International Business Machines Corp Valuation – April 2019 #IBM

Company Profile (excerpt from Reuters): International Business Machines Corporation (IBM), incorporated on June 16, 1911, is a technology company. The Company operates through five segments: Cognitive Solutions, Global Business Services (GBS), Technology Services & Cloud Platforms, Systems and Global Financing.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IBM – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $127,277,532,893 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.29 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 -24.36% Fail
6. Moderate PEmg Ratio PEmg < 20 13.11 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.65 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.29 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.26 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 $10.91
MG Growth Estimate -2.80%
MG Value $31.55
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $158.22
MG Value based on 0% Growth $92.75
Market Implied Growth Rate 2.30%
Current Price $143.03
% of Intrinsic Value 453.39%

IBM Common Stock 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 $13.42 in 2015 to an estimated $10.91 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.3% 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 IBM Common Stock revealed the company was trading above its Graham Number of $75.75. The company pays a dividend of $6.21 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.11, which was below the industry average of 46.57, 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 $-63.31.

IBM Common Stock receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$63.31
Graham Number $75.75
PEmg 13.11
Current Ratio 1.29
PB Ratio 7.65
Current Dividend $6.21
Dividend Yield 4.34%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $49,146,000,000
Total Current Liabilities $38,227,000,000
Long-Term Debt $35,605,000,000
Total Assets $123,382,000,000
Intangible Assets $39,353,000,000
Total Liabilities $106,453,000,000
Shares Outstanding (Diluted Average) 905,242,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.80
Dec2018 $9.52
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

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.91
Dec2018 $9.87
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

Recommended Reading:

Other ModernGraham posts about the company

International Business Machines Corp Valuation – November 2018 $IBM
International Business Machines Corp Valuation – February 2018 $IBM
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

Other ModernGraham posts about related companies

DXC Technology Co Valuation – April 2019 #DXC
Verisign Inc Valuation – March 2019 #VRSN
Motorola Solutions Inc Valuation – February 2019 $MSI
Gartner Inc Valuation – January 2019 $IT
Xerox Corp Valuation – January 2019 $XRX
Cognizant Technology Solutions Corp Valuation – January 2019 $CTSH
International Business Machines Corp Valuation – November 2018 $IBM
DXC Technology Corp Valuation – November 2018 $DXC
Sykes Enterprises Inc Valuation – October 2018 $SYKE
Computer Programs and Systems Inc Valuation – August 2018 $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.

Goldman Sachs Group Inc Valuation – April 2019 #GS

Company Profile (excerpt from Reuters): The Goldman Sachs Group, Inc., incorporated on July 21, 1998, is an investment banking, securities and investment management company that provides a range of financial services to corporations, financial institutions, governments and individuals. The Company operates in four business segments: Investment Banking, Institutional Client Services, Investing & Lending, and Investment Management. As of December 2016, it had offices in over 30 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GS – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $74,225,517,968 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 62.01% Pass
5. Moderate PEmg Ratio PEmg < 20 11.71 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $17.28
MG Growth Estimate 3.68%
MG Value $274.01
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $250.54
MG Value based on 0% Growth $146.87
Market Implied Growth Rate 1.61%
Current Price $202.38
% of Intrinsic Value 73.86%

Goldman Sachs Group 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 Undervalued after growing its EPSmg (normalized earnings) from $13.88 in 2015 to an estimated $17.28 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.61% 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 Goldman Sachs Group Inc revealed the company was trading below its Graham Number of $287.24. The company pays a dividend of $3.15 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 11.71, which was below the industry average of 21.66, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Goldman Sachs Group Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $287.24
PEmg 11.71
PB Ratio 0.86
Dividend Yield 1.56%
TTM Dividend $3.15
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $245,582,000,000
Total Assets $931,796,000,000
Intangible Assets $4,082,000,000
Total Liabilities $841,611,000,000
Shares Outstanding (Diluted Average) 383,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.27
Dec2018 $25.27
Dec2017 $9.01
Dec2016 $16.29
Dec2015 $12.14
Dec2014 $17.07
Dec2013 $15.46
Dec2012 $14.13
Dec2011 $4.51
Dec2010 $13.18
Dec2009 $22.13
Nov2008 $4.47
Nov2007 $24.73
Nov2006 $19.69
Nov2005 $11.21
Nov2004 $8.92
Nov2003 $5.87
Nov2002 $4.03
Nov2001 $4.26
Nov2000 $6.00
Nov1999 $5.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $17.28
Dec2018 $16.84
Dec2017 $13.08
Dec2016 $15.08
Dec2015 $13.88
Dec2014 $14.12
Dec2013 $13.06
Dec2012 $11.80
Dec2011 $11.69
Dec2010 $15.80
Dec2009 $16.89
Nov2008 $14.11
Nov2007 $17.32
Nov2006 $12.39
Nov2005 $8.11
Nov2004 $6.31
Nov2003 $5.05

