Northrop Grumman Corp Valuation – March 2019 #NOC

Company Profile (excerpt from Reuters): Northrop Grumman Corporation, incorporated on August 4, 2010, is a global security company. The Company provides products, systems and solutions in autonomous systems; cyber; command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR); strike, and logistics and modernization. The Company’s segments include Aerospace Systems, Mission Systems and Technology Services. The Company participates in a range of defense and government programs in the United States and abroad. The Company also conducts business with foreign, state and local governments, as well as commercial customers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NOC – 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 $47,326,350,403 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.17 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 138.28% Pass
6. Moderate PEmg Ratio PEmg < 20 17.02 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.88 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 1.17 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.87 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 $16.38
MG Growth Estimate 11.49%
MG Value $515.91
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $237.57
MG Value based on 0% Growth $139.26
Market Implied Growth Rate 4.26%
Current Price $278.82
% of Intrinsic Value 54.04%

Northrop Grumman Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB 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 $9.28 in 2015 to an estimated $16.38 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.26% 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 Northrop Grumman Corporation revealed the company was trading above its Graham Number of $139.21. The company pays a dividend of $4.7 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 17.02, which was below the industry average of 51.79, 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 $-114.5.

Northrop Grumman 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) -$114.50
Graham Number $139.21
PEmg 17.02
Current Ratio 1.17
PB Ratio 5.88
Current Dividend $4.70
Dividend Yield 1.69%
Number of Consecutive Years of Dividend Growth 15

Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $9,680,000,000
Total Current Liabilities $8,274,000,000
Long-Term Debt $13,883,000,000
Total Assets $37,653,000,000
Intangible Assets $20,044,000,000
Total Liabilities $29,466,000,000
Shares Outstanding (Diluted Average) 172,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.95
Dec2018 $18.49
Dec2017 $16.34
Dec2016 $11.32
Dec2015 $10.39
Dec2014 $9.75
Dec2013 $8.35
Dec2012 $7.81
Dec2011 $7.52
Dec2010 $6.82
Dec2009 $5.21
Dec2008 -$3.77
Dec2007 $5.12
Dec2006 $4.37
Dec2005 $3.85
Dec2004 $2.97
Dec2003 $2.09
Dec2002 $1.84
Dec2001 $2.37
Dec2000 $4.29
Dec1999 $3.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $16.38
Dec2018 $14.82
Dec2017 $12.40
Dec2016 $10.13
Dec2015 $9.28
Dec2014 $8.50
Dec2013 $7.63
Dec2012 $6.42
Dec2011 $5.21
Dec2010 $3.88
Dec2009 $2.59
Dec2008 $1.69
Dec2007 $4.18
Dec2006 $3.48
Dec2005 $2.90
Dec2004 $2.52
Dec2003 $2.46

Recommended Reading:

Other ModernGraham posts about the company

Northrop Grumman Corp Valuation – May 2018 $NOC
Northrop Grumman Corp Valuation – February 2017 $NOC
Northrop Grumman Corporation Valuation – November 2015 Update $NOC
30 Companies in the Spotlight This Week – 11/15/14
Northrop Grumman Corporation Annual Valuation – 2014 $NOC

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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.

ConocoPhillips Valuation – February 2019 $COP

Company Profile (excerpt from Reuters): ConocoPhillips, incorporated on November 16, 2001, is an independent exploration and production (E&P) company. The Company explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG) and natural gas liquids. The Company operates through six segments: Alaska, Lower 48, Canada, Europe and North Africa, Asia Pacific and Middle East, and Other International. As of December 31, 2016, its operations were in the United States, Norway, the United Kingdom, Canada, Australia, Timor-Leste, Indonesia, China, Malaysia, Qatar and Libya. Its portfolio includes North American unconventional assets and oil sands assets in Canada; conventional assets in North America, Europe, Asia and Australia; LNG developments, and an inventory of conventional and unconventional exploration prospects. The Company’s subsidiaries include ConocoPhillips Company, ConocoPhillips Canada Funding Company I and Burlington Resources, Inc.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of COP – 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 $78,819,282,328 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.99 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 -98.62% Fail
6. Moderate PEmg Ratio PEmg < 20 167.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 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 1.99 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.04 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.41
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $6.01
MG Value based on 0% Growth $3.52
Market Implied Growth Rate 79.31%
Current Price $69.30
% of Intrinsic Value N/A

ConocoPhillips 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 or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or 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 $6.85 in 2014 to an estimated $0.41 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 79.31% 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 ConocoPhillips revealed the company was trading above its Graham Number of $47.64. The company pays a dividend of $1.06 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 167.12, which was above the industry average of 43.92. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.26.

