Prudential Financial Inc Valuation – April 2019 #PRU

Company Profile (excerpt from Reuters): Prudential Financial, Inc., incorporated in 1999, is a financial services company. The Company, through its subsidiaries and affiliates, offers a range of financial products and services, which includes life insurance, annuities, retirement-related services, mutual funds and investment management. The Company’s operations consists of four divisions, which together encompass seven segments. Its divisions include The U.S. Retirement Solutions and Investment Management division; the U.S. Individual Life and Group Insurance division; the International Insurance division, and Closed Block division. The Company has operations in the United States, Asia, Europe and Latin America.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PRU – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $39,227,191,497 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 191.48% Pass
5. Moderate PEmg Ratio PEmg < 20 7.86 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.82 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $12.20
MG Growth Estimate 15.00%
MG Value $469.62
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $176.87
MG Value based on 0% Growth $103.68
Market Implied Growth Rate -0.32%
Current Price $95.91
% of Intrinsic Value 20.42%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.22 in 2015 to an estimated $12.2 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.32% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Prudential Financial Inc revealed the company was trading below its Graham Number of $177.98. The company pays a dividend of $3.6 per share, for a yield of 3.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.86, which was below the industry average of 19.43, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Prudential Financial Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $177.98
PEmg 7.86
PB Ratio 0.82
Dividend Yield 3.75%
TTM Dividend $3.60
Number of Consecutive Years of Dividend Growth 10

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
Long-Term Debt & Capital Lease Obligation $18,333,000,000
Total Assets $815,078,000,000
Intangible Assets $1,850,000,000
Total Liabilities $766,047,000,000
Shares Outstanding (Diluted Average) 421,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.96
Dec2018 $9.50
Dec2017 $17.86
Dec2016 $9.71
Dec2015 $12.17
Dec2014 $3.23
Dec2013 -$1.55
Dec2012 $1.05
Dec2011 $7.12
Dec2010 $5.32
Dec2009 $7.63
Dec2008 -$2.53
Dec2007 $7.61
Dec2006 $6.50
Dec2005 $6.34
Dec2004 $3.31
Dec2003 $1.98
Dec2002 $1.25
Dec2001 $0.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.20
Dec2018 $11.71
Dec2017 $11.30
Dec2016 $6.99
Dec2015 $5.22
Dec2014 $2.18
Dec2013 $2.41
Dec2012 $4.16
Dec2011 $5.49
Dec2010 $4.75
Dec2009 $4.68
Dec2008 $3.55
Dec2007 $6.11
Dec2006 $4.87
Dec2005 $3.56
Dec2004 $1.89
Dec2003 $1.01

Recommended Reading:

Other ModernGraham posts about the company

Best Stocks Below Their Graham Number – February 2019
10 Best Dividend Paying Stocks for the Enterprising Investor – September 2018
5 Low P/E Companies In The S&P 500 – August 2018
Most Undervalued Stocks of the S&P 500 – August 2018
10 Undervalued Stocks for the Enterprising Investor – August 2018

Other ModernGraham posts about related companies

Torchmark Corp Valuation – March 2019 #TMK
Assurant Inc Valuation – March 2019 #AIZ
Humana Inc Valuation – March 2019 #HUM
American International Group Inc Valuation – March 2019 #AIG
Chubb Ltd Valuation – March 2019 #CB
Loews Corporation Valuation – March 2019 #L
Anthem Inc Valuation – February 2019 $ANTM
Arthur J Gallagher & Co Valuation – February 2019 $AJG
Brighthouse Financial Inc Valuation – February 2019 $BHF
Allstate Corp Valuation – February 2019 $ALL

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.

Prudential Financial Inc Valuation – June 2018 $PRU

Company Profile (excerpt from Reuters): Prudential Financial, Inc., incorporated in 1999, is a financial services company. The Company, through its subsidiaries and affiliates, offers a range of financial products and services, which includes life insurance, annuities, retirement-related services, mutual funds and investment management. The Company’s operations consists of four divisions, which together encompass seven segments. Its divisions include The U.S. Retirement Solutions and Investment Management division; the U.S. Individual Life and Group Insurance division; the International Insurance division, and Closed Block division. The Company has operations in the United States, Asia, Europe and Latin America.

