South Jersey Industries Inc Valuation – July 2018 $SJI

Company Profile (excerpt from Reuters): South Jersey Industries, Inc. (SJI), incorporated in 1969, is an energy services holding company. The Company provides a range of energy-related products and services, primarily through its subsidiaries. The Company’s segments include Gas utility operations, Wholesale energy operations, SJE, On-Site energy production, Appliance service operations, and Corporate and Services segment. Its subsidiaries include South Jersey Gas Company (SJG), South Jersey Energy Company (SJE), South Jersey Resources Group, LLC (SJRG), South Jersey Exploration, LLC (SJEX), Marina Energy, LLC (Marina), South Jersey Energy Service Plus, LLC (SJESP) and SJI Midstream, LLC (Midstream).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SJI – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,838,070,024 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.45 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 -14.73% Fail
6. Moderate PEmg Ratio PEmg < 20 30.25 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.09 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.45 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.91 Fail
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 $1.11
MG Growth Estimate -3.10%
MG Value $2.54
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $16.07
MG Value based on 0% Growth $9.42
Market Implied Growth Rate 10.88%
Current Price $33.52
% of Intrinsic Value 1318.87%

South Jersey Industries 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 high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and 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 $1.4 in 2014 to an estimated $1.11 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.88% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into South Jersey Industries Inc revealed the company was trading above its Graham Number of $19.9. The company pays a dividend of $1.1 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 30.25, which was above the industry average of 22.48. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-27.53.

South Jersey Industries 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) -$27.53
Graham Number $19.90
PEmg 30.25
Current Ratio 0.45
PB Ratio 2.09
Current Dividend $1.10
Dividend Yield 3.28%
Number of Consecutive Years of Dividend Growth 19

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 $413,506,000
Total Current Liabilities $924,180,000
Long-Term Debt $974,749,000
Total Assets $3,890,080,000
Intangible Assets $15,818,000
Total Liabilities $2,608,583,000
Shares Outstanding (Diluted Average) 79,724,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.52
Dec2017 -$0.04
Dec2016 $1.56
Dec2015 $1.52
Dec2014 $1.46
Dec2013 $1.28
Dec2012 $1.49
Dec2011 $1.49
Dec2010 $1.11
Dec2009 $0.97
Dec2008 $1.29
Dec2007 $1.05
Dec2006 $1.22
Dec2005 $0.69
Dec2004 $0.76
Dec2003 $0.63
Dec2002 $0.60
Dec2001 $0.57
Dec2000 $0.53
Dec1999 $0.50
Dec1998 $0.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.11
Dec2017 $0.99
Dec2016 $1.49
Dec2015 $1.45
Dec2014 $1.40
Dec2013 $1.33
Dec2012 $1.33
Dec2011 $1.23
Dec2010 $1.11
Dec2009 $1.09
Dec2008 $1.10
Dec2007 $0.96
Dec2006 $0.87
Dec2005 $0.68
Dec2004 $0.65
Dec2003 $0.59
Dec2002 $0.54

Recommended Reading:

Other ModernGraham posts about the company

South Jersey Industries Inc Valuation – Initial Coverage $SJI

Other ModernGraham posts about related companies

Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE
Suburban Propane Partners LP Valuation – June 2018 $SPH
Public Service Enterprise Group Inc Valuation – June 2018 $PEG
Eversource Energy Valuation – June 2018 $ES
PPL Corp Valuation – June 2018 $PPL
Entergy Corp Valuation – June 2018 $ETR
Pinnacle West Capital Corp Valuation – June 2018 $PNW
NiSource Inc Valuation – June 2018 $NI
American Electric Power Co Valuation – June 2018 $AEP
American Water Works Co Inc Valuation – June 2018 $AWK

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.

South Jersey Industries Inc Valuation – Initial Coverage $SJI

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 South Jersey Industries Inc (SJI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): South Jersey Industries, Inc. (SJI) is an energy services holding company. The Company provides a range of energy-related products and services, primarily through its subsidiaries. Its subsidiaries include South Jersey Gas Company (SJG), South Jersey Energy Company (SJE), South Jersey Resources Group, LLC (SJRG), South Jersey Exploration, LLC (SJEX), Marina Energy, LLC (Marina), South Jersey Energy Service Plus, LLC (SJESP) and SJI Midstream, LLC. The Company operates through various segments, including Gas utility operations (SJG), Wholesale energy operations, SJE, On-Site energy production, Appliance service operations and Corporate & Services. The Company groups its nonutility operations into over two categories: Energy Group and Energy Services. Energy Group includes wholesale energy, retail gas and other, and retail electric operations. Energy Services include on-site energy production and appliance service operations.