ConocoPhillips 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) -$20.26
Graham Number $47.64
PEmg 167.12
Current Ratio 1.99
PB Ratio 2.53
Current Dividend $1.06
Dividend Yield 1.53%
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 9/1/2018
Total Current Assets $14,723,000,000
Total Current Liabilities $7,401,000,000
Long-Term Debt $14,902,000,000
Total Assets $70,556,000,000
Intangible Assets $0
Total Liabilities $38,477,000,000
Shares Outstanding (Diluted Average) 1,172,694,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.88
Dec2017 -$0.70
Dec2016 -$2.91
Dec2015 -$3.58
Dec2014 $5.51
Dec2013 $7.38
Dec2012 $6.72
Dec2011 $8.97
Dec2010 $7.62
Dec2009 $2.94
Dec2008 -$10.73
Dec2007 $7.22
Dec2006 $9.66
Dec2005 $9.55
Dec2004 $5.80
Dec2003 $3.46
Dec2002 -$0.31
Dec2001 $2.82
Dec2000 $3.63
Dec1999 $1.20
Dec1998 $0.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.41
Dec2017 -$0.50
Dec2016 $0.61
Dec2015 $3.25
Dec2014 $6.85
Dec2013 $7.26
Dec2012 $5.83
Dec2011 $4.66
Dec2010 $2.78
Dec2009 $1.49
Dec2008 $1.94
Dec2007 $7.90
Dec2006 $7.37
Dec2005 $5.57
Dec2004 $3.41
Dec2003 $2.20
Dec2002 $1.56

Recommended Reading:

Other ModernGraham posts about the company

ConocoPhillips Valuation – April 2018 $COP
ConocoPhillips Valuation – July 2016 $COP
58 Companies in the Spotlight This Week – 1/31/15
Conoco Phillips Annual Valuation – 2015 $COP
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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.

Sonoco Products Co Valuation – August 2018 $SON

Company Profile (excerpt from Reuters): Sonoco Products Company (Sonoco), incorporated on May 10, 1899, is a manufacturer of industrial and consumer packaging products and a provider of packaging services. The Company operates in four segments: Consumer Packaging, Paper and Industrial Converted Products, Display and Packaging, and Protective Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SON – August 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 $5,542,806,488 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.53 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 39.00% Pass
6. Moderate PEmg Ratio PEmg < 20 21.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.17 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 1.53 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.34 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.57
MG Growth Estimate 3.66%
MG Value $40.69
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $37.27
MG Value based on 0% Growth $21.85
Market Implied Growth Rate 6.67%
Current Price $56.16
% of Intrinsic Value 138.02%

Sonoco Products Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.07 in 2014 to an estimated $2.57 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.67% 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 Sonoco Products Co revealed the company was trading above its Graham Number of $35.27. The company pays a dividend of $1.54 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.85, which was above the industry average of 21.21. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.45.

Sonoco Products Co performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.45
Graham Number $35.27
PEmg 21.85
Current Ratio 1.53
PB Ratio 3.17
Current Dividend $1.54
Dividend Yield 2.74%
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 6/1/2018
Total Current Assets $1,574,968,000
Total Current Liabilities $1,030,072,000
Long-Term Debt $1,274,325,000
Total Assets $4,622,968,000
Intangible Assets $1,638,254,000
Total Liabilities $2,832,703,000
Shares Outstanding (Diluted Average) 101,040,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.22
Dec2017 $1.74
Dec2016 $2.81
Dec2015 $2.44
Dec2014 $2.19
Dec2013 $2.03
Dec2012 $1.90
Dec2011 $2.13
Dec2010 $1.96
Dec2009 $1.50
Dec2008 $1.63
Dec2007 $2.10
Dec2006 $1.92
Dec2005 $1.61
Dec2004 $1.53
Dec2003 $1.43
Dec2002 $1.39
Dec2001 $0.96
Dec2000 $1.66
Dec1999 $1.83
Dec1998 $1.73

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.57
Dec2017 $2.24
Dec2016 $2.42
Dec2015 $2.20
Dec2014 $2.07
Dec2013 $1.97
Dec2012 $1.90
Dec2011 $1.89
Dec2010 $1.79
Dec2009 $1.72
Dec2008 $1.80
Dec2007 $1.83
Dec2006 $1.66
Dec2005 $1.48
Dec2004 $1.41
Dec2003 $1.38
Dec2002 $1.41

Recommended Reading:

Other ModernGraham posts about the company

Sonoco Products Co Valuation – Initial Coverage $SON

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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.

