Keysight Technologies Inc Valuation – April 2019 #KEYS

Company Profile (excerpt from Reuters): Keysight Technologies, Inc. (Keysight), incorporated on December 6, 2013, is a measurement company engaged in providing electronic design and test solutions to communications and electronics industries. The Company provides electronic design and test instruments and systems and related software, software design tools and related services that are used in the design, development, manufacture, installation, deployment and operation of electronics equipment. The Company operates through three segments: Communications Solutions Group (CSG), Electronic Industrial Solutions Group (EISG) and Services Solutions Group (SSG). The CSG and EISG segments provide electronic design and test software, instruments, and systems used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment. The SSG segment provides integrated service solutions, including repair and calibration services, professional services and remanufactured equipment.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KEYS – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $16,693,423,773 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.82 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 17200.00% Pass
6. Moderate PEmg Ratio PEmg < 20 43.15 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.35 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 1.82 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.13 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.06
MG Growth Estimate 3.98%
MG Value $33.86
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $29.84
MG Value based on 0% Growth $17.49
Market Implied Growth Rate 17.32%
Current Price $88.80
% of Intrinsic Value 262.22%

Keysight Technologies 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 net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.63 in 2015 to an estimated $2.06 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.32% 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 Keysight Technologies Inc revealed the company was trading above its Graham Number of $33.26. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 43.15, which was above the industry average of 35.4. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.08.

Keysight Technologies 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) -$4.08
Graham Number $33.26
PEmg 43.15
Current Ratio 1.82
PB Ratio 6.35
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 1/1/2019
Total Current Assets $2,544,000,000
Total Current Liabilities $1,400,000,000
Long-Term Debt $1,291,000,000
Total Assets $5,978,000,000
Intangible Assets $1,775,000,000
Total Liabilities $3,320,000,000
Shares Outstanding (Diluted Average) 190,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.77
Oct2018 $0.86
Oct2017 $0.56
Oct2016 $1.95
Oct2015 $3.00
Oct2014 $2.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.06
Oct2018 $1.38
Oct2017 $1.62
Oct2016 $1.92
Oct2015 $1.63
Oct2014 $0.78

Recommended Reading:

Other ModernGraham posts about the company

Keysight Technologies Inc Valuation – August 2018 $KEYS
Keysight Technologies Inc Valuation – Initial Coverage $KEYS

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Hewlett Packard Enterprise Co Valuation – March 2019 #HPE
Fortive Corp Valuation – March 2019 #FTV
Analog Devices Inc Valuation – March 2019 #ADI
IPG Photonics Corp Valuation – March 2019 #IPGP
Micron Technology Inc Valuation – March 2019 #MU
Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC

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.

Verisign Inc Valuation – March 2019 #VRSN

Company Profile (excerpt from Reuters): VeriSign, Inc., incorporated on April 12, 1995, is a provider of domain name registry services and Internet security, enabling Internet navigation for various domain names and providing protection for Websites and enterprises around the world. The Company operates through Registry Services and Security Services segment. Registry Services ensure the security, stability and resiliency of Internet infrastructure and services, including the .com and .net domains, and operation of the root-zone maintainer functions for the core of the Internet’s Domain Name System (DNS). Security Services provides infrastructure assurance services consisting of Distributed Denial of Services (DDoS) Protection Services and Managed DNS Services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VRSN – 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 $21,248,216,007 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.39 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 81.88% Pass
6. Moderate PEmg Ratio PEmg < 20 40.77 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -15.55 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.39 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.83 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.35
MG Growth Estimate 9.85%
MG Value $122.80
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $63.12
MG Value based on 0% Growth $37.00
Market Implied Growth Rate 16.14%
Current Price $177.49
% of Intrinsic Value 144.54%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.63 in 2015 to an estimated $4.35 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.14% 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 Verisign, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 40.77, which was below the industry average of 56.55, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.33.

