Quanta Services Inc Valuation – March 2019 #PWR

Company Profile (excerpt from Reuters): Quanta Services, Inc. (Quanta), incorporated on August 19, 1997, is a provider of specialty contracting services, offering infrastructure solutions primarily to the electric power and oil and gas industries in the United States, Canada and Australia, and selected other international markets. The Company operates through two segments: Electric Power Infrastructure Services, and Oil and Gas Infrastructure Services. The services it provides include the design, installation, upgrade, repair and maintenance of infrastructure within each of the industries it serves, such as electric power transmission and distribution networks, substation facilities, renewable energy facilities, pipeline transmission and distribution systems and facilities, and infrastructure services for the offshore and inland water energy markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PWR – 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 $4,963,069,313 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.84 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 158.99% Pass
6. Moderate PEmg Ratio PEmg < 20 15.34 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.47 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 1.84 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.68 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.28
MG Growth Estimate 7.85%
MG Value $55.18
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $33.07
MG Value based on 0% Growth $19.39
Market Implied Growth Rate 3.42%
Current Price $34.99
% of Intrinsic Value 63.41%

Quanta Services 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 $1.5 in 2015 to an estimated $2.28 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.42% 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 Quanta Services Inc revealed the company was trading below its Graham Number of $41.66. The company pays a dividend of $0.04 per share, for a yield of 0.1% Its PEmg (price over earnings per share – ModernGraham) was 15.34, which was below the industry average of 20.99, 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 $-0.95.

Quanta Services Inc performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.95
Graham Number $41.66
PEmg 15.34
Current Ratio 1.84
PB Ratio 1.47
Current Dividend $0.04
Dividend Yield 0.11%
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 $3,326,104,000
Total Current Liabilities $1,806,127,000
Long-Term Debt $1,040,532,000
Total Assets $7,075,787,000
Intangible Assets $2,180,059,000
Total Liabilities $3,470,334,000
Shares Outstanding (Diluted Average) 151,310,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.30
Dec2018 $1.90
Dec2017 $2.00
Dec2016 $1.26
Dec2015 $1.59
Dec2014 $1.35
Dec2013 $1.87
Dec2012 $1.44
Dec2011 $0.62
Dec2010 $0.72
Dec2009 $0.81
Dec2008 $0.87
Dec2007 $0.89
Dec2006 $0.15
Dec2005 $0.25
Dec2004 -$0.08
Dec2003 -$0.30
Dec2002 -$7.77
Dec2001 $1.10
Dec2000 $1.42
Dec1999 $0.67

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.28
Dec2018 $1.72
Dec2017 $1.63
Dec2016 $1.46
Dec2015 $1.50
Dec2014 $1.37
Dec2013 $1.28
Dec2012 $0.96
Dec2011 $0.74
Dec2010 $0.76
Dec2009 $0.72
Dec2008 $0.59
Dec2007 $0.36
Dec2006 -$0.46
Dec2005 -$0.96
Dec2004 -$1.42
Dec2003 -$1.72

Recommended Reading:

Other ModernGraham posts about the company

Quanta Services Inc Valuation – May 2018 $PWR
14 Best Stocks for Value Investors This Week – 2/11/17
Quanta Services Inc Valuation – February 2017 $PWR
15 Best Undervalued Stocks of the Week – 8/20/16
Quanta Services Inc Valuation – August 2016 $PWR

Other ModernGraham posts about related companies

Mohawk Industries Inc Valuation – March 2019 #MHK
Jacobs Engineering Group Inc Valuation – March 2019 #JEC
Masco Corp Valuation – February 2019 $MAS
D.R. Horton Inc Valuation – February 2019 $DHI
Martin Marietta Materials Inc Valuation – February 2019 $MLM
Fluor Corp Valuation – February 2019 $FLR
Lennar Corp Valuation – February 2019 $LEN
Vulcan Materials Co Valuation – February 2019 $VMC
PulteGroup Inc Valuation – January 2019 $PHM
Sherwin-Williams Co Valuation – January 2019 $SHW

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.

