LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB

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 LegacyTexas Financial Group Inc (LTXB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): LegacyTexas Financial Group, Inc. is a bank holding company. LegacyTexas Bank (the Bank) is the Company’s principal operating subsidiary, which is a commercial bank that is focused on meeting the needs of businesses and consumers in the North Texas area. Its principal business consists of attracting retail deposits from general public and business community and investing those funds, along with borrowed funds, in commercial real estate loans, secured and unsecured commercial and industrial loans, as well as permanent loans secured by first and second mortgages on one- to four-family residences and consumer loans. Its Warehouse Purchase Program allows mortgage banking company customers to close one- to four-family real estate loans in their own name and manage its cash flow needs until the loans are sold to investors. It offers title services, as well as brokerage services for purchase and sale of non-deposit investment and insurance products through a third-party brokerage arrangement.

LTXB Chart

LTXB data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LTXB – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,805,433,977 Fail
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 893.22% Pass
5. Moderate PEmg Ratio PEmg < 20 21.28 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.97 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.77
MG Growth Estimate 15.00%
MG Value $68.27
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $25.71
MG Value based on 0% Growth $15.07
Market Implied Growth Rate 6.39%
Current Price $37.74
% of Intrinsic Value 55.28%

LegacyTexas Financial Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the  small size, insufficient earnings stability over the last ten years, and the high PEmg ratio. The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.79 in 2013 to an estimated $1.77 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.39% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into LegacyTexas Financial Group Inc revealed the company was trading above its Graham Number of $30.53.  The company pays a dividend of $0.58 per share, for a yield of 1.5%  Its PEmg (price over earnings per share – ModernGraham) was 21.28, which was above the industry average of 20.84.

LegacyTexas Financial Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Graham Number $30.53
PEmg 21.28
PB Ratio 1.97
Dividend Yield 1.54%
TTM Dividend $0.58
Number of Consecutive Years of Dividend Growth 3

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2017
Long-Term Debt & Capital Lease Obligation $964,350,000
Total Assets $8,436,542,000
Intangible Assets $178,559,000
Total Liabilities $7,536,625,000
Shares Outstanding (Diluted Average) 47,060,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.24
Dec2016 $2.09
Dec2015 $1.53
Dec2014 $0.81
Dec2013 $0.83
Dec2012 $0.98
Dec2011 $0.81
Dec2010 $0.59
Dec2009 $0.10
Dec2008 -$0.10
Dec2007 $0.14
Dec2006 $0.06
Dec2005 $1.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.77
Dec2016 $1.44
Dec2015 $1.08
Dec2014 $0.83
Dec2013 $0.79
Dec2012 $0.67
Dec2011 $0.44
Dec2010 $0.23
Dec2009 $0.14
Dec2008 $0.21
Dec2007 $0.35
Dec2006 $0.40
Dec2005 $0.48

Recommended Reading:

Other ModernGraham posts about the company

None.  This is the first time ModernGraham has covered 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.

KeyCorp Valuation – March 2018 $KEY

Company Profile (obtained from Marketwatch): KeyCorp operates as bank holding company. The company through its subsidiary, KeyBank National Association provides retail and commercial banking, commercial leasing, investment management, consumer finance and investment banking products and services to individual, corporate and institutional clients. It operates through two business segments: Key Community Bank and Key Corporate Bank. The Key Community Bank segment serves individuals and small to mid-sized businesses by offering a variety of deposit, investment, lending, and personalized wealth management products and services. The Key Corporate Bank segment focuses on serving the needs of middle market clients in six industry sectors: consumer, energy, healthcare, industrial, public sector and real estate. Key Corporate Bank delivers a broad product suite of banking and capital markets products to its clients, including syndicated finance, debt and equity capital markets, commercial payments, equipment finance, commercial mortgage banking, derivatives, foreign exchange, financial advisory and public finance. KeyCorp was founded in 1958 and is headquartered in Cleveland, OH.

KEY Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of KEY – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $22,178,972,954 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -440.78% Fail
5. Moderate PEmg Ratio PEmg < 20 17.51 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.50 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.19
MG Growth Estimate 4.64%
MG Value $21.22
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $17.31
MG Value based on 0% Growth $10.15
Market Implied Growth Rate 4.51%
Current Price $20.91
% of Intrinsic Value 98.52%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.91 in 2014 to an estimated $1.19 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 4.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into KeyCorp revealed the company was trading below its Graham Number of $21.58. The company pays a dividend of $0.38 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 17.51, which was below the industry average of 24.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

