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Stein Mart Inc Valuation – June 2018 $SMRT

Company Profile (excerpt from Reuters): Stein Mart, Inc., incorporated on October 14, 1983, is a national retailer offering the fashion merchandise, service and presentation of a department or specialty store. The Company offers apparel for women and men, as well as accessories, shoes and home fashions. The Company’s target customers are women over 45 years old. The Company operates approximately 280 stores in over 30 states and an Internet store. Its stores are located in the Northeast, Midwest, Southeast, Texas and the Southwest. It is concentrated in the Southeast and Texas where over 180 of its stores are located.

SMRT Chart

SMRT data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SMRT – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $142,797,898 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.05 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -134.15% Fail
6. Moderate PEmg Ratio PEmg < 20 -99.89 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.41 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 1.05 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.85 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 -$0.03
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$0.43
MG Value based on 0% Growth -$0.25
Market Implied Growth Rate -54.19%
Current Price $2.93
% of Intrinsic Value N/A

Stein Mart, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 $0.61 in 2015 to an estimated $-0.03 for 2019. This level of negative earnings does not support a positive valuation.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 Stein Mart, Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.08 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 -99.89, which was below the industry average of 37.1, 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 $-2.41.

Stein Mart, 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) -$2.41
Graham Number $0.00
PEmg -99.89
Current Ratio 1.05
PB Ratio 2.41
Current Dividend $0.08
Dividend Yield 2.56%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 4/1/2018
Total Current Assets $348,726,000
Total Current Liabilities $331,465,000
Long-Term Debt $49,266,000
Total Assets $517,673,000
Intangible Assets $0
Total Liabilities $461,051,000
Shares Outstanding (Diluted Average) 46,659,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate
Jan2018 -$0.52
Jan2017 $0.01
Jan2016 $0.51
Jan2015 $0.59
Jan2014 $0.57
Jan2013 $0.57
Jan2012 $0.44
Jan2011 $1.26
Jan2010 $0.54
Jan2009 -$1.72
Jan2008 -$0.11
Jan2007 $0.85
Jan2006 $1.15
Jan2005 $0.89
Jan2004 $0.05
Jan2003 $0.50
Jan2002 $0.37
Dec2000 $0.91
Dec1999 $0.26
Dec1998 $0.44

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.03
Jan2018 $0.05
Jan2017 $0.37
Jan2016 $0.55
Jan2015 $0.61
Jan2014 $0.63
Jan2013 $0.52
Jan2012 $0.35
Jan2011 $0.26
Jan2010 -$0.11
Jan2009 -$0.22
Jan2008 $0.54
Jan2007 $0.81
Jan2006 $0.72
Jan2005 $0.52
Jan2004 $0.36
Jan2003 $0.51

Recommended Reading:

Other ModernGraham posts about the company

Stein Mart Inc Valuation – Initial Coverage $SMRT

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Stein Mart Inc Valuation – Initial Coverage $SMRT

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 Stein Mart Inc (SMRT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Stein Mart, Inc. is a national retailer offering the fashion merchandise, service and presentation of a department or specialty store. The Company offers apparel for women and men, as well as accessories, shoes and home fashions. The Company’s target customers are women over 45 years old. The Company operates approximately 280 stores in over 30 states and an Internet store. Its stores are located in the Northeast, Midwest, Southeast, Texas and the Southwest. It is concentrated in the Southeast and Texas where over 180 of its stores are located. The Company’s stores offer a range of services, such as merchandise locator service, a Preferred Customer program, co-branded and private label credit card programs, and electronic gift cards. The Company’s merchants purchase products from approximately 1,200 vendors. It leases all of its store locations, generally for approximately 10 years with options to extend the lease term for over two or five year periods.

SMRT Chart

SMRT data by YCharts

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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 SMRT – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $171,627,620 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.45 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -189.15% Fail
6. Moderate PEmg Ratio PEmg < 20 9.44 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.14 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 1.45 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.28 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 $0.38
MG Growth Estimate -3.83%
MG Value $0.32
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $5.58
MG Value based on 0% Growth $3.27
Market Implied Growth Rate 0.47%
Current Price $3.63
% of Intrinsic Value 1129.49%

Stein Mart, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history. 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 $0.52 in 2013 to an estimated $0.38 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.46% 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 Stein Mart, Inc. revealed the company was trading above its Graham Number of $1.37. The company pays a dividend of $0.3 per share, for a yield of 8.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.41, which was below the industry average of 50.09, 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 $-2.72.