Northrop Grumman Corp Valuation – May 2018 $NOC

Company Profile (excerpt from Reuters): Northrop Grumman Corporation, incorporated on August 4, 2010, is a global security company. The Company provides products, systems and solutions in autonomous systems; cyber; command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR); strike, and logistics and modernization. The Company’s segments include Aerospace Systems, Mission Systems and Technology Services. The Company participates in a range of defense and government programs in the United States and abroad. The Company also conducts business with foreign, state and local governments, as well as commercial customers.

NOC Chart

NOC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NOC – 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 $56,993,625,552 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.52 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 99.28% Pass
6. Moderate PEmg Ratio PEmg < 20 26.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.57 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 2.52 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.48 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 $12.63
MG Growth Estimate 7.30%
MG Value $291.86
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $183.16
MG Value based on 0% Growth $107.37
Market Implied Growth Rate 8.87%
Current Price $331.36
% of Intrinsic Value 113.54%

Northrop Grumman Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $8.5 in 2014 to an estimated $12.63 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.87% 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 Northrop Grumman Corporation revealed the company was trading above its Graham Number of $118.05. The company pays a dividend of $3.9 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 26.23, which was below the industry average of 42.88, 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 $-62.47.

Northrop Grumman 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) -$62.47
Graham Number $118.05
PEmg 26.23
Current Ratio 2.52
PB Ratio 7.57
Current Dividend $3.90
Dividend Yield 1.18%
Number of Consecutive Years of Dividend Growth 14

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 $16,157,000,000
Total Current Liabilities $6,415,000,000
Long-Term Debt $14,392,000,000
Total Assets $34,795,000,000
Intangible Assets $12,455,000,000
Total Liabilities $27,115,000,000
Shares Outstanding (Diluted Average) 175,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $15.30
Dec2017 $11.47
Dec2016 $12.19
Dec2015 $10.39
Dec2014 $9.75
Dec2013 $8.35
Dec2012 $7.81
Dec2011 $7.52
Dec2010 $6.82
Dec2009 $5.21
Dec2008 -$3.77
Dec2007 $5.12
Dec2006 $4.37
Dec2005 $3.85
Dec2004 $2.97
Dec2003 $2.09
Dec2002 $1.84
Dec2001 $2.37
Dec2000 $4.29
Dec1999 $3.35
Dec1998 $1.40

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.63
Dec2017 $11.01
Dec2016 $10.42
Dec2015 $9.28
Dec2014 $8.50
Dec2013 $7.63
Dec2012 $6.42
Dec2011 $5.21
Dec2010 $3.88
Dec2009 $2.59
Dec2008 $1.69
Dec2007 $4.18
Dec2006 $3.48
Dec2005 $2.90
Dec2004 $2.52
Dec2003 $2.46
Dec2002 $2.64

Recommended Reading:

Other ModernGraham posts about the company

Northrop Grumman Corp Valuation – February 2017 $NOC
Northrop Grumman Corporation Valuation – November 2015 Update $NOC
30 Companies in the Spotlight This Week – 11/15/14
Northrop Grumman Corporation Annual Valuation – 2014 $NOC
17 Companies in the Spotlight This Week – 8/2/14

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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.

ConocoPhillips Valuation – April 2018 $COP

Company Profile (excerpt from Reuters): ConocoPhillips, incorporated on November 16, 2001, is an independent exploration and production (E&P) company. The Company explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG) and natural gas liquids. The Company operates through six segments: Alaska, Lower 48, Canada, Europe and North Africa, Asia Pacific and Middle East, and Other International. As of December 31, 2016, its operations were in the United States, Norway, the United Kingdom, Canada, Australia, Timor-Leste, Indonesia, China, Malaysia, Qatar and Libya. Its portfolio includes North American unconventional assets and oil sands assets in Canada; conventional assets in North America, Europe, Asia and Australia; LNG developments, and an inventory of conventional and unconventional exploration prospects. The Company’s subsidiaries include ConocoPhillips Company, ConocoPhillips Canada Funding Company I and Burlington Resources, Inc.

