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Raven Industries Inc Valuation – September 2017 $RAVN

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 Undervalued Stocks for the Enterprising Investor – August 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 Raven Industries Inc (RAVN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Raven Industries, Inc. is a diversified technology company providing a range of products to customers within the industrial, agricultural, energy, construction and defense markets. The Company operates through three segments: Applied Technology Division (Applied Technology), Engineered Films Division (Engineered Films) and Aerostar Division (Aerostar). The Applied Technology segment designs, manufactures, sells and services precision agriculture products and information management tools for growers. The Engineered Films segment produces plastic films and sheeting for energy, agricultural, construction, geomembrane and industrial applications. The Aerostar segment designs and manufactures products, including balloons, tethered aerostats and radar processing systems. It conducts business through its subsidiaries, including Aerostar International, Inc. (Aerostar), Vista Research, Inc. (Vista), Raven International Holding Company BV (Raven Holdings) and Raven Industries Canada, Inc.

RAVN Chart

RAVN data by YCharts

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ModernGraham Valuation of RAVN – September 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 $1,045,046,248 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.91 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -37.68% Fail
6. Moderate PEmg Ratio PEmg < 20 40.49 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.86 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 4.91 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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 Fail

Stage 2: Determination of Intrinsic Value

EPSmg $0.71
MG Growth Estimate -4.25%
MG Value $3.06
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $10.31
MG Value based on 0% Growth $6.05
Market Implied Growth Rate 15.99%
Current Price $28.80
% of Intrinsic Value 940.13%

Raven Industries, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the  small size, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years.  As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.25 in 2014 to an estimated $0.71 for 2018.  This level of demonstrated earnings growth does not support the market’s implied estimate of 15.99% 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 Raven Industries, Inc. revealed the company was trading above its Graham Number of $12.91.  The company pays a dividend of $0.52 per share, for a yield of 1.8%  Its PEmg (price over earnings per share – ModernGraham) was 40.49, which was above the industry average of 26.48.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.06.

Raven Industries, 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) $3.06
Graham Number $12.91
PEmg 40.49
Current Ratio 4.91
PB Ratio 3.86
Current Dividend $0.52
Dividend Yield 1.81%
Number of Consecutive Years of Dividend Growth 15

[/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 7/1/2017
Total Current Assets $156,109,000
Total Current Liabilities $31,777,000
Long-Term Debt $0
Total Assets $317,196,000
Intangible Assets $52,069,000
Total Liabilities $44,129,000
Shares Outstanding (Diluted Average) 36,554,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.03
Jan2017 $0.56
Jan2016 $0.13
Jan2015 $0.86
Jan2014 $1.17
Jan2013 $1.44
Jan2012 $1.39
Jan2011 $1.12
Jan2010 $0.79
Jan2009 $0.85
Jan2008 $0.77
Jan2007 $0.70
Jan2006 $0.67
Jan2005 $0.49
Jan2004 $0.39
Jan2003 $0.30
Jan2002 $0.23
Jan2001 $0.16
Jan2000 $0.13
Jan1999 $0.11
Jan1998 $0.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.71
Jan2017 $0.65
Jan2016 $0.79
Jan2015 $1.15
Jan2014 $1.25
Jan2013 $1.24
Jan2012 $1.08
Jan2011 $0.90
Jan2010 $0.78
Jan2009 $0.75
Jan2008 $0.66
Jan2007 $0.58
Jan2006 $0.49
Jan2005 $0.37
Jan2004 $0.28
Jan2003 $0.22
Jan2002 $0.17

Recommended Reading:

Other ModernGraham posts about the company

Raven Industries Inc Valuation – January 2016 Update $RAVN
Raven Industries Inc. Analysis – October 2015 Update $RAVN
Raven Industries Inc. Analysis – Initial Coverage $RAVN

Other ModernGraham posts about related companies

E I du Pont de Nemours & Co Valuation – August 2016 $DD
3M Company Valuation – August 2016 $MMM
General Electric Co Valuation – July 2016 $GE
Illinois Tool Works Inc Valuation – July 2016 $ITW
Raven Industries Inc Valuation – July 2016 $RAVN
E.I. du Pont de Nemours Valuation – February 2016 $DD
Honeywell International Inc Valuation – February 2016 $HON
3M Company Valuation – February 2016 Update $MMM
Raven Industries Inc Valuation – January 2016 Update $RAVN
Illinois Tool Works Inc Valuation – January 2016 Update $ITW

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.

