Regal Beloit Corp Valuation – August 2018 $RBC

Company Profile (excerpt from Reuters): Regal Beloit Corporation, incorporated on March 2, 1994, is a manufacturer of electric motors, electrical motion controls, power generation and power transmission products. The Company operates through three segments: the Commercial and Industrial Systems segment, with its principal line of business in medium and large electric motors, power generation products, high-performance drives and controls and capacitors; the Climate Solutions segment, with its principal line of business in small motors, controls and air moving products, and the Power Transmission Solutions segment, with its principal line of business in power transmission gearing, hydraulic pump drives, open gearing and specialty mechanical products which control motion and torque. It sells its products directly to original equipment manufacturers (OEMs), distributors and end users. It operates distribution facilities in Plainfield, Indiana; McAllen, Texas; LaVergne, Tennessee, and Florence, Kentucky, which serve as hubs for its North American distribution and logistics operations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RBC – August 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 $3,669,543,261 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.24 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 45.61% Pass
6. Moderate PEmg Ratio PEmg < 20 18.69 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.60 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 2.24 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.29 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 $4.53
MG Growth Estimate 10.91%
MG Value $137.39
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $65.70
MG Value based on 0% Growth $38.52
Market Implied Growth Rate 5.10%
Current Price $84.70
% of Intrinsic Value 61.65%

Regal Beloit Corp qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. . The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.62 in 2014 to an estimated $4.53 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.1% 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 Regal Beloit Corp revealed the company was trading above its Graham Number of $81.91. The company pays a dividend of $1.02 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 18.69, which was below the industry average of 29.32, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.92.

Regal Beloit Corp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.92
Graham Number $81.91
PEmg 18.69
Current Ratio 2.24
PB Ratio 1.60
Current Dividend $1.02
Dividend Yield 1.20%
Number of Consecutive Years of Dividend Growth 13

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 6/1/2018
Total Current Assets $1,724,300,000
Total Current Liabilities $768,100,000
Long-Term Debt $1,235,100,000
Total Assets $4,634,700,000
Intangible Assets $2,211,700,000
Total Liabilities $2,294,000,000
Shares Outstanding (Diluted Average) 44,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.68
Dec2017 $4.74
Dec2016 $4.52
Dec2015 $3.18
Dec2014 $0.69
Dec2013 $2.64
Dec2012 $4.64
Dec2011 $3.79
Dec2010 $3.84
Dec2009 $2.63
Dec2008 $3.78
Dec2007 $3.49
Dec2006 $3.28
Dec2005 $2.25
Dec2004 $1.22
Dec2003 $1.00
Dec2002 $1.01
Dec2001 $0.93
Dec2000 $1.61
Dec1999 $1.80
Dec1998 $2.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.53
Dec2017 $3.69
Dec2016 $3.15
Dec2015 $2.64
Dec2014 $2.62
Dec2013 $3.56
Dec2012 $3.93
Dec2011 $3.55
Dec2010 $3.42
Dec2009 $3.17
Dec2008 $3.23
Dec2007 $2.72
Dec2006 $2.14
Dec2005 $1.47
Dec2004 $1.11
Dec2003 $1.12
Dec2002 $1.28

Recommended Reading:

Other ModernGraham posts about the company

Regal Beloit Corp Valuation – February 2017 $RBC
5 of the Worst Stocks to Invest In – December 2016
Regal Beloit Corp Valuation – August 2016 $RBC
5 Speculative and Overvalued Companies to Avoid – June 2015
Regal-Beloit Corporation Analysis – 2015 Update $RBC

Other ModernGraham posts about related companies

Kennametal Inc Valuation – August 2018 $KMT
SPX Corp Valuation – August 2018 $SPXC
AGCO Corp Valuation – August 2018 $AGCO
John Bean Technologies Corp Valuation – August 2018 $JBT
Stanley Black & Decker Inc Valuation – June 2018 $SWK
Pentair PLC Valuation – June 2018 $PNR
Snap-on Inc Valuation – May 2018 $SNA
Paccar Inc Valuation – May 2018 $PCAR
W.W. Grainger Inc Valuation – May 2018 $GWW
Allegion PLC Valuation – May 2018 $ALLE

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.