SJI Chart

SJI data by YCharts

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of SJI – January 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 $2,546,603,539 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.44 Fail
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 31.72% Fail
6. Moderate PEmg Ratio PEmg < 20 22.17 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.99 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.44 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.78 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.43
MG Growth Estimate 1.11%
MG Value $15.31
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $20.69
MG Value based on 0% Growth $12.13
Market Implied Growth Rate 6.83%
Current Price $31.63
% of Intrinsic Value 206.61%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.33 in 2012 to an estimated $1.43 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.83% 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 South Jersey Industries Inc revealed the company was trading above its Graham Number of $22.25. The company pays a dividend of $1.06 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 22.17, which was below the industry average of 69.19, 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 $-24.26.

South Jersey Industries 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) -$24.26
Graham Number $22.25
PEmg 22.15
Current Ratio 0.44
PB Ratio 1.99
Current Dividend $1.06
Dividend Yield 3.34%
Number of Consecutive Years of Dividend Growth 18

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $357,764,000
Total Current Liabilities $812,397,000
Long-Term Debt $808,704,000
Total Assets $3,557,116,000
Intangible Assets $24,242,000
Total Liabilities $2,289,737,000
Shares Outstanding (Diluted Average) 79,635,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.38
Dec2015 $1.52
Dec2014 $1.46
Dec2013 $1.28
Dec2012 $1.49
Dec2011 $1.49
Dec2010 $1.11
Dec2009 $0.97
Dec2008 $1.29
Dec2007 $1.05
Dec2006 $1.22
Dec2005 $0.69
Dec2004 $0.77
Dec2003 $0.64
Dec2002 $0.72
Dec2001 $0.57
Dec2000 $0.53
Dec1999 $0.50
Dec1998 $0.26
Dec1997 $0.37
Dec1996 $0.71

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.43
Dec2015 $1.45
Dec2014 $1.40
Dec2013 $1.33
Dec2012 $1.33
Dec2011 $1.23
Dec2010 $1.11
Dec2009 $1.09
Dec2008 $1.10
Dec2007 $0.96
Dec2006 $0.88
Dec2005 $0.70
Dec2004 $0.68
Dec2003 $0.62
Dec2002 $0.58
Dec2001 $0.49
Dec2000 $0.46

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Secure Energy Services Inc Valuation – Initial Coverage $TSE:SES
Surge Energy Inc Valuation – Initial Coverage $TSE:SGY
Range Resources Corp Valuation – January 2017 $RRC
Seacor Holdings Inc Valuation – Initial Coverage $CKH
Inter Pipeline Ltd Valuation – Initial Coverage $TSE:IPL
CIRCOR International Inc Valuation – Initial Coverage $CIR
National-Oilwell Varco Valuation – December 2016 $NOV
Canadian Energy Services & Technology Corp Valuation – Initial Coverage $CEU
WPX Energy Inc Valuation – September 2016 $WPX
Newfield Exploration Co Valuation – December 2016 $NFX

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.

WEC Energy Group Inc Valuation – January 2019 $WEC

Company Profile (excerpt from Reuters): WEC Energy Group, Inc., incorporated on June 26, 1981, was a diversified holding company with natural gas and electric utility operations (serving customers in Wisconsin, Illinois, Michigan, and Minnesota), an approximately 60% equity ownership interest in American Transmission Company LLC (ATC) (a federally regulated electric transmission company), and non-utility electric operations through its We Power business, as of December 31, 2016. The Company’s segments include Wisconsin; Illinois; Other States; Electric Transmission; We Power, and Corporate and Other.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WEC – 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 $22,291,919,446 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.51 Fail
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 73.58% Pass
6. Moderate PEmg Ratio PEmg < 20 22.17 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.27 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.51 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.17 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.19
MG Growth Estimate 4.67%
MG Value $56.89
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $46.22
MG Value based on 0% Growth $27.09
Market Implied Growth Rate 6.83%
Current Price $70.65
% of Intrinsic Value 124.18%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.43 in 2014 to an estimated $3.19 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.83% 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 WEC Energy Group Inc revealed the company was trading above its Graham Number of $47.26. The company pays a dividend of $2.08 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 22.17, which was above the industry average of 21.62. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-65.89.

