Royal Caribbean Cruises Ltd Valuation – March 2019 #RCL

Company Profile (excerpt from Reuters): Royal Caribbean Cruises Ltd., incorporated on July 23, 1985, is a cruise company. The Company owns and operates three global cruise brands: Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises (Global Brands). The Company also own joint venture interest in the German brand TUI Cruises, interest in the Spanish brand Pullmantur and interest in the Chinese brand SkySea Cruises (collectively, Partner Brands). Together, its Global Brands and its Partner Brands operate a combined total of 50 ships in the cruise vacation industry with an aggregate capacity of approximately 123,270 berths, as of December 31, 2016. As of July 31, 2018, the Company’s ships offer a selection of itineraries that call on approximately 540 destinations in 105 countries, covering all seven continents.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RCL – 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 $24,317,988,750 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.17 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 396.93% Pass
6. Moderate PEmg Ratio PEmg < 20 14.42 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.20 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 0.17 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.42 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 $8.06
MG Growth Estimate 15.00%
MG Value $310.46
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $116.93
MG Value based on 0% Growth $68.54
Market Implied Growth Rate 2.96%
Current Price $116.25
% of Intrinsic Value 37.44%

Royal Caribbean Cruises Ltd 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, poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.54 in 2015 to an estimated $8.06 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.96% 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 Royal Caribbean Cruises Ltd revealed the company was trading above its Graham Number of $108.51. The company pays a dividend of $2.6 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.42, which was below the industry average of 31.69, 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 $-73.

Royal Caribbean Cruises Ltd receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$73.00
Graham Number $108.51
PEmg 14.42
Current Ratio 0.17
PB Ratio 2.20
Current Dividend $2.60
Dividend Yield 2.24%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,242,044,000
Total Current Liabilities $7,112,165,000
Long-Term Debt $8,355,370,000
Total Assets $27,698,270,000
Intangible Assets $1,378,353,000
Total Liabilities $16,592,809,000
Shares Outstanding (Diluted Average) 210,297,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.85
Dec2018 $8.56
Dec2017 $7.53
Dec2016 $5.93
Dec2015 $3.02
Dec2014 $3.43
Dec2013 $2.14
Dec2012 $0.08
Dec2011 $2.77
Dec2010 $2.37
Dec2009 $0.75
Dec2008 $2.68
Dec2007 $2.82
Dec2006 $2.94
Dec2005 $3.26
Dec2004 $2.26
Dec2003 $1.42
Dec2002 $1.79
Dec2001 $1.32
Dec2000 $2.31
Dec1999 $2.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.06
Dec2018 $6.68
Dec2017 $5.30
Dec2016 $3.76
Dec2015 $2.54
Dec2014 $2.26
Dec2013 $1.65
Dec2012 $1.52
Dec2011 $2.25
Dec2010 $2.10
Dec2009 $2.14
Dec2008 $2.82
Dec2007 $2.77
Dec2006 $2.61
Dec2005 $2.30
Dec2004 $1.82
Dec2003 $1.66

Recommended Reading:

Other ModernGraham posts about the company

Royal Caribbean Cruises Ltd Valuation – Initial Coverage June 2018 $RCL

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Oracle Corporation Valuation – January 2019 $ORCL

Company Profile (excerpt from Reuters): Oracle Corporation (Oracle), incorporated on October 9, 2005, provides products and services that address all aspects of corporate information technology (IT) environments, including application, platform and infrastructure. The Company’s businesses include cloud and on-premise software, hardware and services. Its cloud and on-premise software business consists of three segments, including cloud software and on-premise software, which includes Software as a Service (SaaS) and Platform as a Service (PaaS) offerings, cloud infrastructure as a service (IaaS) and software license updates and product support. Its hardware business consists of two segments, including hardware products and hardware support. Its services business includes activities, such as consulting services, enhanced support services and education services, among others.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORCL – 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 $178,674,331,867 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.80 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 22.73% Fail
6. Moderate PEmg Ratio PEmg < 20 24.31 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.12 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 2.80 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.41 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

EPSmg $2.05
MG Growth Estimate -1.01%
MG Value $13.29
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $29.71
MG Value based on 0% Growth $17.41
Market Implied Growth Rate 7.91%
Current Price $49.81
% of Intrinsic Value 374.79%