Regal Beloit Corp Valuation – February 2017 $RBC

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 Regal Beloit Corp (RBC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regal Beloit Corporation is a manufacturer of electric motors and controls, electric generators and controls, and power transmission products. The Company operates through three segments: Commercial and Industrial Systems, Climate Solutions and Power Transmission Solutions. Its Commercial and Industrial Systems segment produces medium and large motors, commercial and industrial equipment, generator and custom drives and systems serving commercial heating, ventilation and air conditioning (HVAC), and power and oil and gas systems. Its Climate Solutions segment produces small motors, controls and air moving solutions serving markets, including residential and light commercial HVAC, and commercial refrigeration. Its Power Transmission Solutions segment manufactures, sells and services belt and chain drives, helical and worm gearing, mounted and unmounted bearings, couplings, modular plastic belts, conveying chains and components, hydraulic pump drives and specialty mechanical products.

RBC Chart

RBC 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. 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.

Learn More About Premium Membership

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of RBC – 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 $3,424,517,427 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.18 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 20.10% Fail
6. Moderate PEmg Ratio PEmg < 20 20.89 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.68 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 2.18 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.58 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 $3.65
MG Growth Estimate 0.35%
MG Value $33.55
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $52.87
MG Value based on 0% Growth $30.99
Market Implied Growth Rate 6.19%
Current Price $76.15
% of Intrinsic Value 226.98%

Regal Beloit Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg ratio. 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 $3.56 in 2013 to an estimated $3.65 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.19% 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 Regal Beloit Corp revealed the company was trading above its Graham Number of $68.74. The company pays a dividend of $0.95 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 20.89, which was below the industry average of 22.25, 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 $-17.47.

Regal Beloit Corp receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.47
Graham Number $68.74
PEmg 20.89
Current Ratio 2.18
PB Ratio 1.68
Current Dividend $0.95
Dividend Yield 1.25%
Number of Consecutive Years of Dividend Growth 13

[/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 12/1/2016
Total Current Assets $1,532,000,000
Total Current Liabilities $701,600,000
Long-Term Debt $1,310,900,000
Total Assets $4,358,500,000
Intangible Assets $0
Total Liabilities $2,319,700,000
Shares Outstanding (Diluted Average) 45,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.61
Dec2016 $4.52
Dec2015 $3.18
Dec2014 $0.69
Dec2013 $2.64
Dec2012 $4.64
Dec2011 $3.79
Dec2010 $3.84
Dec2009 $2.63
Dec2008 $3.78
Dec2007 $3.49
Dec2006 $3.28
Dec2005 $2.25
Dec2004 $1.22
Dec2003 $1.00
Dec2002 $1.01
Dec2001 $0.93
Dec2000 $1.61
Dec1999 $1.80
Dec1998 $2.02
Dec1997 $1.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.65
Dec2016 $3.15
Dec2015 $2.64
Dec2014 $2.62
Dec2013 $3.56
Dec2012 $3.93
Dec2011 $3.55
Dec2010 $3.42
Dec2009 $3.17
Dec2008 $3.23
Dec2007 $2.72
Dec2006 $2.14
Dec2005 $1.47
Dec2004 $1.11
Dec2003 $1.12
Dec2002 $1.28
Dec2001 $1.49

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – June 2015
Regal-Beloit Corporation Analysis – 2015 Update $RBC
18 Companies in the Spotlight This Week – 3/21/15
Regal-Beloit Corporation Quarterly Valuation – March 2015 $RBC
26 Companies in the Spotlight This Week – 12/13/14

