Leidos Holdings Inc Valuation – April 2018 $LDOS

Company Profile (excerpt from Reuters): Leidos Holdings, Inc., incorporated on August 12, 2005, is global science and technology company. The Company provides technology and engineering services and solutions in the defense, intelligence, civil and health markets. The Company operates through four segments: National Security Solutions (NSS), Information Systems & Global Solutions (IS&GS), Health and Infrastructure (HIS), and Corporate and Other.

LDOS Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LDOS – April 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 $10,081,957,200 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.21 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 -43.32% Fail
6. Moderate PEmg Ratio PEmg < 20 31.24 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.02 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 1.21 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.47 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 $2.08
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $30.10
MG Value based on 0% Growth $17.65
Market Implied Growth Rate 11.37%
Current Price $64.86
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.64 in 2014 to an estimated $2.08 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.37% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Leidos Holdings, Inc. revealed the company was trading above its Graham Number of $46.26. The company pays a dividend of $1.28 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 31.24, which was below the industry average of 42.18, 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 $-18.76.

Leidos Holdings, 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) -$18.76
Graham Number $46.26
PEmg 31.24
Current Ratio 1.21
PB Ratio 3.02
Current Dividend $1.28
Dividend Yield 1.97%
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 12/1/2017
Total Current Assets $2,674,000,000
Total Current Liabilities $2,202,000,000
Long-Term Debt $3,056,000,000
Total Assets $8,990,000,000
Intangible Assets $5,830,000,000
Total Liabilities $5,620,000,000
Shares Outstanding (Diluted Average) 157,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.27
Dec2017 $2.38
Dec2016 $2.35
Jan2015 -$4.36
Jan2014 $1.94
Jan2013 $6.19
Jan2012 $0.68
Jan2011 $6.56
Jan2010 $4.96
Jan2009 $4.36
Jan2008 $4.00
Jan2007 $4.28
Jan2006 $10.32
Jan2005 $4.36
Jan2004 $3.72
Jan2003 $2.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.08
Dec2017 $1.22
Dec2016 $0.88
Jan2015 $0.83
Jan2014 $3.64
Jan2013 $4.51
Jan2012 $3.82
Jan2011 $5.20
Jan2010 $4.87
Jan2009 $5.04
Jan2008 $5.37
Jan2007 $5.72
Jan2006 $5.69
Jan2005 $2.96
Jan2004 $1.92
Jan2003 $0.85

Recommended Reading:

Other ModernGraham posts about the company

Leidos Holdings Inc Valuation – Initial Coverage $LDOS

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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.

Leidos Holdings Inc Valuation – Initial Coverage $LDOS

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 Leidos Holdings Inc (LDOS) fares in the ModernGraham valuation model.

LDOS Chart

LDOS data by YCharts

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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 LDOS – 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 $7,994,229,200 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.18 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 -91.14% Fail
6. Moderate PEmg Ratio PEmg < 20 35.70 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.76 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 1.18 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.84 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 $1.49
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $21.60
MG Value based on 0% Growth $12.66
Market Implied Growth Rate 13.60%
Current Price $53.17
% of Intrinsic Value N/A

Leidos Holdings, 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, 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 $4.51 in 2013 to an estimated $1.49 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.6% 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 Leidos Holdings, Inc. revealed the company was trading above its Graham Number of $38.68. The company pays a dividend of $1.28 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 35.7, which was below the industry average of 38.63, 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 $-34.77.