WEC Energy Group 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) -$65.89
Graham Number $47.26
PEmg 22.17
Current Ratio 0.51
PB Ratio 2.27
Current Dividend $2.08
Dividend Yield 2.94%
Number of Consecutive Years of Dividend Growth 2

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,839,700,000
Total Current Liabilities $3,602,500,000
Long-Term Debt $9,119,000,000
Total Assets $32,562,400,000
Intangible Assets $3,052,800,000
Total Liabilities $22,719,700,000
Shares Outstanding (Diluted Average) 316,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.30
Dec2017 $3.79
Dec2016 $2.96
Dec2015 $2.34
Dec2014 $2.59
Dec2013 $2.51
Dec2012 $2.35
Dec2011 $2.24
Dec2010 $1.93
Dec2009 $1.62
Dec2008 $1.52
Dec2007 $1.42
Dec2006 $1.34
Dec2005 $1.31
Dec2004 $1.29
Dec2003 $1.03
Dec2002 $0.59
Dec2001 $0.93
Dec2000 $0.64
Dec1999 $0.90
Dec1998 $0.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.19
Dec2017 $3.03
Dec2016 $2.62
Dec2015 $2.44
Dec2014 $2.43
Dec2013 $2.28
Dec2012 $2.08
Dec2011 $1.88
Dec2010 $1.66
Dec2009 $1.49
Dec2008 $1.41
Dec2007 $1.33
Dec2006 $1.23
Dec2005 $1.12
Dec2004 $0.99
Dec2003 $0.83
Dec2002 $0.74

Recommended Reading:

Other ModernGraham posts about the company

WEC Energy Group Inc Valuation – March 2018 $WEC
WEC Energy Group Inc Valuation – June 2016 $WEC
Wisconsin Energy Corporation Annual Valuation – 2015 $WEC
16 Companies in the Spotlight this Week – 4/19/14
Wisconsin Energy Corp (WEC) Annual Valuation – 2014

Other ModernGraham posts about related companies

CMS Energy Corp Valuation – January 2019 $CMS
Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU
Spire Inc Valuation – August 2018 $SR
Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB
Just Energy Group Inc Valuation – August 2018 $TSE:JE
South Jersey Industries Inc Valuation – July 2018 $SJI
Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE

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.

Southern Co Valuation – January 2019 $SO

Company Profile (excerpt from Reuters): The Southern Company (Southern Company), incorporated on November 9, 1945, is a holding company. The Company owns all of the stock of the traditional electric operating companies and the parent entities of Southern Power Company (Southern Power) and Southern Company Gas, and owns other direct and indirect subsidiaries. The Company owns all of the outstanding common stock of Alabama Power Company (Alabama Power), Georgia Power Company (Georgia Power), and Mississippi Power Company (Mississippi Power), each of which is an operating public utility company. The primary business of the Southern Company system is electricity sales by the traditional electric operating companies and Southern Power and the distribution of natural gas by Southern Company Gas. The Company’s segments include Gas distribution operations, Gas marketing services, Wholesale gas services, Gas midstream operations and All other.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SO – 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 $48,326,917,585 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -22.24% Fail
6. Moderate PEmg Ratio PEmg < 20 24.70 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.70 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.57 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.90
MG Growth Estimate -2.36%
MG Value $7.18
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $27.57
MG Value based on 0% Growth $16.16
Market Implied Growth Rate 8.10%
Current Price $46.97
% of Intrinsic Value 654.19%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.26 in 2014 to an estimated $1.9 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.1% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Southern Co revealed the company was trading above its Graham Number of $33.1. The company pays a dividend of $2.3 per share, for a yield of 4.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.7, which was above the industry average of 21.62. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-71.86.

Southern Co 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) -$71.86
Graham Number $33.10
PEmg 24.70
Current Ratio 0.72
PB Ratio 1.70
Current Dividend $2.30
Dividend Yield 4.90%
Number of Consecutive Years of Dividend Growth 17

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 $9,384,000,000
Total Current Liabilities $12,965,000,000
Long-Term Debt $41,425,000,000
Total Assets $111,717,000,000
Intangible Assets $5,989,000,000
Total Liabilities $83,328,000,000
Shares Outstanding (Diluted Average) 1,029,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.03
Dec2017 $0.84
Dec2016 $2.55
Dec2015 $2.59
Dec2014 $2.18
Dec2013 $1.87
Dec2012 $2.67
Dec2011 $2.55
Dec2010 $2.36
Dec2009 $2.06
Dec2008 $2.25
Dec2007 $2.28
Dec2006 $2.10
Dec2005 $2.13
Dec2004 $2.06
Dec2003 $2.02
Dec2002 $1.85
Dec2001 $1.82
Dec2000 $2.01
Dec1999 $1.86
Dec1998 $1.40

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.90
Dec2017 $1.89
Dec2016 $2.40
Dec2015 $2.34
Dec2014 $2.26
Dec2013 $2.30
Dec2012 $2.47
Dec2011 $2.34
Dec2010 $2.23
Dec2009 $2.16
Dec2008 $2.20
Dec2007 $2.16
Dec2006 $2.07
Dec2005 $2.03
Dec2004 $1.97
Dec2003 $1.92
Dec2002 $1.85

Recommended Reading:

Other ModernGraham posts about the company

Southern Co Valuation – March 2018 $SO
Southern Company Valuation – June 2016 $SO
58 Companies in the Spotlight This Week – 1/31/15
Southern Company Annual Valuation – 2015 $SO
14 Companies in the Spotlight This Week – 1/25/14

Other ModernGraham posts about related companies

CMS Energy Corp Valuation – January 2019 $CMS
Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU
Spire Inc Valuation – August 2018 $SR
Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB
Just Energy Group Inc Valuation – August 2018 $TSE:JE
South Jersey Industries Inc Valuation – July 2018 $SJI
Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE

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.

