Lydall Inc Valuation – August 2018 $LDL

Company Profile (excerpt from Reuters): Lydall, Inc., incorporated on August 26, 1987, designs and manufactures specialty engineered filtration media, industrial thermal insulating solutions, automotive thermal and acoustical barriers for filtration/separation and thermal/acoustical applications. The Company’s segments are Performance Materials, Technical Nonwovens, Thermal/Acoustical Metals and Thermal/Acoustical Fibers. The Performance Materials segment includes filtration, thermal insulation and life sciences filtration businesses. The Technical Nonwovens segment includes its industrial filtration and advanced materials products. The Thermal/Acoustical Metals segment includes its metal parts and related tooling used in automotive applications. The Thermal/Acoustical Fibers segment includes its fiber parts business and related tooling used in automotive applications.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LDL – 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 $772,392,250 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.82 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 7420.00% Pass
6. Moderate PEmg Ratio PEmg < 20 17.67 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.05 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.82 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.40 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.48
MG Growth Estimate 15.00%
MG Value $95.30
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $35.89
MG Value based on 0% Growth $21.04
Market Implied Growth Rate 4.59%
Current Price $43.75
% of Intrinsic Value 45.91%

Lydall, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, and the poor dividend history. 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 Undervalued after growing its EPSmg (normalized earnings) from $1.05 in 2014 to an estimated $2.48 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.59% 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 Lydall, Inc. revealed the company was trading above its Graham Number of $33.93. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 17.67, 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 $5.29.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $5.29
Graham Number $33.93
PEmg 17.67
Current Ratio 2.82
PB Ratio 2.05
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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Yahoo Finance Seeking Alpha
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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $299,846,000
Total Current Liabilities $106,310,000
Long-Term Debt $76,784,000
Total Assets $578,774,000
Intangible Assets $103,351,000
Total Liabilities $208,059,000
Shares Outstanding (Diluted Average) 17,335,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.51
Dec2017 $2.85
Dec2016 $2.16
Dec2015 $2.71
Dec2014 $1.28
Dec2013 $1.14
Dec2012 $0.99
Dec2011 $0.82
Dec2010 $0.16
Dec2009 -$0.88
Dec2008 -$0.31
Dec2007 $0.55
Dec2006 $0.63
Dec2005 $0.32
Dec2004 -$0.03
Dec2003 $0.47
Dec2002 $0.69
Dec2001 $0.39
Dec2000 -$0.15
Dec1999 $0.68
Dec1998 $0.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.48
Dec2017 $2.31
Dec2016 $1.92
Dec2015 $1.66
Dec2014 $1.05
Dec2013 $0.77
Dec2012 $0.44
Dec2011 $0.14
Dec2010 -$0.13
Dec2009 -$0.16
Dec2008 $0.21
Dec2007 $0.44
Dec2006 $0.40
Dec2005 $0.31
Dec2004 $0.30
Dec2003 $0.44
Dec2002 $0.41

Recommended Reading:

Other ModernGraham posts about the company

11 Best Stocks for Value Investors This Week – 3/4/17
Lydall Inc Valuation – Initial Coverage $LDL

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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.

Lydall Inc Valuation – Initial Coverage $LDL

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 Lydall Inc (LDL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Lydall, Inc. (Lydall) designs and manufactures specialty engineered non-woven filtration media, industrial thermal insulating solutions, and thermal and acoustical barriers for filtration or separation and heat abatement, and sound dampening applications. The Company’s segments are Performance Materials, Industrial Filtration, Thermal/Acoustical Metals, and Thermal/Acoustical Fibers. The Performance Materials segment is engaged in the filtration, thermal insulation and life sciences filtration businesses. The Industrial Filtration segment is engaged in the Lydall’s industrial non-woven felt media and filter bag business. The Thermal/Acoustical Metals segment is engaged in the Lydall’s metal parts and related tooling. The Thermal/Acoustical Fibers segment is engaged in the Lydall’s fiber parts business and related tooling business for use in automotive applications. The Company’s products are sold to original equipment manufacturers and tier-one suppliers.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LDL – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $884,724,960 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.83 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -831.07% Fail
6. Moderate PEmg Ratio PEmg < 20 23.32 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.31 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 2.83 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.78 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.25
MG Growth Estimate 15.00%
MG Value $86.68
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $32.64
MG Value based on 0% Growth $19.14
Market Implied Growth Rate 7.41%
Current Price $52.50
% of Intrinsic Value 60.57%

