Linde PLC Valuation – April 2019 #LIN

Company Profile (excerpt from Reuters): Linde plc, incorporated on April 18, 2017, is an industrial gases and engineering company that operates through its subsidiaries. The Company provides atmospheric gases (oxygen, nitrogen, argon and rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases and acetylene). It designs, engineers and builds equipment that produces industrial gases primarily for internal use. It also offers gaseous medication and related medical products and devices for patients and medical staff. The Company serves the customers in various industries, including healthcare, petroleum refining, manufacturing, food, beverage carbonation, fiber-optics, steel making, aerospace, chemicals and water treatment.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LIN – April 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 $100,601,281,539 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.86 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 26.09% Fail
6. Moderate PEmg Ratio PEmg < 20 32.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.99 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 0.86 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.92 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 $5.70
MG Growth Estimate 0.33%
MG Value $52.23
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $82.69
MG Value based on 0% Growth $48.47
Market Implied Growth Rate 11.94%
Current Price $184.62
% of Intrinsic Value 353.45%

Linde 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 growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $5.58 in 2014 to an estimated $5.7 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.94% 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 Linde PLC revealed the company was trading above its Graham Number of $58.47. The company pays a dividend of $3.15 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 32.37, which was above the industry average of 23.27. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-34.09.

Linde 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) -$34.09
Graham Number $58.47
PEmg 32.37
Current Ratio 0.86
PB Ratio 7.99
Current Dividend $3.15
Dividend Yield 1.71%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

 

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,305,000,000
Total Current Liabilities $3,860,000,000
Long-Term Debt $6,615,000,000
Total Assets $19,979,000,000
Intangible Assets $3,714,000,000
Total Liabilities $13,244,000,000
Shares Outstanding (Diluted Average) 291,513,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.24
Dec2017 $4.32
Dec2016 $5.21
Dec2015 $5.35
Dec2014 $5.73
Dec2013 $5.87
Dec2012 $5.61
Dec2011 $5.45
Dec2010 $3.84
Dec2009 $4.01
Dec2008 $3.80
Dec2007 $3.62
Dec2006 $3.00
Dec2005 $2.20
Dec2004 $2.10
Dec2003 $1.77
Dec2002 $1.24
Dec2001 $1.31
Dec2000 $1.13
Dec1999 $1.33
Dec1998 $1.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.70
Dec2017 $5.05
Dec2016 $5.47
Dec2015 $5.60
Dec2014 $5.58
Dec2013 $5.32
Dec2012 $4.88
Dec2011 $4.39
Dec2010 $3.79
Dec2009 $3.62
Dec2008 $3.27
Dec2007 $2.84
Dec2006 $2.33
Dec2005 $1.90
Dec2004 $1.67
Dec2003 $1.42
Dec2002 $1.25

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.

Illinois Tool Works Inc Valuation – April 2019 #ITW

Company Profile (excerpt from Reuters): Illinois Tool Works Inc., incorporated on June 19, 1961, is a manufacturer of a range of industrial products and equipment. The Company operates through seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products, and Specialty Products. As of December 31, 2016, the Company had 85 divisions in 57 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ITW – April 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 $48,387,279,394 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.63 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 52.27% Pass
6. Moderate PEmg Ratio PEmg < 20 22.20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 15.06 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 1.63 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.70 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 $6.67
MG Growth Estimate 3.23%
MG Value $99.71
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $96.68
MG Value based on 0% Growth $56.67
Market Implied Growth Rate 6.85%
Current Price $148.01
% of Intrinsic Value 148.43%

Illinois Tool Works 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 Overvalued after growing its EPSmg (normalized earnings) from $5.49 in 2015 to an estimated $6.67 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.85% 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 Illinois Tool Works Inc. revealed the company was trading above its Graham Number of $41.22. The company pays a dividend of $3.56 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 22.2, which was below the industry average of 24.48, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.6.