Stein Mart, 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) -$2.72
Graham Number $1.37
PEmg 9.41
Current Ratio 1.45
PB Ratio 2.13
Current Dividend $0.30
Dividend Yield 8.29%
Number of Consecutive Years of Dividend Growth 4

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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 10/1/2016
Total Current Assets $427,880,000
Total Current Liabilities $295,237,000
Long-Term Debt $169,681,000
Total Assets $630,482,000
Intangible Assets $0
Total Liabilities $552,585,000
Shares Outstanding (Diluted Average) 45,845,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.05
Jan2016 $0.51
Jan2015 $0.59
Jan2014 $0.57
Jan2013 $0.57
Jan2012 $0.44
Jan2011 $1.26
Jan2010 $0.54
Jan2009 -$1.72
Jan2008 -$0.11
Jan2007 $0.85
Jan2006 $1.15
Jan2005 $0.89
Jan2004 $0.05
Jan2003 $0.50
Jan2002 $0.37
Dec2000 $0.91
Dec1999 $0.26
Dec1998 $0.44
Dec1997 $0.74
Dec1996 $0.55

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.38
Jan2016 $0.55
Jan2015 $0.61
Jan2014 $0.63
Jan2013 $0.52
Jan2012 $0.35
Jan2011 $0.26
Jan2010 -$0.11
Jan2009 -$0.22
Jan2008 $0.54
Jan2007 $0.81
Jan2006 $0.72
Jan2005 $0.52
Jan2004 $0.36
Jan2003 $0.51
Jan2002 $0.53
Dec2000 $0.60

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

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TJX Companies Inc Valuation – December 2016 $TJX
Shoe Carnival Inc Valuation – Initial Coverage $SCVL
Aaron’s Inc Valuation – November 2016 $AAN
Tractor Supply Company Valuation – August 2016 $TSCO
Fossil Group Inc Valuation – August 2016 $FOSL
Target Corp Valuation – August 2016 $TGT
TJX Companies Inc Valuation – August 2016 $TJX
Dollar General Corp Valuation – August 2016 $DG
Coach Inc Valuation – August 2016 $COH

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.

Company of the Week – Stein Mart (SMRT)

The company of the week this week is Stein Mart (SMRT), a retailer offering fashion merchandise at a discount to larger department and specialty stores.  As we did last week, we will be looking reviewing the company using Warren Buffett’s approach for the Business & Management Review.  We will also use Benjamin Graham’s overall philosophies to guide our Financial & Value Review.

Business & Management Review

1.  Is the business simple and understandable?

     Yes.  The company’s overall operating plan is simple:  sell quality finished goods at lower prices than their competitors. 

2.  Does the business have a consistent operating history?

     The company was founded in 1908 by Sam Stein, the current chairman’s grandfather.  Since then, the company has operated under the same basic plan.  The company has had a positive net income for over 10 years, but only recently began offering a dividend.

3.  Does the business have favorable long-term prospects?

     In the latest annual report, management claimed that the year was the most profitable on record.  Though they recently reported their same-store sales had declined by 2.8% (analysts had estimated a decline of 2%), we believe this is just due to market fluctuations and the fact that the prior year had such high sales.  Long-term, we believe Stein Mart will continue to face growing sales and profits.  In the event of a recession, the target upscale customers would not be affected significantly and would still have disposable income.  In fact, with Stein Mart’s prices being lower than traditional department stores, it could be expected that in a time with lower disposable income available, customers may spend more time at Stein Mart than other stores.

4.  Is management rational?

     In 2003, the company faced a number of difficult decisions that would hurt the company in the short term but benefit the long term.  The management behaved rationally and focused on the long-term goals.  Though inventory levels were declining as planned, sales and earnings were below the management’s expectations.  However, the management did not abandon their plan and continued to make the changes that were necessary for the future of the company.  12 new stores were opened that year while 16 unprofitable stores were closed.  It is very pleasing to see management that is willing to close stores that are not profitable instead of keeping them for the sake of having a higher number of stores.

5.  Is management candid with its shareholders?

     We are not very thrilled about the management’s investor relations website, as it has limited information about management, but it does provide earnings reports, past annual reports, press releases, and other useful information. It can be found at:  http://ir.steinmart.com/index.cfm

6.  Does management resist the institutional imperative?

    The management resists the institutional imperative every time they expand without taking out long-term debt.  The company currently holds no long-term debt, and plans to continue that trend by funding all expansions with internally generated cash.  This is a strategy that goes against the grain in today’s business atmosphere.
 

