Agilent Technologies Inc Valuation – March 2019 #A

Company Profile (excerpt from Reuters): Agilent Technologies, Inc., incorporated on May 4, 1999, provides application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow. The Company serves the life sciences, diagnostics and applied chemical markets. The Company has three business segments: life sciences and applied markets business, diagnostics and genomics business, and Agilent CrossLab business. The life sciences and applied markets business segment brings together the Company’s analytical laboratory instrumentation and informatics. The Company’s diagnostics and genomics business segment includes the reagent partnership, pathology, companion diagnostics, genomics and the nucleic acid solutions businesses. The Company’s Agilent CrossLab business segment spans the entire lab with its consumables and services portfolio.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of A – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,759,898,745 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.39 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 -24.07% Fail
6. Moderate PEmg Ratio PEmg < 20 39.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.99 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 3.39 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.69 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.96
MG Growth Estimate 0.62%
MG Value $19.11
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $28.45
MG Value based on 0% Growth $16.68
Market Implied Growth Rate 15.62%
Current Price $77.98
% of Intrinsic Value 407.98%

Agilent Technologies Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and 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 Overvalued after growing its EPSmg (normalized earnings) from $1.88 in 2015 to an estimated $1.96 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.62% 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 Agilent Technologies Inc revealed the company was trading above its Graham Number of $31.39. The company pays a dividend of $0.6 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 39.75, which was below the industry average of 53.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.63.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.63
Graham Number $31.39
PEmg 39.75
Current Ratio 3.39
PB Ratio 4.99
Current Dividend $0.60
Dividend Yield 0.76%
Number of Consecutive Years of Dividend Growth 3

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Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $3,712,000,000
Total Current Liabilities $1,095,000,000
Long-Term Debt $1,798,000,000
Total Assets $8,952,000,000
Intangible Assets $3,699,000,000
Total Liabilities $3,916,000,000
Shares Outstanding (Diluted Average) 322,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.05
Oct2018 $0.97
Oct2017 $2.10
Oct2016 $1.40
Oct2015 $1.20
Oct2014 $1.62
Oct2013 $2.13
Oct2012 $3.27
Oct2011 $2.85
Oct2010 $1.94
Oct2009 -$0.09
Oct2008 $1.87
Oct2007 $1.57
Oct2006 $7.50
Oct2005 $0.65
Oct2004 $0.75
Oct2003 -$4.35
Oct2002 -$2.22
Oct2001 $0.38
Oct2000 $1.66
Oct1999 $1.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.96
Oct2018 $1.43
Oct2017 $1.67
Oct2016 $1.61
Oct2015 $1.88
Oct2014 $2.27
Oct2013 $2.40
Oct2012 $2.35
Oct2011 $1.80
Oct2010 $1.71
Oct2009 $1.83
Oct2008 $2.68
Oct2007 $2.46
Oct2006 $2.10
Oct2005 -$0.72
Oct2004 -$1.19
Oct2003 -$1.65

Recommended Reading:

Other ModernGraham posts about the company

Agilent Technologies Inc Valuation – May 2018 $A
Agilent Technologies Inc Valuation – February 2017 $A
Agilent Technologies Inc Valuation – August 2016 $A
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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.

Lennar Corp Valuation – February 2019 $LEN

Company Profile (excerpt from Reuters): Lennar Corporation, incorporated on September 6, 1991, is a provider of real estate related financial services, commercial real estate, investment management and finance company. The Company is a homebuilder that operates in various states. The Company delivered 26,563 new homes as of November 30, 2016. The Company’s segments include Homebuilding East, Homebuilding Central, Homebuilding West, Lennar Financial Services and Lennar Multifamily. The Company is a developer of multifamily rental properties. Its Homebuilding operations include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale of residential land.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LEN – 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 $15,492,488,703 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 13.94 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 242.54% Pass
6. Moderate PEmg Ratio PEmg < 20 10.82 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.08 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 13.94 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.52 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.52
MG Growth Estimate 9.90%
MG Value $127.82
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $65.50
MG Value based on 0% Growth $38.40
Market Implied Growth Rate 1.16%
Current Price $48.90
% of Intrinsic Value 38.26%

