Synopsys Inc Valuation – February 2019 $SNPS

Company Profile (excerpt from Reuters): Synopsys, Inc., incorporated on May 7, 1987, provides software, intellectual property (IP) and services. The Company supplies the electronic design automation (EDA) software that engineers use to design and test integrated circuits (ICs), also known as chips. The Company also offers IP products, which are pre-designed circuits that engineers use as components of larger chip designs rather than designing those circuits themselves. The Company provides software and hardware used to develop the electronic systems that incorporate chips and the software that runs on them. The Company provides technical services to support its solutions and help its customers develop chips and electronic systems. The Company is also a provider of software tools that developers use to develop software code in a range of industries, including electronics, financial services, energy and industrials. The Company offers products and services in four categories: core EDA; IP, Systems and Software Integrity; Manufacturing Solutions, and Professional Services and Other.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SNPS – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,801,985,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.73 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 86.56% Pass
6. Moderate PEmg Ratio PEmg < 20 37.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.38 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.73 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -0.22 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.66
MG Growth Estimate 11.76%
MG Value $85.11
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $38.53
MG Value based on 0% Growth $22.59
Market Implied Growth Rate 14.38%
Current Price $99.01
% of Intrinsic Value 116.34%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.49 in 2015 to an estimated $2.66 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.38% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Synopsys, Inc. revealed the company was trading above its Graham Number of $46.99. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 37.26, which was below the industry average of 56.55, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.24.

Synopsys, 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) -$7.24
Graham Number $46.99
PEmg 37.26
Current Ratio 0.73
PB Ratio 4.38
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 10/1/2018
Total Current Assets $1,543,797,000
Total Current Liabilities $2,102,415,000
Long-Term Debt $125,535,000
Total Assets $6,145,974,000
Intangible Assets $3,503,653,000
Total Liabilities $2,660,959,000
Shares Outstanding (Diluted Average) 154,218,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.21
Oct2018 $2.82
Oct2017 $0.88
Oct2016 $1.73
Oct2015 $1.43
Oct2014 $1.64
Oct2013 $1.58
Oct2012 $1.21
Oct2011 $1.47
Oct2010 $1.56
Oct2009 $1.15
Oct2008 $1.29
Oct2007 $0.87
Oct2006 $0.17
Oct2005 -$0.12
Oct2004 $0.47
Oct2003 $0.91
Oct2002 -$1.51
Oct2001 $0.44
Oct2000 $0.69
Sep1999 $1.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.66
Oct2018 $1.82
Oct2017 $1.36
Oct2016 $1.58
Oct2015 $1.49
Oct2014 $1.51
Oct2013 $1.43
Oct2012 $1.35
Oct2011 $1.37
Oct2010 $1.21
Oct2009 $0.92
Oct2008 $0.71
Oct2007 $0.43
Oct2006 $0.14
Oct2005 $0.10
Oct2004 $0.20
Oct2003 $0.15

Recommended Reading:

Other ModernGraham posts about the company

Synopsys Inc Valuation – April 2018 $SNPS
Synopsys Inc Valuation – Initial Coverage $SNPS

Other ModernGraham posts about related companies

Intuit Inc Valuation – February 2019 $INTU
Adobe Inc Valuation – February 2019 $ADBE
Autodesk Inc Valuation – February 2019 $ADSK
F5 Networks Inc Valuation – February 2019 $FFIV
Cadence Design Systems Inc Valuation – January 2019 $CDNS
Oracle Corporation Valuation – January 2019 $ORCL
Red Hat Inc Valuation – January 2019 $RHT
Alphabet Inc Valuation – January 2019 $GOOG $GOOGL
Ansys Inc Valuation – January 2019 $ANSS
Citrix Systems Inc Valuation – January 2019 $CTXS

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.

