Nasdaq Inc Valuation – February 2019 $NDAQ

Company Profile (excerpt from Reuters): Nasdaq, Inc. (Nasdaq), incorporated on November 13, 1979, is a holding company. The Company is a provider of trading, clearing, exchange technology, regulatory, securities listing, information and public company services. The Company manages, operates and provides its products and services through four segments: Market Services, Corporate Services, Information Services and Market Technology. Its global offerings include trading and clearing across various asset classes, trade management services, data products, financial indexes, capital formation solutions, corporate solutions, and market technology products and services. Its technology powers markets across the globe, supporting equity derivative trading, clearing and settlement, cash equity trading, fixed income trading and various other functions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NDAQ – 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 $14,326,562,209 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.97 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 97.70% Pass
6. Moderate PEmg Ratio PEmg < 20 24.88 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.64 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 0.97 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -14.78 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 $3.51
MG Growth Estimate 7.56%
MG Value $82.94
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $50.93
MG Value based on 0% Growth $29.86
Market Implied Growth Rate 8.19%
Current Price $87.38
% of Intrinsic Value 105.36%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.34 in 2015 to an estimated $3.51 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 8.19% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Nasdaq Inc revealed the company was trading above its Graham Number of $61.15. The company pays a dividend of $1.7 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 24.88, which was above the industry average of 20.29. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-23.59.

Nasdaq 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) -$23.59
Graham Number $61.15
PEmg 24.88
Current Ratio 0.97
PB Ratio 2.64
Current Dividend $1.70
Dividend Yield 1.95%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,370,000,000
Total Current Liabilities $6,570,000,000
Long-Term Debt $2,956,000,000
Total Assets $15,700,000,000
Intangible Assets $8,663,000,000
Total Liabilities $10,251,000,000
Shares Outstanding (Diluted Average) 164,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.00
Dec2018 $2.73
Dec2017 $4.33
Dec2016 $0.64
Dec2015 $2.50
Dec2014 $2.39
Dec2013 $2.25
Dec2012 $2.04
Dec2011 $2.15
Dec2010 $1.91
Dec2009 $1.25
Dec2008 $1.55
Dec2007 $3.46
Dec2006 $0.95
Dec2005 $0.57
Dec2004 -$0.02
Dec2003 -$1.45
Dec2002 $0.40
Dec2001 $0.35
Dec2000 $0.21
Dec1999 $0.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.51
Dec2018 $2.69
Dec2017 $2.58
Dec2016 $1.79
Dec2015 $2.34
Dec2014 $2.22
Dec2013 $2.06
Dec2012 $1.91
Dec2011 $1.91
Dec2010 $1.80
Dec2009 $1.69
Dec2008 $1.70
Dec2007 $1.42
Dec2006 $0.30
Dec2005 -$0.03
Dec2004 -$0.25
Dec2003 -$0.22

Recommended Reading:

Other ModernGraham posts about the company

Nasdaq Inc Valuation – April 2018 $NDAQ
Nasdaq Inc Valuation – July 2016 $NDAQ
24 Companies in the Spotlight This Week – 3/28/15
Nasdaq OMX Group Inc. Annual Valuation – 2015 $NDAQ
17 Companies in the Spotlight This Week – 3/29/14

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State Street Corp Valuation – January 2019 $STT
Morgan Stanley Valuation – January 2019 $MS
MSCI Inc Valuation – January 2019 $MSCI
BlackRock Inc Valuation – January 2019 $BLK
Ameriprise Financial Inc Valuation – January 2019 $AMP
Invesco Ltd Valuation – January 2019 $IVZ

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.

Nasdaq Inc Valuation – April 2018 $NDAQ

Company Profile (excerpt from Reuters): Nasdaq, Inc. (Nasdaq), incorporated on November 13, 1979, is a holding company. The Company is a provider of trading, clearing, exchange technology, regulatory, securities listing, information and public company services. The Company manages, operates and provides its products and services through four segments: Market Services, Corporate Services, Information Services and Market Technology. Its global offerings include trading and clearing across various asset classes, trade management services, data products, financial indexes, capital formation solutions, corporate solutions, and market technology products and services. Its technology powers markets across the globe, supporting equity derivative trading, clearing and settlement, cash equity trading, fixed income trading and various other functions.