Raven Industries Inc Valuation – July 2016 $RAVN

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 – June 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 Raven Industries Inc (RAVN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Raven Industries, Inc. is a diversified technology company providing a range of products to customers within the industrial, agricultural, energy, construction and defense markets. The Company operates through three segments: Applied Technology Division (Applied Technology), Engineered Films Division (Engineered Films) and Aerostar Division (Aerostar). The Applied Technology segment designs, manufactures, sells and services precision agriculture products and information management tools for growers. The Engineered Films segment produces plastic films and sheeting for energy, agricultural, construction, geomembrane and industrial applications. The Aerostar segment designs and manufactures products, including balloons, tethered aerostats and radar processing systems. It conducts business through its subsidiaries, including Aerostar International, Inc. (Aerostar), Vista Research, Inc. (Vista), Raven International Holding Company BV (Raven Holdings) and Raven Industries Canada, Inc.

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

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of RAVN – July 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $653,828,340 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.51 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -37.21% Fail
6. Moderate PEmg Ratio PEmg < 20 29.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.55 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 5.51 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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 Fail

Stage 2: Determination of Intrinsic Value

RAVN value chart July 2016

EPSmg $0.63
MG Growth Estimate -4.25%
MG Value $2.35
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $9.07
MG Value based on 0% Growth $5.32
Market Implied Growth Rate 10.53%
Current Price $18.49
% of Intrinsic Value 785.32%

Raven Industries, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.24 in 2013 to an estimated $0.63 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.53% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

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

Stage 3: Information for Further Research

RAVN charts July 2016

Net Current Asset Value (NCAV) $2.35
Graham Number $8.31
PEmg 29.57
Current Ratio 5.51
PB Ratio 2.55
Current Dividend $0.52
Dividend Yield 2.81%
Number of Consecutive Years of Dividend Growth 15

[/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 4/1/2016
Total Current Assets $126,096,000
Total Current Liabilities $22,904,000
Long-Term Debt $0
Total Assets $304,668,000
Intangible Assets $60,560,000
Total Liabilities $40,239,000
Shares Outstanding (Diluted Average) 36,466,000

Earnings Per Share History

Next Fiscal Year Estimate $0.42
Jan2016 $0.23
Jan2015 $0.86
Jan2014 $1.17
Jan2013 $1.44
Jan2012 $1.39
Jan2011 $1.12
Jan2010 $0.79
Jan2009 $0.85
Jan2008 $0.77
Jan2007 $0.70
Jan2006 $0.67
Jan2005 $0.49
Jan2004 $0.38
Jan2003 $0.30
Jan2002 $0.23
Jan2001 $0.16
Jan2000 $0.13
Jan1999 $0.11
Jan1998 $0.14
Jan1997 $0.13

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.63
Jan2016 $0.82
Jan2015 $1.15
Jan2014 $1.25
Jan2013 $1.24
Jan2012 $1.08
Jan2011 $0.90
Jan2010 $0.78
Jan2009 $0.75
Jan2008 $0.66
Jan2007 $0.58
Jan2006 $0.48
Jan2005 $0.36
Jan2004 $0.28
Jan2003 $0.22
Jan2002 $0.17
Jan2001 $0.14

Recommended Reading:

Other ModernGraham posts about the company

Raven Industries Inc Valuation – January 2016 Update $RAVN
Raven Industries Inc. Analysis – October 2015 Update $RAVN
Raven Industries Inc. Analysis – October 2015 Update $RAVN
Raven Industries Inc. Analysis – Initial Coverage $RAVN

Other ModernGraham posts about related companies

E.I. du Pont de Nemours Valuation – February 2016 $DD
Honeywell International Inc Valuation – February 2016 $HON
3M Company Valuation – February 2016 Update $MMM
Raven Industries Inc Valuation – January 2016 Update $RAVN
Illinois Tool Works Inc Valuation – January 2016 Update $ITW
E.I. du Pont de Nemours Valuation – February 2016 $DD
Honeywell International Inc Valuation – February 2016 $HON
3M Company Valuation – February 2016 Update $MMM
Raven Industries Inc Valuation – January 2016 Update $RAVN
Illinois Tool Works Inc Valuation – January 2016 Update $ITW

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.

Raven Industries Inc Valuation – January 2016 Update $RAVN

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 – November 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 Raven Industries Inc (RAVN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Raven Industries, Inc. is a diversified technology company providing a variety of products to customers within the industrial, agricultural, energy, construction, and military/aerospace markets. The Company markets its products around the world and has its principal operations in the United States. The Company operates in three segments: Applied Technology Division (Applied Technology), Engineered Films Division (Engineered Films) and Aerostar Division (Aerostar). The Applied Technology segment designs, manufactures, sells, and services precision agriculture products and information management tools for growers. The Engineered Films segment produces plastic films and sheeting for energy, agricultural, construction, geomembrane, and industrial applications. The Aerostar segment designs and manufactures products, including balloons, tethered aerostats, and radar processing systems.