Lydall, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, 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 Undervalued after growing its EPSmg (normalized earnings) from $0.77 in 2013 to an estimated $2.25 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.41% 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 Lydall, Inc. revealed the company was trading above its Graham Number of $30.88. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 23.32, which was above the industry average of 22.25. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.12.

Lydall, 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) $0.12
Graham Number $30.88
PEmg 23.32
Current Ratio 2.83
PB Ratio 3.31
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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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 $255,606,000
Total Current Liabilities $90,444,000
Long-Term Debt $128,141,000
Total Assets $527,029,000
Intangible Assets $105,053,000
Total Liabilities $253,573,000
Shares Outstanding (Diluted Average) 17,241,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.66
Dec2016 $2.16
Dec2015 $2.71
Dec2014 $1.28
Dec2013 $1.14
Dec2012 $0.99
Dec2011 $0.82
Dec2010 $0.16
Dec2009 -$0.88
Dec2008 -$0.31
Dec2007 $0.55
Dec2006 $0.63
Dec2005 $0.32
Dec2004 -$0.03
Dec2003 $0.47
Dec2002 $0.69
Dec2001 $0.39
Dec2000 -$0.15
Dec1999 $0.68
Dec1998 $0.26
Dec1997 $1.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.25
Dec2016 $1.92
Dec2015 $1.66
Dec2014 $1.05
Dec2013 $0.77
Dec2012 $0.44
Dec2011 $0.14
Dec2010 -$0.13
Dec2009 -$0.16
Dec2008 $0.21
Dec2007 $0.44
Dec2006 $0.40
Dec2005 $0.31
Dec2004 $0.30
Dec2003 $0.44
Dec2002 $0.41
Dec2001 $0.35

Recommended Reading:

Other ModernGraham posts about the company

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

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Disclaimer:

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

BorgWarner Inc Valuation – February 2019 $BWA

Company Profile (excerpt from Reuters): BorgWarner Inc., incorporated on May 4, 1987, is engaged in providing technology solutions for combustion, hybrid and electric vehicles. The Company’s segments include Engine and Drivetrain. The Engine segment’s products include turbochargers, timing devices and chains, emissions systems and thermal systems. The Drivetrain segment’s products include transmission components and systems, all-wheel drive (AWD) torque transfer systems and rotating electrical devices. The Company’s products are manufactured and sold across the world, primarily to original equipment manufacturers (OEMs) of light vehicles (passenger cars, sport-utility vehicles (SUVs), vans and light trucks). Its products are also sold to other OEMs of commercial vehicles (medium-duty trucks, heavy-duty trucks and buses) and off-highway vehicles (agricultural and construction machinery and marine applications). The Company also manufactures and sells its products to certain Tier One vehicle systems suppliers and into the aftermarket for light, commercial and off-highway vehicles. The Company operates manufacturing facilities serving customers in Europe, the Americas and Asia.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BWA – 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 $8,694,363,986 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.59 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 81.86% Pass
6. Moderate PEmg Ratio PEmg < 20 11.93 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.01 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 1.59 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.38 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.51
MG Growth Estimate 5.38%
MG Value $67.56
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $50.88
MG Value based on 0% Growth $29.82
Market Implied Growth Rate 1.72%
Current Price $41.86
% of Intrinsic Value 61.96%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.58 in 2015 to an estimated $3.51 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.72% 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 above the price.

At the time of valuation, further research into BorgWarner Inc. revealed the company was trading below its Graham Number of $43.32. The company pays a dividend of $0.68 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 11.93, 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 $-9.33.