Oracle Corporation 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 and PB ratios. 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 $2.2 in 2015 to an estimated $2.05 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.91% 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 Oracle Corporation revealed the company was trading above its Graham Number of $26.99. The company pays a dividend of $0.76 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 24.31, which was below the industry average of 50.37, 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 $-7.94.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.94
Graham Number $26.99
PEmg 24.31
Current Ratio 2.80
PB Ratio 6.12
Current Dividend $0.76
Dividend Yield 1.53%
Number of Consecutive Years of Dividend Growth 10

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 11/1/2018
Total Current Assets $56,938,000,000
Total Current Liabilities $20,315,000,000
Long-Term Debt $51,561,000,000
Total Assets $118,318,000,000
Intangible Assets $49,881,000,000
Total Liabilities $87,263,000,000
Shares Outstanding (Diluted Average) 3,817,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.83
May2018 $0.90
May2017 $2.21
May2016 $2.07
May2015 $2.21
May2014 $2.38
May2013 $2.26
May2012 $1.96
May2011 $1.67
May2010 $1.21
May2009 $1.09
May2008 $1.06
May2007 $0.81
May2006 $0.64
May2005 $0.55
May2004 $0.50
May2003 $0.43
May2002 $0.39
May2001 $0.44
May2000 $1.05
May1999 $0.22

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.05
May2018 $1.76
May2017 $2.20
May2016 $2.19
May2015 $2.20
May2014 $2.09
May2013 $1.84
May2012 $1.56
May2011 $1.29
May2010 $1.06
May2009 $0.93
May2008 $0.80
May2007 $0.65
May2006 $0.54
May2005 $0.48
May2004 $0.49
May2003 $0.49

Recommended Reading:

Other ModernGraham posts about the company

Oracle Corporation Valuation – March 2018 $ORCL
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Oracle Corporation Valuation – July 2016 $ORCL
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Oracle Corporation Valuation – January 2016 Update $ORCL

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Royal Caribbean Cruises Ltd Valuation – Initial Coverage June 2018 $RCL

Company Profile (excerpt from Reuters): Royal Caribbean Cruises Ltd., incorporated on July 23, 1985, is a cruise company. The Company owns and operates three global cruise brands: Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises (Global Brands). The Company also own joint venture interest in the German brand TUI Cruises, interest in the Spanish brand Pullmantur and interest in the Chinese brand SkySea Cruises (collectively, Partner Brands). Together, its Global Brands and its Partner Brands operate a combined total of 49 ships in the cruise vacation industry with an aggregate capacity of approximately 123,270 berths, as of December 31, 2016. As of December 31, 2016, the Company’s ships offer a selection of itineraries that call on approximately 535 destinations in 105 countries, covering all seven continents.

RCL Chart

RCL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RCL – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $22,515,040,396 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.20 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 274.19% Pass
6. Moderate PEmg Ratio PEmg < 20 15.90 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.13 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 0.20 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.84 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 $6.69
MG Growth Estimate 15.00%
MG Value $257.39
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $96.94
MG Value based on 0% Growth $56.83
Market Implied Growth Rate 3.70%
Current Price $106.33
% of Intrinsic Value 41.31%

Royal Caribbean Cruises Ltd 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, poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.26 in 2014 to an estimated $6.69 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.7% 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 Royal Caribbean Cruises Ltd revealed the company was trading above its Graham Number of $98.41. The company pays a dividend of $2.16 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 15.9, which was below the industry average of 49.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-57.54.

Royal Caribbean Cruises Ltd receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$57.54
Graham Number $98.41
PEmg 15.90
Current Ratio 0.20
PB Ratio 2.13
Current Dividend $2.16
Dividend Yield 2.03%
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 3/1/2018
Total Current Assets $1,034,526,000
Total Current Liabilities $5,195,154,000
Long-Term Debt $7,664,722,000
Total Assets $23,970,972,000
Intangible Assets $288,479,000
Total Liabilities $13,324,176,000
Shares Outstanding (Diluted Average) 213,602,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.58
Dec2017 $7.53
Dec2016 $5.93
Dec2015 $3.02
Dec2014 $3.43
Dec2013 $2.14
Dec2012 $0.08
Dec2011 $2.77
Dec2010 $2.37
Dec2009 $0.75
Dec2008 $2.68
Dec2007 $2.82
Dec2006 $2.94
Dec2005 $3.26
Dec2004 $2.26
Dec2003 $1.42
Dec2002 $1.79
Dec2001 $1.32
Dec2000 $2.31
Dec1999 $2.06
Dec1998 $1.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.69
Dec2017 $5.30
Dec2016 $3.76
Dec2015 $2.54
Dec2014 $2.26
Dec2013 $1.65
Dec2012 $1.52
Dec2011 $2.25
Dec2010 $2.10
Dec2009 $2.14
Dec2008 $2.82
Dec2007 $2.77
Dec2006 $2.61
Dec2005 $2.30
Dec2004 $1.82
Dec2003 $1.66
Dec2002 $1.81