Lennar Corporation qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. . The Enterprising Investor has no initial concerns. As a result, all value 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 $2.72 in 2015 to an estimated $4.52 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.16% 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 Lennar Corporation revealed the company was trading below its Graham Number of $70.12. The company pays a dividend of $0.16 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 10.82, which was below the industry average of 20.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $21.62.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $21.62
Graham Number $70.12
PEmg 10.82
Current Ratio 13.94
PB Ratio 1.08
Current Dividend $0.16
Dividend Yield 0.33%
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 11/1/2018
Total Current Assets $20,924,569,000
Total Current Liabilities $1,500,988,000
Long-Term Debt $10,117,058,000
Total Assets $28,566,181,000
Intangible Assets $3,680,047,000
Total Liabilities $13,883,224,000
Shares Outstanding (Diluted Average) 325,755,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.95
Nov2018 $5.44
Nov2017 $3.38
Nov2016 $3.86
Nov2015 $3.39
Nov2014 $2.75
Nov2013 $2.11
Nov2012 $3.05
Nov2011 $0.47
Nov2010 $0.50
Nov2009 -$2.40
Nov2008 -$6.87
Nov2007 -$12.07
Nov2006 $3.62
Nov2005 $8.07
Nov2004 $5.59
Nov2003 $4.56
Nov2002 $3.44
Nov2001 $0.00
Nov2000 $1.62
Nov1999 $1.22

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.52
Nov2018 $4.12
Nov2017 $3.34
Nov2016 $3.22
Nov2015 $2.72
Nov2014 $2.18
Nov2013 $1.52
Nov2012 $0.46
Nov2011 -$1.91
Nov2010 -$3.22
Nov2009 -$4.03
Nov2008 -$3.34
Nov2007 -$0.40
Nov2006 $5.31
Nov2005 $5.55
Nov2004 $3.87
Nov2003 $2.73

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Lennar Corp Valuation – November 2016 $LEN
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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.

Marsh & McLennan Companies Inc Valuation – January 2019 $MMC

Company Profile (excerpt from Reuters): Marsh & McLennan Companies, Inc., incorporated on March 17, 1969, is a professional services firm offering clients advice and solutions in risk, strategy and people. The Company is the parent company of various risk advisors and specialty consultants, including Marsh, the insurance broker, intermediary and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of human resource (HR) and investment related financial advice and services, and Oliver Wyman Group, the management, economic and brand consultancy. The Company conducts business through two segments: Risk and Insurance Services, which includes risk management activities (risk advice, risk transfer and risk control and mitigation solutions), as well as insurance and reinsurance broking and services, and Consulting includes health, retirement, talent and investments consulting services and products, and specialized management, economic and brand consulting services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MMC – 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 $42,064,656,156 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.26 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 169.15% Pass
6. Moderate PEmg Ratio PEmg < 20 25.27 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.65 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 1.26 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.45 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 $3.31
MG Growth Estimate 6.56%
MG Value $71.48
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $47.93
MG Value based on 0% Growth $28.10
Market Implied Growth Rate 8.38%
Current Price $83.51
% of Intrinsic Value 116.83%

Marsh & McLennan Companies, 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 $2.3 in 2014 to an estimated $3.31 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.38% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Marsh & McLennan Companies, Inc. revealed the company was trading above its Graham Number of $35.49. The company pays a dividend of $1.43 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 25.27, which was above the industry average of 18. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.95.

