Marsh & McLennan Companies Inc Valuation – January 2019 $MMC

Company Profile (excerpt from Reuters): Marsh & McLennan Companies, Inc., incorporated on March 17, 1969, is a professional services firm offering clients advice and solutions in risk, strategy and people. The Company is the parent company of various risk advisors and specialty consultants, including Marsh, the insurance broker, intermediary and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of human resource (HR) and investment related financial advice and services, and Oliver Wyman Group, the management, economic and brand consultancy. The Company conducts business through two segments: Risk and Insurance Services, which includes risk management activities (risk advice, risk transfer and risk control and mitigation solutions), as well as insurance and reinsurance broking and services, and Consulting includes health, retirement, talent and investments consulting services and products, and specialized management, economic and brand consulting services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MMC – 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 $42,064,656,156 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.26 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 169.15% Pass
6. Moderate PEmg Ratio PEmg < 20 25.27 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.65 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 1.26 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.45 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 $3.31
MG Growth Estimate 6.56%
MG Value $71.48
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $47.93
MG Value based on 0% Growth $28.10
Market Implied Growth Rate 8.38%
Current Price $83.51
% of Intrinsic Value 116.83%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.3 in 2014 to an estimated $3.31 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.38% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Marsh & McLennan Companies, Inc. revealed the company was trading above its Graham Number of $35.49. The company pays a dividend of $1.43 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 25.27, which was above the industry average of 18. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.95.

Marsh & McLennan Companies, 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) -$14.95
Graham Number $35.49
PEmg 25.27
Current Ratio 1.26
PB Ratio 5.65
Current Dividend $1.43
Dividend Yield 1.71%
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 9/1/2018
Total Current Assets $5,966,000,000
Total Current Liabilities $4,727,000,000
Long-Term Debt $5,512,000,000
Total Assets $21,129,000,000
Intangible Assets $10,764,000,000
Total Liabilities $13,591,000,000
Shares Outstanding (Diluted Average) 510,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.87
Dec2017 $2.87
Dec2016 $3.38
Dec2015 $2.98
Dec2014 $2.65
Dec2013 $2.43
Dec2012 $2.13
Dec2011 $1.79
Dec2010 $1.55
Dec2009 $0.42
Dec2008 -$0.14
Dec2007 $4.53
Dec2006 $1.76
Dec2005 $0.74
Dec2004 $0.33
Dec2003 $2.81
Dec2002 $2.45
Dec2001 $1.70
Dec2000 $2.05
Dec1999 $1.31
Dec1998 $1.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.31
Dec2017 $2.97
Dec2016 $2.92
Dec2015 $2.59
Dec2014 $2.30
Dec2013 $1.97
Dec2012 $1.54
Dec2011 $1.38
Dec2010 $1.32
Dec2009 $1.29
Dec2008 $1.63
Dec2007 $2.36
Dec2006 $1.39
Dec2005 $1.34
Dec2004 $1.71
Dec2003 $2.29
Dec2002 $1.95

Recommended Reading:

Other ModernGraham posts about the company

Marsh & McLennan Companies Inc Valuation – March 2018 $MMC
5 Best Stocks For Value Investors This Week – 7/16/16
Marsh & McLennan Companies Inc Valuation – July 2016 $MMC
26 Best Stocks For Value Investors This Week – 2/6/16
Marsh & McLennan Company Valuation – January 2016 Update $MMC

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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.

Marsh & McLennan Companies Inc Valuation – March 2018 $MMC

Company Profile (excerpt from Reuters): Marsh & McLennan Companies, Inc., incorporated on March 17, 1969, is a professional services firm offering clients advice and solutions in risk, strategy and people. The Company is the parent company of various risk advisors and specialty consultants, including Marsh, the insurance broker, intermediary and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of human resource (HR) and investment related financial advice and services, and Oliver Wyman Group, the management, economic and brand consultancy. The Company conducts business through two segments: Risk and Insurance Services, which includes risk management activities (risk advice, risk transfer and risk control and mitigation solutions), as well as insurance and reinsurance broking and services, and Consulting includes health, retirement, talent and investments consulting services and products, and specialized management, economic and brand consulting services.