KeyCorp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Graham Number $21.58
PEmg 17.51
PB Ratio 1.50
Dividend Yield 1.82%
TTM Dividend $0.38
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
Long-Term Debt & Capital Lease Obligation $14,333,000,000
Total Assets $137,698,000,000
Intangible Assets $2,954,000,000
Total Liabilities $122,675,000,000
Shares Outstanding (Diluted Average) 1,079,407,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.58
Dec2017 $1.13
Dec2016 $0.80
Dec2015 $1.05
Dec2014 $0.99
Dec2013 $0.97
Dec2012 $0.89
Dec2011 $0.87
Dec2010 $0.44
Dec2009 -$2.34
Dec2008 -$3.36
Dec2007 $2.32
Dec2006 $2.57
Dec2005 $2.73
Dec2004 $2.30
Dec2003 $2.12
Dec2002 $2.27
Dec2001 $0.31
Dec2000 $2.30
Dec1999 $2.45
Dec1998 $2.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.19
Dec2017 $1.00
Dec2016 $0.93
Dec2015 $0.98
Dec2014 $0.91
Dec2013 $0.64
Dec2012 $0.08
Dec2011 -$0.35
Dec2010 -$0.67
Dec2009 -$0.69
Dec2008 $0.53
Dec2007 $2.45
Dec2006 $2.48
Dec2005 $2.27
Dec2004 $1.98
Dec2003 $1.84
Dec2002 $1.77

Recommended Reading:

Other ModernGraham posts about the company

Stocks Trading Below Their Graham Number – March 2016
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – January 2016
9 Best Stocks For Value Investors This Week – 11/28/15
KeyCorp Valuation – November 2015 Update $KEY
The Best Companies of the Banking Industry – October 2015

Other ModernGraham posts about related companies

Canadian Western Bank Valuation – March 2018 $TSE-CWB
Simmons First National Corp Valuation – March 2018 $SFNC
Citigroup Inc Valuation – March 2018 $C
People’s United Financial Inc Valuation – March 2018 $PBCT
JPMorgan Chase & Co Valuation – February 2018 $JPM
Opus Bank Valuation – Initial Coverage $OPB
Wells Fargo & Co Valuation – August 2017 $WFC
Old National Bancorp Valuation – Initial Coverage $ONB
Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB

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.

Canadian Western Bank Valuation – March 2018 $TSE-CWB

Company Profile (obtained from Marketwatch): Canadian Western Bank engages in the provision of business banking services for small and medium-sizes companies. The firm provides general commercial banking; equipment financing and leasing; commercial real estate financing; real estate construction financing; and energy lending. The firm also offers full-service personal banking options, including checking and savings accounts, loans, mortgages, and investment products. The company was founded by Charles R. Allard and Eugene Pechet on November 1, 1987 and is headquartered in Edmonton, Canada.

CWB Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-CWB – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,151,882,003 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 37.66% Pass
5. Moderate PEmg Ratio PEmg < 20 12.81 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.29 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.77
MG Growth Estimate 2.58%
MG Value $37.87
Opinion Fairly Valued
MG Grade A-
MG Value based on 3% Growth $40.22
MG Value based on 0% Growth $23.58
Market Implied Growth Rate 2.15%
Current Price $35.53
% of Intrinsic Value 93.81%

Canadian Western Bank qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.37 in 2014 to an estimated $2.77 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 2.15% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Canadian Western Bank revealed the company was trading below its Graham Number of $40.79. The company pays a dividend of $0.93 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.81, which was below the industry average of 24.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Canadian Western Bank fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $40.79
PEmg 12.81
PB Ratio 1.29
Dividend Yield 2.62%
TTM Dividend $0.93
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 10/1/2017
Long-Term Debt & Capital Lease Obligation $1,476,336,000
Total Assets $26,447,453,000
Intangible Assets $80,638,000
Total Liabilities $23,986,408,000
Shares Outstanding (Diluted Average) 89,114,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.98
Oct2017 $2.42
Oct2016 $2.13
Oct2015 $3.97
Oct2014 $2.70
Oct2013 $2.35
Oct2012 $2.22
Oct2011 $1.95
Oct2010 $2.05
Oct2009 $1.47
Oct2008 $1.58
Oct2007 $1.50
Oct2006 $1.13
Oct2005 $0.87
Oct2004 $0.75
Oct2003 $0.67
Oct2002 $0.54
Oct2001 $0.58
Oct2000 $0.86
Oct1999 $0.66
Oct1998 $0.68

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.77
Oct2017 $2.69
Oct2016 $2.77
Oct2015 $2.94
Oct2014 $2.37
Oct2013 $2.14
Oct2012 $1.97
Oct2011 $1.80
Oct2010 $1.67
Oct2009 $1.42
Oct2008 $1.32
Oct2007 $1.12
Oct2006 $0.88
Oct2005 $0.73
Oct2004 $0.67
Oct2003 $0.64
Oct2002 $0.64

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Defensive Investor – August 2017
6 Best Stocks for Value Investors This Week – 3/26/17
Canadian Western Bank Valuation – Initial Coverage $TSE:CWB

Other ModernGraham posts about related companies

Simmons First National Corp Valuation – March 2018 $SFNC
Citigroup Inc Valuation – March 2018 $C
People’s United Financial Inc Valuation – March 2018 $PBCT
JPMorgan Chase & Co Valuation – February 2018 $JPM
Opus Bank Valuation – Initial Coverage $OPB
Wells Fargo & Co Valuation – August 2017 $WFC
Old National Bancorp Valuation – Initial Coverage $ONB
Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB
SunTrust Banks Inc Valuation – April 2017 $STI

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.

