Charles Schwab Corp Valuation – March 2019 #SCHW

Company Profile (excerpt from Reuters): The Charles Schwab Corporation (CSC), incorporated on November 25, 1986, is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, money management and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services and other corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services as well as retirement business services. The Company’s subsidiaries include Charles Schwab & Co., Inc. (Schwab), which is a securities broker-dealer with over 335 domestic branch offices in 46 states, as well as a branch in each of the Commonwealth of Puerto Rico and London, England, and serves clients in Hong Kong through one of the Company’s subsidiaries, as of December 31, 2016; Charles Schwab Bank (Schwab Bank), which is a federal savings bank located in Nevada, and Charles Schwab Investment Management, Inc. (CSIM), which is the investment advisor for Schwab’s mutual funds referred to as the Schwab Funds, and Schwab’s exchange-traded funds (ETFs), referred to as the Schwab ETFs.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SCHW – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $55,714,926,383 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 279.10% Pass
5. Moderate PEmg Ratio PEmg < 20 19.89 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.74 Fail
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.10
MG Growth Estimate 15.00%
MG Value $80.93
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $30.48
MG Value based on 0% Growth $17.87
Market Implied Growth Rate 5.69%
Current Price $41.80
% of Intrinsic Value 51.65%

Charles Schwab Corporation Common Stock is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with 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 Undervalued after growing its EPSmg (normalized earnings) from $0.89 in 2015 to an estimated $2.1 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.69% 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.

At the time of valuation, further research into Charles Schwab Corporation Common Stock revealed the company was trading above its Graham Number of $28.09. The company pays a dividend of $0.46 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 19.89, which was below the industry average of 21.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Charles Schwab Corporation Common Stock performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Graham Number $28.09
PEmg 19.89
PB Ratio 2.74
Dividend Yield 1.10%
TTM Dividend $0.46
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $6,878,000,000
Total Assets $296,482,000,000
Intangible Assets $1,379,000,000
Total Liabilities $275,812,000,000
Shares Outstanding (Diluted Average) 1,355,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.65
Dec2018 $2.45
Dec2017 $1.61
Dec2016 $1.31
Dec2015 $1.03
Dec2014 $0.95
Dec2013 $0.78
Dec2012 $0.69
Dec2011 $0.70
Dec2010 $0.38
Dec2009 $0.68
Dec2008 $1.05
Dec2007 $1.97
Dec2006 $0.95
Dec2005 $0.55
Dec2004 $0.21
Dec2003 $0.35
Dec2002 $0.08
Dec2001 $0.14
Dec2000 $0.51
Dec1999 $0.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.10
Dec2018 $1.71
Dec2017 $1.27
Dec2016 $1.05
Dec2015 $0.89
Dec2014 $0.78
Dec2013 $0.68
Dec2012 $0.65
Dec2011 $0.74
Dec2010 $0.84
Dec2009 $1.06
Dec2008 $1.15
Dec2007 $1.07
Dec2006 $0.56
Dec2005 $0.33
Dec2004 $0.23
Dec2003 $0.27

Recommended Reading:

Other ModernGraham posts about the company

Charles Schwab Corp Valuation – June 2018 $SCHW
Charles Schwab Corp Valuation – March 2017 $SCHW
Charles Schwab Corp Valuation – August 2016 $SCHW
27 Companies in the Spotlight This Week – 4/4/15
Charles Schwab Corporation Annual Valuation – 2015 $SCHW

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S&P Global Inc Valuation – March 2019 #SPGI
Equifax Inc Valuation – March 2019 #EFX
CME Group Inc Valuation – March 2019 #CME
Northern Trust Corp Valuation – March 2019 #NTRS
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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.

