O’Reilly Automotive Inc Valuation – February 2019 $ORLY

Company Profile (excerpt from Reuters): O’Reilly Automotive, Inc., incorporated on December 20, 2010, is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The Company sells its products to both do-it-yourself (DIY) and professional service provider customers. The Company’s product line includes new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control, chassis parts, driveline parts and engine parts; maintenance items, such as oil, antifreeze, fluids, filters, wiper blades, lighting, engine additives and appearance products, and accessories, such as floor mats, seat covers and truck accessories. It operated 4,829 stores in 47 states, as of December 31, 2016.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORLY – 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 $27,776,062,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.91 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 343.42% Pass
6. Moderate PEmg Ratio PEmg < 20 27.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 56.64 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 0.91 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.20 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 $12.58
MG Growth Estimate 15.00%
MG Value $484.20
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $182.36
MG Value based on 0% Growth $106.90
Market Implied Growth Rate 9.54%
Current Price $346.75
% of Intrinsic Value 71.61%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.7 in 2014 to an estimated $12.58 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.54% 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 O’Reilly Automotive Inc revealed the company was trading above its Graham Number of $52.84. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 27.57, which was above the industry average of 21.23. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-47.12.

O’Reilly Automotive 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) -$47.12
Graham Number $52.84
PEmg 27.57
Current Ratio 0.91
PB Ratio 56.64
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,560,031,000
Total Current Liabilities $3,905,081,000
Long-Term Debt $3,174,327,000
Total Assets $7,894,714,000
Intangible Assets $832,750,000
Total Liabilities $7,396,335,000
Shares Outstanding (Diluted Average) 81,410,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $16.02
Dec2017 $12.67
Dec2016 $10.73
Dec2015 $9.17
Dec2014 $7.34
Dec2013 $6.03
Dec2012 $4.75
Dec2011 $3.71
Dec2010 $2.95
Dec2009 $2.23
Dec2008 $1.48
Dec2007 $1.67
Dec2006 $1.55
Dec2005 $1.45
Dec2004 $0.63
Dec2003 $0.92
Dec2002 $0.77
Dec2001 $0.63
Dec2000 $0.50
Dec1999 $0.46
Dec1998 $0.18

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.58
Dec2017 $10.30
Dec2016 $8.61
Dec2015 $7.10
Dec2014 $5.70
Dec2013 $4.56
Dec2012 $3.56
Dec2011 $2.78
Dec2010 $2.20
Dec2009 $1.78
Dec2008 $1.48
Dec2007 $1.40
Dec2006 $1.20
Dec2005 $0.98
Dec2004 $0.72
Dec2003 $0.73
Dec2002 $0.60

Recommended Reading:

Other ModernGraham posts about the company

O’Reilly Automotive Inc Valuation – April 2018 $ORLY
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
O’Reilly Automotive Inc. Annual Valuation – 2015 $ORLY
16 Companies in the Spotlight this Week – 4/19/14
O’Reilly Automotive Inc. (ORLY) Annual Valuation – 2014

Other ModernGraham posts about related companies

Goodyear Tire & Rubber Co Valuation – January 2019 $GT
Genuine Parts Co Valuation – January 2019 $GPC
Autozone Inc Valuation – January 2019 $AZO
Linamar Corp Valuation – October 2018 $TSE-LNR
AutoNation Inc Valuation – September 2018 $AN
Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL
Delphi Technologies PLC Valuation – August 2018 $DLPH

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.

O’Reilly Automotive Inc Valuation – April 2018 $ORLY

Company Profile (excerpt from Reuters): O’Reilly Automotive, Inc., incorporated on December 20, 2010, is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The Company sells its products to both do-it-yourself (DIY) and professional service provider customers. The Company’s product line includes new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control, chassis parts, driveline parts and engine parts; maintenance items, such as oil, antifreeze, fluids, filters, wiper blades, lighting, engine additives and appearance products, and accessories, such as floor mats, seat covers and truck accessories. It operated 4,829 stores in 47 states, as of December 31, 2016.

