Cisco Systems Inc Valuation – April 2019 #CSCO

Company Profile (excerpt from Reuters): Cisco Systems, Inc. (Cisco), incorporated on December 10, 1984, is engaged in designing and selling a range of technologies across networking, security, collaboration, applications and the cloud. The Company operates through three geographic segments: Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).The Company’s product and technologies includes, infrastructure platforms; applications; security and other products. It also offers technical support services and advanced services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSCO – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $243,035,961,849 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.80 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 21.55% Fail
6. Moderate PEmg Ratio PEmg < 20 31.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.10 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 1.80 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.67 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.76
MG Growth Estimate 1.20%
MG Value $19.19
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $25.52
MG Value based on 0% Growth $14.96
Market Implied Growth Rate 11.43%
Current Price $55.21
% of Intrinsic Value 287.64%

Cisco Systems, 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 growth over the last ten years, and the poor dividend history, 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 Overvalued after growing its EPSmg (normalized earnings) from $1.63 in 2015 to an estimated $1.76 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.43% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Cisco Systems, Inc. revealed the company was trading above its Graham Number of $24.85. The company pays a dividend of $1.24 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 31.37, which was below the industry average of 69.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.9.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.90
Graham Number $24.85
PEmg 31.37
Current Ratio 1.80
PB Ratio 6.10
Current Dividend $1.24
Dividend Yield 2.25%
Number of Consecutive Years of Dividend Growth 8

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Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $53,117,000,000
Total Current Liabilities $29,479,000,000
Long-Term Debt $15,893,000,000
Total Assets $102,462,000,000
Intangible Assets $35,563,000,000
Total Liabilities $61,673,000,000
Shares Outstanding (Diluted Average) 4,505,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.93
Jul2018 $0.02
Jul2017 $1.90
Jul2016 $2.11
Jul2015 $1.75
Jul2014 $1.49
Jul2013 $1.86
Jul2012 $1.49
Jul2011 $1.17
Jul2010 $1.33
Jul2009 $1.05
Jul2008 $1.31
Jul2007 $1.17
Jul2006 $0.89
Jul2005 $0.87
Jul2004 $0.62
Jul2003 $0.50
Jul2002 $0.25
Jul2001 -$0.14
Jul2000 $0.36
Jul1999 $0.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.76
Jul2018 $1.27
Jul2017 $1.87
Jul2016 $1.82
Jul2015 $1.63
Jul2014 $1.54
Jul2013 $1.50
Jul2012 $1.30
Jul2011 $1.21
Jul2010 $1.20
Jul2009 $1.11
Jul2008 $1.08
Jul2007 $0.92
Jul2006 $0.74
Jul2005 $0.58
Jul2004 $0.40
Jul2003 $0.27

Recommended Reading:

Other ModernGraham posts about the company

Cisco Systems Inc Valuation – November 2018 $CSCO
Cisco Systems Inc Valuation – February 2018 $CSCO
5 Undervalued Dow Components to Research – March 2017
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2017
5 Undervalued Dow Components to Research – February 2017

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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.

Alliance Data Systems Corp Valuation – March 2019 #ADS

Company Profile (excerpt from Reuters): Alliance Data Systems Corporation, incorporated on February 23, 1995, is a provider of data-driven marketing and loyalty solutions serving consumer-based businesses in a range of industries. The Company offers a portfolio of integrated outsourced marketing solutions, including customer loyalty programs, database marketing services, end-to-end marketing services, analytics and creative services, direct marketing services, and private label and co-brand retail credit card programs. The Company operates through three segments: LoyaltyOne, which provides coalition and short-term loyalty programs through the Company’s Canadian AIR MILES Reward Program and BrandLoyalty Group B.V. (BrandLoyalty); Epsilon, which provides end-to-end, integrated direct marketing solutions, and Card Services, which provides risk management solutions, account origination, funding, transaction processing, customer care, collections and marketing services for the Company’s private label and co-brand retail credit card programs. Its client base is diversified across a range of end-markets, including financial services, specialty retail, grocery and drugstore chains, petroleum retail, automotive, hospitality and travel, telecommunications, insurance and healthcare.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ADS – 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 $9,070,607,376 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.15 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 232.37% Pass
6. Moderate PEmg Ratio PEmg < 20 10.89 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.97 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 2.15 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