NDAQ Chart

NDAQ data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NDAQ – April 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 $14,245,932,961 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.05 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 81.17% Pass
6. Moderate PEmg Ratio PEmg < 20 25.72 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.46 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 1.05 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 13.96 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 $3.33
MG Growth Estimate 7.48%
MG Value $78.03
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $48.22
MG Value based on 0% Growth $28.27
Market Implied Growth Rate 8.61%
Current Price $85.53
% of Intrinsic Value 109.62%

Nasdaq 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 ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.22 in 2014 to an estimated $3.33 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 8.61% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Nasdaq Inc revealed the company was trading above its Graham Number of $60.1. The company pays a dividend of $1.46 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 25.72, which was above the industry average of 22.34. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-25.76.

Nasdaq 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) -$25.76
Graham Number $60.10
PEmg 25.72
Current Ratio 1.05
PB Ratio 2.46
Current Dividend $1.46
Dividend Yield 1.71%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $5,529,000,000
Total Current Liabilities $5,262,000,000
Long-Term Debt $3,727,000,000
Total Assets $15,786,000,000
Intangible Assets $9,054,000,000
Total Liabilities $9,899,000,000
Shares Outstanding (Diluted Average) 169,642,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.65
Dec2017 $4.33
Dec2016 $0.64
Dec2015 $2.50
Dec2014 $2.39
Dec2013 $2.25
Dec2012 $2.04
Dec2011 $2.15
Dec2010 $1.91
Dec2009 $1.25
Dec2008 $1.55
Dec2007 $3.46
Dec2006 $0.95
Dec2005 $0.57
Dec2004 -$0.02
Dec2003 -$1.45
Dec2002 $0.40
Dec2001 $0.35
Dec2000 $0.21
Dec1999 $0.86
Dec1998 $0.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.33
Dec2017 $2.58
Dec2016 $1.79
Dec2015 $2.34
Dec2014 $2.22
Dec2013 $2.06
Dec2012 $1.91
Dec2011 $1.91
Dec2010 $1.80
Dec2009 $1.69
Dec2008 $1.70
Dec2007 $1.42
Dec2006 $0.30
Dec2005 -$0.03
Dec2004 -$0.25
Dec2003 -$0.22
Dec2002 $0.41

Recommended Reading:

Other ModernGraham posts about the company

24 Companies in the Spotlight This Week – 3/28/15
Nasdaq OMX Group Inc. Annual Valuation – 2015 $NDAQ
17 Companies in the Spotlight This Week – 3/29/14
Nasdaq OMX Group (NDAQ) Annual Valuation – 2014

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Marsh & McLennan Companies Inc Valuation – March 2018 $MMC
Fidelity National Information Services Inc Valuation – March 2018 $FIS
Intercontinental Exchange Inc Valuation – March 2018 $ICE
H&R Block Inc Valuation – March 2018 $HRB
Morgan Stanley Valuation – March 2018 $MS
BlackRock Inc Valuation – March 2018 $BLK

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.

Nasdaq Inc Valuation – July 2016 $NDAQ

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

Company Profile (obtained from Google Finance): Nasdaq, Inc. (Nasdaq), formerly The NASDAQ OMX Group, Inc., is a holding company. The Company is a provider of trading, clearing, exchange technology, regulatory, securities listing, information and public company services across approximately six continents. The Company manages, operates and provides its products and services through four segments: Market Services, Listing Services, Information Services and Technology Solutions. Its Market Services segment includes its equity derivative trading and clearing, cash equity trading, fixed income, currency and commodities trading and clearing (FICC), and access and broker services businesses. Its Listing Services segment includes its United States and European Listing Services businesses. Its Information Services segment includes its Data Products and Index Licensing and Services businesses. Its Technology Solutions segment includes Corporate Solutions and Market Technology businesses.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of NDAQ – July 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,029,618,512 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.07 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 35.14% Pass
6. Moderate PEmg Ratio PEmg < 20 24.20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.99 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 1.07 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.75 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