Leidos Holdings, 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) -$34.77
Graham Number $38.68
PEmg 35.70
Current Ratio 1.18
PB Ratio 1.76
Current Dividend $1.28
Dividend Yield 2.41%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $2,381,000,000
Total Current Liabilities $2,016,000,000
Long-Term Debt $3,225,000,000
Total Assets $9,132,000,000
Intangible Assets $6,211,000,000
Total Liabilities $5,997,000,000
Shares Outstanding (Diluted Average) 104,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.19
Dec2016 $2.35
Jan2015 -$4.36
Jan2014 $1.94
Jan2013 $6.19
Jan2012 $0.68
Jan2011 $6.56
Jan2010 $4.96
Jan2009 $4.36
Jan2008 $4.00
Jan2007 $4.28
Jan2006 $10.32
Jan2005 $4.36
Jan2004 $3.72
Jan2003 $2.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.49
Dec2016 $0.88
Jan2015 $0.83
Jan2014 $3.64
Jan2013 $4.51
Jan2012 $3.82
Jan2011 $5.20
Jan2010 $4.87
Jan2009 $5.04
Jan2008 $5.37
Jan2007 $5.72
Jan2006 $5.69
Jan2005 $2.96
Jan2004 $1.92
Jan2003 $0.85

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.

Xerox Corp Valuation – January 2019 $XRX

Company Profile (excerpt from Reuters): Xerox Corporation, incorporated on April 18, 1906, is a provider of digital print technology and related solutions. The Company has capabilities in imaging and printing, data analytics, and the development of secure and automated solutions to help customers improve productivity. The Company’s primary offerings span three main areas: Managed Document Services, Workplace Solutions and Graphic Communications. Its Managed Document Services offerings help customers, ranging from small businesses to global enterprises, optimize their printing and related document workflow and business processes. Managed Document Services includes the document outsourcing business, as well as a set of communication and marketing solutions. The Company’s Workplace Solutions and Graphic Communications products and solutions support the work processes of its customers by providing them with printing and communications infrastructure.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of XRX – 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 $5,597,258,219 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.82 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -92.69% Fail
6. Moderate PEmg Ratio PEmg < 20 28.28 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.10 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 1.82 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.16 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 $0.83
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $12.04
MG Value based on 0% Growth $7.06
Market Implied Growth Rate 9.89%
Current Price $23.49
% of Intrinsic Value N/A

Xerox Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net 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 $3.39 in 2014 to an estimated $0.83 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.89% 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 Xerox Corp revealed the company was trading below its Graham Number of $28.83. The company pays a dividend of $0.81 per share, for a yield of 3.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 28.28, which was below the industry average of 44.74, 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 $-19.47.

Xerox 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) -$19.47
Graham Number $28.83
PEmg 28.28
Current Ratio 1.82
PB Ratio 1.10
Current Dividend $0.81
Dividend Yield 3.46%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $4,970,000,000
Total Current Liabilities $2,736,000,000
Long-Term Debt $4,815,000,000
Total Assets $15,353,000,000
Intangible Assets $4,131,000,000
Total Liabilities $9,917,000,000
Shares Outstanding (Diluted Average) 254,053,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.79
Dec2017 $0.71
Dec2016 -$1.95
Dec2015 $1.58
Dec2014 $3.36
Dec2013 $3.64
Dec2012 $3.52
Dec2011 $3.60
Dec2010 $1.72
Dec2009 $2.20
Dec2008 $1.04
Dec2007 $4.76
Dec2006 $4.88
Dec2005 $3.76
Dec2004 $3.44
Dec2003 $1.44
Dec2002 $0.08
Dec2001 -$0.60
Dec2000 -$1.92
Dec1999 $7.40
Dec1998 $1.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.83
Dec2017 $0.72
Dec2016 $1.16
Dec2015 $2.86
Dec2014 $3.39
Dec2013 $3.25
Dec2012 $2.84
Dec2011 $2.55
Dec2010 $2.33
Dec2009 $2.86
Dec2008 $3.32
Dec2007 $4.19
Dec2006 $3.51
Dec2005 $2.43
Dec2004 $1.34
Dec2003 $0.62
Dec2002 $0.54

Recommended Reading:

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Xerox Corp Valuation – March 2018 $XRX
Xerox Corp Valuation – June 2016 $XRX
58 Companies in the Spotlight This Week – 1/31/15
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Acxiom Corp Valuation – July 2018 $ACXM
Infosys Ltd Valuation – June 2018 $INFY
Verisign Inc Valuation – May 2018 $VRSN
Motorola Solutions Inc Valuation – May 2018 $MSI
Leidos Holdings Inc Valuation – April 2018 $LDOS

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.