Schweitzer-Mauduit International Inc Valuation – September 2018 $SWM

Company Profile (excerpt from Reuters): Schweitzer-Mauduit International, Inc. (SWM), incorporated on August 21, 1995, is a diversified producer of engineered solutions and materials for a variety of industries. The Company has two operating product line segments: Engineered Papers, and Advanced Materials and Structures. As of December 31, 2016, the Company conducted business in over 90 countries and operate 18 production locations across the world, with facilities in the United States, Canada, the United Kingdom, France, Luxembourg, Russia, Brazil, China and Poland.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SWM – September 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 $1,231,218,084 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.98 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 22.72% Fail
6. Moderate PEmg Ratio PEmg < 20 16.41 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.27 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 2.98 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.37 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 $2.44
MG Growth Estimate -0.96%
MG Value $16.07
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $35.37
MG Value based on 0% Growth $20.73
Market Implied Growth Rate 3.96%
Current Price $40.03
% of Intrinsic Value 249.07%

Schweitzer-Mauduit International, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years. 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 $2.61 in 2014 to an estimated $2.44 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.96% 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 below the price.

At the time of valuation, further research into Schweitzer-Mauduit International, Inc. revealed the company was trading above its Graham Number of $34.89. The company pays a dividend of $1.69 per share, for a yield of 4.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.41, which was below the industry average of 20.11, 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 $-17.46.

Schweitzer-Mauduit International, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.46
Graham Number $34.89
PEmg 16.41
Current Ratio 2.98
PB Ratio 2.27
Current Dividend $1.69
Dividend Yield 4.22%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $406,400,000
Total Current Liabilities $136,200,000
Long-Term Debt $639,800,000
Total Assets $1,485,100,000
Intangible Assets $624,400,000
Total Liabilities $942,600,000
Shares Outstanding (Diluted Average) 30,706,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.04
Dec2017 $1.12
Dec2016 $2.70
Dec2015 $2.94
Dec2014 $2.93
Dec2013 $2.42
Dec2012 $2.51
Dec2011 $2.73
Dec2010 $1.76
Dec2009 $1.10
Dec2008 $0.02
Dec2007 $0.11
Dec2006 -$0.03
Dec2005 $0.63
Dec2004 $1.18
Dec2003 $1.11
Dec2002 $1.09
Dec2001 $0.82
Dec2000 $0.91
Dec1999 $0.98
Dec1998 $0.96

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.44
Dec2017 $2.23
Dec2016 $2.76
Dec2015 $2.76
Dec2014 $2.61
Dec2013 $2.33
Dec2012 $2.06
Dec2011 $1.61
Dec2010 $0.90
Dec2009 $0.43
Dec2008 $0.19
Dec2007 $0.39
Dec2006 $0.62
Dec2005 $0.94
Dec2004 $1.07
Dec2003 $1.01
Dec2002 $0.96

Recommended Reading:

Other ModernGraham posts about the company

5 Best Stocks for Value Investors This Week – 3/18/17
Schweitzer-Mauduit International Inc Valuation – Initial Coverage $SWM

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Ball Corporation Valuation – April 2018 $BLL
WestRock Co Valuation – April 2018 $WRK

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.

Charles Schwab Corp Valuation – June 2018 $SCHW

Company Profile (excerpt from Reuters): The Charles Schwab Corporation (CSC), incorporated on November 25, 1986, is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, money management and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services and other corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services as well as retirement business services. The Company’s subsidiaries include Charles Schwab & Co., Inc. (Schwab), which is a securities broker-dealer with over 335 domestic branch offices in 46 states, as well as a branch in each of the Commonwealth of Puerto Rico and London, England, and serves clients in Hong Kong through one of the Company’s subsidiaries, as of December 31, 2016; Charles Schwab Bank (Schwab Bank), which is a federal savings bank located in Nevada, and Charles Schwab Investment Management, Inc. (CSIM), which is the investment advisor for Schwab’s mutual funds referred to as the Schwab Funds, and Schwab’s exchange-traded funds (ETFs), referred to as the Schwab ETFs.

SCHW Chart

SCHW data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SCHW – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $77,456,710,587 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 195.45% Pass
5. Moderate PEmg Ratio PEmg < 20 34.75 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.05 Fail
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.65
MG Growth Estimate 15.00%
MG Value $63.60
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $23.95
MG Value based on 0% Growth $14.04
Market Implied Growth Rate 13.13%
Current Price $57.41
% of Intrinsic Value 90.26%

Charles Schwab Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. 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 $0.78 in 2014 to an estimated $1.65 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 13.13% 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.

