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Masco Corp Valuation – February 2019 $MAS

Company Profile (excerpt from Reuters): Masco Corporation, incorporated on June 15, 1962, designs, manufactures, markets and distributes branded home improvement and building products. The Company operates through four business segments: Plumbing Products, Decorative Architectural Products, Cabinetry Products, and Windows and Other Specialty Products. The Company’s portfolio of brands includes BEHR paint; DELTA and HANSGROHE faucets, bath and shower fixtures; KRAFTMAID and MERILLAT cabinets; MILGARD windows and doors, and HOT SPRING spas.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MAS – 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 $11,044,960,279 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.64 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 -233.67% Fail
6. Moderate PEmg Ratio PEmg < 20 17.77 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 163.54 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.64 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.75 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 $2.11
MG Growth Estimate 15.00%
MG Value $81.21
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $30.59
MG Value based on 0% Growth $17.93
Market Implied Growth Rate 4.64%
Current Price $37.49
% of Intrinsic Value 46.16%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.98 in 2015 to an estimated $2.11 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.64% 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 Masco Corp revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.44 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 17.77, which was below the industry average of 20.47, 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 $-8.5.

Masco Corp performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.50
Graham Number $0.00
PEmg 17.77
Current Ratio 1.64
PB Ratio 163.54
Current Dividend $0.44
Dividend Yield 1.16%
Number of Consecutive Years of Dividend Growth 2

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 $2,766,000,000
Total Current Liabilities $1,684,000,000
Long-Term Debt $2,971,000,000
Total Assets $5,393,000,000
Intangible Assets $1,304,000,000
Total Liabilities $5,324,000,000
Shares Outstanding (Diluted Average) 301,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.64
Dec2018 $2.37
Dec2017 $1.66
Dec2016 $1.48
Dec2015 $1.02
Dec2014 $2.38
Dec2013 $0.80
Dec2012 -$0.33
Dec2011 -$1.66
Dec2010 -$3.00
Dec2009 -$0.53
Dec2008 -$1.13
Dec2007 $1.03
Dec2006 $1.22
Dec2005 $2.19
Dec2004 $1.96
Dec2003 $1.65
Dec2002 $1.01
Dec2001 $0.35
Dec2000 $1.31
Dec1999 $1.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.11
Dec2018 $1.82
Dec2017 $1.52
Dec2016 $1.33
Dec2015 $0.98
Dec2014 $0.52
Dec2013 -$0.59
Dec2012 -$1.30
Dec2011 -$1.54
Dec2010 -$1.15
Dec2009 $0.04
Dec2008 $0.56
Dec2007 $1.48
Dec2006 $1.67
Dec2005 $1.74
Dec2004 $1.43
Dec2003 $1.15

Recommended Reading:

Other ModernGraham posts about the company

5 Companies for Enterprising Investors Near 52 Week Lows – July 2018
Masco Corp Valuation – May 2018 $MAS
Masco Corp Valuation – January 2017 $MAS
Masco Corporation Analysis – September 2015 Update $MAS
Masco Corporation Annual Valuation – 2015 $MAS

Other ModernGraham posts about related companies

D.R. Horton Inc Valuation – February 2019 $DHI
Martin Marietta Materials Inc Valuation – February 2019 $MLM
Fluor Corp Valuation – February 2019 $FLR
Lennar Corp Valuation – February 2019 $LEN
Vulcan Materials Co Valuation – February 2019 $VMC
PulteGroup Inc Valuation – January 2019 $PHM
Sherwin-Williams Co Valuation – January 2019 $SHW
Johnson Controls International PC Valuation – January 2019 $JCI
Cummins Inc Valuation – January 2019 $CMI
Flowserve Corp Valuation – January 2019 $FLS

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.

Mastercard Inc Valuation – January 2019 $MA

Company Profile (excerpt from Reuters): MasterCard Incorporated, incorporated on May 9, 2001, is a technology company that connects consumers, financial institutions, merchants, governments and businesses across the world, enabling them to use electronic forms of payment. The Company operates through Payment Solutions segment. The Company allows user to make payments by creating a range of payment solutions and services using its brands, which include MasterCard, Maestro and Cirrus.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MA – 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 $209,285,375,529 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.55 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 236.17% Pass
6. Moderate PEmg Ratio PEmg < 20 46.00 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 36.43 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.55 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.09 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 $4.40
MG Growth Estimate 12.00%
MG Value $143.06
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $63.82
MG Value based on 0% Growth $37.41
Market Implied Growth Rate 18.75%
Current Price $202.44
% of Intrinsic Value 141.51%

Mastercard 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 $2.45 in 2014 to an estimated $4.4 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 18.75% 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 Mastercard Inc revealed the company was trading above its Graham Number of $26.71. The company pays a dividend of $0.66 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 46, which was above the industry average of 27.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.38.

