Coverage $CGI

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

Company Profile (obtained from Google Finance): Celadon Group, Inc. (Celadon) is a truckload freight transportation provider. The Company’s segments are asset-based, asset-light, and equipment leasing and services. Its services involve point-to-point shipping for its customers within the United States, between the United States and Mexico, and between the United States and Canada. The Company’s primary asset-based services include the United States domestic dry van, refrigerated and flatbed service; cross-border service between the United States and each of Mexico and Canada; intra-Mexico and intra-Canada service; contract service; regional and specialized short haul service, and rail intermodal service. The Company’s primary asset-light services include freight brokerage, warehousing, less-than truckload consolidation and supply chain logistics services. Celadon’s equipment leasing and services segment consists primarily of leasing activities with independent contractors and other trucking fleets.

CGI Chart

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CGI – December 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $251,138,109 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.16 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 286.44% Pass
6. Moderate PEmg Ratio PEmg < 20 12.22 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.68 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.16 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.73 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg $0.75
MG Growth Estimate -1.86%
MG Value $3.58
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $10.86
MG Value based on 0% Growth $6.36
Market Implied Growth Rate 1.86%
Current Price $9.15
% of Intrinsic Value 255.72%

Celadon Group, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history. 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 $0.85 in 2013 to an estimated $0.75 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.86% 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 Celadon Group, Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.08 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 12.22, which was below the industry average of 21.6, 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 $-17.47.

Celadon Group, 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) -$17.47
Graham Number $0.00
PEmg 12.22
Current Ratio 1.16
PB Ratio 0.68
Current Dividend $0.08
Dividend Yield 0.87%
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 9/1/2016
Total Current Assets $238,668,000
Total Current Liabilities $205,221,000
Long-Term Debt $158,152,000
Total Assets $1,094,756,000
Intangible Assets $62,451,000
Total Liabilities $721,253,000
Shares Outstanding (Diluted Average) 27,616,000

Earnings Per Share History

Next Fiscal Year Estimate -$0.12
Jun2016 $0.88
Jun2015 $1.52
Jun2014 $1.29
Jun2013 $1.17
Jun2012 $1.12
Jun2011 $0.67
Jun2010 $0.18
Jun2009 $0.12
Jun2008 $0.29
Jun2007 $0.94
Jun2006 $0.88
Jun2005 $0.55
Jun2004 -$0.01
Jun2003 $0.20
Jun2002 $0.10
Jun2001 -$0.31
Jun2000 -$0.12
Jun1999 $0.28
Jun1998 $0.35
Jun1997 $0.26

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.75
Jun2016 $1.19
Jun2015 $1.28
Jun2014 $1.07
Jun2013 $0.85
Jun2012 $0.62
Jun2011 $0.40
Jun2010 $0.33
Jun2009 $0.46
Jun2008 $0.60
Jun2007 $0.67
Jun2006 $0.47
Jun2005 $0.21
Jun2004 $0.02
Jun2003 $0.03
Jun2002 -$0.01
Jun2001 -$0.02

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

C.H. Robinson Worldwide Inc Valuation – August 2016 $CHRW
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Ryder System Inc Valuation – July 2016 $R
Expeditors International of Washington Valuation – June 2016 $EXPD
Expeditors International of Washington Valuation – January 2016 Update $EXPD
FedEx Corp Valuation – November 2015 Update $FDX
United Parcel Service Inc. Valuation – October 2015 Update $UPS
Expeditors International of Washington Analysis – October 2015 Update $EXPD
FedEx Corporation Analysis – August 2015 Update $FDX
C.H. Robinson Worldwide Inc. Analysis – 2015 Update $CHRW

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.

Chipotle Mexican Grill Inc Valuation – March 2019 #CMG

Company Profile (excerpt from Reuters): Chipotle Mexican Grill, Inc. (Chipotle), incorporated on January 30, 1998, together with its subsidiaries, operates Chipotle Mexican Grill restaurants. The Company’s Chipotle Mexican Grill restaurants serve a menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads. As of December 31, 2016, the Company managed its operations and restaurants based on 11 regions. As of December 31, 2016, the Company operated 2,198 Chipotle restaurants throughout the United States, as well as 29 international Chipotle restaurants, and it also had 23 restaurants in operation in other non-Chipotle concepts. As of December 31, 2016, 29 of its restaurants were located outside of the United States, with 17 in Canada, six in the United Kingdom, five in France and one in Frankfurt, Germany. The Company sells gift cards, which do not have an expiration date.

