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

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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

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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.

Regeneron Pharmaceuticals Inc Valuation – February 2019 $REGN

Company Profile (excerpt from Reuters): Regeneron Pharmaceuticals, Inc., incorporated on January 11, 1988, is a biopharmaceutical company that discovers, invents, develops, manufactures and commercializes medicines for the treatment of serious medical conditions. The Company commercializes medicines for eye diseases, high low-density lipoprotein (LDL) cholesterol, and an inflammatory condition and have product candidates in development in other areas, including rheumatoid arthritis, asthma, atopic dermatitis, pain, cancer, and infectious diseases. The Company’s marketed products include EYLEA (aflibercept) Injection, Praluent (alirocumab) Injection, ARCALYST (rilonacept) Injection for Subcutaneous Use, Kevzara (sarilumab) Solution for Subcutaneous Injection and ZALTRAP (ziv-aflibercept) Injection for intravenous infusion. As of December 31, 2016, the Company had 16 product candidates in clinical development, which consisted of a Trap-based clinical program and 15 fully human monoclonal antibody product candidates. Its antibodies are generated using its VelocImmune technology.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of REGN – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $45,297,630,364 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.47 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 1470.07% Pass
6. Moderate PEmg Ratio PEmg < 20 29.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.52 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 4.47 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $14.51
MG Growth Estimate 15.00%
MG Value $558.51
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $210.35
MG Value based on 0% Growth $123.31
Market Implied Growth Rate 10.29%
Current Price $421.90
% of Intrinsic Value 75.54%

Regeneron Pharmaceuticals 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, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $4.12 in 2015 to an estimated $14.51 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 10.29% 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 Regeneron Pharmaceuticals Inc revealed the company was trading above its Graham Number of $170.59. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 29.08, which was below the industry average of 39.51, 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 $30.26.

Regeneron Pharmaceuticals 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) $30.26
Graham Number $170.59
PEmg 29.08
Current Ratio 4.47
PB Ratio 5.52
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,447,600,000
Total Current Liabilities $1,442,800,000
Long-Term Debt $0
Total Assets $11,734,500,000
Intangible Assets $0
Total Liabilities $2,977,200,000
Shares Outstanding (Diluted Average) 114,671,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $16.10
Dec2018 $21.29
Dec2017 $10.34
Dec2016 $7.70
Dec2015 $5.52
Dec2014 $2.98
Dec2013 $3.72
Dec2012 $6.75
Dec2011 -$2.45
Dec2010 -$1.26
Dec2009 -$0.85
Dec2008 -$1.00
Dec2007 -$1.59
Dec2006 -$1.77
Dec2005 -$1.71
Dec2004 $0.74
Dec2003 -$2.13
Dec2002 -$2.83
Dec2001 -$1.81
Dec2000 -$0.66
Dec1999 -$0.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $14.51
Dec2018 $12.33
Dec2017 $7.25
Dec2016 $5.58
Dec2015 $4.12
Dec2014 $2.92
Dec2013 $2.33
Dec2012 $1.16
Dec2011 -$1.56
Dec2010 -$1.18
Dec2009 -$1.22
Dec2008 -$1.29
Dec2007 -$1.39
Dec2006 -$1.37
Dec2005 -$1.30
Dec2004 -$1.17
Dec2003 -$1.96

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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.

Alexion Pharmaceuticals Inc Valuation – February 2019 $ALXN

Company Profile (excerpt from Reuters): Alexion Pharmaceuticals, Inc., incorporated on January 28, 1992, is a biopharmaceutical company. The Company is focused on the development and commercialization of therapeutic products. The Company’s products include Soliris (eculizumab), Strensiq (asfotase alfa) and Kanuma (sebelipase alfa). The Company’s clinical development programs include Soliris (eculizumab), cPMP (ALXN1101), SBC-103, ALXN1210 (IV) and ALXN1210 (Subcutaneous).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ALXN – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $28,604,032,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.88 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 314.76% Pass
6. Moderate PEmg Ratio PEmg < 20 34.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.15 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.88 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.13 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.74
MG Growth Estimate 15.00%
MG Value $143.99
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $54.23
MG Value based on 0% Growth $31.79
Market Implied Growth Rate 12.86%
Current Price $128.02
% of Intrinsic Value 88.91%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.58 in 2015 to an estimated $3.74 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 12.86% 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 Alexion Pharmaceuticals, Inc. revealed the company was trading above its Graham Number of $90.72. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 34.23, which was below the industry average of 39.51, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-6.13.