Marsh & McLennan Companies, 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) -$14.95
Graham Number $35.49
PEmg 25.27
Current Ratio 1.26
PB Ratio 5.65
Current Dividend $1.43
Dividend Yield 1.71%
Number of Consecutive Years of Dividend Growth 8

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 $5,966,000,000
Total Current Liabilities $4,727,000,000
Long-Term Debt $5,512,000,000
Total Assets $21,129,000,000
Intangible Assets $10,764,000,000
Total Liabilities $13,591,000,000
Shares Outstanding (Diluted Average) 510,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.87
Dec2017 $2.87
Dec2016 $3.38
Dec2015 $2.98
Dec2014 $2.65
Dec2013 $2.43
Dec2012 $2.13
Dec2011 $1.79
Dec2010 $1.55
Dec2009 $0.42
Dec2008 -$0.14
Dec2007 $4.53
Dec2006 $1.76
Dec2005 $0.74
Dec2004 $0.33
Dec2003 $2.81
Dec2002 $2.45
Dec2001 $1.70
Dec2000 $2.05
Dec1999 $1.31
Dec1998 $1.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.31
Dec2017 $2.97
Dec2016 $2.92
Dec2015 $2.59
Dec2014 $2.30
Dec2013 $1.97
Dec2012 $1.54
Dec2011 $1.38
Dec2010 $1.32
Dec2009 $1.29
Dec2008 $1.63
Dec2007 $2.36
Dec2006 $1.39
Dec2005 $1.34
Dec2004 $1.71
Dec2003 $2.29
Dec2002 $1.95

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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.

Lennox International Inc Valuation – October 2018 $LII

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

LII Chart

LII data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LII – October 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,770,827,357 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.86 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 371.49% Pass
6. Moderate PEmg Ratio PEmg < 20 32.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -49.69 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.86 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.04 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.79
MG Growth Estimate 15.00%
MG Value $261.24
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $98.39
MG Value based on 0% Growth $57.68
Market Implied Growth Rate 11.81%
Current Price $217.88
% of Intrinsic Value 83.40%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.02 in 2014 to an estimated $6.79 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.81% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Lennox International Inc. revealed the company was trading above its Graham Number of $15.02. The company pays a dividend of $1.96 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 32.11, which was above the industry average of 31.29. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-21.75.

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

Stage 3: Information for Further Research

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

Useful Links:

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

Most Recent Balance Sheet Figures

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

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

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Lennox International Inc Valuation – Initial Coverage $LII

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Disclaimer:

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

Cullen/Frost Bankers Inc Valuation – July 2018 $CFR

Company Profile (excerpt from Reuters): Cullen/Frost Bankers, Inc., incorporated on January 25, 1966, is a financial holding company and a bank holding company. The Company, through its subsidiaries, provides a range of products and services throughout Texas markets. The Company’s segments include Banking, Frost Wealth Advisors and Non-Banks. The Banking segment includes both commercial and consumer banking services, and Frost Insurance Agency. Commercial banking services are provided to corporations and other business clients and include a range of lending and cash management products. Consumer banking services include direct lending and depository services. Frost Insurance Agency provides insurance brokerage services to individuals and businesses covering corporate and personal property and casualty products, as well as group health and life insurance products and human resources consulting services. The Frost Wealth Advisors segment includes fee-based services within private trust, retirement services, and financial management services, including personal wealth management and securities brokerage services. The Non-Banks segment includes the direct and indirect ownership of its banking and non-banking subsidiaries and the issuance of debt and equity.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CFR – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,231,845,441 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 66.93% Pass
5. Moderate PEmg Ratio PEmg < 20 21.01 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.27 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.42
MG Growth Estimate 5.74%
MG Value $108.23
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $78.53
MG Value based on 0% Growth $46.04
Market Implied Growth Rate 6.25%
Current Price $113.78
% of Intrinsic Value 105.12%

Cullen/Frost Bankers, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg ratio. 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 $3.92 in 2014 to an estimated $5.42 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.25% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Cullen/Frost Bankers, Inc. revealed the company was trading above its Graham Number of $84.91. The company pays a dividend of $2.25 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 21.01, which was above the industry average of 20.05.