Synopsys Inc Valuation – April 2018 $SNPS

Company Profile (excerpt from Reuters): Synopsys, Inc., incorporated on May 7, 1987, provides software, intellectual property (IP) and services. The Company supplies the electronic design automation (EDA) software that engineers use to design and test integrated circuits (ICs), also known as chips. The Company also offers IP products, which are pre-designed circuits that engineers use as components of larger chip designs rather than designing those circuits themselves. The Company provides software and hardware used to develop the electronic systems that incorporate chips and the software that runs on them. The Company provides technical services to support its solutions and help its customers develop chips and electronic systems. The Company is also a provider of software tools that developers use to develop software code in a range of industries, including electronics, financial services, energy and industrials. The Company offers products and services in four categories: core EDA; IP, Systems and Software Integrity; Manufacturing Solutions, and Professional Services and Other.

SNPS Chart

SNPS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SNPS – April 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,104,739,949 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.68 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 50.72% Pass
6. Moderate PEmg Ratio PEmg < 20 38.56 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.88 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.68 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -0.21 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.11
MG Growth Estimate 5.97%
MG Value $43.13
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $30.60
MG Value based on 0% Growth $17.94
Market Implied Growth Rate 15.03%
Current Price $81.39
% of Intrinsic Value 188.71%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.51 in 2014 to an estimated $2.11 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.03% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Synopsys, Inc. revealed the company was trading above its Graham Number of $42.52. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 38.56, which was below the industry average of 49.59, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-8.36.

Synopsys, 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) -$8.36
Graham Number $42.52
PEmg 38.56
Current Ratio 0.68
PB Ratio 3.88
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2018
Total Current Assets $1,332,346,000
Total Current Liabilities $1,950,414,000
Long-Term Debt $131,250,000
Total Assets $5,717,549,000
Intangible Assets $3,565,137,000
Total Liabilities $2,581,020,000
Shares Outstanding (Diluted Average) 149,441,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.69
Oct2017 $0.88
Oct2016 $1.73
Oct2015 $1.43
Oct2014 $1.64
Oct2013 $1.58
Oct2012 $1.21
Oct2011 $1.47
Oct2010 $1.56
Oct2009 $1.15
Oct2008 $1.29
Oct2007 $0.87
Oct2006 $0.17
Oct2005 -$0.12
Oct2004 $0.47
Oct2003 $0.91
Oct2002 -$1.51
Oct2001 $0.44
Oct2000 $0.69
Sep1999 $1.10
Sep1998 $0.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.11
Oct2017 $1.36
Oct2016 $1.58
Oct2015 $1.49
Oct2014 $1.51
Oct2013 $1.43
Oct2012 $1.35
Oct2011 $1.37
Oct2010 $1.21
Oct2009 $0.92
Oct2008 $0.71
Oct2007 $0.43
Oct2006 $0.14
Oct2005 $0.10
Oct2004 $0.20
Oct2003 $0.15
Oct2002 -$0.06

Recommended Reading:

Other ModernGraham posts about the company

Synopsys Inc Valuation – Initial Coverage $SNPS

Other ModernGraham posts about related companies

F5 Networks Inc Valuation – April 2018 $FFIV
Cadence Design Systems Inc Valuation – Initial Coverage $CDNS
Oracle Corporation Valuation – March 2018 $ORCL
CA Inc Valuation – March 2018 $CA
Red Hat Inc Valuation – March 2018 $RHT
Alphabet Inc Valuation – March 2018 $GOOGL
Ansys Inc Valuation – March 2018 $ANSS
Citrix Systems Inc Valuation – February 2018 $CTXS
Microsoft Corp Valuation – February 2018 $MSFT
Cisco Systems Inc Valuation – February 2018 $CSCO

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.

Synopsys Inc Valuation – Initial Coverage $SNPS

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 Synopsys Inc (SNPS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Synopsys, Inc. provides software, intellectual property (IP) and services. The Company supplies the electronic design automation (EDA) software that engineers use to design and test integrated circuits, also known as chips. It also offers IP products, which are pre-designed circuits that engineers use as components of larger chip designs rather than designing those circuits themselves. It provides software and hardware used to develop the electronic systems that incorporate chips and the software that runs on them. It provides technical services to support its solutions and help its customers develop chips and electronic systems. It is also a provider of software tools that developers use to develop software code in a range of industries, including electronics, financial services, energy, and industrials. It offers products and services in four categories: core EDA; IP, Systems and Software Integrity; Manufacturing Solutions, and Professional Services and Other.