Alexion Pharmaceuticals, 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) -$6.13
Graham Number $90.72
PEmg 34.23
Current Ratio 2.88
PB Ratio 3.15
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,385,000,000
Total Current Liabilities $1,174,000,000
Long-Term Debt $2,501,700,000
Total Assets $13,931,900,000
Intangible Assets $8,678,700,000
Total Liabilities $4,766,600,000
Shares Outstanding (Diluted Average) 225,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.92
Dec2018 $0.35
Dec2017 $1.97
Dec2016 $1.76
Dec2015 $0.67
Dec2014 $3.26
Dec2013 $1.27
Dec2012 $1.28
Dec2011 $0.91
Dec2010 $0.52
Dec2009 $1.63
Dec2008 $0.20
Dec2007 -$0.64
Dec2006 -$1.04
Jul2005 -$0.98
Jul2004 -$0.86
Jul2003 -$1.16
Jul2002 -$0.78
Jul2001 -$0.82
Jul2000 -$0.36
Jul1999 -$0.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.74
Dec2018 $1.30
Dec2017 $1.78
Dec2016 $1.67
Dec2015 $1.58
Dec2014 $1.84
Dec2013 $1.12
Dec2012 $1.00
Dec2011 $0.75
Dec2010 $0.49
Dec2009 $0.26
Dec2008 -$0.50
Dec2007 -$0.88
Dec2006 -$0.98
Jul2005 -$0.94
Jul2004 -$0.88
Jul2003 -$0.82

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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.

Vertex Pharmaceuticals Inc Valuation – February 2019 $VRTX

Company Profile (excerpt from Reuters): Vertex Pharmaceuticals Incorporated, incorporated on January 4, 1989, is engaged in discovering, developing, manufacturing and commercializing medicines for serious diseases. The Company is focused on developing and commercializing therapies for the treatment of cystic fibrosis (CF) and advancing its research and development programs in other indications. The Company’s marketed medicines are ORKAMBI and KALYDECO. ORKAMBI (lumacaftor in combination with ivacaftor) is approved as a treatment for patients having two copies (homozygous) of the Delta-F508 (F508del) mutation in their cystic fibrosis transmembrane conductance regulator (CFTR) gene. KALYDECO (ivacaftor) is approved for the treatment of CF patients having the G551D mutation or other specified mutations in their CFTR gene.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VRTX – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $47,416,062,908 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.17 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -405.57% Fail
6. Moderate PEmg Ratio PEmg < 20 56.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.89 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 5.17 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.31
MG Growth Estimate 15.00%
MG Value $127.56
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $48.04
MG Value based on 0% Growth $28.16
Market Implied Growth Rate 23.79%
Current Price $185.82
% of Intrinsic Value 145.67%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-2.06 in 2015 to an estimated $3.31 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 23.79% 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 Vertex Pharmaceuticals Incorporated revealed the company was trading above its Graham Number of $36.92. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 56.08, which was above the industry average of 39.51. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.28.

Vertex Pharmaceuticals Incorporated scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.28
Graham Number $36.92
PEmg 56.08
Current Ratio 5.17
PB Ratio 10.89
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,702,290,000
Total Current Liabilities $715,482,000
Long-Term Debt $0
Total Assets $6,245,898,000
Intangible Assets $50,384,000
Total Liabilities $1,810,695,000
Shares Outstanding (Diluted Average) 259,812,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.49
Dec2018 $8.09
Dec2017 $1.04
Dec2016 -$0.46
Dec2015 -$2.31
Dec2014 -$3.14
Dec2013 -$1.98
Dec2012 -$0.50
Dec2011 $0.14
Dec2010 -$3.77
Dec2009 -$3.71
Dec2008 -$3.27
Dec2007 -$3.03
Dec2006 -$1.83
Dec2005 -$2.28
Dec2004 -$2.12
Dec2003 -$2.56
Dec2002 -$1.43
Dec2001 -$0.89
Dec2000 -$0.51
Dec1999 -$0.80

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.31
Dec2018 $2.36
Dec2017 -$0.79
Dec2016 -$1.69
Dec2015 -$2.06
Dec2014 -$1.91
Dec2013 -$1.52
Dec2012 -$1.60
Dec2011 -$2.34
Dec2010 -$3.43
Dec2009 -$3.11
Dec2008 -$2.71
Dec2007 -$2.41
Dec2006 -$2.08
Dec2005 -$2.09
Dec2004 -$1.83
Dec2003 -$1.53

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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.

