Salesforce.com Inc Valuation – March 2019 #CRM

Company Profile (excerpt from Reuters): Salesforce.com, Inc., incorporated February 3, 1999, is a provider of enterprise software, delivered through the cloud, with a focus on customer relationship management (CRM). The Company focuses on cloud, mobile, social, Internet of Things (IoT) and artificial intelligence technologies. The Company’s service offerings are configured and integrated with other platforms and enterprise applications. The Company delivers its service offerings via Internet browsers and on mobile devices. Its Customer Success Platform is a portfolio of service offerings providing sales force automation, customer service and support, marketing automation, digital commerce, community management, analytics, application development, IoT integration, collaborative productivity tools and its professional cloud services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CRM – 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 $121,301,431,411 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.95 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 -1259.69% Fail
6. Moderate PEmg Ratio PEmg < 20 114.55 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.90 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 0.95 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.55 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.37
MG Growth Estimate 15.00%
MG Value $52.85
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $19.90
MG Value based on 0% Growth $11.67
Market Implied Growth Rate 53.03%
Current Price $157.24
% of Intrinsic Value 297.53%

salesforce.com, 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 stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 growing its EPSmg (normalized earnings) from $-0.28 in 2016 to an estimated $1.37 for 2020. This level of demonstrated earnings growth does not support the market’s implied estimate of 53.03% 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 salesforce.com, inc. revealed the company was trading above its Graham Number of $33.94. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 114.55, which was above the industry average of 65.85. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.67.

salesforce.com, inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.67
Graham Number $33.94
PEmg 114.55
Current Ratio 0.95
PB Ratio 7.90
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $10,683,000,000
Total Current Liabilities $11,255,000,000
Long-Term Debt $3,173,000,000
Total Assets $30,737,000,000
Intangible Assets $14,926,000,000
Total Liabilities $15,132,000,000
Shares Outstanding (Diluted Average) 784,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.51
Jan2019 $1.43
Jan2018 $0.49
Jan2017 $0.46
Jan2016 -$0.07
Jan2015 -$0.42
Jan2014 -$0.39
Jan2013 -$0.48
Jan2012 -$0.02
Jan2011 $0.12
Jan2010 $0.16
Jan2009 $0.09
Jan2008 $0.04
Jan2007 $0.00
Jan2006 $0.06
Jan2005 $0.02
Jan2004 $0.01
Jan2003 -$0.09
Jan2002 -$0.34
Jan2001 -$0.60

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.37
Jan2019 $0.66
Jan2018 $0.19
Jan2017 -$0.03
Jan2016 -$0.28
Jan2015 -$0.33
Jan2014 -$0.24
Jan2013 -$0.11
Jan2012 $0.07
Jan2011 $0.10
Jan2010 $0.09
Jan2009 $0.05
Jan2008 $0.03
Jan2007 $0.01
Jan2006 -$0.01
Jan2005 -$0.09
Jan2004 -$0.17

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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.

Microsoft Corporation Valuation – November 2018 $MSFT

Company Profile (excerpt from Reuters): Microsoft Corporation, incorporated on September 22, 1993, is a technology company. The Company develops, licenses, and supports a range of software products, services and devices. The Company’s segments include Productivity and Business Processes, Intelligent Cloud and More Personal Computing. The Company’s products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; video games, and training and certification of computer system integrators and developers. It also designs, manufactures, and sells devices, including personal computers (PCs), tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories, that integrate with its cloud-based offerings. It offers an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content, and it provides solution support and consulting services. It also delivers online advertising to a global audience.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MSFT – November 2018 $MSFT

