SLM Corp Valuation – July 2018 $SLM

Company Profile (excerpt from Reuters): SLM Corporation, incorporated on December 2, 2013, is a holding company. The Company’s primary business is to originate and service loans it makes to students and their families to finance the cost of their education. The Company is a saving, planning and paying for college company. It is engaged in originating and servicing Private Education Loans it makes to students and their families. The Company uses Private Education Loans to mean education loans to students or their families that are not made, insured or guaranteed by any state or federal government. The Company also operates Upromise, Inc. (Upromise), a consumer savings network that provides financial rewards on everyday purchases to help families save for college.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SLM – 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 $5,170,427,490 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 -14.00% Fail
5. Moderate PEmg Ratio PEmg < 20 16.70 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.00 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 $0.71
MG Growth Estimate 2.65%
MG Value $9.81
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $10.31
MG Value based on 0% Growth $6.05
Market Implied Growth Rate 4.10%
Current Price $11.88
% of Intrinsic Value 121.09%

SLM Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the 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 Overvalued after growing its EPSmg (normalized earnings) from $0.6 in 2014 to an estimated $0.71 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.1% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into SLM Corp revealed the company was trading above its Graham Number of $10.39. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 16.7, which was below the industry average of 21.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $10.39
PEmg 16.70
PB Ratio 2.00
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 $3,744,345,000
Total Assets $23,406,322,000
Intangible Assets $0
Total Liabilities $20,796,489,000
Shares Outstanding (Diluted Average) 438,977,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.00
Dec2017 $0.62
Dec2016 $0.53
Dec2015 $0.59
Dec2014 $0.42
Dec2013 $0.58
Dec2012 $0.45
Dec2011 $1.18
Dec2010 $0.94
Dec2009 $0.38
Dec2008 -$0.69
Dec2007 -$2.26
Dec2006 $2.63
Dec2005 $3.05
Dec2004 $4.04
Dec2003 $3.29
Dec2002 $1.64
Dec2001 $0.76
Dec2000 $0.92
Dec1999 $1.02
Dec1998 $0.98

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.71
Dec2017 $0.56
Dec2016 $0.53
Dec2015 $0.56
Dec2014 $0.60
Dec2013 $0.70
Dec2012 $0.66
Dec2011 $0.48
Dec2010 $0.15
Dec2009 $0.04
Dec2008 $0.37
Dec2007 $1.32
Dec2006 $3.05
Dec2005 $3.02
Dec2004 $2.71
Dec2003 $1.88
Dec2002 $1.13

Recommended Reading:

Other ModernGraham posts about the company

SLM Corp Valuation – December 2016 $SLM
SLM Corporation Analysis – August 2015 Update $SLM
5 Low PE Stocks for the Enterprising Investor – July 2015
5 Most Undervalued Companies for the Enterprising Investor – July 2015
5 Most Undervalued Companies for the Enterprising Investor – June 2015

Other ModernGraham posts about related companies

IGM Financial Inc Valuation – July 2018 $TSE-IGM
Main Street Capital Corp Valuation – July 2018 $MAIN
Legg Mason Inc Valuation – June 2018 $LM
T. Rowe Price Group Inc Valuation – June 2018 $TROW
Moody’s Corporation – June 2018 $MCO
Charles Schwab Corp Valuation – June 2018 $SCHW
Willis Towers Watson PLC Valuation – Initial Coverage June 2018 $WLTW
PayPal Holdings Inc Valuation – June 2018 $PYPL
Synchrony Financial Valuation – June 2018 $SYF
CBRE Group Inc Valuation – June 2018 $CBRE

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.

SLM Corp Valuation – December 2016 $SLM

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 – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how SLM Corp (SLM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): SLM Corporation is a holding company. The Company’s primary business is to originate and service loans it makes to students and their families to finance the cost of their education. The Company is a saving, planning and paying for education company. It is engaged in originating and servicing Private Education Loans it makes to students and their families. It uses Private Education Loans to mean education loans to students or their families that are not made, insured or guaranteed by any state or federal government. It also operates Upromise, Inc., a consumer savings network that provides financial rewards on everyday purchases to help families save for college. Its Private Education Loans are made primarily to bridge the gap between the cost of higher education and the amount funded through financial aid, government loans and customers’ resources. The Company’s Private Education Loans that it owns or services are originated and funded by its subsidiary, Sallie Mae Bank (the Bank).