Illinois Tool Works Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.60
Graham Number $41.22
PEmg 22.20
Current Ratio 1.63
PB Ratio 15.06
Current Dividend $3.56
Dividend Yield 2.41%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $5,778,000,000
Total Current Liabilities $3,542,000,000
Long-Term Debt $6,029,000,000
Total Assets $14,870,000,000
Intangible Assets $5,717,000,000
Total Liabilities $11,612,000,000
Shares Outstanding (Diluted Average) 331,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.70
Dec2018 $7.60
Dec2017 $4.86
Dec2016 $5.70
Dec2015 $5.13
Dec2014 $7.28
Dec2013 $3.74
Dec2012 $6.06
Dec2011 $4.19
Dec2010 $2.99
Dec2009 $1.89
Dec2008 $2.91
Dec2007 $3.36
Dec2006 $3.01
Dec2005 $1.30
Dec2004 $1.10
Dec2003 $1.66
Dec2002 $1.16
Dec2001 $1.32
Dec2000 $1.58
Dec1999 $1.38

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.67
Dec2018 $6.14
Dec2017 $5.39
Dec2016 $5.63
Dec2015 $5.49
Dec2014 $5.39
Dec2013 $4.23
Dec2012 $4.18
Dec2011 $3.18
Dec2010 $2.73
Dec2009 $2.57
Dec2008 $2.71
Dec2007 $2.44
Dec2006 $1.87
Dec2005 $1.30
Dec2004 $1.32
Dec2003 $1.43

Recommended Reading:

Other ModernGraham posts about the company

Illinois Tool Works Inc Valuation – June 2018 $ITW
Best Dividend Paying Stocks for Dividend Growth Investors – August 2017
Illinois Tool Works Inc Valuation – August 2017 $ITW
9 Best Stocks For Value Investors This Week – 7/8/16
Illinois Tool Works Inc Valuation – July 2016 $ITW

Other ModernGraham posts about related companies

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Honeywell International Inc Valuation – June 2018 $HON
General Electric Co Valuation – February 2018 $GE
3M Company Valuation – February 2018 $MMM
Raven Industries Inc Valuation – September 2017 $RAVN
Illinois Tool Works Inc Valuation – August 2017 $ITW

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.

CenturyLink Inc Valuation – April 2019 #CTL

Company Profile (excerpt from Reuters): CenturyLink, Inc., incorporated on May 7, 1968, is an integrated communications company. The Company is engaged in providing an array of communications services to its residential and business customers. The Company’s segments include Enterprise and Consumer . Its communications services include local and long-distance voice, broadband, Multi-Protocol Label Switching (MPLS), private line (including special access), Ethernet, colocation, hosting (including cloud hosting and managed hosting), data integration, video, network, public access, Voice over Internet Protocol (VoIP), information technology and other ancillary services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CTL – April 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 $13,378,511,740 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.69 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -70.46% Fail
6. Moderate PEmg Ratio PEmg < 20 20.27 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.67 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 0.69 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -20.69 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.61
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $8.85
MG Value based on 0% Growth $5.19
Market Implied Growth Rate 5.88%
Current Price $12.37
% of Intrinsic Value N/A

Centurylink Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the 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 $1.05 in 2015 to an estimated $0.61 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.88% 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 Centurylink Inc revealed the company was trading below its Graham Number of $20.62. The company pays a dividend of $2.16 per share, for a yield of 17.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.26, which was below the industry average of 97.99, 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 $-43.67.

Centurylink 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) -$43.67
Graham Number $20.62
PEmg 20.26
Current Ratio 0.69
PB Ratio 0.67
Current Dividend $2.16
Dividend Yield 17.46%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,820,000,000
Total Current Liabilities $5,531,000,000
Long-Term Debt $35,409,000,000
Total Assets $70,256,000,000
Intangible Assets $38,810,000,000
Total Liabilities $50,428,000,000
Shares Outstanding (Diluted Average) 1,067,234,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.03
Dec2018 -$1.63
Dec2017 $2.21
Dec2016 $1.16
Dec2015 $1.58
Dec2014 $1.36
Dec2013 -$0.40
Dec2012 $1.25
Dec2011 $1.07
Dec2010 $3.13
Dec2009 $3.23
Dec2008 $3.52
Dec2007 $3.72
Dec2006 $3.07
Dec2005 $2.49
Dec2004 $2.41
Dec2003 $2.35
Dec2002 $5.61
Dec2001 $1.05
Dec2000 $0.90
Dec1999 $1.70

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.61
Dec2018 $0.58
Dec2017 $1.52
Dec2016 $1.11
Dec2015 $1.05
Dec2014 $0.95
Dec2013 $1.05
Dec2012 $1.99
Dec2011 $2.55
Dec2010 $3.31
Dec2009 $3.33
Dec2008 $3.27
Dec2007 $3.03
Dec2006 $2.86
Dec2005 $2.76
Dec2004 $2.75
Dec2003 $2.72

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CenturyLink Inc Valuation – June 2018 $CTL
CenturyLink Inc Valuation – July 2017 $CTL
CenturyLink Inc Valuation – February 2016 $CTL
27 Companies in the Spotlight This Week – 12/20/14
CenturyLink Inc. Annual Valuation – 2014 $CTL

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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.