At the time of valuation, further research into Charles Schwab Corp revealed the company was trading above its Graham Number of $24.49. The company pays a dividend of $0.32 per share, for a yield of 0.6% Its PEmg (price over earnings per share – ModernGraham) was 34.75, which was above the industry average of 22.96.

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

Stage 3: Information for Further Research

Graham Number $24.49
PEmg 34.75
PB Ratio 4.05
Dividend Yield 0.56%
TTM Dividend $0.32
Number of Consecutive Years of Dividend Growth 2

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
Long-Term Debt & Capital Lease Obligation $4,128,000,000
Total Assets $248,320,000,000
Intangible Assets $1,328,000,000
Total Liabilities $228,990,000,000
Shares Outstanding (Diluted Average) 1,362,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.28
Dec2017 $1.61
Dec2016 $1.31
Dec2015 $1.03
Dec2014 $0.95
Dec2013 $0.78
Dec2012 $0.69
Dec2011 $0.70
Dec2010 $0.38
Dec2009 $0.68
Dec2008 $1.05
Dec2007 $1.97
Dec2006 $0.95
Dec2005 $0.55
Dec2004 $0.21
Dec2003 $0.35
Dec2002 $0.08
Dec2001 $0.14
Dec2000 $0.51
Dec1999 $0.49
Dec1998 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.65
Dec2017 $1.27
Dec2016 $1.05
Dec2015 $0.89
Dec2014 $0.78
Dec2013 $0.68
Dec2012 $0.65
Dec2011 $0.74
Dec2010 $0.84
Dec2009 $1.06
Dec2008 $1.15
Dec2007 $1.07
Dec2006 $0.56
Dec2005 $0.33
Dec2004 $0.23
Dec2003 $0.27
Dec2002 $0.25

Recommended Reading:

Other ModernGraham posts about the company

Charles Schwab Corp Valuation – August 2016 $SCHW
27 Companies in the Spotlight This Week – 4/4/15
Charles Schwab Corporation Annual Valuation – 2015 $SCHW
17 Companies in the Spotlight This Week – 3/29/14
Charles Schwab Corp (SCHW) Annual Valuation – 2014

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Equifax Inc Valuation – May 2018 $EFX
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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.

Schweitzer-Mauduit International Inc Valuation – Initial Coverage $SWM

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 – March 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 Schweitzer-Mauduit International Inc (SWM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Schweitzer-Mauduit International, Inc. is a producer of specialty papers and resin-based products. The Company manufactures and sells lightweight specialty papers, which are used in manufacturing ventilated cigarettes, reconstituted tobacco used in producing blended cigarettes and banded papers used in the production of lower ignition propensity (LIP) cigarettes. The Company operates through two segments: Engineered Papers, and Advanced Materials and Structures. Its Engineered Papers segment produces both tobacco-related papers and non-tobacco-related papers. The Company’s tobacco-related papers include various porous papers used to wrap parts of a cigarette, such as tobacco column and filter, and reconstituted tobacco leaf (RTL), which is blended with virgin tobacco in a cigarette. It manufactures and sells a range of engineered resin-based, rolled goods, such as films, nets, foams and other non-wovens. The Company operates approximately 20 production locations.

SWM Chart

SWM data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of SWM – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,244,152,264 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.68 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 205.21% Pass
6. Moderate PEmg Ratio PEmg < 20 13.92 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.43 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 2.68 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.91 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.91
MG Growth Estimate 3.73%
MG Value $46.47
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $42.20
MG Value based on 0% Growth $24.74
Market Implied Growth Rate 2.71%
Current Price $40.51
% of Intrinsic Value 87.18%

Schweitzer-Mauduit International, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the small size. 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.33 in 2013 to an estimated $2.91 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 2.71% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Schweitzer-Mauduit International, Inc. revealed the company was trading above its Graham Number of $34.35. The company pays a dividend of $1.62 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.92, which was below the industry average of 28.3, 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 $-9.88.

