LogMeIn Inc Valuation – Initial Coverage $LOGM

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how LogMeIn Inc (LOGM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): LogMeIn, Inc. provides a portfolio of cloud-based service offerings, which helps people and businesses to connect to their workplace, colleagues and customers. The Company’s core cloud-based services are categorized into four business lines: Communications and Collaboration; Engagement and Support; Identity and Access, and Additional Service Offerings. The Company’s communication and collaboration services include GoToMeeting; GoToTraining; GoToWebinar; join.me, join.me pro and join.me enterprise; OpenVoice, and Grasshopper. The Company’s customer engagement and support services include BoldChat; GoToAssist, GoToAssist Corporate and GoToAssist Seeit; LogMeIn Rescue, Rescue Lens and LogMeIn Rescue+Mobile, and Xively. Its identity and access management services include LogMeIn Central, GoToMyPC, LogMeIn Pro and LastPass. Its additional service offerings include LogMeIn Backup, LogMeIn Hamachi and RemotelyAnywhere.

LOGM Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LOGM – April 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 $5,429,654,673 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.10 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 -674.67% Fail
6. Moderate PEmg Ratio PEmg < 20 73.00 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 13.39 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 1.10 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.41 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.38
MG Growth Estimate 15.00%
MG Value $52.95
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $19.94
MG Value based on 0% Growth $11.69
Market Implied Growth Rate 32.25%
Current Price $100.40
% of Intrinsic Value 189.61%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.11 in 2013 to an estimated $1.38 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 32.25% 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 LogMeIn Inc revealed the company was trading above its Graham Number of $25.11. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 73, which was above the industry average of 34.38. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.73.

LogMeIn 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) -$0.73
Graham Number $25.11
PEmg 73.00
Current Ratio 1.10
PB Ratio 13.39
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $228,090,000
Total Current Liabilities $206,859,000
Long-Term Debt $30,000,000
Total Assets $443,293,000
Intangible Assets $184,270,000
Total Liabilities $247,177,000
Shares Outstanding (Diluted Average) 26,164,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.65
Dec2016 $0.10
Dec2015 $0.56
Dec2014 $0.31
Dec2013 -$0.32
Dec2012 $0.14
Dec2011 $0.23
Dec2010 $0.85
Dec2009 $0.37
Dec2008 -$1.97
Dec2007 -$7.45
Dec2006 -$2.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.38
Dec2016 $0.21
Dec2015 $0.24
Dec2014 $0.13
Dec2013 $0.11
Dec2012 $0.20
Dec2011 -$0.38
Dec2010 -$1.17
Dec2009 -$2.22
Dec2008 -$3.14
Dec2007 -$3.14
Dec2006 -$0.82

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.

Verisign Inc Valuation – May 2018 $VRSN

Company Profile (excerpt from Reuters): VeriSign, Inc., incorporated on April 12, 1995, is a provider of domain name registry services and Internet security, enabling Internet navigation for various domain names and providing protection for Websites and enterprises around the world. The Company operates through Registry Services and Security Services segment. Registry Services ensure the security, stability and resiliency of Internet infrastructure and services, including the .com and .net domains, and operation of the root-zone maintainer functions for the core of the Internet’s Domain Name System (DNS). Security Services provides infrastructure assurance services consisting of Distributed Denial of Services (DDoS) Protection Services and Managed DNS Services.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of VRSN – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,589,991,262 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.55 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 69.76% Pass
6. Moderate PEmg Ratio PEmg < 20 34.42 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -12.67 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 1.55 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.07 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 $3.68
MG Growth Estimate 6.35%
MG Value $78.02
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $53.35
MG Value based on 0% Growth $31.27
Market Implied Growth Rate 12.96%
Current Price $126.66
% of Intrinsic Value 162.34%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.58 in 2014 to an estimated $3.68 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.96% 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 Verisign, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 34.42, which was below the industry average of 42.24, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.02.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$14.02
Graham Number $0.00
PEmg 34.42
Current Ratio 1.55
PB Ratio -12.67
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 3/1/2018
Total Current Assets $2,408,528,000
Total Current Liabilities $1,548,946,000
Long-Term Debt $1,783,159,000
Total Assets $2,905,323,000
Intangible Assets $52,527,000
Total Liabilities $4,140,057,000
Shares Outstanding (Diluted Average) 123,506,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.41
Dec2017 $3.68
Dec2016 $3.42
Dec2015 $2.82
Dec2014 $2.52
Dec2013 $3.49
Dec2012 $1.95
Dec2011 $0.86
Dec2010 $4.64
Dec2009 $1.28
Dec2008 -$1.90
Dec2007 -$0.63
Dec2006 $1.53
Dec2005 $1.63
Dec2004 $0.60
Dec2003 -$1.20
Dec2002 -$20.97
Dec2001 -$65.64
Dec2000 -$19.57
Dec1999 $0.03
Dec1998 -$0.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.68
Dec2017 $3.27
Dec2016 $2.99
Dec2015 $2.63
Dec2014 $2.58
Dec2013 $2.56
Dec2012 $1.85
Dec2011 $1.48
Dec2010 $1.53
Dec2009 $0.11
Dec2008 -$0.24
Dec2007 $0.52
Dec2006 -$0.49
Dec2005 -$6.71
Dec2004 -$14.37
Dec2003 -$21.73
Dec2002 -$28.42