Quanta Services Inc Valuation – May 2018 $PWR

Company Profile (excerpt from Reuters): Quanta Services, Inc. (Quanta), incorporated on August 19, 1997, is a provider of specialty contracting services, offering infrastructure solutions primarily to the electric power and oil and gas industries in the United States, Canada and Australia, and selected other international markets. The Company operates through two segments: Electric Power Infrastructure Services, and Oil and Gas Infrastructure Services. The services it provides include the design, installation, upgrade, repair and maintenance of infrastructure within each of the industries it serves, such as electric power transmission and distribution networks, substation facilities, renewable energy facilities, pipeline transmission and distribution systems and facilities, and infrastructure services for the offshore and inland water energy markets.

PWR Chart

PWR data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PWR – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,478,478,961 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.91 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 170.23% Pass
6. Moderate PEmg Ratio PEmg < 20 18.84 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.58 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 1.91 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.63 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.94
MG Growth Estimate 6.25%
MG Value $40.70
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $28.09
MG Value based on 0% Growth $16.47
Market Implied Growth Rate 5.17%
Current Price $36.50
% of Intrinsic Value 89.69%

Quanta Services 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 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.37 in 2014 to an estimated $1.94 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.17% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Quanta Services Inc revealed the company was trading below its Graham Number of $37.67. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 18.84, 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 $-0.34.

Quanta Services Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.34
Graham Number $37.67
PEmg 18.84
Current Ratio 1.91
PB Ratio 1.58
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $2,957,069,000
Total Current Liabilities $1,549,639,000
Long-Term Debt $882,795,000
Total Assets $6,653,402,000
Intangible Assets $2,173,697,000
Total Liabilities $3,010,050,000
Shares Outstanding (Diluted Average) 157,556,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.55
Dec2017 $2.00
Dec2016 $1.26
Dec2015 $1.59
Dec2014 $1.35
Dec2013 $1.87
Dec2012 $1.44
Dec2011 $0.62
Dec2010 $0.72
Dec2009 $0.81
Dec2008 $0.87
Dec2007 $0.89
Dec2006 $0.15
Dec2005 $0.25
Dec2004 -$0.08
Dec2003 -$0.30
Dec2002 -$7.77
Dec2001 $1.10
Dec2000 $1.42
Dec1999 $1.00
Dec1998 $0.59

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.94
Dec2017 $1.63
Dec2016 $1.46
Dec2015 $1.50
Dec2014 $1.37
Dec2013 $1.28
Dec2012 $0.96
Dec2011 $0.74
Dec2010 $0.76
Dec2009 $0.72
Dec2008 $0.59
Dec2007 $0.36
Dec2006 -$0.46
Dec2005 -$0.96
Dec2004 -$1.42
Dec2003 -$1.70
Dec2002 -$1.84

Recommended Reading:

Other ModernGraham posts about the company

14 Best Stocks for Value Investors This Week – 2/11/17
Quanta Services Inc Valuation – February 2017 $PWR
15 Best Undervalued Stocks of the Week – 8/20/16
Quanta Services Inc Valuation – August 2016 $PWR
5 Undervalued Companies with a Low Beta – August 2016

Other ModernGraham posts about related companies

Jacobs Engineering Group Inc Valuation – May 2018 $JEC
Masco Corp Valuation – May 2018 $MAS
D.R. Horton Inc Valuation – May 2018 $DHI
Martin Marietta Materials Inc Valuation – May 2018 $MLM
Fluor Corporation Valuation – April 2018 $FLR
Lennar Corp Valuation – April 2018 $LEN
Vulcan Materials Co Valuation – April 2018 $VMC
PulteGroup Inc Valuation – March 2018 $PHM
Sherwin-Williams Co Valuation – March 2018 $SHW
Cummins Inc Valuation – March 2018 $CMI

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.