Schweitzer-Mauduit International, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.88
Graham Number $34.35
PEmg 13.92
Current Ratio 2.68
PB Ratio 2.43
Current Dividend $1.62
Dividend Yield 4.00%
Number of Consecutive Years of Dividend Growth 6

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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 12/1/2016
Total Current Assets $364,300,000
Total Current Liabilities $135,800,000
Long-Term Debt $437,400,000
Total Assets $1,173,700,000
Intangible Assets $411,400,000
Total Liabilities $665,400,000
Shares Outstanding (Diluted Average) 30,463,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.15
Dec2016 $2.70
Dec2015 $2.94
Dec2014 $2.93
Dec2013 $2.42
Dec2012 $2.51
Dec2011 $2.73
Dec2010 $1.76
Dec2009 $1.10
Dec2008 $0.02
Dec2007 $0.11
Dec2006 -$0.03
Dec2005 $0.63
Dec2004 $1.18
Dec2003 $1.11
Dec2002 $1.09
Dec2001 $0.82
Dec2000 $0.91
Dec1999 $0.98
Dec1998 $0.96
Dec1997 $1.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.91
Dec2016 $2.76
Dec2015 $2.76
Dec2014 $2.61
Dec2013 $2.33
Dec2012 $2.06
Dec2011 $1.61
Dec2010 $0.90
Dec2009 $0.43
Dec2008 $0.19
Dec2007 $0.39
Dec2006 $0.62
Dec2005 $0.94
Dec2004 $1.07
Dec2003 $1.01
Dec2002 $0.96
Dec2001 $0.93

Recommended Reading:

Other ModernGraham posts about the company

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

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International Paper Co Valuation – December 2015 Update $IP
Bemis Company Inc. Analysis – September 2015 Update $BMS
WestRock Co. Analysis – Initial Coverage $WRK
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Ball Corporation Analysis – 2015 Update $BLL

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.

Charles Schwab Corp Valuation – March 2017 $SCHW

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 Charles Schwab Corp (SCHW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Charles Schwab Corporation is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, money management and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services and other corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services, as well as retirement business services. The Company offers a range of products to address individuals’ varying investment and financial needs. Its product offerings include brokerage, mutual funds, exchange-traded funds, advice solutions, banking and trust. Its subsidiaries include Charles Schwab & Co., Inc. (Schwab), Charles Schwab Bank (Schwab Bank) and Charles Schwab Investment Management, Inc. (CSIM).

SCHW Chart

SCHW data by YCharts

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ModernGraham Valuation of SCHW – March 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $57,018,203,782 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 73.93% Pass
5. Moderate PEmg Ratio PEmg < 20 36.08 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.45 Fail
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.18
MG Growth Estimate 10.97%
MG Value $35.84
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $17.07
MG Value based on 0% Growth $10.01
Market Implied Growth Rate 13.79%
Current Price $42.48
% of Intrinsic Value 118.53%

Charles Schwab Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. 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 Overvalued after growing its EPSmg (normalized earnings) from $0.68 in 2013 to an estimated $1.18 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.79% 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.

At the time of valuation, further research into Charles Schwab Corp revealed the company was trading above its Graham Number of $17.55. The company pays a dividend of $0.27 per share, for a yield of 0.6% Its PEmg (price over earnings per share – ModernGraham) was 36.08, which was above the industry average of 21.33.

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

Stage 3: Information for Further Research

Graham Number $17.55
PEmg 36.08
PB Ratio 3.45
Dividend Yield 0.64%
TTM Dividend $0.27
Number of Consecutive Years of Dividend Growth 2

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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 12/1/2016
Long-Term Debt & Capital Lease Obligation $2,876,000,000
Total Assets $223,383,000,000
Intangible Assets $1,371,000,000
Total Liabilities $206,962,000,000
Shares Outstanding (Diluted Average) 1,334,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.33
Dec2016 $1.31
Dec2015 $1.03
Dec2014 $0.95
Dec2013 $0.78
Dec2012 $0.69
Dec2011 $0.70
Dec2010 $0.38
Dec2009 $0.68
Dec2008 $1.05
Dec2007 $1.97
Dec2006 $0.95
Dec2005 $0.55
Dec2004 $0.21
Dec2003 $0.35
Dec2002 $0.08
Dec2001 $0.14
Dec2000 $0.51
Dec1999 $0.49
Dec1998 $0.28
Dec1997 $0.22

