LGI Homes Inc Valuation – September 2018 $LGIH

Company Profile (excerpt from Reuters): LGI Homes, Inc., incorporated on June 26, 2013, is a homebuilder and land developer. The Company is engaged in the design, construction, marketing and sale of new homes in markets in Texas, Arizona, Florida, Georgia, New Mexico, South Carolina, North Carolina, Colorado, Washington and Tennessee. The Company operates through five segments: the Texas division, the Southwest division, the Southeast division, the Florida division and the Northwest division. The Texas division includes homebuilding operations in Houston, Dallas/Fort Worth, San Antonio and Austin locations. The Southwest division includes homebuilding operations in Phoenix, Tucson, Albuquerque, Denver and Colorado Springs locations. The Southeast division includes homebuilding operations in Atlanta, Charlotte and Nashville locations. The Florida division includes homebuilding operations in Tampa, Orlando, Fort Myers and Jacksonville locations. The Northwest division includes homebuilding operations in Seattle location.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LGIH – September 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,307,283,805 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.21 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 47733.33% Pass
6. Moderate PEmg Ratio PEmg < 20 13.01 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 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 2.21 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 Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.43
MG Growth Estimate 15.00%
MG Value $170.45
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $64.20
MG Value based on 0% Growth $37.63
Market Implied Growth Rate 2.26%
Current Price $57.60
% of Intrinsic Value 33.79%

LGI Homes Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.74 in 2014 to an estimated $4.43 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.26% 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 LGI Homes Inc revealed the company was trading above its Graham Number of $55.97. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 13.01, which was below the industry average of 25.8, 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 $21.67.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $21.67
Graham Number $55.97
PEmg 13.01
Current Ratio 2.21
PB Ratio 2.53
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $1,172,890,000
Total Current Liabilities $529,853,000
Long-Term Debt $67,235,000
Total Assets $1,199,919,000
Intangible Assets $12,018,000
Total Liabilities $631,237,000
Shares Outstanding (Diluted Average) 25,001,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.21
Dec2017 $4.73
Dec2016 $3.41
Dec2015 $2.44
Dec2014 $1.33
Dec2013 $0.34
Dec2012 $1.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.43
Dec2017 $3.17
Dec2016 $2.17
Dec2015 $1.38
Dec2014 $0.74
Dec2013 $0.39
Dec2012 $0.35

Recommended Reading:

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5 Undervalued Companies for Value Investors with a Low Beta – July 2017
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Best Stocks Below Their Graham Number – March 2017
5 Best Stocks for Value Investors This Week – 3/18/17
LGI Homes Inc Valuation – Initial Coverage $LGIH

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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.

LGI Homes Inc Valuation – Initial Coverage $LGIH

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 LGI Homes Inc (LGIH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): LGI Homes, Inc. is a homebuilder. The Company is engaged in the design, construction, marketing and sale of new homes in markets in Texas, Arizona, Florida, Georgia, New Mexico, South Carolina, North Carolina, Colorado, Washington and Tennessee. The Company has five segments: the Texas division, the Southwest division, the Southeast division, the Florida division and the Northwest division. The Texas division includes homebuilding operations in Houston, Dallas/Fort Worth, San Antonio and Austin locations. The Southwest division includes homebuilding operations in Phoenix, Tucson, Albuquerque, Denver and Colorado Springs locations. The Southeast division includes homebuilding operations in Atlanta, Charlotte and Nashville locations. The Florida division includes homebuilding operations in Tampa, Orlando, Fort Myers and Jacksonville locations. The Northwest division includes homebuilding operations in Seattle location. Its product offerings include entry-level homes and move-up homes.

LGIH Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LGIH – 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 $687,502,888 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 13.55 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 31000.00% Pass
6. Moderate PEmg Ratio PEmg < 20 11.70 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.00 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 13.55 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.54 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.76
MG Growth Estimate 15.00%
MG Value $106.16
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $39.98
MG Value based on 0% Growth $23.44
Market Implied Growth Rate 1.60%
Current Price $32.25
% of Intrinsic Value 30.38%

LGI Homes Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.39 in 2013 to an estimated $2.76 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.6% 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 above the price.