COP Chart

COP data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of COP – 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 $68,231,207,154 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.76 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 -109.93% Fail
6. Moderate PEmg Ratio PEmg < 20 -180.40 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.26 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 1.76 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.41 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.32
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$4.67
MG Value based on 0% Growth -$2.74
Market Implied Growth Rate -94.45%
Current Price $58.09
% of Intrinsic Value N/A

ConocoPhillips 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 or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or 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 $6.85 in 2014 to an estimated $-0.32 for 2018. This level of negative earnings does not support a positive valuation.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 ConocoPhillips revealed the company was trading above its Graham Number of $31.26. The company pays a dividend of $1.06 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was -180.4, which was below the industry average of 85.36, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-22.02.

ConocoPhillips 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) -$22.02
Graham Number $31.26
PEmg -180.40
Current Ratio 1.76
PB Ratio 2.26
Current Dividend $1.06
Dividend Yield 1.82%
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 $16,512,000,000
Total Current Liabilities $9,397,000,000
Long-Term Debt $17,128,000,000
Total Assets $73,362,000,000
Intangible Assets $0
Total Liabilities $42,755,000,000
Shares Outstanding (Diluted Average) 1,191,926,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.67
Dec2017 -$0.70
Dec2016 -$2.91
Dec2015 -$3.58
Dec2014 $5.51
Dec2013 $7.38
Dec2012 $6.72
Dec2011 $8.97
Dec2010 $7.62
Dec2009 $2.94
Dec2008 -$11.16
Dec2007 $7.22
Dec2006 $9.66
Dec2005 $9.55
Dec2004 $5.80
Dec2003 $3.46
Dec2002 -$0.31
Dec2001 $2.82
Dec2000 $3.63
Dec1999 $1.20
Dec1998 $0.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.32
Dec2017 -$0.50
Dec2016 $0.61
Dec2015 $3.25
Dec2014 $6.85
Dec2013 $7.26
Dec2012 $5.80
Dec2011 $4.60
Dec2010 $2.70
Dec2009 $1.37
Dec2008 $1.80
Dec2007 $7.90
Dec2006 $7.37
Dec2005 $5.57
Dec2004 $3.41
Dec2003 $2.20
Dec2002 $1.56

Recommended Reading:

Other ModernGraham posts about the company

58 Companies in the Spotlight This Week – 1/31/15
Conoco Phillips Annual Valuation – 2015 $COP
14 Companies in the Spotlight This Week – 1/18/14
ModernGraham Valuation: Conoco Phillips (COP)

Other ModernGraham posts about related companies

Devon Energy Corp Valuation – March 2018 $DVN
Noble Energy Inc Valuation – March 2018 $NBL
ONEOK Inc Valuation – March 2018 $OKE
Marathon Oil Corp Valuation – March 2018 $MRO
Hess Corp Valuation – March 2018 $HES
Cimarex Energy Co Valuation – Initial Coverage $XEC
EQT Corporation Valuation – March 2018 $EQT
Helmerich & Payne Inc Valuation – March 2018 $HP
Chesapeake Energy Corp Valuation – March 2018 $CHK
Williams Companies Inc Valuation – March 2018 $WMB

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.

Northrop Grumman Corp Valuation – February 2017 $NOC

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 – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Northrop Grumman Corp (NOC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Northrop Grumman Corporation is a global security company. The Company provides products, systems and solutions in autonomous systems; cyber; command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR); strike, and logistics and modernization. The Company’s segments include Aerospace Systems, Mission Systems and Technology Services. The Company’s Aerospace Systems segment is engaged in the design, development, integration and production of manned aircraft, autonomous systems, spacecraft, high-energy laser systems, microelectronics and other systems/subsystems. The Mission Systems segment offers mission solutions and multifunction systems for Department of Defense (DoD), intelligence community, international, federal civil and commercial customers. The Technology Services segment provides logistics solutions supporting the full life cycle of platforms and systems for global defense and federal-civil customers.