BorgWarner Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.33
Graham Number $43.32
PEmg 11.93
Current Ratio 1.59
PB Ratio 2.01
Current Dividend $0.68
Dividend Yield 1.62%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

ModernGraham tagged articles Morningstar
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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,804,600,000
Total Current Liabilities $2,398,900,000
Long-Term Debt $1,940,700,000
Total Assets $10,095,300,000
Intangible Assets $2,292,900,000
Total Liabilities $5,750,500,000
Shares Outstanding (Diluted Average) 208,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.11
Dec2018 $4.44
Dec2017 $2.08
Dec2016 $2.76
Dec2015 $2.56
Dec2014 $2.86
Dec2013 $2.70
Dec2012 $2.09
Dec2011 $2.22
Dec2010 $1.54
Dec2009 $0.12
Dec2008 -$0.16
Dec2007 $1.23
Dec2006 $0.92
Dec2005 $1.04
Dec2004 $0.97
Dec2003 $0.80
Dec2002 -$0.56
Dec2001 $0.31
Dec2000 $0.44
Dec1999 $0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.51
Dec2018 $3.12
Dec2017 $2.50
Dec2016 $2.67
Dec2015 $2.58
Dec2014 $2.49
Dec2013 $2.11
Dec2012 $1.60
Dec2011 $1.23
Dec2010 $0.74
Dec2009 $0.43
Dec2008 $0.66
Dec2007 $1.04
Dec2006 $0.85
Dec2005 $0.71
Dec2004 $0.49
Dec2003 $0.28

Recommended Reading:

Other ModernGraham posts about the company

BorgWarner Inc Valuation – April 2018 $BWA
BorgWarner Inc Valuation – December 2016 $BWA
BorgWarner Inc Valuation – August 2016 $BWA
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Lydall Inc Valuation – August 2018 $LDL

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.

Regeneron Pharmaceuticals Inc Valuation – February 2019 $REGN

Company Profile (excerpt from Reuters): Regeneron Pharmaceuticals, Inc., incorporated on January 11, 1988, is a biopharmaceutical company that discovers, invents, develops, manufactures and commercializes medicines for the treatment of serious medical conditions. The Company commercializes medicines for eye diseases, high low-density lipoprotein (LDL) cholesterol, and an inflammatory condition and have product candidates in development in other areas, including rheumatoid arthritis, asthma, atopic dermatitis, pain, cancer, and infectious diseases. The Company’s marketed products include EYLEA (aflibercept) Injection, Praluent (alirocumab) Injection, ARCALYST (rilonacept) Injection for Subcutaneous Use, Kevzara (sarilumab) Solution for Subcutaneous Injection and ZALTRAP (ziv-aflibercept) Injection for intravenous infusion. As of December 31, 2016, the Company had 16 product candidates in clinical development, which consisted of a Trap-based clinical program and 15 fully human monoclonal antibody product candidates. Its antibodies are generated using its VelocImmune technology.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of REGN – 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 $45,297,630,364 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.47 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 1470.07% Pass
6. Moderate PEmg Ratio PEmg < 20 29.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.52 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 4.47 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 $14.51
MG Growth Estimate 15.00%
MG Value $558.51
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $210.35
MG Value based on 0% Growth $123.31
Market Implied Growth Rate 10.29%
Current Price $421.90
% of Intrinsic Value 75.54%

Regeneron Pharmaceuticals Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg 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 Fairly Valued after growing its EPSmg (normalized earnings) from $4.12 in 2015 to an estimated $14.51 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 10.29% 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 Regeneron Pharmaceuticals Inc revealed the company was trading above its Graham Number of $170.59. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 29.08, which was below the industry average of 39.51, 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 $30.26.

