Phillips 66 Valuation – March 2019 #PSX

Company Profile (excerpt from Reuters): Phillips 66, incorporated on November 10, 2011, is an energy manufacturing and logistics company with midstream, chemicals, refining, and marketing and specialties businesses. The Company operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment gathers, processes, transports and markets natural gas, and transports, stores, fractionates and markets natural gas liquids (NGLs) in the United States. The Chemicals segment consists of its equity investment in Chevron Phillips Chemical Company LLC (CPChem), which manufactures and markets petrochemicals and plastics. The Refining segment buys, sells and refines crude oil and other feedstocks at refineries, primarily in the United States and Europe. The M&S segment purchases for resale and markets refined petroleum products, such as gasolines, distillates and aviation fuels, primarily in the United States and Europe, as well as includes the manufacturing and marketing of specialty products, and power generation operations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PSX – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $44,040,480,834 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.48 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 343.98% Pass
6. Moderate PEmg Ratio PEmg < 20 11.54 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.66 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.60 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 $8.39
MG Growth Estimate 3.34%
MG Value $127.43
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $121.72
MG Value based on 0% Growth $71.35
Market Implied Growth Rate 1.52%
Current Price $96.89
% of Intrinsic Value 76.04%

Phillips 66 does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history. 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 $6.87 in 2015 to an estimated $8.39 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 1.52% 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 Phillips 66 revealed the company was trading above its Graham Number of $93.06. The company pays a dividend of $3.1 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.54, which was below the industry average of 58.42, 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 $-30.01.

Phillips 66 receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$30.01
Graham Number $93.06
PEmg 11.54
Current Ratio 1.48
PB Ratio 1.66
Current Dividend $3.10
Dividend Yield 3.20%
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 $13,209,000,000
Total Current Liabilities $8,935,000,000
Long-Term Debt $11,093,000,000
Total Assets $54,302,000,000
Intangible Assets $4,139,000,000
Total Liabilities $27,149,000,000
Shares Outstanding (Diluted Average) 464,528,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.12
Dec2018 $11.80
Dec2017 $9.85
Dec2016 $2.92
Dec2015 $7.73
Dec2014 $8.33
Dec2013 $6.02
Dec2012 $6.48

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.39
Dec2018 $8.73
Dec2017 $7.12
Dec2016 $5.94
Dec2015 $6.87
Dec2014 $5.68
Dec2013 $3.73
Dec2012 $2.16

Recommended Reading:

Other ModernGraham posts about the company

Phillips 66 Valuation – April 2018 $PSX
Phillips 66 Valuation – August 2016 $PSX
10 Best Dividend Paying Stocks for the Enterprising Investor – August 2016
5 Undervalued Stocks Near Lows for Enterprising Value Investors – Aug 2016
10 Companies Benjamin Graham Would Invest In Today – June 2016

Other ModernGraham posts about related companies

Kinder Morgan Inc Valuation – February 2019 $KMI
National Oilwell Varco Inc Valuation – February 2019 $NOV
Diamondback Energy Inc Valuation – February 2019 $FANG
TechnipFMC PLC Valuation – February 2019 $FTI
Marathon Petroleum Corp Valuation – February 2019 $MPC
Baker Hughes, a GE Co Valuation – February 2019 $BHGE
EOG Resources Inc Valuation – February 2019 $EOG
ConocoPhillips Valuation – February 2019 $COP
Devon Energy Corp Valuation – January 2019 $DVN
Noble Energy Inc Valuation – January 2019 $NBL

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.

Phillips 66 Valuation – April 2018 $PSX

Company Profile (excerpt from Reuters): Phillips 66, incorporated on November 10, 2011, is an energy manufacturing and logistics company with midstream, chemicals, refining, and marketing and specialties businesses. The Company operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment gathers, processes, transports and markets natural gas, and transports, stores, fractionates and markets natural gas liquids (NGLs) in the United States. The Chemicals segment consists of its equity investment in Chevron Phillips Chemical Company LLC (CPChem), which manufactures and markets petrochemicals and plastics. The Refining segment buys, sells and refines crude oil and other feedstocks at refineries, primarily in the United States and Europe. The M&S segment purchases for resale and markets refined petroleum products, such as gasolines, distillates and aviation fuels, primarily in the United States and Europe, as well as includes the manufacturing and marketing of specialty products, and power generation operations.