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.18
Dec2016 $1.05
Dec2015 $0.89
Dec2014 $0.78
Dec2013 $0.68
Dec2012 $0.65
Dec2011 $0.74
Dec2010 $0.84
Dec2009 $1.06
Dec2008 $1.15
Dec2007 $1.07
Dec2006 $0.56
Dec2005 $0.33
Dec2004 $0.23
Dec2003 $0.27
Dec2002 $0.25
Dec2001 $0.33

Recommended Reading:

Other ModernGraham posts about the company

Charles Schwab Corp Valuation – August 2016 $SCHW
27 Companies in the Spotlight This Week – 4/4/15
Charles Schwab Corporation Annual Valuation – 2015 $SCHW
17 Companies in the Spotlight This Week – 3/29/14
Charles Schwab Corp (SCHW) Annual Valuation – 2014

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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.

Charles Schwab Corp Valuation – August 2016 $SCHW

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 Charles Schwab Corp (SCHW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Charles Schwab Corporation is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, money management and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services and other corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services, as well as retirement business services. The Company offers a range of products to address individuals’ varying investment and financial needs. Its product offerings include brokerage, mutual funds, exchange-traded funds, advice solutions, banking and trust. Its subsidiaries include Charles Schwab & Co., Inc. (Schwab), Charles Schwab Bank (Schwab Bank) and Charles Schwab Investment Management, Inc. (CSIM).

SCHW Chart

SCHW data by YCharts

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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 SCHW – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $39,743,346,963 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -14.05% Fail
5. Moderate PEmg Ratio PEmg < 20 29.67 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.68 Fail
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

SCHW value chart August 2016

EPSmg $1.01
MG Growth Estimate 8.30%
MG Value $25.46
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $14.71
MG Value based on 0% Growth $8.62
Market Implied Growth Rate 10.59%
Current Price $30.11
% of Intrinsic Value 118.26%

Charles Schwab 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 and PB ratios. 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 Overvalued after growing its EPSmg (normalized earnings) from $0.65 in 2012 to an estimated $1.01 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.59% 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.

At the time of valuation, further research into Charles Schwab Corp revealed the company was trading above its Graham Number of $16.17. The company pays a dividend of $0.25 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 29.67, which was above the industry average of 19.87.

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

Stage 3: Information for Further Research

SCHW charts August 2016

Graham Number $16.17
PEmg 29.67
PB Ratio 2.68
Dividend Yield 0.83%
TTM Dividend $0.25
Number of Consecutive Years of Dividend Growth 1

[/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
Long-Term Debt & Capital Lease Obligation $2,876,000,000
Total Assets $198,052,000,000
Intangible Assets $1,390,000,000
Total Liabilities $183,062,000,000
Shares Outstanding (Diluted Average) 1,333,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.20
Dec2015 $1.03
Dec2014 $0.95
Dec2013 $0.78
Dec2012 $0.69
Dec2011 $0.70
Dec2010 $0.38
Dec2009 $0.68
Dec2008 $1.05
Dec2007 $1.97
Dec2006 $0.95
Dec2005 $0.55
Dec2004 $0.21
Dec2003 $0.35
Dec2002 $0.08
Dec2001 $0.14
Dec2000 $0.51
Dec1999 $0.49
Dec1998 $0.28
Dec1997 $0.22
Dec1996 $0.19

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.01
Dec2015 $0.89
Dec2014 $0.78
Dec2013 $0.68
Dec2012 $0.65
Dec2011 $0.74
Dec2010 $0.84
Dec2009 $1.06
Dec2008 $1.15
Dec2007 $1.07
Dec2006 $0.56
Dec2005 $0.33
Dec2004 $0.23
Dec2003 $0.27
Dec2002 $0.25
Dec2001 $0.33
Dec2000 $0.40

Recommended Reading:

Other ModernGraham posts about the company

27 Companies in the Spotlight This Week – 4/4/15
Charles Schwab Corporation Annual Valuation – 2015 $SCHW
17 Companies in the Spotlight This Week – 3/29/14
Charles Schwab Corp (SCHW) Annual Valuation – 2014

Other ModernGraham posts about related companies

Northern Trust Corp Valuation – July 2016 $NTRS
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
Invesco Ltd Valuation – July 2016 $IVZ
Nasdaq Inc Valuation – July 2016 $NDAQ
Leucadia National Corp Valuation – July 2016 $LUK
E*Trade Financial Corp Valuation – July 2016 $ETFC
CBRE Group Inc Valuation – July 2016 $CBG
Fidelity National Information Services Valuation – July 2016 $FIS
Capital One Financial Corp Valuation – July 2016 $COF
Intercontinental Exchange Inc Valuation – July 2016 $ICE

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.