ORLY Chart

ORLY data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORLY – 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 $20,754,315,960 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.93 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 314.17% Pass
6. Moderate PEmg Ratio PEmg < 20 20.30 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 31.09 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 0.93 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.93 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 $11.71
MG Growth Estimate 15.00%
MG Value $450.84
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $169.80
MG Value based on 0% Growth $99.54
Market Implied Growth Rate 5.90%
Current Price $237.77
% of Intrinsic Value 52.74%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.7 in 2014 to an estimated $11.71 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.9% 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 O’Reilly Automotive Inc revealed the company was trading above its Graham Number of $48.37. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 20.3, which was above the industry average of 17.88. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-41.23.

O’Reilly Automotive 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) -$41.23
Graham Number $48.37
PEmg 20.30
Current Ratio 0.93
PB Ratio 31.09
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 12/1/2017
Total Current Assets $3,397,672,000
Total Current Liabilities $3,647,366,000
Long-Term Debt $2,978,390,000
Total Assets $7,571,885,000
Intangible Assets $798,450,000
Total Liabilities $6,918,839,000
Shares Outstanding (Diluted Average) 85,401,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.42
Dec2017 $12.67
Dec2016 $10.73
Dec2015 $9.17
Dec2014 $7.34
Dec2013 $6.03
Dec2012 $4.75
Dec2011 $3.71
Dec2010 $2.95
Dec2009 $2.23
Dec2008 $1.48
Dec2007 $1.67
Dec2006 $1.55
Dec2005 $1.45
Dec2004 $1.25
Dec2003 $0.92
Dec2002 $0.77
Dec2001 $0.63
Dec2000 $0.50
Dec1999 $0.46
Dec1998 $0.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $11.71
Dec2017 $10.30
Dec2016 $8.61
Dec2015 $7.10
Dec2014 $5.70
Dec2013 $4.56
Dec2012 $3.56
Dec2011 $2.78
Dec2010 $2.20
Dec2009 $1.78
Dec2008 $1.53
Dec2007 $1.49
Dec2006 $1.33
Dec2005 $1.14
Dec2004 $0.93
Dec2003 $0.73
Dec2002 $0.61

Recommended Reading:

Other ModernGraham posts about the company

O’Reilly Automotive Inc Valuation – July 2016 $ORLY
O’Reilly Automotive Inc. Annual Valuation – 2015 $ORLY
16 Companies in the Spotlight this Week – 4/19/14
O’Reilly Automotive Inc. (ORLY) Annual Valuation – 2014

Other ModernGraham posts about related companies

Goodyear Tire & Rubber Co Valuation – March 2018 $GT
Genuine Parts Co Valuation – March 2018 $GPC
AutoZone Inc Valuation – February 2018 $AZO
Thor Industries Inc Valuation – Initial Coverage $THO
Titan International Inc Valuation – Initial Coverage $TWI
Harley-Davidson Inc Valuation – August 2017 $HOG
Wabash National Corp Valuation – Initial Coverage $WNC
Advance Auto Parts Inc Valuation – August 2017 $AAP
Fox Factory Holding Corp Valuation – Initial Coverage $FOXF
Monro Muffler Brake Inc Valuation – Initial Coverage $MNRO

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.

O’Reilly Automotive Inc Valuation – July 2016 $ORLY

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 O’Reilly Automotive Inc (ORLY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): O’Reilly Automotive, Inc. is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The Company offers its products to both do-it-yourself (DIY) and professional service provider customers. Its stores’ product line includes new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control and engine parts; maintenance items, such as filters, lighting, engine additives and appearance products, and accessories, such as floor mats, seat covers and truck accessories. It offers various services and programs to its customers, such as used oil, oil filter and battery recycling; battery diagnostic testing; loaner tool program; custom hydraulic hoses; professional paint shop mixing and related materials, and machine shops. Its brands include BestTest, BrakeBest, Precision, Import Direct, Master Pro, Micro-Gard and Murray.

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ORLY Chart

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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

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[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORLY – 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 $26,683,131,284 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.12 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 401.12% Pass
6. Moderate PEmg Ratio PEmg < 20 32.17 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 13.92 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 1.12 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.89 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

ORLY value chart July 2016

EPSmg $8.52
MG Growth Estimate 15.00%
MG Value $327.92
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $123.50
MG Value based on 0% Growth $72.40
Market Implied Growth Rate 11.83%
Current Price $273.97
% of Intrinsic Value 83.55%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.56 in 2012 to an estimated $8.52 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 11.83% 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.