NOC Chart

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ModernGraham Valuation of NOC – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $42,537,652,079 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.22 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 312.59% Pass
6. Moderate PEmg Ratio PEmg < 20 22.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.36 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 1.22 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.76 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 $11.02
MG Growth Estimate 6.67%
MG Value $240.68
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $159.77
MG Value based on 0% Growth $93.66
Market Implied Growth Rate 6.80%
Current Price $243.58
% of Intrinsic Value 101.21%

Northrop Grumman Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $7.63 in 2013 to an estimated $11.02 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 6.8% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Northrop Grumman Corporation revealed the company was trading above its Graham Number of $88.16. The company pays a dividend of $3.5 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 22.11, which was below the industry average of 22.93, 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 $-74.79.

Northrop Grumman Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$74.79
Graham Number $88.16
PEmg 22.11
Current Ratio 1.22
PB Ratio 8.36
Current Dividend $3.50
Dividend Yield 1.44%
Number of Consecutive Years of Dividend Growth 14

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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 12/1/2016
Total Current Assets $6,856,000,000
Total Current Liabilities $5,630,000,000
Long-Term Debt $7,058,000,000
Total Assets $25,614,000,000
Intangible Assets $12,450,000,000
Total Liabilities $20,355,000,000
Shares Outstanding (Diluted Average) 180,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.50
Dec2016 $12.19
Dec2015 $10.39
Dec2014 $9.75
Dec2013 $8.35
Dec2012 $7.81
Dec2011 $7.52
Dec2010 $6.82
Dec2009 $5.21
Dec2008 -$3.77
Dec2007 $5.12
Dec2006 $4.37
Dec2005 $3.85
Dec2004 $2.97
Dec2003 $2.09
Dec2002 $1.84
Dec2001 $2.37
Dec2000 $4.29
Dec1999 $3.35
Dec1998 $1.40
Dec1997 $2.99

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $11.02
Dec2016 $10.42
Dec2015 $9.28
Dec2014 $8.50
Dec2013 $7.63
Dec2012 $6.42
Dec2011 $5.21
Dec2010 $3.88
Dec2009 $2.59
Dec2008 $1.69
Dec2007 $4.18
Dec2006 $3.48
Dec2005 $2.90
Dec2004 $2.52
Dec2003 $2.46
Dec2002 $2.64
Dec2001 $2.99

Recommended Reading:

Other ModernGraham posts about the company

Northrop Grumman Corporation Valuation – November 2015 Update $NOC
30 Companies in the Spotlight This Week – 11/15/14
Northrop Grumman Corporation Annual Valuation – 2014 $NOC
17 Companies in the Spotlight This Week – 8/2/14
Northrop Grumman Corporation Quarterly Valuation – July 2014 $NOC

Other ModernGraham posts about related companies

Rockwell Collins Inc Valuation – January 2017 $COL
Raytheon Company Valuation – August 2016 $RTN
Rockwell Collins Inc Valuation – August 2016 $COL
L-3 Communications Holdings Inc Valuation – July 2016 $LLL
Lockheed Martin Corporation Valuation – June 2016 $LMT
United Technologies Corporation Valuation – May 2016 $UTX
Raytheon Co Valuation – February 2016 $RTN
Rockwell Collins Inc Valuation – January 2016 Update $COL
General Dynamics Corporation Valuation – January 2016 Update $GD
Precision Castparts Corporation Valuation – January 2016 Update $PCP

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.

Sonoco Products Co Valuation – Initial Coverage $SON

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

Company Profile (obtained from Google Finance): Sonoco Products Company (Sonoco) is a manufacturer of industrial and consumer packaging products and a provider of packaging services. The Company operates in four segments: Consumer Packaging, Paper and Industrial Converted Products, Display and Packaging, and Protective Solutions. Its Consumer Packaging segment’s products and services include round composite cans, aluminum, steel and peelable membrane easy-open closures for composite and metal cans; plastic bottles, cups and trays, and printed flexible packaging and global brand management. Its Display and Packaging segment’s products and services include point-of-purchase displays; fulfillment; supply chain management, and paperboard specialties. Its Paper and Industrial Converted Products segment provides the raw material for its fiber-based packaging. The Protective Solutions segment’s products and services include custom-engineered and expanded foam protective packaging and components, and temperature-assured packaging.

