Navient Corp Valuation – March 2018 $NAVI

Company Profile (obtained from Marketwatch): Navient Corp. engages in the provision of loan management, servicing, and asset recovery services. It operates the business through the following segments: FFELP Loans, Private Education Loans, Business Services, and Others. The FFELP Loans segment consists of its FFELP Loan portfolio; and the underlying debt and capital funding the loans. The Private Education Loans segment acquires finances and services private education loans. The Business Services segment provides servicing and asset recovery services for loans on behalf of Guarantors of FFELP Loans and other institutions. The Other segment covers activities related to repurchases of debt; its corporate liquidity portfolio; and unallocated overhead and regulatory-related costs. The company was founded on November 7, 2013 and is headquartered in Wilmington, DE.

NAVI Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of NAVI – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,532,253,362 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 16766566.67% Pass
5. Moderate PEmg Ratio PEmg < 20 7.28 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.05 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.85
MG Growth Estimate -1.81%
MG Value $9.02
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $26.77
MG Value based on 0% Growth $15.69
Market Implied Growth Rate -0.61%
Current Price $13.43
% of Intrinsic Value 148.83%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.1 in 2014 to an estimated $1.85 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.61% 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 below the price.

At the time of valuation, further research into Navient Corp revealed the company was trading below its Graham Number of $23.51. The company pays a dividend of $0.64 per share, for a yield of 4.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.28, which was below the industry average of 21.55, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $23.51
PEmg 7.28
PB Ratio 1.05
Dividend Yield 4.77%
TTM Dividend $0.64
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $105,012,000,000
Total Assets $114,991,000,000
Intangible Assets $810,000,000
Total Liabilities $111,537,000,000
Shares Outstanding (Diluted Average) 269,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.87
Dec2017 $1.04
Dec2016 $2.12
Dec2015 $2.58
Dec2014 $2.66
Dec2013 $3.12
Dec2012 $1.90

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.85
Dec2017 $1.99
Dec2016 $2.47
Dec2015 $2.45
Dec2014 $2.10
Dec2013 $1.55
Dec2012 $0.63

Recommended Reading:

Other ModernGraham posts about the company

10 Best Dividend Paying Stocks for the Enterprising Investor – September 2016
7 Best Undervalued Stocks of the Week – 9/3/16
10 Low PE Stock Picks for the Enterprising Investor – September 2016
Navient Corp Valuation – August 2016 $NAVI
Navient Corporation Analysis – Initial Coverage $NAVI

Other ModernGraham posts about related companies

Invesco Ltd Valuation – March 2018 $IVZ
Capital One Financial Corp Valuation – March 2018 $COF
Total System Services Inc Valuation – February 2018 $TSS
Visa Inc Valuation – February 2018 $V
Goldman Sachs Group Inc Valuation – February 2018 $GS
American Express Co. Valuation – February 2018 $AXP
Encore Capital Group Inc Valuation – Initial Coverage $ECPG
T.Rowe Price Group Inc Valuation – July 2017 $TROW
T.Rowe Price Group Inc Valuation – June 2017 $TROW
Tricon Capital Group Inc Valuation – Initial Coverage $TSE:TCN

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.

Navient Corp Valuation – August 2016 $NAVI

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 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 Navient Corp (NAVI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Navient Corporation is a loan management, servicing and asset recovery company. The Company holds the portfolio of education loans insured or guaranteed under the Federal Family Education Loan Program (FFELP), as well as the portfolio of Private Education Loans. FFELP Loans are insured or guaranteed by state based on guaranty agreements among the United States Department of Education (ED) and these agencies. Private Education Loans are education loans to students or their families that bear the full credit risk of the customer and any cosigner. The Company operates in three segments: FFELP Loans, Private Education Loans and Business Services. The Company services its own portfolio of education loans, as well as those owned by banks, credit unions, non-profit education lenders and ED. It also provides asset recovery services on its own portfolio, guaranty agencies, higher education institutions, ED and other federal clients, as well as states, courts and municipalities.