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Stericycle Inc Valuation – May 2018 $SRCL

Company Profile (excerpt from Reuters): Stericycle, Inc., incorporated on March 21, 1989, is a business-to-business services provider. The Company focuses on regulated and compliance solutions for healthcare, retail, and commercial businesses. The Company’s segments include Domestic and Canada Regulated Waste and Compliance Services (RCS), Domestic Communication and Related Services (CRS), International RCS and All other. The Domestic and Canada RCS and International RCS segments include medical waste disposal, pharmaceutical waste disposal, hazardous waste management, sustainability solutions for expired or unused inventory, secure information destruction of documents and e-media, training and consulting through its Steri-Safe and Clinical Services programs, and other regulatory compliance services. The Domestic CRS segment consists of inbound/outbound communication, automated patient reminders, online scheduling, notifications, product retrievals, product returns and quality audits.

SRCL Chart

SRCL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SRCL – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,461,921,199 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.81 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -3.94% Fail
6. Moderate PEmg Ratio PEmg < 20 24.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.86 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 0.81 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -13.66 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.63
MG Growth Estimate -3.21%
MG Value $5.49
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $38.15
MG Value based on 0% Growth $22.37
Market Implied Growth Rate 7.88%
Current Price $63.83
% of Intrinsic Value 1161.96%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.35 in 2014 to an estimated $2.63 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.88% 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 Stericycle Inc revealed the company was trading above its Graham Number of $58.44. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 24.26, which was below the industry average of 51.04, 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 $-38.05.

Stericycle 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) -$38.05
Graham Number $58.44
PEmg 24.26
Current Ratio 0.81
PB Ratio 1.86
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $810,600,000
Total Current Liabilities $999,900,000
Long-Term Debt $2,586,200,000
Total Assets $7,015,700,000
Intangible Assets $5,396,400,000
Total Liabilities $4,075,700,000
Shares Outstanding (Diluted Average) 85,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.48
Dec2017 $0.27
Dec2016 $2.08
Dec2015 $2.98
Dec2014 $3.79
Dec2013 $3.56
Dec2012 $3.08
Dec2011 $2.69
Dec2010 $2.39
Dec2009 $2.03
Dec2008 $1.68
Dec2007 $1.32
Dec2006 $1.16
Dec2005 $0.74
Dec2004 $0.85
Dec2003 $0.72
Dec2002 $0.51
Dec2001 $0.18
Dec2000 $0.18
Dec1999 $0.23
Dec1998 $0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.63
Dec2017 $1.98
Dec2016 $2.93
Dec2015 $3.31
Dec2014 $3.35
Dec2013 $3.00
Dec2012 $2.60
Dec2011 $2.25
Dec2010 $1.93
Dec2009 $1.59
Dec2008 $1.30
Dec2007 $1.06
Dec2006 $0.88
Dec2005 $0.69
Dec2004 $0.61
Dec2003 $0.45
Dec2002 $0.29

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Oracle Corporation Valuation – March 2018 $ORCL

Company Profile (excerpt from Reuters): Oracle Corporation (Oracle), incorporated on October 9, 2005, provides products and services that address all aspects of corporate information technology (IT) environments, including application, platform and infrastructure. The Company’s businesses include cloud and on-premise software, hardware and services. Its cloud and on-premise software business consists of three segments, including cloud software and on-premise software, which includes Software as a Service (SaaS) and Platform as a Service (PaaS) offerings, cloud infrastructure as a service (IaaS) and software license updates and product support. Its hardware business consists of two segments, including hardware products and hardware support. Its services business includes activities, such as consulting services, enhanced support services and education services, among others.