SON Chart

SON 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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ModernGraham Valuation of SON – February 2017

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,506,691,951 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.67 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 34.03% Pass
6. Moderate PEmg Ratio PEmg < 20 24.14 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.57 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 1.67 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.73 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.28
MG Growth Estimate 2.98%
MG Value $32.94
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $33.05
MG Value based on 0% Growth $19.37
Market Implied Growth Rate 7.82%
Current Price $55.03
% of Intrinsic Value 167.06%

Sonoco Products Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.9 in 2012 to an estimated $2.28 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.82% 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 Sonoco Products Co revealed the company was trading above its Graham Number of $28.97. The company pays a dividend of $1.44 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.14, which was below the industry average of 28.3, 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 $-9.82.

Sonoco Products Co performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.82
Graham Number $28.97
PEmg 24.14
Current Ratio 1.67
PB Ratio 3.57
Current Dividend $1.44
Dividend Yield 2.62%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $1,480,207,000
Total Current Liabilities $885,697,000
Long-Term Debt $1,030,338,000
Total Assets $4,044,549,000
Intangible Assets $1,294,264,000
Total Liabilities $2,477,956,000
Shares Outstanding (Diluted Average) 101,579,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.38
Dec2015 $2.44
Dec2014 $2.19
Dec2013 $2.03
Dec2012 $1.90
Dec2011 $2.13
Dec2010 $1.96
Dec2009 $1.50
Dec2008 $1.63
Dec2007 $2.10
Dec2006 $1.92
Dec2005 $1.61
Dec2004 $1.53
Dec2003 $1.43
Dec2002 $1.39
Dec2001 $0.96
Dec2000 $1.66
Dec1999 $1.83
Dec1998 $1.73
Dec1997 -$0.01
Dec1996 $1.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.28
Dec2015 $2.20
Dec2014 $2.07
Dec2013 $1.97
Dec2012 $1.90
Dec2011 $1.89
Dec2010 $1.79
Dec2009 $1.72
Dec2008 $1.80
Dec2007 $1.83
Dec2006 $1.66
Dec2005 $1.48
Dec2004 $1.41
Dec2003 $1.38
Dec2002 $1.41
Dec2001 $1.36
Dec2000 $1.49

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

WestRock Co Valuation – August 2016 $WRK
Bemis Company Inc Valuation – July 2016 $BMS
Owens-Illinois Inc Valuation – June 2016 $OI
Bemis Co Inc Valuation – January 2016 Update $BMS
WestRock Co Valuation – January 2016 Update $WRK
International Paper Co Valuation – December 2015 Update $IP
Bemis Company Inc. Analysis – September 2015 Update $BMS
WestRock Co. Analysis – Initial Coverage $WRK
International Paper Company Analysis – September 2015 Update $IP
Ball Corporation Analysis – 2015 Update $BLL

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.

ConocoPhillips Valuation – July 2016 $COP

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 – July 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 ConocoPhillips (COP) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): ConocoPhillips (ConocoPhillips) is an independent exploration and production company. The Company explores for, produces, transports and markets crude oil, bitumen, natural gas and liquefied natural gas (LNG). The Company operates through six operating segments, which are primarily defined by geographic region: Alaska; Lower 48; Canada; Europe and North Africa; Asia Pacific and Middle East, and Other International. The Company’s continuing operations are producing in the United States, Norway, the United Kingdom, Canada, Australia, Timor-Leste, Indonesia, China, Malaysia and Qatar. The Company’s portfolio includes North American unconventional assets and oil sands assets in Canada; assets in North America, Europe, Asia and Australia; several international developments, and an inventory of global conventional and unconventional exploration prospects.

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of COP – 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 $49,287,701,803 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.24 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 21.43% Fail
6. Moderate PEmg Ratio PEmg < 20 62.45 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.30 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 1.24 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 12.98 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

COP value chart July 2016

EPSmg $0.65
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $9.46
MG Value based on 0% Growth $5.55
Market Implied Growth Rate 26.98%
Current Price $40.76
% of Intrinsic Value N/A

ConocoPhillips 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 or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or 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 $5.84 in 2012 to an estimated $0.65 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 26.98% 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 below the price.