CenterPoint Energy Inc Valuation – January 2019 $CNP

Company Profile (excerpt from Reuters): CenterPoint Energy, Inc., incorporated on August 31, 2001, is a public utility holding company. The Company’s operating subsidiaries own and operate electric transmission and distribution facilities, and natural gas distribution facilities, and own interests in Enable Midstream Partners, LP (Enable). The Company’s segments include Electric Transmission & Distribution, Natural Gas Distribution, Energy Services, Midstream Investments and Other Operations. Its Electric Transmission & Distribution segment provides electric transmission and distribution services to retail electric providers (REPs). Its Natural Gas Distribution segment offers intrastate natural gas sales to and natural gas transportation and distribution for residential, commercial and industrial customers. Its Energy Services segment includes non-rate regulated gas sales to, and transportation and storage services for, commercial and industrial customers. Its Midstream Investments segment includes equity investment in Enable that owns, operates and develops natural gas and crude oil assets. Its Other Operations segment includes office buildings and other real estate used in its business operations and other corporate operations, which support all of its business operations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CNP – 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 $14,689,922,597 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.06 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 13.14% Fail
6. Moderate PEmg Ratio PEmg < 20 20.20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.31 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.06 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 50.01 Fail
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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.45
MG Growth Estimate 1.09%
MG Value $15.49
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $21.04
MG Value based on 0% Growth $12.34
Market Implied Growth Rate 5.85%
Current Price $29.31
% of Intrinsic Value 189.23%

CenterPoint Energy, 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 high PEmg ratio. 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. 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 $1.35 in 2014 to an estimated $1.45 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.85% 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 CenterPoint Energy, Inc. revealed the company was trading above its Graham Number of $14.08. The company pays a dividend of $1.07 per share, for a yield of 3.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.2, which was below the industry average of 21.62, 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 $-32.17.

CenterPoint Energy, 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) -$32.17
Graham Number $14.08
PEmg 20.20
Current Ratio 1.06
PB Ratio 2.31
Current Dividend $1.07
Dividend Yield 3.65%
Number of Consecutive Years of Dividend Growth 12

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 $2,726,000,000
Total Current Liabilities $2,581,000,000
Long-Term Debt $7,252,000,000
Total Assets $22,228,000,000
Intangible Assets $934,000,000
Total Liabilities $16,720,000,000
Shares Outstanding (Diluted Average) 435,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.81
Dec2017 $4.13
Dec2016 $1.00
Dec2015 -$1.61
Dec2014 $1.42
Dec2013 $0.72
Dec2012 $0.97
Dec2011 $3.17
Dec2010 $1.07
Dec2009 $1.01
Dec2008 $1.30
Dec2007 $1.17
Dec2006 $1.33
Dec2005 $0.75
Dec2004 -$2.94
Dec2003 $1.46
Dec2002 -$13.16
Dec2001 $3.35
Dec2000 $1.56
Dec1999 $5.18
Dec1998 -$0.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.45
Dec2017 $1.56
Dec2016 $0.35
Dec2015 $0.33
Dec2014 $1.35
Dec2013 $1.34
Dec2012 $1.60
Dec2011 $1.80
Dec2010 $1.13
Dec2009 $1.14
Dec2008 $0.92
Dec2007 $0.60
Dec2006 -$0.63
Dec2005 -$1.77
Dec2004 -$2.67
Dec2003 -$1.80
Dec2002 -$2.52

Recommended Reading:

Other ModernGraham posts about the company

CenterPoint Energy Inc Valuation – March 2018 $CNP
CenterPoint Energy Inc Valuation – June 2016 $CNP
18 Companies in the Spotlight This Week – 3/15/15
CenterPoint Energy Inc. Annual Valuation – 2015 $CNP
26 Companies in the Spotlight This Week – 11/22/14

Other ModernGraham posts about related companies

CMS Energy Corp Valuation – January 2019 $CMS
Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU
Spire Inc Valuation – August 2018 $SR
Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB
Just Energy Group Inc Valuation – August 2018 $TSE:JE
South Jersey Industries Inc Valuation – July 2018 $SJI
Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE

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.