At the time of valuation, further research into LGI Homes Inc revealed the company was trading below its Graham Number of $36.13. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 11.7, which was below the industry average of 28.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $15.24.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $15.24
Graham Number $36.13
PEmg 11.70
Current Ratio 13.55
PB Ratio 2.00
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $794,905,000
Total Current Liabilities $58,666,000
Long-Term Debt $400,483,000
Total Assets $814,514,000
Intangible Assets $12,018,000
Total Liabilities $459,313,000
Shares Outstanding (Diluted Average) 22,024,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.48
Dec2016 $3.41
Dec2015 $2.44
Dec2014 $1.33
Dec2013 $0.34
Dec2012 $1.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.76
Dec2016 $2.17
Dec2015 $1.38
Dec2014 $0.74
Dec2013 $0.39
Dec2012 $0.35

Recommended Reading:

Other ModernGraham posts about the company

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

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Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
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Sherwin-Williams Co Valuation – July 2016 $SHW
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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.

Martin Marietta Materials Inc Valuation – February 2019 $MLM

Company Profile (excerpt from Reuters): Martin Marietta Materials, Inc., incorporated on November 12, 1993, is a supplier of aggregates products (crushed stone, sand, and gravel) used for the construction of infrastructure, nonresidential, and residential projects. Aggregates products are also used for railroad ballast and in agricultural, utility and environmental applications. The Company’s Aggregates business operates through three segments: the Mid-America Group, Southeast Group and West Group. The Company’s business is categorized into Aggregates Business, Cement Business and Magnesia Specialties Business. Its Cement business is reported through the Cement segment. Its Magnesia Specialties business manufactures and markets magnesia-based chemical products used in industrial, agricultural, and environmental applications, and dolomitic lime sold to customers in the steel industry. Its Aggregates business consists of mining, processing, and selling granite, limestone, sand and gravel. Its Aggregates business also includes aggregates-related downstream product lines (including its building materials, such as asphalt products, ready mixed concrete, and road paving construction services). It is also a supplier of cement, ready mixed concrete, and asphalt and paving services. Its Cement business produces Portland and specialty cements.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MLM – 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 $11,875,000,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.74 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 377.76% Pass
6. Moderate PEmg Ratio PEmg < 20 22.98 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.42 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 1.74 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.72 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.27
MG Growth Estimate 15.00%
MG Value $318.32
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $119.89
MG Value based on 0% Growth $70.28
Market Implied Growth Rate 7.24%
Current Price $190.00
% of Intrinsic Value 59.69%

Martin Marietta Materials, 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 ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.04 in 2015 to an estimated $8.27 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.24% 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 Martin Marietta Materials, Inc. revealed the company was trading above its Graham Number of $123.79. The company pays a dividend of $1.84 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 22.98, which was above the industry average of 20.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-51.44.

Martin Marietta Materials, 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) -$51.44
Graham Number $123.79
PEmg 22.98
Current Ratio 1.74
PB Ratio 2.42
Current Dividend $1.84
Dividend Yield 0.97%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,365,816,000
Total Current Liabilities $786,750,000
Long-Term Debt $2,730,439,000
Total Assets $9,551,419,000
Intangible Assets $2,900,400,000
Total Liabilities $4,602,007,000
Shares Outstanding (Diluted Average) 62,918,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.60
Dec2018 $7.43
Dec2017 $11.25
Dec2016 $6.63
Dec2015 $4.29
Dec2014 $2.71
Dec2013 $2.61
Dec2012 $1.83
Dec2011 $1.78
Dec2010 $2.10
Dec2009 $1.91
Dec2008 $4.18
Dec2007 $6.06
Dec2006 $5.29
Dec2005 $4.08
Dec2004 $2.66
Dec2003 $1.91
Dec2002 $1.77
Dec2001 $2.19
Dec2000 $2.39
Dec1999 $2.68

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.27
Dec2018 $7.56
Dec2017 $6.91
Dec2016 $4.37
Dec2015 $3.04
Dec2014 $2.34
Dec2013 $2.12
Dec2012 $2.04
Dec2011 $2.50
Dec2010 $3.21
Dec2009 $3.94
Dec2008 $4.79
Dec2007 $4.73
Dec2006 $3.76
Dec2005 $2.83
Dec2004 $2.20
Dec2003 $2.04

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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.