EPSmg $15.71
MG Growth Estimate 15.00%
MG Value $604.68
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $227.74
MG Value based on 0% Growth $133.50
Market Implied Growth Rate 1.19%
Current Price $171.03
% of Intrinsic Value 28.28%

Alliance Data Systems Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $7.77 in 2015 to an estimated $15.71 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.19% 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 Alliance Data Systems Corporation revealed the company was trading above its Graham Number of $138.66. The company pays a dividend of $2.28 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 10.89, which was below the industry average of 32.74, 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 $-61.7.

Alliance Data Systems Corporation performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$61.70
Graham Number $138.66
PEmg 10.89
Current Ratio 2.15
PB Ratio 3.97
Current Dividend $2.28
Dividend Yield 1.33%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $24,711,700,000
Total Current Liabilities $11,484,000,000
Long-Term Debt $10,527,500,000
Total Assets $30,387,700,000
Intangible Assets $4,380,700,000
Total Liabilities $28,055,600,000
Shares Outstanding (Diluted Average) 54,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $19.96
Dec2018 $17.49
Dec2017 $14.10
Dec2016 $7.34
Dec2015 $8.85
Dec2014 $7.87
Dec2013 $7.42
Dec2012 $6.58
Dec2011 $5.45
Dec2010 $3.48
Dec2009 $2.49
Dec2008 $2.80
Dec2007 $2.03
Dec2006 $2.32
Dec2005 $1.64
Dec2004 $1.22
Dec2003 $0.84
Dec2002 $0.31
Dec2001 -$0.21
Dec2000 -$0.60
Dec1999 -$0.70

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $15.71
Dec2018 $12.76
Dec2017 $9.97
Dec2016 $7.81
Dec2015 $7.77
Dec2014 $6.88
Dec2013 $5.95
Dec2012 $4.86
Dec2011 $3.75
Dec2010 $2.81
Dec2009 $2.40
Dec2008 $2.24
Dec2007 $1.84
Dec2006 $1.59
Dec2005 $1.07
Dec2004 $0.62
Dec2003 $0.19

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Stocks for the Enterprising Investor – January 2019
Most Undervalued Stocks of the S&P 500 – August 2018
5 Undervalued Stocks for Value Investors with a High Beta – July 2018
Alliance Data Systems Corp Valuation – May 2018 $ADS
14 Best Stocks for Value Investors This Week – 2/11/17

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Fidelity National Information Services Inc Valuation – January 2019 $FIS
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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.

Motorola Solutions Inc Valuation – February 2019 $MSI

Company Profile (excerpt from Reuters): Motorola Solutions, Inc., incorporated on March 9, 1973, is a provider of communication infrastructure, devices, accessories, software and services. The Company operates through two segments: Products and Services. It serves global customer base spanning federal, state, county, province, territory, municipal and departmental independent bodies, along with its commercial and industrial customers. The Company, through VaaS International Holdings, Inc. (VaaS), provides data and image analytics for vehicle location. The Company’s image capture and analysis platform, which includes fixed and mobile license plate reader cameras driven by machine learning and artificial intelligence, provides vehicle location data to public safety and commercial customers. VaaS platform enables controllable, audited data-sharing across multiple law enforcement agencies. Vehicle location information can help accelerate time to resolution and improve outcomes for public safety agencies, particularly when combined with police records.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MSI – 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 $22,938,661,879 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.38 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 48.30% Pass
6. Moderate PEmg Ratio PEmg < 20 31.40 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -19.00 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 1.38 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.50 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 $4.46
MG Growth Estimate 2.37%
MG Value $58.99
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $64.65
MG Value based on 0% Growth $37.90
Market Implied Growth Rate 11.45%
Current Price $139.98
% of Intrinsic Value 237.29%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.85 in 2015 to an estimated $4.46 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.45% 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 Motorola Solutions Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $2.13 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 31.4, which was below the industry average of 51.56, 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 $-37.03.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$37.03
Graham Number $0.00
PEmg 31.40
Current Ratio 1.38
PB Ratio -19.00
Current Dividend $2.13
Dividend Yield 1.52%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,272,000,000
Total Current Liabilities $3,096,000,000
Long-Term Debt $5,289,000,000
Total Assets $9,409,000,000
Intangible Assets $2,744,000,000
Total Liabilities $10,685,000,000
Shares Outstanding (Diluted Average) 173,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.55
Dec2018 $5.62
Dec2017 -$0.95
Dec2016 $3.24
Dec2015 $3.02
Dec2014 $5.29
Dec2013 $4.06
Dec2012 $2.96
Dec2011 $3.41
Dec2010 $1.87
Dec2009 -$0.14
Dec2008 -$13.09
Dec2007 -$0.14
Dec2006 $10.22
Dec2005 $12.67
Dec2004 $4.38
Dec2003 $2.66
Dec2002 -$7.63
Dec2001 -$12.46
Dec2000 $4.06
Dec1999 $2.87