PRU Chart

PRU data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PRU – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $40,030,198,975 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 97.16% Pass
5. Moderate PEmg Ratio PEmg < 20 7.60 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.79 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $12.54
MG Growth Estimate 15.00%
MG Value $482.89
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $181.87
MG Value based on 0% Growth $106.61
Market Implied Growth Rate -0.45%
Current Price $95.31
% of Intrinsic Value 19.74%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.17 in 2014 to an estimated $12.54 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.45% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Prudential Financial Inc revealed the company was trading below its Graham Number of $185.87. The company pays a dividend of $3 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.6, which was below the industry average of 30.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Prudential Financial Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $185.87
PEmg 7.60
PB Ratio 0.79
Dividend Yield 3.15%
TTM Dividend $3.00
Number of Consecutive Years of Dividend Growth 9

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Long-Term Debt & Capital Lease Obligation $19,097,000,000
Total Assets $829,677,000,000
Intangible Assets $1,995,000,000
Total Liabilities $777,502,000,000
Shares Outstanding (Diluted Average) 430,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.00
Dec2017 $17.86
Dec2016 $9.71
Dec2015 $12.17
Dec2014 $3.23
Dec2013 -$1.55
Dec2012 $1.01
Dec2011 $7.12
Dec2010 $5.32
Dec2009 $7.63
Dec2008 -$2.53
Dec2007 $7.61
Dec2006 $6.50
Dec2005 $6.34
Dec2004 $3.31
Dec2003 $1.98
Dec2002 $1.25
Dec2001 $0.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.54
Dec2017 $11.30
Dec2016 $6.99
Dec2015 $5.22
Dec2014 $2.17
Dec2013 $2.39
Dec2012 $4.15
Dec2011 $5.49
Dec2010 $4.75
Dec2009 $4.68
Dec2008 $3.55
Dec2007 $6.11
Dec2006 $4.87
Dec2005 $3.56
Dec2004 $1.89
Dec2003 $1.01
Dec2002 $0.44

Recommended Reading:

Other ModernGraham posts about the company

Prudential Financial Inc Valuation – July 2017 $PRU
Prudential Financial Inc Valuation – February 2016 $PRU
5 Speculative and Overvalued Companies to Avoid – December 2014
27 Companies in the Spotlight This Week – 12/20/14
Prudential Financial Inc. Annual Valuation – 2014 $PRU

Other ModernGraham posts about related companies

Assurant Inc Valuation – June 2018 $AIZ
Torchmark Corp Valuation – June 2018 $TMK
Humana Inc Valuation – June 2018 $HUM
American International Group Inc – June 2018 $AIG
Chubb Ltd Valuation – June 2018 $CB
Loews Corp Valuation – May 2018 $L
Anthem Inc Valuation – May 2018 $ANTM
Berkshire Hathaway Inc Valuation – May 2018 $BRK-B
Arthur J Gallagher & Co Valuation – April 2018 $AJG
Allstate Corp Valuation – April 2018 $ALL

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.

Prudential Financial Inc Valuation – July 2017 $PRU

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 – March 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 Prudential Financial Inc (PRU) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Prudential Financial, Inc., is a financial services company. The Company, through its subsidiaries, offers a range of financial products and services, which includes life insurance, annuities, retirement-related services, mutual funds and investment management. The Company’s operations consists of four divisions, which together encompass seven segments. The U.S. Retirement Solutions and Investment Management division consists of Individual Annuities, Retirement and Asset Management segments. The U.S. Individual Life and Group Insurance division consists of Individual Life and Group Insurance segments. The International Insurance division consists of International Insurance segment. The Closed Block division consists of Closed Block segment. The Company has operations in the United States, Asia, Europe and Latin America.

PRU Chart

PRU data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of PRU – July 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $47,577,544,438 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 215.07% Pass
5. Moderate PEmg Ratio PEmg < 20 12.36 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.04 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $9.00
MG Growth Estimate 15.00%
MG Value $346.53
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $130.51
MG Value based on 0% Growth $76.51
Market Implied Growth Rate 1.93%
Current Price $111.23
% of Intrinsic Value 32.10%

Prudential Financial Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the  insufficient earnings stability over the last ten years. The Enterprising Investor has concerns regarding 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 Undervalued after growing its EPSmg (normalized earnings) from $2.39 in 2013 to an estimated $9 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.93% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Prudential Financial Inc revealed the company was trading below its Graham Number of $162.19.  The company pays a dividend of $2.8 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 12.36, which was below the industry average of 20.16, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Prudential Financial Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Graham Number $162.19
PEmg 12.35
PB Ratio 1.04
Dividend Yield 2.52%
TTM Dividend $2.80
Number of Consecutive Years of Dividend Growth 8