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

Stage 3: Information for Further Research

COP charts July 2016

Net Current Asset Value (NCAV) -$40.02
Graham Number $0.00
PEmg 62.45
Current Ratio 1.24
PB Ratio 1.30
Current Dividend $2.46
Dividend Yield 6.04%
Number of Consecutive Years of Dividend Growth 0

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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 $10,934,000,000
Total Current Liabilities $8,825,000,000
Long-Term Debt $27,376,000,000
Total Assets $99,834,000,000
Intangible Assets $0
Total Liabilities $60,745,000,000
Shares Outstanding (Diluted Average) 1,244,557,000

Earnings Per Share History

Next Fiscal Year Estimate -$2.78
Dec2015 -$3.58
Dec2014 $5.51
Dec2013 $7.38
Dec2012 $6.72
Dec2011 $8.97
Dec2010 $7.62
Dec2009 $3.24
Dec2008 -$11.16
Dec2007 $7.22
Dec2006 $9.66
Dec2005 $9.55
Dec2004 $5.80
Dec2003 $3.46
Dec2002 -$0.31
Dec2001 $2.82
Dec2000 $3.63
Dec1999 $1.20
Dec1998 $0.46
Dec1997 $1.81
Dec1996 $2.46

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.65
Dec2015 $3.25
Dec2014 $6.85
Dec2013 $7.28
Dec2012 $5.84
Dec2011 $4.66
Dec2010 $2.78
Dec2009 $1.47
Dec2008 $1.80
Dec2007 $7.90
Dec2006 $7.37
Dec2005 $5.57
Dec2004 $3.41
Dec2003 $2.20
Dec2002 $1.56
Dec2001 $2.33
Dec2000 $2.02

Recommended Reading:

Other ModernGraham posts about the company

58 Companies in the Spotlight This Week – 1/31/15
Conoco Phillips Annual Valuation – 2015 $COP
14 Companies in the Spotlight This Week – 1/18/14
ModernGraham Valuation: Conoco Phillips (COP)

Other ModernGraham posts about related companies

Devon Energy Corp Valuation – July 2016 $DVN
Noble Energy Inc Valuation – July 2016 $NBL
Diamond Offshore Drilling Inc Valuation – July 2016 $DO
Nabors Industries Ltd Valuation – July 2016 $NBR
Transocean Ltd Valuation – July 2016 $RIG
ONEOK Inc Valuation – July 2016 $OKE
Marathon Oil Corp Valuation – July 2016 $MRO
Hess Corp Valuation – July 2016 $HES
EQT Corporation Valuation – July 2016 $EQT
QEP Resources Inc Valuation – July 2016 $QEP

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.

Northrop Grumman Corporation Valuation – November 2015 Update $NOC

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – October 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 Northrop Grumman Corporation (NOC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Northrop Grumman Corporation is a global security company. The Company provides systems, products and solutions in unmanned systems; cyber; command, control, communications and computers (C4), intelligence, surveillance, and reconnaissance (C4ISR); strike aircraft, and logistics and modernization to government and commercial customers across the world. The Company operates through four segments: Aerospace Systems, Electronic Systems, Information Systems and Technical Services. It offers a portfolio of capabilities and technologies that enable it to deliver systems and solutions for applications. It participates in many high-priority defense and Government programs in the United States and abroad. The Company conducts business with the United States Government, the Department of Defense (DoD) and intelligence community. The Company also conducts business with local, state, and foreign Governments and domestic and international commercial customers.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of NOC – November 2015

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $34,049,235,051 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.16 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 385.49% Pass
6. Moderate PEmg Ratio PEmg < 20 20.63 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.15 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.16 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 7.84 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

NOC value Chart November 2015

EPSmg $9.04
MG Growth Estimate 11.04%
MG Value $276.24
Opinion Undervalued
MG Value based on 3% Growth $131.02
MG Value based on 0% Growth $76.81
Market Implied Growth Rate 6.06%
Current Price $186.40
% of Intrinsic Value 67.48%

Northrop Grumman Corporation does not qualify for 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 is concerned by the level of debt relative to the current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $5.21 in 2011 to an estimated $9.04 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.06% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

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

Stage 3: Information for Further Research

NOC Charts November 2015

Net Current Asset Value (NCAV) -$65.56
Graham Number $82.34
PEmg 20.63
Current Ratio 1.16
PB Ratio 6.15
Dividend Yield 1.61%
Number of Consecutive Years of Dividend Growth 12

 

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Most Recent Balance Sheet Figures

Total Current Assets $5,951,000,000
Total Current Liabilities $5,133,000,000
Long-Term Debt $6,417,000,000
Total Assets $23,966,000,000
Intangible Assets $12,458,000,000
Total Liabilities $18,269,000,000
Shares Outstanding (Diluted Average) 187,900,000