SNPS Chart

SNPS 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 SNPS – 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 $9,850,853,481 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.00 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 59.00% Pass
6. Moderate PEmg Ratio PEmg < 20 30.36 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.14 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 1.00 Fail
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 $2.14
MG Growth Estimate 7.46%
MG Value $50.06
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $31.00
MG Value based on 0% Growth $18.17
Market Implied Growth Rate 10.93%
Current Price $64.90
% of Intrinsic Value 129.64%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.43 in 2013 to an estimated $2.14 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.93% 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 Synopsys, Inc. revealed the company was trading above its Graham Number of $38.97. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 30.36, which was below the industry average of 38.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.12.

Synopsys, 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) -$2.12
Graham Number $38.97
PEmg 30.36
Current Ratio 1.00
PB Ratio 3.14
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 $1,716,938,000
Total Current Liabilities $1,714,946,000
Long-Term Debt $0
Total Assets $5,240,365,000
Intangible Assets $2,784,906,000
Total Liabilities $2,045,219,000
Shares Outstanding (Diluted Average) 154,721,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.20
Oct2016 $1.73
Oct2015 $1.43
Oct2014 $1.64
Oct2013 $1.58
Oct2012 $1.21
Oct2011 $1.47
Oct2010 $1.56
Oct2009 $1.15
Oct2008 $1.29
Oct2007 $0.87
Oct2006 $0.17
Oct2005 -$0.12
Oct2004 $0.47
Oct2003 $0.91
Oct2002 -$1.51
Oct2001 $0.44
Oct2000 $0.69
Sep1999 $1.10
Sep1998 $0.65
Sep1997 $0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.14
Oct2016 $1.58
Oct2015 $1.49
Oct2014 $1.51
Oct2013 $1.43
Oct2012 $1.35
Oct2011 $1.37
Oct2010 $1.21
Oct2009 $0.92
Oct2008 $0.71
Oct2007 $0.43
Oct2006 $0.14
Oct2005 $0.10
Oct2004 $0.20
Oct2003 $0.15
Oct2002 -$0.06
Oct2001 $0.68

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

Microsoft Corporation Valuation – February 2017 $MSFT
Cisco Systems Inc Valuation – January 2017 $CSCO
Autodesk Inc Valuation – December 2016 $ADSK
Symantec Corporation Valuation – August 2016 $SYMC
Adobe Systems Inc Valuation – August 2016 $ADBE
Microsoft Corporation Valuation – August 2016 $MSFT
Cisco Systems Inc Valuation – August 2016 $CSCO
Oracle Corporation Valuation – July 2016 $ORCL
CA Inc Valuation – July 2016 $CA
Red Hat Inc Valuation – June 2016 $RHT

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.

Cisco Systems Inc Valuation – April 2019 #CSCO

Company Profile (excerpt from Reuters): Cisco Systems, Inc. (Cisco), incorporated on December 10, 1984, is engaged in designing and selling a range of technologies across networking, security, collaboration, applications and the cloud. The Company operates through three geographic segments: Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).The Company’s product and technologies includes, infrastructure platforms; applications; security and other products. It also offers technical support services and advanced services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSCO – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $243,035,961,849 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.80 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 21.55% Fail
6. Moderate PEmg Ratio PEmg < 20 31.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.10 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 1.80 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.67 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.76
MG Growth Estimate 1.20%
MG Value $19.19
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $25.52
MG Value based on 0% Growth $14.96
Market Implied Growth Rate 11.43%
Current Price $55.21
% of Intrinsic Value 287.64%