Mastercard 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) -$2.38
Graham Number $26.71
PEmg 46.00
Current Ratio 1.55
PB Ratio 36.43
Current Dividend $0.66
Dividend Yield 0.33%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $15,064,000,000
Total Current Liabilities $9,709,000,000
Long-Term Debt $5,858,000,000
Total Assets $23,340,000,000
Intangible Assets $3,973,000,000
Total Liabilities $17,544,000,000
Shares Outstanding (Diluted Average) 1,043,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.11
Dec2017 $3.65
Dec2016 $3.69
Dec2015 $3.35
Dec2014 $3.10
Dec2013 $2.56
Dec2012 $2.19
Dec2011 $1.48
Dec2010 $1.41
Dec2009 $1.12
Dec2008 -$0.19
Dec2007 $0.80
Dec2006 $0.04
Dec2005 $0.20
Dec2004 $0.24
Dec2003 -$0.39
Dec2002 $0.14
Dec2001 $0.20
Dec2000 $0.17
Dec1998 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.40
Dec2017 $3.45
Dec2016 $3.23
Dec2015 $2.85
Dec2014 $2.45
Dec2013 $2.00
Dec2012 $1.54
Dec2011 $1.12
Dec2010 $0.84
Dec2009 $0.50
Dec2008 $0.20
Dec2007 $0.32
Dec2006 $0.07
Dec2005 $0.08
Dec2004 $0.04
Dec2003 -$0.03
Dec2002 $0.14

Recommended Reading:

Other ModernGraham posts about the company

Mastercard Inc Valuation – March 2018 $MA
5 Best Stocks For Value Investors This Week – 7/16/16
Mastercard Inc Valuation – July 2016 $MA
19 Best Stocks For Value Investors This Week – 1/9/16
Mastercard Inc Valuation – January 2016 Update $MA

Other ModernGraham posts about related companies

Visa Inc Valuation – November 2018 $V
American Express Co Valuation – November 2018 $AXP
Mastercard Inc Valuation – March 2018 $MA
Discover Financial Services Valuation – January 2017 $DFS
Discover Financial Services Valuation – August 2016 $DFS
Mastercard Inc Valuation – July 2016 $MA
Discover Financial Services Valuation – February 2016 $DFS
Mastercard Inc Valuation – January 2016 Update $MA
Discover Financial Services Inc. Valuation – November 2015 Update $DFS
MasterCard Inc. Analysis – October 2015 Update $MA

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.

Legg Mason Inc Valuation – June 2018 $LM

Company Profile (excerpt from Reuters): Legg Mason, Inc., incorporated on January 13, 1981, is a holding company. The Company and its subsidiaries are principally engaged in providing asset management and related financial services to individuals, institutions, corporations and municipalities. The Company operates through Global Asset Management segment. Global Asset Management provides investment advisory services to institutional and individual clients and to the Company-sponsored investment funds. The Company, through its subsidiaries, provides investment management and related services to institutional and individual clients, Company-sponsored investment funds and retail separately managed account programs. The Company offers its products and services directly and through various financial intermediaries. The Company has operations principally in the United States and the United Kingdom and also have offices in Australia, Bahamas, Brazil, Canada, Chile, China, Dubai, France, Germany, Italy, Japan, Luxembourg, Poland, Singapore, Spain, Switzerland and Taiwan.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LM – June 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 $2,972,262,474 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.96 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 92.87% Pass
6. Moderate PEmg Ratio PEmg < 20 13.90 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.77 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 1.96 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.35 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.50
MG Growth Estimate 15.00%
MG Value $96.17
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $36.22
MG Value based on 0% Growth $21.23
Market Implied Growth Rate 2.70%
Current Price $34.73
% of Intrinsic Value 36.11%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.09 in 2015 to an estimated $2.5 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.7% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Legg Mason Inc revealed the company was trading below its Graham Number of $59.43. The company pays a dividend of $1.12 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.9, which was below the industry average of 22.96, 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 $-27.85.