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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 3/1/2017
Long-Term Debt & Capital Lease Obligation $20,072,000,000
Total Assets $797,365,000,000
Intangible Assets $0
Total Liabilities $750,581,000,000
Shares Outstanding (Diluted Average) 439,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.95
Dec2016 $9.71
Dec2015 $12.17
Dec2014 $3.23
Dec2013 -$1.55
Dec2012 $1.01
Dec2011 $7.12
Dec2010 $5.32
Dec2009 $7.63
Dec2008 -$2.53
Dec2007 $7.61
Dec2006 $6.50
Dec2005 $6.34
Dec2004 $3.31
Dec2003 $1.98
Dec2002 $1.25
Dec2001 $0.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.00
Dec2016 $6.99
Dec2015 $5.22
Dec2014 $2.17
Dec2013 $2.39
Dec2012 $4.15
Dec2011 $5.49
Dec2010 $4.75
Dec2009 $4.68
Dec2008 $3.55
Dec2007 $6.11
Dec2006 $4.87
Dec2005 $3.56
Dec2004 $1.89
Dec2003 $1.01
Dec2002 $0.44
Dec2001 $0.02

Recommended Reading:

Other ModernGraham posts about the company

Prudential Financial Inc Valuation – February 2016 $PRU
5 Speculative and Overvalued Companies to Avoid – December 2014
27 Companies in the Spotlight This Week – 12/20/14
Prudential Financial Inc. Annual Valuation – 2014 $PRU

Other ModernGraham posts about related companies

Assurant Inc Valuation – March 2017 $AIZ
American International Group Inc Valuation – March 2017 $AIG
Torchmark Corporation Valuation – March 2017 $TMK
Humana Inc Valuation – Initial Coverage $HUM
Chubb Ltd Valuation – March 2017 $CB
Stewart Information Services Corp Valuation – Initial Coverage $STC
Loews Corporation – February 2017 $L
Kemper Corp Valuation – Initial Coverage $KMPR
CNO Financial Group Inc Valuation – January 2017 $CNO
Anthem Inc Valuation – January 2017 $ANTM

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.

Prudential Financial Inc Valuation – February 2016 $PRU

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 – February 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 Prudential Financial Inc (PRU) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Prudential Financial, Inc. is a financial services company. The Company, through its subsidiaries and affiliates, provides a arrange of financial products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. The Company has organized its principal operations into the Financial Services Businesses and the Closed Block Business. The Financial Services Businesses consists of three divisions, containing six segments, and the Company’s corporate operations. The Financial Services Businesses operate through three operating divisions: U.S. Retirement Solutions and Investment Management, U.S. Individual Life and Group Insurance, and International Insurance. The Company’s investment portfolio consists of public and private fixed maturity securities, commercial mortgage and other loans, equity securities and other invested assets.

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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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Downloadable PDF version of this valuation:

ModernGraham Valuation of PRU – February 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $26,234,479,032 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 23.75% Fail
5. Moderate PEmg Ratio PEmg < 20 10.78 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.62 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

PRU value Chart February 2016

EPSmg $5.38
MG Growth Estimate -0.18%
MG Value $43.76
Opinion Overvalued
MG Value based on 3% Growth $77.99
MG Value based on 0% Growth $45.72
Market Implied Growth Rate 1.14%
Current Price $58.00
% of Intrinsic Value 132.53%

Prudential Financial 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, and the insufficient earnings growth over the last ten years. The Enterprising Investor has concerns regarding the lack of earnings growth or stability over the last five years.  As a result, value investors following the ModernGraham approach should explore other opportunities or proceed with a speculative attitude.

As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $5.44 in 2011 to an estimated $5.38 for 2015. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.14% 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.

Stage 3: Information for Further Research

PRU Charts February 2016

Graham Number $164.80
PEmg 10.78
PB Ratio 0.62
Dividend Yield 4.00%
Number of Consecutive Years of Dividend Growth 7

 

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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 Sep2015
Long-Term Debt $28,699,000,000
Total Assets $754,527,000,000
Intangible Assets $0
Total Liabilities $711,807,000,000
Shares Outstanding (Diluted Average) 459,700,000

Earnings Per Share History

Next Fiscal Year Estimate $12.70
Dec2014 $3.20
Dec2013 -$1.57
Dec2012 $1.05
Dec2011 $6.99
Dec2010 $5.32
Dec2009 $7.63
Dec2008 -$2.53
Dec2007 $7.61
Dec2006 $6.50
Dec2005 $6.34
Dec2004 $3.31
Dec2003 $1.98
Dec2002 $1.25
Dec2001 $0.07