Cullen/Frost Bankers, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Graham Number $84.91
PEmg 21.01
PB Ratio 2.27
Dividend Yield 1.98%
TTM Dividend $2.25
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Long-Term Debt & Capital Lease Obligation $234,789,000
Total Assets $31,459,232,000
Intangible Assets $659,637,000
Total Liabilities $28,215,802,000
Shares Outstanding (Diluted Average) 64,662,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.45
Dec2017 $5.51
Dec2016 $4.70
Dec2015 $4.28
Dec2014 $4.29
Dec2013 $3.80
Dec2012 $3.86
Dec2011 $3.54
Dec2010 $3.44
Dec2009 $3.00
Dec2008 $3.50
Dec2007 $3.55
Dec2006 $3.42
Dec2005 $3.07
Dec2004 $2.66
Dec2003 $2.48
Dec2002 $2.29
Dec2001 $1.57
Dec2000 $2.03
Dec1999 $1.78
Dec1998 $1.38

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.42
Dec2017 $4.77
Dec2016 $4.33
Dec2015 $4.08
Dec2014 $3.92
Dec2013 $3.66
Dec2012 $3.55
Dec2011 $3.40
Dec2010 $3.35
Dec2009 $3.30
Dec2008 $3.38
Dec2007 $3.23
Dec2006 $2.97
Dec2005 $2.64
Dec2004 $2.35
Dec2003 $2.14
Dec2002 $1.92

Recommended Reading:

Other ModernGraham posts about the company

Cullen/Frost Bankers Inc Valuation – Initial Coverage $CFR

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SVB Financial Group Valuation – June 2018 $SIVB
US Bancorp Valuation – May 2018 $USB
Bank of New York Mellon Corp Valuation – May 2018 $BK
Citizens Financial Group Inc Valuation – April 2018 $CFG
BB&T Corporation Valuation – April 2018 $BBT
M&T Bank Corp Valuation – April 2018 $MTB
Bank of America Corp Valuation – March 2018 $BAC

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.

Agilent Technologies Inc Valuation – May 2018 $A

Company Profile (excerpt from Reuters): Agilent Technologies, Inc., incorporated on May 4, 1999, provides application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow. The Company serves the life sciences, diagnostics and applied chemical markets. The Company has three business segments: life sciences and applied markets business, diagnostics and genomics business, and Agilent CrossLab business. The life sciences and applied markets business segment brings together the Company’s analytical laboratory instrumentation and informatics. The Company’s diagnostics and genomics business segment includes the reagent partnership, pathology, companion diagnostics, genomics and the nucleic acid solutions businesses. The Company’s Agilent CrossLab business segment spans the entire lab with its consumables and services portfolio.

A Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of A – May 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 $20,506,289,918 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.32 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 -8.51% Fail
6. Moderate PEmg Ratio PEmg < 20 46.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.55 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.32 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.57 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.37
MG Growth Estimate -4.25%
MG Value $1.09
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $19.93
MG Value based on 0% Growth $11.68
Market Implied Growth Rate 19.14%
Current Price $64.32
% of Intrinsic Value 5923.25%

Agilent Technologies Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth 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 earnings growth over the last five years. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.27 in 2014 to an estimated $1.37 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 19.14% 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 Agilent Technologies Inc revealed the company was trading above its Graham Number of $16.43. The company pays a dividend of $0.53 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 46.79, which was above the industry average of 42.49. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.09.