MMC Chart

MMC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MMC – 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 $41,670,631,151 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 178.99% Pass
6. Moderate PEmg Ratio PEmg < 20 23.94 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.76 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.31 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.02 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 $3.43
MG Growth Estimate 7.37%
MG Value $79.66
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $49.72
MG Value based on 0% Growth $29.14
Market Implied Growth Rate 7.72%
Current Price $82.09
% of Intrinsic Value 103.05%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.3 in 2014 to an estimated $3.43 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.72% 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 Marsh & McLennan Companies revealed the company was trading above its Graham Number of $37.15. The company pays a dividend of $1.43 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 23.94, which was below the industry average of 25.5, 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 $-14.55.

Marsh & McLennan Companies scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$14.55
Graham Number $37.15
PEmg 23.94
Current Ratio 1.31
PB Ratio 5.76
Current Dividend $1.43
Dividend Yield 1.74%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $5,562,000,000
Total Current Liabilities $4,262,000,000
Long-Term Debt $5,225,000,000
Total Assets $20,429,000,000
Intangible Assets $10,363,000,000
Total Liabilities $13,070,000,000
Shares Outstanding (Diluted Average) 516,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.24
Dec2017 $2.87
Dec2016 $3.38
Dec2015 $2.98
Dec2014 $2.65
Dec2013 $2.43
Dec2012 $2.13
Dec2011 $1.79
Dec2010 $1.55
Dec2009 $0.42
Dec2008 -$0.14
Dec2007 $4.53
Dec2006 $1.76
Dec2005 $0.74
Dec2004 $0.33
Dec2003 $2.81
Dec2002 $2.45
Dec2001 $1.70
Dec2000 $2.05
Dec1999 $1.31
Dec1998 $1.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.43
Dec2017 $2.97
Dec2016 $2.92
Dec2015 $2.59
Dec2014 $2.30
Dec2013 $1.97
Dec2012 $1.54
Dec2011 $1.38
Dec2010 $1.32
Dec2009 $1.29
Dec2008 $1.63
Dec2007 $2.36
Dec2006 $1.39
Dec2005 $1.34
Dec2004 $1.71
Dec2003 $2.29
Dec2002 $1.95

Recommended Reading:

Other ModernGraham posts about the company

26 Best Stocks For Value Investors This Week – 2/6/16
Marsh & McLennan Company Valuation – January 2016 Update $MMC
The Best Companies of the Insurance Industry – October 2015
15 Best Stocks For Value Investors This Week – 9/12/15
Marsh & McLennan Companies Analysis – September 2015 Update $MMC

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Ameriprise Financial Inc Valuation – March 2018 $AMP
Navient Corp Valuation – March 2018 $NAVI
Invesco Ltd Valuation – March 2018 $IVZ
Capital One Financial Corp Valuation – March 2018 $COF
Total System Services Inc Valuation – February 2018 $TSS

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.

Marsh & McLennan Companies Inc Valuation – July 2016 $MMC

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 Marsh & McLennan Companies Inc (MMC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Marsh & McLennan Companies, Inc. is a professional services firm offering clients advice and solutions in risk, strategy and people. The Company is the parent company of various specialty consultants, including Marsh, an insurance broker, intermediary and risk advisor; Guy Carpenter, a risk and reinsurance specialist; Mercer, a provider of human resource (HR) and related financial advice and services, and Oliver Wyman Group, a management, economic and brand consultancy. The Company provides analysis, advice and transactional capabilities to clients in approximately 130 countries. The Company operates through two segments: Risk and Insurance Services and Consulting. The Risk and Insurance Services segment includes risk management activities, as well as insurance and reinsurance broking and services. The Company’s consulting segment includes health, retirement, talent and investments consulting services and products, and specialized management, economic and brand consulting services.