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.38
Dec2014 $2.14
Dec2013 $2.37
Dec2012 $4.13
Dec2011 $5.44
Dec2010 $4.75
Dec2009 $4.68
Dec2008 $3.55
Dec2007 $6.11
Dec2006 $4.87
Dec2005 $3.56
Dec2004 $1.89
Dec2003 $1.01
Dec2002 $0.44
Dec2001 $0.02

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – December 2014

Other ModernGraham posts about related companies

Anthem Inc Valuation – February 2016 $ANTM
Aflac Inc Valuation – February 2016 $AFL
MetLife Inc Valuation – February 2016 Update $MET
Aetna Inc Valuation – February 2016 Update $AET
Marsh & McLennan Company Valuation – January 2016 Update $MMC
Aon PLC Valuation – January 2016 Update $AON
Progressive Corp Valuation – November 2015 Update $PGR
Progressive Corp Valuation – November 2015 Update $PGR
Ace Limited Valuation – November 2015 Update $ACE
Travelers Companies Inc. Valuation – November 2015 Update $TRV

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.

Prudential Financial Inc. Annual Valuation – 2014 $PRU

220px-Prudential_Financial.svg

Prudential does not perform well in the initial stages of the analysis, as it is not suitable for either the Enterprising Investor or the Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years along with the high PEmg ratio. The Enterprising Investor is concerned with the lack of earnings growth or stability over the last five years. Any value investor following the ModernGraham approach based on Benjamin Graham’s teachings should be very cautious proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

To determine an estimate of the intrinsic value, one must consider the company’s earnings. Here, the company has seen its EPSmg (normalized earnings) drop from $4.75 in 2010 to only an estimated $4.19 for 2014. This drop in earnings does not support the market’s implied forecast of 5.87% earnings growth over the next 7-10 years. The company would have to see a significant change in growth in order to be valued at the market’s current price. As a result, the ModernGraham valuation model returns an estimate of intrinsic value well below the price, supporting a clear conclusion that the company is significantly overvalued.

Read the full valuation on Seeking Alpha!

PRU Chart

PRU data by YCharts

Disclaimer:  The author did not hold a position in Prudential Financial (PRU) 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.

Berkshire Hathaway Inc Valuation – April 2019 #BRK.B

Company Profile (excerpt from Reuters): Berkshire Hathaway Inc. (Berkshire), incorporated on June 16, 1998, is a holding company owning subsidiaries engaged in various business activities. The Company’s segments include Insurance, Burlington Northern Santa Fe, LLC (BNSF), Berkshire Hathaway Energy, Manufacturing, McLane Company, Service and retailing, and Finance and financial products. The Company conducts insurance businesses on both a primary basis and a reinsurance basis, a freight rail transportation business and a group of utility and energy generation and distribution businesses. Berkshire also owns and operates a range of other businesses engaged in a range of activities. Its insurance and reinsurance business activities are conducted through various domestic and foreign-based insurance entities. Its insurance businesses provide insurance and reinsurance of property and casualty risks and also reinsure life, accident and health risks across the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BRK.B – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $501,551,804,600 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 93.65% Pass
5. Moderate PEmg Ratio PEmg < 20 21.36 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.40 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Fail
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $9.36
MG Growth Estimate 2.43%
MG Value $125.05
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $135.79
MG Value based on 0% Growth $79.60
Market Implied Growth Rate 6.43%
Current Price $200.07
% of Intrinsic Value 159.99%

Berkshire Hathaway Inc. Class B does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $8.06 in 2015 to an estimated $9.36 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.43% 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.

At the time of valuation, further research into Berkshire Hathaway Inc. Class B revealed the company was trading above its Graham Number of $178.09. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 21.36, which was above the industry average of 19.43.