SLM Chart

SLM data by YCharts

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of SLM December 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $4,525,406,657 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -159.53% Fail
5. Moderate PEmg Ratio PEmg < 20 20.75 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.08 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 Fail

Stage 2: Determination of Intrinsic Value

EPSmg $0.52
MG Growth Estimate -3.09%
MG Value $1.21
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $7.57
MG Value based on 0% Growth $4.44
Market Implied Growth Rate 6.12%
Current Price $10.83
% of Intrinsic Value 892.91%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.66 in 2012 to an estimated $0.52 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.12% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into SLM Corp revealed the company was trading above its Graham Number of $6.8. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 20.75, which was above the industry average of 19.87.

SLM Corp scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Graham Number $6.80
PEmg 20.75
PB Ratio 2.08
Dividend Yield 0.00%
TTM Dividend $0.00
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Long-Term Debt & Capital Lease Obligation $1,577,689,000
Total Assets $17,745,613,000
Intangible Assets $0
Total Liabilities $15,486,117,000
Shares Outstanding (Diluted Average) 433,523,000

Earnings Per Share History

Next Fiscal Year Estimate $0.52
Dec2015 $0.59
Dec2014 $0.42
Dec2013 $0.58
Dec2012 $0.45
Dec2011 $1.18
Dec2010 $0.94
Dec2009 $0.38
Dec2008 -$0.69
Dec2007 -$2.26
Dec2006 $2.63
Dec2005 $3.05
Dec2004 $4.04
Dec2003 $3.29
Dec2002 $1.64
Dec2001 $0.76
Dec2000 $0.92
Dec1999 $1.02
Dec1998 $0.98
Dec1997 $0.93
Dec1996 $0.70

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.52
Dec2015 $0.56
Dec2014 $0.60
Dec2013 $0.70
Dec2012 $0.66
Dec2011 $0.48
Dec2010 $0.15
Dec2009 $0.04
Dec2008 $0.37
Dec2007 $1.32
Dec2006 $3.05
Dec2005 $3.02
Dec2004 $2.71
Dec2003 $1.88
Dec2002 $1.13
Dec2001 $0.90
Dec2000 $0.95

Recommended Reading:

Other ModernGraham posts about the company

SLM Corporation Analysis – August 2015 Update $SLM
5 Low PE Stocks for the Enterprising Investor – July 2015
5 Most Undervalued Companies for the Enterprising Investor – July 2015
5 Most Undervalued Companies for the Enterprising Investor – June 2015
5 Low PE Stocks for the Enterprising Investor – May 2015

Other ModernGraham posts about related companies

The Western Union Company Valuation – December 2016 $WU
IGM Financial Inc Valuation – Initial Coverage $IGM
Main Street Capital Corporation Valuation – September 2016 $MAIN
Navient Corp Valuation – August 2016 $NAVI
T Rowe Price Group Inc Valuation – August 2016 $TROW
Moody’s Corporation Valuation – August 2016 $MCO
KKR & Co L.P. Valuation – August 2016 $KKR
Franklin Resources Inc Valuation – August 2016 $BEN
Equifax Inc Valuation – August 2016 $EFX
Charles Schwab Corp Valuation – August 2016 $SCHW

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.

SLM Corporation Analysis – August 2015 Update $SLM

Sallie_Mae_logo_2009In the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how SLM Corporation (SLM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): SLM Corporation is a holding company. The Company is a saving, planning and paying for education company. It is engaged in originating and servicing private education loans it makes to students and their families. The Company also operates a consumer savings network that provides financial rewards on everyday purchases to help families save for college. The Company’s private education loans are made primarily to bridge the gap between the cost of higher education and the amount funded through financial aid, federal loans or customers’ resources. The Company’s loans are non-federal loans and loans not insured or guaranteed under the federal family education loan program. It provides incentives for customers to include a cosigner on the loan and also encourages customers to make payments while in school.