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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]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of MMC – 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 $35,068,541,703 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.52 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 86.07% Pass
6. Moderate PEmg Ratio PEmg < 20 23.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.30 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 1.52 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.90 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

MMC value chart July 2016

EPSmg $2.90
MG Growth Estimate 13.15%
MG Value $100.81
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $42.01
MG Value based on 0% Growth $24.63
Market Implied Growth Rate 7.36%
Current Price $67.30
% of Intrinsic Value 66.76%

Marsh & McLennan Companies, 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 is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.54 in 2012 to an estimated $2.9 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.36% 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.

Marsh & McLennan Companies, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

MMC charts July 2016

Net Current Asset Value (NCAV) -$12.64
Graham Number $30.93
PEmg 23.23
Current Ratio 1.52
PB Ratio 5.30
Current Dividend $1.52
Dividend Yield 2.26%
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 $4,798,000,000
Total Current Liabilities $3,159,000,000
Long-Term Debt $4,748,000,000
Total Assets $18,128,000,000
Intangible Assets $8,985,000,000
Total Liabilities $11,449,000,000
Shares Outstanding (Diluted Average) 526,000,000

Earnings Per Share History

Next Fiscal Year Estimate $3.32
Dec2015 $2.98
Dec2014 $2.65
Dec2013 $2.43
Dec2012 $2.13
Dec2011 $1.79
Dec2010 $1.55
Dec2009 $0.42
Dec2008 -$0.14
Dec2007 $4.53
Dec2006 $1.76
Dec2005 $0.74
Dec2004 $0.33
Dec2003 $2.81
Dec2002 $2.45
Dec2001 $1.70
Dec2000 $2.05
Dec1999 $1.31
Dec1998 $1.49
Dec1997 $0.80
Dec1996 $1.06

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.90
Dec2015 $2.59
Dec2014 $2.30
Dec2013 $1.97
Dec2012 $1.54
Dec2011 $1.38
Dec2010 $1.32
Dec2009 $1.29
Dec2008 $1.63
Dec2007 $2.36
Dec2006 $1.39
Dec2005 $1.34
Dec2004 $1.71
Dec2003 $2.29
Dec2002 $1.95
Dec2001 $1.63
Dec2000 $1.51

Recommended Reading:

Other ModernGraham posts about the company

26 Best Stocks For Value Investors This Week – 2/6/16
Marsh & McLennan Company Valuation – January 2016 Update $MMC
The Best Companies of the Insurance Industry – October 2015
15 Best Stocks For Value Investors This Week – 9/12/15
Marsh & McLennan Companies Analysis – September 2015 Update $MMC

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The Travelers Companies Valuation – May 2016 $TRV
Unum Group Valuation – March 2016 $UNM
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Assurant Inc Valuation – February 2016 $AIZ
American International Group Inc Stock Valuation – February 2016 $AIG

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.

Marsh & McLennan Company Valuation – January 2016 Update $MMC

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 Marsh & McLennan Company (MMC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Marsh and McLennan Companies, Inc. is a professional services firm. The Company operates as two business segments: Risk and Insurance Services, and Consulting. The Risk and Insurance Services segment provides risk management activities and insurance broking, reinsurance broking and insurance program management services for businesses, public entities, insurance companies, associations, professional services organizations and private clients. The Company conducts business in this segment through Marsh and Guy Carpenter. The Company conducts business in its Consulting segment through two main business groups: Mercer, provides consulting expertise, advice, services and solutions in the areas of health, retirement, talent and investments, and Oliver Wyman Group, provides specialized management and economic and brand consulting services.