Fluor Corp Valuation – February 2019 $FLR

Company Profile (excerpt from Reuters): Fluor Corporation (Fluor), incorporated on September 11, 2000, is a holding company. The Company operates its business in four segments: Energy, Chemicals & Mining; Industrial, Infrastructure & Power; Government, and Maintenance, Modification & Asset Integrity (MMAI). The Company, through its subsidiaries, offers professional services providing engineering, procurement, construction, fabrication and modularization, commissioning and maintenance, as well as project management services on a global basis. The Company is an integrated solutions provider for various industries, including oil and gas, chemicals and petrochemicals, mining and metals, transportation, power, life sciences and advanced manufacturing. The Company is also a service provider to the United States federal Government and governments abroad, and it performs operations and maintenance activities around the world for its industrial clients. The Company offers services in various categories, including engineering and design, procurement, construction, fabrication, maintenance, modification and asset integrity and project management. The Company offers these services both independently, as well as through its integrated solutions offerings. Its services range from basic consulting activities, at the early stages of a project, to complete design-build and maintenance contracts.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FLR – 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 $5,303,183,707 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.52 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 -43.59% Fail
6. Moderate PEmg Ratio PEmg < 20 19.36 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.67 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 1.52 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.87 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.95
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $28.24
MG Value based on 0% Growth $16.55
Market Implied Growth Rate 5.43%
Current Price $37.70
% of Intrinsic Value N/A

Fluor Corporation (NEW) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.28 in 2014 to an estimated $1.95 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.43% 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 Fluor Corporation (NEW) revealed the company was trading above its Graham Number of $31.02. The company pays a dividend of $0.84 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.36, 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 $-2.57.

Fluor Corporation (NEW) receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.57
Graham Number $31.02
PEmg 19.36
Current Ratio 1.52
PB Ratio 1.67
Current Dividend $0.84
Dividend Yield 2.23%
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 $5,584,161,000
Total Current Liabilities $3,662,103,000
Long-Term Debt $1,667,359,000
Total Assets $9,147,976,000
Intangible Assets $553,294,000
Total Liabilities $5,948,047,000
Shares Outstanding (Diluted Average) 141,549,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.79
Dec2017 $1.36
Dec2016 $2.00
Dec2015 $2.81
Dec2014 $3.20
Dec2013 $4.06
Dec2012 $2.71
Dec2011 $3.40
Dec2010 $1.98
Dec2009 $3.75
Dec2008 $3.93
Dec2007 $2.93
Dec2006 $1.48
Dec2005 $1.31
Dec2004 $1.13
Dec2003 $0.98
Dec2002 $1.03
Dec2001 $0.13
Oct2000 $0.81
Oct1999 $0.69
Oct1998 $1.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.95
Dec2017 $2.25
Dec2016 $2.78
Dec2015 $3.19
Dec2014 $3.28
Dec2013 $3.27
Dec2012 $2.97
Dec2011 $3.13
Dec2010 $2.94
Dec2009 $3.17
Dec2008 $2.64
Dec2007 $1.85
Dec2006 $1.26
Dec2005 $1.08
Dec2004 $0.91
Dec2003 $0.78
Dec2002 $0.73

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LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN

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

Recommended Reading:

Other ModernGraham posts about the company

5 Companies for Enterprising Investors Near 52 Week Lows – April 2018
Lennar Corp Valuation – April 2018 $LEN
Lennar Corp Valuation – November 2016 $LEN
6 Best Stocks For Value Investors This Week – 5/14/16
Lennar Corporation Valuation – May 2016 $LEN

Other ModernGraham posts about related companies

Vulcan Materials Co Valuation – February 2019 $VMC
PulteGroup Inc Valuation – January 2019 $PHM
Sherwin-Williams Co Valuation – January 2019 $SHW
Johnson Controls International PC Valuation – January 2019 $JCI
Cummins Inc Valuation – January 2019 $CMI
Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN

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.