Macy’s Inc Valuation – January 2019 $M

Company Profile (excerpt from Reuters): Macy’s, Inc., incorporated on December 13, 1985, is an omnichannel retail company operating stores, Websites and mobile applications under various brands, such as Macy’s, Bloomingdale’s and Bluemercury. The Company sells a range of merchandise, including apparel and accessories (men’s, women’s and children’s), cosmetics, home furnishings and other consumer goods. The Company’s subsidiaries provide various support functions to its retail operations on an integrated, company-wide basis. The Company’s bank subsidiary, FDS Bank, provides credit processing, certain collections, customer service and credit marketing services in respect of all credit card accounts that are owned either by Department Stores National Bank (DSNB), a subsidiary of Citibank N.A., or FDS Bank and that constitutes a part of the credit programs of the Company’s retail operations. Macy’s Systems and Technology, Inc. (MST), a subsidiary of the Company, provides operational electronic data processing and management information services to all of the Company’s operations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of M – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,941,872,586 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 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 88.38% Pass
6. Moderate PEmg Ratio PEmg < 20 7.01 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.42 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.46 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.68
MG Growth Estimate 0.29%
MG Value $33.41
Opinion Fairly Valued
MG Grade A-
MG Value based on 3% Growth $53.30
MG Value based on 0% Growth $31.25
Market Implied Growth Rate -0.75%
Current Price $25.76
% of Intrinsic Value 77.11%

Macy’s Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor 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 Fairly Valued after growing its EPSmg (normalized earnings) from $3.61 in 2015 to an estimated $3.68 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 0.75% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Macy’s Inc revealed the company was trading below its Graham Number of $39.21. The company pays a dividend of $1.51 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 7.01, which was below the industry average of 25.4, 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 $-19.38.

Macy’s Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$19.38
Graham Number $39.21
PEmg 7.01
Current Ratio 1.34
PB Ratio 1.42
Current Dividend $1.51
Dividend Yield 5.86%
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 10/1/2018
Total Current Assets $8,667,000,000
Total Current Liabilities $6,444,000,000
Long-Term Debt $5,469,000,000
Total Assets $20,361,000,000
Intangible Assets $4,389,000,000
Total Liabilities $14,716,000,000
Shares Outstanding (Diluted Average) 312,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.67
Jan2018 $5.04
Jan2017 $1.99
Jan2016 $3.22
Jan2015 $4.22
Jan2014 $3.86
Jan2013 $3.24
Jan2012 $2.92
Jan2011 $1.98
Jan2010 $0.78
Jan2009 -$11.40
Jan2008 $1.97
Jan2007 $1.81
Jan2006 $3.24
Jan2005 $1.93
Jan2004 $1.86
Jan2003 $2.06
Jan2002 -$0.71
Jan2001 -$0.45
Jan2000 $1.81
Jan1999 $1.48

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.68
Jan2018 $3.67
Jan2017 $3.10
Jan2016 $3.60
Jan2015 $3.61
Jan2014 $3.05
Jan2013 $1.60
Jan2012 $0.27
Jan2011 -$1.03
Jan2010 -$1.93
Jan2009 -$2.35
Jan2008 $2.17
Jan2007 $2.24
Jan2006 $2.19
Jan2005 $1.43
Jan2004 $1.09
Jan2003 $0.75

Recommended Reading:

Other ModernGraham posts about the company

10 Stocks for Using A Benjamin Graham Value Investing Strategy – May 2018
Macy’s Inc Valuation – April 2018 $M
Macy’s Inc Valuation – July 2016 $M
27 Companies in the Spotlight This Week – 2/14/15
Macy’s Inc. Annual Valuation – 2015 $M

Other ModernGraham posts about related companies

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Walgreens Boots Alliance Inc Valuation – December 2018 $WBA
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McKesson Corp Valuation – June 2018 $MCK
Big 5 Sporting Goods Corp Valuation – June 2018 $BGFV
Amazon.com Inc Valuation – June 2018 $AMZN
Fossil Group Inc Valuation – June 2018 $FOSL
Costco Wholesale Corp Valuation – June 2018 $COST

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.