[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 MMC

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 $27,021,379,986 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 30.24% Fail
6. Moderate PEmg Ratio PEmg < 20 20.73 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.55 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 2.08 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

MMC value chart January 2016

EPSmg $2.57
MG Growth Estimate 13.02%
MG Value $88.85
Opinion Undervalued
MG Value based on 3% Growth $37.30
MG Value based on 0% Growth $21.87
Market Implied Growth Rate 6.11%
Current Price $53.33
% of Intrinsic Value 60.02%

Marsh & McLennan Company 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 or growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the level of debt relative to the net current assets. 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 $1.38 in 2011 to an estimated $2.57 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.11% annual earnings loss 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 Marsh & McLennan Company (MMC)?  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

MMC charts January 2016

Net Current Asset Value (NCAV) -$11.16
Graham Number $28.08
PEmg 20.73
Current Ratio 1.62
PB Ratio 4.55
Dividend Yield 2.74%
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 Sep2015
Total Current Assets $5,526,000,000
Total Current Liabilities $3,404,000,000
Long-Term Debt $4,422,000,000
Total Assets $17,724,000,000
Intangible Assets $8,342,000,000
Total Liabilities $11,476,000,000
Shares Outstanding (Diluted Average) 533,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.93
Dec2014 $2.65
Dec2013 $2.43
Dec2012 $2.13
Dec2011 $1.79
Dec2010 $1.55
Dec2009 $0.42
Dec2008 -$0.14
Dec2007 $4.53
Dec2006 $1.76
Dec2005 $0.74
Dec2004 $0.33
Dec2003 $2.81
Dec2002 $2.45
Dec2001 $1.70
Dec2000 $2.05
Dec1999 $1.31
Dec1998 $1.49
Dec1997 $0.87
Dec1996 $1.04

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.57
Dec2014 $2.30
Dec2013 $1.97
Dec2012 $1.54
Dec2011 $1.38
Dec2010 $1.32
Dec2009 $1.29
Dec2008 $1.63
Dec2007 $2.36
Dec2006 $1.39
Dec2005 $1.34
Dec2004 $1.71
Dec2003 $2.29
Dec2002 $1.95
Dec2001 $1.63
Dec2000 $1.52
Dec1999 $1.15

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Insurance Industry – October 2015
5 Undervalued Companies with a Low Beta – June 2015
The Best Companies of the Insurance Industry – June 2015
The 8 Best Stocks For Value Investors This Week – 6/6/15
Marsh & McLennan Companies Analysis – June 2015 Quarterly Update $MMC

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Unum Group Valuation – November 2015 Update $UNM
Principal Financial Group Valuation – November 2015 Update $PFG
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American International Group Inc. Valuation – November 2015 Update $AIG

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.

Marsh & McLennan Companies Analysis – September 2015 Update $MMC

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 – August 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 Marsh & McLennan Companies (MMC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Marsh and McLennan Companies, Inc. is a professional services firm. The Company operates as two business segments: Risk and Insurance Services, and Consulting. The Risk and Insurance Services segment provides risk management activities and insurance broking, reinsurance broking and insurance program management services for businesses, public entities, insurance companies, associations, professional services organizations and private clients. The Company conducts business in this segment through Marsh and Guy Carpenter. The Company conducts business in its Consulting segment through two main business groups: Mercer, provides consulting expertise, advice, services and solutions in the areas of health, retirement, talent and investments, and Oliver Wyman Group, provides specialized management and economic and brand consulting services.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of MMC – September 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 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 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 Fail
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 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 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 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 $2.56
MG Growth Estimate 12.91%
MG Value $87.95
Opinion Undervalued
MG Value based on 3% Growth $37.16
MG Value based on 0% Growth $21.78
Market Implied Growth Rate 6.34%
Current Price $54.26
% of Intrinsic Value 61.70%

Marsh & McLennan Companies 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 or growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned with the level of debt relative to the net current assets.  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 $1.38 in 2011 to an estimated $2.56 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.34% 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 Marsh & McLennan Companies (MMC)?  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