CMG Chart

CMG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CMG – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,600,677,500 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.81 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 11.30% Fail
6. Moderate PEmg Ratio PEmg < 20 87.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 13.05 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 1.81 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.71
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $111.83
MG Value based on 0% Growth $65.56
Market Implied Growth Rate 39.38%
Current Price $672.98
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $12.51 in 2015 to an estimated $7.71 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 39.38% 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 Chipotle Mexican Grill, Inc. revealed the company was trading above its Graham Number of $113.79. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 87.26, which was above the industry average of 33.53. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.34.

Chipotle Mexican Grill, 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) -$0.34
Graham Number $113.79
PEmg 87.26
Current Ratio 1.81
PB Ratio 13.05
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $814,794,000
Total Current Liabilities $449,990,000
Long-Term Debt $0
Total Assets $2,265,518,000
Intangible Assets $21,939,000
Total Liabilities $824,179,000
Shares Outstanding (Diluted Average) 27,947,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.06
Dec2018 $6.31
Dec2017 $6.17
Dec2016 $0.77
Dec2015 $15.10
Dec2014 $14.13
Dec2013 $10.47
Dec2012 $8.75
Dec2011 $6.76
Dec2010 $5.64
Dec2009 $3.95
Dec2008 $2.36
Dec2007 $2.13
Dec2006 $1.28
Dec2005 $1.43
Dec2004 $0.24
Dec2003 -$0.34
Dec2002 -$0.87
Dec2001 -$1.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.71
Dec2018 $6.86
Dec2017 $7.86
Dec2016 $9.09
Dec2015 $12.51
Dec2014 $10.53
Dec2013 $8.19
Dec2012 $6.53
Dec2011 $5.00
Dec2010 $3.77
Dec2009 $2.64
Dec2008 $1.82
Dec2007 $1.35
Dec2006 $0.75
Dec2005 $0.26
Dec2004 -$0.38
Dec2003 -$0.64

Recommended Reading:

Other ModernGraham posts about the company

Chipotle Mexican Grill Inc Valuation – June 2018 $CMG
Chipotle Mexican Grill Inc Valuation – March 2017 $CMG
Chipotle Mexican Grill Inc Valuation – August 2016 $CMG
Chipotle Mexican Grill Inc Stock Valuation – February 2016 $CMG
Chipotle Mexican Group Inc Valuation – November 2015 Update $CMG

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Yum Brands Inc Valuation – February 2019 $YUM
Starbucks Corporation Valuation – January 2019 $SBUX
McDonald’s Corp Valuation – November 2018 $MCD
Sonic Corp Valuation – August 2018 $SONC
Jack in the Box Inc Valuation – July 2018 $JACK
Chuy’s Holdings Inc Valuation – July 2018 $CHUY
Chipotle Mexican Grill Inc Valuation – June 2018 $CMG
Darden Restaurants Inc Valuation – May 2018 $DRI
Yum Brands Inc Valuation – April 2018 $YUM

Disclaimer:

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

American Airlines Group Inc Valuation – March 2019 #AAL

Company Profile (excerpt from Reuters): American Airlines Group Inc., incorporated on February 16, 1982, is a holding company. The Company’s primary business activity is the operation of a network air carrier, providing scheduled air transportation for passengers and cargo. The Company operates through American segment, which provides air transportation for passengers and cargo. Together with its regional airline subsidiaries and third-party regional carriers operating as American Eagle, its airline operated an average of nearly 6,700 flights per day to nearly 350 destinations in more than 50 countries, principally from its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, District of Columbia, as of December 31, 2016. In the fiscal year ended December 31, 2016, approximately 199 million passengers boarded its mainline and regional flights.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAL – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,392,244,457 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.12 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 -141.07% Fail
6. Moderate PEmg Ratio PEmg < 20 7.09 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.26 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.12 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.67 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.52
MG Growth Estimate 15.00%
MG Value $174.07
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $65.56
MG Value based on 0% Growth $38.43
Market Implied Growth Rate -0.71%
Current Price $32.04
% of Intrinsic Value 18.41%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.37 in 2015 to an estimated $4.52 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.71% annual earnings loss 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 American Airlines Group Inc revealed the company was trading below its Graham Number of $55.21. The company pays a dividend of $0.4 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 7.09, which was below the industry average of 10.49, 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 $-86.27.