Macerich Co Valuation – January 2019 $MAC

Company Profile (excerpt from Reuters): The Macerich Company is a self-administered and self-managed real estate investment trust (REIT). The Company is involved in the acquisition, ownership, development, redevelopment, management, and leasing of regional shopping centers located throughout the United States. The Company owns ownership interests in, The Macerich Partnership, L.P. (the Operating Partnership).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MAC – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $6,508,088,439 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.96 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 82.27% Pass
6. Moderate PEmg Ratio PEmg < 20 20.21 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.98 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 0.96 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -374.30 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 $2.28
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $33.11
MG Value based on 0% Growth $19.41
Market Implied Growth Rate 5.85%
Current Price $46.14
% of Intrinsic Value N/A

Macerich Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg 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 $4.96 in 2014 to an estimated $2.28 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.85% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Macerich Co revealed the company was trading above its Graham Number of $18.78. The company pays a dividend of $2.87 per share, for a yield of 6.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.21, which was below the industry average of 70.5, 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 $-38.14.

Macerich Co 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) -$38.14
Graham Number $18.78
PEmg 20.21
Current Ratio 0.96
PB Ratio 1.98
Current Dividend $2.87
Dividend Yield 6.22%
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 9/1/2018
Total Current Assets $337,069,000
Total Current Liabilities $350,088,000
Long-Term Debt $4,872,983,000
Total Assets $9,010,730,000
Intangible Assets $21,868,000
Total Liabilities $5,722,801,000
Shares Outstanding (Diluted Average) 141,196,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.60
Dec2017 $1.02
Dec2016 $3.52
Dec2015 $3.08
Dec2014 $10.45
Dec2013 $3.00
Dec2012 $2.51
Dec2011 $1.18
Dec2010 $0.19
Dec2009 $1.45
Dec2008 $2.17
Dec2007 $0.98
Dec2006 $3.07
Dec2005 $0.85
Dec2004 $1.35
Dec2003 $2.01
Dec2002 $1.56
Dec2001 $1.66
Dec2000 $1.07
Dec1999 $2.88
Dec1998 $1.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.28
Dec2017 $3.49
Dec2016 $4.65
Dec2015 $4.83
Dec2014 $4.96
Dec2013 $2.03
Dec2012 $1.53
Dec2011 $1.09
Dec2010 $1.22
Dec2009 $1.72
Dec2008 $1.80
Dec2007 $1.63
Dec2006 $1.89
Dec2005 $1.36
Dec2004 $1.59
Dec2003 $1.75
Dec2002 $1.63

Recommended Reading:

Other ModernGraham posts about the company

Macerich Co Valuation – March 2018 $MAC
Macerich Co Valuation – July 2016 $MAC
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2016
19 Best Stocks For Value Investors This Week – 1/9/16
Macerich Co Valuation – January 2016 Update $MAC

Other ModernGraham posts about related companies

HCP Inc Valuation – January 2019 $HCP
Apartment Investment and Management Co Valuation – January 2019 $AIV
Simon Property Group Inc Valuation – January 2019 $SPG
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Welltower Inc Valuation – January 2019 $WELL
Boston Properties Inc Valuation – January 2019 $BXP
AvalonBay Communities Inc Valuation – December 2018 $AVB
Weyerhaeuser Co Valuation – December 2018 $WY
Alexandria Real Estate Equities Inc Valuation – November 2018 $ARE
LaSalle Hotel Properties Valuation – September 2018 $LHO

Disclaimer:

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

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

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $110,482,042,902 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.31 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 -11.68% Fail
6. Moderate PEmg Ratio PEmg < 20 11.36 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.59 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 1.31 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.15 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 $10.71
MG Growth Estimate -2.96%
MG Value $27.70
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $155.24
MG Value based on 0% Growth $91.00
Market Implied Growth Rate 1.43%
Current Price $121.57
% of Intrinsic Value 438.89%

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 $13.33 in 2014 to an estimated $10.71 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.43% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into IBM Common Stock revealed the company was trading above its Graham Number of $71.86. The company pays a dividend of $5.9 per share, for a yield of 4.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.36, which was below the industry average of 49.32, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-58.8.