[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 RAVN – January 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 $538,485,856 0 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.34 1 Pass
3. Earnings Stability Positive EPS for 10 years prior 1 Pass
4. Dividend Record Dividend Payments for 10 years prior 1 Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 1.30% 0 Fail
6. Moderate PEmg Ratio PEmg < 20 17.73 1 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.04 1 Pass
Score 5
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 6.34 1 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 1 Pass
3. Earnings Stability Positive EPS for 5 years prior 1 Pass
4. Dividend Record Currently Pays Dividend 1 Pass
5. Earnings Growth EPSmg greater than 5 years ago 0 Fail

Stage 2: Determination of Intrinsic Value

RAVN value Chart January 2016

EPSmg $0.85
MG Growth Estimate -3.22%
MG Value $2.43
Opinion Overvalued
MG Value based on 3% Growth $12.34
MG Value based on 0% Growth $7.24
Market Implied Growth Rate 4.61%
Current Price $15.09
% of Intrinsic Value 621.48%

Raven Industries Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the small size along with the insufficient earnings growth over the last ten years.  The Enterprising Investor is only initially concerned by the lack of earnings growth over the last five years.  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 overvalued after seeing its EPSmg (normalized earnings) decline from $1.08 in 2012 to an estimated $0.85 for 2016.  This level of demonstrated earnings growth does not support the market’s implied estimate of 4.61% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

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 Raven Industries Inc (RAVN)?  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

RAVN Charts January 2016

Net Current Asset Value (NCAV) $2.43
Graham Number $7.21
PEmg 17.73
Current Ratio 6.34
PB Ratio 2.04
Dividend Yield 3.45%
Number of Consecutive Years of Dividend Growth 14

 

[/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 Oct2015
Total Current Assets $126,665,000
Total Current Liabilities $19,973,000
Long-Term Debt $0
Total Assets $309,666,000
Intangible Assets $61,382,000
Total Liabilities $37,122,000
Shares Outstanding (Diluted Average) 36,878,000

Earnings Per Share History

Next Fiscal Year Estimate $0.31
Jan2015 $0.86
Jan2014 $1.17
Jan2013 $1.44
Jan2012 $1.39
Jan2011 $1.12
Jan2010 $0.79
Jan2009 $0.85
Jan2008 $0.77
Jan2007 $0.70
Jan2006 $0.67
Jan2005 $0.49
Jan2004 $0.39
Jan2003 $0.30
Jan2002 $0.23
Jan2001 $0.16
Jan2000 $0.13
Jan1999 $0.11
Jan1998 $0.14
Jan1997 $0.13
Jan1996 $0.11

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.85
Jan2015 $1.15
Jan2014 $1.25
Jan2013 $1.24
Jan2012 $1.08
Jan2011 $0.90
Jan2010 $0.78
Jan2009 $0.75
Jan2008 $0.66
Jan2007 $0.58
Jan2006 $0.49
Jan2005 $0.37
Jan2004 $0.28
Jan2003 $0.22
Jan2002 $0.17
Jan2001 $0.14
Jan2000 $0.12

Recommended Reading:

Other ModernGraham posts about the company

Raven Industries Inc. Analysis – October 2015 Update $RAVN
Raven Industries Inc. Analysis – Initial Coverage $RAVN

Other ModernGraham posts about related companies

Illinois Tool Works Inc Valuation – January 2016 Update $ITW
E I du Pont de Nemours & Co Valuation – November 2015 Update $DD
E I Du Pont de Nemours & Company Analysis – August 2015 Update $DD
E. I. Du Pont De Nemours and Company Quarterly Valuation – May 2015 $DD
Honeywell International Inc. Valuation – October 2015 Update $HON
Raven Industries Inc. Analysis – October 2015 Update $RAVN
Illinois Tool Works Inc. Analysis – October 2015 Update $ITW
3M Company Analysis – September 2015 Update $MMM
Honeywell International Inc. Analysis – July 2015 Update $HON
Raven Industries Inc. Analysis – Initial Coverage $RAVN

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.