Other ModernGraham posts about related companies

Snap-on Inc Valuation – February 2017 $SNA
Kennametal Inc Valuation – Initial Coverage $KMT
SPX Corporation Valuation – Initial Coverage $SPXC
KLX Inc Valuation – Initial Coverage $KLXI
AGCO Corporation Valuation – February 2017 $AGCO
PACCAR Inc Valuation – February 2017 $PCAR
Kaman Corporation Valuation – Initial Coverage $KAMN
John Bean Technologies Corp Valuation – Initial Coverage $JBT
W. W. Grainger Inc Valuation – January 2017 $GWW
Allegion PLC Valuation – January 2017 $ALLE

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.

Regal Beloit Corp Valuation – August 2016 $RBC

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 Regal Beloit Corp (RBC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regal Beloit Corporation is a manufacturer of electric motors and controls, electric generators and controls, and power transmission products. The Company operates through three segments: Commercial and Industrial Systems, Climate Solutions and Power Transmission Solutions. Its Commercial and Industrial Systems segment produces medium and large motors, commercial and industrial equipment, generator and custom drives and systems serving commercial heating, ventilation and air conditioning (HVAC), and power and oil and gas systems. Its Climate Solutions segment produces small motors, controls and air moving solutions serving markets, including residential and light commercial HVAC, and commercial refrigeration. Its Power Transmission Solutions segment manufactures, sells and services belt and chain drives, helical and worm gearing, mounted and unmounted bearings, couplings, modular plastic belts, conveying chains and components, hydraulic pump drives and specialty mechanical products.

RBC Chart

RBC 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 RBC – 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 $2,834,740,814 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.73 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 -16.97% Fail
6. Moderate PEmg Ratio PEmg < 20 20.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.43 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 2.73 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.55 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 Fail

Stage 2: Determination of Intrinsic Value

RBC value chart August 2016

EPSmg $3.10
MG Growth Estimate -3.17%
MG Value $6.68
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $44.91
MG Value based on 0% Growth $26.33
Market Implied Growth Rate 6.04%
Current Price $63.72
% of Intrinsic Value 954.29%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.93 in 2012 to an estimated $3.1 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.04% 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 Regal Beloit Corp revealed the company was trading below its Graham Number of $66.35. The company pays a dividend of $0.93 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 20.57, which was below the industry average of 20.76, 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 $-19.82.

Regal Beloit Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

RBC charts August 2016

Net Current Asset Value (NCAV) -$19.82
Graham Number $66.35
PEmg 20.57
Current Ratio 2.73
PB Ratio 1.43
Current Dividend $0.93
Dividend Yield 1.46%
Number of Consecutive Years of Dividend Growth 12

[/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 $1,636,800,000
Total Current Liabilities $599,800,000
Long-Term Debt $1,610,500,000
Total Assets $4,540,600,000
Intangible Assets $2,215,100,000
Total Liabilities $2,528,600,000
Shares Outstanding (Diluted Average) 45,000,000

Earnings Per Share History

Next Fiscal Year Estimate $4.35
Dec2015 $3.18
Dec2014 $0.69
Dec2013 $2.64
Dec2012 $4.64
Dec2011 $3.79
Dec2010 $3.84
Dec2009 $2.63
Dec2008 $3.78
Dec2007 $3.49
Dec2006 $3.28
Dec2005 $2.25
Dec2004 $1.22
Dec2003 $1.00
Dec2002 $1.01
Dec2001 $0.93
Dec2000 $1.61
Dec1999 $1.80
Dec1998 $2.02
Dec1997 $1.83
Dec1996 $1.57

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.10
Dec2015 $2.64
Dec2014 $2.62
Dec2013 $3.56
Dec2012 $3.93
Dec2011 $3.55
Dec2010 $3.42
Dec2009 $3.17
Dec2008 $3.23
Dec2007 $2.72
Dec2006 $2.14
Dec2005 $1.47
Dec2004 $1.11
Dec2003 $1.12
Dec2002 $1.28
Dec2001 $1.49
Dec2000 $1.77