Berkshire Hathaway Inc. Class B scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Graham Number $178.09
PEmg 21.36
PB Ratio 1.40
Dividend Yield 0.00%
TTM Dividend $0.00
Number of Consecutive Years of Dividend Growth 0

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $93,117,000,000
Total Assets $707,794,000,000
Intangible Assets $113,173,000,000
Total Liabilities $355,294,000,000
Shares Outstanding (Diluted Average) 2,462,433,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.00
Dec2018 $1.63
Dec2017 $18.22
Dec2016 $9.76
Dec2015 $9.77
Dec2014 $8.06
Dec2013 $7.90
Dec2012 $5.99
Dec2011 $4.14
Dec2010 $5.29
Dec2009 $3.46
Dec2008 $2.15
Dec2007 $5.70
Dec2006 $4.76
Dec2005 $3.69
Dec2004 $3.17
Dec2003 $3.54
Dec2002 $1.86
Dec2001 $0.35
Dec2000 $1.46
Dec1999 $0.68

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.36
Dec2018 $9.19
Dec2017 $12.23
Dec2016 $8.92
Dec2015 $8.06
Dec2014 $6.90
Dec2013 $5.99
Dec2012 $4.76
Dec2011 $4.15
Dec2010 $4.19
Dec2009 $3.75
Dec2008 $3.89
Dec2007 $4.57
Dec2006 $3.80
Dec2005 $3.06
Dec2004 $2.52
Dec2003 $1.99

Recommended Reading:

Other ModernGraham posts about the company

Berkshire Hathaway Inc Valuation – May 2018 $BRK-B
Berkshire Hathaway Inc Valuation – January 2017 $BRK.B
Berkshire Hathaway Analysis – August 2015 Update $BRK/B
20 Companies in the Spotlight This Week – 8/16/14

Other ModernGraham posts about related companies

Prudential Financial Inc Valuation – April 2019 #PRU
Torchmark Corp Valuation – March 2019 #TMK
Assurant Inc Valuation – March 2019 #AIZ
Humana Inc Valuation – March 2019 #HUM
American International Group Inc Valuation – March 2019 #AIG
Chubb Ltd Valuation – March 2019 #CB
Loews Corporation Valuation – March 2019 #L
Anthem Inc Valuation – February 2019 $ANTM
Arthur J Gallagher & Co Valuation – February 2019 $AJG
Brighthouse Financial Inc Valuation – February 2019 $BHF

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.

Best Stocks Below Their Graham Number – February 2019

One popular approach to investing based on Benjamin Graham’s methods is to use the so-called “Graham Number.”  There are some important differences between the Graham Number and the Graham Formula, but using the Graham Number is definitely useful even if the investor only uses it as a screening tactic.

I’ve selected the best companies reviewed by ModernGraham which trade below their Graham Number.  The companies selected all are found suitable for the Defensive Investor and/or the Enterprising Investor, and have been valued as undervalued based on the ModernGraham valuation model.  The full list can be found in the latest issue of my monthly Stocks & Screens report; however, to cut down on the length of the post, I’ve selected the ten which trade furthest below their Graham Number.

Defensive Investors are defined as investors who need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

These companies have demonstrated strong financial positions through passing the rigorous requirements of the ModernGraham Investor and show potential for capital growth based on their current price in relation to intrinsic value.  As such, these graham number stocks may be a great investment if they prove to be suitable for your portfolio after your own additional research.

GameStop Corp. (GME)

GameStop Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history. 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 Undervalued after growing its EPSmg (normalized earnings) from $2.03 in 2015 to an estimated $2.45 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.3% annual earnings loss 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 GameStop Corp. revealed the company was trading below its Graham Number of $37.34. The company pays a dividend of $1.52 per share, for a yield of 10.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 5.91, which was below the industry average of 37.1, 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 $-2.68.

GameStop Corp. fares extremely well in the ModernGraham grading system, scoring an A-.  (See the full valuation)

Signet Jewelers Ltd. (SIG)

Signet Jewelers Ltd. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.86 in 2014 to an estimated $6.07 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.22% annual earnings loss 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 Signet Jewelers Ltd. revealed the company was trading below its Graham Number of $61.99. The company pays a dividend of $1.04 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.06, which was below the industry average of 30.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.32.

Signet Jewelers Ltd. fares extremely well in the ModernGraham grading system, scoring an A-.  (See the full valuation)

Canfor Corporation (TSE:CFP)

Canfor Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.88 in 2014 to an estimated $2.18 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.34% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Canfor Corporation revealed the company was trading below its Graham Number of $32.18. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 13.17, which was below the industry average of 20.82, 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 $-0.99.