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) -$58.80
Graham Number $71.86
PEmg 11.36
Current Ratio 1.31
PB Ratio 5.59
Current Dividend $5.90
Dividend Yield 4.85%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $48,257,000,000
Total Current Liabilities $36,822,000,000
Long-Term Debt $35,989,000,000
Total Assets $121,990,000,000
Intangible Assets $39,661,000,000
Total Liabilities $102,072,000,000
Shares Outstanding (Diluted Average) 915,213,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.03
Dec2017 $6.14
Dec2016 $12.38
Dec2015 $13.42
Dec2014 $11.90
Dec2013 $14.94
Dec2012 $14.37
Dec2011 $13.06
Dec2010 $11.52
Dec2009 $10.01
Dec2008 $8.89
Dec2007 $7.15
Dec2006 $6.11
Dec2005 $4.87
Dec2004 $4.38
Dec2003 $3.74
Dec2002 $2.06
Dec2001 $3.69
Dec2000 $4.44
Dec1999 $4.12
Dec1998 $3.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.71
Dec2017 $10.61
Dec2016 $13.04
Dec2015 $13.42
Dec2014 $13.33
Dec2013 $13.63
Dec2012 $12.50
Dec2011 $11.09
Dec2010 $9.65
Dec2009 $8.28
Dec2008 $7.03
Dec2007 $5.82
Dec2006 $4.85
Dec2005 $4.06
Dec2004 $3.66
Dec2003 $3.40
Dec2002 $3.33

Recommended Reading:

Other ModernGraham posts about the company

International Business Machines Corp Valuation – 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
International Business Machines Annual Valuation – 2014 $IBM

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Infosys Ltd Valuation – June 2018 $INFY
Verisign Inc Valuation – May 2018 $VRSN
Motorola Solutions Inc Valuation – May 2018 $MSI
Leidos Holdings Inc Valuation – April 2018 $LDOS
Gartner Inc Valuation – March 2018 $IT

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.

Ligand Pharmaceuticals Inc Valuation – September 2018 $LGND

Company Profile (excerpt from Reuters): Ligand Pharmaceuticals Incorporated (Ligand), incorporated on September 28, 1987, is a biopharmaceutical company that focuses on developing and acquiring technologies that help pharmaceutical companies discover and develop medicines. The Company is involved in the development and licensing of biopharmaceutical assets. The Company employs research technologies, such as nuclear receptor assays, high throughput computer screening, formulation science, liver targeted pro-drug technologies and antibody discovery technologies to assist companies in their work towards obtaining prescription drug approvals. As of December 31, 2016, it had partnerships and license agreements with over 85 pharmaceutical and biotechnology companies, and over 140 various programs under license with it were in various stages of commercialization and development. It has contributed research and technologies for approved medicines that treat cancer, osteoporosis, fungal infections and low blood platelets, among others. Its partners have programs in clinical development targeting seizure, coma, cancer, diabetes, cardiovascular disease, muscle wasting, liver disease and kidney disease, among others. The Company is developing a small molecule glucagon receptor antagonist for the treatment of Type II diabetes mellitus.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LGND – September 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,371,771,546 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.34 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -5378.57% Fail
6. Moderate PEmg Ratio PEmg < 20 64.93 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.04 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.34 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.70 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.92
MG Growth Estimate 15.00%
MG Value $150.92
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $56.84
MG Value based on 0% Growth $33.32
Market Implied Growth Rate 28.22%
Current Price $254.54
% of Intrinsic Value 168.66%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.36 in 2014 to an estimated $3.92 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 28.22% 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 Ligand Pharmaceuticals Inc. revealed the company was trading above its Graham Number of $54.33. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 64.93, which was above the industry average of 41.98. Finally, the company was trading above its Net Current Asset Value (NCAV) of $9.9.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $9.90
Graham Number $54.33
PEmg 64.93
Current Ratio 2.34
PB Ratio 10.04
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $1,480,470,000
Total Current Liabilities $632,850,000
Long-Term Debt $595,912,000
Total Assets $1,858,284,000
Intangible Assets $328,399,000
Total Liabilities $1,238,471,000
Shares Outstanding (Diluted Average) 24,438,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.94
Dec2017 $0.53
Dec2016 -$0.08
Dec2015 $10.83
Dec2014 $0.56
Dec2013 $0.55
Dec2012 -$0.03
Dec2011 $0.49
Dec2010 -$0.53
Dec2009 -$0.10
Dec2008 -$6.18
Dec2007 $17.22
Dec2006 -$2.34
Dec2005 -$2.94
Dec2004 -$3.66
Dec2003 -$8.16
Dec2002 -$4.56
Dec2001 -$4.32
Dec2000 -$8.10
Dec1999 -$9.48
Dec1998 -$17.52