NAVI Chart

NAVI data by YCharts

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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. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of NAVI – August 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $4,636,150,604 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 23833233.33% Pass
5. Moderate PEmg Ratio PEmg < 20 6.01 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.28 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

NAVI value chart August 2016

EPSmg $2.39
MG Growth Estimate 15.00%
MG Value $92.14
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $34.70
MG Value based on 0% Growth $20.34
Market Implied Growth Rate -1.25%
Current Price $14.38
% of Intrinsic Value 15.61%

Navient Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history. 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 $0.63 in 2012 to an estimated $2.39 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.25% 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.

At the time of valuation, further research into Navient Corp revealed the company was trading below its Graham Number of $21.98. The company pays a dividend of $0.64 per share, for a yield of 4.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 6.01, which was below the industry average of 19.87, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

NAVI charts August 2016

Graham Number $21.98
PEmg 6.01
PB Ratio 1.28
Dividend Yield 4.45%
TTM Dividend $0.64
Number of Consecutive Years of Dividend Growth 3

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Long-Term Debt & Capital Lease Obligation $119,637,000,000
Total Assets $128,372,000,000
Intangible Assets $696,000,000
Total Liabilities $124,693,000,000
Shares Outstanding (Diluted Average) 328,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.85
Dec2015 $2.61
Dec2014 $2.69
Dec2013 $3.12
Dec2012 $1.90

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.39
Dec2015 $2.46
Dec2014 $2.11
Dec2013 $1.55
Dec2012 $0.63

Recommended Reading:

Other ModernGraham posts about the company

Navient Corporation Analysis – Initial Coverage $NAVI

Other ModernGraham posts about related companies

T Rowe Price Group Inc Valuation – August 2016 $TROW
Moody’s Corporation Valuation – August 2016 $MCO
KKR & Co L.P. Valuation – August 2016 $KKR
Franklin Resources Inc Valuation – August 2016 $BEN
Equifax Inc Valuation – August 2016 $EFX
Charles Schwab Corp Valuation – August 2016 $SCHW
Northern Trust Corp Valuation – July 2016 $NTRS
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
Invesco Ltd Valuation – July 2016 $IVZ
Nasdaq Inc Valuation – July 2016 $NDAQ

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.

Navient Corporation Analysis – Initial Coverage $NAVI

logo_navientBenjamin 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 – July 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 Navient Corporation (NAVI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Navient Corporation is a loan management, servicing and asset recovery company. The Company holds the portfolio of education loans insured or guaranteed under the Federal Family Education Loan Program (FFELP), as well as the portfolio of Private Education Loans. FFELP Loans are insured or guaranteed by state based on guaranty agreements among the United States Department of Education (ED) and these agencies. Private Education Loans are education loans to students or their families that bear the full credit risk of the customer and any cosigner. The Company operates in three segments: FFELP Loans, Private Education Loans and Business Services. The Company services its own portfolio of education loans, as well as those owned by banks, credit unions, non-profit education lenders and ED. It also provides asset recovery services on its own portfolio, guaranty agencies, higher education institutions, ED and other federal clients, as well as states, courts and municipalities.

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Defensive Investor – must pass all 6 of the following tests: Score = 3/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  4. 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
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 1/3

  1. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $15.89
MG Value $85.14
MG Opinion Undervalued
Value Based on 3% Growth $32.06
Value Based on 0% Growth $18.80
Market Implied Growth Rate -0.66%
PEmg 7.19
PB Ratio 1.57

Balance Sheet – March 2015

Total Debt $132,330,000,000
Total Assets $143,872,000,000
Intangible Assets $549,000,000
Total Liabilities $139,785,000,000
Outstanding Shares 405,000,000

Earnings Per Share

2015 (estimate) $1.85
2014 $2.69
2013 $3.12
2012 $1.90

Earnings Per Share – ModernGraham

2015 (estimate) $2.21
2014 $2.11
2013 $1.55
2012 $0.63

Dividend History

Conclusion:

Navient Corporation does not qualify for either the Defensive Investor and the Enterprising Investor.  Both investor types are concerned with the short operating history as a stand-alone company, as there is not enough data yet to accurately provide information for a full valuation.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a speculative attitude.  As for a valuation based on the limited data available, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.63 in 2012 to an estimated $2.21 for 2015.  This level of earnings growth outpaces the market’s implied estimate of 0.66% annual earnings decrease 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 Navient Corporation (NAVI)?  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.