Raven Industries Inc. Analysis – October 2015 Update $RAVN

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 – September 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 Raven Industries Inc. (RAVN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Raven Industries, Inc. is a diversified technology company providing a variety of products to customers within the industrial, agricultural, energy, construction, and military/aerospace markets. The Company markets its products around the world and has its principal operations in the United States. The Company operates in three segments: Applied Technology Division (Applied Technology), Engineered Films Division (Engineered Films) and Aerostar Division (Aerostar). The Applied Technology segment designs, manufactures, sells, and services precision agriculture products and information management tools for growers. The Engineered Films segment produces plastic films and sheeting for energy, agricultural, construction, geomembrane, and industrial applications. The Aerostar segment designs and manufactures products, including balloons, tethered aerostats, and radar processing systems.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of RAVN – 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 $695,332,986 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.75 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 12.12% Fail
6. Moderate PEmg Ratio PEmg < 20 19.94 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.40 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 6.75 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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 Fail

Stage 2: Determination of Intrinsic Value

RAVN value Chart October 2015

EPSmg $0.93
MG Growth Estimate -2.07%
MG Value $4.07
Opinion Overvalued
MG Value based on 3% Growth $13.55
MG Value based on 0% Growth $7.94
Market Implied Growth Rate 5.72%
Current Price $18.64
% of Intrinsic Value 457.49%

Raven Industries Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned by the small size and the insufficient earnings growth over the last ten years, while the Enterprising Investor is only concerned by the lack of earnings growth over the last five years.  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 overvalued after seeing its EPSmg (normalized earnings) decline from $1.08 in 2012 to an estimated $0.93 for 2016.  This level of demonstrated earnings growth does not support the market’s implied estimate of 5.72% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

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 Raven Industries Inc. (RAVN)?  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

RAVN Charts October 2015

Net Current Asset Value (NCAV) $2.71
Graham Number $9.93
PEmg 19.94
Current Ratio 6.75
PB Ratio 2.40
Dividend Yield 2.79%
Number of Consecutive Years of Dividend Growth 14

 

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

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 $148,854,000
Total Current Liabilities $22,050,000
Long-Term Debt $0
Total Assets $340,630,000
Intangible Assets $69,346,000
Total Liabilities $46,414,000
Shares Outstanding (Diluted Average) 37,828,000

Earnings Per Share History

Next Fiscal Year Estimate $0.56
Jan15 $0.86
Jan14 $1.17
Jan13 $1.44
Jan12 $1.39
Jan11 $1.12
Jan10 $0.79
Jan09 $0.85
Jan08 $0.77
Jan07 $0.70
Jan06 $0.67
Jan05 $0.49
Jan04 $0.39
Jan03 $0.30
Jan02 $0.23
Jan01 $0.16
Jan00 $0.13
Jan99 $0.11
Jan98 $0.14
Jan97 $0.13
Jan96 $0.11

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.93
Jan15 $1.15
Jan14 $1.25
Jan13 $1.24
Jan12 $1.08
Jan11 $0.90
Jan10 $0.78
Jan09 $0.75
Jan08 $0.66
Jan07 $0.58
Jan06 $0.49
Jan05 $0.37
Jan04 $0.28
Jan03 $0.22
Jan02 $0.17
Jan01 $0.14
Jan00 $0.12

Recommended Reading:

Other ModernGraham posts about the company

Raven Industries Inc. Analysis – Initial Coverage $RAVN

Other ModernGraham posts about related companies

Illinois Tool Works Inc. Analysis – October 2015 Update $ITW
3M Company Analysis – September 2015 Update $MMM
Honeywell International Inc. Analysis – July 2015 Update $HON
Raven Industries Inc. Analysis – Initial Coverage $RAVN
Illinois Tool Works Analysis – July 2015 Update $ITW
3M Company Quarterly Valuation – May 2015 $MMM
Honeywell International Inc. Quarterly Valuation – May 2015 $HON
Illinois Tool Works Inc. Quarterly Valuation – March 2015 $ITW
General Electric Annual Valuation – 2015 $GE
3M Company Quarterly Valuation – February 2015 $MMM

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.

Raven Industries Inc. Analysis – Initial Coverage $RAVN

raven industriesBenjamin 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 – July 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 Raven Industries Inc. (RAVN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Raven Industries, Inc. is a diversified technology company providing a variety of products to customers within the industrial, agricultural, energy, construction, and military/aerospace markets. The Company markets its products around the world and has its principal operations in the United States. The Company operates in three segments: Applied Technology Division (Applied Technology), Engineered Films Division (Engineered Films) and Aerostar Division (Aerostar). The Applied Technology segment designs, manufactures, sells, and services precision agriculture products and information management tools for growers. The Engineered Films segment produces plastic films and sheeting for energy, agricultural, construction, geomembrane, and industrial applications. The Aerostar segment designs and manufactures products, including balloons, tethered aerostats, and radar processing systems.