Recommended Reading:

Other ModernGraham posts about the company

Verisign Inc Valuation – February 2017 $VRSN
Verisign Inc Valuation – August 2016 $VRSN
Verisign Inc. Analysis – 2015 Update $VRSN
20 Companies in the Research Spotlight This Week – June 7, 2014
Verisign Inc. Annual Valuation – 2014 $VRSN

Other ModernGraham posts about related companies

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

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.

Motorola Solutions Inc Valuation – May 2018 $MSI

Company Profile (excerpt from Reuters): Motorola Solutions, Inc., incorporated on March 9, 1973, is a provider of communication infrastructure, devices, accessories, software and services. The Company operates through two segments: Products and Services. It serves global customer base spanning federal, state, county, province, territory, municipal and departmental independent bodies, along with its commercial and industrial customers.

MSI Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of MSI – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,707,418,048 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.35 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 68.87% Pass
6. Moderate PEmg Ratio PEmg < 20 33.48 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -10.21 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 1.35 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.34 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 $3.28
MG Growth Estimate -2.75%
MG Value $9.82
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $47.56
MG Value based on 0% Growth $27.88
Market Implied Growth Rate 12.49%
Current Price $109.83
% of Intrinsic Value 1118.45%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.02 in 2014 to an estimated $3.28 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.49% 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 Motorola Solutions Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.93 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 33.48, which was below the industry average of 42.24, 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 $-37.04.

Motorola Solutions Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$37.04
Graham Number $0.00
PEmg 33.48
Current Ratio 1.35
PB Ratio -10.21
Current Dividend $1.93
Dividend Yield 1.76%
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 12/1/2017
Total Current Assets $3,950,000,000
Total Current Liabilities $2,931,000,000
Long-Term Debt $4,419,000,000
Total Assets $8,208,000,000
Intangible Assets $1,799,000,000
Total Liabilities $9,950,000,000
Shares Outstanding (Diluted Average) 162,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.39
Dec2017 -$0.95
Dec2016 $3.24
Dec2015 $3.02
Dec2014 $5.29
Dec2013 $4.06
Dec2012 $2.96
Dec2011 $3.41
Dec2010 $1.87
Dec2009 -$0.14
Dec2008 -$13.09
Dec2007 -$0.14
Dec2006 $10.22
Dec2005 $12.67
Dec2004 $4.38
Dec2003 $2.66
Dec2002 -$7.63
Dec2001 -$12.46
Dec2000 $4.06
Dec1999 $2.87
Dec1998 -$3.52

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.28
Dec2017 $2.13
Dec2016 $3.68
Dec2015 $3.85
Dec2014 $4.02
Dec2013 $3.06
Dec2012 $1.38
Dec2011 -$0.15
Dec2010 -$1.37
Dec2009 -$1.36
Dec2008 -$0.38
Dec2007 $5.97
Dec2006 $7.51
Dec2005 $4.08
Dec2004 -$0.75
Dec2003 -$2.91
Dec2002 -$4.91