Verisign, 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) -$16.33
Graham Number $0.00
PEmg 40.77
Current Ratio 1.39
PB Ratio -15.55
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 12/1/2018
Total Current Assets $1,317,034,000
Total Current Liabilities $947,590,000
Long-Term Debt $1,785,047,000
Total Assets $1,914,504,000
Intangible Assets $52,527,000
Total Liabilities $3,299,978,000
Shares Outstanding (Diluted Average) 121,407,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.12
Dec2018 $4.75
Dec2017 $3.68
Dec2016 $3.42
Dec2015 $2.82
Dec2014 $2.52
Dec2013 $3.49
Dec2012 $1.95
Dec2011 $0.86
Dec2010 $4.64
Dec2009 $1.28
Dec2008 -$1.90
Dec2007 -$0.63
Dec2006 $1.53
Dec2005 $1.63
Dec2004 $0.60
Dec2003 -$1.20
Dec2002 -$20.97
Dec2001 -$65.64
Dec2000 -$19.57
Dec1999 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.35
Dec2018 $3.79
Dec2017 $3.27
Dec2016 $2.99
Dec2015 $2.63
Dec2014 $2.58
Dec2013 $2.56
Dec2012 $1.85
Dec2011 $1.48
Dec2010 $1.53
Dec2009 $0.11
Dec2008 -$0.24
Dec2007 $0.52
Dec2006 -$0.49
Dec2005 -$6.71
Dec2004 -$14.37
Dec2003 -$21.73

Recommended Reading:

Other ModernGraham posts about the company

Verisign Inc Valuation – May 2018 $VRSN
Verisign Inc Valuation – February 2017 $VRSN
Verisign Inc Valuation – August 2016 $VRSN
Verisign Inc. Analysis – 2015 Update $VRSN
20 Companies in the Research Spotlight This Week – June 7, 2014

Other ModernGraham posts about related companies

Motorola Solutions Inc Valuation – February 2019 $MSI
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Xerox Corp Valuation – January 2019 $XRX
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International Business Machines Corp Valuation – November 2018 $IBM
DXC Technology Corp Valuation – November 2018 $DXC
Sykes Enterprises Inc Valuation – October 2018 $SYKE
Computer Programs and Systems Inc Valuation – August 2018 $CPSI
Science Applications International Corp Valuation – July 2018 $SAIC
Acxiom Corp Valuation – July 2018 $ACXM

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.

Signet Jewelers Ltd Valuation – March 2019 #SIG

Company Profile (excerpt from Reuters): Signet Jewelers Limited, incorporated on June 25, 2008, is a retailer of diamond jewelry. As of January 28, 2017, the Company had 3,682 stores and kiosks. The Company’s segments include the Sterling Jewelers division; the Zale division, which consists of the Zale Jewelry and Piercing Pagoda segments; the UK Jewelry division, and Other. The Sterling Jewelers division’s stores operate in the United States in malls and off-mall locations principally as Kay Jewelers (Kay), Kay Jewelers Outlet, Jared The Galleria Of Jewelry (Jared) and Jared Vault. The Zale division operates jewelry stores (Zale Jewelry) and kiosks (Piercing Pagoda), located primarily in shopping malls throughout the United States, Canada and Puerto Rico. Zale Jewelry includes the United States store brand, Zales (Zales Jewelers and Zales Outlet), and the Canadian store brand, Peoples Jewellers. Piercing Pagoda operates through mall-based kiosks. The UK Jewelry division operates stores in the United Kingdom, Republic of Ireland and Channel Islands, principally as H.Samuel and Ernest Jones. The Other segment includes the operations of subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SIG – 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 $1,440,038,868 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.20 Pass
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 5.20% Fail
6. Moderate PEmg Ratio PEmg < 20 11.44 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.73 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 2.20 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.40 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.42
MG Growth Estimate -4.25%
MG Value $1.29
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $35.13
MG Value based on 0% Growth $20.59
Market Implied Growth Rate 1.47%
Current Price $27.71
% of Intrinsic Value 2149.19%

Signet Jewelers Ltd. 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 stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.32 in 2015 to an estimated $2.42 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.47% 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 Signet Jewelers Ltd. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.24 per share, for a yield of 4.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.44, which was below the industry average of 62.84, 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 $1.29.