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5 Hints for Navigating Mr. Market’s Movements – Throwback Thursday

This was originally published in April 2009, titled “5 Things to Remember as the Market Turns the Corner.”  It has some helpful hints that are true in any market environment.  This week for Throwback Thursday we will revisit those hints.

1.  Prices may fluctuate as Mr. Market sways his opinion, but values only change with earnings results.

Investing Research

A value of a company should be based on the earnings that it has achieved, and the present value of future earnings.  We use the past 10 years of earnings to determine an anticipated growth rate for a company, then use a normalized earnings per share amount to calculate the present value of that earnings per share grown in a perpetuity discounted at 11.78%.  This is the basis of Benjamin Graham’s formula from The Intelligent Investor, and you can easily calculate it yourself with the use of our valuation calculator.

2.  Diversification is your friend.

We don’t always buy into the whole modern portfolio theory idea that the market is efficient (at best it is semi-strong efficient), but the fact remains that by diversifying across a number of investments and industries you can lower your risk. In football you don’t want to have to gain all 10 yards in one play. You want to gain 4 yards per play on average because then you will easily get more than the 10 yards you need every 4 plays. The same idea comes into play with diversification. You don’t want to have the risk that your single chance at gaining will come from one company. You could fail with that investment and end up with nothing. We favor diversification across a small field of 10-15 companies for the enterprising investor or the use of ETFs for a very passive defensive investor.

3.  Rebalance your equity/bond ratio.

BalanceLast fall as the market was coming down we had a number of people tell us they were taking money out of their equities and putting them in bonds. I cringed every time I heard it. They should have been doing the opposite – take money out of your bonds now and put them in equities! Sure, this downturn hasn’t behaved exactly the way that it should (bonds rise as stocks fall) but equities will rise more when the market recovers. For an easy way to keep balance between bonds and equities in your portfolio, rebalance every 6-18 months (depending on your own preferences regarding capital gains taxation), and strive for a set ratio of 110-your age=% of portfolio in equities. For example, a 30 year old should have 80% of his portfolio in equities while a 60 year old should have a 50/50 split.  In The Intelligent Investor, Benjamin Graham suggests a 50/50 split, with flexibility of moving to a 25/75 split (in either direction) depending on the individual’s expectations of the market.

4.  Rebalance your individual investments.

When you rebalance your equity/bond ratio, do it with your individual investments. If you want to diversify across 10 investments, each one should constitute 10% of your overall portfolio. Over time, some investments will rise faster than others leading to them taking up more than their share of your portfolio. By rebalancing them back down to 10% you lock in some gains and are able to put those funds towards the investments that have taken longer to rise (and may be due for a quicker rise).

5.  Dividends can make or break a portfolio.

BuffettFor both the defensive and enterprising investors, we think that dividends are an extremely important part of the investment screen. One reason is that companies that make dividend payments tend to be more established and stable businesses. Another reason is that a constant dividend stream lowers the risk of capital depreciation. As Warren Buffett says, “The number one rule in investing is to not lose money.” If you invest in a company that has a dividend yield of 3%, you can face losing some capital in the price of the company over time without actually losing any money.

Garmin Ltd Valuation – March 2019 #GRMN

Company Profile (excerpt from Reuters): Garmin Ltd. (Garmin), incorporated on February 9, 2010, and subsidiaries offer global positioning system (GPS) navigation and wireless devices and applications. The Company operates through five segments: auto, aviation, fitness, marine and outdoor. The Company designs, develops, manufactures, markets and distributes a family of hand-held, wearable, portable and fixed-mount GPS-enabled products and other navigation, communications, sensor-based and information products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GRMN – 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 $15,869,253,764 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.89 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 30.79% Fail
6. Moderate PEmg Ratio PEmg < 20 24.42 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.83 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 2.89 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 Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.43
MG Growth Estimate 5.85%
MG Value $69.35
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $49.75
MG Value based on 0% Growth $29.17
Market Implied Growth Rate 7.96%
Current Price $83.81
% of Intrinsic Value 120.86%