Legg Mason Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$27.85
Graham Number $59.43
PEmg 13.90
Current Ratio 1.96
PB Ratio 0.77
Current Dividend $1.12
Dividend Yield 3.22%
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 3/1/2018
Total Current Assets $1,928,382,000
Total Current Liabilities $982,042,000
Long-Term Debt $2,221,810,000
Total Assets $8,152,534,000
Intangible Assets $5,730,014,000
Total Liabilities $4,300,398,000
Shares Outstanding (Diluted Average) 85,179,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.47
Mar2018 $3.01
Mar2017 $2.18
Mar2016 -$0.25
Mar2015 $2.04
Mar2014 $2.33
Mar2013 -$2.65
Mar2012 $1.54
Mar2011 $1.63
Mar2010 $1.32
Mar2009 -$13.99
Mar2008 $1.86
Mar2007 $4.48
Mar2006 $8.80
Mar2005 $3.53
Mar2004 $2.65
Mar2003 $1.78
Mar2002 $1.45
Mar2001 $1.53
Mar2000 $1.51
Mar1999 $1.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.50
Mar2018 $1.96
Mar2017 $1.20
Mar2016 $0.68
Mar2015 $1.09
Mar2014 $0.68
Mar2013 -$0.90
Mar2012 -$0.53
Mar2011 -$1.36
Mar2010 -$1.73
Mar2009 -$1.86
Mar2008 $4.22
Mar2007 $5.02
Mar2006 $4.74
Mar2005 $2.53
Mar2004 $1.95
Mar2003 $1.56

Recommended Reading:

Other ModernGraham posts about the company

Legg Mason Inc Valuation – June 2016 $LM
Stocks Trading Below Their Graham Number – May 2016
Stocks Trading Below Their Graham Number – February 2016
10 Companies Benjamin Graham Would Invest In Today – February 2016
13 Best Stocks For Value Investors This Week – 12/12/15

Other ModernGraham posts about related companies

T. Rowe Price Group Inc Valuation – June 2018 $TROW
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Charles Schwab Corp Valuation – June 2018 $SCHW
Willis Towers Watson PLC Valuation – Initial Coverage June 2018 $WLTW
PayPal Holdings Inc Valuation – June 2018 $PYPL
Synchrony Financial Valuation – June 2018 $SYF
CBRE Group Inc Valuation – June 2018 $CBRE
Franklin Resources Inc Valuation – May 2018 $BEN
S&P Global Inc Valuation – May 2018 $SPGI
Equifax Inc Valuation – May 2018 $EFX

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.

Masco Corp Valuation – May 2018 $MAS

Company Profile (excerpt from Reuters): Masco Corporation, incorporated on June 15, 1962, designs, manufactures, markets and distributes branded home improvement and building products. The Company operates through four business segments: Plumbing Products, Decorative Architectural Products, Cabinetry Products, and Windows and Other Specialty Products. The Company’s portfolio of brands includes BEHR paint; DELTA and HANSGROHE faucets, bath and shower fixtures; KRAFTMAID and MERILLAT cabinets; MILGARD windows and doors, and HOT SPRING spas.

MAS Chart

MAS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MAS – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,801,759,899 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.69 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -207.51% Fail
6. Moderate PEmg Ratio PEmg < 20 20.74 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -166.59 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 1.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.43 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 $1.85
MG Growth Estimate 15.00%
MG Value $71.15
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $26.80
MG Value based on 0% Growth $15.71
Market Implied Growth Rate 6.12%
Current Price $38.32
% of Intrinsic Value 53.86%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.52 in 2014 to an estimated $1.85 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.12% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Masco Corp revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.41 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 20.74, which was below the industry average of 26.36, 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 $-8.65.

Masco Corp performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.65
Graham Number $0.00
PEmg 20.74
Current Ratio 1.69
PB Ratio -166.59
Current Dividend $0.41
Dividend Yield 1.06%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $2,993,000,000
Total Current Liabilities $1,770,000,000
Long-Term Debt $2,971,000,000
Total Assets $5,630,000,000
Intangible Assets $1,320,000,000
Total Liabilities $5,702,000,000
Shares Outstanding (Diluted Average) 313,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.45
Dec2017 $1.66
Dec2016 $1.47
Dec2015 $1.02
Dec2014 $2.38
Dec2013 $0.80
Dec2012 -$0.33
Dec2011 -$1.66
Dec2010 -$3.00
Dec2009 -$0.53
Dec2008 -$1.13
Dec2007 $1.03
Dec2006 $1.22
Dec2005 $2.19
Dec2004 $1.96
Dec2003 $1.65
Dec2002 $1.01
Dec2001 $0.35
Dec2000 $1.31
Dec1999 $1.28
Dec1998 $1.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.85
Dec2017 $1.52
Dec2016 $1.32
Dec2015 $0.98
Dec2014 $0.52
Dec2013 -$0.59
Dec2012 -$1.30
Dec2011 -$1.54
Dec2010 -$1.15
Dec2009 $0.04
Dec2008 $0.56
Dec2007 $1.48
Dec2006 $1.67
Dec2005 $1.74
Dec2004 $1.43
Dec2003 $1.15
Dec2002 $0.95

Recommended Reading:

Other ModernGraham posts about the company

Masco Corp Valuation – January 2017 $MAS
Masco Corporation Analysis – September 2015 Update $MAS
Masco Corporation Annual Valuation – 2015 $MAS
14 Companies in the Spotlight This Week – 4/12/14
Masco Corporation (MAS) Annual Valuation – 2014