PSX Chart

PSX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PSX – 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 $47,858,944,758 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.42 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 60800.00% Pass
6. Moderate PEmg Ratio PEmg < 20 15.48 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.10 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.42 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.35 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 $6.63
MG Growth Estimate 2.51%
MG Value $89.70
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $96.14
MG Value based on 0% Growth $56.36
Market Implied Growth Rate 3.49%
Current Price $102.63
% of Intrinsic Value 114.41%

Phillips 66 does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history. 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 $5.68 in 2014 to an estimated $6.63 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.49% 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 Phillips 66 revealed the company was trading above its Graham Number of $78.62. The company pays a dividend of $2.73 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 15.48, which was below the industry average of 85.36, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-29.07.

Phillips 66 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) -$29.07
Graham Number $78.62
PEmg 15.48
Current Ratio 1.42
PB Ratio 2.10
Current Dividend $2.73
Dividend Yield 2.66%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $14,390,000,000
Total Current Liabilities $10,107,000,000
Long-Term Debt $10,069,000,000
Total Assets $54,371,000,000
Intangible Assets $4,146,000,000
Total Liabilities $29,286,000,000
Shares Outstanding (Diluted Average) 512,484,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.50
Dec2017 $9.85
Dec2016 $2.92
Dec2015 $7.73
Dec2014 $8.33
Dec2013 $6.02
Dec2012 $6.48

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.63
Dec2017 $7.12
Dec2016 $5.94
Dec2015 $6.87
Dec2014 $5.68
Dec2013 $3.73
Dec2012 $2.16

Recommended Reading:

Other ModernGraham posts about the company

10 Best Dividend Paying Stocks for the Enterprising Investor – August 2016
5 Undervalued Stocks Near Lows for Enterprising Value Investors – Aug 2016
10 Companies Benjamin Graham Would Invest In Today – June 2016
Phillips 66 Valuation – March 2016 $PSX
27 Companies in the Spotlight This Week – 12/20/14

Other ModernGraham posts about related companies

EOG Resources Inc Valuation – April 2018 $EOG
ConocoPhillips Valuation – April 2018 $COP
Devon Energy Corp Valuation – March 2018 $DVN
Noble Energy Inc Valuation – March 2018 $NBL
ONEOK Inc Valuation – March 2018 $OKE
Marathon Oil Corp Valuation – March 2018 $MRO
Hess Corp Valuation – March 2018 $HES
Cimarex Energy Co Valuation – Initial Coverage $XEC
EQT Corporation Valuation – March 2018 $EQT
Helmerich & Payne Inc Valuation – March 2018 $HP

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.

Phillips 66 Valuation – August 2016 $PSX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Phillips 66 (PSX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Phillips 66 is an energy manufacturing and logistics company with midstream, chemicals, refining and marketing, and specialties businesses. The Company operates its business through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment includes its equity investment in DCP Midstream , LLC (DCP Midstream) and its investment in Phillips 66 Partners LP. The Midstream segment consists of three business lines: Transportation, DCP Midstream and NGL. The Midstream segment also transports crude oil and other feedstocks to refineries and other locations, and delivers refined and specialty products to market, and provides storage services for crude oil and petroleum products. The Chemical segment manufactures and markets petrochemicals and plastics. The refining segment buys, sells and refines crude oil and other feedstocks into petroleum products. The M&S segment purchases for resale and markets refined petroleum products.

PSX Chart

PSX data by YCharts

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of PSX – August 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $41,614,811,700 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.22 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 61133.33% Pass
6. Moderate PEmg Ratio PEmg < 20 13.84 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.84 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.22 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.27 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

PSX value chart August 2016

EPSmg $5.73
MG Growth Estimate 15.00%
MG Value $220.68
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $83.11
MG Value based on 0% Growth $48.72
Market Implied Growth Rate 2.67%
Current Price $79.33
% of Intrinsic Value 35.95%

Phillips 66 does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.16 in 2012 to an estimated $5.73 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.67% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Phillips 66 revealed the company was trading above its Graham Number of $47.65. The company pays a dividend of $2.31 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.84, which was below the industry average of 55.24, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-28.01.