American Airlines Group 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) -$86.27
Graham Number $55.21
PEmg 7.09
Current Ratio 1.12
PB Ratio 1.26
Current Dividend $0.40
Dividend Yield 1.25%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $19,257,000,000
Total Current Liabilities $17,121,000,000
Long-Term Debt $20,650,000,000
Total Assets $70,878,000,000
Intangible Assets $15,322,000,000
Total Liabilities $59,108,000,000
Shares Outstanding (Diluted Average) 461,916,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.50
Dec2018 $3.03
Dec2017 $2.61
Dec2016 $4.65
Dec2015 $11.07
Dec2014 $3.93
Dec2013 -$6.54
Dec2012 -$7.52
Dec2011 -$15.83
Dec2010 -$3.78
Dec2009 -$13.36
Dec2008 -$21.85
Dec2007 $4.77
Dec2006 $2.62
Dec2005 -$13.87
Dec2004 -$12.69
Dec2003 -$20.78
Dec2002 -$60.46
Dec2001 -$30.60
Dec2000 $13.47
Dec1999 $16.76

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.52
Dec2018 $4.37
Dec2017 $4.41
Dec2016 $3.91
Dec2015 $1.37
Dec2014 -$4.30
Dec2013 -$8.75
Dec2012 -$10.72
Dec2011 -$11.55
Dec2010 -$8.38
Dec2009 -$9.90
Dec2008 -$8.18
Dec2007 -$3.56
Dec2006 -$12.16
Dec2005 -$22.26
Dec2004 -$25.04
Dec2003 -$26.25

Recommended Reading:

Other ModernGraham posts about the company

American Airlines Group Inc Valuation – May 2018 $AAL
American Airlines Group Inc Valuation – February 2017 $AAL
American Airlines Group Inc Valuation – August 2016 $AAL
American Airlines Group Analysis – 2015 Initial Coverage $AAL

Other ModernGraham posts about related companies

Alaska Air Group Inc Valuation – February 2019 $ALK
Delta Air Lines Inc Valuation – January 2019 $DAL
United Continental Holdings Inc Valuation – January 2019 $UAL
JetBlue Airways Corp Valuation – August 2018 $JBLU
SkyWest Inc Valuation – July 2018 $SKYW
American Airlines Group Inc Valuation – May 2018 $AAL
Southwest Airlines Co Valuation – May 2018 $LUV
Alaska Air Group Inc Valuation – May 2018 $ALK
Delta Air Lines Inc Valuation – March 2018 $DAL
United Continental Holdings Inc Valuation – Initial Coverage $UAL

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.

Kraft Heinz Co Valuation – March 2019 #KHC

Company Profile (excerpt from Reuters): The Kraft Heinz Company (Kraft Heinz), incorporated on February 8, 2013, is a food and beverage company. The Company is engaged in the manufacturing and marketing of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. The Company’s segments include the United States, Canada and Europe. The Company’s remaining businesses are combined as Rest of World. The Rest of World consists of Latin America and Asia, Middle East and Africa (AMEA). The Company provides products for various occasions whether at home, in restaurants or on the go. The Company’s brands include Heinz, Kraft, Oscar Mayer, Philadelphia, Planters, Velveeta, Lunchables, Maxwell House, Capri Sun, and Ore-Ida. The Company’s products are sold through its own sales organizations and through independent brokers, agents and distributors to chain, wholesale, cooperative and independent grocery accounts, convenience stores, drug stores, value stores, bakeries, pharmacies, mass merchants, club stores, foodservice distributors and institutions, including hotels, restaurants, hospitals, healthcare facilities and certain government agencies.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KHC – March 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $39,177,731,650 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.22 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 -72.29% Fail
6. Moderate PEmg Ratio PEmg < 20 40.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.76 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.22 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 18.61 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.80
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $11.62
MG Value based on 0% Growth $6.81
Market Implied Growth Rate 15.81%
Current Price $32.15
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.82 in 2015 to an estimated $0.8 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.81% 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 Kraft Heinz Co revealed the company was trading below its Graham Number of $50.71. The company pays a dividend of $2.5 per share, for a yield of 7.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 40.12, which was above the industry average of 26.89. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-34.95.