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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – FAIL
  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 – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  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 – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $19.53
MG Value $5.32
MG Opinion Overvalued
Value Based on 3% Growth $14.13
Value Based on 0% Growth $8.28
Market Implied Growth Rate 5.77%
Net Current Asset Value (NCAV) $2.86
PEmg 20.04
Current Ratio 6.02
PB Ratio 2.47

Balance Sheet – April 2015

Current Assets $161,900,000
Current Liabilities $26,900,000
Total Debt $0
Total Assets $354,600,000
Intangible Assets $70,000,000
Total Liabilities $52,500,000
Outstanding Shares 38,200,000

Earnings Per Share

2016 (estimate) $0.68
2015 $0.86
2014 $1.17
2013 $1.44
2012 $1.39
2011 $1.12
2010 $0.79
2009 $0.85
2008 $0.77
2007 $0.70
2006 $0.49

Earnings Per Share – ModernGraham

2016 (estimate) $0.97
2015 $1.15
2014 $1.25
2013 $1.24
2012 $1.08
2011 $0.90

Dividend History

Conclusion:

Raven Industries Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years, and the high PEmg ratio. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $1.08 in 2012 to only an estimated $0.97 for 2016.  This level of demonstrated earnings growth does not support the market’s implied estimate of 5.77% 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 falling below 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 Raven Industries Inc. (RAVN)?  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 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.

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Illinois Tool Works Inc Valuation – April 2019 #ITW

Company Profile (excerpt from Reuters): Illinois Tool Works Inc., incorporated on June 19, 1961, is a manufacturer of a range of industrial products and equipment. The Company operates through seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products, and Specialty Products. As of December 31, 2016, the Company had 85 divisions in 57 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ITW – 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 $48,387,279,394 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.63 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 52.27% Pass
6. Moderate PEmg Ratio PEmg < 20 22.20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 15.06 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 1.63 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.70 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 $6.67
MG Growth Estimate 3.23%
MG Value $99.71
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $96.68
MG Value based on 0% Growth $56.67
Market Implied Growth Rate 6.85%
Current Price $148.01
% of Intrinsic Value 148.43%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $5.49 in 2015 to an estimated $6.67 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.85% 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 Illinois Tool Works Inc. revealed the company was trading above its Graham Number of $41.22. The company pays a dividend of $3.56 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 22.2, which was below the industry average of 24.48, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.6.

Illinois Tool Works Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.60
Graham Number $41.22
PEmg 22.20
Current Ratio 1.63
PB Ratio 15.06
Current Dividend $3.56
Dividend Yield 2.41%
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 $5,778,000,000
Total Current Liabilities $3,542,000,000
Long-Term Debt $6,029,000,000
Total Assets $14,870,000,000
Intangible Assets $5,717,000,000
Total Liabilities $11,612,000,000
Shares Outstanding (Diluted Average) 331,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.70
Dec2018 $7.60
Dec2017 $4.86
Dec2016 $5.70
Dec2015 $5.13
Dec2014 $7.28
Dec2013 $3.74
Dec2012 $6.06
Dec2011 $4.19
Dec2010 $2.99
Dec2009 $1.89
Dec2008 $2.91
Dec2007 $3.36
Dec2006 $3.01
Dec2005 $1.30
Dec2004 $1.10
Dec2003 $1.66
Dec2002 $1.16
Dec2001 $1.32
Dec2000 $1.58
Dec1999 $1.38

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.67
Dec2018 $6.14
Dec2017 $5.39
Dec2016 $5.63
Dec2015 $5.49
Dec2014 $5.39
Dec2013 $4.23
Dec2012 $4.18
Dec2011 $3.18
Dec2010 $2.73
Dec2009 $2.57
Dec2008 $2.71
Dec2007 $2.44
Dec2006 $1.87
Dec2005 $1.30
Dec2004 $1.32
Dec2003 $1.43

Recommended Reading:

Other ModernGraham posts about the company

Illinois Tool Works Inc Valuation – June 2018 $ITW
Best Dividend Paying Stocks for Dividend Growth Investors – August 2017
Illinois Tool Works Inc Valuation – August 2017 $ITW
9 Best Stocks For Value Investors This Week – 7/8/16
Illinois Tool Works Inc Valuation – July 2016 $ITW

Other ModernGraham posts about related companies

Ingersoll-Rand PLC Valuation – January 2019 $IR
General Electric Co Valuation – November 2018 $GE
3M Co Valuation – November 2018 $MMM
ITT Inc Valuation – July 2018 $ITT
Illinois Tool Works Inc Valuation – June 2018 $ITW
Honeywell International Inc Valuation – June 2018 $HON
General Electric Co Valuation – February 2018 $GE
3M Company Valuation – February 2018 $MMM
Raven Industries Inc Valuation – September 2017 $RAVN
Illinois Tool Works Inc Valuation – August 2017 $ITW

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.