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 $786,398,728,564 1 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.92 1 Pass
3. Earnings Stability Positive EPS for 10 years prior 1 Pass
4. Dividend Record Dividend Payments for 10 years prior 1 Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 44.48% 1 Pass
6. Moderate PEmg Ratio PEmg < 20 32.62 0 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.24 0 Fail
Score 5
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.92 1 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.65 1 Pass
3. Earnings Stability Positive EPS for 5 years prior 1 Pass
4. Dividend Record Currently Pays Dividend 1 Pass
5. Earnings Growth EPSmg greater than 5 years ago 1 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.13
MG Growth Estimate 6.80%
MG Value $69.29
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $45.45
MG Value based on 0% Growth $26.64
Market Implied Growth Rate 12.06%
Current Price $102.24
% of Intrinsic Value 147.55%

Microsoft Corporation 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 $2.16 in 2015 to an estimated $3.13 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.06% 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 Microsoft Corporation revealed the company was trading above its Graham Number of $32.77. The company pays a dividend of $1.65 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 32.62, which was below the industry average of 54.3, 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 $-0.96.

Microsoft 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) -$0.96
Graham Number $32.77
PEmg 32.62
Current Ratio 2.92
PB Ratio 9.24
Current Dividend $1.65
Dividend Yield 1.61%
Number of Consecutive Years of Dividend Growth 17

Useful Links:

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Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $164,195,000,000
Total Current Liabilities $56,277,000,000
Long-Term Debt $69,733,000,000
Total Assets $257,619,000,000
Intangible Assets $43,434,000,000
Total Liabilities $171,652,000,000
Shares Outstanding (Diluted Average) 7,766,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.43
Jun2018 $2.13
Jun2017 $3.25
Jun2016 $2.56
Jun2015 $1.48
Jun2014 $2.63
Jun2013 $2.58
Jun2012 $2.00
Jun2011 $2.69
Jun2010 $2.10
Jun2009 $1.62
Jun2008 $1.87
Jun2007 $1.42
Jun2006 $1.20
Jun2005 $1.12
Jun2004 $0.75
Jun2003 $0.69
Jun2002 $0.48
Jun2001 $0.66
Jun2000 $0.85
Jun1999 $0.71

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.13
Jun2018 $2.46
Jun2017 $2.58
Jun2016 $2.25
Jun2015 $2.16
Jun2014 $2.46
Jun2013 $2.32
Jun2012 $2.14
Jun2011 $2.12
Jun2010 $1.78
Jun2009 $1.56
Jun2008 $1.44
Jun2007 $1.16
Jun2006 $0.97
Jun2005 $0.82
Jun2004 $0.67
Jun2003 $0.65

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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.

J&J Snack Foods Corp Valuation – August 2018 $JJSF

Company Profile (excerpt from Reuters): J & J Snack Foods Corp., incorporated in 1971, is a manufacturer, marketer and distributor of a range of snack foods and beverages for the food service and retail supermarket industries. The Company serves both national and international markets. It operates in three business segments: Food Service, Retail Supermarkets and Frozen Beverages. The Company’s portfolio of products includes soft pretzels, frozen beverages, frozen juice treats and desserts, stuffed sandwiches, burritos, churros, fruit pies, funnel cakes, cookies and bakery goods, and other snack foods and drinks. Its principal snack food products are soft pretzels marketed primarily under the brand names SUPERPRETZEL and BAVARIAN BAKERY; frozen juice treats and desserts marketed primarily under the LUIGI’S, WHOLE FRUIT, ICEE, PHILLY SWIRL and MINUTE MAID brand names; churros marketed primarily under the TIO PEPE’S, CALIFORNIA CHURROS and OREO brand names, and bakery products sold primarily under the READI-BAKE, COUNTRY HOME, MARY B’S and DADDY RAY’S brand names, as well as for private label and contract packing.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JJSF – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,714,691,536 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.09 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 79.30% Pass
6. Moderate PEmg Ratio PEmg < 20 31.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.61 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 3.09 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.55
MG Growth Estimate 5.58%
MG Value $89.44
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $65.99
MG Value based on 0% Growth $38.69
Market Implied Growth Rate 11.29%
Current Price $141.41
% of Intrinsic Value 158.11%

J & J Snack Foods 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 $3.32 in 2014 to an estimated $4.55 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.29% 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 J & J Snack Foods Corp revealed the company was trading above its Graham Number of $67.88. The company pays a dividend of $1.68 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 31.07, which was above the industry average of 26.3. Finally, the company was trading above its Net Current Asset Value (NCAV) of $10.87.