Financial and Value Review

Upon our review, we find Stein Mart to be suitable for the enterprising investor following Benjamin Graham’s value investing strategy, but not suitable for the defensive investor.  The company is too small for the defensive investor, does not have a significant dividend history, and has not increased earnings per share over the last 10 years enough for the defensive investor.  However, we find the company to have a PE ratio of 16.75, and a price to book ratio of 1.95.

We believe the company has potential to reach $18/share in the next few years. 

Neither of us held a position in Stein Mart at the time of publication.  Also, please read our disclaimer and Our Methods.

Please discuss this article in our forums.  Your comments help us mold our future articles.

Costco Wholesale Corp Valuation – June 2018 $COST

Company Profile (excerpt from Reuters): Costco Wholesale Corporation, incorporated on May 12, 1987, is engaged in the operation of membership warehouses in the United States and Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Australia, Spain, and through its subsidiaries in Taiwan and Korea. As of August 28, 2016, the Company operated 715 warehouses across the world. The Company’s average warehouse space is approximately 144,000 square feet. The Company’s warehouses on average operate on a seven-day, 70-hour week. The Company offers merchandise in various categories, which include foods (including dry foods, packaged foods and groceries); sundries (including snack foods, candy, alcoholic and nonalcoholic beverages, and cleaning supplies); hardlines (including appliances, electronics, health and beauty aids, hardware, and garden and patio); fresh foods (including meat, produce, deli and bakery); softlines (including apparel and small appliances), and other (including gas stations and pharmacy).

COST Chart

COST data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of COST – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $89,414,017,639 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.01 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 107.83% Pass
6. Moderate PEmg Ratio PEmg < 20 34.36 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.23 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 1.01 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 23.02 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 $5.93
MG Growth Estimate 6.19%
MG Value $123.84
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $85.99
MG Value based on 0% Growth $50.41
Market Implied Growth Rate 12.93%
Current Price $203.76
% of Intrinsic Value 164.53%

Costco Wholesale 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 $4.2 in 2014 to an estimated $5.93 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.93% 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 Costco Wholesale Corporation revealed the company was trading above its Graham Number of $60.63. The company pays a dividend of $1.9 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 34.36, which was below the industry average of 37.1, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.9.

Costco Wholesale 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) -$16.90
Graham Number $60.63
PEmg 34.36
Current Ratio 1.01
PB Ratio 7.23
Current Dividend $1.90
Dividend Yield 0.93%
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 5/1/2018
Total Current Assets $19,693,000,000
Total Current Liabilities $19,411,000,000
Long-Term Debt $6,492,000,000
Total Assets $39,605,000,000
Intangible Assets $0
Total Liabilities $27,158,000,000
Shares Outstanding (Diluted Average) 441,715,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.65
Aug2017 $6.08
Aug2016 $5.33
Aug2015 $5.37
Aug2014 $4.65
Aug2013 $4.63
Aug2012 $3.89
Aug2011 $3.30
Aug2010 $2.92
Aug2009 $2.47
Aug2008 $2.89
Aug2007 $2.37
Aug2006 $2.30
Aug2005 $2.18
Aug2004 $1.85
Aug2003 $1.53
Aug2002 $1.48
Aug2001 $1.29
Aug2000 $1.35
Aug1999 $0.87
Aug1998 $1.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.93
Aug2017 $5.45
Aug2016 $5.02
Aug2015 $4.69
Aug2014 $4.20
Aug2013 $3.79
Aug2012 $3.28
Aug2011 $2.92
Aug2010 $2.68
Aug2009 $2.52
Aug2008 $2.47
Aug2007 $2.19
Aug2006 $2.02
Aug2005 $1.81
Aug2004 $1.58
Aug2003 $1.40
Aug2002 $1.29

Recommended Reading:

Other ModernGraham posts about the company

Costco Wholesale Corp Valuation – September 2017 $COST
Costco Wholesale Corp Valuation – July 2016 $COST
58 Companies in the Spotlight This Week – 1/31/15
Costco Wholesale Corporation Annual Valuation – 2015 $COST
14 Companies in the Spotlight This Week – 1/18/14

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Lumber Liquidators Holdings Inc Valuation – Initial Coverage $LL

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Lumber Liquidators Holdings Inc (LL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Lumber Liquidators Holdings, Inc. is a multi-channel specialty retailer of hardwood flooring, and hardwood flooring enhancements and accessories. The Company offers hardwood species, engineered hardwood, laminate and resilient vinyl flooring direct to the consumer. Its product categories include Solid and Engineered Hardwood; Laminate; Bamboo, Cork, Vinyl Plank and Other, Moldings and Accessories, and Non-Merchandise Services. It features the renewable flooring products, bamboo and cork, and provides a selection of flooring enhancements and accessories, including moldings, noise-reducing underlay, adhesives and flooring tools. It operates in a holding company structure with Lumber Liquidators Holdings, Inc. serving as its parent company and certain direct and indirect subsidiaries, including Lumber Liquidators, Inc., Lumber Liquidators Services, LLC, Lumber Liquidators Production, LLC, and Lumber Liquidators Canada ULC, conducting its operations.