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.46
Dec2018 $3.02
Dec2017 $2.13
Dec2016 $3.68
Dec2015 $3.85
Dec2014 $4.02
Dec2013 $3.06
Dec2012 $1.38
Dec2011 -$0.15
Dec2010 -$1.37
Dec2009 -$1.36
Dec2008 -$0.38
Dec2007 $5.97
Dec2006 $7.51
Dec2005 $4.08
Dec2004 -$0.75
Dec2003 -$2.91

Recommended Reading:

Other ModernGraham posts about the company

Motorola Solutions Inc Valuation – May 2018 $MSI
5 Undervalued Companies for Value Investors with a Low Beta – July 2017
5 Undervalued Companies for Value Investors with a Low Beta – January 2017
8 Best Stocks for Value Investors This Week – 12/27/16
Motorola Solutions Inc Valuation – December 2016 $MSI

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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.

FLIR Systems Inc Valuation – February 2019 $FLIR

Company Profile (excerpt from Reuters): FLIR Systems, Inc. (FLIR), incorporated on March 8, 1978, designs, develops, markets and distributes thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems and threat-detection solutions. The Company’s segments include Surveillance, Instruments, Security, OEM & Emerging Markets, Maritime and Detection. Its Surveillance segment provides enhanced imaging and recognition solutions under its commercially developed, military qualified (CDMQ) model to a range of military, law enforcement, public safety and other government customers. Its Instruments segment provides devices that image, measure and assess thermal energy, gases and other environmental elements for industrial, commercial, and scientific applications under the FLIR and Extech brands. Its Security segment develops and manufactures a range of cameras and video recording systems for use in commercial, critical infrastructure, and home monitoring applications. Its OEM & Emerging Markets segment provides thermal imaging camera cores and components that are utilized by third parties to create thermal and other types of imaging systems. Its Maritime segment develops and manufactures electronics and imaging instruments for the recreational and commercial maritime market under the FLIR and Raymarine brands. The Detection segment offers sensors, instruments and integrated platform solutions for the detection, identification, and suppression of chemical, biological, radiological, nuclear and explosives (CBRNE) threats.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FLIR – 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 $7,250,818,658 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.09 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 16.70% Fail
6. Moderate PEmg Ratio PEmg < 20 30.16 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.87 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.09 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.43 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.74
MG Growth Estimate 2.69%
MG Value $24.14
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $25.20
MG Value based on 0% Growth $14.77
Market Implied Growth Rate 10.83%
Current Price $52.41
% of Intrinsic Value 217.11%

FLIR Systems, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the poor dividend history, 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 Overvalued after growing its EPSmg (normalized earnings) from $1.47 in 2015 to an estimated $1.74 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.83% 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 FLIR Systems, Inc. revealed the company was trading above its Graham Number of $26.61. The company pays a dividend of $0.64 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 30.16, which was above the industry average of 29.46. Finally, the company was trading above its Net Current Asset Value (NCAV) of $2.8.