Recommended Reading:

Other ModernGraham posts about the company

Goldman Sachs Group Inc Valuation – November 2018 $GS
Goldman Sachs Group Inc Valuation – February 2018 $GS
Goldman Sachs Group Inc Valuation – June 2016 $GS
10 Low PE Stocks for the Enterprising Investor – June 2016
Stocks Trading Below Their Graham Number – May 2016

Other ModernGraham posts about related companies

American Express Co Valuation – April 2019 #AXP
Broadridge Financial Solutions Inc Valuation – April 2019 #BR
T.Rowe Price Group Inc Valuation – March 2019 #TROW
Moody’s Corp Valuation – March 2019 #MCO
Charles Schwab Corp Valuation – March 2019 #SCHW
Willis Towers Watson PLC Valuation – March 2019 #WLTW
Paypal Holdings Inc Valuation – March 2019 #PYPL
Synchrony Financial Valuation – March 2019 #SYF
CBRE Group Inc Valuation – March 2019 #CBRE
Franklin Resources Inc Valuation – March 2019 #BEN

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.

Maxim Integrated Products Inc Valuation – April 2019 #MXIM

Company Profile (excerpt from Reuters): Maxim Integrated Products, Inc., incorporated on August 19, 1987, is engaged in designing, developing, manufacturing and marketing a range of linear and mixed-signal integrated circuits, referred to as analog circuits. The Company also provides a range of high-frequency process technologies and capabilities for use in custom designs. The Company caters to automotive, communications and data center, computing, consumer and industrial markets. The Company offers a range of products, such as switching regulators, battery management, isolated power, charge pumps, linear regulators, light emitting diode (LED) drivers, motor driver integrated circuits (ICs), monitors and sequencers, transceivers, controllers and expanders, level translators, signal line protection ICs, broadband switches, universal serial bus (USB) products, current loop products, powerline communications, real-time clocks, embedded security, microcontrollers, 1-Wire, iButton, data loggers, clock generation and distribution, memory products, optical, signal integrity, high-speed signaling, and display power and control.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MXIM – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,578,217,914 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.54 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 76.97% Pass
6. Moderate PEmg Ratio PEmg < 20 33.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.09 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 6.54 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.44 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.73
MG Growth Estimate 7.55%
MG Value $40.74
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $25.03
MG Value based on 0% Growth $14.67
Market Implied Growth Rate 12.26%
Current Price $56.99
% of Intrinsic Value 139.88%

Maxim Integrated Products Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.15 in 2015 to an estimated $1.73 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.26% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Maxim Integrated Products Inc. revealed the company was trading above its Graham Number of $18.6. The company pays a dividend of $1.56 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 33.02, which was below the industry average of 35.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.87.

Maxim Integrated Products Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.87
Graham Number $18.60
PEmg 33.02
Current Ratio 6.54
PB Ratio 9.09
Current Dividend $1.56
Dividend Yield 2.74%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,657,918,000
Total Current Liabilities $406,480,000
Long-Term Debt $991,866,000
Total Assets $3,888,927,000
Intangible Assets $599,412,000
Total Liabilities $2,133,513,000
Shares Outstanding (Diluted Average) 280,008,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.22
Jun2018 $1.64
Jun2017 $1.98
Jun2016 $0.79
Jun2015 $0.71
Jun2014 $1.23
Jun2013 $1.52
Jun2012 $1.29
Jun2011 $1.61
Jun2010 $0.40
Jun2009 $0.03
Jun2008 $0.98
Jun2007 $0.87
Jun2006 $1.14
Jun2005 $1.35
Jun2004 $0.88
Jun2003 $0.70
Jun2002 $0.73
Jun2001 $0.93
Jun2000 $1.04
Jun1999 $0.64

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.73
Jun2018 $1.41
Jun2017 $1.28
Jun2016 $0.99
Jun2015 $1.15
Jun2014 $1.31
Jun2013 $1.23
Jun2012 $1.01
Jun2011 $0.84
Jun2010 $0.53
Jun2009 $0.69
Jun2008 $1.03
Jun2007 $1.03
Jun2006 $1.06
Jun2005 $0.98
Jun2004 $0.82
Jun2003 $0.80

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

Skyworks Solutions Inc Valuation – March 2019 #SWKS
Garmin Ltd Valuation – March 2019 #GRMN
Hewlett Packard Enterprise Co Valuation – March 2019 #HPE
Fortive Corp Valuation – March 2019 #FTV
Analog Devices Inc Valuation – March 2019 #ADI
IPG Photonics Corp Valuation – March 2019 #IPGP
Micron Technology Inc Valuation – March 2019 #MU
Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC

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.