Simmons First National Corp Valuation – March 2018 $SFNC

Company Profile (obtained from Marketwatch): Simmons First National Corp. operates as a bank holding company. The company’s services include consumer, real estate & commercial loans, checking, savings & time deposits, trust & investment management services and securities & investment services. Simmons First National was founded in 1903 and is headquartered in Pine Bluff, AR.

SFNC Chart

SFNC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SFNC – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,807,610,074 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 92.91% Pass
5. Moderate PEmg Ratio PEmg < 20 18.22 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.28 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.67
MG Growth Estimate 13.67%
MG Value $59.91
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $24.24
MG Value based on 0% Growth $14.21
Market Implied Growth Rate 4.86%
Current Price $30.45
% of Intrinsic Value 50.83%

Simmons First National Corporation qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.87 in 2014 to an estimated $1.67 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.86% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Simmons First National Corporation revealed the company was trading below its Graham Number of $34.09. The company pays a dividend of $0.5 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 18.22, which was below the industry average of 24.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Simmons First National Corporation fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $34.09
PEmg 18.22
PB Ratio 1.28
Dividend Yield 1.64%
TTM Dividend $0.50
Number of Consecutive Years of Dividend Growth 6

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
Long-Term Debt & Capital Lease Obligation $1,520,589,000
Total Assets $15,055,806,000
Intangible Assets $948,722,000
Total Liabilities $12,971,242,000
Shares Outstanding (Diluted Average) 87,370,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.28
Dec2017 $1.33
Dec2016 $1.56
Dec2015 $1.31
Dec2014 $1.06
Dec2013 $0.71
Dec2012 $0.82
Dec2011 $0.74
Dec2010 $1.08
Dec2009 $0.87
Dec2008 $0.96
Dec2007 $0.96
Dec2006 $0.95
Dec2005 $0.92
Dec2004 $0.83
Dec2003 $0.83
Dec2002 $0.77
Dec2001 $0.58
Dec2000 $0.65
Dec1999 $0.58
Dec1998 $0.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.67
Dec2017 $1.31
Dec2016 $1.23
Dec2015 $1.02
Dec2014 $0.87
Dec2013 $0.80
Dec2012 $0.86
Dec2011 $0.90
Dec2010 $0.97
Dec2009 $0.92
Dec2008 $0.94
Dec2007 $0.92
Dec2006 $0.89
Dec2005 $0.83
Dec2004 $0.77
Dec2003 $0.72
Dec2002 $0.65

Recommended Reading:

Other ModernGraham posts about the company

Simmons First National Corporation Valuation – Initial Coverage $SFNC

Other ModernGraham posts about related companies

Citigroup Inc Valuation – March 2018 $C
People’s United Financial Inc Valuation – March 2018 $PBCT
JPMorgan Chase & Co Valuation – February 2018 $JPM
Opus Bank Valuation – Initial Coverage $OPB
Wells Fargo & Co Valuation – August 2017 $WFC
Old National Bancorp Valuation – Initial Coverage $ONB
Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB
SunTrust Banks Inc Valuation – April 2017 $STI
Toronto-Dominion Bank Valuation – Initial Coverage $TSE:TD

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.

Citigroup Inc Valuation – March 2018 $C

Company Profile (obtained from Marketwatch): Citigroup, Inc. is a global financial services holding company, which engages in the provision of a range of financial products and services including consumer banking and credit, corporate and investment banking, securities brokerage, trade and securities services, and wealth management. It operates through the Citicorp and Citi Holdings segments. The Citicorp segment consists of the company’s Global Consumer Banking and Institutional Clients Group businesses; as well as corporate and other functions. The Citi Holdings segment comprises of Citigroup’s other businesses and portfolios of assets. The company was founded on October 8, 1998 and is headquartered in New York, NY.

C Chart

C data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of C – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $194,810,100,807 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -1024.10% Fail
5. Moderate PEmg Ratio PEmg < 20 24.62 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.96 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.99
MG Growth Estimate -0.51%
MG Value $22.37
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $43.39
MG Value based on 0% Growth $25.44
Market Implied Growth Rate 8.06%
Current Price $73.68
% of Intrinsic Value 329.42%

Citigroup 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 ratio. The Enterprising Investor has concerns regarding 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 $3.1 in 2014 to an estimated $2.99 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.06% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Citigroup Inc revealed the company was trading below its Graham Number of $97.07. The company pays a dividend of $0.96 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 24.62, which was above the industry average of 20.84.