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

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

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

Valuation Summary

Key Data:

Recent Price $9.07
MG Value $48.30
MG Opinion Undervalued
Value Based on 3% Growth $18.19
Value Based on 0% Growth $10.66
Market Implied Growth Rate -0.64%
PEmg 7.23
PB Ratio 2.00

Balance Sheet – June 2015

Total Debt $0
Total Assets $12,875,000,000
Intangible Assets $2,500,000
Total Liabilities $10,912,800,000
Outstanding Shares 432,700,000

Earnings Per Share

2015 (estimate) $0.56
2014 $0.42
2013 $3.12
2012 $1.90
2011 $1.18
2010 $0.94
2009 $0.38
2008 -$0.69
2007 -$2.26
2006 $2.63
2005 $3.05
2004 $4.04

Earnings Per Share – ModernGraham 

2015 (estimate) $1.25
2014 $1.57
2013 $1.93
2012 $1.14
2011 $0.48
2010 $0.15

Dividend History

Conclusion

SLM Corporation does not qualify for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years and the inconsistent dividend record.  The Enterprising Investor is concerned with the lack of dividends.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed cautiously with a speculative attitude.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $0.48 in 2011 to an estimated $1.25 for 2015.  This level of demonstrated growth is greater than the market’s implied estimate of 0.64% annual earnings decline and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on SLM Corporation (SLM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any of the companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

SLM Corporation Quarterly Valuation – May 2015 $SLM

Sallie_Mae_logo_2009SLM Corporation (SLM) presents an intriguing investment possibility for value investors, as the company has maintained very strong earnings growth over the last few years that may not be properly factored into the market price. Benjamin Graham, the father of value investing, taught that looking at the price cannot be the sole factor in investment decisions, as the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here is a look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham, and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation, in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

SLM Chart

SLM data by YCharts

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

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Earnings Stability – Positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – Has paid a dividend for at least 10 straight years – FAIL
  4. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – FAIL
  5. Moderate PEmg (price over normalized earnings) Ratio – PEmg is less than 20 – PASS
  6. Moderate Price-to-Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – Must pass all 3 of the following tests or be suitable for a Defensive Investor: Score = 3/3

  1. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  2. Dividend Record – Currently pays a dividend – PASS
  3. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $10.36
MG Value $48.56
MG Opinion Undervalued
Value Based on 3% Growth $18.29
Value Based on 0% Growth $10.72
Market Implied Growth Rate -0.14%
PEmg 8.21
PB Ratio 2.40

Balance Sheet – March 2015

Total Debt $0
Total Assets $12,933,500,000
Intangible Assets $2,900,000
Total Liabilities $11,067,600,000
Outstanding Shares 432,300,000

Earnings Per Share

2015 (estimate) $0.58
2014 $0.42
2013 $3.12
2012 $1.90
2011 $1.18
2010 $0.94
2009 $0.38
2008 -$0.69
2007 -$2.26
2006 $2.63
2005 $3.05
2004 $4.04

Earnings Per Share – ModernGraham

2015 (estimate) $1.26
2014 $1.57
2013 $1.93
2012 $1.14
2011 $0.48
2010 $0.15

Dividend History

SLM Dividend Chart

SLM Dividend data by YCharts

Conclusion

SLM Corporation passes the initial requirements of the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor has issues with the company’s inconsistent dividend history, and the lack of earnings stability or sufficient growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $0.48 in 2011 to an estimated $1.26 for 2015. This is a very strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of an annual earnings loss of 0.14% over the next 7-10 years. The ModernGraham valuation model returns an estimate of intrinsic value falling above the current price, indicating that the company is undervalued at the present time.

Disclaimer: The author did not hold a position in any of the companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours. Logos taken from either the company website or Wikipedia; this article is not affiliated with the companies in any manner.