CMS Energy Corp Valuation – January 2019 $CMS

Company Profile (excerpt from Reuters): CMS Energy Corporation (CMS Energy), incorporated on February 26, 1987, is an energy company operating primarily in Michigan. The Company operates through three segments: electric utility, which consists of regulated activities associated with the generation, transmission and distribution of electricity in Michigan; gas utility, which consists of regulated activities associated with the transportation, storage and distribution of natural gas in Michigan, and enterprises, which consists of various subsidiaries engaging primarily in domestic independent power production. The Company is the parent holding company of various subsidiaries, including Consumers Energy Company (Consumers), an electric and gas utility company, and CMS Enterprises Company (CMS Enterprises), a domestic independent power producer.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CMS – 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 $14,206,216,167 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.69 Fail
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 58.24% Pass
6. Moderate PEmg Ratio PEmg < 20 25.35 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.97 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 0.69 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -8.30 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.98
MG Growth Estimate 3.60%
MG Value $31.05
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $28.68
MG Value based on 0% Growth $16.81
Market Implied Growth Rate 8.42%
Current Price $50.14
% of Intrinsic Value 161.50%

CMS Energy Corporation 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, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.6 in 2014 to an estimated $1.98 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.42% 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 CMS Energy Corporation revealed the company was trading above its Graham Number of $28.75. The company pays a dividend of $1.33 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 25.35, which was above the industry average of 21.62. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-59.16.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$59.16
Graham Number $28.75
PEmg 25.35
Current Ratio 0.69
PB Ratio 2.97
Current Dividend $1.33
Dividend Yield 2.65%
Number of Consecutive Years of Dividend Growth 11

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 $2,374,000,000
Total Current Liabilities $3,442,000,000
Long-Term Debt $8,869,000,000
Total Assets $23,913,000,000
Intangible Assets $0
Total Liabilities $19,127,000,000
Shares Outstanding (Diluted Average) 283,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.33
Dec2017 $1.64
Dec2016 $1.98
Dec2015 $1.89
Dec2014 $1.74
Dec2013 $1.66
Dec2012 $1.39
Dec2011 $1.57
Dec2010 $1.28
Dec2009 $0.91
Dec2008 $1.20
Dec2007 -$1.02
Dec2006 -$0.41
Dec2005 -$0.44
Dec2004 $0.64
Dec2003 -$0.30
Dec2002 -$4.68
Dec2001 -$3.51
Dec2000 $0.04
Dec1999 $2.17
Dec1998 $2.45

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.98
Dec2017 $1.80
Dec2016 $1.83
Dec2015 $1.72
Dec2014 $1.60
Dec2013 $1.47
Dec2012 $1.34
Dec2011 $1.14
Dec2010 $0.75
Dec2009 $0.34
Dec2008 $0.03
Dec2007 -$0.47
Dec2006 -$0.48
Dec2005 -$0.89
Dec2004 -$1.27
Dec2003 -$1.90
Dec2002 -$2.04

Recommended Reading:

Other ModernGraham posts about the company

CMS Energy Corp Valuation – March 2018 $CMS
CMS Energy Corp Valuation – June 2016 $CMS
40 Companies in the Spotlight This Week – 2/21/15
CMS Energy Corporation Annual Valuation – 2015 $CMS
5 Undervalued Companies to Research with a Low Beta – February 2015

Other ModernGraham posts about related companies

Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU
Spire Inc Valuation – August 2018 $SR
Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB
Just Energy Group Inc Valuation – August 2018 $TSE:JE
South Jersey Industries Inc Valuation – July 2018 $SJI
Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE
Suburban Propane Partners LP Valuation – June 2018 $SPH

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.

Xcel Energy Inc Valuation – December 2018 $XEL

Company Profile (excerpt from Reuters): Xcel Energy Inc., incorporated on June 17, 1909, is a public utility holding company. The Company’s operations include the activity of four utility subsidiaries that serve electric and natural gas customers in eight states. Its segments include regulated electric utility, regulated natural gas utility and all other. Its utility subsidiaries include NSP-Minnesota, NSP-Wisconsin, Public Service Company of Colorado (PSCo) and Southwestern Public Service Co. (SPS), which serve customers in portions of Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas and Wisconsin. Along with WYCO Development LLC (WYCO), a joint venture formed with Colorado Interstate Gas Company, LLC (CIG) to develop and lease natural gas pipelines storage and compression facilities, and WestGas InterState, Inc. (WGI), an interstate natural gas pipeline company, these companies comprise the regulated utility operations.