Agilent Technologies Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.09
Graham Number $16.43
PEmg 46.79
Current Ratio 3.32
PB Ratio 4.55
Current Dividend $0.53
Dividend Yield 0.82%
Number of Consecutive Years of Dividend Growth 2

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 $4,525,000,000
Total Current Liabilities $1,365,000,000
Long-Term Debt $1,800,000,000
Total Assets $8,784,000,000
Intangible Assets $2,932,000,000
Total Liabilities $4,171,000,000
Shares Outstanding (Diluted Average) 326,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.80
Oct2017 $2.10
Oct2016 $1.40
Oct2015 $1.20
Oct2014 $1.62
Oct2013 $2.13
Oct2012 $3.27
Oct2011 $2.85
Oct2010 $1.94
Oct2009 -$0.09
Oct2008 $1.87
Oct2007 $1.57
Oct2006 $7.50
Oct2005 $0.65
Oct2004 $0.75
Oct2003 -$4.35
Oct2002 -$2.22
Oct2001 $0.38
Oct2000 $1.66
Oct1999 $1.35
Oct1998 $0.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.37
Oct2017 $1.67
Oct2016 $1.61
Oct2015 $1.88
Oct2014 $2.27
Oct2013 $2.40
Oct2012 $2.35
Oct2011 $1.80
Oct2010 $1.71
Oct2009 $1.83
Oct2008 $2.68
Oct2007 $2.46
Oct2006 $2.10
Oct2005 -$0.72
Oct2004 -$1.19
Oct2003 -$1.65
Oct2002 -$0.09

Recommended Reading:

Other ModernGraham posts about the company

Agilent Technologies Inc Valuation – February 2017 $A
Agilent Technologies Inc Valuation – August 2016 $A
Agilent Technologies Inc Valuation – February 2016
Agilent Technologies Inc. Valuation – October 2015 Update $A
Agilent Technologies Inc. Analysis – July 2015 Update $A

Other ModernGraham posts about related companies

Cooper Companies Inc Valuation – May 2018 $COO
Edwards Lifesciences Corp Valuation – May 2018 $EW
Baxter International Inc Valuation – May 2018 $BAX
Boston Scientific Corp Valuation – May 2018 $BSX
Centene Corp Valuation – May 2018 $CNC
Abbott Laboratories Valuation – May 2018 $ABT
Becton Dickinson and Co Valuation – May 2018 $BDX
IQVIA Holdings Inc Valuation – Initial Coverage May 2018 $IQV
Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
Illumina Inc Valuation – April 2018 $ILMN

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.

Lennar Corp Valuation – April 2018 $LEN

Company Profile (excerpt from Reuters): Lennar Corporation, incorporated on September 6, 1991, is a provider of real estate related financial services, commercial real estate, investment management and finance company. The Company is a homebuilder that operates in various states. The Company delivered 26,563 new homes as of November 30, 2016. The Company’s segments include Homebuilding East, Homebuilding Central, Homebuilding West, Lennar Financial Services, Rialto and Lennar Multifamily. The Company is a developer of multifamily rental properties. Its Homebuilding operations include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale of residential land.

LEN Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LEN – 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 $18,312,413,895 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 15.97 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -900.14% Fail
6. Moderate PEmg Ratio PEmg < 20 15.50 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.12 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 15.97 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.61 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 $3.71
MG Growth Estimate 10.50%
MG Value $109.52
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $53.82
MG Value based on 0% Growth $31.55
Market Implied Growth Rate 3.50%
Current Price $57.53
% of Intrinsic Value 52.53%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.18 in 2014 to an estimated $3.71 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.5% 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 Lennar Corporation revealed the company was trading above its Graham Number of $55.75. The company pays a dividend of $0.16 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 15.5, which was below the industry average of 28.14, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $21.3.

Lennar Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $21.30
Graham Number $55.75
PEmg 15.50
Current Ratio 15.97
PB Ratio 1.12
Current Dividend $0.16
Dividend Yield 0.27%
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 2/1/2018
Total Current Assets $20,302,526,000
Total Current Liabilities $1,270,902,000
Long-Term Debt $11,593,659,000
Total Assets $27,944,023,000
Intangible Assets $3,644,105,000
Total Liabilities $14,883,093,000
Shares Outstanding (Diluted Average) 254,448,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.21
Nov2017 $3.38
Nov2016 $3.86
Nov2015 $3.39
Nov2014 $2.75
Nov2013 $2.11
Nov2012 $3.05
Nov2011 $0.47
Nov2010 $0.50
Nov2009 -$2.40
Nov2008 -$6.87
Nov2007 -$12.07
Nov2006 $3.62
Nov2005 $8.07
Nov2004 $5.59
Nov2003 $4.56
Nov2002 $3.44
Nov2001 $0.00
Nov2000 $1.62
Nov1999 $1.22
Nov1998 $1.22