Vulcan Materials Co Valuation – February 2019 $VMC

Company Profile (excerpt from Reuters): Vulcan Materials Company, incorporated on February 14, 2007, is a supplier of construction aggregates (primarily crushed stone, sand and gravel) and a producer of asphalt mix and ready-mixed concrete. The Company operates through four segments: Aggregates, Asphalt Mix, Concrete and Calcium. As of December 31, 2016, it had 337 active aggregates facilities. The Company sells aggregates that are used as ballast for construction and maintenance of railroad tracks. It also sells riprap and jetty stone for erosion control along roads and waterways. In addition, stone can be used as a feedstock for cement and lime plants and for making a variety of adhesives, fillers and extenders. It sells construction aggregates outside of the United States, principally in the areas surrounding its quarry on the Yucatan Peninsula in Mexico.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VMC – 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 $13,714,505,360 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.70 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 -1171.43% Fail
6. Moderate PEmg Ratio PEmg < 20 30.89 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.70 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 1.70 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.72 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 $3.36
MG Growth Estimate 15.00%
MG Value $129.44
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $48.75
MG Value based on 0% Growth $28.58
Market Implied Growth Rate 11.20%
Current Price $103.86
% of Intrinsic Value 80.24%

Vulcan Materials Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the 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 $0.36 in 2014 to an estimated $3.36 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.2% 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 Vulcan Materials Company revealed the company was trading above its Graham Number of $55.91. The company pays a dividend of $1 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 30.89, which was above the industry average of 20.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.54.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$26.54
Graham Number $55.91
PEmg 30.89
Current Ratio 1.70
PB Ratio 2.70
Current Dividend $1.00
Dividend Yield 0.96%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,175,912,000
Total Current Liabilities $690,415,000
Long-Term Debt $2,778,129,000
Total Assets $9,875,635,000
Intangible Assets $4,268,969,000
Total Liabilities $4,729,846,000
Shares Outstanding (Diluted Average) 133,894,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.70
Dec2017 $4.46
Dec2016 $3.09
Dec2015 $1.64
Dec2014 $1.54
Dec2013 $0.19
Dec2012 -$0.41
Dec2011 -$0.55
Dec2010 -$0.75
Dec2009 $0.25
Dec2008 $0.01
Dec2007 $4.54
Dec2006 $4.71
Dec2005 $3.74
Dec2004 $2.77
Dec2003 $1.90
Dec2002 $1.66
Dec2001 $2.17
Dec2000 $2.16
Dec1999 $2.35
Dec1998 $2.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.36
Dec2017 $2.86
Dec2016 $1.77
Dec2015 $0.90
Dec2014 $0.36
Dec2013 -$0.24
Dec2012 -$0.40
Dec2011 -$0.03
Dec2010 $0.74
Dec2009 $1.87
Dec2008 $2.84
Dec2007 $4.01
Dec2006 $3.49
Dec2005 $2.73
Dec2004 $2.20
Dec2003 $1.95
Dec2002 $2.04

Recommended Reading:

Other ModernGraham posts about the company

Vulcan Materials Co Valuation – April 2018 $VMC
Vulcan Materials Co Valuation – July 2016 $VMC
5 Speculative and Overvalued Companies to Avoid – June 2015
30 Companies in the Spotlight This Week – 5/23/15
Vulcan Materials Company Annual Valuation – 2015 $VMC

Other ModernGraham posts about related companies

PulteGroup Inc Valuation – January 2019 $PHM
Sherwin-Williams Co Valuation – January 2019 $SHW
Johnson Controls International PC Valuation – January 2019 $JCI
Cummins Inc Valuation – January 2019 $CMI
Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD

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.