Downloadable PDF version of this valuation:

ModernGraham Valuation of XEL – December 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 $26,564,708,796 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.78 Fail
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 43.15% Pass
6. Moderate PEmg Ratio PEmg < 20 23.00 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.17 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.78 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -18.57 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.25
MG Growth Estimate 2.82%
MG Value $31.81
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $32.62
MG Value based on 0% Growth $19.12
Market Implied Growth Rate 7.25%
Current Price $51.73
% of Intrinsic Value 162.63%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.89 in 2014 to an estimated $2.25 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.25% 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 Xcel Energy Inc revealed the company was trading above its Graham Number of $35.19. The company pays a dividend of $1.44 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23, which was above the industry average of 22.27. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-58.06.

Xcel Energy 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) -$58.06
Graham Number $35.19
PEmg 23.00
Current Ratio 0.78
PB Ratio 2.17
Current Dividend $1.44
Dividend Yield 2.78%
Number of Consecutive Years of Dividend Growth 14

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 $3,003,000,000
Total Current Liabilities $3,838,000,000
Long-Term Debt $15,508,000,000
Total Assets $44,835,000,000
Intangible Assets $0
Total Liabilities $32,670,000,000
Shares Outstanding (Diluted Average) 511,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.44
Dec2017 $2.25
Dec2016 $2.21
Dec2015 $1.94
Dec2014 $2.03
Dec2013 $1.91
Dec2012 $1.85
Dec2011 $1.72
Dec2010 $1.62
Dec2009 $1.48
Dec2008 $1.46
Dec2007 $1.35
Dec2006 $1.36
Dec2005 $1.23
Dec2004 $0.87
Dec2003 $1.50
Dec2002 -$5.82
Dec2001 $2.30
Dec2000 $1.54
Dec1999 $1.70
Dec1998 $1.91

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.25
Dec2017 $2.13
Dec2016 $2.04
Dec2015 $1.93
Dec2014 $1.89
Dec2013 $1.79
Dec2012 $1.69
Dec2011 $1.59
Dec2010 $1.50
Dec2009 $1.42
Dec2008 $1.34
Dec2007 $1.27
Dec2006 $0.77
Dec2005 $0.32
Dec2004 -$0.06
Dec2003 -$0.27
Dec2002 -$0.66

Recommended Reading:

Other ModernGraham posts about the company

Xcel Energy Inc Valuation – February 2018 $XEL
Xcel Energy Inc Valuation – May 2016 $XEL
Xcel Energy Inc. Analysis – September 2015 Update $XEL
The 10 Best Stocks For Value Investors This Week – 6/20/15
Xcel Energy Analysis – June 2015 Update $XEL

Other ModernGraham posts about related companies

California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU
Spire Inc Valuation – August 2018 $SR
Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB
Just Energy Group Inc Valuation – August 2018 $TSE:JE
South Jersey Industries Inc Valuation – July 2018 $SJI
Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE
Suburban Propane Partners LP Valuation – June 2018 $SPH
Public Service Enterprise Group Inc Valuation – June 2018 $PEG

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.

California Water Service Group Valuation – October 2018 $CWT

Company Profile (excerpt from Reuters): California Water Service Group, incorporated on August 2, 1999, is a holding company. The Company operates through the supply and distribution of water and providing water-related utility services segment. The Company, through its subsidiaries, provides non-regulated services and non-regulated services to private companies and municipalities. The bulk of the business consists of the production, purchase, storage, treatment, testing, distribution and sale of water for domestic, industrial, public and irrigation uses, and for fire protection. It also provides non-regulated water-related services under agreements with municipalities and other private companies. The non-regulated services include water system operation, billing and meter reading services. Non-regulated operations also include the lease of communication antenna sites, lab services and promotion of other non-regulated services. Its subsidiaries include California Water Service Company (Cal Water), New Mexico Water Service Company (New Mexico Water), Washington Water Service Company (Washington Water), Hawaii Water Service Company, Inc. (Hawaii Water) and CWS Utility Services and HWS Utility Services LLC.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CWT – October 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 $2,037,687,186 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.30 Fail
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 28.65% Fail
6. Moderate PEmg Ratio PEmg < 20 36.33 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.97 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 0.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -0.96 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.17
MG Growth Estimate 1.16%
MG Value $12.63
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $16.92
MG Value based on 0% Growth $9.92
Market Implied Growth Rate 13.92%
Current Price $42.39
% of Intrinsic Value 335.57%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.08 in 2014 to an estimated $1.17 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.92% 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 California Water Service Group revealed the company was trading above its Graham Number of $19.42. The company pays a dividend of $0.72 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 36.33, which was above the industry average of 22.78. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-39.81.