Cognizant Technology Solutions Corp Valuation – January 2019 $CTSH

Company Profile (excerpt from Reuters): Cognizant Technology Solutions Corporation, incorporated on April 6, 1988, is a professional services company. The Company operates through four segments: Financial Services, Healthcare, Manufacturing/Retail/Logistics, and Other. The Company’s services include consulting and technology services and outsourcing services. Its consulting and technology services include business, process, operations and technology consulting, application development and systems integrations, application testing, enterprise information management and software solutions and related services. Its outsourcing services include application maintenance, IT infrastructure services and business process services. The Company deploys a range of commercial and delivery models, including managed services, fixed bid, output and outcome based pricing and platforms to address the various needs of its customers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CTSH – 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 $39,333,372,216 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.24 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 146.00% Pass
6. Moderate PEmg Ratio PEmg < 20 23.65 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.59 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 3.24 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.10 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.87
MG Growth Estimate 7.26%
MG Value $66.09
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $41.63
MG Value based on 0% Growth $24.41
Market Implied Growth Rate 7.58%
Current Price $67.92
% of Intrinsic Value 102.77%

Cognizant Technology Solutions 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 has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.94 in 2014 to an estimated $2.87 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.58% 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 Cognizant Technology Solutions Corp revealed the company was trading above its Graham Number of $37.96. The company pays a dividend of $0.45 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 23.65, which was below the industry average of 44.74, 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 $7.64.

Cognizant Technology Solutions 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) $7.64
Graham Number $37.96
PEmg 23.65
Current Ratio 3.24
PB Ratio 3.59
Current Dividend $0.45
Dividend Yield 0.66%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $8,727,000,000
Total Current Liabilities $2,693,000,000
Long-Term Debt $624,000,000
Total Assets $15,274,000,000
Intangible Assets $4,058,000,000
Total Liabilities $4,296,000,000
Shares Outstanding (Diluted Average) 580,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.53
Dec2017 $2.53
Dec2016 $2.55
Dec2015 $2.65
Dec2014 $2.35
Dec2013 $2.02
Dec2012 $1.72
Dec2011 $1.43
Dec2010 $1.19
Dec2009 $0.89
Dec2008 $0.72
Dec2007 $0.58
Dec2006 $0.39
Dec2005 $0.28
Dec2004 $0.18
Dec2003 $0.11
Dec2002 $0.07
Dec2001 $0.05
Dec2000 $0.04
Dec1999 $0.02
Dec1998 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.87
Dec2017 $2.50
Dec2016 $2.41
Dec2015 $2.24
Dec2014 $1.94
Dec2013 $1.63
Dec2012 $1.36
Dec2011 $1.10
Dec2010 $0.88
Dec2009 $0.67
Dec2008 $0.52
Dec2007 $0.38
Dec2006 $0.26
Dec2005 $0.17
Dec2004 $0.11
Dec2003 $0.07
Dec2002 $0.05

Recommended Reading:

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Cognizant Technology Solutions Corp – March 2018 $CTSH
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Cognizant Technology Solutions Corp Valuation – January 2016 Update $CTSH

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Acxiom Corp Valuation – July 2018 $ACXM
Infosys Ltd Valuation – June 2018 $INFY
Verisign Inc Valuation – May 2018 $VRSN
Motorola Solutions Inc Valuation – May 2018 $MSI
Leidos Holdings Inc Valuation – April 2018 $LDOS

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.