LL Chart

LL data by YCharts

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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.

Learn More About Premium Membership

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LL – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $544,058,392 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.93 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -306.99% Fail
6. Moderate PEmg Ratio PEmg < 20 -20.27 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.25 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.93 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.23 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg -$0.94
MG Growth Estimate -4.25%
MG Value $3.76
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$13.62
MG Value based on 0% Growth -$7.98
Market Implied Growth Rate -14.38%
Current Price $19.04
% of Intrinsic Value 506.06%

Lumber Liquidators Holdings Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability or 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 $1.75 in 2013 to an estimated $-0.94 for 2017. This level of negative earnings does not support a positive valuation.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 Lumber Liquidators Holdings Inc revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -20.27, which was below the industry average of 50.09, 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 $3.76.

Lumber Liquidators Holdings 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) $3.76
Graham Number $0.00
PEmg -20.27
Current Ratio 1.93
PB Ratio 2.25
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/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 12/1/2016
Total Current Assets $360,395,000
Total Current Liabilities $186,712,000
Long-Term Debt $40,000,000
Total Assets $488,634,000
Intangible Assets $9,693,000
Total Liabilities $257,742,000
Shares Outstanding (Diluted Average) 27,284,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.04
Dec2016 -$2.51
Dec2015 -$2.08
Dec2014 $2.31
Dec2013 $2.77
Dec2012 $1.68
Dec2011 $0.93
Dec2010 $0.93
Dec2009 $0.97
Dec2008 $0.82
Dec2007 $0.48
Dec2006 $0.56
Dec2005 $0.46
Dec2004 $0.51
Dec2003 $0.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.94
Dec2016 -$0.45
Dec2015 $0.76
Dec2014 $2.03
Dec2013 $1.75
Dec2012 $1.18
Dec2011 $0.89
Dec2010 $0.83
Dec2009 $0.74
Dec2008 $0.61
Dec2007 $0.48
Dec2006 $0.43
Dec2005 $0.32
Dec2004 $0.22
Dec2003 $0.06

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

Target Corp Valuation – March 2017 $TGT
Foot Locker Inc Valuation – Initial Coverage $FL
Ulta Beauty Inc Valuation – Initial Coverage $ULTA
Kohl’s Corporation Valuation – March 2017 $KSS
Stamps.com Inc Valuation – Initial Coverage $STMP
Kirkland’s Inc Valuation – Initial Coverage $KIRK
Dollar Tree Inc Valuation – February 2017 $DLTR
Staples Inc Valuation – February 2017 $SPLS
Stein Mart Inc Valuation – Initial Coverage $SMRT
J C Penney Company Inc Valuation – Initial Coverage $JCP

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.

CVS Health Corp Valuation – March 2017 $CVS

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how CVS Health Corp (CVS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CVS Health Corporation, together with its subsidiaries, is an integrated pharmacy healthcare company. The Company provides pharmacy care for the senior community through Omnicare, Inc. (Omnicare) and Omnicare’s long-term care (LTC) operations, which include distribution of pharmaceuticals, related pharmacy consulting and other ancillary services to chronic care facilities and other care settings. It operates through three segments: Pharmacy Services, Retail/LTC and Corporate. The Pharmacy Services Segment provides a range of pharmacy benefit management (PBM) solutions to its clients. As of December 31, 2016, the Retail/LTC Segment included 9,709 retail locations (of which 7,980 were its stores that operated a pharmacy and 1,674 were its pharmacies located within Target Corporation (Target) stores), its online retail pharmacy Websites, CVS.com, Navarro.com and Onofre.com.br, 38 onsite pharmacy stores, its long-term care pharmacy operations and its retail healthcare clinics.

CVS Chart

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ModernGraham Valuation of CVS – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $79,961,439,547 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.18 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 112.33% Pass
6. Moderate PEmg Ratio PEmg < 20 15.91 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.30 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 1.18 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.35 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 $4.94
MG Growth Estimate 9.17%
MG Value $132.67
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $71.68
MG Value based on 0% Growth $42.02
Market Implied Growth Rate 3.70%
Current Price $78.63
% of Intrinsic Value 59.27%

CVS Health Corp qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current 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 feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.07 in 2013 to an estimated $4.94 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.71% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into CVS Health Corp revealed the company was trading above its Graham Number of $67.31. The company pays a dividend of $1.7 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 15.91, which was below the industry average of 50.09, 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 $-24.64.