MMC Charts September 2015

Net Current Asset Value (NCAV) -$9.85
Graham Number $28.60
PEmg 21.17
Current Ratio 1.65
PB Ratio 4.33
Dividend Yield 2.06%
Number of Consecutive Years of Dividend Growth 6

 

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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

Total Current Assets $5,299,000,000
Total Current Liabilities $3,208,000,000
Long-Term Debt $3,825,000,000
Total Assets $17,413,000,000
Intangible Assets $8,155,000,000
Total Liabilities $10,630,000,000
Shares Outstanding (Diluted Average) 541,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.90
Dec14 $2.65
Dec13 $2.43
Dec12 $2.13
Dec11 $1.79
Dec10 $1.55
Dec09 $0.42
Dec08 -$0.14
Dec07 $4.53
Dec06 $1.76
Dec05 $0.74
Dec04 $0.33
Dec03 $2.81
Dec02 $2.45
Dec01 $1.70
Dec00 $2.05
Dec99 $1.31
Dec98 $1.49
Dec97 $0.80
Dec96 $1.06
Dec95 $0.92

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.56
Dec14 $2.30
Dec13 $1.97
Dec12 $1.54
Dec11 $1.38
Dec10 $1.32
Dec09 $1.29
Dec08 $1.63
Dec07 $2.36
Dec06 $1.39
Dec05 $1.34
Dec04 $1.71
Dec03 $2.29
Dec02 $1.95
Dec01 $1.63
Dec00 $1.51
Dec99 $1.20

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies with a Low Beta – June 2015
The Best Companies of the Insurance Industry – June 2015
The 8 Best Stocks For Value Investors This Week – 6/6/15
Marsh & McLennan Companies Analysis – June 2015 Quarterly Update $MMC
23 Companies in the Spotlight This Week – 3/9/15

Other ModernGraham posts about related companies

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Progressive Corporation Analysis – August 2015 Update $PGR
Ace Limited Analysis – August 2015 Update $ACE
Travelers Companies Analysis – August 2015 Update $TRV
Lincoln National Corporation Analysis – August 2015 Update $LNC
Unum Group Analysis – August 2015 Update $UNM
Principal Financial Group Analysis – August 2015 Update $PFG
Assurant Inc. Analysis – August 2015 Update $AIZ
Arthur J Gallagher & Company Analysis – Initial Coverage $AJG
American International Group Inc. Analysis – August 2015 Update $AIG

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.

Marsh & McLennan Companies Analysis – June 2015 Quarterly Update $MMC

Mmc-logoBenjamin 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 5 Most Undervalued Companies for the Defensive Investor – May 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 Marsh & McLennan Companies (MMC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Marsh & McLennan Companies, Inc. is a global professional services firm providing advice and solutions in the areas of risk, strategy and human capital. The Company conducts business through two segments: Risk and Insurance Services, which include risk management activities, such as risk advice, risk transfer and risk control and mitigation solutions, as well as insurance and reinsurance broking and services, and Consulting include retirement, health, talent and investments consulting and services, and specialized management and economic consulting services. It is the parent company of a number of risk experts and specialty consultants, including Marsh, the insurance broker, intermediary and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of human resource (HR) and related financial advice and services, and Oliver Wyman Group, the management and economic consultancy. The Company provides analysis, advice and transactional capabilities.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $57.94
MG Value $87.95
MG Opinion Undervalued
Value Based on 3% Growth $37.16
Value Based on 0% Growth $21.78
Market Implied Growth Rate 7.05%
Net Current Asset Value (NCAV) -$8.96
PEmg 22.61
Current Ratio 1.88
PB Ratio 4.66

Balance Sheet – March 2015

Current Assets $5,177,000,000
Current Liabilities $2,753,000,000
Total Debt $3,828,000,000
Total Assets $16,834,000,000
Intangible Assets $7,832,000,000
Total Liabilities $10,062,000,000
Outstanding Shares 545,000,000