Other ModernGraham posts about related companies

Martin Marietta Materials Inc Valuation – May 2018 $MLM
Fluor Corporation Valuation – April 2018 $FLR
Lennar Corp Valuation – April 2018 $LEN
Vulcan Materials Co Valuation – April 2018 $VMC
PulteGroup Inc Valuation – March 2018 $PHM
Sherwin-Williams Co Valuation – March 2018 $SHW
Cummins Inc Valuation – March 2018 $CMI
Johnson Controls International PLC Valuation – March 2018 $JCI
Flowserve Corp Valuation – February 2018 $FLS
Corning Inc Valuation – February 2018 $GLW

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.

Mastercard Inc Valuation – March 2018 $MA

Company Profile (excerpt from Reuters): MasterCard Incorporated, incorporated on May 9, 2001, is a technology company that connects consumers, financial institutions, merchants, governments and businesses across the world, enabling them to use electronic forms of payment. The Company operates through Payment Solutions segment. The Company allows user to make payments by creating a range of payment solutions and services using its brands, which include MasterCard, Maestro and Cirrus.

MA Chart

MA data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MA – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $186,273,894,470 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 219.17% Pass
6. Moderate PEmg Ratio PEmg < 20 42.44 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 34.44 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 1.57 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.08 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 $4.17
MG Growth Estimate 10.61%
MG Value $124.08
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $60.53
MG Value based on 0% Growth $35.48
Market Implied Growth Rate 16.97%
Current Price $177.17
% of Intrinsic Value 142.78%

Mastercard 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 $2.45 in 2014 to an estimated $4.17 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.97% 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 Mastercard revealed the company was trading above its Graham Number of $25.18. The company pays a dividend of $0.66 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 42.44, which was above the industry average of 35.34. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.94.

Mastercard receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.94
Graham Number $25.18
PEmg 42.44
Current Ratio 1.57
PB Ratio 34.44
Current Dividend $0.66
Dividend Yield 0.37%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $13,797,000,000
Total Current Liabilities $8,793,000,000
Long-Term Debt $5,424,000,000
Total Assets $21,329,000,000
Intangible Assets $4,155,000,000
Total Liabilities $15,861,000,000
Shares Outstanding (Diluted Average) 1,063,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.43
Dec2017 $3.65
Dec2016 $3.69
Dec2015 $3.35
Dec2014 $3.10
Dec2013 $2.56
Dec2012 $2.19
Dec2011 $1.48
Dec2010 $1.41
Dec2009 $1.12
Dec2008 -$0.19
Dec2007 $0.80
Dec2006 $0.04
Dec2005 $0.20
Dec2004 $0.24
Dec2003 -$0.39
Dec2002 $0.14
Dec2001 $0.20
Dec2000 $0.17
Dec1998 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.17
Dec2017 $3.45
Dec2016 $3.23
Dec2015 $2.85
Dec2014 $2.45
Dec2013 $2.00
Dec2012 $1.54
Dec2011 $1.12
Dec2010 $0.84
Dec2009 $0.50
Dec2008 $0.20
Dec2007 $0.32
Dec2006 $0.07
Dec2005 $0.08
Dec2004 $0.04
Dec2003 -$0.03
Dec2002 $0.14

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Mastercard Inc Valuation – January 2016 Update $MA
13 Best Stocks For Value Investors This Week – 10/3/15
MasterCard Inc. Analysis – October 2015 Update $MA
Mastercard Inc. Analysis – June 2015 Update $MA

Other ModernGraham posts about related companies

Discover Financial Services Valuation – January 2017 $DFS
Discover Financial Services Valuation – August 2016 $DFS
Mastercard Inc Valuation – July 2016 $MA
Discover Financial Services Valuation – February 2016 $DFS
Mastercard Inc Valuation – January 2016 Update $MA
Discover Financial Services Inc. Valuation – November 2015 Update $DFS
MasterCard Inc. Analysis – October 2015 Update $MA
Discover Financial Services Analysis – August 2015 Update $DFS
Mastercard Inc. Analysis – June 2015 Update $MA
Discover Financial Services Quarterly Valuation – May 2015 $DFS

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.

Masco Corp Valuation – January 2017 $MAS

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

Company Profile (obtained from Google Finance): Masco Corporation designs, manufactures, markets and distributes branded home improvement and building products. The Company operates through four business segments: Cabinets and Related Products, Plumbing Products, Decorative Architectural Products and Other Specialty Products. It has a portfolio of brands, which includes KRAFTMAID, MERILLAT and PEERLESS. Its Cabinets and Related Products segment includes assembled kitchen and bath cabinets, home office workstations, entertainment centers, storage products, bookcases and kitchen utility products. Its Plumbing Products segment includes faucets, plumbing fittings and valves, showerheads and hand showers, bathtubs and shower enclosures, toilets, spas and exercise pools. Its Decorative Architectural Products segment includes paints and stains, cabinet, door, window and other hardware. Its Other Specialty Products segment includes windows, window frame components and patio doors, staple gun tackers, staples and other fastening tools.