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for Value Investors with a Low Beta – July 2017
5 Undervalued Companies for Value Investors with a Low Beta – January 2017
8 Best Stocks for Value Investors This Week – 12/27/16
Motorola Solutions Inc Valuation – December 2016 $MSI
5 Undervalued Companies for Value Investors with a Low Beta – December 2016

Other ModernGraham posts about related companies

Leidos Holdings Inc Valuation – April 2018 $LDOS
Gartner Inc Valuation – March 2018 $IT
Cognizant Technology Solutions Corp – March 2018 $CTSH
International Business Machines Corp Valuation – February 2018 $IBM
Viavi Solutions Inc Valuation – Initial Coverage $VIAV
Equinix Inc Valuation – July 2017 $EQIX
Liquidity Services Inc Valuation – Initial Coverage $LQDT
LivePerson Inc Valuation – Initial Coverage $LPSN
LogMeIn Inc Valuation – Initial Coverage $LOGM
Sykes Enterprises Inc Valuation – Initial Coverage $SYKE

Disclaimer:

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

Leidos Holdings Inc Valuation – April 2018 $LDOS

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

LDOS Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LDOS – April 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,081,957,200 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.21 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -43.32% Fail
6. Moderate PEmg Ratio PEmg < 20 31.24 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.02 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.21 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.47 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.08
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $30.10
MG Value based on 0% Growth $17.65
Market Implied Growth Rate 11.37%
Current Price $64.86
% of Intrinsic Value N/A

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

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

At the time of valuation, further research into Leidos Holdings, Inc. revealed the company was trading above its Graham Number of $46.26. The company pays a dividend of $1.28 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 31.24, which was below the industry average of 42.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-18.76.

Leidos Holdings, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$18.76
Graham Number $46.26
PEmg 31.24
Current Ratio 1.21
PB Ratio 3.02
Current Dividend $1.28
Dividend Yield 1.97%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $2,674,000,000
Total Current Liabilities $2,202,000,000
Long-Term Debt $3,056,000,000
Total Assets $8,990,000,000
Intangible Assets $5,830,000,000
Total Liabilities $5,620,000,000
Shares Outstanding (Diluted Average) 157,000,000

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

Leidos Holdings Inc Valuation – Initial Coverage $LDOS

Other ModernGraham posts about related companies

Gartner Inc Valuation – March 2018 $IT
Cognizant Technology Solutions Corp – March 2018 $CTSH
International Business Machines Corp Valuation – February 2018 $IBM
Viavi Solutions Inc Valuation – Initial Coverage $VIAV
Equinix Inc Valuation – July 2017 $EQIX
Liquidity Services Inc Valuation – Initial Coverage $LQDT
LivePerson Inc Valuation – Initial Coverage $LPSN
LogMeIn Inc Valuation – Initial Coverage $LOGM
Sykes Enterprises Inc Valuation – Initial Coverage $SYKE
Convergys Corp Valuation – Initial Coverage $CVG

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.

Gartner Inc Valuation – March 2018 $IT

Company Profile (excerpt from Reuters): Gartner, Inc., incorporated on June 1, 1990, is an information technology research and advisory company. The Company works with clients to research, analyze and interpret the business of information technology (IT), supply chain and marketing within the context of their individual roles. The Company operates through three segments: Research, Consulting and Events. Research segment consists of subscription-based research products, access to research inquiry, peer networking services and membership programs. Consulting segment consists of consulting, measurement engagements and strategic advisory services. Events segment consists of various symposia, conferences and exhibitions.

IT Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of IT – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,690,230,261 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.92 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 90.63% Pass
6. Moderate PEmg Ratio PEmg < 20 55.18 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.54 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 0.92 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -12.39 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 $2.13
MG Growth Estimate 2.90%
MG Value $30.52
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $30.92
MG Value based on 0% Growth $18.13
Market Implied Growth Rate 23.34%
Current Price $117.69
% of Intrinsic Value 385.64%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.79 in 2014 to an estimated $2.13 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 23.34% 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 Gartner Inc revealed the company was trading above its Graham Number of $30.23. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 55.18, which was above the industry average of 43.34. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-38.49.