Signet Jewelers Ltd. 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) $1.29
Graham Number $0.00
PEmg 11.44
Current Ratio 2.20
PB Ratio 0.73
Current Dividend $1.24
Dividend Yield 4.47%
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 10/1/2018
Total Current Assets $3,010,100,000
Total Current Liabilities $1,365,700,000
Long-Term Debt $660,400,000
Total Assets $4,907,500,000
Intangible Assets $849,200,000
Total Liabilities $2,943,700,000
Shares Outstanding (Diluted Average) 51,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$6.23
Jan2018 $7.44
Jan2017 $7.08
Jan2016 $5.87
Jan2015 $4.75
Jan2014 $4.56
Jan2013 $4.35
Jan2012 $3.73
Jan2011 $2.32
Jan2010 $1.83
Jan2009 -$4.62
Jan2008 $2.55
Jan2007 $3.07
Jan2006 $2.71
Jan2005 $2.94
Jan2004 $0.10
Jan2003 $2.47
Jan2002 $1.98
Jan2001 $1.90
Jan2000 $1.71
Jan1999 $0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.42
Jan2018 $6.48
Jan2017 $5.77
Jan2016 $4.96
Jan2015 $4.32
Jan2014 $3.86
Jan2013 $2.84
Jan2012 $1.78
Jan2011 $0.88
Jan2010 $0.48
Jan2009 $0.31
Jan2008 $2.61
Jan2007 $2.51
Jan2006 $2.17
Jan2005 $1.89
Jan2004 $1.45
Jan2003 $1.97

Recommended Reading:

Other ModernGraham posts about the company

Best Stocks Below Their Graham Number – February 2019
10 Undervalued Stocks for the Enterprising Investor – January 2019
10 Undervalued Stocks for the Enterprising Investor – July 2018
10 Best Dividend Paying Stocks for the Enterprising Investor – May 2018
10 Stocks for Using A Benjamin Graham Value Investing Strategy – May 2018

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Johnson & Johnson Valuation – November 2018 $JNJ
Inter Parfums Inc Valuation – July 2018 $IPAR
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Coty Inc Valuation – May 2018 $COTY

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.

Cadence Design Systems Inc Valuation – January 2019 $CDNS

Company Profile (excerpt from Reuters): Cadence Design Systems, Inc., incorporated on April 8, 1987, provides solutions that enable its customers to design electronic products. The Company’s product categories include Functional Verification, Digital integrated circuits (IC) Design and Signoff, Custom IC Design and Verification, System Interconnect and Analysis, and intellectual property (IP). The Company’s functional verification products are used to verify that the circuitry or the software designed will perform as intended. Its digital IC design offerings are used to create representations of a digital circuit or an IC that can be verified for correctness prior to implementation. Its custom IC design and verification offerings are used to create schematic and physical representations of circuits down to the transistor level for analog, mixed-signal, custom digital, memory and radio frequency (RF) designs. Its system interconnect and analysis offerings are used to develop printed circuit boards (PCBs) and IC packages. Its design IP offerings consist of functional blocks, which customers integrate into their ICs for the development process. Its product offerings include electronic design automation software, emulation and prototyping hardware, system interconnect and analysis.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CDNS – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,545,636,946 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.64 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 1535.29% Pass
6. Moderate PEmg Ratio PEmg < 20 51.86 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.77 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 1.64 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.99 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.93
MG Growth Estimate 4.74%
MG Value $16.67
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $13.45
MG Value based on 0% Growth $7.88
Market Implied Growth Rate 21.68%
Current Price $48.09
% of Intrinsic Value 288.43%

Cadence Design Systems Inc is suitable for the Enterprising Investor but not 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 is only concerned with the lack of dividends. 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 $0.7 in 2014 to an estimated $0.93 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 21.68% 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 Cadence Design Systems Inc revealed the company was trading above its Graham Number of $10.32. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 51.86, which was above the industry average of 50.37. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.45.

Cadence Design Systems Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.45
Graham Number $10.32
PEmg 51.86
Current Ratio 1.64
PB Ratio 10.77
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 9/1/2018
Total Current Assets $888,381,000
Total Current Liabilities $541,321,000
Long-Term Debt $345,113,000
Total Assets $2,273,207,000
Intangible Assets $899,726,000
Total Liabilities $1,015,790,000
Shares Outstanding (Diluted Average) 281,646,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.35
Dec2017 $0.73
Dec2016 $0.70
Dec2015 $0.81
Dec2014 $0.52
Dec2013 $0.56
Dec2012 $1.57
Dec2011 $0.27
Dec2010 $0.48
Dec2009 -$0.58
Dec2008 -$7.30
Dec2007 $1.01
Dec2006 $0.46
Dec2005 $0.16
Dec2004 $0.25
Dec2003 -$0.07
Dec2002 $0.23
Dec2001 $0.55
Dec2000 $0.19
Dec1999 -$0.06
Dec1998 $0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.93
Dec2017 $0.70
Dec2016 $0.73
Dec2015 $0.75
Dec2014 $0.70
Dec2013 $0.68
Dec2012 $0.13
Dec2011 -$0.80
Dec2010 -$1.29
Dec2009 -$1.87
Dec2008 -$2.03
Dec2007 $0.52
Dec2006 $0.25
Dec2005 $0.17
Dec2004 $0.20
Dec2003 $0.17
Dec2002 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Cadence Design Systems Inc Valuation – Initial Coverage $CDNS

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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.