ORCL Chart

ORCL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORCL – March 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 $186,765,780,359 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.33 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 32.24% Fail
6. Moderate PEmg Ratio PEmg < 20 25.70 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.95 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 4.33 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.94 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 $1.78
MG Growth Estimate -2.23%
MG Value $7.18
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $25.81
MG Value based on 0% Growth $15.13
Market Implied Growth Rate 8.60%
Current Price $45.75
% of Intrinsic Value 637.15%

Oracle Corporation 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 poor dividend history, 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 $2.09 in 2014 to an estimated $1.78 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.6% 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 Oracle Corporation revealed the company was trading above its Graham Number of $16.86. The company pays a dividend of $0.64 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 25.7, which was below the industry average of 50.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.08.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.08
Graham Number $16.86
PEmg 25.70
Current Ratio 4.33
PB Ratio 3.95
Current Dividend $0.64
Dividend Yield 1.40%
Number of Consecutive Years of Dividend Growth 9

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 2/1/2018
Total Current Assets $77,732,000,000
Total Current Liabilities $17,968,000,000
Long-Term Debt $56,224,000,000
Total Assets $138,201,000,000
Intangible Assets $49,365,000,000
Total Liabilities $90,412,000,000
Shares Outstanding (Diluted Average) 4,122,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.97
May2017 $2.21
May2016 $2.07
May2015 $2.21
May2014 $2.38
May2013 $2.26
May2012 $1.96
May2011 $1.67
May2010 $1.21
May2009 $1.09
May2008 $1.06
May2007 $0.81
May2006 $0.64
May2005 $0.55
May2004 $0.50
May2003 $0.43
May2002 $0.39
May2001 $0.44
May2000 $1.05
May1999 $0.22
May1998 $0.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.78
May2017 $2.20
May2016 $2.19
May2015 $2.20
May2014 $2.09
May2013 $1.84
May2012 $1.56
May2011 $1.29
May2010 $1.06
May2009 $0.93
May2008 $0.80
May2007 $0.65
May2006 $0.54
May2005 $0.48
May2004 $0.49
May2003 $0.49
May2002 $0.50

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Oracle Corporation Valuation – January 2016 Update $ORCL
13 Best Stocks For Value Investors This Week – 10/3/15
Oracle Corporation Analysis – October 2015 Update $ORCL
The Best Companies of the Software Industry – August 2015

Other ModernGraham posts about related companies

CA Inc Valuation – March 2018 $CA
Red Hat Inc Valuation – March 2018 $RHT
Alphabet Inc Valuation – March 2018 $GOOGL
Ansys Inc Valuation – March 2018 $ANSS
Citrix Systems Inc Valuation – February 2018 $CTXS
Microsoft Corp Valuation – February 2018 $MSFT
Cisco Systems Inc Valuation – February 2018 $CSCO
Symantec Corp Valuation – August 2017 $SYMC
Intuit Inc Valuation – March 2017 $INTU
CommVault Systems Inc Valuation – Initial Coverage $CVLT

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.

Stericycle Inc Valuation – February 2017 $SRCL

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 – January 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 Stericycle Inc (SRCL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Stericycle, Inc. is a business-to-business services provider with a focus on regulated and compliance solutions for healthcare, retail and commercial businesses. The Company’s solutions include the collection and processing of specialized waste for disposal, the collection of personal and confidential information for secure destruction, and a range of training, consulting, recall/return, communication and compliance services. It operates regulated waste management networks in the United States and over 20 other countries. It operates through two geographical segments: United States and International. The networks include a total of approximately 250 processing facilities, over 360 transfer sites and over 140 other service facilities. Its regulated waste processing treatments or technologies are autoclaving and incineration. It offers services to a range of business customers, including hospitals, physician and dental practices, outpatient clinics and other businesses.

SRCL Chart

SRCL data by YCharts

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

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ModernGraham Valuation of SRCL – 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 $6,135,130,226 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.44 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 90.85% Pass
6. Moderate PEmg Ratio PEmg < 20 23.66 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.26 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.44 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 12.37 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.18
MG Growth Estimate 3.29%
MG Value $47.90
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $46.05
MG Value based on 0% Growth $27.00
Market Implied Growth Rate 7.58%
Current Price $75.13
% of Intrinsic Value 156.86%

Stericycle 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, poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.6 in 2012 to an estimated $3.18 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.58% 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 Stericycle Inc revealed the company was trading above its Graham Number of $46.17. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 23.66, 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 $-40.15.