O’Reilly Automotive Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

ORLY charts July 2016

Net Current Asset Value (NCAV) -$18.05
Graham Number $68.67
PEmg 32.17
Current Ratio 1.12
PB Ratio 13.92
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $3,701,463,000
Total Current Liabilities $3,315,677,000
Long-Term Debt $1,885,877,000
Total Assets $7,419,773,000
Intangible Assets $757,130,000
Total Liabilities $5,479,932,000
Shares Outstanding (Diluted Average) 98,537,000

Earnings Per Share History

Next Fiscal Year Estimate $10.45
Dec2015 $9.17
Dec2014 $7.34
Dec2013 $6.03
Dec2012 $4.75
Dec2011 $3.71
Dec2010 $2.95
Dec2009 $2.23
Dec2008 $1.48
Dec2007 $1.67
Dec2006 $1.55
Dec2005 $1.45
Dec2004 $1.26
Dec2003 $0.92
Dec2002 $0.77
Dec2001 $0.63
Dec2000 $0.50
Dec1999 $0.46
Dec1998 $0.36
Dec1997 $0.27
Dec1996 $0.23

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $8.52
Dec2015 $7.10
Dec2014 $5.70
Dec2013 $4.56
Dec2012 $3.56
Dec2011 $2.78
Dec2010 $2.20
Dec2009 $1.78
Dec2008 $1.53
Dec2007 $1.49
Dec2006 $1.33
Dec2005 $1.15
Dec2004 $0.93
Dec2003 $0.73
Dec2002 $0.61
Dec2001 $0.50
Dec2000 $0.41

Recommended Reading:

Other ModernGraham posts about the company

O’Reilly Automotive Inc. Annual Valuation – 2015 $ORLY
16 Companies in the Spotlight this Week – 4/19/14
O’Reilly Automotive Inc. (ORLY) Annual Valuation – 2014

Other ModernGraham posts about related companies

Genuine Parts Co Valuation – July 2016 $GPC
Johnson Controls Inc Valuation – July 2016 $JCI
Goodyear Tire & Rubber Co Valuation – July 2016 $GT
Harley-Davidson Inc Valuation – June 2016 $HOG
Autozone Inc Valuation – June 2016 $AZO
BorgWarner Inc Valuation – February 2016 Update $BWA
Genuine Parts Co Valuation – January 2016 Update $GPC
Ford Motor Company Valuation – January 2016 Update $F
Genuine Parts Co Valuation – January 2016 Update $GPC
Ford Motor Company Valuation – January 2016 Update $F

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.

O’Reilly Automotive Inc. Annual Valuation – 2015 $ORLY

500px-O'Reilly_Auto_Parts_Logo.svgO’Reilly Automotive Inc. (NASDAQ:ORLY) has seen a significant price increase over the last few years, which will attract many speculative investors. However, Benjamin Graham, the father of value investing, taught that the sole factor in investment decisions as the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It’s through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here’s an updated look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved 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 theModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

ORLY Chart

ORLY data by YCharts

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To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – FAIL
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – 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 (price over normalized earnings) ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – Must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 2/5

  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 – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $216.12
MG Value $219.30
MG Opinion Fairly Valued
Value Based on 3% Growth $82.59
Value Based on 0% Growth $48.42
Market Implied Growth Rate 14.72%
Net Current Asset Value (NCAV) -$14.09
PEmg 37.94
Current Ratio 1.08
PB Ratio 11.06

Balance Sheet – December 2014

Current Assets $3,067,000,000
Current Liabilities $2,831,000,000
Total Debt $1,397,000,000
Total Assets $6,540,000,000
Intangible Assets $771,000,000
Total Liabilities $4,522,000,000
Outstanding Shares 103,300,000

Earnings Per Share

2014 $7.34
2013 $6.03
2012 $4.75
2011 $3.71
2010 $2.95
2009 $2.23
2008 $1.48
2007 $1.67
2006 $1.55
2005 $1.45
2004 $1.06

Earnings Per Share – ModernGraham

2014 $5.70
2013 $4.56
2012 $3.56
2011 $2.78
2010 $2.20
2009 $1.78

Dividend History

O’Reilly Automotive does not pay a dividend.