Quanta Services Inc Valuation – February 2017 $PWR

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

Company Profile (obtained from Google Finance): Quanta Services, Inc. is a provider of specialty contracting services, offering infrastructure solutions primarily to the electric power and oil and gas industries in the United States, Canada and Australia and selected other international markets. The Company operates through two segments: Electric Power Infrastructure Services, which provides network solutions to customers in the electric power industry, and Oil and Gas Infrastructure Services, which provides network solutions to customers involved in the development and transportation of natural gas, oil and other pipeline products. The services it provides include the design, installation, upgrade, repair and maintenance of infrastructure within each of the industries it serves, such as electric power transmission and distribution networks, substation facilities, renewable energy facilities, pipeline transmission and distribution systems and facilities, and infrastructure services for the offshore and inland water energy markets.

PWR Chart

PWR data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of PWR – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,437,683,421 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.93 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 59.38% Pass
6. Moderate PEmg Ratio PEmg < 20 25.40 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.71 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 1.93 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.42 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.42
MG Growth Estimate 7.36%
MG Value $33.08
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $20.65
MG Value based on 0% Growth $12.11
Market Implied Growth Rate 8.45%
Current Price $36.18
% of Intrinsic Value 109.36%

Quanta Services 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, and the high PEmg ratio. 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.96 in 2012 to an estimated $1.42 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 8.45% 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 Quanta Services Inc revealed the company was trading above its Graham Number of $24.23. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 25.4, which was below the industry average of 28.49, 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 $1.31.

Quanta Services 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) $1.31
Graham Number $24.23
PEmg 25.40
Current Ratio 1.93
PB Ratio 1.71
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $2,405,351,000
Total Current Liabilities $1,245,908,000
Long-Term Debt $482,399,000
Total Assets $5,476,468,000
Intangible Assets $1,809,794,000
Total Liabilities $2,202,532,000
Shares Outstanding (Diluted Average) 155,024,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.15
Dec2015 $1.59
Dec2014 $1.35
Dec2013 $1.87
Dec2012 $1.44
Dec2011 $0.62
Dec2010 $0.72
Dec2009 $0.81
Dec2008 $0.87
Dec2007 $0.89
Dec2006 $0.15
Dec2005 $0.25
Dec2004 -$0.08
Dec2003 -$0.30
Dec2002 -$7.77
Dec2001 $1.10
Dec2000 $1.42
Dec1999 $1.00
Dec1998 $0.59
Dec1997 $0.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.42
Dec2015 $1.50
Dec2014 $1.37
Dec2013 $1.28
Dec2012 $0.96
Dec2011 $0.74
Dec2010 $0.76
Dec2009 $0.72
Dec2008 $0.59
Dec2007 $0.36
Dec2006 -$0.46
Dec2005 -$0.96
Dec2004 -$1.42
Dec2003 -$1.70
Dec2002 -$1.84
Dec2001 $1.04
Dec2000 $0.88

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies with a Low Beta – August 2016
5 Undervalued Companies with a Low Beta – July 2016
5 Undervalued Companies with a Low Beta – February 2016
15 Best Stocks For Value Investors This Week – 2/13/16
Quanta Services Inc Valuation – February 2016 $PWR

Other ModernGraham posts about related companies

Quanta Services Inc Valuation – August 2016 $PWR
Jacobs Engineering Group Inc Valuation – August 2016 $JEC
PPG Industries Inc Valuation – August 2016 $PPG
D.R. Horton Inc Valuation – August 2016 $DHI
Martin Marietta Materials Inc Valuation – August 2016 $MLM
Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI

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.