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

Stage 3: Information for Further Research

Graham Number $97.07
PEmg 24.62
PB Ratio 0.96
Dividend Yield 1.30%
TTM Dividend $0.96
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $236,709,000,000
Total Assets $1,842,465,000,000
Intangible Assets $27,402,000,000
Total Liabilities $1,641,725,000,000
Shares Outstanding (Diluted Average) 2,606,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.93
Dec2017 -$2.98
Dec2016 $4.72
Dec2015 $5.40
Dec2014 $2.20
Dec2013 $4.34
Dec2012 $2.44
Dec2011 $3.63
Dec2010 $3.54
Dec2009 -$8.00
Dec2008 -$56.30
Dec2007 $7.20
Dec2006 $43.10
Dec2005 $47.50
Dec2004 $32.60
Dec2003 $34.20
Dec2002 $29.40
Dec2001 $27.20
Dec2000 $26.20
Dec1999 $21.70
Dec1998 $13.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.99
Dec2017 $1.93
Dec2016 $4.19
Dec2015 $3.82
Dec2014 $3.10
Dec2013 $2.76
Dec2012 -$2.33
Dec2011 -$6.47
Dec2010 -$8.38
Dec2009 -$7.33
Dec2008 $0.28
Dec2007 $30.02
Dec2006 $40.07
Dec2005 $37.10
Dec2004 $31.24
Dec2003 $29.62
Dec2002 $26.06

Recommended Reading:

Other ModernGraham posts about the company

Benjamin Graham Would Love These 10 Companies Today
Citigroup Inc Valuation – July 2016 $C
5 Companies for Value Investors with a High Beta – July 2016
Stocks Trading Below Their Graham Number – June 2016
10 Companies Benjamin Graham Would Invest In Today – June 2016

Other ModernGraham posts about related companies

People’s United Financial Inc Valuation – March 2018 $PBCT
JPMorgan Chase & Co Valuation – February 2018 $JPM
Opus Bank Valuation – Initial Coverage $OPB
Wells Fargo & Co Valuation – August 2017 $WFC
Old National Bancorp Valuation – Initial Coverage $ONB
Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB
SunTrust Banks Inc Valuation – April 2017 $STI
Toronto-Dominion Bank Valuation – Initial Coverage $TSE:TD
Texas Capital Banchares Inc Valuation – Initial Coverage $TCBI

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.

People’s United Financial Inc Valuation – March 2018 $PBCT

Company Profile (obtained from Marketwatch): People’s United Financial, Inc. is a bank and financial holding company, which engages in the provision of commercial banking, retail and business banking, and wealth management services to individual, corporate and municipal customers. It operates through the Commercial Banking and Retail Banking segments. The Commercial Banking segment consists commercial real estate lending, commercial and industrial lending, and commercial deposit gathering activities. This segment also includes the equipment financing operations of People’s Capital and Leasing Corp. and People’s United Equipment Finance Corp, as well as cash management, correspondent banking and municipal banking. The Retail Banking segment comprises consumer lending, and consumer deposit gathering activities, consumer lending (including residential mortgage and home equity lending), and merchant services. This segment also provides brokerage, financial advisory services, investment management services and life insurance provided by People’s Securities, Inc. and non-institutional trust services. The company was founded on November 2, 2006 and is headquartered in Bridgeport, CT.

PBCT Chart

PBCT data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PBCT – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $6,627,255,795 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 185.32% Pass
5. Moderate PEmg Ratio PEmg < 20 18.76 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.13 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.02
MG Growth Estimate 6.53%
MG Value $21.99
Opinion Fairly Valued
MG Grade A
MG Value based on 3% Growth $14.79
MG Value based on 0% Growth $8.67
Market Implied Growth Rate 5.13%
Current Price $19.14
% of Intrinsic Value 87.04%

People’s United Financial, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.71 in 2014 to an estimated $1.02 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.13% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into People’s United Financial, Inc. revealed the company was trading below its Graham Number of $21.22. The company pays a dividend of $0.69 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.76, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