Conclusion:

O’Reilly Automotive does not qualify for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is concerned with the low current ratio, lack of dividends, and the high PEmg and PB ratios. The Enterprising Investor takes issue with the level of debt relative to the current assets as well as the lack of dividends. As a result, any purchase of the company is made with a speculative nature behind it. That said, any speculator interested in pursuing the company should still proceed to the next part of the analysis, which is a determination of the company’s intrinsic value.

With regard to the intrinsic value, the company has grown its EPSmg (normalized earnings) from $2.20 in 2010 to $5.70 for 2014. This level of demonstrated growth supports the market’s implied estimate for earnings growth of 14.72% annually over the next 7-10 years. The ModernGraham valuation model therefore returns an estimate of intrinsic value within a margin of safety relative to the current price, indicating the company is fairly valued at the present time.

Disclaimer:  The author did not hold a position in O’Reilly Automotive (ORLY) 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.

[/level-mg-stocks-screens-subscriber]

O’Reilly Automotive Inc. (ORLY) Annual Valuation – 2014

500px-O'Reilly_Auto_Parts_Logo.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 5 Undervalued Companies for the Defensive Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how O’Reilly Automotive fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): O’Reilly Automotive, Inc. (O’Reilly) is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, selling its products to both do-it-yourself (DIY) customers and professional service providers. As of December 31, 2012, O’Reilly operated 3,976 stores in 42 states. The Company’s stores product line includes products, such as new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control, chassis parts and engine parts; maintenance items, such as oil, antifreeze, fluids, filters, wiper blades, lighting, engine additives and appearance products, and accessories, such as floor mats, seat covers and truck accessories. Its stores offer a number of services and programs to its customers, such as used oil and battery recycling; battery diagnostic testing; professional paint shop mixing and related materials, and machine shops.

ORLY Chart

ORLY data by YCharts

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – 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 – FAIL

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 $141.93
MG Value $175.59
MG Opinion Fairly Valued
Value Based on 3% Growth $66.13
Value Based on 0% Growth $38.77
Market Implied Growth Rate 11.31%
Net Current Asset Value (NCAV) -$11.95
PEmg 31.12
Current Ratio 1.17
PB Ratio 7.65

Balance Sheet – 12/31/2013

Current Assets $2,835,200,000
Current Liabilities $2,423,000,000
Total Debt $1,396,100,000
Total Assets $6,067,200,000
Intangible Assets $756,200,000
Total Liabilities $4,100,900,000
Outstanding Shares 105,940,000

Earnings Per Share

2013 $6.03
2012 $4.75
2011 $3.71
2010 $2.95
2009 $2.23
2008 $1.48
2007 $1.67
2006 $1.55
2005 $1.45
2004 $1.06

Earnings Per Share – ModernGraham

2013 $4.56
2012 $3.56
2011 $2.78
2010 $2.20
2009 $1.78
2008 $1.51

 

Conclusion:

O’Reilly Automotive is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor’s issues with the company are the low current ratio, the lack of dividend payments, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with 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 Stocks & Screens as well as 5 Low PEmg Companies for the Defensive Investor.  From a valuation perspective, the company appears to be fairly valued, having grown its EPSmg (normalized earnings) from $1.78 in 2009 to $4.56 for 2013.  This very impressive level of demonstrated growth supports the market’s implied estimate of 11.31% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is within 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 O’Reilly Automotive (ORLY)?  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 O’Reilly Automotive (ORLY) or any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