Gartner 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) -$38.49
Graham Number $30.23
PEmg 55.18
Current Ratio 0.92
PB Ratio 11.54
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $2,588,608,000
Total Current Liabilities $2,822,585,000
Long-Term Debt $2,899,124,000
Total Assets $7,283,173,000
Intangible Assets $4,279,316,000
Total Liabilities $6,299,708,000
Shares Outstanding (Diluted Average) 96,405,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.75
Dec2017 $0.04
Dec2016 $2.31
Dec2015 $2.06
Dec2014 $2.03
Dec2013 $1.93
Dec2012 $1.73
Dec2011 $1.39
Dec2010 $0.96
Dec2009 $0.85
Dec2008 $1.05
Dec2007 $0.68
Dec2006 $0.50
Dec2005 -$0.02
Dec2004 $0.13
Dec2003 $0.25
Sep2002 $0.46
Sep2001 -$0.78
Sep2000 $0.30
Sep1999 $0.84
Sep1998 $0.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.13
Dec2017 $1.44
Dec2016 $2.10
Dec2015 $1.94
Dec2014 $1.79
Dec2013 $1.57
Dec2012 $1.32
Dec2011 $1.07
Dec2010 $0.88
Dec2009 $0.76
Dec2008 $0.64
Dec2007 $0.39
Dec2006 $0.25
Dec2005 $0.09
Dec2004 $0.12
Dec2003 $0.15
Sep2002 $0.17

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

International Business Machines Corp Valuation – February 2018 $IBM
Viavi Solutions Inc Valuation – Initial Coverage $VIAV
Equinix Inc Valuation – July 2017 $EQIX
Liquidity Services Inc Valuation – Initial Coverage $LQDT
LivePerson Inc Valuation – Initial Coverage $LPSN
LogMeIn Inc Valuation – Initial Coverage $LOGM
Sykes Enterprises Inc Valuation – Initial Coverage $SYKE
Convergys Corp Valuation – Initial Coverage $CVG
International Business Machines Corp Valuation – March 2017 $IBM
Verisk Analytics Inc Valuation – Initial Coverage $VRSK

Disclaimer:

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

Cognizant Technology Solutions Corp – March 2018 $CTSH

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

CTSH Chart

CTSH data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CTSH – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $49,284,578,017 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.21 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 168.00% Pass
6. Moderate PEmg Ratio PEmg < 20 26.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.65 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.21 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.11 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.13
MG Growth Estimate 9.25%
MG Value $84.44
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $45.36
MG Value based on 0% Growth $26.59
Market Implied Growth Rate 9.15%
Current Price $83.81
% of Intrinsic Value 99.25%

Cognizant Technology Solutions Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.94 in 2014 to an estimated $3.13 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 9.15% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Cognizant Technology Solutions Corp revealed the company was trading above its Graham Number of $41.9. The company pays a dividend of $0.45 per share, for a yield of 0.5% Its PEmg (price over earnings per share – ModernGraham) was 26.79, which was below the industry average of 43.34, 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 $7.7.

Cognizant Technology Solutions Corp receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.70
Graham Number $41.90
PEmg 26.79
Current Ratio 3.21
PB Ratio 4.65
Current Dividend $0.45
Dividend Yield 0.54%
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 12/1/2017
Total Current Assets $9,111,000,000
Total Current Liabilities $2,839,000,000
Long-Term Debt $698,000,000
Total Assets $15,221,000,000
Intangible Assets $3,685,000,000
Total Liabilities $4,552,000,000
Shares Outstanding (Diluted Average) 592,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.30
Dec2017 $2.53
Dec2016 $2.55
Dec2015 $2.65
Dec2014 $2.35
Dec2013 $2.02
Dec2012 $1.72
Dec2011 $1.43
Dec2010 $1.19
Dec2009 $0.89
Dec2008 $0.72
Dec2007 $0.58
Dec2006 $0.39
Dec2005 $0.28
Dec2004 $0.18
Dec2003 $0.11
Dec2002 $0.07
Dec2001 $0.05
Dec2000 $0.04
Dec1999 $0.02
Dec1998 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.13
Dec2017 $2.50
Dec2016 $2.41
Dec2015 $2.24
Dec2014 $1.94
Dec2013 $1.63
Dec2012 $1.36
Dec2011 $1.10
Dec2010 $0.88
Dec2009 $0.67
Dec2008 $0.52
Dec2007 $0.38
Dec2006 $0.26
Dec2005 $0.17
Dec2004 $0.11
Dec2003 $0.07
Dec2002 $0.05