Cisco Systems, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.63 in 2015 to an estimated $1.76 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.43% 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 Cisco Systems, Inc. revealed the company was trading above its Graham Number of $24.85. The company pays a dividend of $1.24 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 31.37, which was below the industry average of 69.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.9.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.90
Graham Number $24.85
PEmg 31.37
Current Ratio 1.80
PB Ratio 6.10
Current Dividend $1.24
Dividend Yield 2.25%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $53,117,000,000
Total Current Liabilities $29,479,000,000
Long-Term Debt $15,893,000,000
Total Assets $102,462,000,000
Intangible Assets $35,563,000,000
Total Liabilities $61,673,000,000
Shares Outstanding (Diluted Average) 4,505,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.93
Jul2018 $0.02
Jul2017 $1.90
Jul2016 $2.11
Jul2015 $1.75
Jul2014 $1.49
Jul2013 $1.86
Jul2012 $1.49
Jul2011 $1.17
Jul2010 $1.33
Jul2009 $1.05
Jul2008 $1.31
Jul2007 $1.17
Jul2006 $0.89
Jul2005 $0.87
Jul2004 $0.62
Jul2003 $0.50
Jul2002 $0.25
Jul2001 -$0.14
Jul2000 $0.36
Jul1999 $0.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.76
Jul2018 $1.27
Jul2017 $1.87
Jul2016 $1.82
Jul2015 $1.63
Jul2014 $1.54
Jul2013 $1.50
Jul2012 $1.30
Jul2011 $1.21
Jul2010 $1.20
Jul2009 $1.11
Jul2008 $1.08
Jul2007 $0.92
Jul2006 $0.74
Jul2005 $0.58
Jul2004 $0.40
Jul2003 $0.27

Recommended Reading:

Other ModernGraham posts about the company

Cisco Systems Inc Valuation – November 2018 $CSCO
Cisco Systems Inc Valuation – February 2018 $CSCO
5 Undervalued Dow Components to Research – March 2017
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2017
5 Undervalued Dow Components to Research – February 2017

Other ModernGraham posts about related companies

Salesforce.com Inc Valuation – March 2019 #CRM
Akamai Technologies Inc Valuation – February 2019 $AKAM
Accenture PLC Valuation – February 2019 $ACN
Fortinet Inc Valuation – February 2019 $FTNT
Synopsys Inc Valuation – February 2019 $SNPS
Symantec Corp Valuation – February 2019 $SYMC
Intuit Inc Valuation – February 2019 $INTU
Adobe Inc Valuation – February 2019 $ADBE
Autodesk Inc Valuation – February 2019 $ADSK
F5 Networks Inc Valuation – February 2019 $FFIV

Disclaimer:

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

Salesforce.com Inc Valuation – March 2019 #CRM

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CRM – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $121,301,431,411 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.95 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -1259.69% Fail
6. Moderate PEmg Ratio PEmg < 20 114.55 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.90 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.95 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.55 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

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

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.28 in 2016 to an estimated $1.37 for 2020. This level of demonstrated earnings growth does not support the market’s implied estimate of 53.03% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into salesforce.com, inc. revealed the company was trading above its Graham Number of $33.94. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 114.55, which was above the industry average of 65.85. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.67.

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

Stage 3: Information for Further Research

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

Useful Links:

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

Most Recent Balance Sheet Figures

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

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

Salesforce.com Inc Valuation – June 2018 $CRM
Salesforce.com Inc Valuation – April 2017 $CRM
Salesforce.com Valuation – January 2016 Update $CRM
26 Companies in the Spotlight This Week – 12/13/14
Salesforce.com Inc. Annual Valuation – 2014 $CRM

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Akamai Technologies Inc Valuation – February 2019 $AKAM
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Symantec Corp Valuation – February 2019 $SYMC
Intuit Inc Valuation – February 2019 $INTU
Adobe Inc Valuation – February 2019 $ADBE
Autodesk Inc Valuation – February 2019 $ADSK
F5 Networks Inc Valuation – February 2019 $FFIV
Cadence Design Systems Inc Valuation – January 2019 $CDNS

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.