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.92
Dec2017 $2.43
Dec2016 $3.04
Dec2015 $3.90
Dec2014 $0.36
Dec2013 $0.20
Dec2012 -$0.41
Dec2011 $0.33
Dec2010 $0.70
Dec2009 $1.25
Dec2008 $1.43
Dec2007 $3.50
Dec2006 -$3.69
Dec2005 -$4.48
Dec2004 -$5.42
Dec2003 -$6.51
Dec2002 -$6.72

Recommended Reading:

Other ModernGraham posts about the company

Ligand Pharmaceuticals Inc Valuation – Initial Coverage $LGND

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Bristol-Myers Squibb Company Valuation – June 2018 $BMY
Biogen Inc Valuation – June 2018 $BIIB
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Amgen Inc Valuation – June 2018 $AMGN
Celgene Corp Valuation – June 2018 $CELG

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.

Supernus Pharmaceuticals Inc Valuation – August 2018 $SUPN

Company Profile (excerpt from Reuters): Supernus Pharmaceuticals, Inc., incorporated on March 30, 2005, is a pharmaceutical company focused on developing and commercializing products for the treatment of central nervous system (CNS) diseases. The Company offers Oxtellar XR (extended-release oxcarbazepine) and Trokendi XR (extended-release topiramate), its two treatments for patients with epilepsy. In addition, it is developing multiple product candidates in psychiatry to address unmet medical needs and market opportunities for the treatment of impulsive aggression (IA) and for the treatment of attention deficit hyperactivity disorder (ADHD). It is developing SPN-810 (molindone hydrochloride) to treat IA in patients having ADHD. It is developing SPN-812 (viloxazine hydrochloride) as a candidate to treat patients having ADHD.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SUPN – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,246,336,172 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.74 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 21.91% Fail
6. Moderate PEmg Ratio PEmg < 20 33.72 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.04 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.74 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.78 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.29
MG Growth Estimate 15.00%
MG Value $49.67
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $18.71
MG Value based on 0% Growth $10.97
Market Implied Growth Rate 12.61%
Current Price $43.50
% of Intrinsic Value 87.59%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $-0.89 in 2014 to an estimated $1.29 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 12.61% 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 Supernus Pharmaceuticals Inc revealed the company was trading above its Graham Number of $14.89. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 33.72, which was below the industry average of 42.68, 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 $-3.28.

Supernus Pharmaceuticals 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) -$3.28
Graham Number $14.89
PEmg 33.72
Current Ratio 2.74
PB Ratio 6.04
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $284,516,000
Total Current Liabilities $103,934,000
Long-Term Debt $321,920,000
Total Assets $852,799,000
Intangible Assets $33,794,000
Total Liabilities $462,307,000
Shares Outstanding (Diluted Average) 54,203,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.89
Dec2017 $1.08
Dec2016 $1.76
Dec2015 $0.28
Dec2014 -$0.26
Dec2013 -$2.90
Dec2012 -$2.72
Dec2011 $3.88

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.29
Dec2017 $0.66
Dec2016 $0.04
Dec2015 -$0.66
Dec2014 -$0.89
Dec2013 -$0.92
Dec2012 $0.13
Dec2011 $1.29

Recommended Reading:

Other ModernGraham posts about the company

Supernus Pharmaceuticals Inc Valuation – Initial Coverage $SUPN

Other ModernGraham posts about related companies

Spectrum Pharmaceuticals Inc Valuation – August 2018 $SPPI
Akorn Inc Valuation – July 2018 $AKRX
Mallinckrodt PLC Valuation – July 2018 $MNK
Bristol-Myers Squibb Company Valuation – June 2018 $BMY
Biogen Inc Valuation – June 2018 $BIIB
Mylan NV Valuation – June 2018 $MYL
Amgen Inc Valuation – June 2018 $AMGN
Celgene Corp Valuation – June 2018 $CELG
Allergan PLC Valuation – May 2018 $AGN
Incyte Corp Valuation – April 2018 $INCY

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.