Earnings Per Share

2015 (estimate) $2.90
2014 $2.65
2013 $2.43
2012 $2.13
2011 $1.79
2010 $1.55
2009 $0.42
2008 -$0.14
2007 $4.53
2006 $1.76
2005 $0.74

Earnings Per Share – ModernGraham

2015 (estimate) $2.56
2014 $2.30
2013 $1.97
2012 $1.54
2011 $1.38
2010 $1.32

Dividend History

Conclusion:

As this stock analysis shows, Marsh & McLennan Companies is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, lack of earnings stability or growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is only concerned by the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.38 in 2011 to an estimated $2.56 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 7.05% annual earnings growth over the next 7-10 years and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return 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 Marsh & McLennan Companies (MMC)?  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.

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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Marsh & McLennan Companies Inc. Quarterly Valuation – March 2015 $MMC

Mmc-logoBenjamin 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 5 Most Undervalued Companies for the Defensive Investor – February 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 specific look at how Marsh & McLennan Companies Inc. (MMC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Marsh & McLennan Companies, Inc. is a global professional services firm providing advice and solutions in the areas of risk, strategy and human capital. The Company conducts business through two segments: Risk and Insurance Services, which include risk management activities, such as risk advice, risk transfer and risk control and mitigation solutions, as well as insurance and reinsurance broking and services, and Consulting include retirement, health, talent and investments consulting and services, and specialized management and economic consulting services. It is the parent company of a number of risk experts and specialty consultants, including Marsh, the insurance broker, intermediary and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of human resource (HR) and related financial advice and services, and Oliver Wyman Group, the management and economic consultancy. The Company provides analysis, advice and transactional capabilities.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $57.24
MG Value $75.31
MG Opinion Fairly Valued
Value Based on 3% Growth $34.16
Value Based on 0% Growth $20.03
Market Implied Growth Rate 7.90%
Net Current Asset Value (NCAV) -$5.99
PEmg 24.30
Current Ratio 1.66
PB Ratio 4.03

Balance Sheet – December 2014

Current Assets $6,852,000,000
Current Liabilities $4,130,000,000
Total Debt $3,379,000,000
Total Assets $17,987,000,000
Intangible Assets $7,814,000,000
Total Liabilities $10,154,000,000
Outstanding Shares 551,000,000

Earnings Per Share

2014 $2.82
2013 $2.43
2012 $2.13
2011 $1.79
2010 $1.55
2009 $0.42
2008 -$0.14
2007 $4.53
2006 $1.76
2005 $0.74
2004 $0.33

Earnings Per Share – ModernGraham

2014 $2.36
2013 $1.97
2012 $1.54
2011 $1.38
2010 $1.32
2009 $1.29

Dividend History

Conclusion:

Marsh & McLennan Companies Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, the insufficient earnings growth and stability over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned by the level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.32 in 2010 to $2.36 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 7.9% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out previous ModernGraham valuations of Marsh & McLennan Companies Inc. (MMC) for greater perspective!

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 Marsh & McLennan Companies Inc. (MMC)?  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.

Disclaimer:  The author did not hold a position in Marsh & McLennan Companies Inc. (MMC) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Marsh & McLennan Companies Inc. Quarterly Valuation – December 2014 $MMC