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

General Electric Co Valuation – April 2019 #GE

Company Profile (excerpt from Reuters): General Electric Company (GE), incorporated on April 15, 1892, is a global digital industrial company. The Company’s products and services range from aircraft engines, power generation, and oil and gas production equipment to medical imaging, financing and industrial products. The Company’s segments include Power, Renewable Energy, Oil & Gas, Aviation, Healthcare, Transportation, Energy Connections & Lighting, and Capital. As of December 31, 2016, the Company served customers in approximately 180 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GE – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $87,183,478,373 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.81 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 -186.59% Fail
6. Moderate PEmg Ratio PEmg < 20 -15.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.69 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 1.81 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.75 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 -$0.66
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$9.61
MG Value based on 0% Growth -$5.63
Market Implied Growth Rate -11.80%
Current Price $10.01
% of Intrinsic Value N/A

General Electric Company 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 $0.7 in 2015 to an estimated $-0.66 for 2019. 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 General Electric Company revealed the company was trading above its Graham Number of $6.64. The company pays a dividend of $0.37 per share, for a yield of 3.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -15.11, which was below the industry average of 24.48, 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 $-15.42.

General Electric Company 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) -$15.42
Graham Number $6.64
PEmg -15.11
Current Ratio 1.81
PB Ratio 1.69
Current Dividend $0.37
Dividend Yield 3.70%
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 $123,547,000,000
Total Current Liabilities $68,269,000,000
Long-Term Debt $96,883,000,000
Total Assets $309,129,000,000
Intangible Assets $77,770,000,000
Total Liabilities $257,648,000,000
Shares Outstanding (Diluted Average) 8,697,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.55
Dec2018 -$2.62
Dec2017 -$1.03
Dec2016 $0.75
Dec2015 -$0.62
Dec2014 $1.50
Dec2013 $1.27
Dec2012 $1.29
Dec2011 $1.23
Dec2010 $1.06
Dec2009 $1.01
Dec2008 $1.72
Dec2007 $2.17
Dec2006 $2.00
Dec2005 $1.57
Dec2004 $1.64
Dec2003 $1.51
Dec2002 $1.41
Dec2001 $1.37
Dec2000 $1.27
Dec1999 $1.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.66
Dec2018 -$0.98
Dec2017 $0.02
Dec2016 $0.64
Dec2015 $0.70
Dec2014 $1.33
Dec2013 $1.22
Dec2012 $1.22
Dec2011 $1.27
Dec2010 $1.39
Dec2009 $1.60
Dec2008 $1.87
Dec2007 $1.89
Dec2006 $1.71
Dec2005 $1.54
Dec2004 $1.50
Dec2003 $1.39

Recommended Reading:

Other ModernGraham posts about the company

General Electric Co Valuation – November 2018 $GE
5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018
General Electric Co Valuation – February 2018 $GE
5 Overvalued Dow Components – February 2017

Other ModernGraham posts about related companies

3M Co Valuation – April 2019 #MMM
Illinois Tool Works Inc Valuation – April 2019 #ITW
Honeywell International Inc Valuation – March 2019 #HON
Ingersoll-Rand PLC Valuation – January 2019 $IR
General Electric Co Valuation – November 2018 $GE
3M Co Valuation – November 2018 $MMM
ITT Inc Valuation – July 2018 $ITT
Illinois Tool Works Inc Valuation – June 2018 $ITW
Honeywell International Inc Valuation – June 2018 $HON
General Electric Co Valuation – February 2018 $GE

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.

Caterpillar Inc Valuation – April 2019 #CAT

Company Profile (excerpt from Reuters): Caterpillar Inc. (Caterpillar), incorporated on March 12, 1986, is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The Company operates through segments, including Construction Industries, Resource Industries, Energy & Transportation, Financial Products segment and All Other operating segments. The Company’s products are sold primarily under the brands Caterpillar, CAT, design versions of CAT and Caterpillar, EMD, FG Wilson, MaK, MWM, Perkins, Progress Rail, SEM and Solar Turbines. As of December 31, 2016, the Company’s machines were distributed principally through an organization of dealers (dealer network), 49 located in the United States and 123 located outside the United States, serving 190 countries.