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.71
Nov2017 $3.34
Nov2016 $3.22
Nov2015 $2.72
Nov2014 $2.18
Nov2013 $1.52
Nov2012 $0.46
Nov2011 -$1.91
Nov2010 -$3.22
Nov2009 -$4.03
Nov2008 -$3.34
Nov2007 -$0.40
Nov2006 $5.31
Nov2005 $5.55
Nov2004 $3.87
Nov2003 $2.73
Nov2002 $1.72

Recommended Reading:

Other ModernGraham posts about the company

Lennar Corp Valuation – November 2016 $LEN
6 Best Stocks For Value Investors This Week – 5/14/16
Lennar Corporation Valuation – May 2016 $LEN
12 Best Stocks For Value Investors This Week – 11/14/15
Lennar Corporation Valuation – November 2015 Update $LEN

Other ModernGraham posts about related companies

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PulteGroup Inc Valuation – March 2018 $PHM
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Cummins Inc Valuation – March 2018 $CMI
Johnson Controls International PLC Valuation – March 2018 $JCI
Flowserve Corp Valuation – February 2018 $FLS
Corning Inc Valuation – February 2018 $GLW
Home Depot Inc Valuation – February 2018 $HD
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Eagle Materials Inc Valuation – Initial Coverage $EXP

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.

Marsh & McLennan Companies Inc Valuation – March 2018 $MMC

Company Profile (excerpt from Reuters): Marsh & McLennan Companies, Inc., incorporated on March 17, 1969, is a professional services firm offering clients advice and solutions in risk, strategy and people. The Company is the parent company of various risk advisors and specialty consultants, including Marsh, the insurance broker, intermediary and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of human resource (HR) and investment related financial advice and services, and Oliver Wyman Group, the management, economic and brand consultancy. The Company conducts business through two segments: Risk and Insurance Services, which includes risk management activities (risk advice, risk transfer and risk control and mitigation solutions), as well as insurance and reinsurance broking and services, and Consulting includes health, retirement, talent and investments consulting services and products, and specialized management, economic and brand consulting services.

MMC Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of MMC – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $41,670,631,151 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 178.99% Pass
6. Moderate PEmg Ratio PEmg < 20 23.94 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.76 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 4.02 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 $3.43
MG Growth Estimate 7.37%
MG Value $79.66
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $49.72
MG Value based on 0% Growth $29.14
Market Implied Growth Rate 7.72%
Current Price $82.09
% of Intrinsic Value 103.05%

Marsh & McLennan Companies 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.3 in 2014 to an estimated $3.43 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.72% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Marsh & McLennan Companies revealed the company was trading above its Graham Number of $37.15. The company pays a dividend of $1.43 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 23.94, which was below the industry average of 25.5, 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 $-14.55.

Marsh & McLennan Companies 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) -$14.55
Graham Number $37.15
PEmg 23.94
Current Ratio 1.31
PB Ratio 5.76
Current Dividend $1.43
Dividend Yield 1.74%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $5,562,000,000
Total Current Liabilities $4,262,000,000
Long-Term Debt $5,225,000,000
Total Assets $20,429,000,000
Intangible Assets $10,363,000,000
Total Liabilities $13,070,000,000
Shares Outstanding (Diluted Average) 516,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.24
Dec2017 $2.87
Dec2016 $3.38
Dec2015 $2.98
Dec2014 $2.65
Dec2013 $2.43
Dec2012 $2.13
Dec2011 $1.79
Dec2010 $1.55
Dec2009 $0.42
Dec2008 -$0.14
Dec2007 $4.53
Dec2006 $1.76
Dec2005 $0.74
Dec2004 $0.33
Dec2003 $2.81
Dec2002 $2.45
Dec2001 $1.70
Dec2000 $2.05
Dec1999 $1.31
Dec1998 $1.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.43
Dec2017 $2.97
Dec2016 $2.92
Dec2015 $2.59
Dec2014 $2.30
Dec2013 $1.97
Dec2012 $1.54
Dec2011 $1.38
Dec2010 $1.32
Dec2009 $1.29
Dec2008 $1.63
Dec2007 $2.36
Dec2006 $1.39
Dec2005 $1.34
Dec2004 $1.71
Dec2003 $2.29
Dec2002 $1.95