CVS Health Corp performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.64
Graham Number $67.31
PEmg 15.91
Current Ratio 1.18
PB Ratio 2.30
Current Dividend $1.70
Dividend Yield 2.16%
Number of Consecutive Years of Dividend Growth 14

[/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 12/1/2016
Total Current Assets $31,042,000,000
Total Current Liabilities $26,250,000,000
Long-Term Debt $25,615,000,000
Total Assets $94,462,000,000
Intangible Assets $51,760,000,000
Total Liabilities $57,632,000,000
Shares Outstanding (Diluted Average) 1,079,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.80
Dec2016 $4.90
Dec2015 $4.63
Dec2014 $3.96
Dec2013 $3.74
Dec2012 $3.02
Dec2011 $2.57
Dec2010 $2.49
Dec2009 $2.55
Dec2008 $2.18
Dec2007 $1.92
Dec2006 $1.60
Dec2005 $1.45
Dec2004 $1.10
Dec2003 $1.03
Dec2002 $0.88
Dec2001 $0.50
Dec2000 $0.92
Dec1999 $0.78
Dec1998 $0.48
Dec1997 $0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.94
Dec2016 $4.36
Dec2015 $3.92
Dec2014 $3.43
Dec2013 $3.07
Dec2012 $2.68
Dec2011 $2.45
Dec2010 $2.31
Dec2009 $2.13
Dec2008 $1.83
Dec2007 $1.57
Dec2006 $1.34
Dec2005 $1.13
Dec2004 $0.94
Dec2003 $0.85
Dec2002 $0.74
Dec2001 $0.64

Recommended Reading:

Other ModernGraham posts about the company

CVS Health Corp Valuation – December 2015 Update $CVS
22 Companies in the Spotlight This Week – 11/29/14
CVS Health Corporation Annual Valuation – 2014 $CVS
10 Companies in the Spotlight This Week – 11/30/2013
ModernGraham Valuation: CVS Caremark (CVS)

Other ModernGraham posts about related companies

Target Corp Valuation – March 2017 $TGT
Foot Locker Inc Valuation – Initial Coverage $FL
Ulta Beauty Inc Valuation – Initial Coverage $ULTA
Kohl’s Corporation Valuation – March 2017 $KSS
Stamps.com Inc Valuation – Initial Coverage $STMP
Kirkland’s Inc Valuation – Initial Coverage $KIRK
Dollar Tree Inc Valuation – February 2017 $DLTR
Staples Inc Valuation – February 2017 $SPLS
Stein Mart Inc Valuation – Initial Coverage $SMRT
J C Penney Company Inc Valuation – Initial Coverage $JCP

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.

Target Corp Valuation – March 2017 $TGT

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Target Corp (TGT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Target Corporation offers everyday essentials and merchandise to its customers. The Company sells a range of general merchandise and food through its store and digital channels. The Company’s general merchandise stores offer an edited food assortment, including perishables, dry grocery, dairy and frozen items. The Company’s digital channels include a range of general merchandise, including various items found in its stores, along with a complementary assortment, such as additional sizes and colors sold only online. The Company’s brands include Archer Farms, Market Pantry, Threshold, Simply Balanced, Merona, up & up, Boots & Barkley, Room Essentials, Wine Cube, Circo, Smith & Hawken, Xhilaration, Embark, Ava & Viv, Spritz and Sonia Kashuk. The Company’s exclusive brands include C9 by Champion, DENIZEN from Levi’s, Nate Berkus for Target, Cherokee, Fieldcrest, Oh Joy! for Target, Mossimo, Genuine Kids from OshKosh, Shaun White, Kid Made Modern and Hand Made Modern.

TGT Chart

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ModernGraham Valuation of TGT – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $29,998,053,727 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.94 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 36.12% Pass
6. Moderate PEmg Ratio PEmg < 20 15.97 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.84 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 0.94 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -15.36 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 $3.45
MG Growth Estimate -1.51%
MG Value $18.93
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $50.05
MG Value based on 0% Growth $29.34
Market Implied Growth Rate 3.74%
Current Price $55.14
% of Intrinsic Value 291.34%

Target 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, insufficient earnings stability 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 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 $3.84 in 2014 to an estimated $3.45 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.74% 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 Target Corporation revealed the company was trading above its Graham Number of $41.14. The company pays a dividend of $2.32 per share, for a yield of 4.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 15.97, which was below the industry average of 50.09, 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 $-25.67.