Recommended Reading:

Other ModernGraham posts about the company

18 Best Stocks For Value Investors This Week – 1/30/16
Cognizant Technology Solutions Corp Valuation – January 2016 Update $CTSH
8 Best Stocks For Value Investors This Week – 10/13/15
Cognizant Technology Solutions Corp Analysis – October 2015 Update $CTSH
The 20 Best Stocks For Value Investors This Week – 7/25/15

Other ModernGraham posts about related companies

International Business Machines Corp Valuation – February 2018 $IBM
Viavi Solutions Inc Valuation – Initial Coverage $VIAV
Equinix Inc Valuation – July 2017 $EQIX
Liquidity Services Inc Valuation – Initial Coverage $LQDT
LivePerson Inc Valuation – Initial Coverage $LPSN
LogMeIn Inc Valuation – Initial Coverage $LOGM
Sykes Enterprises Inc Valuation – Initial Coverage $SYKE
Convergys Corp Valuation – Initial Coverage $CVG
International Business Machines Corp Valuation – March 2017 $IBM
Verisk Analytics Inc Valuation – Initial Coverage $VRSK

Disclaimer:

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

International Business Machines Corp Valuation – February 2018 $IBM

Company Profile (obtained from Marketwatch): International Business Machines Corp. is an information technology company, which provides integrated solutions that leverage information technology and knowledge of business processes. It operates through the following segments: Cognitive Solutions, Global Business Services, Technology Services & Cloud Platforms, Systems, and Global Financing. The Cognitive Solutions segment comprises a portfolio of capabilities that help IBM’s clients to identify actionable insights and inform decision making for competitive advantage. It includes Watson, a cognitive computing platform that has the ability to interact in natural language, process amounts of big data, and learn from interactions with people and computers. This segment consists of Solutions Software, which provides the basis for many of the company’s strategic areas including analytics, security and social; and Transaction Processing Software, which includes software that primarily runs mission-critical systems in industries such as banking, airlines and retail. The Global Business Services segment provides clients with consulting, application management and global process services. The Technology Services & Cloud Platforms segment provides IT infrastructure services creating business value for clients through integrated services that incorporate intellectual property within its global delivery model. The Systems segment provides clients with infrastructure technologies to help meet the requirements of hybrid cloud and cognitive workload from deploying analytics, to moving to digital service delivery with the cloud, and securing mobile transaction processing. The Global Financing segment facilitates IBM clients acquisition of information technology systems, software and services by providing financing solutions in the areas where the company functions. The company was founded by Charles Ranlett Flint and Thomas J. Watson Sr. on June 16, 1911 and is headquartered in Armonk, NY.

IBM Chart

IBM data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IBM – February 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 $143,979,103,945 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.33 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 -7.43% Fail
6. Moderate PEmg Ratio PEmg < 20 13.89 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.21 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 1.33 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.22 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $11.20
MG Growth Estimate -2.41%
MG Value $41.31
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $162.34
MG Value based on 0% Growth $95.17
Market Implied Growth Rate 2.70%
Current Price $155.52
% of Intrinsic Value 376.47%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $13.33 in 2014 to an estimated $11.2 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.7% 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 International Business Machines Corp. revealed the company was trading above its Graham Number of $75.98. The company pays a dividend of $5.9 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 13.89, which was below the industry average of 34.38, 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 $-62.47.