Stericycle 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) -$40.15
Graham Number $46.17
PEmg 23.66
Current Ratio 1.44
PB Ratio 2.26
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $773,938,000
Total Current Liabilities $537,727,000
Long-Term Debt $2,921,770,000
Total Assets $7,057,264,000
Intangible Assets $5,524,008,000
Total Liabilities $4,209,807,000
Shares Outstanding (Diluted Average) 85,571,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.83
Dec2015 $2.98
Dec2014 $3.79
Dec2013 $3.56
Dec2012 $3.08
Dec2011 $2.69
Dec2010 $2.39
Dec2009 $2.03
Dec2008 $1.68
Dec2007 $1.32
Dec2006 $1.16
Dec2005 $0.74
Dec2004 $0.85
Dec2003 $0.72
Dec2002 $0.51
Dec2001 $0.18
Dec2000 $0.18
Dec1999 $0.23
Dec1998 $0.13
Dec1997 $0.03
Dec1996 -$0.08

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.18
Dec2015 $3.31
Dec2014 $3.35
Dec2013 $3.00
Dec2012 $2.60
Dec2011 $2.25
Dec2010 $1.93
Dec2009 $1.59
Dec2008 $1.30
Dec2007 $1.06
Dec2006 $0.88
Dec2005 $0.69
Dec2004 $0.61
Dec2003 $0.45
Dec2002 $0.29
Dec2001 $0.17
Dec2000 $0.15

Recommended Reading:

Other ModernGraham posts about the company

Stericycle Inc. Analysis – October 2015 Update $SRCL
14 Companies in the Spotlight This Week – 10/18/14
Stericycle Inc. Annual Stock Valuation – 2014 $SRCL

Other ModernGraham posts about related companies

Republic Services Inc Valuation – January 2017 $RSG
Clean Harbors Inc Valuation – Initial Coverage $CLH
Waste Management Inc Valuation – August 2016 $WM
Stericycle Inc. Analysis – October 2015 Update $SRCL
Republic Services Inc. Analysis – September 2015 Update $RSG
Waste Management Inc. Analysis – 2015 Update $WM
Stericycle Inc. Annual Stock Valuation – 2014 $SRCL
Republic Services Inc. Annual Stock Valuation – September 2014 $RSG

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.

Oracle Corporation Valuation – July 2016 $ORCL

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 Oracle Corporation (ORCL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Oracle Corporation (Oracle) provides products and services that address all aspects of corporate information technology (IT) environments, including application, platform and infrastructure. The Company’s businesses include cloud and on-premise software, hardware and services. Its cloud and on-premise software business consists of three segments, including cloud software and on-premise software, which includes Software as a Service (SaaS) and Platform as a Service (PaaS) offerings, cloud infrastructure as a service (IaaS) and software license updates and product support. Its hardware business consists of two segments, including hardware products and hardware support. The Company’s services business includes the remainder of the Company’s segments. Its services business includes activities, such as consulting services, enhanced support services and education services, among others.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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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ModernGraham Valuation of ORCL – 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 $172,619,664,184 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.74 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 106.55% Pass
6. Moderate PEmg Ratio PEmg < 20 17.78 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.80 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 3.74 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.85 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

ORCL value chart July 2016

EPSmg $2.35
MG Growth Estimate 4.11%
MG Value $39.25
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $34.06
MG Value based on 0% Growth $19.96
Market Implied Growth Rate 4.64%
Current Price $41.77
% of Intrinsic Value 106.43%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.84 in 2013 to an estimated $2.35 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 4.64% 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 within a margin of safety relative to the price.