Regeneron Pharmaceuticals 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) $30.26
Graham Number $170.59
PEmg 29.08
Current Ratio 4.47
PB Ratio 5.52
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 $6,447,600,000
Total Current Liabilities $1,442,800,000
Long-Term Debt $0
Total Assets $11,734,500,000
Intangible Assets $0
Total Liabilities $2,977,200,000
Shares Outstanding (Diluted Average) 114,671,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $16.10
Dec2018 $21.29
Dec2017 $10.34
Dec2016 $7.70
Dec2015 $5.52
Dec2014 $2.98
Dec2013 $3.72
Dec2012 $6.75
Dec2011 -$2.45
Dec2010 -$1.26
Dec2009 -$0.85
Dec2008 -$1.00
Dec2007 -$1.59
Dec2006 -$1.77
Dec2005 -$1.71
Dec2004 $0.74
Dec2003 -$2.13
Dec2002 -$2.83
Dec2001 -$1.81
Dec2000 -$0.66
Dec1999 -$0.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $14.51
Dec2018 $12.33
Dec2017 $7.25
Dec2016 $5.58
Dec2015 $4.12
Dec2014 $2.92
Dec2013 $2.33
Dec2012 $1.16
Dec2011 -$1.56
Dec2010 -$1.18
Dec2009 -$1.22
Dec2008 -$1.29
Dec2007 -$1.39
Dec2006 -$1.37
Dec2005 -$1.30
Dec2004 -$1.17
Dec2003 -$1.96

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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.

CarMax Inc Valuation – February 2019 $KMX

Company Profile (excerpt from Reuters): CarMax, Inc. (CarMax), incorporated on October 4, 1996, is a holding company. The Company is a retailer of used vehicles. The Company operates through two segments: CarMax Sales Operations and CarMax Auto Finance (CAF). The Company’s CarMax Sales Operations segment consists of all aspects of its auto merchandising and service operations, excluding financing provided by CAF. The Company’s CAF segment consists of its own finance operation that provides vehicle financing through CarMax stores. The Company operates approximately 160 used car stores in over 70 metropolitan markets. The Company’s products and services include retail merchandising, wholesale auctions, extended protection plans (EPPs), reconditioning and service, and customer credit. It offers customers a range of makes and models of used vehicles, including both domestic and imported vehicles. It provides condition disclosures on each vehicle, including those for vehicles with major mechanical issues, possible frame or flood damage, branded titles, salvage history and unknown true mileage. It performs routine mechanical and minor body repairs in-house; however, for some reconditioning services, including but not limited to services related to manufacturer’s warranties, it engages third parties specializing in those services. The Company offers financing alternatives for retail customers across a range of the credit spectrum through CAF and arrangements with several financial institutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KMX – 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 $10,521,581,923 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.50 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 143.19% Pass
6. Moderate PEmg Ratio PEmg < 20 16.62 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.16 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.50 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 7.09 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.72
MG Growth Estimate 10.27%
MG Value $108.09
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $53.96
MG Value based on 0% Growth $31.63
Market Implied Growth Rate 4.06%
Current Price $61.86
% of Intrinsic Value 57.23%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.21 in 2015 to an estimated $3.72 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.06% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into CarMax, Inc revealed the company was trading above its Graham Number of $43.56. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 16.62, 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 $-67.9.

CarMax, 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) -$67.90
Graham Number $43.56
PEmg 16.62
Current Ratio 2.50
PB Ratio 3.16
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 11/1/2018
Total Current Assets $3,057,419,000
Total Current Liabilities $1,224,873,000
Long-Term Debt $12,989,406,000
Total Assets $18,396,812,000
Intangible Assets $0
Total Liabilities $14,961,699,000
Shares Outstanding (Diluted Average) 175,321,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.57
Feb2018 $3.60
Feb2017 $3.26
Feb2016 $3.03
Feb2015 $2.73
Feb2014 $2.16
Feb2013 $1.87
Feb2012 $1.79
Feb2011 $1.65
Feb2010 $1.26
Feb2009 $0.27
Feb2008 $0.83
Feb2007 $0.92
Feb2006 $0.63
Feb2005 $0.48
Feb2004 $0.55
Feb2003 $0.46
Feb2002 $0.44
Feb2001 $0.23
Feb2000 $0.01
Feb1999 -$0.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.72
Feb2018 $3.18
Feb2017 $2.85
Feb2016 $2.54
Feb2015 $2.21
Feb2014 $1.88
Feb2013 $1.62
Feb2012 $1.38
Feb2011 $1.11
Feb2010 $0.82
Feb2009 $0.61
Feb2008 $0.75
Feb2007 $0.67
Feb2006 $0.54
Feb2005 $0.47
Feb2004 $0.42
Feb2003 $0.31