NDAQ value chart July 2016

EPSmg $2.78
MG Growth Estimate 6.89%
MG Value $62.05
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $40.37
MG Value based on 0% Growth $23.66
Market Implied Growth Rate 7.85%
Current Price $67.37
% of Intrinsic Value 108.57%

Nasdaq 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 ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.91 in 2012 to an estimated $2.78 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 7.85% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

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

Stage 3: Information for Further Research

NDAQ charts July 2016

Net Current Asset Value (NCAV) -$19.59
Graham Number $53.04
PEmg 24.20
Current Ratio 1.07
PB Ratio 1.99
Current Dividend $1.00
Dividend Yield 1.48%
Number of Consecutive Years of Dividend Growth 5

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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 3/1/2016
Total Current Assets $4,722,000,000
Total Current Liabilities $4,429,000,000
Long-Term Debt $2,565,000,000
Total Assets $13,717,000,000
Intangible Assets $7,748,000,000
Total Liabilities $8,020,000,000
Shares Outstanding (Diluted Average) 168,368,000

Earnings Per Share History

Next Fiscal Year Estimate $3.61
Dec2015 $2.50
Dec2014 $2.39
Dec2013 $2.25
Dec2012 $2.04
Dec2011 $2.15
Dec2010 $1.91
Dec2009 $1.25
Dec2008 $1.58
Dec2007 $3.46
Dec2006 $0.95
Dec2005 $0.57
Dec2004 $0.12
Dec2003 -$1.45
Dec2002 $0.40
Dec2001 $0.35
Dec2000 $0.21
Dec1999 $0.86
Dec1998 $0.35

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.78
Dec2015 $2.34
Dec2014 $2.22
Dec2013 $2.06
Dec2012 $1.91
Dec2011 $1.92
Dec2010 $1.81
Dec2009 $1.69
Dec2008 $1.72
Dec2007 $1.44
Dec2006 $0.33
Dec2005 $0.01
Dec2004 -$0.21
Dec2003 -$0.22
Dec2002 $0.41
Dec2001 $0.39
Dec2000 $0.37

Recommended Reading:

Other ModernGraham posts about the company

24 Companies in the Spotlight This Week – 3/28/15
Nasdaq OMX Group Inc. Annual Valuation – 2015 $NDAQ
17 Companies in the Spotlight This Week – 3/29/14
Nasdaq OMX Group (NDAQ) Annual Valuation – 2014

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Fidelity National Information Services Valuation – July 2016 $FIS
Capital One Financial Corp Valuation – July 2016 $COF
Intercontinental Exchange Inc Valuation – July 2016 $ICE
H&R Block Inc Valuation – June 2016 $HRB
Visa Inc Valuation – June 2016 $V
Legg Mason Inc Valuation – June 2016 $LM
Morgan Stanley Valuation – June 2016 $MS

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.

Nasdaq OMX Group Inc. Annual Valuation – 2015 $NDAQ

500px-NASDAQ_OMX_Group.svgBenjamin 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 – March 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Nasdaq OMX Group Inc. (NDAQ) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The NASDAQ OMX Group, Inc. (NASDAQ OMX), is a holding company. NASDAQ OMX is a global exchange group that delivers trading, clearing, exchange technology, regulatory, securities listing, and public company services across six continents. Its global offerings are diverse and include trading and clearing across multiple asset classes, market data products, financial indexes, capital formation solutions, financial services and market technology products and services. Its technology supports cash equity trading, derivatives trading, clearing and settlement, and many other functions. The Company operates in three segments: Market Services, Issuer Services and Market Technology. In the United States, it operates The NASDAQ Stock Market LLC (The NASDAQ Stock Market), a registered national securities exchange. In August 2012, the Company sold IDCG to LCH.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

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

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

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

Valuation Summary

Key Data:

Recent Price $49.31
MG Value $34.13
MG Opinion Overvalued
Value Based on 3% Growth $32.17
Value Based on 0% Growth $18.86
Market Implied Growth Rate 6.86%
Net Current Asset Value (NCAV) -$16.76
PEmg 22.23
Current Ratio 1.14
PB Ratio 1.47

Balance Sheet – December 2014

Current Assets $3,400,000,000
Current Liabilities $2,980,000,000
Total Debt $2,313,000,000
Total Assets $12,087,000,000
Intangible Assets $7,615,000,000
Total Liabilities $6,294,000,000
Outstanding Shares 172,700,000