People’s United Financial, Inc. fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $21.22
PEmg 18.76
PB Ratio 1.13
Dividend Yield 3.59%
TTM Dividend $0.69
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
Long-Term Debt & Capital Lease Obligation $3,883,800,000
Total Assets $44,453,400,000
Intangible Assets $2,560,000,000
Total Liabilities $38,633,500,000
Shares Outstanding (Diluted Average) 342,333,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.22
Dec2017 $0.97
Dec2016 $0.92
Dec2015 $0.86
Dec2014 $0.84
Dec2013 $0.74
Dec2012 $0.72
Dec2011 $0.55
Dec2010 $0.24
Dec2009 $0.30
Dec2008 $0.41
Dec2007 $0.52
Dec2006 $0.41
Dec2005 $0.46
Dec2004 $0.68
Dec2003 $0.22
Dec2002 $0.19
Dec2001 $0.26
Dec2000 $0.38
Dec1999 $0.81
Dec1998 $0.64

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.02
Dec2017 $0.90
Dec2016 $0.85
Dec2015 $0.79
Dec2014 $0.71
Dec2013 $0.60
Dec2012 $0.50
Dec2011 $0.40
Dec2010 $0.34
Dec2009 $0.40
Dec2008 $0.46
Dec2007 $0.48
Dec2006 $0.44
Dec2005 $0.42
Dec2004 $0.38
Dec2003 $0.28
Dec2002 $0.36

Recommended Reading:

Other ModernGraham posts about the company

People’s United Financial Inc Valuation – June 2016 $PBCT
10 Companies Benjamin Graham Would Invest In Today – March 2016
Dividend Growth Stocks for Intelligent Investors – February 2016
13 Best Stocks For Value Investors This Week – 12/12/15
People’s United Financial Corp Valuation – December 2015 Update $PBCT

Other ModernGraham posts about related companies

JPMorgan Chase & Co Valuation – February 2018 $JPM
Opus Bank Valuation – Initial Coverage $OPB
Wells Fargo & Co Valuation – August 2017 $WFC
Old National Bancorp Valuation – Initial Coverage $ONB
Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB
SunTrust Banks Inc Valuation – April 2017 $STI
Toronto-Dominion Bank Valuation – Initial Coverage $TSE:TD
Texas Capital Banchares Inc Valuation – Initial Coverage $TCBI
TCF Financial Corp Valuation – Initial Coverage $TCB

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.

JPMorgan Chase & Co Valuation – February 2018 $JPM

Company Profile (obtained from Marketwatch): JPMorgan Chase & Co. is a financial holding company, which provides financial and investment banking services. It offers a range of investment banking products and services in all capital markets, including advising on corporate strategy and structure; capital raising in equity and debt markets; sophisticated risk management; market making in cash securities and derivative instruments; and prime brokerage and research. It also offers investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management and private equity. The company operates its business through the following segments: Consumer and Community Banking; Corporate and Investment Bank; Commercial Banking; and Asset & Wealth Management. The Consumer and Community Banking segment serves consumers and businesses through personal service at bank branches and through automated teller machine, online, mobile, and telephone banking. It is organized into Consumer and Business Banking, Mortgage Banking and Card, Merchant Services and Auto Card. The segment’s Consumer and Business banking offers deposit and investment products and services to consumers, and lending, deposit, and cash management and payment solutions to small businesses; Mortgage Banking includes mortgage origination and servicing activities, as well as portfolios comprised of residential mortgages and home equity loans, including the purchased credit impaired portfolio acquired in the Washington Mutual transaction; and Auto Card issues credit cards to consumers and small businesses, provides payment services to corporate and public sector clients through its commercial card products, offers payment processing services to merchants, and provides auto and student loan services. The Corporate and Investment Bank segment offers a suite of investment banking, market-making, prime brokerage, and treasury and securities products and services to a global client base of corporations, investors, financial institutions, government and municipal entities. It offers a range of investment banking products and services in all capital markets, including advising on corporate strategy and structure, capital-raising in equity and debt markets, as well as loan origination and syndication. The Commercial Banking segment delivers industry knowledge, local expertise and dedicated service to United States and its multinational clients, including corporations, municipalities, financial institutions, and non profit entities. This segment provides financing to real estate investors and owners as well as financial solutions, including lending, treasury services, investment banking, and asset management to meet its client’s domestic and international financial needs. The Asset & Wealth Management segment provides asset and wealth management services. It offers investment management across all major asset services, including equities, fixed income, alternatives, and money market funds. JPMorgan Chase was founded in 1968 and is headquartered in New York, NY.