Akamai Technologies Inc Valuation – February 2019 $AKAM

Company Profile (excerpt from Reuters): Akamai Technologies, Inc., incorporated on August 20, 1998, is engaged in providing cloud services for delivering, optimizing and securing content and business applications over the Internet. As of December 31, 2016, the Company’s globally-distributed platform included more than 200,000 servers in over 1,600 networks in 131 countries. It is involved in offering content delivery network (CDN) services. Its services include the delivery of content, applications and software over the Internet, as well as mobile and security solutions, and enterprise professional services. The Company’s solutions include Performance and Security Solutions, Media Delivery Solutions, and Service and Support Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AKAM – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,398,590,049 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.09 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 122.01% Pass
6. Moderate PEmg Ratio PEmg < 20 29.64 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.60 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 2.09 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.66 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 $2.36
MG Growth Estimate 6.75%
MG Value $51.89
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $34.20
MG Value based on 0% Growth $20.05
Market Implied Growth Rate 10.57%
Current Price $69.90
% of Intrinsic Value 134.71%

Akamai Technologies, 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 $1.63 in 2015 to an estimated $2.36 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.57% 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 Akamai Technologies, Inc. revealed the company was trading above its Graham Number of $41.15. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 29.64, which was below the industry average of 56.55, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.61.

Akamai Technologies, 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) $1.61
Graham Number $41.15
PEmg 29.64
Current Ratio 2.09
PB Ratio 3.60
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,535,354,000
Total Current Liabilities $1,210,709,000
Long-Term Debt $874,080,000
Total Assets $5,461,770,000
Intangible Assets $1,655,752,000
Total Liabilities $2,269,910,000
Shares Outstanding (Diluted Average) 164,540,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.84
Dec2018 $1.76
Dec2017 $1.26
Dec2016 $1.79
Dec2015 $1.78
Dec2014 $1.84
Dec2013 $1.61
Dec2012 $1.12
Dec2011 $1.07
Dec2010 $0.90
Dec2009 $0.78
Dec2008 $0.79
Dec2007 $0.56
Dec2006 $0.34
Dec2005 $2.11
Dec2004 $0.25
Dec2003 -$0.25
Dec2002 -$1.81
Dec2001 -$23.59
Dec2000 -$10.07
Dec1999 -$1.98

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.36
Dec2018 $1.64
Dec2017 $1.61
Dec2016 $1.73
Dec2015 $1.63
Dec2014 $1.47
Dec2013 $1.22
Dec2012 $1.00
Dec2011 $0.90
Dec2010 $0.76
Dec2009 $0.77
Dec2008 $0.78
Dec2007 $0.72
Dec2006 $0.57
Dec2005 -$1.09
Dec2004 -$4.16
Dec2003 -$6.76

Recommended Reading:

Other ModernGraham posts about the company

Akamai Technologies Inc Valuation – May 2018 $AKAM
Akamai Technologies Inc Valuation – January 2017 $AKAM
15 Best Undervalued Stocks of the Week – 8/20/16
Akamai Technologies Inc Valuation – August 2016 $AKAM
18 Best Stocks For Value Investors This Week – 1/30/16

Other ModernGraham posts about related companies

Accenture PLC Valuation – February 2019 $ACN
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Intuit Inc Valuation – February 2019 $INTU
Adobe Inc Valuation – February 2019 $ADBE
Autodesk Inc Valuation – February 2019 $ADSK
F5 Networks Inc Valuation – February 2019 $FFIV
Cadence Design Systems Inc Valuation – January 2019 $CDNS
Oracle Corporation Valuation – January 2019 $ORCL

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.