FLIR Systems, 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) $2.80
Graham Number $26.61
PEmg 30.16
Current Ratio 4.09
PB Ratio 3.87
Current Dividend $0.64
Dividend Yield 1.22%
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 12/1/2018
Total Current Assets $1,292,647,000
Total Current Liabilities $316,014,000
Long-Term Debt $421,948,000
Total Assets $2,781,242,000
Intangible Assets $1,051,416,000
Total Liabilities $904,456,000
Shares Outstanding (Diluted Average) 138,509,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.32
Dec2018 $2.01
Dec2017 $0.77
Dec2016 $1.20
Dec2015 $1.72
Dec2014 $1.39
Dec2013 $1.22
Dec2012 $1.45
Dec2011 $1.38
Dec2010 $1.54
Dec2009 $1.45
Dec2008 $1.28
Dec2007 $0.89
Dec2006 $0.66
Dec2005 $0.58
Dec2004 $0.46
Dec2003 $0.29
Dec2002 $0.29
Dec2001 $0.20
Dec2000 -$0.23
Dec1999 -$0.48

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.74
Dec2018 $1.44
Dec2017 $1.19
Dec2016 $1.40
Dec2015 $1.47
Dec2014 $1.37
Dec2013 $1.37
Dec2012 $1.44
Dec2011 $1.39
Dec2010 $1.32
Dec2009 $1.13
Dec2008 $0.90
Dec2007 $0.67
Dec2006 $0.52
Dec2005 $0.43
Dec2004 $0.30
Dec2003 $0.15

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Other ModernGraham posts about the company

FLIR Systems Inc Valuation – April 2018 $FLIR
FLIR Systems Inc Valuation – November 2016 $FLIR
FLIR Systems Inc Valuation – May 2016 $FLIR
FLIR Systems Inc. Valuation – November 2015 Update $FLIR
FLIR Systems Inc. Analysis – August 2015 Update $FLIR

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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.

Cadence Design Systems Inc Valuation – January 2019 $CDNS

Company Profile (excerpt from Reuters): Cadence Design Systems, Inc., incorporated on April 8, 1987, provides solutions that enable its customers to design electronic products. The Company’s product categories include Functional Verification, Digital integrated circuits (IC) Design and Signoff, Custom IC Design and Verification, System Interconnect and Analysis, and intellectual property (IP). The Company’s functional verification products are used to verify that the circuitry or the software designed will perform as intended. Its digital IC design offerings are used to create representations of a digital circuit or an IC that can be verified for correctness prior to implementation. Its custom IC design and verification offerings are used to create schematic and physical representations of circuits down to the transistor level for analog, mixed-signal, custom digital, memory and radio frequency (RF) designs. Its system interconnect and analysis offerings are used to develop printed circuit boards (PCBs) and IC packages. Its design IP offerings consist of functional blocks, which customers integrate into their ICs for the development process. Its product offerings include electronic design automation software, emulation and prototyping hardware, system interconnect and analysis.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CDNS – 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 $13,545,636,946 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 Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 1535.29% Pass
6. Moderate PEmg Ratio PEmg < 20 51.86 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.77 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 0.99 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.93
MG Growth Estimate 4.74%
MG Value $16.67
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $13.45
MG Value based on 0% Growth $7.88
Market Implied Growth Rate 21.68%
Current Price $48.09
% of Intrinsic Value 288.43%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.7 in 2014 to an estimated $0.93 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 21.68% 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 Cadence Design Systems Inc revealed the company was trading above its Graham Number of $10.32. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 51.86, which was above the industry average of 50.37. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.45.

Cadence Design Systems 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) -$0.45
Graham Number $10.32
PEmg 51.86
Current Ratio 1.64
PB Ratio 10.77
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $888,381,000
Total Current Liabilities $541,321,000
Long-Term Debt $345,113,000
Total Assets $2,273,207,000
Intangible Assets $899,726,000
Total Liabilities $1,015,790,000
Shares Outstanding (Diluted Average) 281,646,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.35
Dec2017 $0.73
Dec2016 $0.70
Dec2015 $0.81
Dec2014 $0.52
Dec2013 $0.56
Dec2012 $1.57
Dec2011 $0.27
Dec2010 $0.48
Dec2009 -$0.58
Dec2008 -$7.30
Dec2007 $1.01
Dec2006 $0.46
Dec2005 $0.16
Dec2004 $0.25
Dec2003 -$0.07
Dec2002 $0.23
Dec2001 $0.55
Dec2000 $0.19
Dec1999 -$0.06
Dec1998 $0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.93
Dec2017 $0.70
Dec2016 $0.73
Dec2015 $0.75
Dec2014 $0.70
Dec2013 $0.68
Dec2012 $0.13
Dec2011 -$0.80
Dec2010 -$1.29
Dec2009 -$1.87
Dec2008 -$2.03
Dec2007 $0.52
Dec2006 $0.25
Dec2005 $0.17
Dec2004 $0.20
Dec2003 $0.17
Dec2002 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Cadence Design Systems Inc Valuation – Initial Coverage $CDNS

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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.