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

Stage 3: Information for Further Research

ORCL charts July 2016

Net Current Asset Value (NCAV) -$0.13
Graham Number $26.17
PEmg 17.78
Current Ratio 3.74
PB Ratio 3.80
Current Dividend $0.60
Dividend Yield 1.44%
Number of Consecutive Years of Dividend Growth 4

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 5/1/2016
Total Current Assets $64,313,000,000
Total Current Liabilities $17,208,000,000
Long-Term Debt $40,105,000,000
Total Assets $112,180,000,000
Intangible Assets $39,533,000,000
Total Liabilities $64,891,000,000
Shares Outstanding (Diluted Average) 4,305,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.66
May2016 $2.07
May2015 $2.21
May2014 $2.38
May2013 $2.26
May2012 $1.96
May2011 $1.67
May2010 $1.21
May2009 $1.09
May2008 $1.06
May2007 $0.81
May2006 $0.64
May2005 $0.55
May2004 $0.50
May2003 $0.43
May2002 $0.39
May2001 $0.44
May2000 $1.05
May1999 $0.22
May1998 $0.14
May1997 $0.14

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.35
May2016 $2.19
May2015 $2.20
May2014 $2.09
May2013 $1.84
May2012 $1.56
May2011 $1.29
May2010 $1.06
May2009 $0.93
May2008 $0.80
May2007 $0.65
May2006 $0.54
May2005 $0.48
May2004 $0.49
May2003 $0.49
May2002 $0.50
May2001 $0.50

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Oracle Corporation Valuation – January 2016 Update $ORCL
13 Best Stocks For Value Investors This Week – 10/3/15
Oracle Corporation Analysis – October 2015 Update $ORCL
The Best Companies of the Software Industry – August 2015

Other ModernGraham posts about related companies

CA Inc Valuation – July 2016 $CA
Red Hat Inc Valuation – June 2016 $RHT
Yahoo! Inc Valuation – June 2016 $YHOO
Alphabet Inc Valuation – June 2016 $GOOGL
Ansys Inc Valuation – June 2016 $ANSS
Citrix Systems Inc Valuation – May 2016 $CTXS
Symantec Corp Valuation – February 2016 $SYMC
Microsoft Corp Valuation – February 2016 $MSFT
Cisco Systems Inc Valuation – February 2016 $CSCO
CA Inc Valuation – January 2016 Update $CA

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.

Oracle Corporation Valuation – January 2016 Update $ORCL

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 Oracle Corporation (ORCL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Oracle Corporation (Oracle) is a provider of enterprise software and computer hardware products, and services. The Company’s offerings include Oracle database and middleware software, application software, cloud infrastructure, hardware systems including computer server, storage and networking products, and related services. It operates through various segments, including new software licenses and cloud software subscriptions, which include software licenses and Oracle Cloud offerings; cloud infrastructure-as-a-service, which provides deployment and management offerings; software license updates and product support, which includes support, enhancements and upgrades for Oracle software products; hardware systems products, which includes servers, storage, networking, virtualization software, operating systems and management software; hardware systems support, which provides software updates for software components, and services business, which offers consulting services

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of ORCL – 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 $149,731,500,017 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.26 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 132.43% Pass
6. Moderate PEmg Ratio PEmg < 20 15.86 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.37 Fail
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 4.26 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.89 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

ORCL value Chart January 2016

EPSmg $2.26
MG Growth Estimate 6.78%
MG Value $49.89
Opinion Undervalued
MG Value based on 3% Growth $32.78
MG Value based on 0% Growth $19.22
Market Implied Growth Rate 3.68%
Current Price $35.86
% of Intrinsic Value 71.88%

Oracle Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short dividend history as well as the high PB ratio.  The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.56 in 2012 to an estimated $2.26 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.68% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Oracle Corporation (ORCL)?  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

ORCL Charts January 2016

Net Current Asset Value (NCAV) -$0.45
Graham Number $23.71
PEmg 15.86
Current Ratio 4.26
PB Ratio 3.37
Dividend Yield 1.59%
Number of Consecutive Years of Dividend Growth 3

 

[/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 Nov15
Total Current Assets $58,618,000,000
Total Current Liabilities $13,754,000,000
Long-Term Debt $39,940,000,000
Total Assets $106,483,000,000
Intangible Assets $39,770,000,000
Total Liabilities $60,559,000,000
Shares Outstanding (Diluted Average) 4,316,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.29
May15 $2.21
May14 $2.38
May13 $2.26
May12 $1.96
May11 $1.67
May10 $1.21
May09 $1.09
May08 $1.06
May07 $0.81
May06 $0.64
May05 $0.55
May04 $0.50
May03 $0.43
May02 $0.39
May01 $0.44
May00 $1.05
May99 $0.22
May98 $0.14
May97 $0.14
May96 $0.10