Quanta Services Inc Valuation – August 2016 $PWR

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

Company Profile (obtained from Google Finance): Quanta Services, Inc. is a provider of specialty contracting services, offering infrastructure solutions primarily to the electric power and oil and gas industries in the United States, Canada and Australia and selected other international markets. The Company operates through two segments: Electric Power Infrastructure Services, which provides network solutions to customers in the electric power industry, and Oil and Gas Infrastructure Services, which provides network solutions to customers involved in the development and transportation of natural gas, oil and other pipeline products. The services it provides include the design, installation, upgrade, repair and maintenance of infrastructure within each of the industries it serves, such as electric power transmission and distribution networks, substation facilities, renewable energy facilities, pipeline transmission and distribution systems and facilities, and infrastructure services for the offshore and inland water energy markets.

PWR Chart

PWR data by YCharts

[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 PWR – 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 $3,956,750,645 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.86 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 61.87% Pass
6. Moderate PEmg Ratio PEmg < 20 18.08 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.28 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 1.86 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.39 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PWR value chart August 2016

EPSmg $1.45
MG Growth Estimate 7.70%
MG Value $34.55
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $20.96
MG Value based on 0% Growth $12.29
Market Implied Growth Rate 4.79%
Current Price $26.14
% of Intrinsic Value 75.66%

Quanta Services 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 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.96 in 2012 to an estimated $1.45 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 4.79% 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 Quanta Services Inc revealed the company was trading above its Graham Number of $24.64. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 18.08, which was below the industry average of 28.02, 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 $0.95.

Quanta Services Inc receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

PWR charts August 2016

Net Current Asset Value (NCAV) $0.95
Graham Number $24.64
PEmg 18.08
Current Ratio 1.86
PB Ratio 1.28
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $2,244,387,000
Total Current Liabilities $1,208,089,000
Long-Term Debt $401,119,000
Total Assets $5,297,101,000
Intangible Assets $1,798,811,000
Total Liabilities $2,096,778,000
Shares Outstanding (Diluted Average) 156,130,000

Earnings Per Share History

Next Fiscal Year Estimate $1.22
Dec2015 $1.59
Dec2014 $1.35
Dec2013 $1.87
Dec2012 $1.44
Dec2011 $0.62
Dec2010 $0.72
Dec2009 $0.81
Dec2008 $0.87
Dec2007 $0.89
Dec2006 $0.15
Dec2005 $0.25
Dec2004 -$0.08
Dec2003 -$0.30
Dec2002 -$7.77
Dec2001 $1.10
Dec2000 $1.42
Dec1999 $1.00
Dec1998 $0.59
Dec1997 $0.19

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.45
Dec2015 $1.50
Dec2014 $1.37
Dec2013 $1.28
Dec2012 $0.96
Dec2011 $0.74
Dec2010 $0.76
Dec2009 $0.72
Dec2008 $0.59
Dec2007 $0.36
Dec2006 -$0.46
Dec2005 -$0.96
Dec2004 -$1.42
Dec2003 -$1.70
Dec2002 -$1.84
Dec2001 $1.04
Dec2000 $0.88

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies with a Low Beta – August 2016
5 Undervalued Companies with a Low Beta – July 2016
5 Undervalued Companies with a Low Beta – February 2016
15 Best Stocks For Value Investors This Week – 2/13/16
Quanta Services Inc Valuation – February 2016 $PWR

Other ModernGraham posts about related companies

Jacobs Engineering Group Inc Valuation – August 2016 $JEC
PPG Industries Inc Valuation – August 2016 $PPG
D.R. Horton Inc Valuation – August 2016 $DHI
Martin Marietta Materials Inc Valuation – August 2016 $MLM
Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI
Corning Inc Valuation – May 2016 $GLW

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.