Garmin Ltd. 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 high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.47 in 2015 to an estimated $3.43 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.96% 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 Garmin Ltd. revealed the company was trading above its Graham Number of $41.91. The company pays a dividend of $2.1 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.42, which was below the industry average of 35.5, 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 $7.6.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.60
Graham Number $41.91
PEmg 24.42
Current Ratio 2.89
PB Ratio 3.83
Current Dividend $2.10
Dividend Yield 2.51%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,665,368,000
Total Current Liabilities $921,313,000
Long-Term Debt $0
Total Assets $5,382,858,000
Intangible Assets $417,080,000
Total Liabilities $1,219,884,000
Shares Outstanding (Diluted Average) 190,178,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.54
Dec2018 $3.66
Dec2017 $3.76
Dec2016 $2.73
Dec2015 $2.39
Dec2014 $1.88
Dec2013 $3.12
Dec2012 $2.76
Dec2011 $2.67
Dec2010 $2.95
Dec2009 $3.50
Dec2008 $3.48
Dec2007 $3.89
Dec2006 $2.35
Dec2005 $1.43
Dec2004 $0.95
Dec2003 $0.82
Dec2002 $0.66
Dec2001 $0.53
Dec2000 $0.53
Dec1999 $0.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.43
Dec2018 $3.21
Dec2017 $2.92
Dec2016 $2.52
Dec2015 $2.47
Dec2014 $2.56
Dec2013 $2.94
Dec2012 $2.92
Dec2011 $3.10
Dec2010 $3.29
Dec2009 $3.28
Dec2008 $2.92
Dec2007 $2.39
Dec2006 $1.51
Dec2005 $1.01
Dec2004 $0.77
Dec2003 $0.65

Recommended Reading:

Other ModernGraham posts about the company

Garmin Ltd Valuation – June 2018 $GRMN
Garmin Ltd Valuation – March 2017 $GRMN
Garmin Limited Valuation – August 2016 $GRMN
Garmin Ltd Stock Valuation – February 2016 $GRMN
Garmin Limited Analysis – September 2015 Update $GRMN

Other ModernGraham posts about related companies

Hewlett Packard Enterprise Co Valuation – March 2019 #HPE
Fortive Corp Valuation – March 2019 #FTV
Analog Devices Inc Valuation – March 2019 #ADI
IPG Photonics Corp Valuation – March 2019 #IPGP
Micron Technology Inc Valuation – March 2019 #MU
Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC
Texas Instruments Inc Valuation – March 2019 #TXN
Qualcomm Inc Valuation – March 2019 #QCOM

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.

Verisign Inc Valuation – March 2019 #VRSN

Company Profile (excerpt from Reuters): VeriSign, Inc., incorporated on April 12, 1995, is a provider of domain name registry services and Internet security, enabling Internet navigation for various domain names and providing protection for Websites and enterprises around the world. The Company operates through Registry Services and Security Services segment. Registry Services ensure the security, stability and resiliency of Internet infrastructure and services, including the .com and .net domains, and operation of the root-zone maintainer functions for the core of the Internet’s Domain Name System (DNS). Security Services provides infrastructure assurance services consisting of Distributed Denial of Services (DDoS) Protection Services and Managed DNS Services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VRSN – 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 $21,248,216,007 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.39 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 81.88% Pass
6. Moderate PEmg Ratio PEmg < 20 40.77 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -15.55 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 1.39 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.83 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.35
MG Growth Estimate 9.85%
MG Value $122.80
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $63.12
MG Value based on 0% Growth $37.00
Market Implied Growth Rate 16.14%
Current Price $177.49
% of Intrinsic Value 144.54%

Verisign, 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, 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 dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.63 in 2015 to an estimated $4.35 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.14% 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 Verisign, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 40.77, which was below the industry average of 56.55, 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 $-16.33.