Keysight Technologies Inc Valuation – August 2018 $KEYS

Company Profile (excerpt from Reuters): Keysight Technologies, Inc. (Keysight), incorporated on December 6, 2013, is a measurement company engaged in providing electronic design and test solutions to communications and electronics industries. The Company provides electronic design and test instruments and systems and related software, software design tools and related services that are used in the design, development, manufacture, installation, deployment and operation of electronics equipment. The Company operates through three segments: Communications Solutions Group (CSG), Electronic Industrial Solutions Group (EISG) and Services Solutions Group (SSG). The CSG and EISG segments provide electronic design and test software, instruments, and systems used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment. The SSG segment provides integrated service solutions, including repair and calibration services, professional services and remanufactured equipment.

KEYS Chart

KEYS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KEYS – 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 $11,179,503,421 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.30 Pass
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 16300.00% Pass
6. Moderate PEmg Ratio PEmg < 20 31.72 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.54 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 2.30 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.45 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.90
MG Growth Estimate 15.00%
MG Value $73.12
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $27.54
MG Value based on 0% Growth $16.14
Market Implied Growth Rate 11.61%
Current Price $60.25
% of Intrinsic Value 82.39%

Keysight Technologies Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings 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 net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.78 in 2014 to an estimated $1.9 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.61% 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 Keysight Technologies Inc revealed the company was trading above its Graham Number of $25.97. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 31.72, which was below the industry average of 53.7, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-6.37.

Keysight Technologies 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) -$6.37
Graham Number $25.97
PEmg 31.72
Current Ratio 2.30
PB Ratio 4.54
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 $2,189,000,000
Total Current Liabilities $953,000,000
Long-Term Debt $1,789,000,000
Total Assets $5,923,000,000
Intangible Assets $2,645,000,000
Total Liabilities $3,400,000,000
Shares Outstanding (Diluted Average) 190,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.41
Oct2017 $0.56
Oct2016 $1.95
Oct2015 $3.00
Oct2014 $2.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.90
Oct2017 $1.62
Oct2016 $1.92
Oct2015 $1.63
Oct2014 $0.78

Recommended Reading:

Other ModernGraham posts about the company

Keysight Technologies Inc Valuation – Initial Coverage $KEYS

Other ModernGraham posts about related companies

Semtech Corp Valuation – August 2018 $SMTC
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Coherent Inc Valuation – August 2018 $COHR
Teradata Corp Valuation – August 2018 $TDC
Silicon Laboratories Inc Valuation – August 2018 $SLAB
Itron Inc Valuation – July 2018 $ITRI
Celestica Inc Valuation – July 2018 $TSE-CLS
Ciena Corp Valuation – July 2018 $CIEN
iRobot Corp Valuation – July 2018 $IRBT
ScanSource Inc Valuation – July 2018 $SCSC

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.

Selective Insurance Group Inc Valuation – July 2018 $SIGI

Company Profile (excerpt from Reuters): Selective Insurance Group, Inc., incorporated in August 1977, is a holding company. As of December 31, 2016, the Company had 10 insurance subsidiaries, nine of which were licensed by various state departments of insurance to write specific lines of property and casualty insurance business in the standard market. The remaining subsidiary is authorized by various state insurance departments to write property and casualty insurance in the excess and surplus lines (E&S) market. The Company operates its business through four segments: Standard Commercial Lines, Standard Personal Lines, E&S Lines and Investments. Its Standard Commercial Lines segment consists of insurance products and services provided in the standard marketplace to its commercial customers, including businesses, non-profit organizations, and local government agencies. Its Standard Personal Lines segment consists of insurance products and services, including flood insurance coverage that it writes through the National Flood Insurance Program (NFIP), provided primarily to individuals acquiring coverage in the standard marketplace. Its E&S Lines segment consists of insurance products and services provided to customers who have not obtained coverage in the standard marketplace. The investment segment invests insurance premiums, as well as amounts generated through its capital management strategies, which includes the issuance of debt and equity securities.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SIGI – 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 $3,341,689,935 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 280.26% Pass
5. Moderate PEmg Ratio PEmg < 20 20.31 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.10 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 $2.89
MG Growth Estimate 12.20%
MG Value $94.91
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $41.84
MG Value based on 0% Growth $24.53
Market Implied Growth Rate 5.90%
Current Price $58.60
% of Intrinsic Value 61.74%