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SLM Corporation Quarterly Valuation – January 2015 $SLM

Sallie_Mae_logo_2009In the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how SLM Corporation (SLM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): SLM Corporation (Sallie Mae) is the nation’s saving, planning, and paying for college company. Sallie Mae offers products, which promote personal finance including private education loans, Upromise rewards, scholarship search, college financial planning tools, insurance, and online retail banking.

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

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

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

Valuation Summary

Key Data:

Recent Price $9.11
MG Value $60.52
MG Opinion Undervalued
Value Based on 3% Growth $22.79
Value Based on 0% Growth $13.36
Market Implied Growth Rate -1.35%
PEmg 5.80
PB Ratio 2.15

Balance Sheet – December 2014

Total Debt $0
Total Assets $12,972,000,000
Intangible Assets $3,000,000
Total Liabilities $11,142,000,000
Outstanding Shares 432,100,000

Earnings Per Share

2014 (estimate) $0.42
2013 $3.12
2012 $1.90
2011 $1.18
2010 $0.94
2009 $0.38
2008 -$0.69
2007 -$2.26
2006 $2.63
2005 $3.05
2004 $4.04

Earnings Per Share – ModernGraham 

2014 (estimate) $1.57
2013 $1.93
2012 $1.14
2011 $0.48
2010 $0.15
2009 $0.04

Dividend History

Conclusion:

SLM Corporation qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability over the last ten years and the inconsistent dividend record, while the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $0.15 in 2010 to $1.57 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 1.35% annual earnings loss and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

Be sure to check out previous ModernGraham valuations of SLM Corporation (SLM) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on SLM Corporation (SLM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in SLM Corporation (SLM) or in any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

SLM Corporation Quarterly Stock Valuation – October 2014 $SLM

Sallie_Mae_logo_2009Benjamin 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 5 Undervalued Companies to Research for the Defensive Investor – October 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how SLM Corporation (SLM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): SLM Corporation (Sallie Mae) is a holding company. It operates in three business segments: Consumer Lending, Business Services and FFELP Loans. The fourth segment includes Other. The Company’s primary business is to originate, service and collect loans it makes to students and their families to finance the cost of their education. It uses Private Education Loans to mean education loans to students or their families that are non-federal loans and loans not insured or guaranteed under the previously existing Federal Family Education Loan Program (FFELP). It also provides servicing, loan default aversion and defaulted loan collection services for loans owned by other institutions, including the United States Department of Education (ED), as well as processing capabilities to educational institutions and 529 college-savings plan programs. On May 7, 2013, Higher One Holdings, Inc. acquired Sallie Mae’s Campus Solutions business.
SLM Chart

SLM data by YCharts

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

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

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

Valuation Summary

Key Data:

Recent Price $8.80
MG Value $60.39
MG Opinion Undervalued
Value Based on 3% Growth $22.75
Value Based on 0% Growth $13.33
Market Implied Growth Rate -1.45%
PEmg 5.61
PB Ratio 2.18

Balance Sheet – 6/30/2014

Total Debt $0
Total Assets $11,379,000,000
Intangible Assets $4,000,000
Total Liabilities $9,641,000,000
Outstanding Shares 430,800,000

Earnings Per Share

2014 (estimate) $0.41
2013 $3.12
2012 $1.90
2011 $1.18
2010 $0.94
2009 $0.38
2008 -$0.69
2007 -$2.26
2006 $2.63
2005 $3.05
2004 $4.04

Earnings Per Share – ModernGraham

2014 (estimate) $1.57
2013 $1.93
2012 $1.14
2011 $0.48
2010 $0.15
2009 $0.04

Dividend History
SLM Dividend Chart

SLM Dividend data by YCharts

Conclusion:

SLM Corporation qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the company’s lack of earnings or dividend stability over the last ten years, while the Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.15 in 2010 to an estimated $1.57 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of negative 1.45% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out previous ModernGraham valuations of SLM Corporation (SLM) for better perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on SLM Corporation (SLM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in SLM Corporation (SLM) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