Sherwin-Williams Co Valuation – January 2019 $SHW

Company Profile (excerpt from Reuters): The Sherwin-Williams Company (Sherwin-Williams), incorporated on July 16, 1884, is engaged in the development, manufacture, distribution and sale of paint, coatings and related products to professional, industrial, commercial and retail customers primarily in North and South America with additional operations in the Caribbean region, Europe and Asia. The Company’s segments are Paint Stores Group, Consumer Group, Global Finishes Group, Latin America Coatings Group and Administrative.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SHW – 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 $36,779,226,028 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.04 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 269.25% Pass
6. Moderate PEmg Ratio PEmg < 20 27.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.40 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 1.04 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 44.45 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 $14.16
MG Growth Estimate 15.00%
MG Value $545.08
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $205.29
MG Value based on 0% Growth $120.34
Market Implied Growth Rate 9.62%
Current Price $392.83
% of Intrinsic Value 72.07%

Sherwin-Williams Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg 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 $6.9 in 2014 to an estimated $14.16 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.62% 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 Sherwin-Williams Co revealed the company was trading above its Graham Number of $111.82. The company pays a dividend of $3.4 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 27.75, which was above the industry average of 18.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-115.29.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$115.29
Graham Number $111.82
PEmg 27.75
Current Ratio 1.04
PB Ratio 9.40
Current Dividend $3.40
Dividend Yield 0.87%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $5,038,032,000
Total Current Liabilities $4,842,065,000
Long-Term Debt $8,710,831,000
Total Assets $19,980,696,000
Intangible Assets $12,253,184,000
Total Liabilities $16,005,857,000
Shares Outstanding (Diluted Average) 95,135,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $14.13
Dec2017 $18.67
Dec2016 $11.99
Dec2015 $11.15
Dec2014 $8.77
Dec2013 $7.26
Dec2012 $6.02
Dec2011 $4.14
Dec2010 $4.21
Dec2009 $3.78
Dec2008 $4.00
Dec2007 $4.70
Dec2006 $4.19
Dec2005 $3.28
Dec2004 $2.72
Dec2003 $2.26
Dec2002 $0.84
Dec2001 $1.68
Dec2000 $0.10
Dec1999 $1.80
Dec1998 $1.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $14.16
Dec2017 $13.30
Dec2016 $10.09
Dec2015 $8.59
Dec2014 $6.90
Dec2013 $5.67
Dec2012 $4.72
Dec2011 $4.11
Dec2010 $4.12
Dec2009 $4.04
Dec2008 $4.04
Dec2007 $3.85
Dec2006 $3.17
Dec2005 $2.49
Dec2004 $1.91
Dec2003 $1.45
Dec2002 $1.09

Recommended Reading:

Other ModernGraham posts about the company

Sherwin-Williams Co Valuation – March 2018 $SHW
Sherwin-Williams Co Valuation – July 2016 $SHW
47 Companies in the Spotlight This Week – 5/16/15
Sherwin Williams Company Annual Valuation – 2015 $SHW
16 Companies in the Spotlight This Week – 5/24/14

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LGI Homes Inc Valuation – September 2018 $LGIH
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KBR Inc Valuation – August 2018 $KBR
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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.