Downloadable PDF version of this valuation:

ModernGraham Valuation of CAT – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $80,783,215,831 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 5.64% Fail
6. Moderate PEmg Ratio PEmg < 20 21.71 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.84 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 2.36 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.47
MG Growth Estimate 3.62%
MG Value $101.81
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $93.75
MG Value based on 0% Growth $54.96
Market Implied Growth Rate 6.60%
Current Price $140.36
% of Intrinsic Value 137.86%

Caterpillar 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 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 current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $5.21 in 2015 to an estimated $6.47 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.6% 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 Caterpillar Inc. revealed the company was trading above its Graham Number of $72.74. The company pays a dividend of $3.28 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.71, which was below the industry average of 26.97, 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 $-44.06.

Caterpillar 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) -$44.06
Graham Number $72.74
PEmg 21.71
Current Ratio 1.37
PB Ratio 5.84
Current Dividend $3.28
Dividend Yield 2.34%
Number of Consecutive Years of Dividend Growth 5

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 $38,603,000,000
Total Current Liabilities $28,218,000,000
Long-Term Debt $24,544,000,000
Total Assets $78,509,000,000
Intangible Assets $8,114,000,000
Total Liabilities $64,429,000,000
Shares Outstanding (Diluted Average) 586,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.64
Dec2018 $10.26
Dec2017 $1.26
Dec2016 -$0.11
Dec2015 $4.18
Dec2014 $3.90
Dec2013 $5.75
Dec2012 $8.48
Dec2011 $7.40
Dec2010 $4.15
Dec2009 $1.43
Dec2008 $5.66
Dec2007 $5.37
Dec2006 $5.17
Dec2005 $4.04
Dec2004 $2.88
Dec2003 $1.56
Dec2002 $1.15
Dec2001 $1.16
Dec2000 $1.51
Dec1999 $1.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.47
Dec2018 $4.55
Dec2017 $2.13
Dec2016 $3.19
Dec2015 $5.21
Dec2014 $5.79
Dec2013 $6.31
Dec2012 $6.20
Dec2011 $4.97
Dec2010 $3.96
Dec2009 $4.02
Dec2008 $5.08
Dec2007 $4.46
Dec2006 $3.66
Dec2005 $2.66
Dec2004 $1.86
Dec2003 $1.35

Recommended Reading:

Other ModernGraham posts about the company

5 Overvalued Dow Components – April 2019
5 Overvalued Dow Components – January 2019
Caterpillar Inc Valuation – November 2018 $CAT
5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018

Other ModernGraham posts about related companies

Stanley Black & Decker Inc Valuation – March 2019 #SWK
Pentair PLC Valuation – March 2019 #PNR
Snap-On Inc Valuation – March 2019 #SNA
W.W. Grainger Inc Valuation – February 2019 $GWW
Xylem Inc Valuation – February 2019 $XYL
Allegion PLC Valuation – February 2019 $ALLE
Arconic Inc Valuation – February 2019 $ARNC
Roper Technologies Inc Valuation – February 2019 $ROP
Rockwell Automation Inc Valuation – February 2019 $ROK
Eaton Corp PLC Valuation – January 2019 $ETN

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.

Boeing Co Valuation – April 2019 #BA

Company Profile (excerpt from Reuters): The Boeing Company, incorporated on July 19, 1934, is an aerospace firm. The Company operates in four segments: Commercial Airplanes (BCA); Defense, Space & Security (BDS); Global Services (BGS), and Boeing Capital (BCC).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BA – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $221,355,979,748 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.08 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 236.24% Pass
6. Moderate PEmg Ratio PEmg < 20 25.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 552.21 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 1.08 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.71 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 $15.20
MG Growth Estimate 15.00%
MG Value $585.33
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $220.45
MG Value based on 0% Growth $129.23
Market Implied Growth Rate 8.65%
Current Price $392.11
% of Intrinsic Value 66.99%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $6.68 in 2015 to an estimated $15.2 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.65% 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 Boeing Co revealed the company was trading above its Graham Number of $15.72. The company pays a dividend of $6.84 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 25.79, which was above the industry average of 24.41. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-50.43.