Target 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) -$25.67
Graham Number $41.14
PEmg 15.97
Current Ratio 0.94
PB Ratio 2.84
Current Dividend $2.32
Dividend Yield 4.21%
Number of Consecutive Years of Dividend Growth 20

[/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 1/1/2017
Total Current Assets $11,990,000,000
Total Current Liabilities $12,708,000,000
Long-Term Debt $11,031,000,000
Total Assets $37,431,000,000
Intangible Assets $0
Total Liabilities $26,478,000,000
Shares Outstanding (Diluted Average) 564,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.82
Jan2017 $4.70
Jan2016 $5.31
Jan2015 -$2.56
Jan2014 $3.07
Jan2013 $4.52
Jan2012 $4.28
Jan2011 $4.00
Jan2010 $3.30
Jan2009 $2.86
Jan2008 $3.33
Jan2007 $3.21
Jan2006 $2.71
Jan2005 $3.51
Jan2004 $1.76
Jan2003 $1.78
Jan2002 $1.21
Jan2001 $1.38
Jan2000 $1.23
Jan1999 $0.99
Jan1998 $0.80

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.45
Jan2017 $3.18
Jan2016 $2.59
Jan2015 $1.71
Jan2014 $3.84
Jan2013 $4.08
Jan2012 $3.76
Jan2011 $3.44
Jan2010 $3.14
Jan2009 $3.08
Jan2008 $3.09
Jan2007 $2.85
Jan2006 $2.51
Jan2005 $2.25
Jan2004 $1.57
Jan2003 $1.42
Jan2002 $1.20

Recommended Reading:

Other ModernGraham posts about the company

Target Corporation Stock Analysis – 2015 Update $TGT
17 Companies in the Spotlight This Week – June 21, 2014
Target Corp Annual Valuation – 2014 $TGT
17 Companies in the Spotlight This Week – 3/22/14
Target Corporation (TGT) Quarterly Valuation – March 2014

Other ModernGraham posts about related companies

Foot Locker Inc Valuation – Initial Coverage $FL
Ulta Beauty Inc Valuation – Initial Coverage $ULTA
Kohl’s Corporation Valuation – March 2017 $KSS
Stamps.com Inc Valuation – Initial Coverage $STMP
Kirkland’s Inc Valuation – Initial Coverage $KIRK
Dollar Tree Inc Valuation – February 2017 $DLTR
Staples Inc Valuation – February 2017 $SPLS
Stein Mart Inc Valuation – Initial Coverage $SMRT
J C Penney Company Inc Valuation – Initial Coverage $JCP
TJX Companies Inc Valuation – December 2016 $TJX

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.

Foot Locker Inc Valuation – Initial Coverage $FL

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Foot Locker Inc (FL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Foot Locker, Inc. is a retailer of shoes and apparel. The Company operates through two segments: Athletic Stores and Direct-to-Customers. The Company’s Athletic Stores segment is an athletic footwear and apparel retailer whose formats include Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Footaction, SIX:02, Runners Point Group, including Runners Point and Sidestep. The Company’s Direct-to-Customers segment includes Footlocker.com, Inc. and other affiliates, including Eastbay, Inc., and its international e-commerce businesses, which sell to customers through their Internet and mobile sites and catalogs. The Direct-to-Customers segment operates the Websites for eastbay.com, final-score.com, eastbayteamsales.com, and sp24.com. It operates over 3,383 primarily mall-based stores in the United States, Canada, Europe, Australia and New Zealand. The Company operates over 60 franchised stores that are located in the Middle East, Germany and Switzerland, and Republic of Korea.

FL Chart

FL 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.

Learn More About Premium Membership

[/level-free]
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ModernGraham Valuation of FL – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,034,621,607 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.30 Pass
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 1540.00% Pass
6. Moderate PEmg Ratio PEmg < 20 16.96 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.73 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 4.30 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $4.47
MG Growth Estimate 15.00%
MG Value $172.17
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $64.84
MG Value based on 0% Growth $38.01
Market Implied Growth Rate 4.23%
Current Price $75.84
% of Intrinsic Value 44.05%

Foot Locker, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.16 in 2014 to an estimated $4.47 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.23% 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 above the price.

At the time of valuation, further research into Foot Locker, Inc. revealed the company was trading above its Graham Number of $48.72. The company pays a dividend of $1.1 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 16.96, which was below the industry average of 50.09, 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 $11.28.