Franklin Resources Inc Valuation – March 2019 #BEN

Company Profile (excerpt from Reuters): Franklin Resources, Inc., incorporated on November 28, 1969, is a holding company. The Company, along with its subsidiaries, operates as Franklin Templeton Investments. The Company is a global investment management company that provides investment management and related services to retail, institutional and high net-worth clients in jurisdictions around the world. The Company offers its investment products and services under the Franklin, Templeton, Franklin Mutual Series, Franklin Bissett, Fiduciary Trust, Darby, Balanced Equity Management, K2 and LibertyShares brand names. The Company’s products include investment funds and institutional, high net-worth and separately managed accounts (collectively, sponsored investment products (SIPs)). The Company offers various types of SIPs, such as the United States funds, cross-border funds, local/regional funds, and other managed accounts, alternative investment products and trusts.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BEN – 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 $16,503,028,589 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.25 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 -17.09% Fail
6. Moderate PEmg Ratio PEmg < 20 13.97 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.64 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 5.25 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.12 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 $2.32
MG Growth Estimate -4.25%
MG Value $7.03
Opinion Overvalued
MG Grade B+
MG Value based on 3% Growth $33.60
MG Value based on 0% Growth $19.70
Market Implied Growth Rate 2.73%
Current Price $32.37
% of Intrinsic Value 460.50%

Franklin Resources, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the 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 value 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 $3.37 in 2015 to an estimated $2.32 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.73% 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 Franklin Resources, Inc. revealed the company was trading above its Graham Number of $30.72. The company pays a dividend of $0.92 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.97, which was below the industry average of 21.22, 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 $7.03.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.03
Graham Number $30.72
PEmg 13.97
Current Ratio 5.25
PB Ratio 1.64
Current Dividend $0.92
Dividend Yield 2.84%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $7,464,500,000
Total Current Liabilities $1,420,500,000
Long-Term Debt $730,400,000
Total Assets $13,950,600,000
Intangible Assets $2,326,200,000
Total Liabilities $3,873,900,000
Shares Outstanding (Diluted Average) 510,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.20
Sep2018 $1.39
Sep2017 $3.01
Sep2016 $2.94
Sep2015 $3.29
Sep2014 $3.79
Sep2013 $3.37
Sep2012 $2.98
Sep2011 $2.87
Sep2010 $2.11
Sep2009 $1.28
Sep2008 $2.22
Sep2007 $2.34
Sep2006 $1.62
Sep2005 $1.35
Sep2004 $0.92
Sep2003 $0.66
Sep2002 $0.55
Sep2001 $0.64
Sep2000 $0.76
Sep1999 $0.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.32
Sep2018 $2.55
Sep2017 $3.18
Sep2016 $3.26
Sep2015 $3.37
Sep2014 $3.28
Sep2013 $2.86
Sep2012 $2.50
Sep2011 $2.23
Sep2010 $1.91
Sep2009 $1.80
Sep2008 $1.93
Sep2007 $1.65
Sep2006 $1.21
Sep2005 $0.94
Sep2004 $0.73
Sep2003 $0.63

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Franklin Resources Inc Valuation – May 2018 $BEN
Franklin Resources Inc Valuation – February 2017 $BEN
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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.

Xilinx Inc Valuation – March 2019 #XLNX

Company Profile (excerpt from Reuters): Xilinx, Inc. (Xilinx), incorporated on February 5, 1990, is engaged in designing and developing programmable devices and associated technologies. The Company’s programmable devices and associated technologies include integrated circuits (ICs) in the form of programmable logic devices (PLDs), including programmable System on Chips (SoCs) and three-dimensional ICs (3D ICs); software design tools to program the PLDs; targeted reference designs; printed circuit boards, and intellectual property (IP), which consists of Xilinx, and various third-party verification and IP cores. In addition to its programmable platforms, Xilinx provides design services, customer training, field engineering and technical support.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of XLNX – 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 $30,836,641,097 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.38 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 35.70% Pass
6. Moderate PEmg Ratio PEmg < 20 48.05 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.84 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.38 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.38 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 $2.53
MG Growth Estimate 2.73%
MG Value $35.37
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $36.75
MG Value based on 0% Growth $21.54
Market Implied Growth Rate 19.78%
Current Price $121.80
% of Intrinsic Value 344.34%

Xilinx, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with 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 $2.14 in 2015 to an estimated $2.53 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 19.78% 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 Xilinx, Inc. revealed the company was trading above its Graham Number of $26.25. The company pays a dividend of $1.4 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 48.05, which was above the industry average of 35.5. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.67.