Mmc-logoBenjamin 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 5 Most Undervalued Companies for the Defensive Investor – November 2014.  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 specific look at how Marsh & McLennan Companies (MMC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Marsh & McLennan Companies, Inc. is a global professional services firm providing advice and solutions in the areas of risk, strategy and human capital. It is the parent company of a number of risk experts and specialty consultants. It conducts business through two segments: Risk and Insurance Services includes risk management activities, as well as insurance and reinsurance broking and services, and Consulting include retirement, health, talent and investments consulting and services, and specialized management and economic consulting services. In February 2014, the Company’s subsidiary Marsh & McLennan Agency LLC has acquired Barney & Barney, LLC, brokerage firm. In February 2014, Marsh & McLennan Companies Inc announced that Marsh & McLennan Agency LLC acquired The Bond Network. In September 2014, Marsh & McLennan Companies Inc acquires Kocisko Insurance Brokers Inc.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $56.48
MG Value $74.46
MG Opinion Fairly Valued
Value Based on 3% Growth $34.02
Value Based on 0% Growth $19.94
Market Implied Growth Rate 7.79%
Net Current Asset Value (NCAV) -$5.99
PEmg 24.08
Current Ratio 1.66
PB Ratio 4.02

Balance Sheet – September 2014

Current Assets $6,852,000,000
Current Liabilities $4,130,000,000
Total Debt $3,379,000,000
Total Assets $17,897,000,000
Intangible Assets $7,814,000,000
Total Liabilities $10,154,000,000
Outstanding Shares 551,000,000

Earnings Per Share

2014 (estimate) $2.79
2013 $2.43
2012 $2.13
2011 $1.79
2010 $1.55
2009 $0.42
2008 -$0.14
2007 $4.53
2006 $1.76
2005 $0.74
2004 $0.33

Earnings Per Share – ModernGraham

2014 (estimate) $2.35
2013 $1.97
2012 $1.54
2011 $1.38
2010 $1.32
2009 $1.29

Dividend History

Conclusion:

Marsh & McLennan qualifies for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, lack of earnings growth or stability over the last ten years, and the poor PEmg and PB ratios.  The Enterprising Investor’s only initial concern is the level of debt relative to the current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.32 in 2010 to an estimated $2.35 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 7.79% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out previous ModernGraham valuations of Marsh & McLennan Companies Inc. (MMC) for greater perspective!

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 Marsh & McLennan Companies Inc. (MMC)?  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.

Disclaimer:  The author did not hold a position in Marsh & McLennan Companies Inc. (MMC) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Marsh & McLennan Quarterly Stock Valuation – August 2014 $MMC

Mmc-logoBenjamin 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 5 Undervalued Companies for the Enterprising Investor.  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 specific look at how Marsh & McLennan (MMC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Marsh & McLennan Companies, Inc. is a global professional services firm providing advice and solutions in the areas of risk, strategy and human capital. It is the parent company of a number of risk experts and specialty consultants. It conducts business through two segments: Risk and Insurance Services includes risk management activities, as well as insurance and reinsurance broking and services, and Consulting include retirement, health, talent and investments consulting and services, and specialized management and economic consulting services. In February 2014, the Company’s subsidiary Marsh & McLennan Agency LLC has acquired Barney & Barney, LLC, brokerage firm. In February 2014, Marsh & McLennan Companies Inc announced that Marsh & McLennan Agency LLC acquired The Bond Network.
MMC Chart

MMC data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $53.10
MG Value $87.99
MG Opinion Undervalued
Value Based on 3% Growth $33.14
Value Based on 0% Growth $19.43
Market Implied Growth Rate 7.37%
Net Current Asset Value (NCAV) -$5.54
PEmg 23.24
Current Ratio 1.82
PB Ratio 3.55

Balance Sheet – 6/30/2014

Current Assets $6,414,000,000
Current Liabilities $3,530,000,000
Total Debt $3,212,000,000
Total Assets $17,588,000,000
Intangible Assets $7,871,000,000
Total Liabilities $9,437,000,000
Outstanding Shares 545,650,000

Earnings Per Share

2014 (estimate) $2.75
2013 $2.42
2012 $2.13
2011 $1.73
2010 $1.00
2009 $0.43
2008 -$0.13
2007 $0.99
2006 $1.45
2005 $0.67
2004 $0.33

Earnings Per Share – ModernGraham

2014 (estimate) $2.29
2013 $1.88
2012 $1.42
2011 $0.98
2010 $0.65
2009 $0.54

Dividend History

MMC Dividend Chart

MMC Dividend data by YCharts

Conclusion:

Marsh & McLennan is not suitable for the Defensive Investor but does satisfy for the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio, instability of earnings over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is only concerned with the high level of debt relative to net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.65 in 2010 to an estimated $2.29 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 7.37% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return 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 Marsh & McLennan (MMC)?  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.