Kraft Heinz Co receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$34.95
Graham Number $50.71
PEmg 40.12
Current Ratio 1.22
PB Ratio 0.76
Current Dividend $2.50
Dividend Yield 7.78%
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 12/1/2018
Total Current Assets $9,091,000,000
Total Current Liabilities $7,432,000,000
Long-Term Debt $30,873,000,000
Total Assets $103,627,000,000
Intangible Assets $85,986,000,000
Total Liabilities $51,724,000,000
Shares Outstanding (Diluted Average) 1,220,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.69
Dec2018 -$8.39
Dec2017 $8.95
Dec2016 $2.81
Dec2015 -$0.34
Dec2014 $1.74
Dec2013 $4.51
Dec2012 $2.75
Dec2011 $3.00
Dec2010 $5.98

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.80
Dec2018 $0.22
Dec2017 $4.20
Dec2016 $1.98
Dec2015 $1.82
Dec2014 $3.13
Dec2013 $3.63
Dec2012 $2.91
Dec2011 $2.59
Dec2010 $1.99

Recommended Reading:

Other ModernGraham posts about the company

Kraft Heinz Co Valuation – May 2018 $KHC
5 of the Worst Stocks to Invest In – February 2017
Kraft Heinz Co Valuation – Initial Coverage $KHC

Other ModernGraham posts about related companies

Sysco Corp Valuation – March 2019 $SYY
General Mills Inc Valuation – February 2019 $GIS
McCormick & Co Valuation – February 2019 $MKC
Archer-Daniels Midland Co Valuation – February 2019 $ADM
Conagra Brands Inc Valuation – February 2019 $CAG
Monster Beverage Corp Valuation – February 2019 $MNST
Campbell Soup Co Valuation – January 2019 $CPB
Kellogg Co Valuation – January 2019 $K
PepsiCo Inc Valuation – January 2019 $PEP
The Hershey Co Valuation – January 2019 $HSY

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.

Clorox Co Valuation – March 2019 $CLX

Company Profile (excerpt from Reuters): The Clorox Company, incorporated on September 5, 1986, is a manufacturer and marketer of consumer and professional products. The Company sells its products primarily through mass retail outlets, e-commerce channels, wholesale distributors and medical supply distributors. The Company operates through four segments: Cleaning, Household, Lifestyle and International. The Company markets some of the consumer brand names, including namesake bleach and cleaning products, Pine-Sol cleaners, Liquid-Plumr clog removers, Poett home care products, Fresh Step cat litter, Glad bags, wraps and containers, Kingsford charcoal, Hidden Valley dressings and sauces, Brita water-filtration products and Burt’s Bees natural personal care products. The Company also markets brands for professional services, including Clorox Healthcare and Clorox Commercial Solutions. The Company manufactures products in approximately 10 countries and markets them in over 100 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CLX – March 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,224,279,591 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.15 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 44.05% Pass
6. Moderate PEmg Ratio PEmg < 20 27.45 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 27.67 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 1.15 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 12.77 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 $5.75
MG Growth Estimate 5.25%
MG Value $109.28
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $83.37
MG Value based on 0% Growth $48.87
Market Implied Growth Rate 9.47%
Current Price $157.80
% of Intrinsic Value 144.40%