JPM Chart

JPM data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JPM – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $407,033,491,576 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 88.97% Pass
5. Moderate PEmg Ratio PEmg < 20 17.65 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.61 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.65
MG Growth Estimate 5.68%
MG Value $131.95
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $96.38
MG Value based on 0% Growth $56.50
Market Implied Growth Rate 4.57%
Current Price $117.31
% of Intrinsic Value 88.90%

JPMorgan Chase & Co. qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $4.82 in 2014 to an estimated $6.65 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 4.57% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into JPMorgan Chase & Co. revealed the company was trading above its Graham Number of $107.91. The company pays a dividend of $2.12 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 17.65, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

JPMorgan Chase & Co. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Graham Number $107.91
PEmg 17.65
PB Ratio 1.61
Dividend Yield 1.81%
TTM Dividend $2.12
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
Long-Term Debt & Capital Lease Obligation $284,080,000,000
Total Assets $2,533,600,000,000
Intangible Assets $54,392,000,000
Total Liabilities $2,277,907,000,000
Shares Outstanding (Diluted Average) 3,512,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.72
Dec2017 $6.31
Dec2016 $6.19
Dec2015 $6.00
Dec2014 $5.29
Dec2013 $4.34
Dec2012 $5.20
Dec2011 $4.48
Dec2010 $3.96
Dec2009 $2.26
Dec2008 $1.35
Dec2007 $4.38
Dec2006 $4.04
Dec2005 $2.38
Dec2004 $1.55
Dec2003 $3.24
Dec2002 $0.80
Dec2001 $0.80
Dec2000 $2.86
Dec1999 $3.69
Dec1998 $2.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.65
Dec2017 $5.95
Dec2016 $5.65
Dec2015 $5.27
Dec2014 $4.82
Dec2013 $4.41
Dec2012 $4.11
Dec2011 $3.47
Dec2010 $3.05
Dec2009 $2.69
Dec2008 $2.85
Dec2007 $3.44
Dec2006 $2.78
Dec2005 $2.01
Dec2004 $1.84
Dec2003 $2.08
Dec2002 $1.73

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stocks for the Defensive Investor – July 2016
5 Undervalued Dow Components to Research – July 2016
10 Low PE Stocks for the Defensive Investor – June 2016
10 Low PE Stocks for the Defensive Investor – May 2016
18 Best Stocks For Value Investors This Week – 1/30/16

Other ModernGraham posts about related companies

Opus Bank Valuation – Initial Coverage $OPB
Wells Fargo & Co Valuation – August 2017 $WFC
Old National Bancorp Valuation – Initial Coverage $ONB
Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB
SunTrust Banks Inc Valuation – April 2017 $STI
Toronto-Dominion Bank Valuation – Initial Coverage $TSE:TD
Texas Capital Banchares Inc Valuation – Initial Coverage $TCBI
TCF Financial Corp Valuation – Initial Coverage $TCB
Canadian Western Bank Valuation – Initial Coverage $TSE:CWB

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.

Opus Bank Valuation – Initial Coverage $OPB

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 Undervalued Stocks for the Enterprising Investor – August 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 Opus Bank (OPB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Opus Bank is a commercial bank. The Company provides banking products, services and solutions to its clients through its Retail Bank, Commercial Bank, Merchant Bank, and Correspondent Bank. The Company’s Commercial Bank consists Commercial Banking, Business Banking, Healthcare Banking, Technology Banking, Fiduciary Banking, Institutional Syndications and Commercial Real Estate Banking (CREB), which includes Income Property Banking, its Structured Finance Group and Capital Markets Group. Through its Merchant Bank, the Company offers transaction support, and debt and equity capital to entrepreneurs, small and mid-sized business and middle-market companies. Through its Retail Bank, the Company provides banking solutions for small and mid-sized companies, entrepreneurs, real estate investors, professional and high net worth individuals. Through its Correspondent Bank, the Company offers loan and depository services to other financial institutions.

OPB Chart

OPB data by YCharts

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ModernGraham Valuation of OPB – August 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $727,869,597 Fail
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 11866566.67% Pass
5. Moderate PEmg Ratio PEmg < 20 15.65 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.86 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.44
MG Growth Estimate -1.86%
MG Value $6.90
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $20.89
MG Value based on 0% Growth $12.25
Market Implied Growth Rate 3.58%
Current Price $22.55
% of Intrinsic Value 326.81%

Opus Bank 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 over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding 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 $1.64 in 2013 to an estimated $1.44 for 2017.  This level of demonstrated earnings growth does not support the market’s implied estimate of 3.58% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Opus Bank revealed the company was trading below its Graham Number of $29.57.  The company pays a dividend of $0.53 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 15.65, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Opus Bank receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Graham Number $29.57
PEmg 15.65
PB Ratio 0.86
Dividend Yield 2.35%
TTM Dividend $0.53
Number of Consecutive Years of Dividend Growth 2

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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
Long-Term Debt & Capital Lease Obligation $197,479,000
Total Assets $7,882,563,000
Intangible Assets $382,550,000
Total Liabilities $6,956,628,000
Shares Outstanding (Diluted Average) 35,513,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.44
Dec2016 $0.33
Dec2015 $1.79
Dec2014 $1.38
Dec2013 $4.96
Dec2012 $0.79
Dec2011 -$1.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.44
Dec2016 $1.58
Dec2015 $1.99
Dec2014 $1.79
Dec2013 $1.64
Dec2012 -$0.03
Dec2011 -$0.37