J & J Snack Foods Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $10.87
Graham Number $67.88
PEmg 31.07
Current Ratio 3.09
PB Ratio 3.61
Current Dividend $1.68
Dividend Yield 1.19%
Number of Consecutive Years of Dividend Growth 13

Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $380,726,000
Total Current Liabilities $123,086,000
Long-Term Debt $0
Total Assets $914,232,000
Intangible Assets $161,157,000
Total Liabilities $176,157,000
Shares Outstanding (Diluted Average) 18,822,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.60
Sep2017 $4.21
Sep2016 $4.05
Sep2015 $3.73
Sep2014 $3.82
Sep2013 $3.41
Sep2012 $2.86
Sep2011 $2.93
Sep2010 $2.59
Sep2009 $2.21
Sep2008 $1.47
Sep2007 $1.69
Sep2006 $1.57
Sep2005 $1.40
Sep2004 $1.24
Sep2003 $1.10
Sep2002 $1.00
Sep2001 $0.68
Sep2000 $0.55
Sep1999 $0.75
Sep1998 $0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.55
Sep2017 $3.97
Sep2016 $3.75
Sep2015 $3.52
Sep2014 $3.32
Sep2013 $2.98
Sep2012 $2.65
Sep2011 $2.42
Sep2010 $2.08
Sep2009 $1.77
Sep2008 $1.52
Sep2007 $1.50
Sep2006 $1.36
Sep2005 $1.20
Sep2004 $1.03
Sep2003 $0.89
Sep2002 $0.77

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J&J Snack Foods Corp Valuation – Initial Coverage $JJSF

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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.

ServisFirst Bancshares Inc Valuation – July 2018 $SFBS

Company Profile (excerpt from Reuters): ServisFirst Bancshares, Inc., incorporated on August 16, 2007, is a bank holding company whose business is conducted by its subsidiary, ServisFirst Bank (the Bank). The Company’s principal business is to accept deposits from the public and to make loans and other investments. The Company, through its bank, originates commercial, consumer and other loans; accept deposits; provides electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services, and provides correspondent banking services to other financial institutions. The Company offers a range of products and services, including round the clock telephone banking, direct deposit, Internet banking, mobile banking, traveler’s checks, safe deposit boxes, attorney trust accounts and automatic account transfers. It also participates in a shared network of automated teller machines and a debit card system. Additionally, it offers Visa credit cards.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SFBS – July 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 $2,190,725,210 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 872.79% Pass
5. Moderate PEmg Ratio PEmg < 20 23.09 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.48 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 $1.82
MG Growth Estimate 15.00%
MG Value $70.04
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $26.38
MG Value based on 0% Growth $15.46
Market Implied Growth Rate 7.30%
Current Price $42.01
% of Intrinsic Value 59.98%

ServisFirst Bancshares, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, 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 Undervalued after growing its EPSmg (normalized earnings) from $0.85 in 2014 to an estimated $1.82 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.3% 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 ServisFirst Bancshares, Inc. revealed the company was trading above its Graham Number of $25.28. The company pays a dividend of $0.2 per share, for a yield of 0.5% Its PEmg (price over earnings per share – ModernGraham) was 23.09, which was above the industry average of 20.05.