Clorox Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.26 in 2015 to an estimated $5.75 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.47% 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 Clorox Co revealed the company was trading above its Graham Number of $28.13. The company pays a dividend of $3.48 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 27.45, which was above the industry average of 26.43. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-22.8.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$22.80
Graham Number $28.13
PEmg 27.45
Current Ratio 1.15
PB Ratio 27.67
Current Dividend $3.48
Dividend Yield 2.21%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,365,000,000
Total Current Liabilities $1,186,000,000
Long-Term Debt $2,285,000,000
Total Assets $5,073,000,000
Intangible Assets $2,505,000,000
Total Liabilities $4,331,000,000
Shares Outstanding (Diluted Average) 130,094,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.20
Jun2018 $6.26
Jun2017 $5.33
Jun2016 $4.92
Jun2015 $4.37
Jun2014 $4.23
Jun2013 $4.30
Jun2012 $4.09
Jun2011 $4.02
Jun2010 $4.24
Jun2009 $3.79
Jun2008 $3.24
Jun2007 $3.26
Jun2006 $2.90
Jun2005 $6.11
Jun2004 $2.56
Jun2003 $2.23
Jun2002 $1.37
Jun2001 $1.35
Jun2000 $1.64
Jun1999 $0.52

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.75
Jun2018 $5.36
Jun2017 $4.81
Jun2016 $4.50
Jun2015 $4.26
Jun2014 $4.19
Jun2013 $4.15
Jun2012 $4.00
Jun2011 $3.88
Jun2010 $3.70
Jun2009 $3.57
Jun2008 $3.51
Jun2007 $3.57
Jun2006 $3.50
Jun2005 $3.44
Jun2004 $2.01
Jun2003 $1.63

Recommended Reading:

Other ModernGraham posts about the company

Clorox Co Valuation – May 2018 $CLX
Clorox Company Valuation – January 2017 $CLX
Clorox Company Analysis – September 2015 Update $CLX
23 Companies to Research This Week – 9/13/14
Clorox Company Annual Stock Valuation – 2014 $CLX

Other ModernGraham posts about related companies

Kimberly-Clark Corp Valuation – January 2019 $KMB
Newell Brands Inc Valuation – January 2019 $NWL
Sleep Number Corp Valuation – July 2018 $SNBR
National Presto Industries Inc Valuation – June 2018 $NPK
Leggett & Platt Inc Valuation – June 2018 $LEG
Clorox Co Valuation – May 2018 $CLX
Newell Brands Inc Valuation – March 2018 $NWL
La-Z-Boy Inc Valuation – Initial Coverage $LZB
Tupperware Brands Corp Valuation – Initial Coverage $TUP
Leggett & Platt Inc Valuation – March 2017 $LEG

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.

Ford Motor Co Valuation – February 2019 $F

Company Profile (excerpt from Reuters): Ford Motor Company, incorporated on July 9, 1919, is a global automotive and mobility company. The Company’s business includes designing, manufacturing, marketing, and servicing a line of Ford cars, trucks, and sport utility vehicles (SUVs), as well as Lincoln luxury vehicles. The Company operates in four segments: Automotive, Financial Services, Ford Smart Mobility LLC, and Central Treasury Operations. Ford Smart Mobility LLC and Central Treasury Operations are combined in All Other. The Company’s vehicle brands are Ford and Lincoln. The Company sells its dealerships for retail sale, it also sells vehicles to its dealerships for sale to fleet customers, including commercial fleet customers, daily rental car companies, and governments. The Company also sells parts and accessories, primarily to its dealerships (which in turn sell these products to retail customers) and to authorized parts distributors (which in turn primarily sell these products to retailers). The Company also offers extended service contracts.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of F – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $33,366,215,390 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.19 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -52.93% Fail
6. Moderate PEmg Ratio PEmg < 20 7.01 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.95 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.19 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.59 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 $1.22
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $17.66
MG Value based on 0% Growth $10.35
Market Implied Growth Rate -0.74%
Current Price $8.54
% of Intrinsic Value N/A

Ford Motor Company 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 poor dividend history. 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 $1.8 in 2015 to an estimated $1.22 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.74% annual earnings loss 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 Ford Motor Company revealed the company was trading below its Graham Number of $13.9. The company pays a dividend of $0.6 per share, for a yield of 7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.01, which was below the industry average of 21.23, 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 $-26.81.