Charles Schwab Corporation Annual Valuation – 2015 $SCHW

Charles_Schwab_logoIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  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 Charles Schwab Corporation (SCHW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Charles Schwab Corporation (CSC) is a savings and loan holding company. The Company, through its subsidiaries, is engaged in securities brokerage, banking, money management, and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments, such as Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services to individual investors, retirement plan services, and corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services to independent investment advisors, and retirement business services to independent retirement plan advisors and record keepers whose plan assets are held at Schwab Bank. Charles Schwab Investment Management, Inc. (CSIM) is the investment advisor for Schwab’s mutual funds.

Defensive Investor – must pass all 6 of the following tests: Score = 3/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. 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
  5. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 2/3

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

Valuation Summary

Key Data:

Recent Price $30.23
MG Value $4.90
MG Opinion Overvalued
Value Based on 3% Growth $11.33
Value Based on 0% Growth $6.64
Market Implied Growth Rate 15.10%
PEmg 38.69
PB Ratio 3.38

Balance Sheet – December 2014

Total Debt $1,899,000,000
Total Assets $154,642,000,000
Intangible Assets $1,454,000,000
Total Liabilities $142,839,000,000
Outstanding Shares 1,321,000,000

Earnings Per Share

2014 $0.95
2013 $0.78
2012 $0.69
2011 $0.70
2010 $0.38
2009 $0.68
2008 $1.05
2007 $1.97
2006 $0.95
2005 $0.55
2004 $0.30

Earnings Per Share – ModernGraham 

2014 $0.78
2013 $0.68
2012 $0.65
2011 $0.74
2010 $0.84
2009 $1.06

Dividend History

Conclusion:

Charles Schwab Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned by the insufficient earnings growth over the last ten years and the high PEmg  and PB ratios, while the Enterprising Investor is concerned by the lack of earnings growth over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time.  As for a valuation, the company appears overvalued after seeing its EPSmg (normalized earnings) drop from $0.84 in 2010 to 0.78 for 2014.  This lack of demonstrated growth does not support the market’s implied estimate of 15.1% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the market price.

Be sure to check out previous ModernGraham valuations of Charles Schwab Corporation (SCHW) 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 Charles Schwab Corporation (SCHW)?  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 Charles Schwab Corporation (SCHW) or in 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.

Charles Schwab Corp (SCHW) Annual Valuation – 2014

Charles_Schwab_logoIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to widdle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  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 Charles Schwab Corp fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Charles Schwab Corporation (CSC) is a savings and loan holding company. The Company engages, through its subsidiaries, in securities brokerage, banking, and related financial services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Institutional Services. The Investor Services segment provides retail brokerage and banking services to individual investors. The Institutional Services segment provides custodial, trading and support services to independent investment advisors (IAs). Its business subsidiaries include Charles Schwab & Co., Inc. (Schwab), Charles Schwab Bank and Charles Schwab Investment Management, Inc. (CSIM), which is the investment advisor for Schwab’s mutual funds. In November 2011, the Company acquired Compliance11, Inc. In September 2012, GAIN Capital Holdings Inc. acquired Open E Cry, LLC. In December 2012, the Company acquired ThomasPartners, Inc.