Advance Auto Parts Inc Valuation – March 2019 #AAP

Company Profile (excerpt from Reuters): Advance Auto Parts, Inc., incorporated on August 1, 2001, provides automotive aftermarket parts in North America, serving do-it-for-me (Professional) and do-it-yourself (DIY), customers. The Company’s stores and branches offer a selection of brand name, original equipment manufacturer (OEM) and private label automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks. The Company serves its Professional and DIY customers through various channels ranging from traditional brick and mortar store locations to self-serving e-commerce sites. As of December 31, 2016, the Company operated 5,062 total stores and 127 branches primarily under the trade names Advance Auto Parts, Autopart International, Carquest and Worldpac. As of December 31, 2016, the Company’s Advance Auto Parts operations consisted of three geographic divisions, which included the operations of the stores operating under the Advance Auto Parts, Carquest and Autopart International trade names. The Company’s e-commerce platforms, primarily consisting of its online Websites and Professional ordering platforms, are part of its integrated operating approach of serving its Professional and DIY customers. The Company’s online Websites allow its DIY customers to pick up merchandise at a store or have their purchases shipped directly to them. The majority of the Company’s online DIY sales are picked up at store locations. Through the Company’s online ordering platforms, Professional customers can place orders with a designated store location for delivery to their places of business or pick-up.

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAP – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,221,885,012 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.57 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 39.57% Pass
6. Moderate PEmg Ratio PEmg < 20 25.61 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.52 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 1.57 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.48 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 $6.66
MG Growth Estimate 1.58%
MG Value $77.67
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $96.55
MG Value based on 0% Growth $56.60
Market Implied Growth Rate 8.56%
Current Price $170.53
% of Intrinsic Value 219.56%

Advance Auto Parts, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $6.02 in 2015 to an estimated $6.66 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.56% 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 Advance Auto Parts, Inc. revealed the company was trading above its Graham Number of $92.34. The company pays a dividend of $0.24 per share, for a yield of 0.1% Its PEmg (price over earnings per share – ModernGraham) was 25.61, which was above the industry average of 22.49. Finally, the company was trading above its Net Current Asset Value (NCAV) of $8.08.

Advance Auto Parts, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $8.08
Graham Number $92.34
PEmg 25.61
Current Ratio 1.57
PB Ratio 3.52
Current Dividend $0.24
Dividend Yield 0.14%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,082,454,000
Total Current Liabilities $3,885,950,000
Long-Term Debt $1,045,720,000
Total Assets $9,040,648,000
Intangible Assets $1,540,830,000
Total Liabilities $5,489,835,000
Shares Outstanding (Diluted Average) 73,328,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.78
Dec2018 $5.73
Dec2017 $6.42
Dec2016 $6.20
Dec2015 $6.40
Dec2014 $6.71
Dec2013 $5.32
Dec2012 $5.22
Dec2011 $5.11
Dec2010 $3.95
Dec2009 $2.83
Dec2008 $2.49
Dec2007 $2.28
Dec2006 $2.16
Dec2005 $2.13
Dec2004 $1.66
Dec2003 $1.11
Dec2002 $0.60
Dec2001 $0.13
Dec2000 $0.23
Dec1999 -$0.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.66
Dec2018 $6.16
Dec2017 $6.32
Dec2016 $6.17
Dec2015 $6.02
Dec2014 $5.64
Dec2013 $4.90
Dec2012 $4.44
Dec2011 $3.81
Dec2010 $3.02
Dec2009 $2.49
Dec2008 $2.26
Dec2007 $2.06
Dec2006 $1.81
Dec2005 $1.46
Dec2004 $1.00
Dec2003 $0.57

Recommended Reading:

Other ModernGraham posts about the company

Advance Auto Parts Inc Valuation – June 2018 $AAP
Advance Auto Parts Inc Valuation – August 2017 $AAP
Advance Auto Parts Inc Valuation – November 2016 $AAP
Advance Auto Parts Inc. Analysis – Initial Coverage $AAP

Other ModernGraham posts about related companies

LKQ Corp Valuation – March 2019 #LKQ
Aptiv PLC Valuation – March 2019 #APTV
Paccar Inc Valuation – March 2019 #PCAR
BorgWarner Inc Valuation – February 2019 $BWA
CarMax Inc Valuation – February 2019 $KMX
Ford Motor Co Valuation – February 2019 $F
General Motors Co Valuation – February 2019 $GM
O’Reilly Automotive Inc Valuation – February 2019 $ORLY
Goodyear Tire & Rubber Co Valuation – January 2019 $GT
Genuine Parts Co Valuation – January 2019 $GPC

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.