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

Stage 3: Information for Further Research

Graham Number $25.28
PEmg 23.09
PB Ratio 3.48
Dividend Yield 0.48%
TTM Dividend $0.20
Number of Consecutive Years of Dividend Growth 4

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
Long-Term Debt & Capital Lease Obligation $64,648,000
Total Assets $7,084,562,000
Intangible Assets $14,584,000
Total Liabilities $6,429,448,000
Shares Outstanding (Diluted Average) 54,196,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.48
Dec2017 $1.72
Dec2016 $1.52
Dec2015 $1.20
Dec2014 $1.05
Dec2013 $0.95
Dec2012 $0.83
Dec2011 $0.59

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.82
Dec2017 $1.42
Dec2016 $1.22
Dec2015 $1.02
Dec2014 $0.85
Dec2013 $0.65
Dec2012 $0.43
Dec2011 $0.20

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ServisFirst Bancshares Inc Valuation – Initial Coverage $SFBS

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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.

Stifel Financial Corp Valuation – July 2018 $SF

Company Profile (excerpt from Reuters): Stifel Financial Corp., incorporated on December 31, 1981, is a financial holding company. The Company operates through three segments: Global Wealth Management, Institutional Group and Other. The Company’s principal subsidiary is Stifel, Nicolaus & Company, Incorporated (Stifel), a full-service retail and institutional wealth management and investment banking company. Its principal activities are private client services, including securities transaction and financial planning services; institutional equity and fixed income sales, trading, research and municipal finance; investment banking services, including mergers and acquisitions, public offerings and private placements, and retail and commercial banking, including personal and commercial lending programs. The Global Wealth Management segment consists of two businesses, such as the Private Client Group and Stifel Bank. The Private Client Group includes branch offices and independent contractor offices of its broker-dealer subsidiaries located throughout the United States. These branches provide securities brokerage services, including the sale of equities, mutual funds, fixed income products and insurance, as well as offers banking products to its private clients through Stifel Bank, which provides residential, consumer and commercial lending, as well as the Federal Deposit Insurance Corporation (FDIC)-insured deposit accounts to customers of its broker-dealer subsidiaries and to the general public. The Institutional Group segment includes research, equity and fixed income institutional sales and trading, investment banking, public finance, and syndicate. The Other segment includes interest income from stock borrow activities and interest income, among others.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SF – July 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 $3,807,434,857 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 175.45% Pass
5. Moderate PEmg Ratio PEmg < 20 19.36 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.48 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 $2.73
MG Growth Estimate 5.72%
MG Value $54.50
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $39.61
MG Value based on 0% Growth $23.22
Market Implied Growth Rate 5.43%
Current Price $52.89
% of Intrinsic Value 97.04%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.98 in 2014 to an estimated $2.73 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.43% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Stifel Financial Corp revealed the company was trading below its Graham Number of $65.28. The company pays a dividend of $0.2 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 19.36, which was below the industry average of 21.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Stifel Financial Corp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Graham Number $65.28
PEmg 19.36
PB Ratio 1.48
Dividend Yield 0.38%
TTM Dividend $0.20
Number of Consecutive Years of Dividend Growth 1

 

Useful Links:

 

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Long-Term Debt & Capital Lease Obligation $2,225,695,000
Total Assets $21,715,342,000
Intangible Assets $1,103,257,000
Total Liabilities $18,797,802,000
Shares Outstanding (Diluted Average) 81,789,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.95
Dec2017 $2.14
Dec2016 $1.00
Dec2015 $1.18
Dec2014 $2.31
Dec2013 $2.20
Dec2012 $2.20
Dec2011 $1.34
Dec2010 $0.03
Dec2009 $1.57
Dec2008 $1.32
Dec2007 $0.83
Dec2006 $0.49
Dec2005 $0.69
Dec2004 $0.84
Dec2003 $0.61
Dec2002 $0.11
Dec2001 $0.08
Dec2000 $0.40
Dec1999 $0.34
Dec1998 $0.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.73
Dec2017 $1.67
Dec2016 $1.55
Dec2015 $1.83
Dec2014 $1.98
Dec2013 $1.70
Dec2012 $1.39
Dec2011 $1.00
Dec2010 $0.84
Dec2009 $1.15
Dec2008 $0.91
Dec2007 $0.70
Dec2006 $0.61
Dec2005 $0.60
Dec2004 $0.50
Dec2003 $0.33
Dec2002 $0.20

Recommended Reading:

Other ModernGraham posts about the company

Stifel Financial Corp Valuation – Initial Coverage $SF

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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.