5 Undervalued Companies for Value Investors with a Low Beta – January 2019

imageThere are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected five undervalued companies with a low beta reviewed by ModernGraham.

A company’s beta indicates the correlation at which its price moves in relation to the market.  A beta less than 1 indicates a company is less volatile than the market.

Each company has been determined to be suitable for either the Defensive Investor or the Enterprising Investor according to the ModernGraham approach. Defensive Investors are defined as investors who need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk.

With a low beta, Mr. Market may not hit these companies as harshly in a downturn, so be sure to check them out in depth!

 

H & R Block Inc (HRB)

H & R Block Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. 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 $1.55 in 2015 to an estimated $2.05 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.95% 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 H & R Block Inc revealed the company was trading above its Graham Number of $8.61. The company pays a dividend of $0.96 per share, for a yield of 3.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.39, which was below the industry average of 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 $-6.68.

H & R Block Inc performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

LGI Homes Inc (LGIH)

LGI Homes Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.74 in 2014 to an estimated $4.43 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.26% 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 LGI Homes Inc revealed the company was trading above its Graham Number of $55.97. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 13.01, which was below the industry average of 25.8, 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 $21.67.

LGI Homes Inc performs fairly well in the ModernGraham grading system, scoring a B-.  (See the full valuation)

Tyson Foods, Inc. (TSN)

Tyson Foods, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.13 in 2014 to an estimated $5.52 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.07% 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 Tyson Foods, Inc. revealed the company was trading below its Graham Number of $73.4. The company pays a dividend of $0.9 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 12.65, which was below the industry average of 24.35, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.88.

Tyson Foods, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Constellation Brands, Inc. Class A (STZ)

Constellation Brands, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the 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 $4.88 in 2015 to an estimated $8.7 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 8.5% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Constellation Brands, Inc. revealed the company was trading above its Graham Number of $94.52. The company pays a dividend of $2.08 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 25.5, which was above the industry average of 24.61. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-45.22.

Constellation Brands, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.  (See the full valuation)

Aaron’s, Inc. (AAN)

Aaron’s, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. 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 $1.52 in 2014 to an estimated $2.87 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.84% 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 Aaron’s, Inc. revealed the company was trading below its Graham Number of $42.55. The company pays a dividend of $0.11 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 14.17, which was below the industry average of 37.1, 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 $-7.75.

Aaron’s, Inc. performs fairly well in the ModernGraham grading system, scoring an B.  (See the full valuation)

 

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.

PulteGroup Inc Valuation – January 2019 $PHM

Company Profile (excerpt from Reuters): PulteGroup, Inc., incorporated on September 17, 1987, is a homebuilder in the United States. The Company’s segments include Homebuilding and Financial Services. Its Homebuilding operations are engaged in the acquisition and development of land primarily for residential purposes within the United States and the construction of housing on such land. Its Financial Services operations consist principally of mortgage banking and title operations. The Company’s subsidiaries are engaged in the homebuilding business. The Company offers a product line to meet the needs of homebuyers in its focused markets. Through its brands, which include Centex, Pulte Homes, Del Webb, DiVosta Homes, and John Wieland Homes and Neighborhoods, the Company offers a range of home designs, including single-family detached, townhouses, condominiums and duplexes.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PHM – 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 $7,392,261,434 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.77 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 -187.42% Fail
6. Moderate PEmg Ratio PEmg < 20 12.60 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.58 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 4.77 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.50 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 $2.09
MG Growth Estimate 0.26%
MG Value $18.86
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $30.30
MG Value based on 0% Growth $17.76
Market Implied Growth Rate 2.05%
Current Price $26.32
% of Intrinsic Value 139.57%