Boeing Co 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) -$50.43
Graham Number $15.72
PEmg 25.79
Current Ratio 1.08
PB Ratio 552.21
Current Dividend $6.84
Dividend Yield 1.74%
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 $87,830,000,000
Total Current Liabilities $81,590,000,000
Long-Term Debt $10,657,000,000
Total Assets $117,359,000,000
Intangible Assets $11,269,000,000
Total Liabilities $116,949,000,000
Shares Outstanding (Diluted Average) 577,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $18.40
Dec2018 $17.85
Dec2017 $13.85
Dec2016 $7.83
Dec2015 $7.44
Dec2014 $7.38
Dec2013 $5.96
Dec2012 $5.11
Dec2011 $5.34
Dec2010 $4.45
Dec2009 $1.84
Dec2008 $3.67
Dec2007 $5.28
Dec2006 $2.85
Dec2005 $3.20
Dec2004 $2.30
Dec2003 $0.89
Dec2002 $0.61
Dec2001 $3.41
Dec2000 $2.44
Dec1999 $2.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $15.20
Dec2018 $12.69
Dec2017 $9.57
Dec2016 $7.21
Dec2015 $6.68
Dec2014 $6.08
Dec2013 $5.13
Dec2012 $4.51
Dec2011 $4.18
Dec2010 $3.60
Dec2009 $3.24
Dec2008 $3.78
Dec2007 $3.53
Dec2006 $2.42
Dec2005 $2.17
Dec2004 $1.74
Dec2003 $1.63

Recommended Reading:

Other ModernGraham posts about the company

Boeing Co Valuation – November 2018 $BA
Boeing Co. Valuation – February 2018 $BA
5 Undervalued Dow Components to Research – March 2017
5 Undervalued Dow Components to Research – February 2017
5 Undervalued Dow Components to Research – December 2016

Other ModernGraham posts about related companies

Boeing Co. Valuation – February 2018 $BA
AAR Corp Valuation – Initial Coverage $AIR
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Textron Inc Valuation – June 2016 $TXT
Boeing Company Valuation – June 2016 $BA
Textron Inc Valuation – December 2015 Update $TXT
Boeing Company Valuation – November 2015 Update $BA
Textron Inc. Analysis – August 2015 Update $TXT
Boeing Company Analysis – August 2015 Update $BA
Textron Inc. Quarterly Valuation – May 2015 $TXT

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.

Apple Inc Valuation – April 2019 #AAPL

Company Profile (excerpt from Reuters): Apple Inc., incorporated on January 3, 1977, designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players. The Company sells a range of related software, services, accessories, networking solutions and third-party digital content and applications. The Company’s segments include the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. The Americas segment includes both North and South America. The Europe segment includes European countries, India, the Middle East and Africa. The Greater China segment includes China, Hong Kong and Taiwan. The Rest of Asia Pacific segment includes Australia and the Asian countries not included in the Company’s other operating segments. The Company’s products and services include iPhone, iPad, Mac, iPod, Apple Watch, Apple TV, a portfolio of consumer and professional software applications, iPhone OS (iOS), OS X and watchOS operating systems, iCloud, Apple Pay and a range of accessory, service and support offerings.

Downloadable PDF version of this valuation:

ModernGraham Valuation of AAPL – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $928,509,329,542 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 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 151.37% Pass
6. Moderate PEmg Ratio PEmg < 20 19.47 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.97 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.86 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 $10.11
MG Growth Estimate 6.57%
MG Value $218.81
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $146.65
MG Value based on 0% Growth $85.97
Market Implied Growth Rate 5.48%
Current Price $196.89
% of Intrinsic Value 89.98%

Apple 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. 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 $7.03 in 2015 to an estimated $10.11 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 5.48% 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 Apple Inc. revealed the company was trading above its Graham Number of $71.63. The company pays a dividend of $2.72 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 19.47, which was below the industry average of 35.4, 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 $-24.09.