Schlumberger NV Valuation – March 2019 #SLB

Company Profile (excerpt from Reuters): Schlumberger N.V., incorporated on November 6, 1956, provides technology for reservoir characterization, drilling, production and processing to the oil and gas industry. The Company’s segments include Reservoir Characterization Group, Drilling Group, Production Group and Cameron Group. The Reservoir Characterization Group is engaged in finding and defining hydrocarbon resources. The Drilling Group is engaged in drilling and positioning of oil and gas wells. The Production Group is engaged in the lifetime production of oil and gas reservoirs. The Cameron Group is engaged in pressure and flow control for drilling and intervention rigs, oil and gas wells, and production facilities. The Company operates in North America, Latin America, and the Middle East and Asia, among others. The Company’s subsidiaries include Schlumberger Holdings Corporation and Schlumberger Investment SA.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SLB – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $60,386,843,187 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.17 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -83.41% Fail
6. Moderate PEmg Ratio PEmg < 20 72.38 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.66 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.17 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.52 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.60
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $8.73
MG Value based on 0% Growth $5.12
Market Implied Growth Rate 31.94%
Current Price $43.57
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.45 in 2015 to an estimated $0.6 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 31.94% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Schlumberger Limited. revealed the company was trading above its Graham Number of $28.7. The company pays a dividend of $2 per share, for a yield of 4.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 72.38, which was above the industry average of 58.42. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-13.06.

Schlumberger Limited. 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) -$13.06
Graham Number $28.70
PEmg 72.38
Current Ratio 1.17
PB Ratio 1.66
Current Dividend $2.00
Dividend Yield 4.59%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $15,731,000,000
Total Current Liabilities $13,486,000,000
Long-Term Debt $14,644,000,000
Total Assets $70,507,000,000
Intangible Assets $33,658,000,000
Total Liabilities $33,921,000,000
Shares Outstanding (Diluted Average) 1,393,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.40
Dec2018 $1.53
Dec2017 -$1.08
Dec2016 -$1.24
Dec2015 $1.63
Dec2014 $4.16
Dec2013 $5.05
Dec2012 $4.10
Dec2011 $3.67
Dec2010 $3.38
Dec2009 $2.59
Dec2008 $4.45
Dec2007 $4.20
Dec2006 $3.01
Dec2005 $1.82
Dec2004 $1.02
Dec2003 $0.33
Dec2002 -$2.00
Dec2001 $0.91
Dec2000 $0.64
Dec1999 $0.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.60
Dec2018 $0.47
Dec2017 $0.53
Dec2016 $1.80
Dec2015 $3.45
Dec2014 $4.27
Dec2013 $4.13
Dec2012 $3.66
Dec2011 $3.52
Dec2010 $3.47
Dec2009 $3.41
Dec2008 $3.52
Dec2007 $2.72
Dec2006 $1.60
Dec2005 $0.74
Dec2004 $0.19
Dec2003 -$0.14

Recommended Reading:

Other ModernGraham posts about the company

Schlumberger Ltd Valuation – June 2018 $SLB
Schlumberger Limited Valuation – July 2017 $SLB
Schlumberger Ltd Valuation – February 2016 $SLB
Schlumberger Limited Valuation – October 2015 Update $SLB
Schlumberger Limited Analysis – July 2015 Update $SLB

Other ModernGraham posts about related companies

Anadarko Petroleum Corp Valuation – March 2019 #APC
Apache Corp Valuation – March 2019 #APA
Cabot Oil & Gas Corp Valuation – March 2019 #COG
Concho Resources Inc Valuation – March 2019 #CXO
Valero Energy Corp Valuation – March 2019 #VLO
Occidental Petroleum Corp Valuation – March 2019 #OXY
Phillips 66 Valuation – March 2019 #PSX
Halliburton Co Valuation – March 2019 #HAL
Kinder Morgan Inc Valuation – February 2019 $KMI
National Oilwell Varco Inc Valuation – February 2019 $NOV

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.