MAS Chart

MAS data by YCharts

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ModernGraham Valuation of MAS – January 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,522,239,741 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.07 Pass
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 -876.19% Fail
6. Moderate PEmg Ratio PEmg < 20 24.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -107.60 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 2.07 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.86 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.33
MG Growth Estimate 15.00%
MG Value $51.18
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $19.28
MG Value based on 0% Growth $11.30
Market Implied Growth Rate 7.80%
Current Price $32.05
% of Intrinsic Value 62.62%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-1.3 in 2012 to an estimated $1.33 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.8% 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 Masco Corp revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.47 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 24.11, which was below the industry average of 28.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.14.

Masco Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.14
Graham Number $0.00
PEmg 24.11
Current Ratio 2.07
PB Ratio -107.60
Current Dividend $0.47
Dividend Yield 1.47%
Number of Consecutive Years of Dividend Growth 1

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $3,122,000,000
Total Current Liabilities $1,511,000,000
Long-Term Debt $2,993,000,000
Total Assets $5,373,000,000
Intangible Assets $996,000,000
Total Liabilities $5,471,000,000
Shares Outstanding (Diluted Average) 329,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.49
Dec2015 $1.02
Dec2014 $2.38
Dec2013 $0.80
Dec2012 -$0.33
Dec2011 -$1.66
Dec2010 -$3.00
Dec2009 -$0.53
Dec2008 -$1.13
Dec2007 $1.03
Dec2006 $1.22
Dec2005 $2.19
Dec2004 $1.96
Dec2003 $1.65
Dec2002 $1.01
Dec2001 $0.35
Dec2000 $1.31
Dec1999 $1.28
Dec1998 $1.26
Dec1997 $1.02
Dec1996 $0.92

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.33
Dec2015 $0.98
Dec2014 $0.52
Dec2013 -$0.59
Dec2012 -$1.30
Dec2011 -$1.54
Dec2010 -$1.15
Dec2009 $0.04
Dec2008 $0.56
Dec2007 $1.48
Dec2006 $1.67
Dec2005 $1.74
Dec2004 $1.43
Dec2003 $1.15
Dec2002 $0.95
Dec2001 $0.96
Dec2000 $1.23

Recommended Reading:

Other ModernGraham posts about the company

Masco Corporation Analysis – September 2015 Update $MAS
Masco Corporation Annual Valuation – 2015 $MAS
14 Companies in the Spotlight This Week – 4/12/14
Masco Corporation (MAS) Annual Valuation – 2014

Other ModernGraham posts about related companies

Quanta Services Inc Valuation – August 2016 $PWR
Jacobs Engineering Group Inc Valuation – August 2016 $JEC
PPG Industries Inc Valuation – August 2016 $PPG
D.R. Horton Inc Valuation – August 2016 $DHI
Martin Marietta Materials Inc Valuation – August 2016 $MLM
Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI

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.

Mastercard Inc Valuation – July 2016 $MA

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Mastercard Inc (MA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): MasterCard Incorporated is a technology company that connects consumers, financial institutions, merchants, governments and businesses across the world. The Company operates through payment solutions segment. The Company allows user to make payments by a range of payment solutions and services using various brands, which include MasterCard, Maestro and Cirrus. Its offerings include loyalty and reward programs, information services and consulting. It provides a range of products and solutions that support payment products that customers can offer to their cardholders. The Company’s services facilitate transactions on the MasterCard Network among cardholders, merchants, financial institutions and governments. The Company’s programs include consumer credit, commercial, and debit and prepaid. The Company’s offerings and platforms include premium, travel, purchasing and fleet cards and programs.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of MA – July 2016

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 $97,652,672,441 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.65 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 475.25% Pass
6. Moderate PEmg Ratio PEmg < 20 28.54 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 18.25 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 1.65 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.80 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

MA value chart July 2016

EPSmg $3.15
MG Growth Estimate 15.00%
MG Value $121.31
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $45.69
MG Value based on 0% Growth $26.78
Market Implied Growth Rate 10.02%
Current Price $89.94
% of Intrinsic Value 74.14%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.54 in 2012 to an estimated $3.15 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 10.02% 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.