Foot Locker, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $11.28
Graham Number $48.72
PEmg 16.96
Current Ratio 4.30
PB Ratio 3.73
Current Dividend $1.10
Dividend Yield 1.45%
Number of Consecutive Years of Dividend Growth 7

[/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 1/1/2017
Total Current Assets $2,633,000,000
Total Current Liabilities $612,000,000
Long-Term Debt $0
Total Assets $3,840,000,000
Intangible Assets $0
Total Liabilities $1,130,000,000
Shares Outstanding (Diluted Average) 133,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.19
Jan2017 $4.91
Jan2016 $3.84
Jan2015 $3.56
Jan2014 $2.85
Jan2013 $2.58
Jan2012 $1.80
Jan2011 $1.07
Jan2010 $0.30
Jan2009 -$0.52
Jan2008 $0.29
Jan2007 $1.60
Jan2006 $1.68
Jan2005 $1.88
Jan2004 $1.39
Jan2003 $1.05
Jan2002 $0.64
Jan2001 -$1.73
Jan2000 $0.43
Jan1999 -$1.00
Jan1998 $1.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.47
Jan2017 $3.92
Jan2016 $3.26
Jan2015 $2.77
Jan2014 $2.16
Jan2013 $1.56
Jan2012 $0.90
Jan2011 $0.48
Jan2010 $0.34
Jan2009 $0.57
Jan2008 $1.20
Jan2007 $1.61
Jan2006 $1.52
Jan2005 $1.18
Jan2004 $0.67
Jan2003 $0.17
Jan2002 -$0.20

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

Ulta Beauty Inc Valuation – Initial Coverage $ULTA
Kohl’s Corporation Valuation – March 2017 $KSS
Stamps.com Inc Valuation – Initial Coverage $STMP
Kirkland’s Inc Valuation – Initial Coverage $KIRK
Dollar Tree Inc Valuation – February 2017 $DLTR
Staples Inc Valuation – February 2017 $SPLS
Stein Mart Inc Valuation – Initial Coverage $SMRT
J C Penney Company Inc Valuation – Initial Coverage $JCP
TJX Companies Inc Valuation – December 2016 $TJX
Shoe Carnival Inc Valuation – Initial Coverage $SCVL

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.

Ulta Beauty Inc Valuation – Initial Coverage $ULTA

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Ulta Beauty Inc (ULTA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Ulta Beauty, Inc. is a holding company for the Ulta Beauty group of companies. The Company is a beauty retailer. The Company offers cosmetics, fragrance, skin, hair care products and salon services. The Company offers approximately 20,000 products from over 500 beauty brands across all categories, including the Company’s own private label. The Company also offers a full-service salon in every store featuring hair, skin and brow services. The Company operates approximately 970 retail stores across over 48 states and the District of Columbia and also distributes its products through its Website, which includes a collection of tips, tutorials and social content. The Company offers makeup products, such as foundation, face powder, concealer, color correcting, face primer, blush, bronzer, contouring, highlighter, setting spray, shampoos, conditioners, hair styling products, hair styling tools and perfumes. The Company also offers makeup brushes and tools, and makeup bags and cases.

ULTA Chart

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ModernGraham Valuation of ULTA – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,353,722,489 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.35 Pass
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 876.43% Pass
6. Moderate PEmg Ratio PEmg < 20 57.40 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 12.01 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.35 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 $4.85
MG Growth Estimate 15.00%
MG Value $186.57
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $70.27
MG Value based on 0% Growth $41.19
Market Implied Growth Rate 24.45%
Current Price $278.15
% of Intrinsic Value 149.09%

Ulta Beauty Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.75 in 2013 to an estimated $4.85 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 24.45% 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 Ulta Beauty Inc revealed the company was trading above its Graham Number of $57.79. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 57.4, which was above the industry average of 50.09. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.01.

Ulta Beauty 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) $7.01
Graham Number $57.79
PEmg 57.40
Current Ratio 2.35
PB Ratio 12.01
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2016
Total Current Assets $1,538,465,000
Total Current Liabilities $654,640,000
Long-Term Debt $0
Total Assets $2,551,201,000
Intangible Assets $0
Total Liabilities $1,099,117,000
Shares Outstanding (Diluted Average) 62,692,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.37
Jan2016 $4.98
Jan2015 $3.98
Jan2014 $3.15
Jan2013 $2.68
Jan2012 $1.90
Jan2011 $1.16
Jan2010 $0.66
Jan2009 $0.43
Jan2008 $0.48
Jan2007 $0.45
Jan2006 $0.33
Jan2005 -$0.70
Jan2004 -$2.36
Jan2003 $0.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.85
Jan2016 $3.84
Jan2015 $3.03
Jan2014 $2.34
Jan2013 $1.75
Jan2012 $1.16
Jan2011 $0.74
Jan2010 $0.51
Jan2009 $0.36
Jan2008 $0.10
Jan2007 -$0.22
Jan2006 -$0.55
Jan2005 -$0.86
Jan2004 -$0.78
Jan2003 $0.01