Salesforce.com Inc Valuation – June 2018 $CRM

Company Profile (excerpt from Reuters): Salesforce.com, Inc., incorporated February 3, 1999, is a provider of enterprise software, delivered through the cloud, with a focus on customer relationship management (CRM). The Company focuses on cloud, mobile, social, Internet of Things (IoT) and artificial intelligence technologies. The Company’s service offerings are configured and integrated with other platforms and enterprise applications. The Company delivers its service offerings via Internet browsers and on mobile devices. Its Customer Success Platform is a portfolio of service offerings providing sales force automation, customer service and support, marketing automation, digital commerce, community management, analytics, application development, IoT integration, collaborative productivity tools and its professional cloud services.

CRM Chart

CRM data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CRM – 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 $95,713,496,486 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.29 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 860.94% Pass
6. Moderate PEmg Ratio PEmg < 20 180.80 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.08 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.29 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.41 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.74
MG Growth Estimate 15.00%
MG Value $28.36
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $10.68
MG Value based on 0% Growth $6.26
Market Implied Growth Rate 86.15%
Current Price $133.19
% of Intrinsic Value 469.61%

salesforce.com, 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 stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 growing its EPSmg (normalized earnings) from $-0.33 in 2015 to an estimated $0.74 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 86.15% 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 salesforce.com, inc. revealed the company was trading above its Graham Number of $24.24. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 180.8, which was above the industry average of 163.46. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.32.

salesforce.com, inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.32
Graham Number $24.24
PEmg 180.80
Current Ratio 1.29
PB Ratio 9.08
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 4/1/2018
Total Current Assets $10,151,000,000
Total Current Liabilities $7,895,000,000
Long-Term Debt $3,172,000,000
Total Assets $22,963,000,000
Intangible Assets $8,429,000,000
Total Liabilities $11,903,000,000
Shares Outstanding (Diluted Average) 754,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.03
Jan2018 $0.17
Jan2017 $0.26
Jan2016 -$0.07
Jan2015 -$0.42
Jan2014 -$0.39
Jan2013 -$0.48
Jan2012 -$0.02
Jan2011 $0.12
Jan2010 $0.16
Jan2009 $0.09
Jan2008 $0.04
Jan2007 $0.00
Jan2006 $0.06
Jan2005 $0.02
Jan2004 $0.01
Jan2003 -$0.09
Jan2002 -$0.34
Jan2001 -$0.60

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.74
Jan2018 $0.03
Jan2017 -$0.10
Jan2016 -$0.28
Jan2015 -$0.33
Jan2014 -$0.24
Jan2013 -$0.11
Jan2012 $0.07
Jan2011 $0.10
Jan2010 $0.09
Jan2009 $0.05
Jan2008 $0.03
Jan2007 $0.01
Jan2006 -$0.01
Jan2005 -$0.09
Jan2004 -$0.17
Jan2003 -$0.24

Recommended Reading:

Other ModernGraham posts about the company

Salesforce.com Inc Valuation – April 2017 $CRM
Salesforce.com Valuation – January 2016 Update $CRM
26 Companies in the Spotlight This Week – 12/13/14
Salesforce.com Inc. Annual Valuation – 2014 $CRM

Other ModernGraham posts about related companies

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Salesforce.com Inc Valuation – April 2017 $CRM
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Shutterstock Inc Valuation – Initial Coverage $SSTK
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eBay Inc Valuation – December 2016 $EBAY
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Salesforce.com Valuation – January 2016 Update $CRM

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.

Simmons First National Corp Valuation – March 2018 $SFNC

Company Profile (obtained from Marketwatch): Simmons First National Corp. operates as a bank holding company. The company’s services include consumer, real estate & commercial loans, checking, savings & time deposits, trust & investment management services and securities & investment services. Simmons First National was founded in 1903 and is headquartered in Pine Bluff, AR.