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Wells Fargo & Co Valuation – August 2017 $WFC
Old National Bancorp Valuation – Initial Coverage $ONB
Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB
SunTrust Banks Inc Valuation – April 2017 $STI
Toronto-Dominion Bank Valuation – Initial Coverage $TSE:TD
Texas Capital Banchares Inc Valuation – Initial Coverage $TCBI
TCF Financial Corp Valuation – Initial Coverage $TCB
Canadian Western Bank Valuation – Initial Coverage $TSE:CWB
CVB Financial Corp Valuation – Initial Coverage $CVBF

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.

Wells Fargo & Co Valuation – August 2017 $WFC

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 Wells Fargo & Co (WFC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Wells Fargo & Company is a bank holding company. The Company is a diversified financial services company. It has three operating segments: Community Banking, Wholesale Banking, and Wealth and Investment Management. The Company offers its services under three categories: personal, small business and commercial. It provides retail, commercial and corporate banking services through banking locations and offices, the Internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia and in other countries. It provides other financial services through its subsidiaries engaged in various businesses, including wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, computer and data processing services, investment advisory services, mortgage-backed securities servicing and venture capital investment.

WFC Chart

WFC data by YCharts

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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 WFC – August 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $257,827,293,159 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 159.23% Pass
5. Moderate PEmg Ratio PEmg < 20 12.93 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.27 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $4.02
MG Growth Estimate 4.02%
MG Value $66.46
Opinion Fairly Valued
MG Grade B+
MG Value based on 3% Growth $58.25
MG Value based on 0% Growth $34.15
Market Implied Growth Rate 2.21%
Current Price $51.94
% of Intrinsic Value 78.15%

Wells Fargo & Co qualifies for both the Defensive Investor and the Enterprising Investor.  In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.17 in 2013 to an estimated $4.02 for 2017.  This level of demonstrated earnings growth supports the market’s implied estimate of 2.21% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Wells Fargo & Co revealed the company was trading below its Graham Number of $55.83.  The company pays a dividend of $1.52 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 12.93, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Wells Fargo & Co performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $55.83
PEmg 12.93
PB Ratio 1.27
Dividend Yield 2.92%
TTM Dividend $1.52
Number of Consecutive Years of Dividend Growth 6

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ModernGraham tagged articles Morningstar
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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Long-Term Debt & Capital Lease Obligation $238,869,000,000
Total Assets $1,930,871,000,000
Intangible Assets $40,761,000,000
Total Liabilities $1,725,641,000,000
Shares Outstanding (Diluted Average) 5,037,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.97
Dec2016 $3.99
Dec2015 $4.12
Dec2014 $4.10
Dec2013 $3.89
Dec2012 $3.36
Dec2011 $2.82
Dec2010 $2.21
Dec2009 $1.75
Dec2008 $0.70
Dec2007 $2.38
Dec2006 $2.47
Dec2005 $2.25
Dec2004 $2.05
Dec2003 $1.83
Dec2002 $1.58
Dec2001 $0.99
Dec2000 $1.16
Dec1999 $1.15
Dec1998 $0.59
Dec1997 $0.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.02
Dec2016 $3.99
Dec2015 $3.88
Dec2014 $3.60
Dec2013 $3.17
Dec2012 $2.59
Dec2011 $2.13
Dec2010 $1.83
Dec2009 $1.73
Dec2008 $1.80
Dec2007 $2.30
Dec2006 $2.18
Dec2005 $1.94
Dec2004 $1.69
Dec2003 $1.46
Dec2002 $1.21
Dec2001 $0.99

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – May 2016
13 Best Stocks For Value Investors This Week – 12/12/15
Wells Fargo & Co Valuation – December 2015 Update $WFC
The Best Companies of the Banking Industry – October 2015
10 Most Undervalued Companies for the Defensive Investor – September 2015

Other ModernGraham posts about related companies

Old National Bancorp Valuation – Initial Coverage $ONB
Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB
SunTrust Banks Inc Valuation – April 2017 $STI
Toronto-Dominion Bank Valuation – Initial Coverage $TSE:TD
Texas Capital Banchares Inc Valuation – Initial Coverage $TCBI
TCF Financial Corp Valuation – Initial Coverage $TCB
Canadian Western Bank Valuation – Initial Coverage $TSE:CWB
CVB Financial Corp Valuation – Initial Coverage $CVBF
Customers Bancorp Inc Valuation – Initial Coverage $CUBI

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.

10 Best Stocks for Value Investors This Week – 7/22/17

I evaluated 38 different companies this week to determine whether they are suitable for Defensive Investors, those unwilling to do substantial research, or Enterprising Investors, those who are willing to do such research. I also put each company through the ModernGraham valuation model based on Benjamin Graham’s value investing formulas in order to determine an intrinsic value for each.