Earnings Per Share History

Next Fiscal Year Estimate $9.67
Dec14 $9.75
Dec13 $8.35
Dec12 $7.81
Dec11 $7.52
Dec10 $6.82
Dec09 $5.21
Dec08 -$3.77
Dec07 $5.12
Dec06 $4.37
Dec05 $3.85
Dec04 $2.97
Dec03 $2.09
Dec02 $1.84
Dec01 $2.37
Dec00 $4.29
Dec99 $3.35
Dec98 $1.40
Dec97 $2.99
Dec96 $2.08
Dec95 $2.36

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $9.04
Dec14 $8.50
Dec13 $7.63
Dec12 $6.42
Dec11 $5.21
Dec10 $3.88
Dec09 $2.59
Dec08 $1.69
Dec07 $4.18
Dec06 $3.48
Dec05 $2.90
Dec04 $2.52
Dec03 $2.46
Dec02 $2.64
Dec01 $2.99
Dec00 $3.14
Dec99 $2.52

Recommended Reading:

Other ModernGraham posts about the company

30 Companies in the Spotlight This Week – 11/15/14
Northrop Grumman Corporation Annual Valuation – 2014 $NOC
17 Companies in the Spotlight This Week – 8/2/14
Northrop Grumman Corporation Quarterly Valuation – July 2014 $NOC

Other ModernGraham posts about related companies

Raytheon Company Valuation – October 2015 Update $RTN
Precision Castparts Corporation Analysis – October 2015 Update $PCP
Raytheon Company Analysis – July 2015 Update $RTN
Precision Castparts Corporation Analysis – June 2015 Update $PCP
L3 Communications Holdings Inc. Quarterly Valuation – May 2015 $LLL
Raytheon Corporation Quarterly Valuation – April 2015 $RTN
Precision Castparts Corporation Quarterly Valuation – February 2015 $PCP
L-3 Communications Holdings Inc. Quarterly Valuation – February 2015 $LLL
Lockheed Martin Corporation Annual Valuation – 2015 $LMT
Raytheon Company Quarterly Valuation – January 2015 $RTN

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.

Conoco Phillips Annual Valuation – 2015 $COP

conoco-phillipsBenjamin 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 – December 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Conoco Phillips (COP) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): ConocoPhillips is an independent exploration and production (E&P) company. The Company manages its operations through six segments: The Alaska segment explores for, produces, transports and markets crude oil, natural gas liquids, natural gas and LNG; The Lower 48 and Latin America segment consists of operations located in the United States Lower 48 states, as well as exploration in the Gulf of Mexico and Colombia; Canadian operations consist of natural gas fields in western Canada and oil sands developments in the Athabasca Region of northeastern Alberta; The Europe segment consists of operations located in the Norwegian and United Kingdom sectors of the North Sea, as well as exploration in Poland and Greenland; The Asia Pacific and Middle East segment has exploration and production in China, Indonesia, Malaysia, Australia and the Timor Sea, operations in Qatar, Bangladesh and Brunei; The Other International segment includes exploration and producing operations in Libya and Russia.

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 – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – 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 $64.65
MG Value $259.85
MG Opinion Undervalued
Value Based on 3% Growth $97.87
Value Based on 0% Growth $57.37
Market Implied Growth Rate 0.54%
NCAV -$38.05
PEmg 9.58
Current Ratio 1.15
PB Ratio 1.46

Balance Sheet – September 2014

Current Assets $16,253,000,000
Current Liabilities $14,141,000,000
Total Debt $19,499,000,000
Total Assets $118,986,000,000
Intangible Assets $0
Total Liabilities $63,712,000,000
Outstanding Shares 1,247,400,000

Earnings Per Share

2014 (estimate) $5.20
2013 $7.38
2012 $6.72
2011 $8.97
2010 $7.62
2009 $2.94
2008 -$11.16
2007 $7.22
2006 $9.66
2005 $9.55
2004 $5.80

Earnings Per Share – ModernGraham

2014 (estimate) $6.75
2013 $7.26
2012 $5.80
2011 $4.60
2010 $2.70
2009 $1.37

Dividend History

Conclusion:

Conoco Phillips is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio and the insufficient earnings stability or growth over the last ten years.  The Enterprising Investor is concerned with 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.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.70 in 2010 to an estimated $6.75 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 0.54% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out previous ModernGraham valuations of Conoco Phillips (COP) for greater perspective!

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