Verisign, 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) -$16.33
Graham Number $0.00
PEmg 40.77
Current Ratio 1.39
PB Ratio -15.55
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,317,034,000
Total Current Liabilities $947,590,000
Long-Term Debt $1,785,047,000
Total Assets $1,914,504,000
Intangible Assets $52,527,000
Total Liabilities $3,299,978,000
Shares Outstanding (Diluted Average) 121,407,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.12
Dec2018 $4.75
Dec2017 $3.68
Dec2016 $3.42
Dec2015 $2.82
Dec2014 $2.52
Dec2013 $3.49
Dec2012 $1.95
Dec2011 $0.86
Dec2010 $4.64
Dec2009 $1.28
Dec2008 -$1.90
Dec2007 -$0.63
Dec2006 $1.53
Dec2005 $1.63
Dec2004 $0.60
Dec2003 -$1.20
Dec2002 -$20.97
Dec2001 -$65.64
Dec2000 -$19.57
Dec1999 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.35
Dec2018 $3.79
Dec2017 $3.27
Dec2016 $2.99
Dec2015 $2.63
Dec2014 $2.58
Dec2013 $2.56
Dec2012 $1.85
Dec2011 $1.48
Dec2010 $1.53
Dec2009 $0.11
Dec2008 -$0.24
Dec2007 $0.52
Dec2006 -$0.49
Dec2005 -$6.71
Dec2004 -$14.37
Dec2003 -$21.73

Recommended Reading:

Other ModernGraham posts about the company

Verisign Inc Valuation – May 2018 $VRSN
Verisign Inc Valuation – February 2017 $VRSN
Verisign Inc Valuation – August 2016 $VRSN
Verisign Inc. Analysis – 2015 Update $VRSN
20 Companies in the Research Spotlight This Week – June 7, 2014

Other ModernGraham posts about related companies

Motorola Solutions Inc Valuation – February 2019 $MSI
Gartner Inc Valuation – January 2019 $IT
Xerox Corp Valuation – January 2019 $XRX
Cognizant Technology Solutions Corp Valuation – January 2019 $CTSH
International Business Machines Corp Valuation – November 2018 $IBM
DXC Technology Corp Valuation – November 2018 $DXC
Sykes Enterprises Inc Valuation – October 2018 $SYKE
Computer Programs and Systems Inc Valuation – August 2018 $CPSI
Science Applications International Corp Valuation – July 2018 $SAIC
Acxiom Corp Valuation – July 2018 $ACXM

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.

iRobot Corp Valuation – July 2018 $IRBT

Company Profile (excerpt from Reuters): iRobot Corporation, incorporated on December 20, 2000, is a consumer robot company, which is engaged in designing and building robots. The Company’s portfolio of solutions features various technologies for the connected home and various concepts in mapping, navigation, mobility and artificial intelligence. The Company sells various products that are designed for use at home. Its consumer products focus on both indoor and outdoor cleaning applications. The Company offers multiple Roomba floor vacuuming robots. Roomba’s design allows it to clean under kick boards, beds and other furniture. The Company offers the Braava family of automatic floor mopping robots designed for hard surface floors. The Company’s trademarks include iRobot, Roomba, Scooba, ViPR, NorthStar, Create, iAdapt, Aware, Home Base, Looj, Braava, AeroForce, Mirra, vSLAM and Virtual Wall.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IRBT – July 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,239,045,575 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.89 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 114.62% Pass
6. Moderate PEmg Ratio PEmg < 20 45.19 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.96 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 2.89 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.77
MG Growth Estimate 10.46%
MG Value $52.18
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $25.72
MG Value based on 0% Growth $15.08
Market Implied Growth Rate 18.34%
Current Price $80.16
% of Intrinsic Value 153.63%

iRobot Corporation 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 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 $1.05 in 2014 to an estimated $1.77 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 18.34% 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 iRobot Corporation revealed the company was trading above its Graham Number of $28.73. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 45.19, which was below the industry average of 53.59, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.4.