Recommended Reading:

Other ModernGraham posts about the company

26 Best Stocks For Value Investors This Week – 2/6/16
Marsh & McLennan Company Valuation – January 2016 Update $MMC
The Best Companies of the Insurance Industry – October 2015
15 Best Stocks For Value Investors This Week – 9/12/15
Marsh & McLennan Companies Analysis – September 2015 Update $MMC

Other ModernGraham posts about related companies

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Navient Corp Valuation – March 2018 $NAVI
Invesco Ltd Valuation – March 2018 $IVZ
Capital One Financial Corp Valuation – March 2018 $COF
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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.

Lennox International Inc Valuation – Initial Coverage $LII

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 – March 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 Lennox International Inc (LII) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Lennox International Inc. is a provider of climate control solutions. The Company designs, manufactures and markets a range of products for the heating, ventilation, air conditioning and refrigeration (HVACR) markets. It operates through three segments: Residential Heating & Cooling; Commercial Heating & Cooling, and Refrigeration. It manufactures and markets a range of furnaces, air conditioners, heat pumps, packaged heating and cooling systems, equipment and accessories to manage indoor air quality, comfort control products, replacement parts and supplies and related products for both the residential replacement and new construction markets in North America. It manufactures and sells unitary heating and cooling equipment used in light commercial applications, such as low-rise office buildings, restaurants, retail centers, churches and schools. It manufactures and markets equipment for the global commercial refrigeration markets under the Heatcraft Worldwide Refrigeration name.

LII Chart

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LII – 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 $7,410,194,778 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.13 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 256.78% Pass
6. Moderate PEmg Ratio PEmg < 20 29.27 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 201.31 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 1.13 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.25 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $5.88
MG Growth Estimate 15.00%
MG Value $226.25
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $85.21
MG Value based on 0% Growth $49.95
Market Implied Growth Rate 10.39%
Current Price $172.03
% of Intrinsic Value 76.03%

Lennox International 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.26 in 2013 to an estimated $5.88 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 10.39% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Lennox International Inc. revealed the company was trading above its Graham Number of $12.35. The company pays a dividend of $1.65 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 29.27, which was above the industry average of 22.25. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.29.

Lennox International 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) -$16.29
Graham Number $12.35
PEmg 29.27
Current Ratio 1.13
PB Ratio 201.31
Current Dividend $1.65
Dividend Yield 0.96%
Number of Consecutive Years of Dividend Growth 8

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ModernGraham tagged articles Morningstar
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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $1,005,900,000
Total Current Liabilities $888,600,000
Long-Term Debt $615,700,000
Total Assets $1,760,300,000
Intangible Assets $202,400,000
Total Liabilities $1,722,700,000
Shares Outstanding (Diluted Average) 44,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.75
Dec2016 $6.32
Dec2015 $4.09
Dec2014 $4.23
Dec2013 $3.39
Dec2012 $1.75
Dec2011 $1.65
Dec2010 $2.08
Dec2009 $0.90
Dec2008 $2.11
Dec2007 $2.43
Dec2006 $2.26
Dec2005 $2.11
Dec2004 -$2.24
Dec2003 $1.36
Dec2002 $0.66
Dec2001 -$0.83
Dec2000 $0.79
Dec1999 $1.81
Dec1998 $1.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.88
Dec2016 $4.61
Dec2015 $3.51
Dec2014 $3.02
Dec2013 $2.26
Dec2012 $1.70
Dec2011 $1.73
Dec2010 $1.83
Dec2009 $1.79
Dec2008 $1.94
Dec2007 $1.63
Dec2006 $1.09
Dec2005 $0.41
Dec2004 -$0.31
Dec2003 $0.69
Dec2002 $0.50
Dec2001 $0.49

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.