Quanta Services Inc Valuation – February 2016 $PWR

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 Quanta Services Inc (PWR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Quanta Services, Inc. (Quanta) is a provider of specialty contracting services, offering infrastructure solutions primarily to the electric power, and natural gas and oil pipeline industries. The Company operates in two segments, such as electric power infrastructure services, and oil and gas infrastructure services. The Electric Power Infrastructure Services segment provides network solutions to the electric power industry. Its Electric Power Infrastructure Services segment includes various services, such as design, installation and maintenance of electric power transmission and distribution infrastructure and substation facilities, among others. The Oil and Gas Infrastructure Services segment provides network solutions to customers of development and transportation of natural gas and oil. Its Oil and Gas Infrastructure Services segment include the design, installation and maintenance of pipeline transmission, distribution systems and gathering systems, among others.

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

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

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[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of PWR

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 $2,627,952,545 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.76 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 167.02% Pass
6. Moderate PEmg Ratio PEmg < 20 11.00 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.13 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 1.76 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.34 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PWR value chart February 2016

EPSmg $1.59
MG Growth Estimate 15.00%
MG Value $61.37
Opinion Undervalued
MG Value based on 3% Growth $23.11
MG Value based on 0% Growth $13.55
Market Implied Growth Rate 1.25%
Current Price $17.54
% of Intrinsic Value 28.58%

Quanta Services Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio and the lack of dividends.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.74 in 2011 to an estimated $1.59 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.25% 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.

Stage 3: Information for Further Research

PWR charts February 2016

Net Current Asset Value (NCAV) $0.87
Graham Number $29.36
PEmg 11.00
Current Ratio 1.76
PB Ratio 1.13
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information Sep2015
Total Current Assets $2,362,664,000
Total Current Liabilities $1,340,538,000
Long-Term Debt $348,209,000
Total Assets $5,373,424,000
Intangible Assets $1,822,344,000
Total Liabilities $2,184,052,000
Shares Outstanding (Diluted Average) 206,193,000

Earnings Per Share History

Next Fiscal Year Estimate $1.88
Dec2014 $1.35
Dec2013 $1.87
Dec2012 $1.44
Dec2011 $0.62
Dec2010 $0.72
Dec2009 $0.81
Dec2008 $0.87
Dec2007 $0.89
Dec2006 $0.15
Dec2005 $0.25
Dec2004 -$0.08
Dec2003 -$0.30
Dec2002 -$7.77
Dec2001 $1.10
Dec2000 $1.42
Dec1999 $1.00
Dec1998 $0.59
Dec1997 $0.19

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.59
Dec2014 $1.37
Dec2013 $1.28
Dec2012 $0.96
Dec2011 $0.74
Dec2010 $0.76
Dec2009 $0.72
Dec2008 $0.59
Dec2007 $0.36
Dec2006 -$0.46
Dec2005 -$0.96
Dec2004 -$1.42
Dec2003 -$1.70
Dec2002 -$1.84
Dec2001 $1.04
Dec2000 $0.88
Dec1999 $0.53

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies with a Low Beta – January 2016
The Best Companies of the Construction Industry – October 2015
10 Most Undervalued Companies for the Defensive Investor – August 2015
5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – August 2015 $BEN $RL $FOSL $PWR $CMI
The 20 Best Stocks For Value Investors This Week – 7/25/15

Other ModernGraham posts about related companies

Martin Marietta Materials Inc Valuation – February 2016 Update $MLM
Fluor Corp Valuation – February 2016 Update $FLR
Jacobs Engineering Group Inc Valuation – January 2016 Update $JEC
Lowe’s Companies Inc Valuation – January 2016 Update $LOW
PulteGroup Inc Valuation – January 2016 Update $PHM
Flowserve Corp Valuation – November 2015 Update $FLS
Lennar Corporation Valuation – November 2015 Update $LEN
Home Depot Inc. Valuation – November 2015 Update $HD
Quanta Services Inc. Valuation – October 2015 Update $PWR
Fluor Corporation Valuation – October 2015 Update $FLR

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.