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – June 2015
Regal-Beloit Corporation Analysis – 2015 Update $RBC
18 Companies in the Spotlight This Week – 3/21/15
Regal-Beloit Corporation Quarterly Valuation – March 2015 $RBC
26 Companies in the Spotlight This Week – 12/13/14

Other ModernGraham posts about related companies

Snap-on Incorporated Valuation – August 2016 $SNA
AGCO Corporation Valuation – August 2016 $AGCO
PACCAR Inc Valuation – August 2016 $PCAR
W.W. Grainger Inc Valuation – August 2016 $GWW
Allegion PLC Valuation – August 2016 $ALLE
Xylem Inc Valuation – August 2016 $XYL
Rockwell Automation Inc Valuation – July 2016 $ROK
Roper Technologies Inc Valuation – July 2016 $ROP
Eaton Corp Valuation – July 2016 $ETN
Parker-Hannifin Corp Valuation – July 2016 $PH

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.

Regal-Beloit Corporation Analysis – 2015 Update $RBC

RBClogoBenjamin 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 – June 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 Regal-Beloit Corporation (RBC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regal Beloit Corporation is a global manufacturer electric motors and controls, electric generators and controls, and power transmission products. The Company operates through three segments: Commercial and Industrial Systems segment, which designs, manufactures and sells Fractional, integral and large horsepower motors and controls, electronic variable speed controls and blowers, Solid state and electro-mechanical starters, contactors, relays, variable frequency drives and motors, artificial lift system pumping equipment, Precision stator and rotor kits, Hazardous duty motors and Electric generators; Climate Solutions segment, which designs, manufactures and sells Fractional motors, electronic variable speed controls and blowers, and Power Transmission Solutions segment, which designs, manufactures and markets enclosed gear drives, gearmotors, transmissions and custom open gearing used for motion control within complex equipment and systems.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  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 – 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 = 3/5

  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 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $76.04
MG Value $22.48
MG Opinion Overvalued
Value Based on 3% Growth $48.58
Value Based on 0% Growth $28.48
Market-Implied Growth Rate 7.10%
NCAV -$27.07
PEmg 22.70
Current Ratio 2.50
PB Ratio 1.76

Balance Sheet – March 2015

Current Assets $1,801,000,000
Current Liabilities $721,000,000
Total Debt $1,876,000,000
Total Assets $4,968,000,000
Intangible Assets $2,418,000,000
Total Liabilities $3,022,000,000
Outstanding Shares 45,100,000

Earnings Per Share

2015 (estimate) $5.30
2014 $0.69
2013 $2.64
2012 $4.64
2011 $3.79
2010 $3.84
2009 $2.63
2008 $3.78
2007 $3.49
2006 $3.28
2005 $2.25

Earnings Per Share – ModernGraham

2015 (estimate) $3.35
2014 $2.62
2013 $3.56
2012 $3.93
2011 $3.55
2010 $3.42

Dividend History

Conclusion:

Regal-Beloit Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor is concerned with the lack of earnings growth over the last five years and the level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $3.55 in 2011 to only an estimated $3.35 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 7.1% 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 well 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 Regal-Beloit Corporation (RBC)?  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.

 