California Water Service Group 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) -$39.81
Graham Number $19.42
PEmg 36.33
Current Ratio 0.30
PB Ratio 2.97
Current Dividend $0.72
Dividend Yield 1.70%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $189,570,000
Total Current Liabilities $622,300,000
Long-Term Debt $414,530,000
Total Assets $2,789,514,000
Intangible Assets $2,615,000
Total Liabilities $2,103,582,000
Shares Outstanding (Diluted Average) 48,073,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.16
Dec2017 $1.40
Dec2016 $1.01
Dec2015 $0.94
Dec2014 $1.19
Dec2013 $1.02
Dec2012 $1.17
Dec2011 $0.90
Dec2010 $0.90
Dec2009 $0.98
Dec2008 $0.95
Dec2007 $0.75
Dec2006 $0.67
Dec2005 $0.74
Dec2004 $0.70
Dec2003 $0.57
Dec2002 $0.63
Dec2001 $0.49
Dec2000 $0.66
Dec1999 $0.72
Dec1998 $0.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.17
Dec2017 $1.15
Dec2016 $1.04
Dec2015 $1.05
Dec2014 $1.08
Dec2013 $1.02
Dec2012 $1.00
Dec2011 $0.91
Dec2010 $0.89
Dec2009 $0.87
Dec2008 $0.80
Dec2007 $0.71
Dec2006 $0.68
Dec2005 $0.66
Dec2004 $0.62
Dec2003 $0.59
Dec2002 $0.61

Recommended Reading:

Other ModernGraham posts about the company

California Water Service Group Valuation – Initial Coverage $CWT

Other ModernGraham posts about related companies

Canadian Utilities Ltd Valuation – September 2018 $TSE:CU
Spire Inc Valuation – August 2018 $SR
Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB
Just Energy Group Inc Valuation – August 2018 $TSE:JE
South Jersey Industries Inc Valuation – July 2018 $SJI
Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE
Suburban Propane Partners LP Valuation – June 2018 $SPH
Public Service Enterprise Group Inc Valuation – June 2018 $PEG
Eversource Energy Valuation – June 2018 $ES

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.

Canadian Utilities Ltd Valuation – September 2018 $TSE:CU

Company Profile (excerpt from Reuters): Canadian Utilities Limited is a global enterprise company. Its segments include Electricity, Pipeline & Liquids, and Corporate & Other. Its Electricity segment’s activities are conducted through two regulated businesses; ATCO Electric Distribution and ATCO Electric Transmission, and three non-regulated businesses, ATCO Power, ATCO Power Australia and Alberta PowerLine (APL). The Pipelines & Liquids segment’s activities are conducted through three regulated businesses, ATCO Gas, ATCO Pipelines and ATCO Gas Australia, and one non-regulated business, ATCO Energy Solutions. It delivers natural gas distribution and transmission services, energy storage, and industrial water solutions to existing and new customers. The Corporate & Other segment includes retail energy business, which through ATCOenergy, sells electricity and natural gas to large commercial retail customers. It also includes the commercial real estate in Alberta, and the strategic investment and expansion into Mexico.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-CU – September 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,697,840,205 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.10 Fail
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 7.85% Fail
6. Moderate PEmg Ratio PEmg < 20 17.27 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.36 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.10 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 87.75 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.84
MG Growth Estimate -2.18%
MG Value $7.60
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $26.66
MG Value based on 0% Growth $15.63
Market Implied Growth Rate 4.38%
Current Price $31.75
% of Intrinsic Value 417.51%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.15 in 2014 to an estimated $1.84 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.38% 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 Canadian Utilities Limited Class A revealed the company was trading above its Graham Number of $28.9. The company pays a dividend of $1.43 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 17.27, which was below the industry average of 22.75, 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 $-49.29.

Canadian Utilities Limited Class A 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) -$49.29
Graham Number $28.90
PEmg 17.27
Current Ratio 1.10
PB Ratio 1.36
Current Dividend $1.43
Dividend Yield 4.50%
Number of Consecutive Years of Dividend Growth 10

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $1,181,000,000
Total Current Liabilities $1,070,000,000
Long-Term Debt $9,740,000,000
Total Assets $20,911,000,000
Intangible Assets $600,000,000
Total Liabilities $14,580,000,000
Shares Outstanding (Diluted Average) 271,818,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.10
Dec2017 $1.54
Dec2016 $2.06
Dec2015 $1.11
Dec2014 $2.52
Dec2013 $2.09
Dec2012 $2.02
Dec2011 $1.83
Dec2010 $1.61
Dec2009 $1.86
Dec2008 $1.65
Dec2007 $1.54
Dec2006 $1.28
Dec2005 $1.04
Dec2004 $1.22
Dec2003 $1.02
Dec2002 $1.20
Dec2001 $0.93
Dec2000 $0.90
Dec1999 $0.78
Dec1998 $0.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.84
Dec2017 $1.76
Dec2016 $1.90
Dec2015 $1.85
Dec2014 $2.15
Dec2013 $1.94
Dec2012 $1.84
Dec2011 $1.73
Dec2010 $1.65
Dec2009 $1.60
Dec2008 $1.43
Dec2007 $1.29
Dec2006 $1.16
Dec2005 $1.10
Dec2004 $1.10
Dec2003 $1.02
Dec2002 $0.98