Spectrum Pharmaceuticals Inc Valuation – August 2018 $SPPI

Company Profile (excerpt from Reuters): Spectrum Pharmaceuticals, Inc., incorporated on November 18, 2002, is a biotechnology company. The Company operates through developing and commercializing oncology and hematology drug products segment. It has a product portfolio consisting of both commercial stage and development stage products that address various cancer types. The Company has six approved oncology/hematology products that target different types of cancer, including non-Hodgkin’s lymphoma (NHL), advanced metastatic colorectal cancer (mCRC), acute lymphoblastic leukemia (ALL) and multiple myeloma (MM). It also has three drugs in mid-to-late stage development, which include ROLONTIS for chemotherapy-induced neutropenia; QAPZOLA for immediate intravesical instillation in post-transurethral resection of bladder tumors in patients with non-muscle invasive bladder cancer (NMIBC), and POZIOTINIB, a pan- human epidermal growth factor receptor (HER) inhibitor used in the treatment of patients with a range of solid tumors, including breast and lung cancer.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SPPI – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,345,273,926 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.97 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 438.60% Pass
6. Moderate PEmg Ratio PEmg < 20 -22.67 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.90 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.97 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.98
MG Growth Estimate -4.25%
MG Value $1.56
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$14.20
MG Value based on 0% Growth -$8.32
Market Implied Growth Rate -15.58%
Current Price $22.20
% of Intrinsic Value 1425.02%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $-0.17 in 2014 to an estimated $-0.98 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Spectrum Pharmaceuticals, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -22.67, which was below the industry average of 42.68, 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 $1.56.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.56
Graham Number $0.00
PEmg -22.67
Current Ratio 2.97
PB Ratio 6.90
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $277,028,000
Total Current Liabilities $93,422,000
Long-Term Debt $0
Total Assets $444,273,000
Intangible Assets $148,546,000
Total Liabilities $119,979,000
Shares Outstanding (Diluted Average) 100,810,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.04
Dec2017 -$1.07
Dec2016 -$0.96
Dec2015 -$0.81
Dec2014 -$0.71
Dec2013 -$1.02
Dec2012 $1.46
Dec2011 $0.86
Dec2010 -$0.95
Dec2009 -$0.48
Dec2008 -$0.45
Dec2007 -$1.17
Dec2006 -$0.96
Dec2005 -$1.06
Dec2004 -$0.98
Dec2003 -$4.83
Dec2002 -$12.34
Dec2001 -$36.50
Dec2000 -$109.25
Dec1999 -$92.00
Dec1998 -$51.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.98
Dec2017 -$0.94
Dec2016 -$0.72
Dec2015 -$0.41
Dec2014 -$0.17
Dec2013 $0.06
Dec2012 $0.43
Dec2011 -$0.20
Dec2010 -$0.75
Dec2009 -$0.71
Dec2008 -$0.86
Dec2007 -$1.31
Dec2006 -$2.27
Dec2005 -$5.66
Dec2004 -$16.23
Dec2003 -$32.90
Dec2002 -$51.41

Recommended Reading:

Other ModernGraham posts about the company

Spectrum Pharmaceuticals Inc Valuation – Initial Coverage $SPPI

Other ModernGraham posts about related companies

Akorn Inc Valuation – July 2018 $AKRX
Mallinckrodt PLC Valuation – July 2018 $MNK
Bristol-Myers Squibb Company Valuation – June 2018 $BMY
Biogen Inc Valuation – June 2018 $BIIB
Mylan NV Valuation – June 2018 $MYL
Amgen Inc Valuation – June 2018 $AMGN
Celgene Corp Valuation – June 2018 $CELG
Allergan PLC Valuation – May 2018 $AGN
Incyte Corp Valuation – April 2018 $INCY
Regeneron Pharmaceuticals Inc Valuation – April 2018 $REGN

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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