Public Service Enterprise Group Inc Valuation – March 2019 #PEG

Company Profile (excerpt from Reuters): Public Service Enterprise Group Incorporated (PSEG), incorporated on July 25, 1985, is a holding company. The Company is an energy company with operations located primarily in the Northeastern and Mid- Atlantic United States. The Company’s segments include Public Service Electric and Gas Company (PSE&G), PSEG Power LLC (Power) and Other. Its other subsidiaries include PSEG Energy Holdings L.L.C. (Energy Holdings), which earns its revenues primarily from its portfolio of lease investments; PSEG Long Island LLC (PSEG LI), which operates the Long Island Power Authority’s (LIPA) transmission and distribution (T&D) system under a contractual agreement, and PSEG Services Corporation (Services), which provides its operating subsidiaries with certain management, administrative and general services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PEG – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $30,002,014,276 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.71 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 5.96% Fail
6. Moderate PEmg Ratio PEmg < 20 20.69 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.10 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.71 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.22 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 $2.87
MG Growth Estimate -0.25%
MG Value $22.99
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $41.63
MG Value based on 0% Growth $24.41
Market Implied Growth Rate 6.10%
Current Price $59.41
% of Intrinsic Value 258.42%

Public Service Enterprise Group Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings 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 $2.92 in 2015 to an estimated $2.87 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.1% 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 Public Service Enterprise Group Inc. revealed the company was trading above its Graham Number of $44.76. The company pays a dividend of $1.8 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.69, which was below the industry average of 23.71, 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 $-54.13.

Public Service Enterprise Group 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) -$54.13
Graham Number $44.76
PEmg 20.69
Current Ratio 0.71
PB Ratio 2.10
Current Dividend $1.80
Dividend Yield 3.03%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,507,000,000
Total Current Liabilities $4,935,000,000
Long-Term Debt $13,168,000,000
Total Assets $45,326,000,000
Intangible Assets $159,000,000
Total Liabilities $30,949,000,000
Shares Outstanding (Diluted Average) 507,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.13
Dec2018 $2.83
Dec2017 $3.10
Dec2016 $1.75
Dec2015 $3.30
Dec2014 $2.99
Dec2013 $2.45
Dec2012 $2.51
Dec2011 $2.96
Dec2010 $3.08
Dec2009 $3.14
Dec2008 $2.34
Dec2007 $2.62
Dec2006 $1.46
Dec2005 $1.35
Dec2004 $1.52
Dec2003 $2.54
Dec2002 $0.57
Dec2001 $1.84
Dec2000 $1.79
Dec1999 -$0.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.87
Dec2018 $2.76
Dec2017 $2.72
Dec2016 $2.56
Dec2015 $2.92
Dec2014 $2.75
Dec2013 $2.70
Dec2012 $2.82
Dec2011 $2.92
Dec2010 $2.78
Dec2009 $2.48
Dec2008 $2.05
Dec2007 $1.90
Dec2006 $1.53
Dec2005 $1.56
Dec2004 $1.66
Dec2003 $1.59

Recommended Reading:

Other ModernGraham posts about the company

Public Service Enterprise Group Inc Valuation – June 2018 $PEG
Public Service Enterprise Group Inc Valuation – July 2017 $PEG
Public Service Enterprise Group Inc Valuation – August 2016 $PEG
Public Service Enterprise Group Inc. Analysis – 2015 Update $PEG
Public Service Enterprise Group Inc. Annual Valuation – 2014 $PEG

Other ModernGraham posts about related companies

PPL Corp Valuation – March 2019 #PPL
Eversource Energy Valuation – March 2019 #ES
Evergy Inc Valuation – March 2019 #EVRG
Entergy Corp Valuation – March 2019 #ETR
Pinnacle West Capital Corp Valuation – March 2019 #PNW
NiSource Inc Valuation – March 2019 #NI
American Electric Power Company Inc Valuation – March 2019 #AEP
American Water Works Co Inc Valuation – March 2019 #AWK
Alliant Energy Corp Valuation – March 2019 #LNT
Consolidated Edison Inc Valuation – March 2019 #ED

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.

Nielsen Holdings PLC Valuation – March 2019 #NLSN

Company Profile (excerpt from Reuters): Nielsen Holdings plc, incorporated on February 4, 2015, is a performance management company. The Company provides to clients an understanding of what consumers watch and what they buy and how those choices intersect. The Company’s segments include what consumers buy (Buy), consisting principally of market research information and analytical services, and what consumers watch and listen to (Watch), consisting principally of television, radio, online and mobile audience and advertising measurement services and corresponding analytics.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NLSN – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,413,430,517 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 -98.61% Fail
6. Moderate PEmg Ratio PEmg < 20 88.32 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.76 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.21 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 23.93 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.27
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $3.89
MG Value based on 0% Growth $2.28
Market Implied Growth Rate 39.91%
Current Price $23.67
% of Intrinsic Value N/A

Nielsen Holdings PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the 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 $1.28 in 2015 to an estimated $0.27 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 39.91% 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 below the price.