Phillips 66 receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

PSX charts August 2016

Net Current Asset Value (NCAV) -$28.01
Graham Number $47.65
PEmg 13.84
Current Ratio 1.22
PB Ratio 1.84
Current Dividend $2.31
Dividend Yield 2.91%
Number of Consecutive Years of Dividend Growth 5

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $12,643,000,000
Total Current Liabilities $10,400,000,000
Long-Term Debt $7,330,000,000
Total Assets $50,361,000,000
Intangible Assets $4,171,000,000
Total Liabilities $27,519,000,000
Shares Outstanding (Diluted Average) 531,060,000

Earnings Per Share History

Next Fiscal Year Estimate $2.31
Dec2015 $7.73
Dec2014 $8.33
Dec2013 $6.02
Dec2012 $6.48

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.73
Dec2015 $6.87
Dec2014 $5.68
Dec2013 $3.73
Dec2012 $2.16

Recommended Reading:

Other ModernGraham posts about the company

10 Best Dividend Paying Stocks for the Enterprising Investor – August 2016
5 Undervalued Stocks Near Lows for Enterprising Value Investors – Aug 2016
10 Companies Benjamin Graham Would Invest In Today – June 2016
Phillips 66 Valuation – March 2016 $PSX
27 Companies in the Spotlight This Week – 12/20/14

Other ModernGraham posts about related companies

FMC Technologies Inc Valuation – August 2016 $FTI
Marathon Petroleum Corp Valuation – August 2016 $MPC
Magellan Midstream Partners LP Valuation – August 2016 $MMP
Ensco PLC Valuation – August 2016 $ESV
Enterprise Products Partners LP Valuation – August 2016 $EPD
Tidewater Inc Valuation – August 2016 $TDW
Occidental Petroleum Corp Valuation – August 2016 $OXY
Valero Energy Corporation – August 2016 $VLO
Chevron Corp Valuation – August 2016 $CVX
Exxon Mobil Corporation Valuation – August 2016 $XOM

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.

Phillips 66 Valuation – March 2016 $PSX

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 Phillips 66 (PSX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Phillips 66 is an energy manufacturing and logistics company with midstream, chemicals, refining and marketing and specialties businesses. The Company operates its business through four segments: midstream, chemicals, refining and marketing and specialties. It gathers, processes, transports and markets natural gas, and transports, fractionates and markets natural gas liquids (NGL) in the United States. The Chemical segment manufactures and markets petrochemicals and plastics. The Chemicals segment consists of its 50% equity investment in Chevron Phillips Chemical Company LLC (CPChem). The refining segment buys, sells and refines crude oil and other feedstocks into petroleum products (such as gasolines, distillates and aviation fuels) at 14 refineries, mainly in the United States and Europe. The Marketing and Specialties segment purchases for resale and markets refined petroleum products (such as gasolines, distillates and aviation fuels), mainly in the United States and Europe.

[level-free]

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.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of PSX

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $47,715,140,361 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.63 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 71300.00% Pass
6. Moderate PEmg Ratio PEmg < 20 13.25 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.12 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.63 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.87 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PSX value chart March 2016

EPSmg $6.75
MG Growth Estimate 8.02%
MG Value $165.62
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $97.86
MG Value based on 0% Growth $57.36
Market Implied Growth Rate 2.38%
Current Price $89.42
% of Intrinsic Value 53.99%

Phillips 66 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 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 $4.40 in 2012 to an estimated $6.75 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.38% 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.

Phillips 66 performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

PSX charts March 2016

Net Current Asset Value (NCAV) -$24.18
Graham Number $72.54
PEmg 13.25
Current Ratio 1.63
PB Ratio 2.12
Dividend Yield 2.44%
Number of Consecutive Years of Dividend Growth 5

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information Dec2015
Total Current Assets $12,256,000,000
Total Current Liabilities $7,531,000,000
Long-Term Debt $8,843,000,000
Total Assets $48,580,000,000
Intangible Assets $4,181,000,000
Total Liabilities $25,480,000,000
Shares Outstanding (Diluted Average) 546,977,000

Earnings Per Share History

Next Fiscal Year Estimate $5.36
Dec2015 $7.73
Dec2014 $8.33
Dec2013 $6.02
Dec2012 $6.48
Dec2011 $7.52
Dec2010 $1.16