Earnings Per Share

2014 $2.39
2013 $2.25
2012 $2.04
2011 $2.15
2010 $1.91
2009 $1.25
2008 $1.55
2007 $3.46
2006 $0.95
2005 $0.57
2004 -$0.14

Earnings Per Share – ModernGraham

2014 $2.22
2013 $2.06
2012 $1.91
2011 $1.91
2010 $1.80
2009 $1.69

Dividend History

Conclusion:

Nasdaq OMX Group Inc. is not suitable for the Enterprising Investor or for the Defensive Investor.  The Defensive Investor is concerned by the the low current ratio, short dividend history, and the high PEmg ratio.  The Enterprising Investor is concerned by the level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.80 in 2010 to $2.22 for 2014.  This level of demonstrated growth does support the market’s implied estimate of 6.86% annual earnings growth over the next 7-10 years, leading 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 Nasdaq OMX Group Inc. (NDAQ)?  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 Nasdaq OMX Group Inc. (NDAQ) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Nasdaq OMX Group (NDAQ) Annual Valuation – 2014

500px-NASDAQ_OMX_Group.svgBenjamin 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.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Nasdaq OMX Group fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The NASDAQ OMX Group, Inc. (NASDAQ OMX) is a holding company. It is a global exchange group that delivers trading, clearing, exchange technology, regulatory, securities listing, and public company services across six continents. Its global offerings are diverse and include trading and clearing across multiple asset classes, market data products, financial indexes, capital formation solutions, financial services and market technology products and services. The Company operates in three segments: Market Services, Issuer Services and Market Technology. In June 2013, the Company announced the completion of its acquisition of Thomson Reuters Investor Relations, Public Relations and Multimedia Solutions businesses, which provide insight, analytics and communications solutions. In July 2013, BGC Partners Inc announced that it closed the sale of its on-the-run, 2-, 3-, 5-, 7-, 10-, and 30-year fully electronic trading platform for U.S. Treasury Notes and Bonds to NASDAQ OMX Group, Inc.

NDAQ Chart

NDAQ data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

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

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

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

Valuation Summary

Key Data:

Recent Price $37.54
MG Value $31.29
MG Opinion Overvalued
Value Based on 3% Growth $29.89
Value Based on 0% Growth $17.52
Market Implied Growth Rate 4.86%
Net Current Asset Value (NCAV) -$19.07
PEmg 18.21
Current Ratio 1.13
PB Ratio 1.03

Balance Sheet – 12/31/2013

Current Assets $3,163,000,000
Current Liabilities $2,800,000,000
Total Debt $2,589,000,000
Total Assets $12,577,000,000
Intangible Assets $8,572,000,000
Total Liabilities $6,393,000,000
Outstanding Shares 169,360,000

Earnings Per Share

2013 $2.25
2012 $2.04
2011 $2.15
2010 $1.91
2009 $1.24
2008 $1.56
2007 $3.46
2006 $0.95
2005 $0.57
2004 -$0.14

Earnings Per Share – ModernGraham

2013 $2.06
2012 $1.90
2011 $1.91
2010 $1.80
2009 $1.69
2008 $1.70

Dividend History

NDAQ Dividend Yield (TTM) Chart

NDAQ Dividend Yield (TTM) data by YCharts

Conclusion:

Nasdaq OMX Group does not satisfy the requirements of either the Defensive Investor or the Enterprising Investor.  For the Defensive Investor, the turn offs are the poor current ratio, the lack of earnings stability over the ten year period, and the lack of a long enough dividend history.  For the Enterprising Investor, the company fails because of the high level of debt relative to the current assets.  As a result, value investors seeking to follow the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities, through a review of ModernGraham’s valuation of Intercontinental Exchange Group (ICE) and 5 Undervalued Companies for the Enterprising Investor.  From a valuation perspective, the company appears to be overvalued, after growing its EPSmg (normalized earnings) from $1.69 in 2009 to $2.06 in 2013.  This demonstrated level of growth does not support the market’s implied estimate of 4.86% earnings growth, and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Nasdaq OMX Group (NDAQ)?  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.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Nasdaq OMX Group (NDAQ) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