Regal-Beloit Corporation Quarterly Valuation – March 2015 $RBC

RBClogoBenjamin 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 – March 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 specific look at how Regal-Beloit Corporation (RBC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regal Beloit Corporation is a global manufacturer of electric motors and controls, electric generators and controls, variable speed drives and controllers and mechanical motion control products. The Company has two reporting segments: Electrical and Mechanical. The Company operates distribution facilities in Indianapolis, Indiana and LaVergne, Tennessee which serve as hubs for North American distribution and logistics operations. The Company’s manufacturing, sales, service facilities and corporate offices are located throughout the United States, Canada, Mexico, Europe and Asia. The Company’s electrical products primarily include heating, ventilation, air conditioning (HVAC) motors, AC and DC commercial and industrial electric motors, electric generators and controls, high-performance drives and controls and capacitors. The Company’s mechanical products primarily include gears and gearboxes, marine transmissions, manual valve actuators and electrical connectivity devices.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  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 – 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 $76.65
MG Value $0.00
MG Opinion Overvalued
Value Based on 3% Growth $38.04
Value Based on 0% Growth $22.30
Market-Implied Growth Rate 10.36%
NCAV $4.00
PEmg 29.22
Current Ratio 2.94
PB Ratio 1.77

Balance Sheet – December 2014

Current Assets $1,652,000,000
Current Liabilities $561,000,000
Total Debt $625,000,000
Total Assets $3,408,000,000
Intangible Assets $1,206,000,000
Total Liabilities $1,473,000,000
Outstanding Shares 44,700,000

Earnings Per Share

2014 $0.69
2013 $2.64
2012 $4.64
2011 $3.79
2010 $3.84
2009 $2.63
2008 $3.78
2007 $3.49
2006 $3.28
2005 $2.25
2004 $1.22

Earnings Per Share – ModernGraham

2014 $2.62
2013 $3.56
2012 $3.93
2011 $3.55
2010 $3.42
2009 $3.17

Dividend History

Conclusion:

Regal-Beloit Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low level of earnings growth over the last ten years along with the high PEmg ratio, while the Enterprising Investor is concerned by the lack of earnings growth over the last five years.  As a result, Enterprising 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.  From a valuation side of things, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $3.42 in 2010 to only $2.62 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 10.36% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of Regal-Beloit Corporation (RBC) for greater perspective!

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 Regal-Beloit Corporation (RBC)?  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 Regal-Beloit Corporation (RBC) 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.

Regal-Beloit Corporation Quarterly Valuation – December 2014 $RBC

RBClogoBenjamin 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 Undervalued Dow Components to Research – 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 Regal-Beloit Corporation (RBC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance):  Regal Beloit Corporation is a global manufacturer of electric motors and controls, electric generators and controls, and mechanical motion control products. The Company operates in two segments: Electrical and Mechanical. Its electrical products include motors used in commercial and residential heating, ventilation, air conditioning ( HVAC) applications, a full line of alternating current ( AC) and direct current ( DC) commercial and industrial electric motors, electric generators and controls, high-performance drives and controls, and capacitors. Its mechanical products include primarily gears and gearboxes, marine transmissions, automotive transmissions, manual valve actuators, and electrical connectivity devices. In February 2013, it acquired RAM motor business. In July 2014, the Company acquired Benshaw Inc.

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 – 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 – 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 = 5/5

  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 – PASS

Valuation Summary

Key Data:

Recent Price $71.20
MG Value $45.20
MG Opinion Overvalued
Value Based on 3% Growth $55.68
Value Based on 0% Growth $32.64
Market-Implied Growth Rate 5.02%
NCAV $3.96
PEmg 18.54
Current Ratio 2.90
PB Ratio 1.51

Balance Sheet – September 2014

Current Assets $1,719,000,000
Current Liabilities $593,000,000
Total Debt $669,000,000
Total Assets $3,671,000,000
Intangible Assets $1,361,000,000
Total Liabilities $1,540,000,000
Outstanding Shares 45,200,000

Earnings Per Share

2014 (estimate) $4.34
2013 $2.64
2012 $4.64
2011 $3.79
2010 $3.84
2009 $2.63
2008 $3.78
2007 $3.49
2006 $3.28
2005 $2.25
2004 $1.22

Earnings Per Share – ModernGraham

2014 (estimate) $3.84
2013 $3.56
2012 $3.93
2011 $3.55
2010 $3.42
2009 $3.17

Dividend History

Conclusion:

Regal-Beloit Corporation qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only concern is the low level of earnings growth over the last ten years, and the Enterprising Investor has no initial concerns.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.42 in 2010 to only $3.84 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 5.02% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of Regal-Beloit Corporation (RBC) for greater perspective!