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $6.75
Dec2015 $7.37
Dec2014 $6.76
Dec2013 $5.39
Dec2012 $4.40
Dec2011 $2.82
Dec2010 $0.39

Recommended Reading:

Other ModernGraham posts about the company

27 Companies in the Spotlight This Week – 12/20/14

Other ModernGraham posts about related companies

Valero Energy Corp Valuation – February 2016 $VLO
Schlumberger Ltd Valuation – February 2016 $SLB
National Oilwell Varco Inc Valuation – February 2016 Update $NOV
Southwestern Energy Company Valuation – February 2016 Update $SWN
Apache Corporation Valuation – January 2016 Update $APA
Anadarko Petroleum Corp Valuation – January 2016 Update $APC
Cabot Oil & Gas Corp Valuation – December 2015 Update $COG
Helmerich & Payne Inc Valuation – November 2015 Update $HP
Murphy Oil Corporation Valuation – November 2015 Update $MUR
Denbury Resources Inc. Valuation – November 2015 Update $DNR

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.

Phillips 66 Annual Valuation – 2014 $PSX

147px-Phillips66-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 the 5 Most Undervalued Companies for the Defensive Investor – December 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Phillips 66 (PSX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Phillips 66 is an energy manufacturing and logistics company with midstream, chemicals, refining, and marketing and specialties businesses. The Company operates in Midstream, Chemicals, Refining and, Marketing and Specialties. It offers several products and services that provide businesses with fuels, lubricants, chemicals, specialty products and other solutions. Phillips 66 Pipe Line Company operates more than 11,000 miles of pipelines and more than 60 storage terminals in the United States and transports both raw and finished petroleum products. Phillips Specialty Products Inc. (PSPI), a wholly owned subsidiary of the Company, operates the Company’s flow improver business. In February 2013, the Company formed Phillips 66 Partners, to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum product and natural gas liquids (NGL) pipelines and terminals, as well as other transportation and midstream assets.

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 – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

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

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

Valuation Summary

Key Data:

Recent Price $71.81
MG Value $230.79
MG Opinion Undervalued
Value Based on 3% Growth $86.92
Value Based on 0% Growth $50.95
Market Implied Growth Rate 1.74%
Net Current Asset Value (NCAV) -$17.19
PEmg 11.98
Current Ratio 1.32
PB Ratio 1.87

Balance Sheet – September 2014

Current Assets $18,194,000,000
Current Liabilities $13,769,000,000
Total Debt $6,178,000,000
Total Assets $49,650,000,000
Intangible Assets $4,094,000,000
Total Liabilities $27,904,000,000
Outstanding Shares 565,000,000

Earnings Per Share

2014 (estimate) $6.04
2013 $6.02
2012 $6.48
2011 $7.52
2010 $1.16

Earnings Per Share – ModernGraham

2014 (estimate) $5.99
2013 $5.39
2012 $4.40
2011 $2.82
2010 $0.39

Dividend History

Conclusion:

Phillips 66 is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, and the short dividend history.  The Enterprising Investor is concerned with the level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.82 in 2011 to an estimated $5.99 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 1.74% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Phillips 66 (PSX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Phillips 66 (PSX) 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.