Honeywell International Inc Valuation – March 2019 #HON

Company Profile (excerpt from Reuters): Honeywell International Inc., incorporated on November 24, 1999, is a technology and manufacturing company. The Company operates through four segments: Aerospace, Home and Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HON – 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 $115,752,559,066 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.29 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 111.25% Pass
6. Moderate PEmg Ratio PEmg < 20 23.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.44 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 1.29 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.79 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 4.55%
MG Value $116.54
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $96.07
MG Value based on 0% Growth $56.32
Market Implied Growth Rate 7.74%
Current Price $158.92
% of Intrinsic Value 136.37%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $5.08 in 2015 to an estimated $6.63 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.74% 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 Honeywell International Inc. revealed the company was trading above its Graham Number of $66.13. The company pays a dividend of $3.06 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 23.99, which was below the industry average of 25.04, 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 $-20.23.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$20.23
Graham Number $66.13
PEmg 23.99
Current Ratio 1.29
PB Ratio 6.44
Current Dividend $3.06
Dividend Yield 1.92%
Number of Consecutive Years of Dividend Growth 8

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 $24,362,000,000
Total Current Liabilities $18,924,000,000
Long-Term Debt $9,756,000,000
Total Assets $57,773,000,000
Intangible Assets $19,685,000,000
Total Liabilities $39,415,000,000
Shares Outstanding (Diluted Average) 744,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.80
Dec2018 $8.98
Dec2017 $2.00
Dec2016 $6.21
Dec2015 $6.04
Dec2014 $5.33
Dec2013 $4.92
Dec2012 $3.69
Dec2011 $2.61
Dec2010 $2.59
Dec2009 $2.05
Dec2008 $3.76
Dec2007 $3.16
Dec2006 $2.52
Dec2005 $1.92
Dec2004 $1.45
Dec2003 $1.52
Dec2002 -$0.31
Dec2001 -$0.12
Dec2000 $2.05
Dec1999 $1.90

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.63
Dec2018 $5.93
Dec2017 $4.57
Dec2016 $5.65
Dec2015 $5.08
Dec2014 $4.35
Dec2013 $3.63
Dec2012 $2.97
Dec2011 $2.68
Dec2010 $2.75
Dec2009 $2.78
Dec2008 $2.95
Dec2007 $2.40
Dec2006 $1.82
Dec2005 $1.28
Dec2004 $0.95
Dec2003 $0.80

Recommended Reading:

Other ModernGraham posts about the company

Honeywell International Inc Valuation – June 2018 $HON
Honeywell International Inc Valuation – July 2017 $HON
Honeywell International Inc Valuation – February 2016 $HON
7 Best Stocks For Value Investors This Week – 10/24/15
Honeywell International Inc. Valuation – October 2015 Update $HON

Other ModernGraham posts about related companies

Ingersoll-Rand PLC Valuation – January 2019 $IR
General Electric Co Valuation – November 2018 $GE
3M Co Valuation – November 2018 $MMM
ITT Inc Valuation – July 2018 $ITT
Illinois Tool Works Inc Valuation – June 2018 $ITW
Honeywell International Inc Valuation – June 2018 $HON
General Electric Co Valuation – February 2018 $GE
3M Company Valuation – February 2018 $MMM
Raven Industries Inc Valuation – September 2017 $RAVN
Illinois Tool Works Inc Valuation – August 2017 $ITW

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.

Ingersoll-Rand PLC Valuation – January 2019 $IR

Company Profile (excerpt from Reuters): Ingersoll-Rand Public Limited Company, incorporated on April 1, 2009, provides products, services and solutions to improve the quality and comfort of air in homes and buildings, transport and protect food and perishables. The Company’s business segments include Climate and Industrial. The Company is engaged in the design, manufacture, sale and service of a portfolio of industrial and commercial products that include brand names, such as Ingersoll-Rand, Trane, Thermo King, American Standard, ARO and Club Car.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IR – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $22,175,366,295 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.41 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 281.26% Pass
6. Moderate PEmg Ratio PEmg < 20 18.45 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.07 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 1.41 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.13 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 $4.89
MG Growth Estimate 13.21%
MG Value $170.93
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $70.96
MG Value based on 0% Growth $41.60
Market Implied Growth Rate 4.97%
Current Price $90.29
% of Intrinsic Value 52.82%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.6 in 2014 to an estimated $4.89 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.97% 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 Ingersoll-Rand PLC revealed the company was trading above its Graham Number of $59.94. The company pays a dividend of $1.7 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 18.45, which was below the industry average of 21.7, 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 $-19.55.