Selective Insurance Group is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg 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 $1.59 in 2014 to an estimated $2.89 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.9% 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 Selective Insurance Group revealed the company was trading above its Graham Number of $45.41. The company pays a dividend of $0.66 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 20.31, which was below the industry average of 34.9, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Selective Insurance Group performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Graham Number $45.41
PEmg 20.31
PB Ratio 2.10
Dividend Yield 1.13%
TTM Dividend $0.66
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 3/1/2018
Long-Term Debt & Capital Lease Obligation $439,224,000
Total Assets $7,659,949,000
Intangible Assets $7,849,000
Total Liabilities $6,000,153,000
Shares Outstanding (Diluted Average) 59,563,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.13
Dec2017 $2.84
Dec2016 $2.70
Dec2015 $2.85
Dec2014 $2.47
Dec2013 $1.87
Dec2012 $0.68
Dec2011 $0.40
Dec2010 $1.20
Dec2009 $0.68
Dec2008 $0.82
Dec2007 $2.59
Dec2006 $2.65
Dec2005 $2.35
Dec2004 $4.07
Dec2003 $2.20
Dec2002 $1.56
Dec2001 $0.49
Dec2000 $0.51
Dec1999 $0.94
Dec1998 $0.87

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.89
Dec2017 $2.69
Dec2016 $2.45
Dec2015 $2.10
Dec2014 $1.59
Dec2013 $1.09
Dec2012 $0.72
Dec2011 $0.87
Dec2010 $1.27
Dec2009 $1.47
Dec2008 $2.08
Dec2007 $2.73
Dec2006 $2.72
Dec2005 $2.55
Dec2004 $2.35
Dec2003 $1.38
Dec2002 $0.93

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Investor – February 2017
10 Undervalued Companies for the Defensive Investor – January 2017
15 Best Stocks for Value Investors This Week – 1/14/17
Selective Insurance Group Valuation – Initial Coverage $SIGI

Other ModernGraham posts about related companies

Genworth Financial Inc Valuation – June 2018 $GNW
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Assurant Inc Valuation – June 2018 $AIZ
Torchmark Corp Valuation – June 2018 $TMK
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American International Group Inc – June 2018 $AIG
Chubb Ltd Valuation – June 2018 $CB
Loews Corp Valuation – May 2018 $L
Anthem Inc Valuation – May 2018 $ANTM
Berkshire Hathaway Inc Valuation – May 2018 $BRK-B

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.

Signature Bank Valuation – July 2018 $SBNY

Company Profile (excerpt from Reuters): Signature Bank, incorporated in September 2000, is a full-service commercial bank. The Bank operates over 30 private client offices throughout the New York metropolitan area. Its segments include Commercial Banking and Specialty Finance. The Bank offers a range of business and personal banking products and services. Its specialty finance subsidiary, Signature Financial LLC (Signature Financial), provides equipment finance and leasing services. Signature Securities Group Corporation (Signature Securities), a subsidiary of Bank, is a licensed broker-dealer, investment advisor offering investment, brokerage, asset management and insurance products and services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SBNY – 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 $6,501,390,093 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 222.02% Pass
5. Moderate PEmg Ratio PEmg < 20 15.28 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.57 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 Fail
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.56
MG Growth Estimate 9.40%
MG Value $206.50
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $109.65
MG Value based on 0% Growth $64.28
Market Implied Growth Rate 3.39%
Current Price $115.56
% of Intrinsic Value 55.96%

Signature Bank does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history. The Enterprising Investor has concerns regarding 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 Undervalued after growing its EPSmg (normalized earnings) from $4.65 in 2014 to an estimated $7.56 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.39% 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 Signature Bank revealed the company was trading below its Graham Number of $118.23. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 15.28, which was below the industry average of 20.05, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $118.23
PEmg 15.28
PB Ratio 1.57
Dividend Yield 0.00%
TTM Dividend $0.00
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Long-Term Debt & Capital Lease Obligation $4,542,577,000
Total Assets $44,435,634,000
Intangible Assets $0
Total Liabilities $40,434,462,000
Shares Outstanding (Diluted Average) 54,395,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.47
Dec2017 $7.12
Dec2016 $7.37
Dec2015 $7.27
Dec2014 $5.95
Dec2013 $4.76
Dec2012 $3.91
Dec2011 $3.37
Dec2010 $2.46
Dec2009 $1.30
Dec2008 $1.35
Dec2007 $0.91
Dec2006 $1.12
Dec2005 $0.53
Dec2004 $1.15