iRobot Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.40
Graham Number $28.73
PEmg 45.19
Current Ratio 2.89
PB Ratio 4.96
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $348,446,000
Total Current Liabilities $120,723,000
Long-Term Debt $0
Total Assets $596,781,000
Intangible Assets $152,398,000
Total Liabilities $138,740,000
Shares Outstanding (Diluted Average) 28,337,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.18
Dec2017 $1.77
Dec2016 $1.48
Dec2015 $1.47
Dec2014 $1.25
Dec2013 $0.94
Dec2012 $0.61
Dec2011 $1.44
Dec2010 $0.96
Dec2009 $0.13
Dec2008 $0.03
Dec2007 $0.36
Dec2006 $0.14
Dec2005 $0.11
Dec2004 $0.01
Dec2003 -$0.79
Dec2002 -$2.00
Dec2001 -$0.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.77
Dec2017 $1.51
Dec2016 $1.30
Dec2015 $1.19
Dec2014 $1.05
Dec2013 $0.90
Dec2012 $0.80
Dec2011 $0.79
Dec2010 $0.42
Dec2009 $0.15
Dec2008 $0.15
Dec2007 $0.13
Dec2006 -$0.16
Dec2005 -$0.42
Dec2004 -$0.67
Dec2003 -$0.90
Dec2002 -$0.80

Recommended Reading:

Other ModernGraham posts about the company

iRobot Corp Valuation – Initial Coverage $IRBT

Other ModernGraham posts about related companies

ScanSource Inc Valuation – July 2018 $SCSC
Cognex Corp Valuation – July 2018 $CGNX
Sanmina Corp Valuation – July 2018 $SANM
II-VI Inc Valuation – July 2018 $IIVI
CEVA Inc Valuation – July 2018 $CEVA
MTS Systems Corp Valuation – June 2018 $MTSC
Jabil Inc Valuation – June 2018 $JBL
Arrow Electronics Inc Valuation – June 2018 $ARW
Lam Research Corp Valuation – June 2018 $LRCX
Emerson Electric Co Valuation – June 2018 $EMR

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.

Garmin Ltd Valuation – June 2018 $GRMN

Company Profile (excerpt from Reuters): Garmin Ltd. (Garmin), incorporated on February 9, 2010, and subsidiaries offer global positioning system (GPS) navigation and wireless devices and applications. The Company operates through five segments: auto, aviation, fitness, marine and outdoor. The Company designs, develops, manufactures, markets and distributes a family of hand-held, wearable, portable and fixed-mount GPS-enabled products and other navigation, communications, sensor-based and information products.

GRMN Chart

GRMN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GRMN – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,251,089,671 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.93 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 3.40% Fail
6. Moderate PEmg Ratio PEmg < 20 20.74 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.93 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 3.93 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 Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.98
MG Growth Estimate 2.45%
MG Value $39.96
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $43.24
MG Value based on 0% Growth $25.35
Market Implied Growth Rate 6.12%
Current Price $61.85
% of Intrinsic Value 154.79%

Garmin Ltd. 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 high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.56 in 2014 to an estimated $2.98 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.12% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Garmin Ltd. revealed the company was trading above its Graham Number of $37.24. The company pays a dividend of $2.04 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.74, which was below the industry average of 55.37, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.04.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.04
Graham Number $37.24
PEmg 20.74
Current Ratio 3.93
PB Ratio 2.93
Current Dividend $2.04
Dividend Yield 3.30%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $2,191,283,000
Total Current Liabilities $557,843,000
Long-Term Debt $0
Total Assets $4,855,222,000
Intangible Assets $421,006,000
Total Liabilities $858,029,000
Shares Outstanding (Diluted Average) 189,292,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.05
Dec2017 $3.68
Dec2016 $2.70
Dec2015 $2.39
Dec2014 $1.88
Dec2013 $3.12
Dec2012 $2.76
Dec2011 $2.67
Dec2010 $2.95
Dec2009 $3.50
Dec2008 $3.48
Dec2007 $3.89
Dec2006 $2.35
Dec2005 $1.43
Dec2004 $0.95
Dec2003 $0.82
Dec2002 $0.66
Dec2001 $0.53
Dec2000 $0.53
Dec1999 $0.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.98
Dec2017 $2.88
Dec2016 $2.51
Dec2015 $2.47
Dec2014 $2.56
Dec2013 $2.94
Dec2012 $2.92
Dec2011 $3.10
Dec2010 $3.29
Dec2009 $3.28
Dec2008 $2.92
Dec2007 $2.39
Dec2006 $1.51
Dec2005 $1.01
Dec2004 $0.77
Dec2003 $0.65
Dec2002 $0.51