Varian Medical Systems Inc Valuation – January 2019 $VAR

Company Profile (excerpt from Reuters): Varian Medical Systems, Inc., incorporated on January 22, 1976, is a manufacturer of medical devices and software for treating cancer and other medical conditions with radiotherapy, radiosurgery, proton therapy and brachytherapy medical devices and software for treating cancer and other medical conditions with radiotherapy, radiosurgery, proton therapy and brachytherapy. The Company also has Varian Particle Therapy (VPT) and the operations of the Ginzton Technology Center (GTC). Its VPT business develops, designs, manufactures, sells and services products and systems for delivering proton therapy, another form of external beam radiotherapy using proton beams for the treatment of cancer. Its ProBeam system is capable of delivering intensity modulated proton therapy (IMPT) using pencil beam scanning technology. Its ProBeam Compact is a single room proton therapy product.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VAR – 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 $11,581,601,683 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.63 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -13.86% Fail
6. Moderate PEmg Ratio PEmg < 20 38.80 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.40 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 1.63 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.29
MG Growth Estimate -2.38%
MG Value $12.28
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $47.65
MG Value based on 0% Growth $27.93
Market Implied Growth Rate 15.15%
Current Price $127.50
% of Intrinsic Value 1037.99%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.91 in 2015 to an estimated $3.29 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.15% 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 Varian Medical Systems, Inc. revealed the company was trading above its Graham Number of $42.64. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 38.8, which was below the industry average of 52.7, 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 $5.69.

Varian Medical Systems, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $5.69
Graham Number $42.64
PEmg 38.80
Current Ratio 1.63
PB Ratio 7.40
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,188,400,000
Total Current Liabilities $1,339,700,000
Long-Term Debt $0
Total Assets $3,252,700,000
Intangible Assets $394,700,000
Total Liabilities $1,664,000,000
Shares Outstanding (Diluted Average) 92,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.67
Sep2018 $1.62
Sep2017 $2.35
Sep2016 $4.16
Sep2015 $4.09
Sep2014 $3.83
Sep2013 $3.98
Sep2012 $3.76
Sep2011 $3.36
Sep2010 $2.91
Sep2009 $2.55
Sep2008 $2.19
Sep2007 $1.83
Sep2006 $1.81
Sep2005 $1.50
Sep2004 $1.18
Sep2003 $0.92
Sep2002 $0.67
Sep2001 $0.40
Sep2000 $0.41
Sep1999 -$0.20

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.29
Sep2018 $2.80
Sep2017 $3.49
Sep2016 $4.02
Sep2015 $3.91
Sep2014 $3.73
Sep2013 $3.56
Sep2012 $3.22
Sep2011 $2.82
Sep2010 $2.45
Sep2009 $2.14
Sep2008 $1.86
Sep2007 $1.61
Sep2006 $1.41
Sep2005 $1.11
Sep2004 $0.85
Sep2003 $0.60

Recommended Reading:

Other ModernGraham posts about the company

Varian Medical Systems Inc Valuation – March 2018 $VAR
Varian Medical Systems Inc Valuation – July 2016 $VAR
Varian Medical Systems Inc. Valuation – November 2015 Update $VAR
The Best Companies of the Medical Industry – September 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15

Other ModernGraham posts about related companies

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LHC Group Inc Valuation – September 2018 $LHCG
Chartwell Retirement Residences Valuation – August 2018 $TSE:CSH.UN
STERIS PLC Valuation – August 2018 $STE
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Charles River Laboratories International Inc Valuation – August 2018 $CRL

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.

CMS Energy Corp Valuation – January 2019 $CMS

Company Profile (excerpt from Reuters): CMS Energy Corporation (CMS Energy), incorporated on February 26, 1987, is an energy company operating primarily in Michigan. The Company operates through three segments: electric utility, which consists of regulated activities associated with the generation, transmission and distribution of electricity in Michigan; gas utility, which consists of regulated activities associated with the transportation, storage and distribution of natural gas in Michigan, and enterprises, which consists of various subsidiaries engaging primarily in domestic independent power production. The Company is the parent holding company of various subsidiaries, including Consumers Energy Company (Consumers), an electric and gas utility company, and CMS Enterprises Company (CMS Enterprises), a domestic independent power producer.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CMS – 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 $14,206,216,167 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.69 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 58.24% Pass
6. Moderate PEmg Ratio PEmg < 20 25.35 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.97 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 0.69 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -8.30 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.98
MG Growth Estimate 3.60%
MG Value $31.05
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $28.68
MG Value based on 0% Growth $16.81
Market Implied Growth Rate 8.42%
Current Price $50.14
% of Intrinsic Value 161.50%

CMS Energy Corporation 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 $1.6 in 2014 to an estimated $1.98 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.42% 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 CMS Energy Corporation revealed the company was trading above its Graham Number of $28.75. The company pays a dividend of $1.33 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 25.35, which was above the industry average of 21.62. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-59.16.