Out of those 38 companies, only 10 were found to be undervalued or fairly valued and suitable for Defensive and/or Enterprising Investors.  Therefore, these companies are the best undervalued stocks of the week.

The Elite

The following companies were found to be suitable for either the Defensive Investor or Enterprising Investor and undervalued:

Kroger Company (KR)

Kroger 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 $1.07 in 2014 to an estimated $1.96 for 2018.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.51% 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 Kroger Co revealed the company was trading above its Graham Number of $18.2.  The company pays a dividend of $0.45 per share, for a yield of 2%  Its PEmg (price over earnings per share – ModernGraham) was 11.52, which was below the industry average of 36.19, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-21.75.  (See the full valuation)

LegacyTexas Financial Group Inc (LTXB)

LegacyTexas Financial Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the  small size, insufficient earnings stability over the last ten years, and the high PEmg ratio. The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.79 in 2013 to an estimated $1.77 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.39% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into LegacyTexas Financial Group Inc revealed the company was trading above its Graham Number of $30.53.  The company pays a dividend of $0.58 per share, for a yield of 1.5%  Its PEmg (price over earnings per share – ModernGraham) was 21.28, which was above the industry average of 20.84.  (See the full valuation)

Lucara Diamond Corp (TSE:LUC)

Lucara Diamond Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the  small size, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.03 in 2013 to an estimated $0.26 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.36% 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 Lucara Diamond Corp revealed the company was trading above its Graham Number of $2.24.  The company pays a dividend of $0.06 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 11.22, which was below the industry average of 146.28, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.04.  (See the full valuation)

Nielsen N.V. Ordinary Shares (NLSN)

Nielsen N.V. Ordinary Shares is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the  low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the low current ratio.  As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.83 in 2013 to an estimated $1.92 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.91% 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 Nielsen N.V. Ordinary Shares revealed the company was trading above its Graham Number of $27.5.  The company pays a dividend of $1.21 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 20.33, which was below the industry average of 24.68, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-28.15.  (See the full valuation)

TFI International Inc (TFII)

TFI International Inc qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is only initially concerned with the  low current ratio. The Enterprising Investor 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 in 2013 to an estimated $3 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.38% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into TFI International Inc revealed the company was trading above its Graham Number of $26.97.  The company pays a dividend of $0.7 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 9.26, which was below the industry average of 31.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.36.  (See the full valuation)

T.Rowe Price Group Inc (TROW)

T. Rowe Price Group Inc qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is only initially concerned with the  high PB ratio. The Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.23 in 2013 to an estimated $4.97 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.82% 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 T. Rowe Price Group Inc revealed the company was trading above its Graham Number of $51.41.  The company pays a dividend of $2.16 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 16.13, which was below the industry average of 21.55, 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 $3.21.  (See the full valuation)

Tyson Foods Inc (TSN)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.7 in 2013 to an estimated $4 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.43% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Tyson Foods, Inc. revealed the company was trading above its Graham Number of $55.42.  The company pays a dividend of $0.6 per share, for a yield of 1%  Its PEmg (price over earnings per share – ModernGraham) was 15.37, which was below the industry average of 34.94, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-21.1.  (See the full valuation)

The Good

The following companies were found to be suitable for the Defensive Investor or Enterprising Investor and Fairly Valued:

Dime Community Bancshares Inc (DCOM)

Dime Community Bancshares, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the  small size. 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 $1.22 in 2013 to an estimated $1.45 for 2017.  This level of demonstrated earnings growth supports the market’s implied estimate of 2.75% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Dime Community Bancshares, Inc. revealed the company was trading below its Graham Number of $20.94.  The company pays a dividend of $0.56 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 13.99, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Old National Bancorp (ONB)

Old National Bancorp qualifies for both the Defensive Investor and the Enterprising Investor.  In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.81 in 2013 to an estimated $1.03 for 2017.  This level of demonstrated earnings growth supports the market’s implied estimate of 3.85% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Old National Bancorp revealed the company was trading below its Graham Number of $18.06.  The company pays a dividend of $0.52 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 16.21, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Telefex Inc (TFX)

Teleflex Incorporated is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the  insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.67 in 2013 to an estimated $5.86 for 2017.  This level of demonstrated earnings growth supports the market’s implied estimate of 13.91% 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 Teleflex Incorporated revealed the company was trading above its Graham Number of $94.71.  The company pays a dividend of $1.36 per share, for a yield of 0.6%  Its PEmg (price over earnings per share – ModernGraham) was 36.32, which was below the industry average of 37.66, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-34.72.  (See the full valuation)

Disclaimer:

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

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