At the time of valuation, further research into Nielsen Holdings PLC revealed the company was trading above its Graham Number of $12.16. The company pays a dividend of $1.39 per share, for a yield of 5.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 88.32, which was above the industry average of 17.84. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-28.53.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$28.53
Graham Number $12.16
PEmg 88.32
Current Ratio 1.21
PB Ratio 2.76
Current Dividend $1.39
Dividend Yield 5.87%
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 12/1/2018
Total Current Assets $2,003,000,000
Total Current Liabilities $1,657,000,000
Long-Term Debt $8,280,000,000
Total Assets $15,179,000,000
Intangible Assets $12,011,000,000
Total Liabilities $12,136,000,000
Shares Outstanding (Diluted Average) 355,195,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.82
Dec2018 -$2.00
Dec2017 $1.20
Dec2016 $1.39
Dec2015 $1.54
Dec2014 $1.00
Dec2013 $1.94
Dec2012 $0.75
Dec2011 $0.23
Dec2010 $0.46
Dec2009 -$1.79
Dec2008 -$2.61

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.27
Dec2018 $0.20
Dec2017 $1.34
Dec2016 $1.38
Dec2015 $1.28
Dec2014 $1.06
Dec2013 $0.83
Dec2012 -$0.01
Dec2011 -$0.51
Dec2010 -$0.85
Dec2009 -$1.29
Dec2008 -$0.87

Recommended Reading:

Other ModernGraham posts about the company

Nielsen Holdings PLC Valuation – June 2018 $NLSN
10 Best Stocks for Value Investors This Week – 7/22/17
Nielsen N.V. Ordinary Shares Valuation – July 2017 $NLSN
Nielsen NV Valuation – August 2016 $NLSN
Nielsen NV Analysis – July 2015 Update $NLSN

Other ModernGraham posts about related companies

Interpublic Group of Companies Inc Valuation – March 2019 #IPG
Omnicom Group Inc Valuation – February 2019 $OMC
Nielsen Holdings PLC Valuation – June 2018 $NLSN
Interpublic Group of Companies Inc Valuation – April 2018 $IPG
Omnicom Group Inc Valuation – April 2018 $OMC
Nielsen N.V. Ordinary Shares Valuation – July 2017 $NLSN
Lamar Advertising Company Valuation – Initial Coverage $LAMR
Interpublic Group of Companies Inc Valuation – December 2016 $IPG
Nielsen NV Valuation – August 2016 $NLSN
Interpublic Group of Companies Inc Valuation – August 2016 $IPG

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.

Kroger Co Valuation – March 2019 #KR

Company Profile (excerpt from Reuters): The Kroger Co. (Kroger), incorporated on April 3, 1902, manufactures and processes food for sale in its supermarkets. The Company operates supermarkets, multi-department stores, jewelry stores and convenience stores throughout the United States. As of February 3, 2018, it had operated approximately 3,900 owned or leased supermarkets, convenience stores, fine jewelry stores, distribution warehouses and food production plants through divisions, subsidiaries or affiliates. These facilities are located throughout the United States. As of February 3, 2018, Kroger operated, either directly or through its subsidiaries, 2,782 supermarkets under a range of local banner names, of which 2,268 had pharmacies and 1,489 had fuel centers. As of February 3, 2018, the Company offered ClickList and Harris Teeter ExpressLane, personalized, order online, pick up at the store services at 1,056 of its supermarkets. As of February 3, 2018, its supermarkets, on average, stocked over 15,000 private label items. Its corporate brand products are primarily produced and sold in three tiers. P$$T, Check This Out and Heritage Farm are the three brands. Its other brands include Simple Truth and Simple Truth Organic. As of February 3, 2018, it had operated 37 food production plants, which consisted of 17 dairies, 10 deli or bakery plants, five grocery product plants, two beverage plants, two meat plants and two cheese plants.

Downloadable PDF version of this valuation:

ModernGraham Valuation of KR – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $19,630,800,304 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.76 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 182.61% Pass
6. Moderate PEmg Ratio PEmg < 20 9.91 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.76 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.48 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.48
MG Growth Estimate 7.51%
MG Value $58.35
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $35.98
MG Value based on 0% Growth $21.09
Market Implied Growth Rate 0.71%
Current Price $24.60
% of Intrinsic Value 42.16%

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 $1.65 in 2016 to an estimated $2.48 for 2020. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.71% 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 $20.76. The company pays a dividend of $0.53 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.91, which was below the industry average of 24.89, 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 $-24.17.