Xilinx, 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) $5.67
Graham Number $26.25
PEmg 48.05
Current Ratio 4.38
PB Ratio 11.84
Current Dividend $1.40
Dividend Yield 1.15%
Number of Consecutive Years of Dividend Growth 14

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 $4,172,352,000
Total Current Liabilities $952,869,000
Long-Term Debt $1,221,438,000
Total Assets $5,354,764,000
Intangible Assets $423,251,000
Total Liabilities $2,717,569,000
Shares Outstanding (Diluted Average) 256,374,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.33
Mar2018 $1.99
Mar2017 $2.32
Mar2016 $2.05
Mar2015 $2.35
Mar2014 $2.19
Mar2013 $1.79
Mar2012 $1.95
Mar2011 $2.39
Mar2010 $1.29
Mar2009 $1.31
Mar2008 $1.25
Mar2007 $1.02
Mar2006 $1.00
Mar2005 $0.87
Mar2004 $0.85
Mar2003 $0.36
Mar2002 -$0.34
Mar2001 $0.10
Mar2000 $1.90
Mar1999 $0.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.53
Mar2018 $2.15
Mar2017 $2.20
Mar2016 $2.12
Mar2015 $2.14
Mar2014 $2.00
Mar2013 $1.85
Mar2012 $1.80
Mar2011 $1.64
Mar2010 $1.23
Mar2009 $1.17
Mar2008 $1.06
Mar2007 $0.92
Mar2006 $0.76
Mar2005 $0.55
Mar2004 $0.45
Mar2003 $0.32

Recommended Reading:

Other ModernGraham posts about the company

Xilinx Inc Valuation – May 2018 $XLNX
Xilinx Inc Valuation – February 2017 $XLNX
Xilinx Inc Valuation – August 2016 $XLNX
Xilinx Inc Valuation – February 2016 $XLNX
Xilinx Inc. Valuation – November 2015 Update $XLNX

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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.

American Airlines Group Inc Valuation – March 2019 #AAL

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAL – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,392,244,457 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.12 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -141.07% Fail
6. Moderate PEmg Ratio PEmg < 20 7.09 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.26 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.12 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.67 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

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

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.37 in 2015 to an estimated $4.52 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.71% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into American Airlines Group Inc revealed the company was trading below its Graham Number of $55.21. The company pays a dividend of $0.4 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 7.09, which was below the industry average of 10.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-86.27.

American Airlines Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$86.27
Graham Number $55.21
PEmg 7.09
Current Ratio 1.12
PB Ratio 1.26
Current Dividend $0.40
Dividend Yield 1.25%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

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

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

Southwest Airlines Co Valuation – March 2019 #LUV

Company Profile (excerpt from Reuters): Southwest Airlines Co. (Southwest), incorporated on March 9, 1967, operates Southwest Airlines, a passenger airline that provides scheduled air transportation in the United States and near-international markets. Southwest provides point-to-point service. As of December 31, 2016, Southwest operated a total of 723 Boeing 737 aircraft and served 101 destinations in 40 states, the District of Columbia, the Commonwealth of Puerto Rico, and eight near-international countries: Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize and Cuba. During the fiscal year ended December 31, 2016, the Company commenced international service out of Los Angeles International Airport by introducing service to Liberia, Costa Rica, and later to three airports in Mexico’s coastal regions: Cancun, San Jose del Cabo/Los Cabos and Puerto Vallarta. Southwest bundles fares into three categories: Wanna Get Away, Anytime and Business Select.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LUV – 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 $28,679,031,872 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.64 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 922.14% Pass
6. Moderate PEmg Ratio PEmg < 20 11.74 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.94 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.64 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -0.96 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.42
MG Growth Estimate 15.00%
MG Value $170.14
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $64.08
MG Value based on 0% Growth $37.56
Market Implied Growth Rate 1.62%
Current Price $51.88
% of Intrinsic Value 30.49%

Southwest Airlines Co 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 has concerns regarding the level of debt relative to the 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 $1.83 in 2015 to an estimated $4.42 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.62% 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 Southwest Airlines Co revealed the company was trading above its Graham Number of $41.89. The company pays a dividend of $0.61 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 11.74, which was above the industry average of 10.49. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.33.