SLM Corporation Quarterly Valuation – July 2014 $SLM

Sallie_Mae_logo_2009Benjamin 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 5 Undervalued Companies for the Defensive Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how SLM Corporation (SLM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): SLM Corporation (Sallie Mae) is a holding company. It operates in three business segments: Consumer Lending, Business Services and FFELP Loans. The fourth segment includes Other. The Company’s primary business is to originate, service and collect loans it makes to students and their families to finance the cost of their education. It uses Private Education Loans to mean education loans to students or their families that are non-federal loans and loans not insured or guaranteed under the previously existing Federal Family Education Loan Program (FFELP). It also provides servicing, loan default aversion and defaulted loan collection services for loans owned by other institutions, including the United States Department of Education (ED), as well as processing capabilities to educational institutions and 529 college-savings plan programs. On May 7, 2013, Higher One Holdings, Inc. acquired Sallie Mae’s Campus Solutions business.
SLM Chart

SLM data by YCharts

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

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

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

Valuation Summary

Key Data:

Recent Price $8.35
MG Value $58.98
MG Opinion Undervalued
Value Based on 3% Growth $22.21
Value Based on 0% Growth $13.02
Market Implied Growth Rate -1.52%
PEmg 5.45
PB Ratio 0.63

Balance Sheet – 3/31/2014

Total Debt $136,177,000,000
Total Assets $156,472,000,000
Intangible Assets $421,000,000
Total Liabilities $150,879,000,000
Outstanding Shares 422,000,000

Earnings Per Share

2014 (estimate) $0.48
2013 $2.89
2012 $1.90
2011 $1.12
2010 $1.08
2009 $0.71
2008 -$0.69
2007 -$2.26
2006 $2.49
2005 $3.05
2004 $4.04

Earnings Per Share – ModernGraham

2014 (estimate) $1.53
2013 $1.89
2012 $1.20
2011 $0.56
2010 $0.28
2009 $0.14

Dividend History

SLM Dividend Chart

SLM Dividend data by YCharts

Conclusion:

SLM Corporation is suitable for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the lack of stable earnings over the last ten years and the lack of consistent dividend payments over the last ten years.  However, the company passes all of the Enterprising Investor’s requirements and the investor type thus has no significant initial concerns. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities such as through ModernGraham’s valuation of Discover Financial Services (DFS).  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.28 in 2010 to an estimated $1.53 for 2014.  This level of demonstrated growth supports the market’s implied estimate of negative 1.52% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on SLM Corporation (SLM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in SLM Corporation (SLM) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from wikipedia or the company website for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Goldman Sachs Group Inc Valuation – November 2018 $GS

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GS – November 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 $75,183,330,715 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 26.44% Fail
5. Moderate PEmg Ratio PEmg < 20 12.05 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.91 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 $16.77
MG Growth Estimate 2.81%
MG Value $236.89
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $243.13
MG Value based on 0% Growth $142.52
Market Implied Growth Rate 1.78%
Current Price $202.12
% of Intrinsic Value 85.32%

Goldman Sachs Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $14.12 in 2014 to an estimated $16.77 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 1.78% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Goldman Sachs Group Inc revealed the company was trading below its Graham Number of $325.35. The company pays a dividend of $2.9 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 12.05, 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.

Goldman Sachs Group Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Graham Number $325.35
PEmg 12.05
PB Ratio 0.91
Dividend Yield 1.43%
TTM Dividend $2.90
Number of Consecutive Years of Dividend Growth 6

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $255,886,000,000
Total Assets $957,190,000,000
Intangible Assets $4,101,000,000
Total Liabilities $870,428,000,000
Shares Outstanding (Diluted Average) 390,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $25.05
Dec2017 $9.01
Dec2016 $16.29
Dec2015 $12.14
Dec2014 $17.07
Dec2013 $15.46
Dec2012 $14.13
Dec2011 $4.51
Dec2010 $13.18
Dec2009 $22.13
Nov2008 $4.47
Nov2007 $24.73
Nov2006 $19.69
Nov2005 $11.21
Nov2004 $8.92
Nov2003 $5.87
Nov2002 $4.03
Nov2001 $4.26
Nov2000 $6.00
Nov1999 $5.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $16.77
Dec2017 $13.08
Dec2016 $15.08
Dec2015 $13.88
Dec2014 $14.12
Dec2013 $13.06
Dec2012 $11.80
Dec2011 $11.69
Dec2010 $15.80
Dec2009 $16.89
Nov2008 $14.11
Nov2007 $17.32
Nov2006 $12.39
Nov2005 $8.11
Nov2004 $6.31
Nov2003 $5.05
Nov2002 $4.42