Apple 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) -$24.09
Graham Number $71.63
PEmg 19.47
Current Ratio 1.30
PB Ratio 7.97
Current Dividend $2.72
Dividend Yield 1.38%
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 $140,828,000,000
Total Current Liabilities $108,283,000,000
Long-Term Debt $92,989,000,000
Total Assets $373,719,000,000
Intangible Assets $0
Total Liabilities $255,827,000,000
Shares Outstanding (Diluted Average) 4,773,252,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.12
Sep2018 $11.91
Sep2017 $9.21
Sep2016 $8.31
Sep2015 $9.22
Sep2014 $6.45
Sep2013 $5.68
Sep2012 $6.31
Sep2011 $3.95
Sep2010 $2.16
Sep2009 $1.30
Sep2008 $0.97
Sep2007 $0.56
Sep2006 $0.32
Sep2005 $0.22
Sep2004 $0.05
Sep2003 $0.01
Sep2002 $0.01
Sep2001 -$0.01
Sep2000 $0.16
Sep1999 $0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.11
Sep2018 $9.75
Sep2017 $8.37
Sep2016 $7.70
Sep2015 $7.03
Sep2014 $5.60
Sep2013 $4.74
Sep2012 $3.83
Sep2011 $2.32
Sep2010 $1.36
Sep2009 $0.86
Sep2008 $0.57
Sep2007 $0.32
Sep2006 $0.18
Sep2005 $0.09
Sep2004 $0.03
Sep2003 $0.04

Recommended Reading:

Other ModernGraham posts about the company

Apple Inc Valuation – November 2018 $AAPL
Apple Inc Valuation – February 2018 $AAPL
Apple Inc Valuation – January 2017 $AAPL
Apple Inc Valuation – August 2016 $AAPL
Apple Inc Valuation – February 2016 $AAPL

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Disclaimer:

The author held a long position in AAPL but did not hold a position 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.  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.

Linde PLC Valuation – April 2019 #LIN

Company Profile (excerpt from Reuters): Linde plc, incorporated on April 18, 2017, is an industrial gases and engineering company that operates through its subsidiaries. The Company provides atmospheric gases (oxygen, nitrogen, argon and rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases and acetylene). It designs, engineers and builds equipment that produces industrial gases primarily for internal use. It also offers gaseous medication and related medical products and devices for patients and medical staff. The Company serves the customers in various industries, including healthcare, petroleum refining, manufacturing, food, beverage carbonation, fiber-optics, steel making, aerospace, chemicals and water treatment.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LIN – April 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $100,601,281,539 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.86 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 26.09% Fail
6. Moderate PEmg Ratio PEmg < 20 32.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.99 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 0.86 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.92 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 $5.70
MG Growth Estimate 0.33%
MG Value $52.23
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $82.69
MG Value based on 0% Growth $48.47
Market Implied Growth Rate 11.94%
Current Price $184.62
% of Intrinsic Value 353.45%

Linde PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the 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 $5.58 in 2014 to an estimated $5.7 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.94% 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 Linde PLC revealed the company was trading above its Graham Number of $58.47. The company pays a dividend of $3.15 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 32.37, which was above the industry average of 23.27. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-34.09.

Linde PLC 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) -$34.09
Graham Number $58.47
PEmg 32.37
Current Ratio 0.86
PB Ratio 7.99
Current Dividend $3.15
Dividend Yield 1.71%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,305,000,000
Total Current Liabilities $3,860,000,000
Long-Term Debt $6,615,000,000
Total Assets $19,979,000,000
Intangible Assets $3,714,000,000
Total Liabilities $13,244,000,000
Shares Outstanding (Diluted Average) 291,513,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.24
Dec2017 $4.32
Dec2016 $5.21
Dec2015 $5.35
Dec2014 $5.73
Dec2013 $5.87
Dec2012 $5.61
Dec2011 $5.45
Dec2010 $3.84
Dec2009 $4.01
Dec2008 $3.80
Dec2007 $3.62
Dec2006 $3.00
Dec2005 $2.20
Dec2004 $2.10
Dec2003 $1.77
Dec2002 $1.24
Dec2001 $1.31
Dec2000 $1.13
Dec1999 $1.33
Dec1998 $1.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.70
Dec2017 $5.05
Dec2016 $5.47
Dec2015 $5.60
Dec2014 $5.58
Dec2013 $5.32
Dec2012 $4.88
Dec2011 $4.39
Dec2010 $3.79
Dec2009 $3.62
Dec2008 $3.27
Dec2007 $2.84
Dec2006 $2.33
Dec2005 $1.90
Dec2004 $1.67
Dec2003 $1.42
Dec2002 $1.25

Recommended Reading:

Other ModernGraham posts about the company

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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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