PulteGroup, 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. 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 $2.05 in 2014 to an estimated $2.09 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.05% 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 PulteGroup, Inc. revealed the company was trading below its Graham Number of $32.65. The company pays a dividend of $0.36 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 12.6, which was below the industry average of 18.63, 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 $10.27.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $10.27
Graham Number $32.65
PEmg 12.60
Current Ratio 4.77
PB Ratio 1.58
Current Dividend $0.36
Dividend Yield 1.37%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $8,248,466,000
Total Current Liabilities $1,727,675,000
Long-Term Debt $3,256,151,000
Total Assets $10,055,080,000
Intangible Assets $130,642,000
Total Liabilities $5,326,202,000
Shares Outstanding (Diluted Average) 284,672,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.27
Dec2017 $1.44
Dec2016 $1.75
Dec2015 $1.36
Dec2014 $1.26
Dec2013 $6.72
Dec2012 $0.54
Dec2011 -$0.55
Dec2010 -$2.90
Dec2009 -$3.94
Dec2008 -$5.81
Dec2007 -$8.94
Dec2006 $2.66
Dec2005 $5.68
Dec2004 $3.79
Dec2003 $2.48
Dec2002 $1.84
Dec2001 $1.50
Dec2000 $1.12
Dec1999 $1.02
Dec1998 $0.58

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.09
Dec2017 $1.83
Dec2016 $2.13
Dec2015 $2.17
Dec2014 $2.05
Dec2013 $1.62
Dec2012 -$1.46
Dec2011 -$3.12
Dec2010 -$4.19
Dec2009 -$3.92
Dec2008 -$2.78
Dec2007 -$0.46
Dec2006 $3.61
Dec2005 $3.75
Dec2004 $2.57
Dec2003 $1.83
Dec2002 $1.41

Recommended Reading:

Other ModernGraham posts about the company

PulteGroup Inc Valuation – March 2018 $PHM
10 Undervalued Stocks for the Enterprising Investor – July 2017
10 Low PE Stock Picks for the Enterprising Investor – April 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017
10 Low PE Stock Picks for the Enterprising Investor – March 2017

Other ModernGraham posts about related companies

Sherwin-Williams Co Valuation – January 2019 $SHW
Johnson Controls International PC Valuation – January 2019 $JCI
Cummins Inc Valuation – January 2019 $CMI
Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR

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.

Sherwin-Williams Co Valuation – January 2019 $SHW

Company Profile (excerpt from Reuters): The Sherwin-Williams Company (Sherwin-Williams), incorporated on July 16, 1884, is engaged in the development, manufacture, distribution and sale of paint, coatings and related products to professional, industrial, commercial and retail customers primarily in North and South America with additional operations in the Caribbean region, Europe and Asia. The Company’s segments are Paint Stores Group, Consumer Group, Global Finishes Group, Latin America Coatings Group and Administrative.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SHW – 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 $36,779,226,028 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.04 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 269.25% Pass
6. Moderate PEmg Ratio PEmg < 20 27.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.40 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 1.04 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 44.45 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 $14.16
MG Growth Estimate 15.00%
MG Value $545.08
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $205.29
MG Value based on 0% Growth $120.34
Market Implied Growth Rate 9.62%
Current Price $392.83
% of Intrinsic Value 72.07%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $6.9 in 2014 to an estimated $14.16 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.62% 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 above the price.

At the time of valuation, further research into Sherwin-Williams Co revealed the company was trading above its Graham Number of $111.82. The company pays a dividend of $3.4 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 27.75, which was above the industry average of 18.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-115.29.

Sherwin-Williams 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) -$115.29
Graham Number $111.82
PEmg 27.75
Current Ratio 1.04
PB Ratio 9.40
Current Dividend $3.40
Dividend Yield 0.87%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $5,038,032,000
Total Current Liabilities $4,842,065,000
Long-Term Debt $8,710,831,000
Total Assets $19,980,696,000
Intangible Assets $12,253,184,000
Total Liabilities $16,005,857,000
Shares Outstanding (Diluted Average) 95,135,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $14.13
Dec2017 $18.67
Dec2016 $11.99
Dec2015 $11.15
Dec2014 $8.77
Dec2013 $7.26
Dec2012 $6.02
Dec2011 $4.14
Dec2010 $4.21
Dec2009 $3.78
Dec2008 $4.00
Dec2007 $4.70
Dec2006 $4.19
Dec2005 $3.28
Dec2004 $2.72
Dec2003 $2.26
Dec2002 $0.84
Dec2001 $1.68
Dec2000 $0.10
Dec1999 $1.80
Dec1998 $1.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $14.16
Dec2017 $13.30
Dec2016 $10.09
Dec2015 $8.59
Dec2014 $6.90
Dec2013 $5.67
Dec2012 $4.72
Dec2011 $4.11
Dec2010 $4.12
Dec2009 $4.04
Dec2008 $4.04
Dec2007 $3.85
Dec2006 $3.17
Dec2005 $2.49
Dec2004 $1.91
Dec2003 $1.45
Dec2002 $1.09