Recommended Reading:

Other ModernGraham posts about the company

CarMax Inc Valuation – April 2018 $KMX
CarMax Inc Valuation – November 2016 $KMX
Carmax Inc Valuation – August 2016 $KMX
CarMax Inc. Annual Valuation – 2015 $KMX
16 Companies in the Spotlight this Week – 4/19/14

Other ModernGraham posts about related companies

Ford Motor Co Valuation – February 2019 $F
General Motors Co Valuation – February 2019 $GM
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

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

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 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.

Rollins Inc Valuation – February 2019 $ROL

Company Profile (excerpt from Reuters): Rollins, Inc., incorporated on February 24, 1948, is a service company, which operates in pest and termite control business segment. The Company, through its subsidiaries, provides its services to both residential and commercial customers in North America, Australia, and Europe with international franchises in Central America, the Caribbean, the Middle East, Asia, the Mediterranean, Europe, Africa, Canada, Australia, and Mexico. The Company’s subsidiaries include Orkin LLC. (Orkin), Western Pest Services (Western), The Industrial Fumigant Company, LLC (IFC), HomeTeam Pest Defense (HomeTeam), Rollins Australia and Rollins Wildlife Services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ROL – 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 $12,218,781,539 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.96 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 121.29% Pass
6. Moderate PEmg Ratio PEmg < 20 57.04 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 17.18 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.96 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.65
MG Growth Estimate 9.09%
MG Value $17.47
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $9.50
MG Value based on 0% Growth $5.57
Market Implied Growth Rate 24.27%
Current Price $37.36
% of Intrinsic Value 213.80%

Rollins, 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, 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 $0.41 in 2015 to an estimated $0.65 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 24.27% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Rollins, Inc. revealed the company was trading above its Graham Number of $6.14. The company pays a dividend of $0.37 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 57.04, which was above the industry average of 29.23. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.29.

Rollins, 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) -$0.29
Graham Number $6.14
PEmg 57.04
Current Ratio 0.96
PB Ratio 17.18
Current Dividend $0.37
Dividend Yield 1.00%
Number of Consecutive Years of Dividend Growth 17

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 $286,021,000
Total Current Liabilities $299,029,000
Long-Term Debt $0
Total Assets $1,094,124,000
Intangible Assets $611,739,000
Total Liabilities $382,216,000
Shares Outstanding (Diluted Average) 327,316,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.77
Dec2018 $0.71
Dec2017 $0.55
Dec2016 $0.51
Dec2015 $0.47
Dec2014 $0.42
Dec2013 $0.37
Dec2012 $0.34
Dec2011 $0.31
Dec2010 $0.27
Dec2009 $0.25
Dec2008 $0.20
Dec2007 $0.19
Dec2006 $0.17
Dec2005 $0.15
Dec2004 $0.15
Dec2003 $0.10
Dec2002 $0.08
Dec2001 $0.05
Dec2000 $0.03
Dec1999 $0.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.65
Dec2018 $0.58
Dec2017 $0.49
Dec2016 $0.45
Dec2015 $0.41
Dec2014 $0.37
Dec2013 $0.33
Dec2012 $0.30
Dec2011 $0.26
Dec2010 $0.23
Dec2009 $0.21
Dec2008 $0.18
Dec2007 $0.16
Dec2006 $0.14
Dec2005 $0.12
Dec2004 $0.10
Dec2003 $0.07

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

Iron Mountain Inc Valuation – February 2019 $IRM
Cintas Corp Valuation – February 2019 $CTAS
Fidelity National Information Services Inc Valuation – January 2019 $FIS
Avery Dennison Corp Valuation – January 2019 $AVY
Paychex Inc Valuation – January 2019 $PAYX
Fleetcor Technologies Inc Valuation – January 2019 $FLT
TrueBlue Inc Valuation – October 2018 $TBI
Convergys Corp Valuation – September 2018 $CVG
Strategic Education Inc Valuation – August 2018 $STRA
Multi-Color Corp Valuation – August 2018 $LABL

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.