Southwest Airlines Co performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$20.33
Graham Number $41.89
PEmg 11.74
Current Ratio 0.64
PB Ratio 2.94
Current Dividend $0.61
Dividend Yield 1.17%
Number of Consecutive Years of Dividend Growth 7

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 $5,028,000,000
Total Current Liabilities $7,905,000,000
Long-Term Debt $2,771,000,000
Total Assets $26,243,000,000
Intangible Assets $1,369,000,000
Total Liabilities $16,390,000,000
Shares Outstanding (Diluted Average) 559,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.45
Dec2018 $4.29
Dec2017 $5.57
Dec2016 $3.45
Dec2015 $3.27
Dec2014 $1.64
Dec2013 $1.05
Dec2012 $0.56
Dec2011 $0.23
Dec2010 $0.61
Dec2009 $0.13
Dec2008 $0.24
Dec2007 $0.84
Dec2006 $0.61
Dec2005 $0.60
Dec2004 $0.38
Dec2003 $0.46
Dec2002 $0.23
Dec2001 $0.63
Dec2000 $0.79
Dec1999 $0.59

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.42
Dec2018 $4.15
Dec2017 $3.72
Dec2016 $2.53
Dec2015 $1.83
Dec2014 $1.01
Dec2013 $0.64
Dec2012 $0.40
Dec2011 $0.35
Dec2010 $0.44
Dec2009 $0.40
Dec2008 $0.53
Dec2007 $0.64
Dec2006 $0.52
Dec2005 $0.47
Dec2004 $0.43
Dec2003 $0.49

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Investor – June 2018
Southwest Airlines Co Valuation – May 2018 $LUV
Southwest Airlines Co Valuation – February 2017 $LUV
Southwest Airlines Company Valuation – October 2015 Update $LUV
18 Companies in the Spotlight This Week – 10/25/14

Other ModernGraham posts about related companies

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

Disclaimer:

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

Rollins Inc Valuation – February 2019 $ROL

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ROL – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,218,781,539 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.96 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 121.29% Pass
6. Moderate PEmg Ratio PEmg < 20 57.04 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 17.18 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.96 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

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

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

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

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

Rollins, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.29
Graham Number $6.14
PEmg 57.04
Current Ratio 0.96
PB Ratio 17.18
Current Dividend $0.37
Dividend Yield 1.00%
Number of Consecutive Years of Dividend Growth 17

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $286,021,000
Total Current Liabilities $299,029,000
Long-Term Debt $0
Total Assets $1,094,124,000
Intangible Assets $611,739,000
Total Liabilities $382,216,000
Shares Outstanding (Diluted Average) 327,316,000

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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Fidelity National Information Services Inc Valuation – January 2019 $FIS
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Fleetcor Technologies Inc Valuation – January 2019 $FLT
TrueBlue Inc Valuation – October 2018 $TBI
Convergys Corp Valuation – September 2018 $CVG
Strategic Education Inc Valuation – August 2018 $STRA
Multi-Color Corp Valuation – August 2018 $LABL

Disclaimer:

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

Norwegian Cruise Line Holdings Ltd Valuation – January 2019 $NCLH

Company Profile (excerpt from Reuters): Norwegian Cruise Line Holdings Ltd. (NCLH), incorporated on February 21, 2011, is a global cruise company. The Company operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. The Company had 25 ships with approximately 50,400 Berths, as of May 1, 2017. The Company’s brands offer itineraries to various destinations around the world, including Europe, Asia, Australia, New Zealand, South America, Africa, Canada, Bermuda, Caribbean, Alaska and Hawaii. The Company’s brands offer various features, amenities, and activities, including various accommodations, multiple dining venues, bars and lounges, spa, casino and retail shopping areas and various entertainment choices. All the brands offer a selection of shore excursions at each port of call, as well as hotel packages for stays before or after a voyage.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NCLH – 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 $10,517,052,862 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.24 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 867.56% Pass
6. Moderate PEmg Ratio PEmg < 20 14.73 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.72 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.24 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.53 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.24
MG Growth Estimate 15.00%
MG Value $124.92
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $47.05
MG Value based on 0% Growth $27.58
Market Implied Growth Rate 3.12%
Current Price $47.81
% of Intrinsic Value 38.27%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.95 in 2014 to an estimated $3.24 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.12% 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 Norwegian Cruise Line Holdings Ltd revealed the company was trading below its Graham Number of $49.62. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 14.73, which was below the industry average of 29.4, 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 $-37.67.