SFNC Chart

SFNC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SFNC – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,807,610,074 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 92.91% Pass
5. Moderate PEmg Ratio PEmg < 20 18.22 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.28 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 $1.67
MG Growth Estimate 13.67%
MG Value $59.91
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $24.24
MG Value based on 0% Growth $14.21
Market Implied Growth Rate 4.86%
Current Price $30.45
% of Intrinsic Value 50.83%

Simmons First National Corporation 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 $0.87 in 2014 to an estimated $1.67 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.86% 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 Simmons First National Corporation revealed the company was trading below its Graham Number of $34.09. The company pays a dividend of $0.5 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 18.22, which was below the industry average of 24.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Simmons First National Corporation fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $34.09
PEmg 18.22
PB Ratio 1.28
Dividend Yield 1.64%
TTM Dividend $0.50
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 12/1/2017
Long-Term Debt & Capital Lease Obligation $1,520,589,000
Total Assets $15,055,806,000
Intangible Assets $948,722,000
Total Liabilities $12,971,242,000
Shares Outstanding (Diluted Average) 87,370,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.28
Dec2017 $1.33
Dec2016 $1.56
Dec2015 $1.31
Dec2014 $1.06
Dec2013 $0.71
Dec2012 $0.82
Dec2011 $0.74
Dec2010 $1.08
Dec2009 $0.87
Dec2008 $0.96
Dec2007 $0.96
Dec2006 $0.95
Dec2005 $0.92
Dec2004 $0.83
Dec2003 $0.83
Dec2002 $0.77
Dec2001 $0.58
Dec2000 $0.65
Dec1999 $0.58
Dec1998 $0.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.67
Dec2017 $1.31
Dec2016 $1.23
Dec2015 $1.02
Dec2014 $0.87
Dec2013 $0.80
Dec2012 $0.86
Dec2011 $0.90
Dec2010 $0.97
Dec2009 $0.92
Dec2008 $0.94
Dec2007 $0.92
Dec2006 $0.89
Dec2005 $0.83
Dec2004 $0.77
Dec2003 $0.72
Dec2002 $0.65

Recommended Reading:

Other ModernGraham posts about the company

Simmons First National Corporation Valuation – Initial Coverage $SFNC

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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.

Microsoft Corp Valuation – February 2018 $MSFT

Company Profile (obtained from Marketwatch): Microsoft Corp. engages in the provision of developing and marketing software and hardware services. Its products include operating systems for computing devices, servers, phones and intelligent devices. It also offers server applications for distributed computing environments, productivity applications, business solution applications, desktop and server management tools, software development tools, video games, and online advertising. It operates through the following segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing. The Productivity and Business Processes segment consists of products and cloud services in portfolio of productivity, communication, and information services. It comprises of office commercial, office consumer, and microsoft dynamics business solutions. The Intelligent Cloud segment offers hybrid server products and cloud services. It comprises of server products and cloud services and enterprise services. The More Personal Computing segment comprises of windows, devices, gaming, and search advertising. The company was founded by William Henry Gates III in 1975 and is headquartered in Redmond, WA.

MSFT Chart

MSFT data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MSFT – February 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 $742,638,698,133 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.89 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 0.94% Fail
6. Moderate PEmg Ratio PEmg < 20 45.47 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.25 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 2.89 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.67 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 $2.07
MG Growth Estimate -2.40%
MG Value $7.64
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $30.00
MG Value based on 0% Growth $17.58
Market Implied Growth Rate 18.48%
Current Price $94.06
% of Intrinsic Value 1231.05%

Microsoft 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 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 $2.46 in 2014 to an estimated $2.07 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 18.48% 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 Microsoft Corporation revealed the company was trading above its Graham Number of $18.73. The company pays a dividend of $1.53 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 45.47, which was above the industry average of 38.79. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.3.