International Business Machines Corp Valuation – November 2018 $IBM

Company Profile (excerpt from Reuters): International Business Machines Corporation (IBM), incorporated on June 16, 1911, is a technology company. The Company operates through five segments: Cognitive Solutions, Global Business Services (GBS), Technology Services & Cloud Platforms, Systems and Global Financing.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IBM – November 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $110,482,042,902 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.31 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 -11.68% Fail
6. Moderate PEmg Ratio PEmg < 20 11.36 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.59 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 1.31 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.15 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 $10.71
MG Growth Estimate -2.96%
MG Value $27.70
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $155.24
MG Value based on 0% Growth $91.00
Market Implied Growth Rate 1.43%
Current Price $121.57
% of Intrinsic Value 438.89%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $13.33 in 2014 to an estimated $10.71 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.43% 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 IBM Common Stock revealed the company was trading above its Graham Number of $71.86. The company pays a dividend of $5.9 per share, for a yield of 4.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.36, which was below the industry average of 49.32, 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 $-58.8.

IBM Common Stock receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$58.80
Graham Number $71.86
PEmg 11.36
Current Ratio 1.31
PB Ratio 5.59
Current Dividend $5.90
Dividend Yield 4.85%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $48,257,000,000
Total Current Liabilities $36,822,000,000
Long-Term Debt $35,989,000,000
Total Assets $121,990,000,000
Intangible Assets $39,661,000,000
Total Liabilities $102,072,000,000
Shares Outstanding (Diluted Average) 915,213,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.03
Dec2017 $6.14
Dec2016 $12.38
Dec2015 $13.42
Dec2014 $11.90
Dec2013 $14.94
Dec2012 $14.37
Dec2011 $13.06
Dec2010 $11.52
Dec2009 $10.01
Dec2008 $8.89
Dec2007 $7.15
Dec2006 $6.11
Dec2005 $4.87
Dec2004 $4.38
Dec2003 $3.74
Dec2002 $2.06
Dec2001 $3.69
Dec2000 $4.44
Dec1999 $4.12
Dec1998 $3.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.71
Dec2017 $10.61
Dec2016 $13.04
Dec2015 $13.42
Dec2014 $13.33
Dec2013 $13.63
Dec2012 $12.50
Dec2011 $11.09
Dec2010 $9.65
Dec2009 $8.28
Dec2008 $7.03
Dec2007 $5.82
Dec2006 $4.85
Dec2005 $4.06
Dec2004 $3.66
Dec2003 $3.40
Dec2002 $3.33

Recommended Reading:

Other ModernGraham posts about the company

International Business Machines Corp Valuation – February 2018 $IBM
International Business Machines Corp Valuation – March 2017 $IBM
International Business Machines Corp Valuation – November 2015 Update $IBM
30 Companies in the Spotlight This Week – 11/15/14
International Business Machines Annual Valuation – 2014 $IBM

Other ModernGraham posts about related companies

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Science Applications International Corp Valuation – July 2018 $SAIC
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Infosys Ltd Valuation – June 2018 $INFY
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Motorola Solutions Inc Valuation – May 2018 $MSI
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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.

DXC Technology Corp Valuation – November 2018 $DXC

Company Profile (excerpt from Reuters): DXC Technology Company provides digital information technology (IT) services and solutions. The Company provides a range of services, including analytics, applications, business process, cloud and workload, consulting, enterprise and cloud applications, security, and workplace and mobility. The Company also offers e-commerce, finance and administration products and services.

Downloadable PDF version of this valuation:

ModernGraham Valuation of DXC – November 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,370,000,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.04 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 118.54% Pass
6. Moderate PEmg Ratio PEmg < 20 14.24 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.50 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 1.04 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 17.97 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 $4.35
MG Growth Estimate 11.74%
MG Value $139.17
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $63.11
MG Value based on 0% Growth $37.00
Market Implied Growth Rate 2.87%
Current Price $62.00
% of Intrinsic Value 44.55%

DXC Technology 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 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 $2.44 in 2015 to an estimated $4.35 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.87% 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 DXC Technology Co revealed the company was trading below its Graham Number of $92.46. The company pays a dividend of $0.72 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 14.24, which was below the industry average of 52.08, 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 $-28.8.