Norwegian Cruise Line Holdings Ltd receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$37.67
Graham Number $49.62
PEmg 14.73
Current Ratio 0.24
PB Ratio 1.72
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $727,408,000
Total Current Liabilities $3,052,179,000
Long-Term Debt $5,875,252,000
Total Assets $15,316,122,000
Intangible Assets $2,241,747,000
Total Liabilities $9,118,032,000
Shares Outstanding (Diluted Average) 222,753,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.35
Dec2017 $3.31
Dec2016 $2.78
Dec2015 $1.86
Dec2014 $1.62
Dec2013 $0.49
Dec2012 $0.94
Dec2011 $0.62
Dec2010 $0.13
Dec2009 $0.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.24
Dec2017 $2.47
Dec2016 $1.87
Dec2015 $1.32
Dec2014 $0.95
Dec2013 $0.58
Dec2012 $0.55
Dec2011 $0.31
Dec2010 $0.13
Dec2009 $0.11

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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.

Delta Air Lines Inc Valuation – January 2019 $DAL

Company Profile (excerpt from Reuters): Delta Air Lines, Inc., incorporated on March 16, 1967, provides scheduled air transportation for passengers and cargo throughout the United States and across the world. The Company’s segments include Airline and Refinery. The Company’s route network is centered around a system of hub, international gateway and airports that the Company operates in Amsterdam, Atlanta, Boston, Detroit, London-Heathrow, Los Angeles, Minneapolis-St. Paul, New York-LaGuardia, New York- John F Kennedy International Airport, Paris-Charles de Gaulle, Salt Lake City, Seattle and Tokyo-Narita. Each of these operations includes flights that gather and distribute traffic from markets in the geographic region surrounding the hub or gateway to domestic and international cities and to other hubs or gateways. The Company’s route network includes its international joint ventures, its alliances with other foreign airlines, its membership in SkyTeam and agreements with multiple domestic regional carriers that operate as Delta Connection. Its subsidiaries include Monroe Energy, LLC and MIPC, LLC (collectively Monroe).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DAL – 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 $32,258,373,426 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.35 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 476.21% Pass
6. Moderate PEmg Ratio PEmg < 20 8.28 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.35 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.35 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -0.67 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.68
MG Growth Estimate 2.86%
MG Value $80.81
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $82.35
MG Value based on 0% Growth $48.27
Market Implied Growth Rate -0.11%
Current Price $47.04
% of Intrinsic Value 58.21%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.77 in 2015 to an estimated $5.68 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.11% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Delta Air Lines, Inc. revealed the company was trading below its Graham Number of $52.28. The company pays a dividend of $1.31 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.28, which was below the industry average of 9.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-58.71.

Delta Air Lines, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$58.71
Graham Number $52.28
PEmg 8.28
Current Ratio 0.35
PB Ratio 2.35
Current Dividend $1.31
Dividend Yield 2.78%
Number of Consecutive Years of Dividend Growth 6

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,495,000,000
Total Current Liabilities $18,754,000,000
Long-Term Debt $8,270,000,000
Total Assets $60,270,000,000
Intangible Assets $14,610,000,000
Total Liabilities $46,593,000,000
Shares Outstanding (Diluted Average) 683,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.09
Dec2018 $5.67
Dec2017 $4.95
Dec2016 $5.79
Dec2015 $5.63
Dec2014 $0.78
Dec2013 $12.29
Dec2012 $1.19
Dec2011 $1.01
Dec2010 $0.70
Dec2009 -$1.50
Dec2008 -$19.08
Dec2007 $2.11
Dec2006 -$31.58
Dec2005 -$23.75
Dec2004 -$41.07
Dec2003 -$6.40
Dec2002 -$10.44
Dec2001 -$9.99
Jun2000 $8.15
Jun1999 $7.20

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.68
Dec2018 $5.17
Dec2017 $5.24
Dec2016 $5.31
Dec2015 $4.77
Dec2014 $3.96
Dec2013 $4.61
Dec2012 -$0.67
Dec2011 -$2.18
Dec2010 -$5.81
Dec2009 -$10.96
Dec2008 -$18.02
Dec2007 -$18.37
Dec2006 -$26.62
Dec2005 -$22.21
Dec2004 -$18.27
Dec2003 -$5.35

Recommended Reading:

Other ModernGraham posts about the company

Delta Air Lines Inc Valuation – March 2018 $DAL
Delta Air Lines Inc Valuation – July 2016 $DAL
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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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