Chevron Corp Valuation – April 2019 #CVX

Company Profile (excerpt from Reuters): Chevron Corporation (Chevron), incorporated on January 27, 1926, manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to the United States and international subsidiaries that engage in integrated energy and chemicals operations. The Company operates through two business segments: Upstream and Downstream. Upstream operations consist primarily of exploring for, developing and producing crude oil and natural gas; liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transporting crude oil by international oil export pipelines; processing, transporting, storage and marketing of natural gas, and a gas-to-liquids plant. Downstream operations consist primarily of refining of crude oil into petroleum products; marketing of crude oil and refined products; transporting of crude oil and refined products by pipeline, marine vessel, motor equipment and rail car, and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CVX – 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 $240,205,960,980 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.25 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 -49.28% Fail
6. Moderate PEmg Ratio PEmg < 20 24.83 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.55 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.25 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.19 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 $5.09
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $73.82
MG Value based on 0% Growth $43.28
Market Implied Growth Rate 8.17%
Current Price $126.42
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $8.41 in 2015 to an estimated $5.09 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.17% 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 Chevron Corporation revealed the company was trading above its Graham Number of $102.65. The company pays a dividend of $4.48 per share, for a yield of 3.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.83, which was below the industry average of 52.47, 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 $-33.68.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$33.68
Graham Number $102.65
PEmg 24.83
Current Ratio 1.25
PB Ratio 1.55
Current Dividend $4.48
Dividend Yield 3.54%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $34,021,000,000
Total Current Liabilities $27,171,000,000
Long-Term Debt $28,733,000,000
Total Assets $253,863,000,000
Intangible Assets $4,518,000,000
Total Liabilities $98,221,000,000
Shares Outstanding (Diluted Average) 1,906,314,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.79
Dec2018 $7.74
Dec2017 $4.85
Dec2016 -$0.27
Dec2015 $2.45
Dec2014 $10.14
Dec2013 $11.09
Dec2012 $13.32
Dec2011 $13.44
Dec2010 $9.48
Dec2009 $5.24
Dec2008 $11.67
Dec2007 $8.77
Dec2006 $7.80
Dec2005 $6.54
Dec2004 $6.28
Dec2003 $3.48
Dec2002 $0.53
Dec2001 $1.55
Dec2000 $3.99
Dec1999 $1.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.09
Dec2018 $4.82
Dec2017 $4.13
Dec2016 $4.96
Dec2015 $8.41
Dec2014 $11.43
Dec2013 $11.55
Dec2012 $11.40
Dec2011 $10.20
Dec2010 $8.58
Dec2009 $8.09
Dec2008 $9.08
Dec2007 $7.38
Dec2006 $6.10
Dec2005 $4.72
Dec2004 $3.60
Dec2003 $2.25

Recommended Reading:

Other ModernGraham posts about the company

5 Overvalued Dow Components – April 2019
5 Overvalued Dow Components – January 2019
Chevron Corp Valuation – November 2018 $CVX
5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018

Other ModernGraham posts about related companies

Pioneer Natural Resources Co Valuation – April 2019 #PXD
Schlumberger NV Valuation – March 2019 #SLB
Anadarko Petroleum Corp Valuation – March 2019 #APC
Apache Corp Valuation – March 2019 #APA
Cabot Oil & Gas Corp Valuation – March 2019 #COG
Concho Resources Inc Valuation – March 2019 #CXO
Valero Energy Corp Valuation – March 2019 #VLO
Occidental Petroleum Corp Valuation – March 2019 #OXY
Phillips 66 Valuation – March 2019 #PSX
Halliburton Co Valuation – March 2019 #HAL

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.

Pioneer Natural Resources Co Valuation – April 2019 #PXD

Company Profile (excerpt from Reuters): Pioneer Natural Resources Company (Pioneer), incorporated on April 2, 1997, is an oil and gas exploration and production company. The Company explores for, develops and produces oil, natural gas liquids (NGLs) and gas within the United States, with operations primarily in the Permian Basin in West Texas, the Eagle Ford Shale play in South Texas, the Raton field in southeast Colorado and the West Panhandle field in the Texas Panhandle. The Company’s operations include well stimulation and completion activities, such as hydraulic fracturing, and water distribution and disposal activities. As of December 31, 2016, the Company owned interests in eight gas processing plants and nine treating facilities.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PXD – 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 $24,703,246,605 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.42 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 10.03% Fail
6. Moderate PEmg Ratio PEmg < 20 43.92 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.07 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.42 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.00 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 $3.34
MG Growth Estimate 15.00%
MG Value $128.69
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $48.47
MG Value based on 0% Growth $28.41
Market Implied Growth Rate 17.71%
Current Price $146.81
% of Intrinsic Value 114.08%

Pioneer Natural Resources does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 $0.52 in 2015 to an estimated $3.34 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.71% 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 Pioneer Natural Resources revealed the company was trading above its Graham Number of $82.52. The company pays a dividend of $0.32 per share, for a yield of 0.2% Its PEmg (price over earnings per share – ModernGraham) was 43.92, which was below the industry average of 52.47, 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 $-18.78.