Recommended Reading:

Other ModernGraham posts about the company

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

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Kohl’s Corporation Valuation – March 2017 $KSS
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Kohl’s Corporation Valuation – March 2017 $KSS

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Kohl’s Corporation (KSS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kohl’s Corporation (Kohl’s) is an operator of department stores. The Company also operates an e-commerce Website (www.Kohls.com). The Company operates over 1,160 department stores in approximately 50 states. The Company sells private label, exclusive and national brand apparel, footwear, accessories, beauty and home products. Its Website includes merchandise, which is available in its stores, as well as merchandise, which is available only on-line. The Company’s private brands include Apt. 9, Croft & Barrow, Jumping Beans, SO and Sonoma Goods for Life. Its exclusive brands include Food Network, Jennifer Lopez, Marc Anthony, Rock & Republic and Simply Vera Vera Wang.

KSS Chart

KSS 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.

Learn More About Premium Membership

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of KSS – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,205,242,652 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.76 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 2.47% Fail
6. Moderate PEmg Ratio PEmg < 20 12.03 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.42 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 1.76 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.23 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 $3.49
MG Growth Estimate -1.99%
MG Value $15.73
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $50.56
MG Value based on 0% Growth $29.64
Market Implied Growth Rate 1.77%
Current Price $41.95
% of Intrinsic Value 266.70%

Kohl’s 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, insufficient earnings growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.02 in 2014 to an estimated $3.49 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.77% 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 Kohl’s Corporation revealed the company was trading below its Graham Number of $47.5. The company pays a dividend of $2 per share, for a yield of 4.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.03, which was below the industry average of 50.09, 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 $-18.

Kohl’s 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) -$18.00
Graham Number $47.50
PEmg 12.03
Current Ratio 1.76
PB Ratio 1.42
Current Dividend $2.00
Dividend Yield 4.77%
Number of Consecutive Years of Dividend Growth 7

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2017
Total Current Assets $5,247,000,000
Total Current Liabilities $2,974,000,000
Long-Term Debt $2,795,000,000
Total Assets $13,574,000,000
Intangible Assets $0
Total Liabilities $8,397,000,000
Shares Outstanding (Diluted Average) 175,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.39
Jan2017 $3.11
Jan2016 $3.46
Jan2015 $4.24
Jan2014 $4.05
Jan2013 $4.17
Jan2012 $4.30
Jan2011 $3.66
Jan2010 $3.17
Jan2009 $2.89
Jan2008 $3.39
Jan2007 $3.31
Jan2006 $2.43
Jan2005 $2.04
Jan2004 $1.59
Jan2003 $1.85
Jan2002 $1.45
Jan2001 $1.10
Jan2000 $0.77
Jan1999 $0.59
Jan1998 $0.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.49
Jan2017 $3.63
Jan2016 $3.94
Jan2015 $4.14
Jan2014 $4.02
Jan2013 $3.88
Jan2012 $3.65
Jan2011 $3.32
Jan2010 $3.11
Jan2009 $2.99
Jan2008 $2.88
Jan2007 $2.49
Jan2006 $2.02
Jan2005 $1.74
Jan2004 $1.51
Jan2003 $1.37
Jan2002 $1.02

Recommended Reading:

Other ModernGraham posts about the company

Kohl’s Corporation Valuation – November 2015 Update $KSS
The Best Companies of the Retail Industry – August 2015
15 Best Stocks For Value Investors This Week – 8/22/15
Kohl’s Corporation Analysis – August 2015 Update $KSS
30 Companies in the Spotlight This Week – 5/23/15

Other ModernGraham posts about related companies

Kirkland’s Inc Valuation – Initial Coverage $KIRK
Dollar Tree Inc Valuation – February 2017 $DLTR
Staples Inc Valuation – February 2017 $SPLS
Stein Mart Inc Valuation – Initial Coverage $SMRT
J C Penney Company Inc Valuation – Initial Coverage $JCP
TJX Companies Inc Valuation – December 2016 $TJX
Shoe Carnival Inc Valuation – Initial Coverage $SCVL
Aaron’s Inc Valuation – November 2016 $AAN
Tractor Supply Company Valuation – August 2016 $TSCO
Fossil Group Inc Valuation – August 2016 $FOSL

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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