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 Regal-Beloit Corporation (RBC)?  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 Regal-Beloit Corporation (RBC) 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.

Regal-Beloit Corporation Quarterly Stock Valuation – September 2014 $RBC

RBClogoBenjamin 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 Undervalued Companies for the Enterprising Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Regal-Beloit Corporation (RBC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regal Beloit Corporation is a global manufacturer of electric motors and controls, electric generators and controls, and mechanical motion control products. The Company operates in two segments: Electrical and Mechanical. Its electrical products include motors used in commercial and residential heating, ventilation, air conditioning ( HVAC) applications, a full line of alternating current ( AC) and direct current ( DC) commercial and industrial electric motors, electric generators and controls, high-performance drives and controls, and capacitors. Its mechanical products include primarily gears and gearboxes, marine transmissions, automotive transmissions, manual valve actuators, and electrical connectivity devices. In February 2013, it acquired RAM motor business. In July 2014, the Company acquired Benshaw Inc.
RBC Chart

RBC data by YCharts

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 – 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 – 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 = 5/5

  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 – PASS

Valuation Summary

Key Data:

Recent Price $71.34
MG Value $44.10
MG Opinion Overvalued
Value Based on 3% Growth $55.47
Value Based on 0% Growth $32.52
Market-Implied Growth Rate 5.07%
NCAV $4.17
PEmg 18.65
Current Ratio 2.42
PB Ratio 1.50

Balance Sheet – 6/28/2014

Current Assets $1,841,600,000
Current Liabilities $761,900,000
Total Debt $608,800,000
Total Assets $3,799,400,000
Intangible Assets $1,355,100,000
Total Liabilities $1,653,400,000
Outstanding Shares 45,100,000

Earnings Per Share

2014 (estimate) $4.29
2013 $2.64
2012 $4.65
2011 $3.79
2010 $3.84
2009 $2.63
2008 $3.87
2007 $3.49
2006 $3.28
2005 $2.25
2004 $1.22

Earnings Per Share – ModernGraham

2014 (estimate) $3.83
2013 $3.57
2012 $3.94
2011 $3.56
2010 $3.44
2009 $3.19

Dividend History

RBC Dividend Chart

RBC Dividend data by YCharts

Conclusion:

Regal-Beloit satisfies both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only initial concern is the lack of sufficient earnings growth over the last ten years while the Enterprising Investor has no initial concerns.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.44 in 2010 to an estimated $3.83 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 5.07% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out the previous ModernGraham valuations of Regal-Beloit Corporation (RBC) for more perspective!

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 Regal-Beloit Corporation (RBC)?  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 Regal-Beloit Corporation (RBC) 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.

Regal-Beloit Corp Quarterly Valuation – June 2014 $RBC

RBClogoBenjamin 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 Undervalued Companies for the Defensive Investor Near 52 Week Lows.  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 Regal-Beloit Corp (RBC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regal Beloit Corporation is a global manufacturer of electric motors and controls, electric generators and controls, and mechanical motion control products. The Company operates in two segments: Electrical and Mechanical. Its electrical products include motors used in commercial and residential heating, ventilation, air conditioning ( HVAC) applications, a full line of alternating current ( AC) and direct current ( DC) commercial and industrial electric motors, electric generators and controls, high-performance drives and controls, and capacitors. Its mechanical products include primarily gears and gearboxes, marine transmissions, automotive transmissions, manual valve actuators, and electrical connectivity devices. In February 2014, Regal Beloit Corp acquired Hy-Bon Engineering Company, Inc.