SCHW Chart

SCHW data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 4/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. 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
  5. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 2/3

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

Valuation Summary

Key Data:

Recent Price $28.43
MG Value $2.24
MG Opinion Overvalued
Value Based on 3% Growth $9.86
Value Based on 0% Growth $5.78
Market Implied Growth Rate 16.65%
PEmg 41.81
PB Ratio 3.55

Balance Sheet – 12/31/2013

Total Debt $1,903,000,000
Total Assets $143,642,000,000
Intangible Assets $1,227,000,000
Total Liabilities $133,261,000,000
Outstanding Shares 1,296,890,000

Earnings Per Share

2013 $0.78
2012 $0.69
2011 $0.70
2010 $0.38
2009 $0.68
2008 $1.06
2007 $0.92
2006 $0.69
2005 $0.56
2004 $0.30

Earnings Per Share – ModernGraham 

2013 $0.68
2012 $0.65
2011 $0.67
2010 $0.69
2009 $0.82
2008 $0.83

Dividend History

SCHW Dividend Chart

SCHW Dividend data by YCharts

Conclusion:

Charles Schwab Corp does not qualify for either the Defensive Investor or the Enterprising Investor due to insufficient earnings growth over the ten year historical period and the five year historical period, respectively.  The company needs to show further growth in the coming years in order to be more attractive as an investment opportunity.  As a result, value investors seeking to follow the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through a review of ModernGraham’s valuation of Wells Fargo & Co. (WFC) and ModernGraham’s valuation of JP Morgan Chase (JPM).  From a valuation perspective, the company does not fare well at all, again as a result of the lack of earnings growth.  EPSmg (normalized earnings) have dropped from $0.82 in 2009 to $0.68 in 2013, a demonstrated performance that does not support the market’s implied estimate of 16.65% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls well below a margin of safety relative to 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 Charles Schwab Corp (SCHW)?  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 Charles Schwab Corp (SCHW) 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.

Goldman Sachs Group Inc Valuation – April 2019 #GS

Company Profile (excerpt from Reuters): The Goldman Sachs Group, Inc., incorporated on July 21, 1998, is an investment banking, securities and investment management company that provides a range of financial services to corporations, financial institutions, governments and individuals. The Company operates in four business segments: Investment Banking, Institutional Client Services, Investing & Lending, and Investment Management. As of December 2016, it had offices in over 30 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GS – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $74,225,517,968 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 62.01% Pass
5. Moderate PEmg Ratio PEmg < 20 11.71 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.86 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $17.28
MG Growth Estimate 3.68%
MG Value $274.01
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $250.54
MG Value based on 0% Growth $146.87
Market Implied Growth Rate 1.61%
Current Price $202.38
% of Intrinsic Value 73.86%

Goldman Sachs Group Inc 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 has no initial concerns. 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 $13.88 in 2015 to an estimated $17.28 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.61% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Goldman Sachs Group Inc revealed the company was trading below its Graham Number of $287.24. The company pays a dividend of $3.15 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 11.71, which was below the industry average of 21.66, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Goldman Sachs Group Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $287.24
PEmg 11.71
PB Ratio 0.86
Dividend Yield 1.56%
TTM Dividend $3.15
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $245,582,000,000
Total Assets $931,796,000,000
Intangible Assets $4,082,000,000
Total Liabilities $841,611,000,000
Shares Outstanding (Diluted Average) 383,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.27
Dec2018 $25.27
Dec2017 $9.01
Dec2016 $16.29
Dec2015 $12.14
Dec2014 $17.07
Dec2013 $15.46
Dec2012 $14.13
Dec2011 $4.51
Dec2010 $13.18
Dec2009 $22.13
Nov2008 $4.47
Nov2007 $24.73
Nov2006 $19.69
Nov2005 $11.21
Nov2004 $8.92
Nov2003 $5.87
Nov2002 $4.03
Nov2001 $4.26
Nov2000 $6.00
Nov1999 $5.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $17.28
Dec2018 $16.84
Dec2017 $13.08
Dec2016 $15.08
Dec2015 $13.88
Dec2014 $14.12
Dec2013 $13.06
Dec2012 $11.80
Dec2011 $11.69
Dec2010 $15.80
Dec2009 $16.89
Nov2008 $14.11
Nov2007 $17.32
Nov2006 $12.39
Nov2005 $8.11
Nov2004 $6.31
Nov2003 $5.05

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Other ModernGraham posts about related companies

American Express Co Valuation – April 2019 #AXP
Broadridge Financial Solutions Inc Valuation – April 2019 #BR
T.Rowe Price Group Inc Valuation – March 2019 #TROW
Moody’s Corp Valuation – March 2019 #MCO
Charles Schwab Corp Valuation – March 2019 #SCHW
Willis Towers Watson PLC Valuation – March 2019 #WLTW
Paypal Holdings Inc Valuation – March 2019 #PYPL
Synchrony Financial Valuation – March 2019 #SYF
CBRE Group Inc Valuation – March 2019 #CBRE
Franklin Resources Inc Valuation – March 2019 #BEN

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.