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

Stage 3: Information for Further Research

MA charts July 2016

Net Current Asset Value (NCAV) $0.16
Graham Number $19.65
PEmg 28.54
Current Ratio 1.65
PB Ratio 18.25
Current Dividend $0.70
Dividend Yield 0.78%
Number of Consecutive Years of Dividend Growth 5

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $10,606,000,000
Total Current Liabilities $6,440,000,000
Long-Term Debt $3,333,000,000
Total Assets $15,905,000,000
Intangible Assets $2,674,000,000
Total Liabilities $10,426,000,000
Shares Outstanding (Diluted Average) 1,112,000,000

Earnings Per Share History

Next Fiscal Year Estimate $3.45
Dec2015 $3.35
Dec2014 $3.10
Dec2013 $2.56
Dec2012 $2.19
Dec2011 $1.49
Dec2010 $1.41
Dec2009 $1.12
Dec2008 -$0.20
Dec2007 $0.80
Dec2006 $0.04
Dec2005 $0.27
Dec2004 $0.24
Dec2003 -$0.39
Dec2002 $0.14
Dec2001 $0.20
Dec2000 $0.17
Dec1998 $0.03

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.15
Dec2015 $2.85
Dec2014 $2.45
Dec2013 $2.00
Dec2012 $1.54
Dec2011 $1.12
Dec2010 $0.84
Dec2009 $0.50
Dec2008 $0.21
Dec2007 $0.34
Dec2006 $0.09
Dec2005 $0.11
Dec2004 $0.04
Dec2003 -$0.03
Dec2002 $0.14
Dec2001 $0.12
Dec2000 $0.06

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Mastercard Inc Valuation – January 2016 Update $MA
13 Best Stocks For Value Investors This Week – 10/3/15
MasterCard Inc. Analysis – October 2015 Update $MA
Mastercard Inc. Analysis – June 2015 Update $MA

Other ModernGraham posts about related companies

Discover Financial Services Valuation – February 2016 $DFS
Mastercard Inc Valuation – January 2016 Update $MA
Mastercard Inc Valuation – January 2016 Update $MA
Discover Financial Services Inc. Valuation – November 2015 Update $DFS
MasterCard Inc. Analysis – October 2015 Update $MA
Discover Financial Services Analysis – August 2015 Update $DFS
Mastercard Inc. Analysis – June 2015 Update $MA
Discover Financial Services Quarterly Valuation – May 2015 $DFS
Mastercard Inc. Quarterly Valuation – March 2015 $MA
Discover Financial Services Quarterly Valuation – February 2015 $DFS

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.

Legg Mason Inc Valuation – June 2016 $LM

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Legg Mason Inc (LM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Legg Mason, Inc. is a holding company. The Company and its subsidiaries are principally engaged in providing asset management and related financial services to individuals, institutions, corporations and municipalities. The Company operates through Global Asset Management segment. Global Asset Management provides investment advisory services to institutional and individual clients and to the Company-sponsored investment funds. The Company, through its subsidiaries, provides investment management and related services to institutional and individual clients, Company-sponsored investment funds and retail separately managed account programs. It offers its products and services directly and through various financial intermediaries. It has operations principally in the United States and the United Kingdom and also has offices in Australia, Bahamas, Brazil, Canada, Chile, China, Dubai, France, Germany, Italy, Japan, Luxembourg, Poland, Singapore, Spain, Switzerland and Taiwan.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of LM – June 2016

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 $3,197,774,843 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.83 Pass
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 -135.61% Fail
6. Moderate PEmg Ratio PEmg < 20 25.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.75 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 2.83 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.13 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

LM value chart June 2016

EPSmg $1.15
MG Growth Estimate 15.00%
MG Value $44.10
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $16.61
MG Value based on 0% Growth $9.74
Market Implied Growth Rate 8.62%
Current Price $29.49
% of Intrinsic Value 66.88%

Legg Mason 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 high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.89 in 2013 to an estimated $1.15 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.62% 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.

Legg Mason Inc receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

LM charts June 2016

Net Current Asset Value (NCAV) -$8.58
Graham Number $42.20
PEmg 25.75
Current Ratio 2.83
PB Ratio 0.75
Current Dividend $0.80
Dividend Yield 2.71%
Number of Consecutive Years of Dividend Growth 7

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $2,385,128,000
Total Current Liabilities $841,553,000
Long-Term Debt $1,740,985,000
Total Assets $7,520,446,000
Intangible Assets $4,626,001,000
Total Liabilities $3,306,883,000
Shares Outstanding (Diluted Average) 107,406,000

Earnings Per Share History

Next Fiscal Year Estimate $2.01
Mar2016 -$0.25
Mar2015 $2.04
Mar2014 $2.33
Mar2013 -$2.65
Mar2012 $1.54
Mar2011 $1.63
Mar2010 $1.32
Mar2009 -$13.85
Mar2008 $1.86
Mar2007 $4.48
Mar2006 $8.80
Mar2005 $3.53
Mar2004 $2.71
Mar2003 $1.85
Mar2002 $1.49
Mar2001 $1.53
Mar2000 $1.55
Mar1999 $1.03
Mar1998 $0.88
Mar1997 $0.74