Ingersoll-Rand PLC receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$19.55
Graham Number $59.94
PEmg 18.45
Current Ratio 1.41
PB Ratio 3.07
Current Dividend $1.70
Dividend Yield 1.88%
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 9/1/2018
Total Current Assets $6,082,600,000
Total Current Liabilities $4,324,000,000
Long-Term Debt $3,739,800,000
Total Assets $18,304,500,000
Intangible Assets $9,668,700,000
Total Liabilities $10,961,300,000
Shares Outstanding (Diluted Average) 249,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.58
Dec2017 $5.05
Dec2016 $5.65
Dec2015 $2.48
Dec2014 $3.40
Dec2013 $2.07
Dec2012 $3.28
Dec2011 $1.01
Dec2010 $1.89
Dec2009 $1.37
Dec2008 -$8.73
Dec2007 $13.43
Dec2006 $3.20
Dec2005 $3.09
Dec2004 $3.47
Dec2003 $1.87
Dec2002 -$0.52
Dec2001 $0.74
Dec2000 $2.06
Dec1999 $1.38
Dec1998 $1.54

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.89
Dec2017 $4.28
Dec2016 $3.72
Dec2015 $2.65
Dec2014 $2.60
Dec2013 $2.11
Dec2012 $1.34
Dec2011 $0.85
Dec2010 $1.25
Dec2009 $1.45
Dec2008 $1.95
Dec2007 $6.54
Dec2006 $2.80
Dec2005 $2.31
Dec2004 $1.79
Dec2003 $1.00
Dec2002 $0.72

Recommended Reading:

Other ModernGraham posts about the company

Ingersoll-Rand PLC Valuation – February 2018 $IR
Ingersoll-Rand PLC Valuation – May 2016 $IR
34 Companies in the Spotlight This Week – 2/7/15
Ingersoll-Rand Inc. Annual Valuation – 2015 $IR
14 Companies in the Spotlight This Week – 1/18/14

Other ModernGraham posts about related companies

General Electric Co Valuation – November 2018 $GE
3M Co Valuation – November 2018 $MMM
ITT Inc Valuation – July 2018 $ITT
Illinois Tool Works Inc Valuation – June 2018 $ITW
Honeywell International Inc Valuation – June 2018 $HON
General Electric Co Valuation – February 2018 $GE
3M Company Valuation – February 2018 $MMM
Raven Industries Inc Valuation – September 2017 $RAVN
Illinois Tool Works Inc Valuation – August 2017 $ITW
Honeywell International Inc Valuation – July 2017 $HON

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.

General Electric Co Valuation – November 2018 $GE

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GE – November 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 $69,758,886,723 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.66 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 -129.70% Fail
6. Moderate PEmg Ratio PEmg < 20 -21.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.46 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 1.66 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.16 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 -$0.38
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$5.51
MG Value based on 0% Growth -$3.23
Market Implied Growth Rate -14.80%
Current Price $8.02
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.33 in 2014 to an estimated $-0.38 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into General Electric Company revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.84 per share, for a yield of 10.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -21.11, which was below the industry average of 24.68, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.92.

General Electric Company scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$16.92
Graham Number $0.00
PEmg -21.11
Current Ratio 1.66
PB Ratio 1.46
Current Dividend $0.84
Dividend Yield 10.47%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $116,783,000,000
Total Current Liabilities $70,517,000,000
Long-Term Debt $99,759,000,000
Total Assets $311,691,000,000
Intangible Assets $79,214,000,000
Total Liabilities $263,854,000,000
Shares Outstanding (Diluted Average) 8,694,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.15
Dec2017 -$0.72
Dec2016 $0.89
Dec2015 -$0.62
Dec2014 $1.50
Dec2013 $1.27
Dec2012 $1.29
Dec2011 $1.23
Dec2010 $1.06
Dec2009 $1.01
Dec2008 $1.72
Dec2007 $2.17
Dec2006 $2.00
Dec2005 $1.57
Dec2004 $1.64
Dec2003 $1.51
Dec2002 $1.41
Dec2001 $1.37
Dec2000 $1.27
Dec1999 $1.07
Dec1998 $0.93

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.38
Dec2017 $0.16
Dec2016 $0.69
Dec2015 $0.70
Dec2014 $1.33
Dec2013 $1.22
Dec2012 $1.22
Dec2011 $1.27
Dec2010 $1.39
Dec2009 $1.60
Dec2008 $1.87
Dec2007 $1.89
Dec2006 $1.71
Dec2005 $1.54
Dec2004 $1.50
Dec2003 $1.39
Dec2002 $1.29