American Express Co Valuation – April 2019 #AXP

Company Profile (excerpt from Reuters): American Express Company, incorporated on June 10, 1965, together with its subsidiaries, is a global services company. The Company’s principal products and services are charge and credit card products, and travel-related services offered to consumers and businesses around the world. The Company’s segments include the Global Consumer Services Group (GCSG), Global Merchant and Network Services (GMNS), and Global Commercial Services (GCS). The Company’s range of products and services includes network services; merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants; other fee services, including fraud prevention services and the design and operation of customer loyalty programs; expense management products and services, and stored value/prepaid products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AXP – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $93,000,342,672 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 83.98% Pass
5. Moderate PEmg Ratio PEmg < 20 15.56 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.24 Fail
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.13
MG Growth Estimate 6.66%
MG Value $155.42
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $103.32
MG Value based on 0% Growth $60.57
Market Implied Growth Rate 3.53%
Current Price $110.86
% of Intrinsic Value 71.33%

American Express Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with 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 Undervalued after growing its EPSmg (normalized earnings) from $4.94 in 2015 to an estimated $7.13 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.53% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into American Express Company revealed the company was trading above its Graham Number of $76.95. The company pays a dividend of $1.48 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 15.56, which was below the industry average of 21.66, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

American Express Company performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Graham Number $76.95
PEmg 15.56
PB Ratio 4.24
Dividend Yield 1.34%
TTM Dividend $1.48
Number of Consecutive Years of Dividend Growth 3

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $58,423,000,000
Total Assets $188,602,000,000
Intangible Assets $3,347,000,000
Total Liabilities $166,312,000,000
Shares Outstanding (Diluted Average) 853,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.00
Dec2018 $7.91
Dec2017 $2.99
Dec2016 $5.61
Dec2015 $5.05
Dec2014 $5.56
Dec2013 $4.88
Dec2012 $3.89
Dec2011 $4.12
Dec2010 $3.35
Dec2009 $1.54
Dec2008 $2.32
Dec2007 $3.36
Dec2006 $2.99
Dec2005 $2.97
Dec2004 $2.68
Dec2003 $2.30
Dec2002 $2.01
Dec2001 $0.98
Dec2000 $2.07
Dec1999 $1.81

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.13
Dec2018 $5.60
Dec2017 $4.57
Dec2016 $5.24
Dec2015 $4.94
Dec2014 $4.71
Dec2013 $4.04
Dec2012 $3.43
Dec2011 $3.11
Dec2010 $2.64
Dec2009 $2.40
Dec2008 $2.84
Dec2007 $3.02
Dec2006 $2.77
Dec2005 $2.50
Dec2004 $2.18
Dec2003 $1.90

Recommended Reading:

Other ModernGraham posts about the company

American Express Co Valuation – November 2018 $AXP
American Express Co. Valuation – February 2018 $AXP
5 Undervalued Dow Components to Research – March 2017
5 Undervalued Dow Components to Research – February 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017

Other ModernGraham posts about related companies

Broadridge Financial Solutions Inc Valuation – April 2019 #BR
T.Rowe Price Group Inc Valuation – March 2019 #TROW
Moody’s Corp Valuation – March 2019 #MCO
Charles Schwab Corp Valuation – March 2019 #SCHW
Willis Towers Watson PLC Valuation – March 2019 #WLTW
Paypal Holdings Inc Valuation – March 2019 #PYPL
Synchrony Financial Valuation – March 2019 #SYF
CBRE Group Inc Valuation – March 2019 #CBRE
Franklin Resources Inc Valuation – March 2019 #BEN
S&P Global Inc Valuation – March 2019 #SPGI

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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