Kroger Co performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.17
Graham Number $20.76
PEmg 9.91
Current Ratio 0.76
PB Ratio 2.53
Current Dividend $0.53
Dividend Yield 2.15%
Number of Consecutive Years of Dividend Growth 13

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 1/1/2019
Total Current Assets $10,803,000,000
Total Current Liabilities $14,274,000,000
Long-Term Debt $12,072,000,000
Total Assets $38,118,000,000
Intangible Assets $4,345,000,000
Total Liabilities $30,283,000,000
Shares Outstanding (Diluted Average) 806,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.95
Jan2019 $3.76
Jan2018 $2.09
Jan2017 $2.05
Jan2016 $2.06
Jan2015 $1.72
Jan2014 $1.45
Jan2013 $1.39
Jan2012 $0.51
Jan2011 $0.87
Jan2010 $0.06
Jan2009 $0.95
Jan2008 $0.85
Jan2007 $0.77
Jan2006 $0.66
Jan2005 -$0.07
Jan2004 $0.21
Jan2003 $0.76
Jan2002 $0.63
Jan2001 $0.52
Jan2000 $0.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.48
Jan2019 $2.61
Jan2018 $1.98
Jan2017 $1.86
Jan2016 $1.65
Jan2015 $1.36
Jan2014 $1.07
Jan2013 $0.84
Jan2012 $0.59
Jan2011 $0.66
Jan2010 $0.59
Jan2009 $0.78
Jan2008 $0.62
Jan2007 $0.50
Jan2006 $0.39
Jan2005 $0.30
Jan2004 $0.49

Recommended Reading:

Other ModernGraham posts about the company

Kroger Co Valuation – June 2018 $KR
10 Low PE Stock Picks for the Defensive Investor – August 2017
5 Undervalued Large Cap Stocks for Value Investors – August 2017
10 Best Stocks for Value Investors This Week – 7/22/17
Kroger Company Valuation – July 2017 $KR

Other ModernGraham posts about related companies

Supervalu Inc Valuation – September 2018 $SVU
Kroger Co Valuation – June 2018 $KR
Kroger Company Valuation – July 2017 $KR
Supervalu Inc Valuation – Initial Coverage $SVU
SpartanNash Co Valuation – Initial Coverage $SPTN
Core-Mark Holding Company Inc Valuation – Initial Coverage $CORE
The Kroger Co Valuation – August 2016 $KR
Whole Foods Market Inc Valuation – May 2016 $WFM
Whole Foods Market Inc. Valuation – October 2015 Update $WFM
Kroger Company Analysis – 2015 Update $KR

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.

SunTrust Banks Inc Valuation – March 2019 #STI

Company Profile (excerpt from Reuters): SunTrust Banks, Inc., incorporated on July 24, 1984, is a provider of financial services. The Company’s principal subsidiary is SunTrust Bank (the Bank). The Company’s business segments include Consumer Banking and Private Wealth Management, Wholesale Banking, Mortgage Banking and Corporate Other. The Company offers a line of financial services for consumers, businesses, corporations, institutions and not-for-profit entities, both through its branches (located primarily in Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee, Virginia, and the District of Columbia), and through other national delivery channels. The Bank provides clients with a selection of full-, self- and assisted-service channels, including branch, call center, Teller Connect machines, automated teller machines (ATMs), Internet, mobile and tablet. The Company’s other subsidiaries provide capital markets, mortgage banking, securities brokerage, online consumer lending, and asset and wealth management services. As of December 31, 2016, the Company had total deposits of $160 billion. As of December 31, 2016, the Company’s total loans held for investment amounted to $143.3 billion.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of STI – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $26,262,864,675 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 261.38% Pass
5. Moderate PEmg Ratio PEmg < 20 11.90 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.11 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 $4.98
MG Growth Estimate 9.27%
MG Value $134.65
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $72.21
MG Value based on 0% Growth $42.33
Market Implied Growth Rate 1.70%
Current Price $59.25
% of Intrinsic Value 44.00%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.08 in 2015 to an estimated $4.98 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.7% 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 SunTrust Banks, Inc. revealed the company was trading below its Graham Number of $78.57. The company pays a dividend of $1.8 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.9, which was below the industry average of 16.75, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

SunTrust Banks, Inc. fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $78.57
PEmg 11.90
PB Ratio 1.11
Dividend Yield 3.04%
TTM Dividend $1.80
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $15,460,000,000
Total Assets $215,543,000,000
Intangible Assets $8,393,000,000
Total Liabilities $191,263,000,000
Shares Outstanding (Diluted Average) 452,826,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.51
Dec2018 $5.74
Dec2017 $4.47
Dec2016 $3.60
Dec2015 $3.58
Dec2014 $3.23
Dec2013 $2.41
Dec2012 $3.59
Dec2011 $0.94
Dec2010 -$0.18
Dec2009 -$3.98
Dec2008 $2.12
Dec2007 $4.55
Dec2006 $5.82
Dec2005 $5.47
Dec2004 $5.19
Dec2003 $4.73
Dec2002 $4.66
Dec2001 $4.72
Dec2000 $4.30
Dec1999 $4.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.98
Dec2018 $4.52
Dec2017 $3.76
Dec2016 $3.36
Dec2015 $3.08
Dec2014 $2.55
Dec2013 $1.66
Dec2012 $1.02
Dec2011 $0.06
Dec2010 $0.30
Dec2009 $1.29
Dec2008 $4.16
Dec2007 $5.17
Dec2006 $5.38
Dec2005 $5.09
Dec2004 $4.84
Dec2003 $4.61