DXC Technology 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) -$28.80
Graham Number $92.46
PEmg 14.24
Current Ratio 1.04
PB Ratio 1.50
Current Dividend $0.72
Dividend Yield 1.16%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $8,815,000,000
Total Current Liabilities $8,514,000,000
Long-Term Debt $5,409,000,000
Total Assets $28,882,000,000
Intangible Assets $14,019,000,000
Total Liabilities $17,045,000,000
Shares Outstanding (Diluted Average) 285,780,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.04
Mar2018 $6.04
Mar2017 -$0.88
Mar2016 $1.78
Mar2015 $0.01
Mar2014 $6.28
Mar2013 $4.89
Mar2012 -$3.97
Mar2011 $4.73
Mar2010 $5.28
Mar2009 $7.31
Mar2008 $3.20
Mar2007 $2.21
Mar2006 $2.81
Mar2005 $4.22
Mar2004 $2.75
Mar2003 $2.54
Mar2002 $2.01
Mar2001 $1.37
Mar2000 $2.37
Mar1999 $2.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.35
Mar2018 $2.55
Mar2017 $1.35
Mar2016 $2.24
Mar2015 $2.44
Mar2014 $3.59
Mar2013 $2.71
Mar2012 $2.18
Mar2011 $5.02
Mar2010 $4.83
Mar2009 $4.39
Mar2008 $2.96
Mar2007 $2.87
Mar2006 $3.08
Mar2005 $3.01
Mar2004 $2.34
Mar2003 $2.11

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Other ModernGraham posts about related companies

Sykes Enterprises Inc Valuation – October 2018 $SYKE
Computer Programs and Systems Inc Valuation – August 2018 $CPSI
Science Applications International Corp Valuation – July 2018 $SAIC
Acxiom Corp Valuation – July 2018 $ACXM
Infosys Ltd Valuation – June 2018 $INFY
Verisign Inc Valuation – May 2018 $VRSN
Motorola Solutions Inc Valuation – May 2018 $MSI
Leidos Holdings Inc Valuation – April 2018 $LDOS
Gartner Inc Valuation – March 2018 $IT
Cognizant Technology Solutions Corp – March 2018 $CTSH

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.

Sykes Enterprises Inc Valuation – October 2018 $SYKE

Company Profile (excerpt from Reuters): Sykes Enterprises, Incorporated (Sykes), incorporated on March 1, 1996, is engaged in providing outsourced customer contact management solutions and services in the business process outsourcing (BPO) arena on a global basis. The Company has operations in two segments: the Americas, which includes the United States, Canada, Latin America, Australia and the Asia Pacific Rim, and EMEA, which includes Europe, the Middle East and Africa. The Company provides its service to clients from its locations in the United States, Canada, Latin America, Australia, the Asia Pacific Rim, Europe and Africa. It serves a range of clients, including medium-sized businesses and public institutions, which span the communications, financial services, technology/consumer, transportation and leisure, healthcare and other industries. Its Americas and EMEA groups primarily provide customer engagement services (with an emphasis on inbound technical support, digital marketing and demand generation, and customer service), which include customer assistance, healthcare and roadside assistance, technical support, and product and service sales to its clients’ customers.

SYKE Chart

SYKE data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SYKE – October 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,300,051,749 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.90 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 104.76% Pass
6. Moderate PEmg Ratio PEmg < 20 22.52 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.60 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 2.90 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.25 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 $1.35
MG Growth Estimate 6.50%
MG Value $28.97
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $19.55
MG Value based on 0% Growth $11.46
Market Implied Growth Rate 7.01%
Current Price $30.36
% of Intrinsic Value 104.80%

Sykes Enterprises, Incorporated 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, and the high PEmg ratio. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.94 in 2014 to an estimated $1.35 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.01% 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 Sykes Enterprises, Incorporated revealed the company was trading above its Graham Number of $26.13. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 22.52, which was below the industry average of 52.08, 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 $5.2.