Pioneer Natural Resources 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) -$18.78
Graham Number $82.52
PEmg 43.92
Current Ratio 1.42
PB Ratio 2.07
Current Dividend $0.32
Dividend Yield 0.22%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,580,000,000
Total Current Liabilities $1,818,000,000
Long-Term Debt $2,284,000,000
Total Assets $17,903,000,000
Intangible Assets $407,000,000
Total Liabilities $5,792,000,000
Shares Outstanding (Diluted Average) 171,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.26
Dec2018 $5.70
Dec2017 $4.85
Dec2016 -$3.34
Dec2015 -$1.83
Dec2014 $6.38
Dec2013 -$6.16
Dec2012 $1.50
Dec2011 $6.88
Dec2010 $5.08
Dec2009 -$0.46
Dec2008 $1.76
Dec2007 $3.06
Dec2006 $5.81
Dec2005 $3.80
Dec2004 $2.46
Dec2003 $3.46
Dec2002 $0.23
Dec2001 $1.00
Dec2000 $1.53
Dec1999 -$0.22

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.34
Dec2018 $2.71
Dec2017 $0.80
Dec2016 -$1.05
Dec2015 $0.52
Dec2014 $2.04
Dec2013 $0.37
Dec2012 $3.41
Dec2011 $3.99
Dec2010 $2.72
Dec2009 $1.96
Dec2008 $3.24
Dec2007 $3.89
Dec2006 $3.92
Dec2005 $2.71
Dec2004 $2.02
Dec2003 $1.60

Recommended Reading:

Other ModernGraham posts about the company

Pioneer Natural Resources Co Valuation – June 2018 $PXD
Pioneer Natural Resources Valuation – September 2017 $PXD
Pioneer Natural Resources Valuation – June 2016 $PXD
Pioneer Natural Resources Annual Valuation – 2015 $PXD

Other ModernGraham posts about related companies

Schlumberger NV Valuation – March 2019 #SLB
Anadarko Petroleum Corp Valuation – March 2019 #APC
Apache Corp Valuation – March 2019 #APA
Cabot Oil & Gas Corp Valuation – March 2019 #COG
Concho Resources Inc Valuation – March 2019 #CXO
Valero Energy Corp Valuation – March 2019 #VLO
Occidental Petroleum Corp Valuation – March 2019 #OXY
Phillips 66 Valuation – March 2019 #PSX
Halliburton Co Valuation – March 2019 #HAL
Kinder Morgan Inc Valuation – February 2019 $KMI

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.

Schlumberger NV Valuation – March 2019 #SLB

Company Profile (excerpt from Reuters): Schlumberger N.V., incorporated on November 6, 1956, provides technology for reservoir characterization, drilling, production and processing to the oil and gas industry. The Company’s segments include Reservoir Characterization Group, Drilling Group, Production Group and Cameron Group. The Reservoir Characterization Group is engaged in finding and defining hydrocarbon resources. The Drilling Group is engaged in drilling and positioning of oil and gas wells. The Production Group is engaged in the lifetime production of oil and gas reservoirs. The Cameron Group is engaged in pressure and flow control for drilling and intervention rigs, oil and gas wells, and production facilities. The Company operates in North America, Latin America, and the Middle East and Asia, among others. The Company’s subsidiaries include Schlumberger Holdings Corporation and Schlumberger Investment SA.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SLB – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $60,386,843,187 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.17 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 -83.41% Fail
6. Moderate PEmg Ratio PEmg < 20 72.38 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.66 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.17 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.52 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 $0.60
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $8.73
MG Value based on 0% Growth $5.12
Market Implied Growth Rate 31.94%
Current Price $43.57
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.45 in 2015 to an estimated $0.6 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 31.94% 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 Schlumberger Limited. revealed the company was trading above its Graham Number of $28.7. The company pays a dividend of $2 per share, for a yield of 4.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 72.38, which was above the industry average of 58.42. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-13.06.