Recommended Reading:

Other ModernGraham posts about the company

Canadian Utilities Ltd Valuation – Initial Coverage $TSE:CU

Other ModernGraham posts about related companies

Spire Inc Valuation – August 2018 $SR
Capital Power Corp Valuation – August 2018 $TSE-CPX
Superior Plus Corp Valuation – August 2018 $TSX-SPB
Just Energy Group Inc Valuation – August 2018 $TSE:JE
South Jersey Industries Inc Valuation – July 2018 $SJI
Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE
Suburban Propane Partners LP Valuation – June 2018 $SPH
Public Service Enterprise Group Inc Valuation – June 2018 $PEG
Eversource Energy Valuation – June 2018 $ES
PPL Corp Valuation – June 2018 $PPL

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.

Spire Inc Valuation – August 2018 $SR

Company Profile (excerpt from Reuters): Spire Inc., formerly The Laclede Group, Inc., incorporated on October 18, 2000, is engaged to transform its business and pursue growth by growing its gas utility business through prudent investment in infrastructure upgrades and organic growth initiatives; acquire and integrate gas utilities; modernize its gas assets, and invest in innovation. The Company has two business segments, which include gas utility and gas marketing. The gas utility segment includes the regulated operations of Laclede Gas Company (Laclede Gas), Alabama Gas Corporation (Alagasco) and EnergySouth, Inc. (EnergySouth). The gas marketing segment includes Laclede Energy Resources, Inc. (LER), a subsidiary engaged in the marketing of natural gas and related activities on a non-regulated basis.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SR – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,798,503,176 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 Fail
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 33.99% Pass
6. Moderate PEmg Ratio PEmg < 20 20.93 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.80 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -8.83 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.57
MG Growth Estimate 7.10%
MG Value $81.07
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $51.77
MG Value based on 0% Growth $30.35
Market Implied Growth Rate 6.22%
Current Price $74.75
% of Intrinsic Value 92.21%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.42 in 2014 to an estimated $3.57 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.22% 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 Spire Inc revealed the company was trading above its Graham Number of $63.11. The company pays a dividend of $2.1 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.93, which was below the industry average of 23.61, 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 $-27.86.

Spire 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) -$27.86
Graham Number $63.11
PEmg 20.93
Current Ratio 0.72
PB Ratio 0.80
Current Dividend $2.10
Dividend Yield 2.81%
Number of Consecutive Years of Dividend Growth 14

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $584,900,000
Total Current Liabilities $814,100,000
Long-Term Debt $2,024,500,000
Total Assets $6,584,900,000
Intangible Assets $1,171,600,000
Total Liabilities $1,969,500,000
Shares Outstanding (Diluted Average) 49,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.29
Sep2017 $3.43
Sep2016 $3.24
Sep2015 $3.16
Sep2014 $2.35
Sep2013 $2.02
Sep2012 $2.79
Sep2011 $2.86
Sep2010 $2.43
Sep2009 $2.89
Sep2008 $3.58
Sep2007 $2.31
Sep2006 $2.30
Sep2005 $0.02
Sep2004 $0.02
Sep2003 $1.82
Sep2002 $1.18
Sep2001 $1.61
Sep2000 $1.37
Sep1999 $1.43
Sep1998 $1.58

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.57
Sep2017 $3.09
Sep2016 $2.85
Sep2015 $2.65
Sep2014 $2.42
Sep2013 $2.51
Sep2012 $2.80
Sep2011 $2.81
Sep2010 $2.76
Sep2009 $2.69
Sep2008 $2.27
Sep2007 $1.51
Sep2006 $1.10
Sep2005 $0.64
Sep2004 $1.03
Sep2003 $1.52
Sep2002 $1.39

Recommended Reading:

Other ModernGraham posts about the company

Spire Inc Valuation – Initial Coverage $SR

Other ModernGraham posts about related companies

Superior Plus Corp Valuation – August 2018 $TSX-SPB
Just Energy Group Inc Valuation – August 2018 $TSE:JE
South Jersey Industries Inc Valuation – July 2018 $SJI
Innergex Renewable Energy Inc Valuation – July 2018 $TSE:INE
Suburban Propane Partners LP Valuation – June 2018 $SPH
Public Service Enterprise Group Inc Valuation – June 2018 $PEG
Eversource Energy Valuation – June 2018 $ES
PPL Corp Valuation – June 2018 $PPL
Entergy Corp Valuation – June 2018 $ETR
Pinnacle West Capital Corp Valuation – June 2018 $PNW

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.

Back To Top