Disclaimer:  The author did not hold a position in Marsh & McLennan (MMC) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

S&P Global Inc Valuation – March 2019 #SPGI

Company Profile (excerpt from Reuters): S&P Global Inc., formerly McGraw Hill Financial Inc., incorporated on December 29, 1925, is a provider of ratings, benchmarks, analytics and data to the capital and commodity markets around the world. The Company operates through three segments: Ratings, Market and Commodities Intelligence, and S&P Dow Jones Indices (Indices). The Company provides ratings related to new issuance of corporate and government debt instruments, and structured finance debt instruments; bank loan ratings; and corporate credit estimates, which are intended, based on an abbreviated analysis, to provide an indication of its opinion regarding creditworthiness of a company, which does not have a Ratings credit rating. The Company serves its customers through a range of products and services available through both third party and its distribution channels. The Company’s subsidiary, CRISIL Limited (CRISIL), is a global analytical company and a provider of ratings, data and research, analytics and solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SPGI – March 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $48,772,834,606 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.37 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 211.84% Pass
6. Moderate PEmg Ratio PEmg < 20 26.10 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 72.20 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 1.37 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.76 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 $7.52
MG Growth Estimate 15.00%
MG Value $289.39
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $108.99
MG Value based on 0% Growth $63.89
Market Implied Growth Rate 8.80%
Current Price $196.20
% of Intrinsic Value 67.80%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.68 in 2015 to an estimated $7.52 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.8% 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 S&P Global Inc revealed the company was trading above its Graham Number of $22.47. The company pays a dividend of $2 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 26.1, which was above the industry average of 21.22. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.54.

S&P Global 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) -$20.54
Graham Number $22.47
PEmg 26.10
Current Ratio 1.37
PB Ratio 72.20
Current Dividend $2.00
Dividend Yield 1.02%
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 $3,604,000,000
Total Current Liabilities $2,629,000,000
Long-Term Debt $3,662,000,000
Total Assets $9,458,000,000
Intangible Assets $5,059,000,000
Total Liabilities $8,774,000,000
Shares Outstanding (Diluted Average) 251,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.88
Dec2018 $7.73
Dec2017 $5.78
Dec2016 $7.94
Dec2015 $4.21
Dec2014 -$0.42
Dec2013 $4.91
Dec2012 $1.53
Dec2011 $3.00
Dec2010 $2.65
Dec2009 $2.33
Dec2008 $2.51
Dec2007 $2.94
Dec2006 $2.40
Dec2005 $2.21
Dec2004 $1.96
Dec2003 $1.79
Dec2002 $1.48
Dec2001 $0.96
Dec2000 $1.03
Dec1999 $1.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.52
Dec2018 $6.24
Dec2017 $5.16
Dec2016 $4.44
Dec2015 $2.68
Dec2014 $2.05
Dec2013 $3.15
Dec2012 $2.32
Dec2011 $2.70
Dec2010 $2.56
Dec2009 $2.50
Dec2008 $2.53
Dec2007 $2.44
Dec2006 $2.12
Dec2005 $1.88
Dec2004 $1.62
Dec2003 $1.39

Recommended Reading:

Other ModernGraham posts about the company

S&P Global Inc Valuation – May 2018 $SPGI
S&P Global Inc Valuation – Initial Coverage $SPGI

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E*Trade Financial Corp Valuation – January 2019 $ETFC
Marsh & McLennan Companies Inc Valuation – January 2019 $MMC

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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