Schlumberger Limited. 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) -$13.06
Graham Number $28.70
PEmg 72.38
Current Ratio 1.17
PB Ratio 1.66
Current Dividend $2.00
Dividend Yield 4.59%
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 $15,731,000,000
Total Current Liabilities $13,486,000,000
Long-Term Debt $14,644,000,000
Total Assets $70,507,000,000
Intangible Assets $33,658,000,000
Total Liabilities $33,921,000,000
Shares Outstanding (Diluted Average) 1,393,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.40
Dec2018 $1.53
Dec2017 -$1.08
Dec2016 -$1.24
Dec2015 $1.63
Dec2014 $4.16
Dec2013 $5.05
Dec2012 $4.10
Dec2011 $3.67
Dec2010 $3.38
Dec2009 $2.59
Dec2008 $4.45
Dec2007 $4.20
Dec2006 $3.01
Dec2005 $1.82
Dec2004 $1.02
Dec2003 $0.33
Dec2002 -$2.00
Dec2001 $0.91
Dec2000 $0.64
Dec1999 $0.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.60
Dec2018 $0.47
Dec2017 $0.53
Dec2016 $1.80
Dec2015 $3.45
Dec2014 $4.27
Dec2013 $4.13
Dec2012 $3.66
Dec2011 $3.52
Dec2010 $3.47
Dec2009 $3.41
Dec2008 $3.52
Dec2007 $2.72
Dec2006 $1.60
Dec2005 $0.74
Dec2004 $0.19
Dec2003 -$0.14

Recommended Reading:

Other ModernGraham posts about the company

Schlumberger Ltd Valuation – June 2018 $SLB
Schlumberger Limited Valuation – July 2017 $SLB
Schlumberger Ltd Valuation – February 2016 $SLB
Schlumberger Limited Valuation – October 2015 Update $SLB
Schlumberger Limited Analysis – July 2015 Update $SLB

Other ModernGraham posts about related companies

Anadarko Petroleum Corp Valuation – March 2019 #APC
Apache Corp Valuation – March 2019 #APA
Cabot Oil & Gas Corp Valuation – March 2019 #COG
Concho Resources Inc Valuation – March 2019 #CXO
Valero Energy Corp Valuation – March 2019 #VLO
Occidental Petroleum Corp Valuation – March 2019 #OXY
Phillips 66 Valuation – March 2019 #PSX
Halliburton Co Valuation – March 2019 #HAL
Kinder Morgan Inc Valuation – February 2019 $KMI
National Oilwell Varco Inc Valuation – February 2019 $NOV

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.

Anadarko Petroleum Corp Valuation – March 2019 #APC

Company Profile (excerpt from Reuters): Anadarko Petroleum Corporation (Anadarko), incorporated on June 12, 1985, is an independent exploration and production company. The Company is engaged in developing, acquiring, and exploring for oil and natural-gas resources. The Company’s segments include Oil and Gas Exploration and Production; Midstream, and Marketing. The Company’s geographical segments include the United States and International. The Oil and Gas Exploration and Production segment explores for and produces oil, condensate, natural gas and natural gas liquids (NGLs), and focuses on the development and operation of the Company’s liquefied natural gas (LNG) project in Mozambique. The Midstream segment engages in gathering, processing, treating and transporting Anadarko and third-party oil, natural-gas and NGLs production. The Marketing segment sells Anadarko’s oil, natural-gas and NGLs production, as well as third-party purchased volumes. As of December 31, 2016, the Company had approximately 1.7 billion barrels of oil equivalent (BOE) of proved reserves.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of APC – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $22,116,234,175 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 -160.64% Fail
6. Moderate PEmg Ratio PEmg < 20 -24.30 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.00 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 -17.93 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 -$1.82
MG Growth Estimate 9.22%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$26.42
MG Value based on 0% Growth -$15.49
Market Implied Growth Rate -16.40%
Current Price $44.27
% of Intrinsic Value N/A

Anadarko Petroleum Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability 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 $-4.73 in 2015 to an estimated $-1.82 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 Anadarko Petroleum Corporation revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.05 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -24.3, which was below the industry average of 58.42, 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 $-51.79.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$51.79
Graham Number $0.00
PEmg -24.30
Current Ratio 0.81
PB Ratio 2.00
Current Dividend $1.05
Dividend Yield 2.37%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,795,000,000
Total Current Liabilities $4,658,000,000
Long-Term Debt $15,470,000,000
Total Assets $40,376,000,000
Intangible Assets $5,630,000,000
Total Liabilities $29,433,000,000
Shares Outstanding (Diluted Average) 495,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.92
Dec2018 $1.20
Dec2017 -$0.85
Dec2016 -$5.90
Dec2015 -$13.18
Dec2014 -$3.47
Dec2013 $1.58
Dec2012 $4.74
Dec2011 -$5.32
Dec2010 $1.52
Dec2009 -$0.28
Dec2008 $6.91
Dec2007 $8.08
Dec2006 $10.24
Dec2005 $2.45
Dec2004 $1.59
Dec2003 $2.55
Dec2002 $0.81
Dec2001 -$0.38
Dec2000 $2.08
Dec1999 $0.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.82
Dec2018 -$3.00
Dec2017 -$4.85
Dec2016 -$5.65
Dec2015 -$4.73
Dec2014 -$0.40
Dec2013 $0.91
Dec2012 $0.89
Dec2011 $0.04
Dec2010 $3.57
Dec2009 $4.89
Dec2008 $6.94
Dec2007 $6.30
Dec2006 $4.78
Dec2005 $1.83
Dec2004 $1.46
Dec2003 $1.27