Recommended Reading:

Other ModernGraham posts about the company

Garmin Ltd Valuation – March 2017 $GRMN
Garmin Limited Valuation – August 2016 $GRMN
Garmin Ltd Stock Valuation – February 2016 $GRMN
Garmin Limited Analysis – September 2015 Update $GRMN
Garmin Limited Analysis – June 2015 Update $GRMN

Other ModernGraham posts about related companies

Hewlett Packard Enterprise Co Valuation – June 2018 $HPE
Fortive Corp Valuation – June 2018 $FTV
Analog Devices Inc Valuation – June 2018 $ADI
IPG Photonics Corp Valuation – June 2018 $IPGP
Micron Technology Inc Valuation – May 2018 $MU
Amphenol Corp Valuation – May 2018 $APH
Xilinx Inc Valuation – May 2018 $XLNX
Western Digital Corp Valuation – May 2018 $WDC
Texas Instruments Inc Valuation – May 2018 $TXN
Qualcomm Inc Valuation – May 2018 $QCOM

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.

Verisign Inc Valuation – May 2018 $VRSN

Company Profile (excerpt from Reuters): VeriSign, Inc., incorporated on April 12, 1995, is a provider of domain name registry services and Internet security, enabling Internet navigation for various domain names and providing protection for Websites and enterprises around the world. The Company operates through Registry Services and Security Services segment. Registry Services ensure the security, stability and resiliency of Internet infrastructure and services, including the .com and .net domains, and operation of the root-zone maintainer functions for the core of the Internet’s Domain Name System (DNS). Security Services provides infrastructure assurance services consisting of Distributed Denial of Services (DDoS) Protection Services and Managed DNS Services.

VRSN Chart

VRSN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VRSN – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,589,991,262 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.55 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 69.76% Pass
6. Moderate PEmg Ratio PEmg < 20 34.42 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -12.67 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.55 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.07 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.68
MG Growth Estimate 6.35%
MG Value $78.02
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $53.35
MG Value based on 0% Growth $31.27
Market Implied Growth Rate 12.96%
Current Price $126.66
% of Intrinsic Value 162.34%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.58 in 2014 to an estimated $3.68 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.96% 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 Verisign, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 34.42, which was below the industry average of 42.24, 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 $-14.02.

Verisign, 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) -$14.02
Graham Number $0.00
PEmg 34.42
Current Ratio 1.55
PB Ratio -12.67
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $2,408,528,000
Total Current Liabilities $1,548,946,000
Long-Term Debt $1,783,159,000
Total Assets $2,905,323,000
Intangible Assets $52,527,000
Total Liabilities $4,140,057,000
Shares Outstanding (Diluted Average) 123,506,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.41
Dec2017 $3.68
Dec2016 $3.42
Dec2015 $2.82
Dec2014 $2.52
Dec2013 $3.49
Dec2012 $1.95
Dec2011 $0.86
Dec2010 $4.64
Dec2009 $1.28
Dec2008 -$1.90
Dec2007 -$0.63
Dec2006 $1.53
Dec2005 $1.63
Dec2004 $0.60
Dec2003 -$1.20
Dec2002 -$20.97
Dec2001 -$65.64
Dec2000 -$19.57
Dec1999 $0.03
Dec1998 -$0.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.68
Dec2017 $3.27
Dec2016 $2.99
Dec2015 $2.63
Dec2014 $2.58
Dec2013 $2.56
Dec2012 $1.85
Dec2011 $1.48
Dec2010 $1.53
Dec2009 $0.11
Dec2008 -$0.24
Dec2007 $0.52
Dec2006 -$0.49
Dec2005 -$6.71
Dec2004 -$14.37
Dec2003 -$21.73
Dec2002 -$28.42

Recommended Reading:

Other ModernGraham posts about the company

Verisign Inc Valuation – February 2017 $VRSN
Verisign Inc Valuation – August 2016 $VRSN
Verisign Inc. Analysis – 2015 Update $VRSN
20 Companies in the Research Spotlight This Week – June 7, 2014
Verisign Inc. Annual Valuation – 2014 $VRSN