International Business Machines Corp. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$62.47
Graham Number $75.98
PEmg 13.89
Current Ratio 1.33
PB Ratio 8.21
Current Dividend $5.90
Dividend Yield 3.79%
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 12/1/2017
Total Current Assets $49,735,000,000
Total Current Liabilities $37,363,000,000
Long-Term Debt $39,837,000,000
Total Assets $125,356,000,000
Intangible Assets $40,531,000,000
Total Liabilities $107,762,000,000
Shares Outstanding (Diluted Average) 928,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.50
Dec2017 $6.14
Dec2016 $12.38
Dec2015 $13.42
Dec2014 $11.90
Dec2013 $14.94
Dec2012 $14.37
Dec2011 $13.06
Dec2010 $11.52
Dec2009 $10.01
Dec2008 $8.89
Dec2007 $7.15
Dec2006 $6.11
Dec2005 $4.87
Dec2004 $4.38
Dec2003 $3.74
Dec2002 $2.06
Dec2001 $3.69
Dec2000 $4.44
Dec1999 $4.12
Dec1998 $3.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $11.20
Dec2017 $10.61
Dec2016 $13.04
Dec2015 $13.42
Dec2014 $13.33
Dec2013 $13.63
Dec2012 $12.50
Dec2011 $11.09
Dec2010 $9.65
Dec2009 $8.28
Dec2008 $7.03
Dec2007 $5.82
Dec2006 $4.85
Dec2005 $4.06
Dec2004 $3.66
Dec2003 $3.40
Dec2002 $3.33

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Viavi Solutions Inc Valuation – Initial Coverage $VIAV
Equinix Inc Valuation – July 2017 $EQIX
Liquidity Services Inc Valuation – Initial Coverage $LQDT
LivePerson Inc Valuation – Initial Coverage $LPSN
LogMeIn Inc Valuation – Initial Coverage $LOGM
Sykes Enterprises Inc Valuation – Initial Coverage $SYKE
Convergys Corp Valuation – Initial Coverage $CVG
International Business Machines Corp Valuation – March 2017 $IBM
Verisk Analytics Inc Valuation – Initial Coverage $VRSK
CSRA Inc Valuation – Initial Coverage $CSRA

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.

Viavi Solutions Inc Valuation – Initial Coverage $VIAV

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Viavi Solutions Inc (VIAV) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Viavi Solutions Inc. (Viavi) is a provider of network test, monitoring and assurance solutions to communications service providers, enterprises and their ecosystems. The Company also offers thin film optical coatings, providing light management solutions to anti-counterfeiting, consumer and industrial, government and healthcare and other markets. The Company’s segments include Network Enablement (NE), Service Enablement (SE), and Optical Security and Performance Products (OSP). The NE segment provides testing solutions that access the network to perform build-out and maintenance tasks. The SE segment offers solutions, which are embedded systems that yield network, service and application performance data. The OSP segment provides optical security solutions. The OSP segment’s security offerings for the currency market include Optically Variable Pigment (OVP), Optically Variable Magnetic Pigment (OVMP) and banknote thread substrates.

VIAV Chart

VIAV data by YCharts

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of VIAV – July 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 $2,672,262,214 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.87 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 -90.87% Fail
6. Moderate PEmg Ratio PEmg < 20 -200.89 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.42 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 6.87 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.66 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg -$0.06
MG Growth Estimate 11.51%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$0.81
MG Value based on 0% Growth -$0.48
Market Implied Growth Rate -104.70%
Current Price $11.25
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.24 in 2013 to an estimated $-0.06 for 2017.  This level of negative earnings does not support a positive valuation.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 Viavi Solutions Inc revealed the company was trading above its Graham Number of $5.04.  The company does not pay a dividend.  Its PEmg (price over earnings per share – ModernGraham) was -200.89, which was below the industry average of 34.38, 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 $1.4.