Sykes Enterprises, Incorporated receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $5.20
Graham Number $26.13
PEmg 22.52
Current Ratio 2.90
PB Ratio 1.60
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 6/1/2018
Total Current Assets $552,963,000
Total Current Liabilities $190,904,000
Long-Term Debt $90,000,000
Total Assets $1,134,401,000
Intangible Assets $405,820,000
Total Liabilities $333,538,000
Shares Outstanding (Diluted Average) 42,160,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.63
Dec2017 $0.76
Dec2016 $1.48
Dec2015 $1.62
Dec2014 $1.35
Dec2013 $0.87
Dec2012 $0.66
Dec2011 $1.06
Dec2010 -$0.22
Dec2009 $1.05
Dec2008 $1.48
Dec2007 $0.98
Dec2006 $1.05
Dec2005 $0.59
Dec2004 $0.27
Dec2003 $0.23
Dec2002 -$0.46
Dec2001 $0.01
Dec2000 $1.13
Dec1999 $0.51
Dec1998 $0.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.35
Dec2017 $1.21
Dec2016 $1.36
Dec2015 $1.23
Dec2014 $0.94
Dec2013 $0.72
Dec2012 $0.70
Dec2011 $0.77
Dec2010 $0.70
Dec2009 $1.12
Dec2008 $1.06
Dec2007 $0.78
Dec2006 $0.56
Dec2005 $0.25
Dec2004 $0.14
Dec2003 $0.14
Dec2002 $0.15

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6 Best Stocks for Value Investors This Week – 3/26/17
Sykes Enterprises Inc Valuation – Initial Coverage $SYKE

Other ModernGraham posts about related companies

Computer Programs and Systems Inc Valuation – August 2018 $CPSI
Science Applications International Corp Valuation – July 2018 $SAIC
Acxiom Corp Valuation – July 2018 $ACXM
Infosys Ltd Valuation – June 2018 $INFY
Verisign Inc Valuation – May 2018 $VRSN
Motorola Solutions Inc Valuation – May 2018 $MSI
Leidos Holdings Inc Valuation – April 2018 $LDOS
Gartner Inc Valuation – March 2018 $IT
Cognizant Technology Solutions Corp – March 2018 $CTSH
International Business Machines Corp Valuation – February 2018 $IBM

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.

Computer Programs and Systems Inc Valuation – August 2018 $CPSI

Company Profile (excerpt from Reuters): Computer Programs and Systems, Inc. (CPSI), incorporated on March 13, 2002, is a provider of healthcare information technology (IT) solutions for rural and community hospitals, and post-acute care facilities. The Company’s segments include acute care EHR, post-acute care EHR, and TruBridge, Rycan, and other outsourcing. Its Acute Care EHR segment consists of acute care software solutions and supports sales generated by its subsidiaries, Evident, LLC (Evident) and Healthland Inc. (Healthland). Its Post-acute Care EHR segment consists of post-acute care software solutions and support sales generated by American HealthTech, Inc. (AHT). Its TruBridge, Rycan, and Other Outsourcing segment primarily consists of business management, consulting and managed IT services sales generated by TruBridge, LLC (TruBridge) and the sale of Rycan Technologies, Inc.’s (Rycan’s) revenue cycle management workflow and automation software.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CPSI – 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 $374,978,090 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.69 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -101.65% Fail
6. Moderate PEmg Ratio PEmg < 20 61.80 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.49 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 1.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.96 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 $0.43
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $6.21
MG Value based on 0% Growth $3.64
Market Implied Growth Rate 26.65%
Current Price $26.45
% of Intrinsic Value N/A

Computer Programs & Systems, 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 or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net 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 $2.73 in 2014 to an estimated $0.43 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 26.65% 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 Computer Programs & Systems, Inc. revealed the company was trading above its Graham Number of $14.07. The company pays a dividend of $0.85 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 61.8, which was above the industry average of 42.92. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-8.33.