Recommended Reading:

Other ModernGraham posts about the company

Goldman Sachs Group Inc Valuation – February 2018 $GS
Goldman Sachs Group Inc Valuation – June 2016 $GS
10 Low PE Stocks for the Enterprising Investor – June 2016
Stocks Trading Below Their Graham Number – May 2016
Stocks Trading Below Their Graham Number – March 2016

Other ModernGraham posts about related companies

KKR & Co Inc Valuation – September 2018 $KKR
CorVel Corp Valuation – August 2018 $CRVL
Jones Lang LaSalle Inc Valuation – August 2018 $JLL
Investment Technology Group Inc Valuation – July 2018 $ITG
Stifel Financial Corp Valuation – July 2018 $SF
CI Financial Corp Valuation – July 2018 $TSE:CIX
INTL FCStone Inc Valuation – July 2018 $INTL
SEI Investments Co Valuation – July 2018 $SEIC
Canadian General Investments Ltd Valuation – July 2018 $TSE-CGI
SLM Corp Valuation – July 2018 $SLM

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.

KKR & Co Inc Valuation – September 2018 $KKR

Company Profile (excerpt from Reuters): KKR & Co. Inc., incorporated on June 25, 2007, is a global investment firm that manages investments across multiple asset classes, including private equity, energy, infrastructure, real estate, credit and hedge funds. The Company’s business offers a range of investment management services to its fund investors, and provides capital markets services to its firm, its portfolio companies and third parties. The Company conducts its business with offices across the world, providing it with a global platform for sourcing transactions, raising capital and carrying out capital markets activities. Through KKR’s Private Markets segment, KKR manages and sponsors a group of private equity funds and co-investment vehicles. The Company operates through four segments: Private Markets, Public Markets, Capital Markets and Principal Activities.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KKR – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $21,840,989,154 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 195.09% Pass
5. Moderate PEmg Ratio PEmg < 20 16.23 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.61 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.61
MG Growth Estimate 0.54%
MG Value $15.38
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $23.30
MG Value based on 0% Growth $13.66
Market Implied Growth Rate 3.87%
Current Price $26.08
% of Intrinsic Value 169.62%

KKR & Co Inc Class A is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.55 in 2014 to an estimated $1.61 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.87% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into KKR & Co Inc Class A revealed the company was trading below its Graham Number of $27.48. The company pays a dividend of $0.67 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.23, which was below the industry average of 21.31, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

KKR & Co Inc Class A performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Graham Number $27.48
PEmg 16.23
PB Ratio 0.61
Dividend Yield 2.57%
TTM Dividend $0.67
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Long-Term Debt & Capital Lease Obligation $19,972,383,000
Total Assets $48,572,664,000
Intangible Assets $94,899,000
Total Liabilities $25,247,621,000
Shares Outstanding (Diluted Average) 548,745,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.27
Dec2017 $1.95
Dec2016 $0.59
Dec2015 $1.01
Dec2014 $1.16
Dec2013 $2.30
Dec2012 $2.21
Dec2011 $0.01
Dec2010 $1.62

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.61
Dec2017 $1.32
Dec2016 $1.15
Dec2015 $1.40
Dec2014 $1.55
Dec2013 $1.57
Dec2012 $1.06
Dec2011 $0.44
Dec2010 $0.54

Recommended Reading:

Other ModernGraham posts about the company

KKR & Co Ltd Valuation – March 2017 $KKR
KKR & Co L.P. Valuation – August 2016 $KKR
10 Best Dividend Paying Stocks for the Enterprising Investor – August 2016
Dividend Investors Should Research These 10 Stocks – July 2016
10 Most Undervalued Companies for the Enterprising Investor – June 2016