Microsoft 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) -$1.30
Graham Number $18.73
PEmg 45.47
Current Ratio 2.89
PB Ratio 9.25
Current Dividend $1.53
Dividend Yield 1.63%
Number of Consecutive Years of Dividend Growth 15

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 12/1/2017
Total Current Assets $167,633,000,000
Total Current Liabilities $58,099,000,000
Long-Term Debt $73,348,000,000
Total Assets $256,003,000,000
Intangible Assets $44,389,000,000
Total Liabilities $177,643,000,000
Shares Outstanding (Diluted Average) 7,710,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.66
Jun2017 $2.71
Jun2016 $2.10
Jun2015 $1.48
Jun2014 $2.63
Jun2013 $2.58
Jun2012 $2.00
Jun2011 $2.69
Jun2010 $2.10
Jun2009 $1.62
Jun2008 $1.87
Jun2007 $1.42
Jun2006 $1.20
Jun2005 $1.12
Jun2004 $0.75
Jun2003 $0.69
Jun2002 $0.48
Jun2001 $0.66
Jun2000 $0.85
Jun1999 $0.71
Jun1998 $0.42

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.07
Jun2017 $2.28
Jun2016 $2.10
Jun2015 $2.16
Jun2014 $2.46
Jun2013 $2.32
Jun2012 $2.14
Jun2011 $2.12
Jun2010 $1.78
Jun2009 $1.56
Jun2008 $1.44
Jun2007 $1.16
Jun2006 $0.97
Jun2005 $0.82
Jun2004 $0.67
Jun2003 $0.65
Jun2002 $0.63

Recommended Reading:

Other ModernGraham posts about the company

Microsoft Corporation Valuation – August 2016 $MSFT
Microsoft Corp Valuation – February 2016 $MSFT
Microsoft Corporation Valuation – November 2015 Update $MSFT
Microsoft Corporation Analysis – August 2015 Update $MSFT
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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.

Salesforce.com Inc Valuation – April 2017 $CRM

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 Salesforce.com Inc (CRM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Salesforce.com, inc. is a provider of enterprise software, delivered through the cloud, with a focus on customer relationship management (CRM). The Company focuses on cloud, mobile, social, Internet of Things (IoT) and artificial intelligence technologies. The Company’s service offerings are configured and integrated with other platforms and enterprise applications. The Company delivers its service offerings via Internet browsers and on mobile devices. Its Customer Success Platform is a portfolio of service offerings providing sales force automation, customer service and support, marketing automation, digital commerce, community management, analytics, application development, IoT integration, collaborative productivity tools and its professional cloud services. Its cloud service offerings include Sales Cloud, Service Cloud, Marketing Cloud, Commerce Cloud, Community Cloud, Analytics Cloud, Salesforce Quip and Salesforce Platform.

CRM Chart

CRM data by YCharts

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CRM – April 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 $58,718,203,497 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.83 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 301.10% Pass
6. Moderate PEmg Ratio PEmg < 20 210.18 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.78 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 0.83 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.59 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $0.40
MG Growth Estimate 15.00%
MG Value $15.27
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $5.75
MG Value based on 0% Growth $3.37
Market Implied Growth Rate 100.84%
Current Price $83.37
% of Intrinsic Value 545.91%

salesforce.com, 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 stability over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 growing its EPSmg (normalized earnings) from $-0.24 in 2014 to an estimated $0.4 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 100.84% 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 salesforce.com, inc. revealed the company was trading above its Graham Number of $17.4. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 210.18, which was above the industry average of 82.36. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.84.