CBRE Group Inc Valuation – March 2019 #CBRE

Company Profile (excerpt from Reuters): CBRE Group, Inc., incorporated on February 20, 2001, is a holding company that conducts all of its operations through its subsidiaries. The Company operates as a commercial real estate services and investment company. The Company operates through the segments: The Americas; Europe, Middle East and Africa (EMEA); Asia Pacific; Global Investment Management, and Development Services. The Company provides services in the office, retail, industrial, multifamily and hotel sectors of commercial real estate.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CBRE – 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 $16,848,841,335 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.16 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 270.51% Pass
6. Moderate PEmg Ratio PEmg < 20 18.28 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.43 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.16 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.86 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 $2.74
MG Growth Estimate 15.00%
MG Value $105.64
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $39.79
MG Value based on 0% Growth $23.32
Market Implied Growth Rate 4.89%
Current Price $50.16
% of Intrinsic Value 47.48%

CBRE Group 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 PB ratio. 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 Undervalued after growing its EPSmg (normalized earnings) from $1.3 in 2015 to an estimated $2.74 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.89% 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 CBRE Group Inc revealed the company was trading above its Graham Number of $33.87. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 18.28, which was below the industry average of 21.22, 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 $-4.94.

CBRE Group 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) -$4.94
Graham Number $33.87
PEmg 18.28
Current Ratio 1.16
PB Ratio 3.43
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 $6,754,210,000
Total Current Liabilities $5,803,380,000
Long-Term Debt $1,767,260,000
Total Assets $13,456,793,000
Intangible Assets $5,093,617,000
Total Liabilities $8,446,891,000
Shares Outstanding (Diluted Average) 342,689,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.52
Dec2018 $3.10
Dec2017 $2.05
Dec2016 $1.69
Dec2015 $1.63
Dec2014 $1.45
Dec2013 $0.95
Dec2012 $0.97
Dec2011 $0.74
Dec2010 $0.63
Dec2009 $0.12
Dec2008 -$4.81
Dec2007 $1.66
Dec2006 $1.35
Dec2005 $0.95
Dec2004 $0.30
Dec2003 -$0.23
Dec2002 $0.15
Dec2001 $0.73

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.74
Dec2018 $2.23
Dec2017 $1.72
Dec2016 $1.48
Dec2015 $1.30
Dec2014 $1.07
Dec2013 $0.82
Dec2012 $0.34
Dec2011 -$0.09
Dec2010 -$0.41
Dec2009 -$0.67
Dec2008 -$0.74
Dec2007 $1.13
Dec2006 $0.74
Dec2005 $0.42
Dec2004 $0.17
Dec2003 $0.11

Recommended Reading:

Other ModernGraham posts about the company

CBRE Group Inc Valuation – June 2018 $CBRE

Other ModernGraham posts about related companies

Franklin Resources Inc Valuation – March 2019 #BEN
S&P Global Inc Valuation – March 2019 #SPGI
Equifax Inc Valuation – March 2019 #EFX
CME Group Inc Valuation – March 2019 #CME
Northern Trust Corp Valuation – March 2019 #NTRS
Affiliated Managers Group Inc Valuation – February 2019 $AMG
Bank of New York Mellon Corp Valuation – February 2019 $BK
Western Union Co Valuation – February 2019 $WU
Raymond James Financial Valuation – February 2019 $RJF
Nasdaq Inc Valuation – February 2019 $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.