CMS Energy Corporation 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) -$59.16
Graham Number $28.75
PEmg 25.35
Current Ratio 0.69
PB Ratio 2.97
Current Dividend $1.33
Dividend Yield 2.65%
Number of Consecutive Years of Dividend Growth 11

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 $2,374,000,000
Total Current Liabilities $3,442,000,000
Long-Term Debt $8,869,000,000
Total Assets $23,913,000,000
Intangible Assets $0
Total Liabilities $19,127,000,000
Shares Outstanding (Diluted Average) 283,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.33
Dec2017 $1.64
Dec2016 $1.98
Dec2015 $1.89
Dec2014 $1.74
Dec2013 $1.66
Dec2012 $1.39
Dec2011 $1.57
Dec2010 $1.28
Dec2009 $0.91
Dec2008 $1.20
Dec2007 -$1.02
Dec2006 -$0.41
Dec2005 -$0.44
Dec2004 $0.64
Dec2003 -$0.30
Dec2002 -$4.68
Dec2001 -$3.51
Dec2000 $0.04
Dec1999 $2.17
Dec1998 $2.45

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.98
Dec2017 $1.80
Dec2016 $1.83
Dec2015 $1.72
Dec2014 $1.60
Dec2013 $1.47
Dec2012 $1.34
Dec2011 $1.14
Dec2010 $0.75
Dec2009 $0.34
Dec2008 $0.03
Dec2007 -$0.47
Dec2006 -$0.48
Dec2005 -$0.89
Dec2004 -$1.27
Dec2003 -$1.90
Dec2002 -$2.04

Recommended Reading:

Other ModernGraham posts about the company

CMS Energy Corp Valuation – March 2018 $CMS
CMS Energy Corp Valuation – June 2016 $CMS
40 Companies in the Spotlight This Week – 2/21/15
CMS Energy Corporation Annual Valuation – 2015 $CMS
5 Undervalued Companies to Research with a Low Beta – February 2015

Other ModernGraham posts about related companies

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Spire Inc Valuation – August 2018 $SR
Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB
Just Energy Group Inc Valuation – August 2018 $TSE:JE
South Jersey Industries Inc Valuation – July 2018 $SJI
Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE
Suburban Propane Partners LP Valuation – June 2018 $SPH

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.

Morgan Stanley Valuation – January 2019 $MS

Company Profile (excerpt from Reuters): Morgan Stanley, incorporated on October 1, 1981, is a financial holding company. The Company is engaged in global financial services. The Company, through its subsidiaries and affiliates, advises, and originates, trades, manages and distributes capital for governments, institutions and individuals. The Company’s segments include Institutional Securities, Wealth Management and Investment Management. Through its subsidiaries and affiliates, the Company provides a range of products and services to a group of clients and customers, including corporations, governments, financial institutions and individuals.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MS – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $73,072,141,132 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 245.31% Pass
5. Moderate PEmg Ratio PEmg < 20 12.29 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.92 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.46
MG Growth Estimate 15.00%
MG Value $133.06
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $50.11
MG Value based on 0% Growth $29.38
Market Implied Growth Rate 1.90%
Current Price $42.48
% of Intrinsic Value 31.93%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.23 in 2014 to an estimated $3.46 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.9% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Morgan Stanley revealed the company was trading below its Graham Number of $63.69. The company pays a dividend of $0.9 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.29, which was below the industry average of 18, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Morgan Stanley fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $63.69
PEmg 12.29
PB Ratio 0.92
Dividend Yield 2.12%
TTM Dividend $0.90
Number of Consecutive Years of Dividend Growth 4