Computer Programs & Systems, 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) -$8.33
Graham Number $14.07
PEmg 61.80
Current Ratio 1.69
PB Ratio 2.49
Current Dividend $0.85
Dividend Yield 3.21%
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 6/1/2018
Total Current Assets $65,663,000
Total Current Liabilities $38,806,000
Long-Term Debt $133,151,000
Total Assets $322,844,000
Intangible Assets $231,959,000
Total Liabilities $178,603,000
Shares Outstanding (Diluted Average) 13,561,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.89
Dec2017 -$1.27
Dec2016 $0.29
Dec2015 $1.62
Dec2014 $2.94
Dec2013 $2.95
Dec2012 $2.71
Dec2011 $2.34
Dec2010 $1.71
Dec2009 $1.39
Dec2008 $1.42
Dec2007 $1.20
Dec2006 $1.48
Dec2005 $1.37
Dec2004 $0.67
Dec2003 $0.75
Dec2002 $1.06
Dec2001 $0.93
Dec2000 $0.53

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.43
Dec2017 $0.57
Dec2016 $1.69
Dec2015 $2.43
Dec2014 $2.73
Dec2013 $2.49
Dec2012 $2.15
Dec2011 $1.78
Dec2010 $1.48
Dec2009 $1.37
Dec2008 $1.32
Dec2007 $1.21
Dec2006 $1.16
Dec2005 $0.99
Dec2004 $0.79
Dec2003 $0.79
Dec2002 $0.71

Recommended Reading:

Other ModernGraham posts about the company

Computer Programs & Systems Inc Valuation – Initial Coverage $CPSI

Other ModernGraham posts about related companies

Science Applications International Corp Valuation – July 2018 $SAIC
Acxiom Corp Valuation – July 2018 $ACXM
Infosys Ltd Valuation – June 2018 $INFY
Verisign Inc Valuation – May 2018 $VRSN
Motorola Solutions Inc Valuation – May 2018 $MSI
Leidos Holdings Inc Valuation – April 2018 $LDOS
Gartner Inc Valuation – March 2018 $IT
Cognizant Technology Solutions Corp – March 2018 $CTSH
International Business Machines Corp Valuation – February 2018 $IBM
Viavi Solutions Inc Valuation – Initial Coverage $VIAV

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.

Science Applications International Corp Valuation – July 2018 $SAIC

Company Profile (excerpt from Reuters): Science Applications International Corporation (SAIC), incorporated on February 1, 2013, is a provider of technical, engineering and enterprise information technology (IT) services. The Company provides its services primarily to the United States Government, including the Department of Defense (DoD), the intelligence community and federal civilian agencies. The Company provides engineering, systems integration and information technology offerings for government projects, and offers a range of services with a targeted emphasis on higher-end, differentiated technology services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SAIC – July 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,447,240,116 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 37700.00% Pass
6. Moderate PEmg Ratio PEmg < 20 22.54 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.89 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 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.13 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 $3.62
MG Growth Estimate 15.00%
MG Value $139.34
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $52.48
MG Value based on 0% Growth $30.76
Market Implied Growth Rate 7.02%
Current Price $81.57
% of Intrinsic Value 58.54%

Science Applications International Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $1.58 in 2015 to an estimated $3.62 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.02% 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 Science Applications International Corp revealed the company was trading above its Graham Number of $26.35. The company pays a dividend of $1.24 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 22.54, which was below the industry average of 45.08, 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 $-18.57.