Quanta Services Inc. Valuation – October 2015 Update $PWR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – October 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Quanta Services Inc. (PWR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Quanta Services, Inc. (Quanta) is a provider of specialty contracting services, offering infrastructure solutions primarily to the electric power, and natural gas and oil pipeline industries. The Company operates in two segments, such as electric power infrastructure services, and oil and gas infrastructure services. The Electric Power Infrastructure Services segment provides network solutions to the electric power industry. Its Electric Power Infrastructure Services segment includes various services, such as design, installation and maintenance of electric power transmission and distribution infrastructure and substation facilities, among others. The Oil and Gas Infrastructure Services segment provides network solutions to customers of development and transportation of natural gas and oil. Its Oil and Gas Infrastructure Services segment include the design, installation and maintenance of pipeline transmission, distribution systems and gathering systems, among others.

[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 PWR – October 2015

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $4,061,754,179 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.96 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 120.42% Pass
6. Moderate PEmg Ratio PEmg < 20 15.33 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.01 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 1.96 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.19 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PWR value Chart October 2015

EPSmg $1.30
MG Growth Estimate 11.44%
MG Value $40.71
Opinion Undervalued
MG Value based on 3% Growth $18.81
MG Value based on 0% Growth $11.03
Market Implied Growth Rate 3.43%
Current Price $19.94
% of Intrinsic Value 48.98%

Quanta Services Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends and the low current ratio.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.74 in 2011 to an estimated $1.30 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.43% 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 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 Quanta Services Inc. (PWR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

PWR Charts October 2015

Net Current Asset Value (NCAV) $1.79
Graham Number $21.69
PEmg 15.37
Current Ratio 1.96
PB Ratio 1.01
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Total Current Assets $2,315,567,000
Total Current Liabilities $1,179,148,000
Long-Term Debt $214,255,000
Total Assets $6,130,510,000
Intangible Assets $1,832,957,000
Total Liabilities $1,934,266,000
Shares Outstanding (Diluted Average) 213,059,000

Earnings Per Share History

Next Fiscal Year Estimate $0.99
Dec14 $1.35
Dec13 $1.87
Dec12 $1.44
Dec11 $0.62
Dec10 $0.72
Dec09 $0.81
Dec08 $0.87
Dec07 $0.89
Dec06 $0.15
Dec05 $0.25
Dec04 -$0.08
Dec03 -$0.30
Dec02 -$7.77
Dec01 $1.10
Dec00 $1.42
Dec99 $1.00
Dec98 $0.59
Dec97 $0.19

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.30
Dec14 $1.37
Dec13 $1.28
Dec12 $0.96
Dec11 $0.74
Dec10 $0.76
Dec09 $0.72
Dec08 $0.59
Dec07 $0.36
Dec06 -$0.46
Dec05 -$0.96
Dec04 -$1.42
Dec03 -$1.70
Dec02 -$1.84
Dec01 $1.04
Dec00 $0.88
Dec99 $0.53

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Construction Industry – October 2015
10 Most Undervalued Companies for the Defensive Investor – August 2015
5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – August 2015 $BEN $RL $FOSL $PWR $CMI
The 20 Best Stocks For Value Investors This Week – 7/25/15
Quanta Services Inc. Analysis – July 2015 Update $PWR

Other ModernGraham posts about related companies

Fluor Corporation Valuation – October 2015 Update $FLR
Martin Marietta Materials Inc. Valuation – October 2015 Update $MLM
Jacobs Engineering Group Analysis – October 2015 Update $JEC
D.R. Horton Inc. Analysis – October 2015 Update $DHI
The Best Companies of the Construction Industry – October 2015
Mohawk Industries Inc. Analysis – October 2015 Update $MHK
PulteGroup Inc. Analysis – October 2015 Update $PHM
Masco Corporation Analysis – September 2015 Update $MAS
Flowserve Corporation Analysis – August 2015 Update $FLS
Alexander & Baldwin Inc Analysis – Initial Coverage $ALEX

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.