Other ModernGraham posts about related companies

Motorola Solutions Inc Valuation – May 2018 $MSI
Leidos Holdings Inc Valuation – April 2018 $LDOS
Gartner Inc Valuation – March 2018 $IT
Cognizant Technology Solutions Corp – March 2018 $CTSH
International Business Machines Corp Valuation – February 2018 $IBM
Viavi Solutions Inc Valuation – Initial Coverage $VIAV
Equinix Inc Valuation – July 2017 $EQIX
Liquidity Services Inc Valuation – Initial Coverage $LQDT
LivePerson Inc Valuation – Initial Coverage $LPSN
LogMeIn Inc Valuation – Initial Coverage $LOGM

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.

Leucadia National Corp Valuation – March 2018 $LUK

Company Profile (excerpt from Reuters): Leucadia National Corporation (Leucadia), incorporated on May 24, 1968, is a diversified holding company focused on return on investment and long-term value. The Company’s segments, based on requirements, are Jefferies, National Beef, and Corporate and other. The Company’s financial services businesses include Jefferies Group LLC (investment banking and capital markets), Leucadia Asset Management (asset management), Berkadia Commercial Mortgage, LLC (commercial mortgage banking and servicing), FXCM Group, LLC (a publicly traded company providing online foreign exchange trading), HomeFed Corporation (HomeFed) (a publicly traded real estate company) and Foursight Capital and Chrome Capital (vehicle finance). The Company also owns and has investments in an array of other businesses, including National Beef (beef processing), HRG Group, Inc. (HRG), Vitesse Energy, LLC and Juneau Energy, LLC (oil and gas exploration and development), Garcadia (automobile dealerships), Linkem (fixed wireless broadband services in Italy), Conwed Plastics and Idaho Timber (manufacturing) and Golden Queen Mining Company, LLC (a gold and silver mining project).

LUK Chart

LUK data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LUK – 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 $8,098,087,309 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.38 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 -75.20% Fail
6. Moderate PEmg Ratio PEmg < 20 25.18 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.82 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.38 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.72 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.90
MG Growth Estimate -4.25%
MG Value $6.60
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $13.09
MG Value based on 0% Growth $7.67
Market Implied Growth Rate 8.34%
Current Price $22.73
% of Intrinsic Value 344.32%

Leucadia National Corp. 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 ratio. The Enterprising Investor has concerns regarding the low current ratio, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.69 in 2014 to an estimated $0.9 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.34% 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 Leucadia National Corp. revealed the company was trading below its Graham Number of $33.32. The company pays a dividend of $0.33 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 25.18, 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 $6.6.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $6.60
Graham Number $33.32
PEmg 25.18
Current Ratio 1.38
PB Ratio 0.82
Current Dividend $0.33
Dividend Yield 1.43%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $39,483,108,000
Total Current Liabilities $28,592,753,000
Long-Term Debt $7,885,783,000
Total Assets $47,169,108,000
Intangible Assets $2,463,180,000
Total Liabilities $37,063,151,000
Shares Outstanding (Diluted Average) 366,580,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.74
Dec2017 $0.45
Dec2016 $0.34
Dec2015 $0.74
Dec2014 $0.54
Dec2013 $1.06
Dec2012 $3.44
Dec2011 $0.10
Dec2010 $7.85
Dec2009 $2.25
Dec2008 -$11.00
Dec2007 $2.10
Dec2006 $0.85
Dec2005 $7.14
Dec2004 $0.67
Dec2003 $0.52
Dec2002 $0.96
Dec2001 -$0.05
Dec2000 $0.70
Dec1999 $1.21
Dec1998 $0.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.90
Dec2017 $0.53
Dec2016 $0.79
Dec2015 $1.07
Dec2014 $1.69
Dec2013 $2.49
Dec2012 $2.31
Dec2011 $1.25
Dec2010 $1.35
Dec2009 -$1.17
Dec2008 -$1.94
Dec2007 $2.48
Dec2006 $2.45
Dec2005 $2.79
Dec2004 $0.59
Dec2003 $0.59
Dec2002 $0.63

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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.

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