Ford Motor 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) -$26.81
Graham Number $13.90
PEmg 7.01
Current Ratio 1.19
PB Ratio 0.95
Current Dividend $0.60
Dividend Yield 7.03%
Number of Consecutive Years of Dividend Growth 0

 

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $113,585,000,000
Total Current Liabilities $95,569,000,000
Long-Term Debt $100,720,000,000
Total Assets $256,540,000,000
Intangible Assets $0
Total Liabilities $220,574,000,000
Shares Outstanding (Diluted Average) 3,989,957,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.95
Dec2018 $0.92
Dec2017 $1.90
Dec2016 $1.15
Dec2015 $1.84
Dec2014 $0.31
Dec2013 $2.94
Dec2012 $1.41
Dec2011 $4.94
Dec2010 $1.66
Dec2009 $0.86
Dec2008 -$6.50
Dec2007 -$1.40
Dec2006 -$6.73
Dec2005 $0.77
Dec2004 $1.52
Dec2003 $0.13
Dec2002 $0.47
Dec2001 -$3.02
Dec2000 $2.30
Dec1999 $5.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.22
Dec2018 $1.31
Dec2017 $1.55
Dec2016 $1.42
Dec2015 $1.80
Dec2014 $1.94
Dec2013 $2.62
Dec2012 $1.80
Dec2011 $1.30
Dec2010 -$1.15
Dec2009 -$2.57
Dec2008 -$3.68
Dec2007 -$1.90
Dec2006 -$1.69
Dec2005 $0.55
Dec2004 $0.39
Dec2003 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Ford Motor Company Valuation – April 2018 $F
Ford Motor Company Valuation – November 2016 $F
Ford Motor Company Valuation – August 2016 $F
Dividend Investors Should Research These 10 Stocks – July 2016
Benjamin Graham Would Love These 10 Companies Today

Other ModernGraham posts about related companies

O’Reilly Automotive Inc Valuation – February 2019 $ORLY
Goodyear Tire & Rubber Co Valuation – January 2019 $GT
Genuine Parts Co Valuation – January 2019 $GPC
Autozone Inc Valuation – January 2019 $AZO
Linamar Corp Valuation – October 2018 $TSE-LNR
AutoNation Inc Valuation – September 2018 $AN
Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL

Disclaimer:

The author held a long position in F 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.

General Motors Co Valuation – February 2019 $GM

Company Profile (excerpt from Reuters): General Motors Company, incorporated on August 11, 2009, designs, builds and sells cars, trucks, crossovers and automobile parts. The Company’s segments include GM North America (GMNA), GM Europe (GME), GM International Operations (GMIO), GM South America (GMSA) and General Motors Financial Company, Inc. (GM Financial). The Company provides automotive financing services through General Motors Financial Company, Inc. The Company develops, manufactures and/or markets vehicles in North America under the brands, including Buick, Cadillac, Chevrolet and GMC. The Company also develops, manufactures and/or markets vehicles outside North America under the brands, including Buick, Cadillac, Chevrolet, GMC, Holden, Opel and Vauxhall.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GM – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $55,096,534,325 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.92 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 -14.05% Fail
6. Moderate PEmg Ratio PEmg < 20 9.41 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.31 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.92 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.52 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.16
MG Growth Estimate 2.41%
MG Value $55.33
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $60.25
MG Value based on 0% Growth $35.32
Market Implied Growth Rate 0.45%
Current Price $39.09
% of Intrinsic Value 70.65%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.58 in 2015 to an estimated $4.16 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.45% 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 General Motors Company revealed the company was trading below its Graham Number of $61.47. The company pays a dividend of $1.52 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.41, which was below the industry average of 21.23, 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 $-76.36.

General Motors Company performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$76.36
Graham Number $61.47
PEmg 9.41
Current Ratio 0.92
PB Ratio 1.31
Current Dividend $1.52
Dividend Yield 3.89%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $75,293,000,000
Total Current Liabilities $82,237,000,000
Long-Term Debt $73,060,000,000
Total Assets $227,339,000,000
Intangible Assets $5,579,000,000
Total Liabilities $184,562,000,000
Shares Outstanding (Diluted Average) 1,431,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.05
Dec2018 $5.53
Dec2017 -$2.65
Dec2016 $6.00
Dec2015 $5.91
Dec2014 $1.65
Dec2013 $2.38
Dec2012 $2.92
Dec2011 $4.58
Dec2010 $2.89
Dec2009 $113.18
Dec2008 -$53.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.16
Dec2018 $3.23
Dec2017 $2.28
Dec2016 $4.42
Dec2015 $3.58
Dec2014 $2.57
Dec2013 $10.42
Dec2012 $14.30
Dec2011 $17.80
Dec2010 $20.45
Dec2009 $23.47
Dec2008 -$17.82