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $189,949,000,000
Total Assets $865,517,000,000
Intangible Assets $8,920,000,000
Total Liabilities $785,443,000,000
Shares Outstanding (Diluted Average) 1,727,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.68
Dec2017 $3.07
Dec2016 $2.92
Dec2015 $2.90
Dec2014 $1.60
Dec2013 $1.36
Dec2012 -$0.02
Dec2011 $1.23
Dec2010 $2.63
Dec2009 -$0.77
Nov2008 $1.45
Nov2007 $2.98
Nov2006 $7.07
Nov2005 $4.57
Nov2004 $4.06
Nov2003 $3.45
Nov2002 $2.69
Nov2001 $3.11
Nov2000 $4.73
Nov1999 $4.10
Nov1998 $2.67

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.46
Dec2017 $2.69
Dec2016 $2.25
Dec2015 $1.74
Dec2014 $1.23
Dec2013 $0.99
Dec2012 $0.84
Dec2011 $1.35
Dec2010 $1.83
Dec2009 $1.97
Nov2008 $3.57
Nov2007 $4.56
Nov2006 $5.03
Nov2005 $3.86
Nov2004 $3.54
Nov2003 $3.39
Nov2002 $3.40

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Disclaimer:

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

MSCI Inc Valuation – January 2019 $MSCI

Company Profile (excerpt from Reuters): MSCI Inc. (MSCI), incorporated on July 2, 1998, offers products and services to support the needs of institutional investors throughout their investment processes. The Company’s segments include Index, Analytics and All Other segment. All Other segment comprises environmental, social and governance (ESG) and Real Estate segments. The Company’s products and services include the development and production of indexes and analytical models; the provision of ratings and analysis that identify environmental, social and governance risks and opportunities and the analysis of real estate in both privately and publicly owned portfolios.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MSCI – 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 $13,531,533,038 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.75 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 267.88% Pass
6. Moderate PEmg Ratio PEmg < 20 43.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 37.11 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 2.75 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.18 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 $3.56
MG Growth Estimate 14.05%
MG Value $130.10
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $51.55
MG Value based on 0% Growth $30.22
Market Implied Growth Rate 17.37%
Current Price $153.71
% of Intrinsic Value 118.15%

Msci Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor 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 Overvalued after growing its EPSmg (normalized earnings) from $1.84 in 2014 to an estimated $3.56 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.37% 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 Msci Inc revealed the company was trading above its Graham Number of $22.6. The company pays a dividend of $1.32 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 43.23, which was above the industry average of 18. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.19.

Msci 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) -$17.19
Graham Number $22.60
PEmg 43.23
Current Ratio 2.75
PB Ratio 37.11
Current Dividend $1.32
Dividend Yield 0.86%
Number of Consecutive Years of Dividend Growth 4

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,857,346,000
Total Current Liabilities $675,050,000
Long-Term Debt $2,574,616,000
Total Assets $3,806,405,000
Intangible Assets $1,834,447,000
Total Liabilities $3,427,964,000
Shares Outstanding (Diluted Average) 91,372,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.10
Dec2017 $3.31
Dec2016 $2.70
Dec2015 $2.03
Dec2014 $2.43
Dec2013 $1.83
Dec2012 $1.48
Dec2011 $1.41
Nov2010 $0.81
Nov2009 $0.80
Nov2008 $0.67
Nov2007 $0.96
Nov2006 $0.85
Nov2005 $0.65
Nov2004 $0.37
Nov2003 $0.40

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.56
Dec2017 $2.68
Dec2016 $2.27
Dec2015 $1.98
Dec2014 $1.84
Dec2013 $1.45
Dec2012 $1.18
Dec2011 $1.00
Nov2010 $0.80
Nov2009 $0.79
Nov2008 $0.76
Nov2007 $0.75
Nov2006 $0.58
Nov2005 $0.40
Nov2004 $0.23
Nov2003 $0.13

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Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Ameriprise Financial Inc Valuation – January 2019 $AMP
Invesco Ltd Valuation – January 2019 $IVZ
Capital One Financial Corp Valuation – January 2019 $COF
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Goldman Sachs Group Inc Valuation – November 2018 $GS
KKR & Co Inc Valuation – September 2018 $KKR
CorVel Corp Valuation – August 2018 $CRVL
Jones Lang LaSalle Inc Valuation – August 2018 $JLL
Investment Technology Group Inc Valuation – July 2018 $ITG
Stifel Financial Corp Valuation – July 2018 $SF

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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