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.56
Dec2017 $6.90
Dec2016 $6.48
Dec2015 $5.71
Dec2014 $4.65
Dec2013 $3.72
Dec2012 $2.96
Dec2011 $2.28
Dec2010 $1.63
Dec2009 $1.16
Dec2008 $1.06
Dec2007 $0.86
Dec2006 $0.74
Dec2005 $0.48
Dec2004 $0.38

Recommended Reading:

Other ModernGraham posts about the company

Signature Bank Valuation – Initial Coverage $SBNY

Other ModernGraham posts about related companies

Wells Fargo & Co Valuation – June 2018 $WFC
SunTrust Banks Inc Valuation – June 2018 $STI
Comerica Inc Valuation – June 2018 $CMA
SVB Financial Group Valuation – June 2018 $SIVB
US Bancorp Valuation – May 2018 $USB
Bank of New York Mellon Corp Valuation – May 2018 $BK
Citizens Financial Group Inc Valuation – April 2018 $CFG
BB&T Corporation Valuation – April 2018 $BBT
M&T Bank Corp Valuation – April 2018 $MTB
Bank of America Corp Valuation – March 2018 $BAC

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.

Verisign Inc Valuation – May 2018 $VRSN

Company Profile (excerpt from Reuters): VeriSign, Inc., incorporated on April 12, 1995, is a provider of domain name registry services and Internet security, enabling Internet navigation for various domain names and providing protection for Websites and enterprises around the world. The Company operates through Registry Services and Security Services segment. Registry Services ensure the security, stability and resiliency of Internet infrastructure and services, including the .com and .net domains, and operation of the root-zone maintainer functions for the core of the Internet’s Domain Name System (DNS). Security Services provides infrastructure assurance services consisting of Distributed Denial of Services (DDoS) Protection Services and Managed DNS Services.

VRSN Chart

VRSN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VRSN – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,589,991,262 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.55 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 69.76% Pass
6. Moderate PEmg Ratio PEmg < 20 34.42 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -12.67 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.55 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.07 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.68
MG Growth Estimate 6.35%
MG Value $78.02
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $53.35
MG Value based on 0% Growth $31.27
Market Implied Growth Rate 12.96%
Current Price $126.66
% of Intrinsic Value 162.34%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.58 in 2014 to an estimated $3.68 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.96% 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 Verisign, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 34.42, which was below the industry average of 42.24, 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 $-14.02.

Verisign, 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) -$14.02
Graham Number $0.00
PEmg 34.42
Current Ratio 1.55
PB Ratio -12.67
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $2,408,528,000
Total Current Liabilities $1,548,946,000
Long-Term Debt $1,783,159,000
Total Assets $2,905,323,000
Intangible Assets $52,527,000
Total Liabilities $4,140,057,000
Shares Outstanding (Diluted Average) 123,506,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.41
Dec2017 $3.68
Dec2016 $3.42
Dec2015 $2.82
Dec2014 $2.52
Dec2013 $3.49
Dec2012 $1.95
Dec2011 $0.86
Dec2010 $4.64
Dec2009 $1.28
Dec2008 -$1.90
Dec2007 -$0.63
Dec2006 $1.53
Dec2005 $1.63
Dec2004 $0.60
Dec2003 -$1.20
Dec2002 -$20.97
Dec2001 -$65.64
Dec2000 -$19.57
Dec1999 $0.03
Dec1998 -$0.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.68
Dec2017 $3.27
Dec2016 $2.99
Dec2015 $2.63
Dec2014 $2.58
Dec2013 $2.56
Dec2012 $1.85
Dec2011 $1.48
Dec2010 $1.53
Dec2009 $0.11
Dec2008 -$0.24
Dec2007 $0.52
Dec2006 -$0.49
Dec2005 -$6.71
Dec2004 -$14.37
Dec2003 -$21.73
Dec2002 -$28.42

Recommended Reading:

Other ModernGraham posts about the company

Verisign Inc Valuation – February 2017 $VRSN
Verisign Inc Valuation – August 2016 $VRSN
Verisign Inc. Analysis – 2015 Update $VRSN
20 Companies in the Research Spotlight This Week – June 7, 2014
Verisign Inc. Annual Valuation – 2014 $VRSN

Other ModernGraham posts about related companies

Motorola Solutions Inc Valuation – May 2018 $MSI
Leidos Holdings Inc Valuation – April 2018 $LDOS
Gartner Inc Valuation – March 2018 $IT
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International Business Machines Corp Valuation – February 2018 $IBM
Viavi Solutions Inc Valuation – Initial Coverage $VIAV
Equinix Inc Valuation – July 2017 $EQIX
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LivePerson Inc Valuation – Initial Coverage $LPSN
LogMeIn Inc Valuation – Initial Coverage $LOGM

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.

Cadence Design Systems Inc Valuation – Initial Coverage $CDNS

Company Profile (excerpt from Reuters): Cadence Design Systems, Inc., incorporated on April 8, 1987, provides solutions that enable its customers to design electronic products. The Company’s product categories include Functional Verification, Digital integrated circuits (IC) Design and Signoff, Custom IC Design and Verification, System Interconnect and Analysis, and intellectual property (IP). The Company’s functional verification products are used to verify that the circuitry or the software designed will perform as intended. Its digital IC design offerings are used to create representations of a digital circuit or an IC that can be verified for correctness prior to implementation. Its custom IC design and verification offerings are used to create schematic and physical representations of circuits down to the transistor level for analog, mixed-signal, custom digital, memory and radio frequency (RF) designs. Its system interconnect and analysis offerings are used to develop printed circuit boards (PCBs) and IC packages. Its design IP offerings consist of functional blocks, which customers integrate into their ICs for the development process. Its product offerings include electronic design automation software, emulation and prototyping hardware, system interconnect and analysis.

CDNS Chart

CDNS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CDNS – April 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 $10,414,580,128 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.53 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 1652.94% Pass
6. Moderate PEmg Ratio PEmg < 20 36.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.49 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 1.53 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 Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.99
MG Growth Estimate 6.16%
MG Value $20.69
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $14.41
MG Value based on 0% Growth $8.45
Market Implied Growth Rate 14.25%
Current Price $36.77
% of Intrinsic Value 177.69%

Cadence Design Systems 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 net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.7 in 2014 to an estimated $0.99 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.25% 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 Cadence Design Systems Inc revealed the company was trading above its Graham Number of $11.06. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 36.99, which was below the industry average of 49.59, 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 $-1.59.

Cadence Design Systems 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) -$1.59
Graham Number $11.06
PEmg 36.99
Current Ratio 1.53
PB Ratio 10.49
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 12/1/2017
Total Current Assets $979,988,000
Total Current Liabilities $642,398,000
Long-Term Debt $644,369,000
Total Assets $2,418,714,000
Intangible Assets $944,844,000
Total Liabilities $1,429,512,000
Shares Outstanding (Diluted Average) 282,222,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.55
Dec2017 $0.73
Dec2016 $0.70
Dec2015 $0.81
Dec2014 $0.52
Dec2013 $0.56
Dec2012 $1.57
Dec2011 $0.27
Dec2010 $0.48
Dec2009 -$0.58
Dec2008 -$7.30
Dec2007 $1.01
Dec2006 $0.46
Dec2005 $0.16
Dec2004 $0.25
Dec2003 -$0.07
Dec2002 $0.23
Dec2001 $0.55
Dec2000 $0.19
Dec1999 -$0.06
Dec1998 $0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.99
Dec2017 $0.70
Dec2016 $0.73
Dec2015 $0.75
Dec2014 $0.70
Dec2013 $0.68
Dec2012 $0.13
Dec2011 -$0.80
Dec2010 -$1.29
Dec2009 -$1.87
Dec2008 -$2.03
Dec2007 $0.52
Dec2006 $0.25
Dec2005 $0.17
Dec2004 $0.20
Dec2003 $0.17
Dec2002 $0.26

Recommended Reading:

Other ModernGraham posts about the company

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

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Ansys Inc Valuation – March 2018 $ANSS
Citrix Systems Inc Valuation – February 2018 $CTXS
Microsoft Corp Valuation – February 2018 $MSFT
Cisco Systems Inc Valuation – February 2018 $CSCO
Symantec Corp Valuation – August 2017 $SYMC
Intuit Inc Valuation – March 2017 $INTU

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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