Science Applications International 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) -$18.57
Graham Number $26.35
PEmg 22.54
Current Ratio 1.34
PB Ratio 10.89
Current Dividend $1.24
Dividend Yield 1.52%
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 4/1/2018
Total Current Assets $930,000,000
Total Current Liabilities $695,000,000
Long-Term Debt $971,000,000
Total Assets $2,061,000,000
Intangible Assets $1,037,000,000
Total Liabilities $1,736,000,000
Shares Outstanding (Diluted Average) 43,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.20
Jan2018 $4.02
Jan2017 $3.12
Jan2016 $2.47
Jan2015 $2.91
Jan2014 $2.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.62
Jan2018 $3.21
Jan2017 $2.58
Jan2016 $2.05
Jan2015 $1.58
Jan2014 $0.76

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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.

Acxiom Corp Valuation – July 2018 $ACXM

Company Profile (excerpt from Reuters): Acxiom Corporation (Acxiom), incorporated on October 28, 1983, is a technology and enablement services company. The Company operates through three business segments: Marketing Services, Audience Solutions, and Connectivity. The Company serves a global client base from locations in the United States, Europe and the Asia-Pacific region. The Company’s client base includes organizations in these regions across industry verticals, including financial, insurance and investment services, automotive, retail, telecommunications, healthcare, travel, entertainment, non-profit and government.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ACXM – July 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 $2,251,525,241 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.02 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 0.81% Fail
6. Moderate PEmg Ratio PEmg < 20 76.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.25 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 2.02 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.25 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.39
MG Growth Estimate 8.98%
MG Value $10.32
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $5.66
MG Value based on 0% Growth $3.32
Market Implied Growth Rate 34.15%
Current Price $29.95
% of Intrinsic Value 290.33%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.24 in 2015 to an estimated $0.39 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 34.15% 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 Acxiom Corporation revealed the company was trading above its Graham Number of $13.89. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 76.79, which was above the industry average of 45.08. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.23.

Acxiom Corporation 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) -$1.23
Graham Number $13.89
PEmg 76.79
Current Ratio 2.02
PB Ratio 3.25
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $360,345,000
Total Current Liabilities $178,355,000
Long-Term Debt $227,837,000
Total Assets $1,209,253,000
Intangible Assets $672,604,000
Total Liabilities $460,158,000
Shares Outstanding (Diluted Average) 81,282,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.90
Mar2018 $0.29
Mar2017 $0.05
Mar2016 $0.09
Mar2015 -$0.14
Mar2014 $0.12
Mar2013 $0.75
Mar2012 $0.96
Mar2011 -$0.29
Mar2010 $0.56
Mar2009 $0.48
Mar2008 -$0.10
Mar2007 $0.80
Mar2006 $0.71
Mar2005 $0.74
Mar2004 $0.64
Mar2003 $0.24
Mar2002 -$0.36
Mar2001 $0.07
Mar2000 $1.00
Mar1999 -$0.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.39
Mar2018 $0.12
Mar2017 $0.08
Mar2016 $0.18
Mar2015 $0.24
Mar2014 $0.43
Mar2013 $0.55
Mar2012 $0.41
Mar2011 $0.19
Mar2010 $0.45
Mar2009 $0.44
Mar2008 $0.46
Mar2007 $0.71
Mar2006 $0.57
Mar2005 $0.42
Mar2004 $0.28
Mar2003 $0.12

Recommended Reading:

Other ModernGraham posts about the company

Acxiom Corporation Valuation – November 2016 $ACXM
5 Speculative and Overvalued Companies to Avoid – August 2015
Acxiom Corporation Analysis – Initial Coverage $ACXM

Other ModernGraham posts about related companies

Verisign Inc Valuation – May 2018 $VRSN
Motorola Solutions Inc Valuation – May 2018 $MSI
Leidos Holdings Inc Valuation – April 2018 $LDOS
Gartner Inc Valuation – March 2018 $IT
Cognizant Technology Solutions Corp – March 2018 $CTSH
International Business Machines Corp Valuation – February 2018 $IBM
Viavi Solutions Inc Valuation – Initial Coverage $VIAV
Equinix Inc Valuation – July 2017 $EQIX
Liquidity Services Inc Valuation – Initial Coverage $LQDT
LivePerson Inc Valuation – Initial Coverage $LPSN

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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