5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – August 2015 $BEN $RL $FOSL $PWR $CMI

5def-und-lows_edited-1

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the five undervalued companies reviewed by ModernGraham trading closest to their 52 week low. Each of these companies has been determined to be suitable for the Defensive Investor according to the ModernGraham approach. Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore 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.

Be sure to check out the history of this screen to see which companies have been selected in the past.

Here are the five undervalued companies for the Defensive Investor near 52 week lows:

Franklin Resources Inc. (BEN)

Franklin_Resources_LogoFranklin Resources performs very well in the ModernGraham model and is suitable for both Defensive and Enterprising Investors. In fact, the company passes all of the requirements of both investor types, which is a rare accomplishment indicative of the company’s strong financial position. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $2.23 in 2011 to an estimated $3.49 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 3.03% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged over 11% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time. (See the full valuation)

Ralph Lauren Corporation (RL)

Ralph_Lauren_Corporation

Ralph Lauren performs well in the ModernGraham model and is suitable for both Defensive and Enterprising Investors. The Defensive Investor is only concerned with the poor PB ratio, while the Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $4.76 in 2011 to an estimated $7.81 for 2015. This is a strong level of growth and is well above the market’s implied estimate of only 4.33% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged nearly 9.6% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time. (See the full valuation)

Fossil Group Inc. (FOSL)

220px-Fossil_logo.svgFossil Group performs well in the ModernGraham model and is suitable for both Defensive and Enterprising Investors. Both investor types are only initially concerned by the lack of dividend payments. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.68 in 2011 to an estimated $6.01 for 2015. This is a strong level of growth and is well above the market’s implied estimate of only 1.68% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged nearly 16% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (See the full valuation)

Quanta Services Inc. (PWR)

220px-QScolorjpgQuanta Services passes the initial requirements of both the Defensive Investor and the Enterprising Investor. Both investor types are only initially concerned by the lack of dividends. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $0.74 in 2011 to an estimated $1.57 for 2015. This is a fairly strong level of demonstrated growth and outpaces the market’s implied estimate for annual earnings growth of only 4.64% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 22.7% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that Quanta Services is significantly undervalued at the present time.  (See the full valuation)

Cummins Inc. (CMI)

Logo_cumminsCummins performs well in the ModernGraham model and is suitable for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio while the Enterprising Investor has no initial concerns. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $5.78 in 2011 to an estimated $8.88 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 3.74% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged over 10.7% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (See the full valuation)

What do you think?  Are these companies a good value for Defensive Investors?  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 any company mentioned in this article at the time of publication and had no intention of changing those holdings within the next 72 hours.

Quanta Services Inc. Analysis – July 2015 Update $PWR

220px-QScolorjpgQuanta Services Inc. (PWR) has grown its earnings well over the last few years, a trait which may attract some investors. In addition, multiple analysts have focused on qualitative factors when reviewing the company. For example, Seeking Alpha contributor Alpha Gen Capital recently wrote the company’s shares are undervalued by the market due to temporary issues. In addition, Bryan Wagman believes growing demand for energy infrastructure should boost the company in the long term. These are great factors to consider in the final stages of an investment decision, but first one must use quantitative metrics to determine the company’s intrinsic value.

Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits.

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

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

[level-free]
To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
[/level-free]
[level-mg-stocks-screens-subscriber]

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

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – PASS
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) 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 = 4/5

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

Valuation Summary

Key Data

Recent Price $27.92
MG Value $60.47
MG Opinion Undervalued
Value Based on 3% Growth $22.77
Value Based on 0% Growth $13.35
Market Implied Growth Rate 4.64%
Net Current Asset Value (NCAV) $2.53
PEmg 17.78
Current Ratio 2.12
PB Ratio 1.40

Balance Sheet

Current Assets $2,388,000,000
Current Liabilities $1,124,000,000
Total Debt $115,000,000
Total Assets $6,141,000,000
Intangible Assets $2,175,000,000
Total Liabilities $1,843,000,000
Outstanding Shares 215,500,000

Earnings Per Share

2015 (estimate) $1.81
2014 $1.35
2013 $1.87
2012 $1.44
2011 $0.62
2010 $0.72
2009 $0.81
2008 $0.87
2007 $0.89
2006 $0.15
2005 $0.25

Earnings Per Share – ModernGraham

2015 (estimate) $1.57
2014 $1.37
2013 $1.28
2012 $0.96
2011 $0.74
2010 $0.76

Dividend History

Quanta Services does not pay a dividend.