Recommended Reading:

Other ModernGraham posts about the company

General Motors Co Valuation – April 2018 $GM
General Motors Company Valuation – November 2016 $GM
General Motors Company Analysis – 2015 Update $GM
17 Companies in the Spotlight This Week – 8/2/14
General Motors Co. Annual Valuation – 2014 $GM

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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.

Monster Beverage Corp Valuation – February 2019 $MNST

Company Profile (excerpt from Reuters): Monster Beverage Corporation, incorporated on August 12, 2014, develops, markets, sells and distributes energy drink beverages, sodas and/or concentrates for energy drink beverages, primarily under various brand names, including Monster Energy, Monster Rehab, Monster Energy Extra Strength Nitrous Technology, Java Monster, Muscle Monster, Mega Monster Energy, Punch Monster, Juice Monster, Ubermonster, BU, Mutant Super Soda, Nalu, NOS, Burn, Mother, Ultra, Play and Power Play, Gladiator, Relentless, Samurai, BPM and Full Throttle. The Company has three segments: Monster Energy Drinks segment, which consists of its Monster Energy drinks, as well as Mutant Super Soda drinks; Strategic Brands segment, which includes various energy drink brands owned through The Coca-Cola Company (TCCC), and Other segment (Other), which includes the American Fruits & Flavors (AFF) third-party products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MNST – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $31,972,320,491 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.28 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 242.61% Pass
6. Moderate PEmg Ratio PEmg < 20 42.16 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.32 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 3.28 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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 $1.37
MG Growth Estimate 14.50%
MG Value $51.42
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $19.88
MG Value based on 0% Growth $11.66
Market Implied Growth Rate 16.83%
Current Price $57.82
% of Intrinsic Value 112.45%

Monster Beverage Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the 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 $0.7 in 2014 to an estimated $1.37 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.83% 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 Monster Beverage Corp revealed the company was trading above its Graham Number of $16.22. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 42.16, which was above the industry average of 26.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $2.1.

Monster Beverage 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) $2.10
Graham Number $16.22
PEmg 42.16
Current Ratio 3.28
PB Ratio 8.32
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 9/1/2018
Total Current Assets $2,152,671,000
Total Current Liabilities $656,362,000
Long-Term Debt $0
Total Assets $4,871,359,000
Intangible Assets $2,373,891,000
Total Liabilities $978,092,000
Shares Outstanding (Diluted Average) 559,955,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.70
Dec2017 $1.42
Dec2016 $1.19
Dec2015 $0.95
Dec2014 $0.92
Dec2013 $0.65
Dec2012 $0.62
Dec2011 $0.51
Dec2010 $0.38
Dec2009 $0.37
Dec2008 $0.19
Dec2007 $0.25
Dec2006 $0.17
Dec2005 $0.11
Dec2004 $0.04
Dec2003 $0.01
Dec2002 $0.01
Dec2001 $0.01
Dec2000 $0.01
Dec1999 $0.01
Dec1998 $0.01

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.37
Dec2017 $1.15
Dec2016 $0.96
Dec2015 $0.81
Dec2014 $0.70
Dec2013 $0.56
Dec2012 $0.48
Dec2011 $0.39
Dec2010 $0.31
Dec2009 $0.25
Dec2008 $0.18
Dec2007 $0.16
Dec2006 $0.09
Dec2005 $0.05
Dec2004 $0.02
Dec2003 $0.01
Dec2002 $0.01

Recommended Reading:

Other ModernGraham posts about the company

Monster Beverage Corp Valuation – April 2018 $MNST
Monster Beverage Corp Valuation – July 2016 $MNST
Monster Beverage Corp Valuation – January 2016 Update $MNST
Monster Beverage Corporation Analysis – October 2015 Update $MNST
Monster Beverage Analysis – July 2015 Update $MNST

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Disclaimer:

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

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