Recommended Reading:

Other ModernGraham posts about the company

Sherwin-Williams Co Valuation – March 2018 $SHW
Sherwin-Williams Co Valuation – July 2016 $SHW
47 Companies in the Spotlight This Week – 5/16/15
Sherwin Williams Company Annual Valuation – 2015 $SHW
16 Companies in the Spotlight This Week – 5/24/14

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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.

Johnson Controls International PC Valuation – January 2019 $JCI

Company Profile (excerpt from Reuters): Johnson Controls International plc, formerly Tyco International plc, incorporated on May 9, 2014, is a global diversified technology and multi industrial company. The Company’s segments include Buildings and Power Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JCI – 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 $30,244,450,646 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.05 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 0.53% Fail
6. Moderate PEmg Ratio PEmg < 20 21.66 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.36 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 1.05 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 16.85 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 $1.51
MG Growth Estimate -3.52%
MG Value $2.20
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $21.91
MG Value based on 0% Growth $12.85
Market Implied Growth Rate 6.58%
Current Price $32.73
% of Intrinsic Value 1490.37%

Johnson Controls International PLC 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 current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.98 in 2015 to an estimated $1.51 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.58% 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 below the price.

At the time of valuation, further research into Johnson Controls International PLC revealed the company was trading above its Graham Number of $29.58. The company pays a dividend of $1.04 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 21.66, which was above the industry average of 18.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.6.

Johnson Controls International PLC 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) -$15.60
Graham Number $29.58
PEmg 21.66
Current Ratio 1.05
PB Ratio 1.36
Current Dividend $1.04
Dividend Yield 3.18%
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 $11,823,000,000
Total Current Liabilities $11,250,000,000
Long-Term Debt $9,654,000,000
Total Assets $48,797,000,000
Intangible Assets $25,821,000,000
Total Liabilities $26,339,000,000
Shares Outstanding (Diluted Average) 930,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.70
Sep2018 $2.32
Sep2017 $1.71
Sep2016 -$1.30
Sep2015 $2.36
Sep2014 $1.80
Sep2013 $1.71
Sep2012 $1.72
Sep2011 $2.06
Sep2010 $1.92
Sep2009 -$0.57
Sep2008 $1.63
Sep2007 $2.09
Sep2006 $1.74
Sep2005 $1.56
Sep2004 $1.41
Sep2003 $1.20
Sep2002 $1.06
Sep2001 $0.85
Sep2000 $0.85
Sep1999 $0.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.51
Sep2018 $1.40
Sep2017 $1.05
Sep2016 $0.90
Sep2015 $1.98
Sep2014 $1.80
Sep2013 $1.66
Sep2012 $1.54
Sep2011 $1.44
Sep2010 $1.21
Sep2009 $1.00
Sep2008 $1.75
Sep2007 $1.74
Sep2006 $1.51
Sep2005 $1.33
Sep2004 $1.17
Sep2003 $1.02

Recommended Reading:

Other ModernGraham posts about the company

Johnson Controls International PLC Valuation – March 2018 $JCI
Johnson Controls Inc Valuation – July 2016 $JCI
28 Companies in the Spotlight This Week – 2/28/15
Johnson Controls Inc. Annual Valuation – 2015 $JCI
14 Companies in the Spotlight This Week – 2/22/14

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SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ

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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