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.15
Mar2016 $0.68
Mar2015 $1.09
Mar2014 $0.68
Mar2013 -$0.89
Mar2012 -$0.51
Mar2011 -$1.33
Mar2010 -$1.70
Mar2009 -$1.82
Mar2008 $4.23
Mar2007 $5.03
Mar2006 $4.76
Mar2005 $2.57
Mar2004 $2.00
Mar2003 $1.60
Mar2002 $1.41
Mar2001 $1.30

Recommended Reading:

Other ModernGraham posts about the company

Stocks Trading Below Their Graham Number – May 2016
Stocks Trading Below Their Graham Number – February 2016
10 Companies Benjamin Graham Would Invest In Today – February 2016
13 Best Stocks For Value Investors This Week – 12/12/15
Legg Mason Inc Valuation – December 2015 Update $LM

Other ModernGraham posts about related companies

Morgan Stanley Valuation – June 2016 $MS
BlackRock Inc Valuation – June 2016 $BLK
Goldman Sachs Group Inc Valuation – June 2016 $GS
Ameriprise Financial Inc Valuation – June 2016 $AMP
American Express Company Valuation – May 2016 $AXP
T.Rowe Price Group Inc Stock Valuation – February 2016 $TROW
Moody’s Corporation Stock Valuation – February 2016 $MCO
KKR & Co LP Stock Valuation – February 2016 $KKR
Capital One Financial Corp Valuation – January 2016 Update $COF
Franklin Resources Inc Valuation – January 2016 Update $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.

Mastercard Inc Valuation – January 2016 Update $MA

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how MasterCard Inc (MA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): MasterCard Incorporated is a technology company in the global payments industry. The Company connects consumers, financial institutions, merchants, Governments and businesses around the world, enabling them to use electronic forms of payment instead of cash and checks. The Company’s brands include MasterCard, Maestro and Cirrus. It provides offerings, such as loyalty and reward programs, information services and consulting. The Company focuses on segments, including Government programs, such as Social Security payments, unemployment benefits and others; commercial programs, such as payroll, health savings accounts, employee benefits and others, and consumer reloadable programs for individuals without formal banking relationships and non-traditional users of electronic payments. The Company provides a variety of products and solutions that support payment products that customers can offer to their cardholders.

[level-free]

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of MA – January 2016

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 $106,449,699,970 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.62 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 1277.92% Pass
6. Moderate PEmg Ratio PEmg < 20 33.97 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 17.17 Fail
Score
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 1.62 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.41 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

MA value Chart January 2016

EPSmg $2.80
MG Growth Estimate 15.00%
MG Value $107.66
Opinion Fairly Valued
MG Value based on 3% Growth $40.55
MG Value based on 0% Growth $23.77
Market Implied Growth Rate 12.73%
Current Price $94.99
% of Intrinsic Value 88.23%

MasterCard Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.12 in 2011 to an estimated $2.80 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 12.73% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on MasterCard Inc (MA)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

MA Charts January 2016

Net Current Asset Value (NCAV) $1.11
Graham Number $20.03
PEmg 33.97
Current Ratio 1.62
PB Ratio 17.17
Dividend Yield 0.67%
Number of Consecutive Years of Dividend Growth 4

 

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Total Current Assets $9,625,000,000
Total Current Liabilities $5,943,000,000
Long-Term Debt $1,495,000,000
Total Assets $14,634,000,000
Intangible Assets $2,727,000,000
Total Liabilities $8,367,000,000
Shares Outstanding (Diluted Average) 1,133,000,000

Earnings Per Share History

Next Fiscal Year Estimate $3.20
Dec14 $3.10
Dec13 $2.56
Dec12 $2.19
Dec11 $1.49
Dec10 $1.41
Dec09 $1.12
Dec08 -$0.19
Dec07 $0.80
Dec06 $0.04
Dec05 $0.20
Dec04 $0.24
Dec03 -$0.39
Dec02 $0.14
Dec01 $0.20
Dec00 $0.17
Dec98 $0.03

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.80
Dec14 $2.45
Dec13 $2.00
Dec12 $1.54
Dec11 $1.12
Dec10 $0.84
Dec09 $0.50
Dec08 $0.20
Dec07 $0.32
Dec06 $0.07
Dec05 $0.08
Dec04 $0.04
Dec03 -$0.03
Dec02 $0.14
Dec01 $0.12
Dec00 $0.06
Dec98 $0.01

Recommended Reading:

Other ModernGraham posts about the company

13 Best Stocks For Value Investors This Week – 10/3/15
MasterCard Inc. Analysis – October 2015 Update $MA
Mastercard Inc. Analysis – June 2015 Update $MA
24 Companies in the Spotlight This Week – 3/28/15
Mastercard Inc. Quarterly Valuation – March 2015 $MA

Other ModernGraham posts about related companies

Discover Financial Services Inc. Valuation – November 2015 Update $DFS
MasterCard Inc. Analysis – October 2015 Update $MA
Discover Financial Services Analysis – August 2015 Update $DFS
Mastercard Inc. Analysis – June 2015 Update $MA
Discover Financial Services Quarterly Valuation – May 2015 $DFS
Mastercard Inc. Quarterly Valuation – March 2015 $MA
Discover Financial Services Quarterly Valuation – February 2015 $DFS
Mastercard Inc. Quarterly Valuation – December 2014 $MA
Discover Financial Services Quarterly Valuation – November 2014
Mastercard Inc. Quarterly Stock Valuation – September 2014 $MA

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.

 

Legg Mason Inc Valuation – December 2015 Update $LM

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Legg Mason Inc (LM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Legg Mason, Inc. is a holding company. Through its subsidiaries, the Company provides investment management and related services to institutional and individual clients, company-sponsored investment funds and retail separately managed account programs. The Company offers its products and services directly and through various financial intermediaries. Its investment advisory services include discretionary and non-discretionary management of separate investment accounts in numerous investment styles for institutional and individual investors. Its investment products include proprietary mutual funds ranging from money market and other liquidity products to fixed income, equity and alternative funds managed in a wide variety of investment styles. The Company also offers other domestic and offshore funds to both retail and institutional investors and funds-of-hedge funds. The Company’s United States mutual funds consist of two groups of mutual and closed-end funds.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LM – December 2015

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 $4,459,037,931 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.96 Pass
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 -193.33% Fail
6. Moderate PEmg Ratio PEmg < 20 23.58 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.97 Pass
Score
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 2.96 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.91 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

LM value Chart December 2015

EPSmg $1.68
MG Growth Estimate 15.00%
MG Value $64.78
Opinion Undervalued
MG Value based on 3% Growth $24.40
MG Value based on 0% Growth $14.30
Market Implied Growth Rate 7.54%
Current Price $39.68
% of Intrinsic Value 61.25%

Legg Mason Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years along with the high PEmg ratio.  The Enterprising Investor is only initially concerned by the insufficient earnings stability over the last five years . As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $0.53 in 2012 to an estimated gain of $1.68 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.54% 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.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Legg Mason Inc (LM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

LM Charts December 2015

Net Current Asset Value (NCAV) -$6.02
Graham Number $50.67
PEmg 23.58
Current Ratio 2.96
PB Ratio 0.97
Dividend Yield 1.81%
Number of Consecutive Years of Dividend Growth 6

 

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Total Current Assets $1,765,540,000
Total Current Liabilities $596,459,000
Long-Term Debt $1,059,902,000
Total Assets $6,877,954,000
Intangible Assets $4,634,263,000
Total Liabilities $2,420,441,000
Shares Outstanding (Diluted Average) 108,784,000

Earnings Per Share History

Next Fiscal Year Estimate $2.77
Mar15 $2.04
Mar14 $2.33
Mar13 -$2.65
Mar12 $1.54
Mar11 $1.63
Mar10 $1.32
Mar09 -$13.99
Mar08 $1.86
Mar07 $4.48
Mar06 $8.80
Mar05 $3.53
Mar04 $2.65
Mar03 $1.78
Mar02 $1.45
Mar01 $1.53
Mar00 $1.51
Mar99 $1.03
Mar98 $0.87
Mar97 $0.69
Mar96 $0.54

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.68
Mar15 $1.09
Mar14 $0.68
Mar13 -$0.90
Mar12 -$0.53
Mar11 -$1.36
Mar10 -$1.73
Mar09 -$1.86
Mar08 $4.22
Mar07 $5.02
Mar06 $4.74
Mar05 $2.53
Mar04 $1.95
Mar03 $1.56
Mar02 $1.39
Mar01 $1.28
Mar00 $1.08

Recommended Reading:

Other ModernGraham posts about the company

The Best Stocks of the Financial Services Industry – September 2015
15 Best Stocks For Value Investors This Week – 9/4/15
Legg Mason Analysis – August 2015 Update $LM
Legg Mason Stock Analysis – May 2015 Quarterly Update $LM
34 Companies in the Spotlight This Week – 2/7/15

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Invesco Limited Analysis – October 2015 Update $IVZ
CME Group Inc. Analysis – October 2015 Update $CME
T.Rowe Price Group Inc. Analysis – September 2015 Update $TROW
Moody’s Corporation Analysis – September 2015 Update $MCO

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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