salesforce.com, inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.84
Graham Number $17.40
PEmg 210.18
Current Ratio 0.83
PB Ratio 7.78
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 1/1/2017
Total Current Assets $5,996,827,000
Total Current Liabilities $7,258,353,000
Long-Term Debt $2,008,391,000
Total Assets $17,584,923,000
Intangible Assets $8,518,891,000
Total Liabilities $10,084,796,000
Shares Outstanding (Diluted Average) 700,217,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.27
Jan2017 $0.26
Jan2016 -$0.07
Jan2015 -$0.42
Jan2014 -$0.39
Jan2013 -$0.48
Jan2012 -$0.02
Jan2011 $0.12
Jan2010 $0.16
Jan2009 $0.09
Jan2008 $0.04
Jan2007 $0.00
Jan2006 $0.06
Jan2005 $0.02
Jan2004 $0.01
Jan2003 -$0.09
Jan2002 -$0.34
Jan2001 -$0.60

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.40
Jan2017 -$0.10
Jan2016 -$0.28
Jan2015 -$0.33
Jan2014 -$0.24
Jan2013 -$0.11
Jan2012 $0.07
Jan2011 $0.10
Jan2010 $0.09
Jan2009 $0.05
Jan2008 $0.03
Jan2007 $0.01
Jan2006 -$0.01
Jan2005 -$0.09
Jan2004 -$0.17
Jan2003 -$0.24
Jan2002 -$0.27

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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.

Microsoft Corporation Valuation – February 2017 $MSFT

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 Microsoft Corporation (MSFT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Microsoft Corporation is a technology company. The Company develops, licenses, and supports a range of software products, services and devices. The Company’s segments include Productivity and Business Processes, Intelligent Cloud and More Personal Computing. The Company’s products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; video games, and training and certification of computer system integrators and developers. It also designs, manufactures, and sells devices, including personal computers (PCs), tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories, that integrate with its cloud-based offerings. It offers an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content, and it provides solution support and consulting services.

MSFT Chart

MSFT data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MSFT – 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 $480,334,843,658 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.05 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 9.12% Fail
6. Moderate PEmg Ratio PEmg < 20 28.49 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.19 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 2.05 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.80 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 $2.22
MG Growth Estimate -0.65%
MG Value $15.97
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $32.17
MG Value based on 0% Growth $18.86
Market Implied Growth Rate 10.00%
Current Price $63.21
% of Intrinsic Value 395.81%

Microsoft 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 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 $2.32 in 2013 to an estimated $2.22 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 10% 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 Microsoft Corporation revealed the company was trading above its Graham Number of $22.47. The company pays a dividend of $1.47 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 28.49, which was below the industry average of 38.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.39.

Microsoft 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) -$1.39
Graham Number $22.47
PEmg 28.49
Current Ratio 2.05
PB Ratio 7.19
Current Dividend $1.47
Dividend Yield 2.33%
Number of Consecutive Years of Dividend Growth 15

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $144,949,000,000
Total Current Liabilities $70,787,000,000
Long-Term Debt $59,306,000,000
Total Assets $224,610,000,000
Intangible Assets $45,525,000,000
Total Liabilities $155,801,000,000
Shares Outstanding (Diluted Average) 7,830,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.52
Jun2016 $2.10
Jun2015 $1.48
Jun2014 $2.63
Jun2013 $2.58
Jun2012 $2.00
Jun2011 $2.69
Jun2010 $2.10
Jun2009 $1.62
Jun2008 $1.87
Jun2007 $1.42
Jun2006 $1.20
Jun2005 $1.12
Jun2004 $0.75
Jun2003 $0.69
Jun2002 $0.48
Jun2001 $0.66
Jun2000 $0.85
Jun1999 $0.71
Jun1998 $0.42
Jun1997 $0.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.22
Jun2016 $2.10
Jun2015 $2.16
Jun2014 $2.46
Jun2013 $2.32
Jun2012 $2.14
Jun2011 $2.12
Jun2010 $1.78
Jun2009 $1.56
Jun2008 $1.44
Jun2007 $1.16
Jun2006 $0.97
Jun2005 $0.82
Jun2004 $0.67
Jun2003 $0.65
Jun2002 $0.63
Jun2001 $0.67

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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.

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