Accenture PLC Valuation – February 2019 $ACN

Company Profile (excerpt from Reuters): Accenture plc, incorporated on June 10, 2009, is a professional services company serving clients in a range of industries and in geographic regions, which include North America, Europe and Growth Markets. The Company is engaged in providing management and technology consulting services. The Company’s segments include Communications, Media & Technology; Financial Services; Health & Public Service; Products, and Resources. Its services and solutions include Accenture Strategy, Accenture Consulting, Accenture Digital, Accenture Technology and Accenture Operations. The Accenture Strategy provides a range of strategy services focused on areas, such as digital technologies; enterprise architecture and applications; Chief Financial Officer (CFO) and enterprise value; information technology (IT); security; mergers and acquisitions; operations; advanced customer services, and talent and organization. The Accenture Consulting provides industry insights and management and technology consulting capabilities. The Accenture Digital provides digital services across three areas, including Accenture Interactive, Accenture Mobility and Accenture Analytics. The Accenture Technology comprises two primary areas: Technology Services, and Technology Innovation and Ecosystem. The Accenture Operations provide business process services, infrastructure services, security services and cloud services, including the Accenture cloud platform. The Company also provides intelligent automation services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ACN – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $100,971,886,029 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.33 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 90.80% Pass
6. Moderate PEmg Ratio PEmg < 20 25.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.91 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 1.33 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.01 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 $6.32
MG Growth Estimate 5.99%
MG Value $129.42
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $91.63
MG Value based on 0% Growth $53.71
Market Implied Growth Rate 8.29%
Current Price $158.43
% of Intrinsic Value 122.42%

Accenture Plc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the low current ratio. 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 $4.52 in 2015 to an estimated $6.32 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.29% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Accenture Plc revealed the company was trading above its Graham Number of $50.84. The company pays a dividend of $2.66 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 25.07, which was below the industry average of 56.55, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.17.

Accenture Plc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.17
Graham Number $50.84
PEmg 25.07
Current Ratio 1.33
PB Ratio 7.91
Current Dividend $2.66
Dividend Yield 1.68%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 11/1/2018
Total Current Assets $13,540,408,000
Total Current Liabilities $10,176,335,000
Long-Term Debt $19,896,000
Total Assets $26,706,412,000
Intangible Assets $6,219,615,000
Total Liabilities $13,650,844,000
Shares Outstanding (Diluted Average) 652,151,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.09
Aug2018 $6.34
Aug2017 $5.44
Aug2016 $6.45
Aug2015 $4.76
Aug2014 $4.52
Aug2013 $4.93
Aug2012 $3.84
Aug2011 $3.39
Aug2010 $2.66
Aug2009 $2.44
Aug2008 $2.65
Aug2007 $1.97
Aug2006 $1.59
Aug2005 $1.56
Aug2004 $1.22
Aug2003 $1.05
Aug2002 $0.56
Aug2001 $1.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.32
Aug2018 $5.79
Aug2017 $5.42
Aug2016 $5.24
Aug2015 $4.52
Aug2014 $4.22
Aug2013 $3.86
Aug2012 $3.22
Aug2011 $2.81
Aug2010 $2.44
Aug2009 $2.23
Aug2008 $2.02
Aug2007 $1.63
Aug2006 $1.37
Aug2005 $1.21
Aug2004 $0.95
Aug2003 $0.73

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Accenture PLC Valuation – August 2016 $ACN

Other ModernGraham posts about related companies

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Adobe Inc Valuation – February 2019 $ADBE
Autodesk Inc Valuation – February 2019 $ADSK
F5 Networks Inc Valuation – February 2019 $FFIV
Cadence Design Systems Inc Valuation – January 2019 $CDNS
Oracle Corporation Valuation – January 2019 $ORCL
Red Hat Inc Valuation – January 2019 $RHT

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.