O’Reilly Automotive Inc Valuation – February 2019 $ORLY

Company Profile (excerpt from Reuters): O’Reilly Automotive, Inc., incorporated on December 20, 2010, is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The Company sells its products to both do-it-yourself (DIY) and professional service provider customers. The Company’s product line includes new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control, chassis parts, driveline parts and engine parts; maintenance items, such as oil, antifreeze, fluids, filters, wiper blades, lighting, engine additives and appearance products, and accessories, such as floor mats, seat covers and truck accessories. It operated 4,829 stores in 47 states, as of December 31, 2016.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORLY – 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 $27,776,062,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.91 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 343.42% Pass
6. Moderate PEmg Ratio PEmg < 20 27.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 56.64 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.91 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.20 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $12.58
MG Growth Estimate 15.00%
MG Value $484.20
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $182.36
MG Value based on 0% Growth $106.90
Market Implied Growth Rate 9.54%
Current Price $346.75
% of Intrinsic Value 71.61%

O’Reilly Automotive 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, 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 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 Undervalued after growing its EPSmg (normalized earnings) from $5.7 in 2014 to an estimated $12.58 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.54% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into O’Reilly Automotive Inc revealed the company was trading above its Graham Number of $52.84. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 27.57, which was above the industry average of 21.23. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-47.12.

O’Reilly Automotive 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) -$47.12
Graham Number $52.84
PEmg 27.57
Current Ratio 0.91
PB Ratio 56.64
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 $3,560,031,000
Total Current Liabilities $3,905,081,000
Long-Term Debt $3,174,327,000
Total Assets $7,894,714,000
Intangible Assets $832,750,000
Total Liabilities $7,396,335,000
Shares Outstanding (Diluted Average) 81,410,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $16.02
Dec2017 $12.67
Dec2016 $10.73
Dec2015 $9.17
Dec2014 $7.34
Dec2013 $6.03
Dec2012 $4.75
Dec2011 $3.71
Dec2010 $2.95
Dec2009 $2.23
Dec2008 $1.48
Dec2007 $1.67
Dec2006 $1.55
Dec2005 $1.45
Dec2004 $0.63
Dec2003 $0.92
Dec2002 $0.77
Dec2001 $0.63
Dec2000 $0.50
Dec1999 $0.46
Dec1998 $0.18

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.58
Dec2017 $10.30
Dec2016 $8.61
Dec2015 $7.10
Dec2014 $5.70
Dec2013 $4.56
Dec2012 $3.56
Dec2011 $2.78
Dec2010 $2.20
Dec2009 $1.78
Dec2008 $1.48
Dec2007 $1.40
Dec2006 $1.20
Dec2005 $0.98
Dec2004 $0.72
Dec2003 $0.73
Dec2002 $0.60

Recommended Reading:

Other ModernGraham posts about the company

O’Reilly Automotive Inc Valuation – April 2018 $ORLY
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
O’Reilly Automotive Inc. Annual Valuation – 2015 $ORLY
16 Companies in the Spotlight this Week – 4/19/14
O’Reilly Automotive Inc. (ORLY) Annual Valuation – 2014

Other ModernGraham posts about related companies

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
Delphi Technologies PLC Valuation – August 2018 $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.