Canfor Corporation performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

CNO Financial Group Inc (CNO)

CNO Financial Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.01 in 2014 to an estimated $1.56 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.89% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into CNO Financial Group Inc revealed the company was trading below its Graham Number of $36.61. The company pays a dividend of $0.35 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 14.28, which was below the industry average of 36.08, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

CNO Financial Group Inc performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Bed Bath & Beyond Inc. (BBBY)

Bed Bath & Beyond Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.19 in 2014 to an estimated $4.19 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.57% annual earnings loss 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 Bed Bath & Beyond Inc. revealed the company was trading below its Graham Number of $34.59. The company pays a dividend of $0.38 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 5.36, which was below the industry average of 35.42, 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 $-3.6.

Bed Bath & Beyond Inc. performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Prudential Financial Inc (PRU)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.17 in 2014 to an estimated $12.54 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.45% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Prudential Financial Inc revealed the company was trading below its Graham Number of $185.87. The company pays a dividend of $3 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.6, which was below the industry average of 30.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Prudential Financial Inc fares extremely well in the ModernGraham grading system, scoring an A-.  (See the full valuation)

Linamar Corporation (TSE:LNR)

Linamar Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years. 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 Undervalued after growing its EPSmg (normalized earnings) from $3.32 in 2014 to an estimated $8.11 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.63% annual earnings loss 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 Linamar Corporation revealed the company was trading below its Graham Number of $99.21. The company pays a dividend of $0.48 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 7.25, which was below the industry average of 26.58, 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 $-18.85.

Linamar Corporation performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Lincoln National Corporation (LNC)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.25 in 2014 to an estimated $7.01 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.58% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Lincoln National Corporation revealed the company was trading below its Graham Number of $117.31. The company pays a dividend of $0.87 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 7.33, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Lincoln National Corporation performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Unum Group (UNM)

Unum Group qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.71 in 2015 to an estimated $4.02 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Unum Group revealed the company was trading below its Graham Number of $68.83. The company pays a dividend of $0.98 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.85, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Unum Group fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

Invesco Ltd. (IVZ)

Invesco Ltd. qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.89 in 2014 to an estimated $2.39 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.65% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Invesco Ltd. revealed the company was trading below its Graham Number of $33.89. The company pays a dividend of $1.15 per share, for a yield of 6.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.21, which was below the industry average of 18, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Invesco Ltd. fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

Disclaimer: 

The author held a long position in IVZ but did not hold a position in any other company mentioned in this article at the time of publication and had no specific intention of changing that position within the next 72 hours; however, the author does intend to make some trades in the next 72 hours and may select a company from this list.  See my current holdings here.  This article is not investment advice and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions.  Please also read our full disclaimer.

Noble Energy Inc Valuation – January 2019 $NBL

Company Profile (excerpt from Reuters): Noble Energy, Inc., incorporated on December 29, 1969, is an independent energy company. The Company is engaged in crude oil, natural gas and natural gas liquids (NGLs) exploration, development, production and acquisition. The Company’s segments include United States, including the onshore DJ Basin, Permian Basin and Eagle Ford Shale; Eastern Mediterranean, including offshore Israel and Cyprus; West Africa, including offshore Equatorial Guinea, Cameroon and Gabon; Other International and Corporate, including new ventures, such as offshore the Falkland Islands, Suriname and Newfoundland; and Midstream. The Company’s portfolio of assets is diversified through the United States and international projects and production mix among crude oil, natural gas and NGLs. Its business focuses on both the United States unconventional basins and certain global conventional basins.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NBL – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,521,992,216 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.81 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 -208.97% Fail
6. Moderate PEmg Ratio PEmg < 20 -18.33 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.93 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.81 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -16.07 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 -$1.20
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth -$17.35
MG Value based on 0% Growth -$10.17
Market Implied Growth Rate -13.41%
Current Price $21.93
% of Intrinsic Value N/A

Noble Energy, 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 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 $2.69 in 2014 to an estimated $-1.2 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 Noble Energy, Inc. revealed the company was trading below its Graham Number of $26.07. The company pays a dividend of $0.4 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was -18.33, which was below the industry average of 41.28, 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 $-18.65.