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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.

Apache Corp Valuation – March 2019 #APA

Company Profile (excerpt from Reuters): Apache Corporation, incorporated on December 6, 1954, is an independent energy company. Both domestically and internationally, the Company explores for, develops, and produces natural gas, crude oil and natural gas liquids. The Company’s production segments include: the United States, Egypt and the United Kingdom North Sea. It also pursues exploration interests in Suriname.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of APA – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,221,778,646 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.22 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -87.12% Fail
6. Moderate PEmg Ratio PEmg < 20 -20.52 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.52 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.22 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 16.57 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 -$1.72
MG Growth Estimate 12.93%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$24.89
MG Value based on 0% Growth -$14.59
Market Implied Growth Rate -14.51%
Current Price $35.22
% of Intrinsic Value N/A

Apache Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability 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 $-12.42 in 2015 to an estimated $-1.72 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 Apache Corporation revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1 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 -20.52, which was below the industry average of 58.42, 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 $-26.46.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$26.46
Graham Number $0.00
PEmg -20.52
Current Ratio 1.22
PB Ratio 1.52
Current Dividend $1.00
Dividend Yield 2.84%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,687,000,000
Total Current Liabilities $2,201,000,000
Long-Term Debt $8,054,000,000
Total Assets $21,582,000,000
Intangible Assets $0
Total Liabilities $12,770,000,000
Shares Outstanding (Diluted Average) 381,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.32
Dec2018 $0.11
Dec2017 $3.41
Dec2016 -$3.71
Dec2015 -$27.40
Dec2014 -$21.76
Dec2013 $5.50
Dec2012 $4.92
Dec2011 $11.47
Dec2010 $8.46
Dec2009 -$0.87
Dec2008 $2.09
Dec2007 $8.39
Dec2006 $7.64
Dec2005 $7.84
Dec2004 $5.03
Dec2003 $3.43
Dec2002 $1.80
Dec2001 $2.25
Dec2000 $2.46
Dec1999 $0.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.72
Dec2018 -$4.90
Dec2017 -$7.87
Dec2016 -$11.83
Dec2015 -$12.42
Dec2014 -$2.71
Dec2013 $6.51
Dec2012 $6.41
Dec2011 $6.74
Dec2010 $4.63
Dec2009 $3.49
Dec2008 $5.84
Dec2007 $7.30
Dec2006 $6.22
Dec2005 $5.03
Dec2004 $3.42
Dec2003 $2.45

Recommended Reading:

Other ModernGraham posts about the company

Apache Corp Valuation – June 2018 $APA
Apache Corp Valuation – April 2017 $APA
Apache Corporation Valuation – January 2016 Update $APA
32 Companies in the Spotlight This Week – 12/6/14
Apache Corporation Annual Valuation – 2014 $APA

Other ModernGraham posts about related companies

Cabot Oil & Gas Corp Valuation – March 2019 #COG
Concho Resources Inc Valuation – March 2019 #CXO
Valero Energy Corp Valuation – March 2019 #VLO
Occidental Petroleum Corp Valuation – March 2019 #OXY
Phillips 66 Valuation – March 2019 #PSX
Halliburton Co Valuation – March 2019 #HAL
Kinder Morgan Inc Valuation – February 2019 $KMI
National Oilwell Varco Inc Valuation – February 2019 $NOV
Diamondback Energy Inc Valuation – February 2019 $FANG
TechnipFMC PLC Valuation – February 2019 $FTI

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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