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.26
May15 $2.20
May14 $2.09
May13 $1.84
May12 $1.56
May11 $1.29
May10 $1.06
May09 $0.93
May08 $0.80
May07 $0.65
May06 $0.54
May05 $0.48
May04 $0.49
May03 $0.49
May02 $0.50
May01 $0.50
May00 $0.46

Recommended Reading:

Other ModernGraham posts about the company

13 Best Stocks For Value Investors This Week – 10/3/15
Oracle Corporation Analysis – October 2015 Update $ORCL
The Best Companies of the Software Industry – August 2015
The 9 Best Stocks For Value Investors This Week – 7/18/15
Oracle Corporation Analysis – July 2015 Update $ORCL

Other ModernGraham posts about related companies

Ansys Inc. Valuation – November 2015 Update $ANSS
Yahoo! Inc. Valuation – November 2015 Update $YHOO
Microsoft Corporation Valuation – November 2015 Update $MSFT
Cisco Systems Inc. Valuation – November 2015 Update $CSCO
Alphabet Inc. Valuation – October 2015 Update $GOOG $GOOGL
Intuit Inc. Analysis – October 2015 Update $INTU
Oracle Corporation Analysis – October 2015 Update $ORCL
CA Inc. Analysis – August 2015 Update $CA
The Best Companies of the Software Industry – August 2015
Ansys Inc. Analysis – Initial Coverage $ANSS

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.

Stericycle Inc. Analysis – October 2015 Update $SRCL

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 Stericycle Inc. (SRCL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Stericycle, Inc. is engaged in the business of providing regulated and compliance solutions to healthcare and commercial businesses. The Company’s solutions include the collection and processing of specialized waste for disposal, and a variety of training, consulting, recall/return, communication, and compliance services, which include training, consulting, inbound/outbound communications, data reporting, and other regulatory compliance services. The Company operates regulated waste management networks in the United States, Argentina, Brazil, Canada, Chile, Ireland, Japan, Mexico, Portugal, Romania, South Korea, Spain, and the United Kingdom. The Company operates through two segments: United States and International. The Company’s networks include a total of 181 processing facilities, 214 transfer sites, and 97 other service facilities. Its regulated waste processing technology is primarily autoclaving. The Company also uses incineration and electro-thermal-deactivation system (ETD).

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Downloadable PDF version of this valuation:

ModernGraham Valuation of SRCL

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 $12,227,554,870 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 169.23% Pass
6. Moderate PEmg Ratio PEmg < 20 40.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.32 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 10.23 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

SRCL value chart October 2015

EPSmg $3.60
MG Growth Estimate 8.95%
MG Value $94.95
Opinion Overvalued
MG Value based on 3% Growth $52.14
MG Value based on 0% Growth $30.57
Market Implied Growth Rate 15.76%
Current Price $143.92
% of Intrinsic Value 151.58%

Stericycle Inc. does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, lack of dividends, and the high PEmg and PB ratios.  The Enterprising Investor is concerned by the level of debt relative to the current assets and the lack of dividends.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.25 in 2011 to an estimated $3.60 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 15.76% 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 Stericycle Inc. (SRCL)?  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

SRCL charts October 2015

Net Current Asset Value (NCAV) -$22.08
Graham Number $44.77
PEmg 40.02
Current Ratio 1.30
PB Ratio 6.32
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

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Useful Links:

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

Most Recent Balance Sheet Figures

Total Current Assets $660,193,000
Total Current Liabilities $509,735,000
Long-Term Debt $1,538,736,000
Total Assets $4,526,944,000
Intangible Assets $3,362,268,000
Total Liabilities $2,564,241,000
Shares Outstanding (Diluted Average) 86,221,000

Earnings Per Share History

Next Fiscal Year Estimate $3.85
Dec14 $3.79
Dec13 $3.56
Dec12 $3.08
Dec11 $2.69
Dec10 $2.39
Dec09 $2.03
Dec08 $1.68
Dec07 $1.32
Dec06 $1.16
Dec05 $0.74
Dec04 $0.85
Dec03 $0.72
Dec02 $0.51
Dec01 $0.18
Dec00 $0.18
Dec99 $0.23
Dec98 $0.13
Dec97 $0.03
Dec96 -$0.08
Dec95 -$0.20