Other ModernGraham posts about related companies

CorVel Corp Valuation – August 2018 $CRVL
Jones Lang LaSalle Inc Valuation – August 2018 $JLL
Investment Technology Group Inc Valuation – July 2018 $ITG
Stifel Financial Corp Valuation – July 2018 $SF
CI Financial Corp Valuation – July 2018 $TSE:CIX
INTL FCStone Inc Valuation – July 2018 $INTL
SEI Investments Co Valuation – July 2018 $SEIC
Canadian General Investments Ltd Valuation – July 2018 $TSE-CGI
SLM Corp Valuation – July 2018 $SLM
IGM Financial Inc Valuation – July 2018 $TSE-IGM

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.

CorVel Corp Valuation – August 2018 $CRVL

Company Profile (excerpt from Reuters): CorVel Corporation (Corvel), incorporated on May 16, 1991, is a provider of workers’ compensation solutions for employers, third party administrators, insurance companies and government agencies. The Company offers its services as a bundled solution, which includes claims management, as a standalone service, or as add-on services to existing customers. CareMC is an application platform for all of the Company’s primary service lines and delivers immediate access to customers. CareMC offers customers direct access to the Company’s primary services. CareMC allows for electronic communication and reporting between providers, payers, employers and patients. The Company offers services in two general categories, network solutions and patient management.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CRVL – 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 $1,177,565,744 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.75 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 69.01% Pass
6. Moderate PEmg Ratio PEmg < 20 34.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.29 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 1.75 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.76
MG Growth Estimate 4.59%
MG Value $31.06
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $25.46
MG Value based on 0% Growth $14.93
Market Implied Growth Rate 12.81%
Current Price $59.90
% of Intrinsic Value 192.87%

CorVel Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, 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 $1.34 in 2015 to an estimated $1.76 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.81% 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 CorVel Corporation revealed the company was trading above its Graham Number of $20.28. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 34.11, which was above the industry average of 21.12. Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.86.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $3.86
Graham Number $20.28
PEmg 34.11
Current Ratio 1.75
PB Ratio 6.29
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 6/1/2018
Total Current Assets $183,156,000
Total Current Liabilities $104,801,000
Long-Term Debt $0
Total Assets $291,210,000
Intangible Assets $40,120,000
Total Liabilities $109,345,000
Shares Outstanding (Diluted Average) 19,102,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.02
Mar2018 $1.87
Mar2017 $1.51
Mar2016 $1.43
Mar2015 $1.37
Mar2014 $1.61
Mar2013 $1.19
Mar2012 $1.14
Mar2011 $1.03
Mar2010 $1.03
Mar2009 $0.71
Mar2008 $0.84
Mar2007 $0.65
Mar2006 $0.34
Mar2005 $0.32
Mar2004 $0.49
Mar2003 $0.50
Mar2002 $0.43
Mar2001 $0.38
Mar2000 $0.33
Mar1999 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.76
Mar2018 $1.60
Mar2017 $1.45
Mar2016 $1.40
Mar2015 $1.34
Mar2014 $1.29
Mar2013 $1.09
Mar2012 $1.01
Mar2011 $0.91
Mar2010 $0.81
Mar2009 $0.66
Mar2008 $0.59
Mar2007 $0.47
Mar2006 $0.39
Mar2005 $0.42
Mar2004 $0.46
Mar2003 $0.42

Recommended Reading:

Other ModernGraham posts about the company

CorVel Corp Valuation – Initial Coverage $CRVL

Other ModernGraham posts about related companies

Jones Lang LaSalle Inc Valuation – August 2018 $JLL
Investment Technology Group Inc Valuation – July 2018 $ITG
Stifel Financial Corp Valuation – July 2018 $SF
CI Financial Corp Valuation – July 2018 $TSE:CIX
INTL FCStone Inc Valuation – July 2018 $INTL
SEI Investments Co Valuation – July 2018 $SEIC
Canadian General Investments Ltd Valuation – July 2018 $TSE-CGI
SLM Corp Valuation – July 2018 $SLM
IGM Financial Inc Valuation – July 2018 $TSE-IGM
Main Street Capital Corp Valuation – July 2018 $MAIN

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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