Recommended Reading:

Other ModernGraham posts about the company

5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018
General Electric Co Valuation – February 2018 $GE
5 Overvalued Dow Components – February 2017
5 Overvalued Dow Components – December 2016

Other ModernGraham posts about related companies

3M Co Valuation – November 2018 $MMM
ITT Inc Valuation – July 2018 $ITT
Illinois Tool Works Inc Valuation – June 2018 $ITW
Honeywell International Inc Valuation – June 2018 $HON
General Electric Co Valuation – February 2018 $GE
3M Company Valuation – February 2018 $MMM
Raven Industries Inc Valuation – September 2017 $RAVN
Illinois Tool Works Inc Valuation – August 2017 $ITW
Honeywell International Inc Valuation – July 2017 $HON
Carlisle Companies Inc Valuation – Initial Coverage $CSL

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.

3M Co Valuation – November 2018 $MMM

Company Profile (excerpt from Reuters): 3M Company (3M), incorporated on June 25, 1929, is a technology company. The Company is a manufacturer and marketer of a range of products and services. The Company operates through five segments: Industrial; Safety and Graphics; Health Care, and Consumer. 3M products are sold through various distribution channels, including directly to users and through a range of wholesalers, retailers, jobbers, distributors and dealers in a range of trades in various countries around the world. As of December 31, 2016, the Company had operated 81 manufacturing facilities in 29 states. As of December 31, 2016, the Company had operated 122 manufacturing and converting facilities in 36 countries outside the United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MMM – November 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 $117,097,911,210 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.97 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 58.35% Pass
6. Moderate PEmg Ratio PEmg < 20 23.95 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.67 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 1.97 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.91 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 $8.40
MG Growth Estimate 3.74%
MG Value $134.10
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $121.75
MG Value based on 0% Growth $71.37
Market Implied Growth Rate 7.72%
Current Price $201.10
% of Intrinsic Value 149.97%

3M Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $6.72 in 2014 to an estimated $8.4 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.72% 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 3M Co revealed the company was trading above its Graham Number of $64.19. The company pays a dividend of $4.7 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.95, which was below the industry average of 34.87, 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 $-20.96.

3M Co performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$20.96
Graham Number $64.19
PEmg 23.95
Current Ratio 1.97
PB Ratio 11.67
Current Dividend $4.70
Dividend Yield 2.34%
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 9/1/2018
Total Current Assets $14,419,000,000
Total Current Liabilities $7,336,000,000
Long-Term Debt $13,539,000,000
Total Assets $37,275,000,000
Intangible Assets $12,849,000,000
Total Liabilities $26,964,000,000
Shares Outstanding (Diluted Average) 598,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.42
Dec2017 $7.93
Dec2016 $8.16
Dec2015 $7.58
Dec2014 $7.49
Dec2013 $6.72
Dec2012 $6.32
Dec2011 $5.96
Dec2010 $5.63
Dec2009 $4.52
Dec2008 $4.89
Dec2007 $5.60
Dec2006 $5.06
Dec2005 $3.98
Dec2004 $3.56
Dec2003 $3.02
Dec2002 $2.50
Dec2001 $1.79
Dec2000 $2.23
Dec1999 $2.19
Dec1998 $1.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.40
Dec2017 $7.78
Dec2016 $7.56
Dec2015 $7.11
Dec2014 $6.72
Dec2013 $6.17
Dec2012 $5.75
Dec2011 $5.42
Dec2010 $5.14
Dec2009 $4.87
Dec2008 $4.90
Dec2007 $4.69
Dec2006 $4.03
Dec2005 $3.33
Dec2004 $2.88
Dec2003 $2.47
Dec2002 $2.15

Recommended Reading:

Other ModernGraham posts about the company

3M Company Valuation – February 2018 $MMM
3M Co. Valuation – December 2016 $MMM
3M Company Valuation – August 2016 $MMM
3M Company Valuation – February 2016 Update $MMM
15 Best Stocks For Value Investors This Week – 9/12/15

Other ModernGraham posts about related companies

ITT Inc Valuation – July 2018 $ITT
Illinois Tool Works Inc Valuation – June 2018 $ITW
Honeywell International Inc Valuation – June 2018 $HON
General Electric Co Valuation – February 2018 $GE
3M Company Valuation – February 2018 $MMM
Raven Industries Inc Valuation – September 2017 $RAVN
Illinois Tool Works Inc Valuation – August 2017 $ITW
Honeywell International Inc Valuation – July 2017 $HON
Carlisle Companies Inc Valuation – Initial Coverage $CSL
ITT Inc Valuation – Initial Coverage $ITT

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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