RBC Chart

RBC data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  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 – 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 = 5/5

  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 – PASS

Valuation Summary

Key Data:

Recent Price $78.73
MG Value $45.76
MG Opinion Overvalued
Value Based on 3% Growth $56.10
Value Based on 0% Growth $32.88
Market-Implied Growth Rate 5.93%
NCAV $2.58
PEmg 20.35
Current Ratio 2.33
PB Ratio 1.70

Balance Sheet – 3/29/2014

Current Assets $1,758,300,000
Current Liabilities $754,400,000
Total Debt $608,900,000
Total Assets $3,726,500,000
Intangible Assets $1,365,600,000
Total Liabilities $1,641,800,000
Outstanding Shares 45,100,000

Earnings Per Share

2014 (estimate) $4.42
2013 $2.64
2012 $4.65
2011 $3.79
2010 $3.84
2009 $2.63
2008 $3.87
2007 $3.49
2006 $3.28
2005 $2.25
2004 $1.22

Earnings Per Share – ModernGraham

2014 (estimate) $3.87
2013 $3.57
2012 $3.94
2011 $3.56
2010 $3.44
2009 $3.19

Dividend History

RBC Dividend Chart

RBC Dividend data by YCharts

Conclusion:

Regal-Beloit is suitable for Enterprising Investors but not for Defensive Investors.  The Defensive Investor has issues with the lack of sufficient growth over the last ten years and the high PEmg ratio, but the company passes all of the requirements for the Enterprising Investor.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities through a review of ModernGraham’s valuation of Emerson Electric (EMR) and ModernGraham’s valuation of General Electric (GE).  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.44 in 2010 to only an estimated $3.87 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 5.93% earnings growth and leads the ModernGraham valuation model, which is based on one of Benjamin Graham’s formula, to return an estimate of intrinsic value below the market 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 Regal-Beloit Corp (RBC)?  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.

Be sure to review the previous ModernGraham Valuations of Regal-Beloit Corp (RBC)!

Disclaimer:  The author did not hold a position in Regal-Beloit Corp (RBC) or 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; this article is not affiliated with the company in any manner.

Regal-Beloit Corporation (RBC) Quarterly Valuation

RBClogoBenjamin 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.  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 Regal-Beloit fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regal Beloit Corporation is a global manufacturer of electric motors and controls, electric generators and controls, and mechanical motion control products. The Company operates in two segments: Electrical and Mechanical. Its electrical products include motors used in commercial and residential heating, ventilation, air conditioning ( HVAC) applications, a full line of alternating current ( AC) and direct current ( DC) commercial and industrial electric motors, electric generators and controls, high-performance drives and controls, and capacitors. Its mechanical products include primarily gears and gearboxes, marine transmissions, automotive transmissions, manual valve actuators, and electrical connectivity devices. In February 2014, Regal Beloit Corp acquired Hy-Bon Engineering Company, Inc.

RBC Chart

RBC data by YCharts

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 – 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 – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

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

  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 – PASS

Valuation Summary

Key Data:

Recent Price $76.09
MG Value $41.45
MG Opinion Overvalued
Value Based on 3% Growth $51.70
Value Based on 0% Growth $30.31
Market-Implied Growth Rate 6.42%
NCAV $3.07
PEmg 21.34
Current Ratio 2.46
PB Ratio 1.67

Balance Sheet – 12/28/2013

Current Assets $1,725,900,000
Current Liabilities $700,900,000
Total Debt $609,000,000
Total Assets $3,643,500,000
Intangible Assets $1,326,100,000
Total Liabilities $1,587,300,000
Outstanding Shares 45,100,000

Earnings Per Share

2013 $2.64
2012 $4.65
2011 $3.79
2010 $3.84
2009 $2.63
2008 $3.87
2007 $3.49
2006 $3.28
2005 $2.25
2004 $1.22
2003 $1.00

Earnings Per Share – ModernGraham 

2013 $3.57
2012 $3.94
2011 $3.56
2010 $3.44
2009 $3.19
2008 $3.26

Dividend History

RBC Dividend Chart

RBC Dividend data by YCharts

Conclusion:

Regal-Beloit Corporation is suitable for either the Defensive Investor or Enterprising Investor.  The only test for either investor type that the company did not pass was the Defensive Investor’s PEmg requirement.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research, including a review of 5 Outstanding Dow Components and 5 Low PEmg Companies for the Enterprising Investor.  From a valuation standpoint, the company does not fare as well after poor growth in EPSmg (normalized earnings) from $3.19 in 2009 to $3.57 for 2013.  This low level of historically demonstrated growth does not support the market’s current implied estimate of growth of 6.42%, leading the ModernGraham valuation model to return an estimate of intrinsic value that trails the current 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 Regal-Beloit Corporation (RBC)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Regal-Beloit Corporation (RBC) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

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

Valuation: Regal-Beloit Corporation (RBC) is Defensive but Overvalued

moneyCompany Profile (obtained from Google Finance): Regal Beloit Corporation is a global manufacturer of electric motors and controls, electric generators and controls, and mechanical motion control products. The Company operates in two segments: Electrical and Mechanical. Its electrical products include motors used in commercial and residential heating, ventilation, air conditioning ( HVAC) applications, a full line of alternating current ( AC) and direct current ( DC) commercial and industrial electric motors, electric generators and controls, high-performance drives and controls, and capacitors. Its mechanical products include primarily gears and gearboxes, marine transmissions, automotive transmissions, manual valve actuators, and electrical connectivity devices. In November 2013, Regal Beloit Corporation closed on the acquisition of Cemp, s.r.l.

Defensive and Enterprising Investor Tests (What is the significance of these tests, and what is PEmg ratio?):

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

  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 – 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 – 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 = 5/5

  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 – PASS

Valuation Summary (Explanation of the ModernGraham Valuation Model)

Key Data:

MG Value $61.21
MG Opinion Overvalued
Value Based on 3% Growth $59.14
Value Based on 0% Growth $34.67
Market-Implied Growth Rate 4.58%
NCAV $1.75
PEmg 17.67
Current Ratio 2.39
PB Ratio 1.57

Balance Sheet – 9/30/2013 

Current Assets $1,717,500,000
Current Liabilities $720,100,000
Total Debt $609,100,000
Total Assets $3,709,300,000
Intangible Assets $1,403,500,000
Total Liabilities $1,638,900,000
Outstanding Shares 45,000,000

Earnings Per Share – Diluted

2013 (estimate) $4.18
2012 $4.65
2011 $3.79
2010 $3.84
2009 $2.63
2008 $3.87
2007 $3.49
2006 $3.28
2005 $2.25
2004 $1.22
2003 $1.00
2002 $1.01

Earnings Per Share – Modern Graham (Calculating EPSmg)

2013 (estimate) $4.08
2012 $3.94
2011 $3.56
2010 $3.44
2009 $3.19
2008 $3.26

Conclusion:

Regal-Beloit Corporation is one of my personal favorites.  The company passes every single requirement of both the Defensive Investor and the Enterprising Investor.  There are stable earnings, dividends, low debt, and everything else an Intelligent Investor would like to see in a company.  However, just like many other companies in today’s market environment, the current price seems slightly overvalued.  EPSmg (normalized earnings) have grown from $3.26 in 2008 to an estimated $4.08 for 2013, and the growth has been pretty consistent over that period, but the market is implying a rate of 4.58% which is a little above what’s been seen.  As a result, Regal-Beloit should be on all the short list of all Defensive Investors and Enterprising Investors for a time when the price dips a little bit and at that time investors should feel comfortable proceeding with further research to determine whether Regal-Beloit is suitable for their individual portfolios.

What do you think?  Do you agree that Regal-Beloit is overvalued?  Is the company suitable for either Defensive Investors or Enterprising Investors?  Leave a comment or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Nucor at the time of publication and had no intention of entering into a position within the next 72 hours.

Photo Credit:  Andrew Magill

Back To Top