Agilent Technologies Inc Valuation – February 2017 $A

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 Agilent Technologies Inc (A) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Agilent Technologies, Inc. provides application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow. The Company serves the life sciences, diagnostics and applied chemical markets. It has three business segments: life sciences and applied markets business, diagnostics and genomics business, and Agilent CrossLab business. Its life sciences and applied markets business segment offers instruments and software that enable customers to identify, quantify and analyze the physical and biological properties of substances and products, as well as enable customers in the clinical and life sciences research areas to interrogate samples at the molecular level. Its diagnostics and genomics business segment includes the reagent partnership, pathology, companion diagnostics, genomics and the nucleic acid solutions businesses. Its Agilent CrossLab business segment spans the entire lab with its consumables and services portfolio.

A Chart

A 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 A – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $16,377,965,994 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.85 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 24.73% Fail
6. Moderate PEmg Ratio PEmg < 20 30.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.90 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 3.85 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.71 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg $1.65
MG Growth Estimate -4.25%
MG Value $0.23
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $23.92
MG Value based on 0% Growth $14.02
Market Implied Growth Rate 11.00%
Current Price $50.31
% of Intrinsic Value 21778.93%

Agilent Technologies Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability 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 earnings growth over the last five years. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.39 in 2013 to an estimated $1.65 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 11% 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 Agilent Technologies Inc revealed the company was trading above its Graham Number of $24.52. The company pays a dividend of $0.46 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 30.5, which was below the industry average of 32.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.23.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.23
Graham Number $24.52
PEmg 30.50
Current Ratio 3.85
PB Ratio 3.90
Current Dividend $0.46
Dividend Yield 0.91%
Number of Consecutive Years of Dividend Growth 2

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2016
Total Current Assets $3,635,000,000
Total Current Liabilities $945,000,000
Long-Term Debt $1,912,000,000
Total Assets $7,802,000,000
Intangible Assets $2,925,000,000
Total Liabilities $3,559,000,000
Shares Outstanding (Diluted Average) 329,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.04
Oct2016 $1.40
Oct2015 $1.20
Oct2014 $1.62
Oct2013 $2.10
Oct2012 $3.27
Oct2011 $2.85
Oct2010 $1.94
Oct2009 -$0.09
Oct2008 $1.87
Oct2007 $1.57
Oct2006 $7.50
Oct2005 $0.65
Oct2004 $0.75
Oct2003 -$4.35
Oct2002 -$2.22
Oct2001 $0.38
Oct2000 $1.66
Oct1999 $1.35
Oct1998 $0.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.65
Oct2016 $1.61
Oct2015 $1.88
Oct2014 $2.26
Oct2013 $2.39
Oct2012 $2.35
Oct2011 $1.80
Oct2010 $1.71
Oct2009 $1.83
Oct2008 $2.68
Oct2007 $2.46
Oct2006 $2.10
Oct2005 -$0.72
Oct2004 -$1.19
Oct2003 -$1.65
Oct2002 -$0.09
Oct2001 $0.91

Recommended Reading:

Other ModernGraham posts about the company

Agilent Technologies Inc Valuation – February 2016
Agilent Technologies Inc. Valuation – October 2015 Update $A
Agilent Technologies Inc. Analysis – July 2015 Update $A
27 Companies in the Spotlight This Week – 4/4/15
Agilent Technologies Inc. Quarterly Valuation – April 2015 $A

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Disclaimer:

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

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