Noble Energy, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$18.65
Graham Number $26.07
PEmg -18.33
Current Ratio 0.81
PB Ratio 0.93
Current Dividend $0.40
Dividend Yield 1.82%
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 $1,727,000,000
Total Current Liabilities $2,124,000,000
Long-Term Debt $6,381,000,000
Total Assets $22,147,000,000
Intangible Assets $1,719,000,000
Total Liabilities $10,753,000,000
Shares Outstanding (Diluted Average) 484,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.48
Dec2017 -$2.38
Dec2016 -$2.32
Dec2015 -$6.07
Dec2014 $3.27
Dec2013 $2.69
Dec2012 $2.86
Dec2011 $1.27
Dec2010 $2.06
Dec2009 -$0.38
Dec2008 $3.79
Dec2007 $2.73
Dec2006 $1.90
Dec2005 $2.06
Dec2004 $1.39
Dec2003 $0.34
Dec2002 $0.04
Dec2001 $0.59
Dec2000 $0.86
Dec1999 $0.22
Dec1998 -$0.72

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.20
Dec2017 -$2.01
Dec2016 -$1.19
Dec2015 -$0.15
Dec2014 $2.69
Dec2013 $2.16
Dec2012 $1.91
Dec2011 $1.58
Dec2010 $1.83
Dec2009 $1.82
Dec2008 $2.74
Dec2007 $2.03
Dec2006 $1.51
Dec2005 $1.17
Dec2004 $0.70
Dec2003 $0.37
Dec2002 $0.32

Recommended Reading:

Other ModernGraham posts about the company

Noble Energy Inc Valuation – March 2018 $NBL
5 Speculative and Overvalued Companies to Avoid – July 2016
Noble Energy Inc Valuation – July 2016 $NBL
27 Companies in the Spotlight This Week – 2/14/15
Noble Energy Inc. Annual Valuation – 2015 $NBL

Other ModernGraham posts about related companies

ONEOK Inc Valuation – January 2019 $OKE
Marathon Oil Corp Valuation – January 2019 $MRO
HollyFrontier Corp Valuation – January 2019 $HFC
Hess Corp Valuation – January 2019 $HES
Cimarex Energy Co Valuation – January 2019 $XEC
EQT Corp Valuation – January 2019 $EQT
Helmerich & Payne Inc Valuation – January 2019 $HP
Williams Companies Inc Valuation – January 2019 $WMB
Exxon Mobil Corp Valuation – November 2018 $XOM
Chevron Corp Valuation – November 2018 $CVX

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.

10 Undervalued Stocks for the Enterprising Investor – January 2019

Copy of 10 most undervalued enterprisingThere are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the ten most undervalued companies reviewed by ModernGraham. Each company has been determined to be suitable for the Enterprising Investor according to the ModernGraham approach.

Defensive Investors are defined as investors who need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

Prudential Financial Inc (PRU)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.17 in 2014 to an estimated $12.54 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.45% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Prudential Financial Inc revealed the company was trading below its Graham Number of $185.87. The company pays a dividend of $3 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.6, which was below the industry average of 30.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Signet Jewelers Ltd. (SIG)

Signet Jewelers Ltd. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.86 in 2014 to an estimated $6.07 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.22% annual earnings loss 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 Signet Jewelers Ltd. revealed the company was trading below its Graham Number of $61.99. The company pays a dividend of $1.04 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.06, which was below the industry average of 30.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.32.  (See the full valuation)

Synchrony Financial (SYF)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.93 in 2014 to an estimated $2.8 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Synchrony Financial revealed the company was trading below its Graham Number of $36.58. The company pays a dividend of $0.56 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 12.5, which was below the industry average of 22.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Lydall, Inc. (LDL)

Lydall, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.05 in 2014 to an estimated $2.48 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.59% 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 Lydall, Inc. revealed the company was trading above its Graham Number of $33.93. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 17.67, which was below the industry average of 18.51, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.29.  (See the full valuation)

LyondellBasell Industries NV (LYB)

LyondellBasell Industries NV is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history. 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 Undervalued after growing its EPSmg (normalized earnings) from $6.13 in 2014 to an estimated $10.84 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.41% annual earnings loss 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 LyondellBasell Industries NV revealed the company was trading above its Graham Number of $77.64. The company pays a dividend of $3.55 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.68, which was below the industry average of 20.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.01.  (See the full valuation)

Mohawk Industries, Inc. (MHK)

Mohawk Industries, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.94 in 2014 to an estimated $12.62 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.03% 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 Mohawk Industries, Inc. revealed the company was trading above its Graham Number of $180.11. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 16.56, which was below the industry average of 26.36, 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 $-12.35.  (See the full valuation)

Tyson Foods, Inc. (TSN)

Tyson Foods, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years. 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 Undervalued after growing its EPSmg (normalized earnings) from $2.13 in 2014 to an estimated $5.52 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.07% 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 Tyson Foods, Inc. revealed the company was trading below its Graham Number of $73.4. The company pays a dividend of $0.9 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 12.65, which was below the industry average of 24.35, 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 $-26.88.  (See the full valuation)