Free Cash Flow

Conclusion

Quanta Services passes the initial requirements of both the Defensive Investor and the Enterprising Investor. Both investor types are only initially concerned by the lack of dividends. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $0.74 in 2011 to an estimated $1.57 for 2015. This is a fairly strong level of demonstrated growth and outpaces the market’s implied estimate for annual earnings growth of only 4.64% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 22.7% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that Quanta Services is significantly undervalued at the present time.

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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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

Quanta Services Inc. Quarterly Valuation – April 2015 $PWR

220px-QScolorjpg

Quanta Services performs well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the lack of dividend payments along with the high PEmg ratio, while the Enterprising Investor is only concerned with the lack of dividend payments. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $0.76 in 2010 to $1.37 for 2014. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 6.15% annual earnings growth over the next 7-10 years. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.

Read the full valuation on Seeking Alpha!

PWR Chart

PWR data by YCharts

Disclaimer: The author did not hold a position in Quanta Services Inc. (PWR) 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.

Quanta Services Inc. Quarterly Valuation – January 2015 $PWR

220px-QScolorjpgBenjamin 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 Quanta Services Inc. (PWR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Quanta Services, Inc. (Quanta) is a provider of specialty contracting services, offering infrastructure solutions primarily to the electric power and natural gas and oil pipeline industries. The services the Company provides include the design, installation, upgrade, repair and maintenance of infrastructure within each of the industries the Company serves, such as electric power transmission and distribution networks, substation facilities, renewable energy facilities and pipelines transmission, gathering and distribution systems and facilities. It operates in three segments: electric power infrastructure services, natural gas and pipeline infrastructure services and fiber optic licensing and other. Effective August 14, 2013, Quanta Services Inc acquired JW Didado Electric Inc, an electric utility company. Effective July 29, 2013, Quanta Services Inc acquired Nacap Australia Pty Ltd.

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

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

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

Valuation Summary

Key Data:

Recent Price $28.35
MG Value $60.60
MG Opinion Undervalued
Value Based on 3% Growth $22.82
Value Based on 0% Growth $13.38
Market Implied Growth Rate 4.76%
Net Current Asset Value (NCAV) $3.54
PEmg 18.01
Current Ratio 2.25
PB Ratio 1.39

Balance Sheet – September 2014

Current Assets $2,536,000,000
Current Liabilities $1,128,000,000
Total Debt $83,000,000
Total Assets $6,229,000,000
Intangible Assets $2,110,000,000
Total Liabilities $1,758,000,000
Outstanding Shares 219,500,000

Earnings Per Share

2014 (estimate) $1.97
2013 $1.87
2012 $1.44
2011 $0.62
2010 $0.72
2009 $0.81
2008 $0.87
2007 $0.89
2006 $0.15
2005 $0.25
2004 -$0.08

Earnings Per Share – ModernGraham

2014 (estimate) $1.57
2013 $1.28
2012 $0.96
2011 $0.74
2010 $0.76
2009 $0.72

Dividend History
Quanta Services does not pay a dividend.

Conclusion:

Quantas Services Inc. qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only initial concern is the lack of dividends, and the Enterprising Investor is also only concerned by the lack of dividends.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.76 in 2010 to an estimated $1.57 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 4.76% 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 Quantas Services Inc. (PWR)?  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 Quantas Services Inc. (PWR) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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