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.60
Dec14 $3.35
Dec13 $3.00
Dec12 $2.60
Dec11 $2.25
Dec10 $1.93
Dec09 $1.59
Dec08 $1.30
Dec07 $1.06
Dec06 $0.88
Dec05 $0.69
Dec04 $0.61
Dec03 $0.45
Dec02 $0.29
Dec01 $0.17
Dec00 $0.15
Dec99 $0.09

Recommended Reading:

Other ModernGraham posts about the company

14 Companies in the Spotlight This Week – 10/18/14
Stericycle Inc. Annual Stock Valuation – 2014 $SRCL

Other ModernGraham posts about related companies

Republic Services Inc. Analysis – September 2015 Update $RSG
Waste Management Inc. Analysis – 2015 Update $WM
Stericycle Inc. Annual Stock Valuation – 2014 $SRCL
Republic Services Inc. Annual Stock Valuation – September 2014 $RSG

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.

Oracle Corporation Analysis – October 2015 Update $ORCL

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 Oracle Corporation (ORCL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Oracle Corporation (Oracle) is a provider of enterprise software and computer hardware products, and services. The Company’s offerings include Oracle database and middleware software, application software, cloud infrastructure, hardware systems including computer server, storage and networking products, and related services. It operates through various segments, including new software licenses and cloud software subscriptions, which include software licenses and Oracle Cloud offerings; cloud infrastructure-as-a-service, which provides deployment and management offerings; software license updates and product support, which includes support, enhancements and upgrades for Oracle software products; hardware systems products, which includes servers, storage, networking, virtualization software, operating systems and management software; hardware systems support, which provides software updates for software components, and services business, which offers consulting services.

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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 ORCL

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 $154,963,039,752 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.04 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 139.19% Pass
6. Moderate PEmg Ratio PEmg < 20 15.84 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.45 Fail
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 4.04 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.86 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

ORCL value chart October 2015

EPSmg $2.33
MG Growth Estimate 7.43%
MG Value $54.35
Opinion Undervalued
MG Value based on 3% Growth $33.75
MG Value based on 0% Growth $19.78
Market Implied Growth Rate 3.67%
Current Price $36.87
% of Intrinsic Value 67.84%

Oracle Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short dividend history and the high PB ratio.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.56 in 2012 to an estimated $2.33 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.67% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Oracle Corporation (ORCL)?  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

ORCL charts October 2015

Net Current Asset Value (NCAV) -$0.11
Graham Number $24.82
PEmg 15.84
Current Ratio 4.04
PB Ratio 3.45
Dividend Yield 1.46%
Number of Consecutive Years of Dividend Growth 3

 

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Useful Links:

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

Most Recent Balance Sheet Figures

Total Current Assets $62,122,000,000
Total Current Liabilities $15,391,000,000
Long-Term Debt $40,050,000,000
Total Assets $109,706,000,000
Intangible Assets $40,088,000,000
Total Liabilities $62,609,000,000
Shares Outstanding (Diluted Average) 4,412,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.49
May15 $2.21
May14 $2.38
May13 $2.26
May12 $1.96
May11 $1.67
May10 $1.21
May09 $1.09
May08 $1.06
May07 $0.81
May06 $0.64
May05 $0.55
May04 $0.50
May03 $0.43
May02 $0.39
May01 $0.44
May00 $1.05
May99 $0.22
May98 $0.14
May97 $0.14
May96 $0.10

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.33
May15 $2.20
May14 $2.09
May13 $1.84
May12 $1.56
May11 $1.29
May10 $1.06
May09 $0.93
May08 $0.80
May07 $0.65
May06 $0.54
May05 $0.48
May04 $0.49
May03 $0.49
May02 $0.50
May01 $0.50
May00 $0.46

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Software Industry – August 2015
The 9 Best Stocks For Value Investors This Week – 7/18/15
Oracle Corporation Analysis – July 2015 Update $ORCL
24 Companies in the Spotlight This Week – 3/28/15
Oracle Corporation Quarterly Valuation – March 2015 $ORCL

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The Best Companies of the Software Industry – August 2015
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Microsoft Corporation Analysis – August 2015 Update $MSFT
Cisco Systems Inc. Analysis – August 2015 Update $CSCO
Google Inc. Analysis – July 2015 Update $GOOGL
Intuit Inc. Analysis – July 2015 Update $INTU
Oracle Corporation Analysis – July 2015 Update $ORCL

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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