Lincoln National Corporation (LNC)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.25 in 2014 to an estimated $7.01 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.58% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Lincoln National Corporation revealed the company was trading below its Graham Number of $117.31. The company pays a dividend of $0.87 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 7.33, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Alliance Data Systems Corporation (ADS)

Alliance Data Systems Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $6.88 in 2014 to an estimated $14.23 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.11% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Alliance Data Systems Corporation revealed the company was trading above its Graham Number of $128.46. The company pays a dividend of $2.08 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 14.72, which was below the industry average of 33.86, 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 $-70.39.  (See the full valuation)

Citizens Financial Group Inc (CFG)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.89 in 2014 to an estimated $2.67 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.59% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Citizens Financial Group Inc revealed the company was trading below its Graham Number of $55.04. The company pays a dividend of $0.64 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 15.67, which was below the industry average of 22.06, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

 

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 and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions.  Please also read our full disclaimer.

Progressive Corp Valuation – January 2019 $PGR

Company Profile (excerpt from Reuters): The Progressive Corporation, incorporated on February 4, 1965, is an insurance holding company. The Company’s insurance subsidiaries and affiliates provide personal and commercial automobile and property insurance, other specialty property-casualty insurance and related services. The Company operates through the Personal Lines, Commercial Lines and Property segments. It also offers vehicle insurance products that protect its customers against losses due to collision and physical damage to their motor vehicles, uninsured and underinsured bodily injury, and liability to others for personal injury or property damage arising out of the use of those vehicles. The Company’s property insurance products protect its customers against losses due to damages to their structure or possessions within the structure, as well as liability for accidents occurring in the structure or on the property. Its non-insurance subsidiaries and affiliates generally support the Company’s insurance and investment operations. The Company operates its vehicle businesses and property business in the United States. The Company also sells personal auto physical damage and auto property damage liability insurance in Australia.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PGR – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $34,408,800,000 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 96.23% Pass
5. Moderate PEmg Ratio PEmg < 20 18.83 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.92 Fail
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.13
MG Growth Estimate 10.46%
MG Value $92.18
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $45.44
MG Value based on 0% Growth $26.64
Market Implied Growth Rate 5.16%
Current Price $59.00
% of Intrinsic Value 64.00%

Progressive Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.85 in 2014 to an estimated $3.13 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.16% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Progressive Corp revealed the company was trading above its Graham Number of $41.86. The company pays a dividend of $0.68 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 18.83, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $41.86
PEmg 18.83
PB Ratio 2.92
Dividend Yield 1.15%
TTM Dividend $0.68
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $3,859,900,000
Total Assets $45,543,700,000
Intangible Assets $765,300,000
Total Liabilities $33,684,900,000
Shares Outstanding (Diluted Average) 586,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.88
Dec2017 $2.72
Dec2016 $1.76
Dec2015 $2.15
Dec2014 $2.15
Dec2013 $1.93
Dec2012 $1.48
Dec2011 $1.59
Dec2010 $1.61
Dec2009 $1.57
Dec2008 -$0.10
Dec2007 $1.65
Dec2006 $2.10
Dec2005 $1.74
Dec2004 $1.91
Dec2003 $1.42
Dec2002 $0.75
Dec2001 $0.46
Dec2000 $0.05
Dec1999 $0.33
Dec1998 $0.51

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.13
Dec2017 $2.22
Dec2016 $1.95
Dec2015 $1.98
Dec2014 $1.85
Dec2013 $1.68
Dec2012 $1.44
Dec2011 $1.37
Dec2010 $1.30
Dec2009 $1.22
Dec2008 $1.19
Dec2007 $1.81
Dec2006 $1.79
Dec2005 $1.50
Dec2004 $1.23
Dec2003 $0.79
Dec2002 $0.46

Recommended Reading:

Other ModernGraham posts about the company

Progressive Corp Valuation – February 2018 $PGR
Progressive Corporation Valuation – June 2016 $PGR
11 Best Stocks For Value Investors This Week – 11/21/15
Progressive Corp Valuation – November 2015 Update $PGR
The Best Companies of the Insurance Industry – October 2015

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American Financial Group Inc Valuation – August 2018 $AFG
Selective Insurance Group Inc Valuation – July 2018 $SIGI
Genworth Financial Inc Valuation – June 2018 $GNW
Prudential Financial Inc Valuation – June 2018 $PRU

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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