Franklin Resources Inc Valuation – March 2019 #BEN

Company Profile (excerpt from Reuters): Franklin Resources, Inc., incorporated on November 28, 1969, is a holding company. The Company, along with its subsidiaries, operates as Franklin Templeton Investments. The Company is a global investment management company that provides investment management and related services to retail, institutional and high net-worth clients in jurisdictions around the world. The Company offers its investment products and services under the Franklin, Templeton, Franklin Mutual Series, Franklin Bissett, Fiduciary Trust, Darby, Balanced Equity Management, K2 and LibertyShares brand names. The Company’s products include investment funds and institutional, high net-worth and separately managed accounts (collectively, sponsored investment products (SIPs)). The Company offers various types of SIPs, such as the United States funds, cross-border funds, local/regional funds, and other managed accounts, alternative investment products and trusts.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BEN – 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 $16,503,028,589 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.25 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 -17.09% Fail
6. Moderate PEmg Ratio PEmg < 20 13.97 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.64 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 5.25 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.12 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 $2.32
MG Growth Estimate -4.25%
MG Value $7.03
Opinion Overvalued
MG Grade B+
MG Value based on 3% Growth $33.60
MG Value based on 0% Growth $19.70
Market Implied Growth Rate 2.73%
Current Price $32.37
% of Intrinsic Value 460.50%

Franklin Resources, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the insufficient earnings growth over the last ten years. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. 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 Overvalued after seeing its EPSmg (normalized earnings) decline from $3.37 in 2015 to an estimated $2.32 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.73% 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 Franklin Resources, Inc. revealed the company was trading above its Graham Number of $30.72. The company pays a dividend of $0.92 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.97, which was below the industry average of 21.22, 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 $7.03.

Franklin Resources, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.03
Graham Number $30.72
PEmg 13.97
Current Ratio 5.25
PB Ratio 1.64
Current Dividend $0.92
Dividend Yield 2.84%
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 12/1/2018
Total Current Assets $7,464,500,000
Total Current Liabilities $1,420,500,000
Long-Term Debt $730,400,000
Total Assets $13,950,600,000
Intangible Assets $2,326,200,000
Total Liabilities $3,873,900,000
Shares Outstanding (Diluted Average) 510,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.20
Sep2018 $1.39
Sep2017 $3.01
Sep2016 $2.94
Sep2015 $3.29
Sep2014 $3.79
Sep2013 $3.37
Sep2012 $2.98
Sep2011 $2.87
Sep2010 $2.11
Sep2009 $1.28
Sep2008 $2.22
Sep2007 $2.34
Sep2006 $1.62
Sep2005 $1.35
Sep2004 $0.92
Sep2003 $0.66
Sep2002 $0.55
Sep2001 $0.64
Sep2000 $0.76
Sep1999 $0.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.32
Sep2018 $2.55
Sep2017 $3.18
Sep2016 $3.26
Sep2015 $3.37
Sep2014 $3.28
Sep2013 $2.86
Sep2012 $2.50
Sep2011 $2.23
Sep2010 $1.91
Sep2009 $1.80
Sep2008 $1.93
Sep2007 $1.65
Sep2006 $1.21
Sep2005 $0.94
Sep2004 $0.73
Sep2003 $0.63

Recommended Reading:

Other ModernGraham posts about the company

Franklin Resources Inc Valuation – May 2018 $BEN
Franklin Resources Inc Valuation – February 2017 $BEN
Best Dividend Paying Stocks for Dividend Growth Investors – February 2017
10 Low PE Stock Picks for the Defensive Investor – January 2017
Best Dividend Paying Stocks for Dividend Growth Investors – January 2017

Other ModernGraham posts about related companies

S&P Global Inc Valuation – March 2019 #SPGI
Equifax Inc Valuation – March 2019 #EFX
CME Group Inc Valuation – March 2019 #CME
Northern Trust Corp Valuation – March 2019 #NTRS
Affiliated Managers Group Inc Valuation – February 2019 $AMG
Bank of New York Mellon Corp Valuation – February 2019 $BK
Western Union Co Valuation – February 2019 $WU
Raymond James Financial Valuation – February 2019 $RJF
Nasdaq Inc Valuation – February 2019 $NDAQ
E*Trade Financial Corp Valuation – January 2019 $ETFC

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.

S&P Global Inc Valuation – March 2019 #SPGI

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SPGI – March 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $48,772,834,606 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.37 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 211.84% Pass
6. Moderate PEmg Ratio PEmg < 20 26.10 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 72.20 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.37 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.76 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.52
MG Growth Estimate 15.00%
MG Value $289.39
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $108.99
MG Value based on 0% Growth $63.89
Market Implied Growth Rate 8.80%
Current Price $196.20
% of Intrinsic Value 67.80%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.68 in 2015 to an estimated $7.52 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.8% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into S&P Global Inc revealed the company was trading above its Graham Number of $22.47. The company pays a dividend of $2 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 26.1, which was above the industry average of 21.22. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.54.