Viavi Solutions Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.40
Graham Number $5.04
PEmg -200.89
Current Ratio 6.87
PB Ratio 3.42
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2017
Total Current Assets $1,697,500,000
Total Current Liabilities $247,000,000
Long-Term Debt $958,100,000
Total Assets $2,140,700,000
Intangible Assets $188,300,000
Total Liabilities $1,369,500,000
Shares Outstanding (Diluted Average) 234,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.38
Jun2016 -$0.42
Jun2015 -$0.38
Jun2014 -$0.08
Jun2013 $0.24
Jun2012 -$0.24
Jun2011 $0.31
Jun2010 -$0.28
Jun2009 -$4.22
Jun2008 -$0.10
Jun2007 -$0.12
Jun2006 -$0.73
Jun2005 -$1.45
Jun2004 -$0.64
Jun2003 -$5.28
Jun2002 -$52.00
Jun2001 -$411.20
Jun2000 -$10.16
Jun1999 -$2.15
Jun1998 -$0.56
Jun1997 -$0.64

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.06
Jun2016 -$0.24
Jun2015 -$0.11
Jun2014 $0.01
Jun2013 -$0.24
Jun2012 -$0.62
Jun2011 -$0.84
Jun2010 -$1.30
Jun2009 -$1.65
Jun2008 -$0.45
Jun2007 -$0.96
Jun2006 -$4.93
Jun2005 -$36.06
Jun2004 -$67.53
Jun2003 -$99.36
Jun2002 -$129.34
Jun2001 -$140.32

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

Liquidity Services Inc Valuation – Initial Coverage $LQDT
LivePerson Inc Valuation – Initial Coverage $LPSN
LogMeIn Inc Valuation – Initial Coverage $LOGM
Sykes Enterprises Inc Valuation – Initial Coverage $SYKE
Convergys Corp Valuation – Initial Coverage $CVG
International Business Machines Corp Valuation – March 2017 $IBM
Verisk Analytics Inc Valuation – Initial Coverage $VRSK
CSRA Inc Valuation – Initial Coverage $CSRA
CSG Systems International Inc Valuation – Initial Coverage $CSGS
Computer Programs & Systems Inc Valuation – Initial Coverage $CPSI

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.

Equinix Inc Valuation – July 2017 $EQIX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Equinix Inc (EQIX) fares in the ModernGraham valuation model.

EQIX Chart

EQIX data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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

Learn More About Premium Membership

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Downloadable PDF version of this valuation:

ModernGraham Valuation of EQIX – July 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 $34,102,032,100 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.46 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 87.31% Pass
6. Moderate PEmg Ratio PEmg < 20 191.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.89 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 5.46 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.64 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.26
MG Growth Estimate 2.34%
MG Value $29.83
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $32.83
MG Value based on 0% Growth $19.24
Market Implied Growth Rate 91.73%
Current Price $434.60
% of Intrinsic Value 1456.83%

Equinix, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the  insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability over the last five years.  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 $1.96 in 2013 to an estimated $2.26 for 2017.  This level of demonstrated earnings growth does not support the market’s implied estimate of 91.73% 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 Equinix, Inc. revealed the company was trading above its Graham Number of $83.26.  The company pays a dividend of $7 per share, for a yield of 1.6%  Its PEmg (price over earnings per share – ModernGraham) was 191.96, which was above the industry average of 34.38.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-69.42.

Equinix, 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) -$69.42
Graham Number $83.26
PEmg 191.96
Current Ratio 5.46
PB Ratio 4.89
Current Dividend $7.00
Dividend Yield 1.61%
Number of Consecutive Years of Dividend Growth 2

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2017
Total Current Assets $5,574,017,000
Total Current Liabilities $1,020,068,000
Long-Term Debt $7,478,059,000
Total Assets $17,184,684,000
Intangible Assets $3,763,732,000
Total Liabilities $10,666,845,000
Shares Outstanding (Diluted Average) 73,367,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.04
Dec2016 $1.79
Dec2015 $3.21
Dec2014 -$4.96
Dec2013 $1.89
Dec2012 $2.83
Dec2011 $1.74
Dec2010 $0.82
Dec2009 $1.75
Dec2008 $2.79
Dec2007 -$0.16
Dec2006 -$0.22
Dec2005 -$1.78
Dec2004 -$3.87
Dec2003 -$8.76
Dec2002 -$7.23
Dec2001 -$76.62
Dec2000 -$111.18
Dec1999 -$159.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.26
Dec2016 $0.90
Dec2015 $0.62
Dec2014 -$0.30
Dec2013 $1.96
Dec2012 $1.99
Dec2011 $1.51
Dec2010 $1.26
Dec2009 $1.15
Dec2008 $0.35
Dec2007 -$1.57
Dec2006 -$2.97
Dec2005 -$9.45
Dec2004 -$22.70
Dec2003 -$45.60
Dec2002 -$66.29
Dec2001 -$87.01