Goodyear Tire & Rubber Co Valuation – January 2019 $GT

Company Profile (excerpt from Reuters): The Goodyear Tire & Rubber Company (Goodyear), incorporated on August 29, 1898, is a manufacturer of tires. The Company operates through three segments: Americas; Europe, Middle East and Africa (EMEA), and Asia Pacific. The Company also manufactures and markets rubber-related chemicals for various applications. The Company also operates commercial truck service and tire retreading centers. The Company manufactures and markets a range of rubber tires for automobiles, trucks, buses, aircraft, motorcycles, earthmoving and mining equipment, farm implements, industrial equipment and various other applications. Its tires are offered for sale to vehicle manufacturers for mounting as original equipment (OE) and for replacement around the world. The Company manufactures and sells tires under the Goodyear, Dunlop, Kelly, Debica, Sava and Fulda brands, and various other Goodyear owned house brands, and the private-label brands of certain customers. In certain geographic areas it also retreads truck, aviation and off-the-road (OTR) tires; manufactures and sells tread rubber and other tire retreading materials; sells chemical products, and provides automotive and commercial repair services and miscellaneous other products and services. As of December 31, 2016, the Company had operated approximately 1,100 tire and auto service center outlets where it offered its products for retail sale and provided automotive repair and other services. As of December 31, 2016, the Company had manufactured its products in 48 manufacturing facilities in 21 countries, including the United States, and it had marketing operations across the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GT – 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 $4,795,345,782 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 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 -869.49% Fail
6. Moderate PEmg Ratio PEmg < 20 6.77 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.98 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 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.28 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 $3.04
MG Growth Estimate -2.98%
MG Value $7.71
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $44.05
MG Value based on 0% Growth $25.82
Market Implied Growth Rate -0.86%
Current Price $20.58
% of Intrinsic Value 266.80%

Goodyear Tire & Rubber 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. 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 $3.79 in 2014 to an estimated $3.04 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.86% 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 Goodyear Tire & Rubber Co revealed the company was trading below its Graham Number of $35.79. The company pays a dividend of $0.44 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 6.77, which was below the industry average of 19.88, 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 $-24.53.

Goodyear Tire & Rubber 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) -$24.53
Graham Number $35.79
PEmg 6.77
Current Ratio 1.34
PB Ratio 0.98
Current Dividend $0.44
Dividend Yield 2.14%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $6,753,000,000
Total Current Liabilities $5,047,000,000
Long-Term Debt $5,604,000,000
Total Assets $17,591,000,000
Intangible Assets $709,000,000
Total Liabilities $12,591,000,000
Shares Outstanding (Diluted Average) 238,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.97
Dec2017 $1.37
Dec2016 $4.74
Dec2015 $1.12
Dec2014 $8.78
Dec2013 $2.28
Dec2012 $0.74
Dec2011 $1.26
Dec2010 -$0.89
Dec2009 -$1.55
Dec2008 -$0.32
Dec2007 $2.65
Dec2006 -$1.86
Dec2005 $1.16
Dec2004 $0.63
Dec2003 -$4.61
Dec2002 -$7.47
Dec2001 -$1.59
Dec2000 $0.31
Dec1999 $1.53
Dec1998 $4.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.04
Dec2017 $3.27
Dec2016 $3.99
Dec2015 $3.35
Dec2014 $3.79
Dec2013 $0.99
Dec2012 $0.18
Dec2011 $0.01
Dec2010 -$0.54
Dec2009 -$0.24
Dec2008 $0.42
Dec2007 $0.40
Dec2006 -$1.30
Dec2005 -$1.47
Dec2004 -$2.70
Dec2003 -$3.70
Dec2002 -$2.38

Recommended Reading:

Other ModernGraham posts about the company

Goodyear Tire & Rubber Co Valuation – March 2018 $GT
Goodyear Tire & Rubber Co Valuation – July 2016 $GT
34 Companies in the Spotlight This Week – 2/7/15
Goodyear Tire & Rubber Company Annual Valuation – 2015 $GT
15 Companies in the Spotlight This Week – 2/1/14

Other ModernGraham posts about related companies

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
Delphi Technologies PLC Valuation – August 2018 $DLPH
Cooper-Standard Holdings Inc Valuation – August 2018 $CPS

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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