S&P Global Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$20.54
Graham Number $22.47
PEmg 26.10
Current Ratio 1.37
PB Ratio 72.20
Current Dividend $2.00
Dividend Yield 1.02%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,604,000,000
Total Current Liabilities $2,629,000,000
Long-Term Debt $3,662,000,000
Total Assets $9,458,000,000
Intangible Assets $5,059,000,000
Total Liabilities $8,774,000,000
Shares Outstanding (Diluted Average) 251,700,000

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Equifax Inc Valuation – March 2019 #EFX
CME Group Inc Valuation – March 2019 #CME
Northern Trust Corp Valuation – March 2019 #NTRS
Affiliated Managers Group Inc Valuation – February 2019 $AMG
Bank of New York Mellon Corp Valuation – February 2019 $BK
Western Union Co Valuation – February 2019 $WU
Raymond James Financial Valuation – February 2019 $RJF
Nasdaq Inc Valuation – February 2019 $NDAQ
E*Trade Financial Corp Valuation – January 2019 $ETFC
Marsh & McLennan Companies Inc Valuation – January 2019 $MMC

Disclaimer:

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

Equifax Inc Valuation – March 2019 #EFX

Company Profile (excerpt from Reuters): Equifax Inc., incorporated on December 20, 1913, is a global provider of information solutions and human resources business process outsourcing services for businesses, governments and consumers. The Company operates in four segments: U.S. Information Solutions (USIS), International, Workforce Solutions and Global Consumer Solutions. Its products and services are based on databases of consumer and business information derived from various sources, including credit, financial assets, telecommunications and utility payments, employment, income, demographic and marketing data. It uses statistical techniques and software tools to analyze all available data, creating customized insights, decision-making solutions and processing services for its clients. It helps consumers understand, manage and protect their personal information and make more informed financial decisions. It also provides information, technology and services to support debt collections and recovery management.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EFX – 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 $13,221,478,110 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.09 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 107.89% Pass
6. Moderate PEmg Ratio PEmg < 20 25.64 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.20 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.09 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 34.84 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 $4.27
MG Growth Estimate 6.60%
MG Value $92.70
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $61.92
MG Value based on 0% Growth $36.30
Market Implied Growth Rate 8.57%
Current Price $109.49
% of Intrinsic Value 118.12%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.96 in 2015 to an estimated $4.27 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.57% 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 Equifax Inc. revealed the company was trading above its Graham Number of $56.85. The company pays a dividend of $1.56 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 25.64, which was above the industry average of 21.22. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-25.56.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$25.56
Graham Number $56.85
PEmg 25.64
Current Ratio 1.09
PB Ratio 4.20
Current Dividend $1.56
Dividend Yield 1.42%
Number of Consecutive Years of Dividend Growth 9

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 $902,300,000
Total Current Liabilities $826,800,000
Long-Term Debt $2,630,600,000
Total Assets $7,153,200,000
Intangible Assets $5,323,700,000
Total Liabilities $3,997,500,000
Shares Outstanding (Diluted Average) 121,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.61
Dec2018 $2.47
Dec2017 $4.83
Dec2016 $4.04
Dec2015 $3.55
Dec2014 $2.97
Dec2013 $2.84
Dec2012 $2.22
Dec2011 $1.88
Dec2010 $2.11
Dec2009 $1.83
Dec2008 $2.09
Dec2007 $2.02
Dec2006 $2.12
Dec2005 $1.86
Dec2004 $1.76
Dec2003 $1.20
Dec2002 $1.25
Dec2001 $0.85
Dec2000 $1.68
Dec1999 $1.55

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.27
Dec2018 $3.59
Dec2017 $3.98
Dec2016 $3.41
Dec2015 $2.96
Dec2014 $2.58
Dec2013 $2.32
Dec2012 $2.05
Dec2011 $1.97
Dec2010 $2.02
Dec2009 $1.98
Dec2008 $2.02
Dec2007 $1.93
Dec2006 $1.80
Dec2005 $1.55
Dec2004 $1.38
Dec2003 $1.23

Recommended Reading:

Other ModernGraham posts about the company

Equifax Inc Valuation – May 2018 $EFX
Equifax Inc Valuation – February 2017 $EFX
Equifax Inc Valuation – August 2016 $EFX
27 Companies in the Spotlight This Week – 4/4/15
Equifax Inc. Annual Valuation – 2015 $EFX

Other ModernGraham posts about related companies

CME Group Inc Valuation – March 2019 #CME
Northern Trust Corp Valuation – March 2019 #NTRS
Affiliated Managers Group Inc Valuation – February 2019 $AMG
Bank of New York Mellon Corp Valuation – February 2019 $BK
Western Union Co Valuation – February 2019 $WU
Raymond James Financial Valuation – February 2019 $RJF
Nasdaq Inc Valuation – February 2019 $NDAQ
E*Trade Financial Corp Valuation – January 2019 $ETFC
Marsh & McLennan Companies Inc Valuation – January 2019 $MMC
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Disclaimer:

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

CME Group Inc Valuation – March 2019 #CME

Company Profile (excerpt from Reuters): CME Group Inc., incorporated on August 2, 2001, through its exchanges, provides products across all asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The Company’s segment primarily consists of the Chicago Mercantile Exchange Inc. (CME), Board of Trade of the City of Chicago, Inc. (CBOT), New York Mercantile Exchange, Inc. (NYMEX) and Commodity Exchange, Inc. (COMEX) exchanges. The Company provides electronic trading around the globe on its CME Globex platform. The Company also offers clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives through its clearinghouses CME Clearing and CME Clearing Europe. It also provides hosting, connectivity and customer support for electronic trading through its co-location services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CME – 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 $63,440,275,956 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.01 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 121.84% Pass
6. Moderate PEmg Ratio PEmg < 20 25.32 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.41 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 1.01 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.23 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.00
MG Growth Estimate 15.00%
MG Value $269.65
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $101.56
MG Value based on 0% Growth $59.53
Market Implied Growth Rate 8.41%
Current Price $177.31
% of Intrinsic Value 65.75%

CME Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should 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 $3.43 in 2015 to an estimated $7 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.41% 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 CME Group Inc revealed the company was trading above its Graham Number of $104.74. The company pays a dividend of $2.8 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 25.32, which was above the industry average of 21.22. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-27.32.

CME Group 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) -$27.32
Graham Number $104.74
PEmg 25.32
Current Ratio 1.01
PB Ratio 2.41
Current Dividend $2.80
Dividend Yield 1.58%
Number of Consecutive Years of Dividend Growth 8

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $41,886,700,000
Total Current Liabilities $41,272,600,000
Long-Term Debt $3,826,800,000
Total Assets $77,475,700,000
Intangible Assets $33,480,700,000
Total Liabilities $51,510,400,000
Shares Outstanding (Diluted Average) 352,227,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.73
Dec2018 $5.71
Dec2017 $11.94
Dec2016 $4.53
Dec2015 $3.69
Dec2014 $3.35
Dec2013 $2.92
Dec2012 $2.70
Dec2011 $5.43
Dec2010 $2.86
Dec2009 $2.48
Dec2008 $2.43
Dec2007 $2.99
Dec2006 $2.32
Dec2005 $1.76
Dec2004 $1.28
Dec2003 $0.72
Dec2002 $0.63
Dec2001 $0.51
Dec2000 -$0.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.00
Dec2018 $6.71
Dec2017 $6.57
Dec2016 $3.73
Dec2015 $3.43
Dec2014 $3.35
Dec2013 $3.33
Dec2012 $3.41
Dec2011 $3.59
Dec2010 $2.65
Dec2009 $2.50
Dec2008 $2.39
Dec2007 $2.18
Dec2006 $1.64
Dec2005 $1.19
Dec2004 $0.81
Dec2003 $0.50

Recommended Reading:

Other ModernGraham posts about the company

CME Group Inc Valuation – May 2018 $CME
CME Group Inc Valuation – February 2017 $CME
CME Group Inc. Analysis – October 2015 Update $CME
14 Companies in the Spotlight This Week – 10/11/14
CME Group Inc. Annual Stock Valuation – 2014 $CME

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