Recommended Reading:

Other ModernGraham posts about the company

SunTrust Banks Inc Valuation – June 2018 $STI
SunTrust Banks Inc Valuation – April 2017 $STI
10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017
21 Best Undervalued Stocks of the Week – 8/27/16
Best Stocks Below Their Graham Number – August 2016

Other ModernGraham posts about related companies

Comerica Inc Valuation – March 2019 #CMA
SVB Financial Group Valuation – March 2019 #SIVB
US Bancorp Valuation – March 2019 #USB
Citizens Financial Group Inc Valuation – February 2019 $CFG
BB&T Corp Valuation – February 2019 $BBT
M&T Bank Corp Valuation – February 2019 $MTB
Bank of America Corp Valuation – January 2019 $BAC
Fifth Third Bancorp Valuation – January 2019 $FITB
Zions Bancorp Valuation – January 2019 $ZION
Regions Financial Corp Valuation – January 2019 $RF

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.

Honeywell International Inc Valuation – March 2019 #HON

Company Profile (excerpt from Reuters): Honeywell International Inc., incorporated on November 24, 1999, is a technology and manufacturing company. The Company operates through four segments: Aerospace, Home and Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HON – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $115,752,559,066 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.29 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 111.25% Pass
6. Moderate PEmg Ratio PEmg < 20 23.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.44 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 1.29 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.79 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.63
MG Growth Estimate 4.55%
MG Value $116.54
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $96.07
MG Value based on 0% Growth $56.32
Market Implied Growth Rate 7.74%
Current Price $158.92
% of Intrinsic Value 136.37%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $5.08 in 2015 to an estimated $6.63 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.74% 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 Honeywell International Inc. revealed the company was trading above its Graham Number of $66.13. The company pays a dividend of $3.06 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 23.99, which was below the industry average of 25.04, 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 $-20.23.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$20.23
Graham Number $66.13
PEmg 23.99
Current Ratio 1.29
PB Ratio 6.44
Current Dividend $3.06
Dividend Yield 1.92%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $24,362,000,000
Total Current Liabilities $18,924,000,000
Long-Term Debt $9,756,000,000
Total Assets $57,773,000,000
Intangible Assets $19,685,000,000
Total Liabilities $39,415,000,000
Shares Outstanding (Diluted Average) 744,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.80
Dec2018 $8.98
Dec2017 $2.00
Dec2016 $6.21
Dec2015 $6.04
Dec2014 $5.33
Dec2013 $4.92
Dec2012 $3.69
Dec2011 $2.61
Dec2010 $2.59
Dec2009 $2.05
Dec2008 $3.76
Dec2007 $3.16
Dec2006 $2.52
Dec2005 $1.92
Dec2004 $1.45
Dec2003 $1.52
Dec2002 -$0.31
Dec2001 -$0.12
Dec2000 $2.05
Dec1999 $1.90

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.63
Dec2018 $5.93
Dec2017 $4.57
Dec2016 $5.65
Dec2015 $5.08
Dec2014 $4.35
Dec2013 $3.63
Dec2012 $2.97
Dec2011 $2.68
Dec2010 $2.75
Dec2009 $2.78
Dec2008 $2.95
Dec2007 $2.40
Dec2006 $1.82
Dec2005 $1.28
Dec2004 $0.95
Dec2003 $0.80

Recommended Reading:

Other ModernGraham posts about the company

Honeywell International Inc Valuation – June 2018 $HON
Honeywell International Inc Valuation – July 2017 $HON
Honeywell International Inc Valuation – February 2016 $HON
7 Best Stocks For Value Investors This Week – 10/24/15
Honeywell International Inc. Valuation – October 2015 Update $HON

Other ModernGraham posts about related companies

Ingersoll-Rand PLC Valuation – January 2019 $IR
General Electric Co Valuation – November 2018 $GE
3M Co Valuation – November 2018 $MMM
ITT Inc Valuation – July 2018 $ITT
Illinois Tool Works Inc Valuation – June 2018 $ITW
Honeywell International Inc Valuation – June 2018 $HON
General Electric Co Valuation – February 2018 $GE
3M Company Valuation – February 2018 $MMM
Raven Industries Inc Valuation – September 2017 $RAVN
Illinois Tool Works Inc Valuation – August 2017 $ITW

Disclaimer:

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

Back To Top