Recommended Reading:

Other ModernGraham posts about the company

Equinix Inc. Analysis – Initial Coverage $EQIX

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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.

Liquidity Services Inc Valuation – Initial Coverage $LQDT

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Liquidity Services Inc (LQDT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Liquidity Services, Inc. operates a network of e-commerce marketplaces that enable buyers and sellers to transact in an automated environment. The Company employs e-commerce marketplace solutions to manage, value and sell inventory and equipment for business and government clients. The Company’s marketplaces provide professional buyers access to a global supply of new, surplus and scrap assets presented with digital images and other relevant product information. Additionally, the Company enables its corporate and government sellers to enhance their financial return on assets offered for sale by providing a liquid marketplace and value-added services. The Company’s range of services include program management, valuation, asset management, reconciliation, Return to Vendor and Returns Management Authorization (RTV and RMA), refurbishment and recycling, fulfillment, marketing and sales, warehousing and transportation, buyer customer support, and compliance and risk mitigation.

LQDT Chart

LQDT data by YCharts

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LQDT – April 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 $233,881,058 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.06 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 -698.11% Fail
6. Moderate PEmg Ratio PEmg < 20 -5.68 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.49 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.06 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg -$1.30
MG Growth Estimate -4.25%
MG Value $2.57
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$18.89
MG Value based on 0% Growth -$11.07
Market Implied Growth Rate -7.09%
Current Price $7.40
% of Intrinsic Value 288.43%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.94 in 2013 to an estimated $-1.3 for 2017. This level of negative earnings does not support a positive valuation.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 Liquidity Services, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -5.68, which was below the industry average of 34.38, 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.

Liquidity Services, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $2.57
Graham Number $0.00
PEmg -5.68
Current Ratio 2.06
PB Ratio 1.49
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 $177,138,000
Total Current Liabilities $85,813,000
Long-Term Debt $0
Total Assets $252,707,000
Intangible Assets $47,110,000
Total Liabilities $96,932,000
Shares Outstanding (Diluted Average) 31,262,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.88
Sep2016 -$1.96
Sep2015 -$3.50
Sep2014 $0.97
Sep2013 $1.26
Sep2012 $1.47
Sep2011 $0.29
Sep2010 $0.44
Sep2009 $0.21
Sep2008 $0.41
Sep2007 $0.39
Sep2006 $0.31
Sep2005 $0.18
Sep2004 $0.29
Sep2003 $0.17
Sep2002 $0.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.30
Sep2016 -$1.13
Sep2015 -$0.44
Sep2014 $1.02
Sep2013 $0.94
Sep2012 $0.71
Sep2011 $0.34
Sep2010 $0.36
Sep2009 $0.31
Sep2008 $0.35
Sep2007 $0.30
Sep2006 $0.24
Sep2005 $0.18
Sep2004 $0.16
Sep2003 $0.08
Sep2002 $0.02

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

LivePerson Inc Valuation – Initial Coverage $LPSN
LogMeIn Inc Valuation – Initial Coverage $LOGM
Sykes Enterprises Inc Valuation – Initial Coverage $SYKE
Convergys Corp Valuation – Initial Coverage $CVG
International Business Machines Corp Valuation – March 2017 $IBM
Verisk Analytics Inc Valuation – Initial Coverage $VRSK
CSRA Inc Valuation – Initial Coverage $CSRA
CSG Systems International Inc Valuation – Initial Coverage $CSGS
Computer Programs & Systems Inc Valuation – Initial Coverage $CPSI
Qualcomm Inc Valuation – February 2017 $QCOM

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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