Fortinet Inc Valuation – February 2019 $FTNT

Company Profile (excerpt from Reuters): Fortinet, Inc., incorporated on November 28, 2000, is a network security company. The Company provides cyber security solutions to a range of enterprises, service providers and government organizations across the world. It provides protection against cyber-attacks and the technology to take on security performance requirements of the network. It offers a range of security products and solutions, providing customers with an integrated network security architecture and a source of threat intelligence to identify and minimize security gaps. The Company’s network security solution consists of FortiGate physical, software and cloud solutions, which are deployable in the business environments of enterprises, service providers and small and medium-sized businesses, as well as government organizations. These platforms provide a range of integrated security and networking functions to help protect data, applications and users from network- and content-level security threats.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FTNT – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,931,162,505 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.87 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 54.37% Pass
6. Moderate PEmg Ratio PEmg < 20 160.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 16.11 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 1.87 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 $0.51
MG Growth Estimate 13.65%
MG Value $18.29
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $7.40
MG Value based on 0% Growth $4.34
Market Implied Growth Rate 75.81%
Current Price $81.77
% of Intrinsic Value 447.19%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.27 in 2014 to an estimated $0.51 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 75.81% 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 Fortinet Inc revealed the company was trading above its Graham Number of $9.86. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 160.12, which was above the industry average of 56.55. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.17.

Fortinet 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) $1.17
Graham Number $9.86
PEmg 160.12
Current Ratio 1.87
PB Ratio 16.11
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,078,100,000
Total Current Liabilities $1,111,900,000
Long-Term Debt $0
Total Assets $2,763,500,000
Intangible Assets $43,800,000
Total Liabilities $1,871,900,000
Shares Outstanding (Diluted Average) 175,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.23
Dec2017 $0.18
Dec2016 $0.18
Dec2015 $0.05
Dec2014 $0.15
Dec2013 $0.26
Dec2012 $0.40
Dec2011 $0.38
Dec2010 $0.26
Dec2009 $0.39
Dec2008 $0.01

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.51
Dec2017 $0.16
Dec2016 $0.16
Dec2015 $0.19
Dec2014 $0.27
Dec2013 $0.33
Dec2012 $0.34
Dec2011 $0.28
Dec2010 $0.19
Dec2009 $0.13

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

Synopsys Inc Valuation – February 2019 $SNPS
Symantec Corp Valuation – February 2019 $SYMC
Intuit Inc Valuation – February 2019 $INTU
Adobe Inc Valuation – February 2019 $ADBE
Autodesk Inc Valuation – February 2019 $ADSK
F5 Networks Inc Valuation – February 2019 $FFIV
Cadence Design Systems Inc Valuation – January 2019 $CDNS
Oracle Corporation Valuation – January 2019 $ORCL
Red Hat Inc Valuation – January 2019 $RHT
Alphabet Inc Valuation – January 2019 $GOOG $GOOGL

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.

Kinaxis Inc Valuation – August 2018 $TSE:KXS

Company Profile (excerpt from Reuters): Kinaxis Inc. is a provider of cloud-based subscription software for supply chain operations. The Company offers RapidResponse as a collection of cloud-based configurable applications. The Company’s RapidResponse product provides supply chain planning and analytics capabilities that create the foundation for managing multiple, interconnected supply chain management processes, including demand planning, supply planning, inventory management, order fulfillment and capacity planning. The Company’s customers include companies in various industries, including high technology and electronics; aerospace and defense; life sciences and pharmaceuticals; industrial, and automotive. Its sales and operations planning solutions include demand planning, aggregate supply planning, capacity planning (constraints), inventory planning and optimization, and inventory management. The Company’s supply chain management applications include capacity planning, order fulfillment and supplier collaboration.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-KXS – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,495,212,529 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.84 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 9300.00% Pass
6. Moderate PEmg Ratio PEmg < 20 107.82 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.52 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 2.84 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.89
MG Growth Estimate 15.00%
MG Value $34.35
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $12.94
MG Value based on 0% Growth $7.58
Market Implied Growth Rate 49.66%
Current Price $96.20
% of Intrinsic Value 280.06%

Kinaxis Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.17 in 2014 to an estimated $0.89 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 49.66% 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 Kinaxis Inc revealed the company was trading above its Graham Number of $13.47. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 107.82, which was above the industry average of 47.04. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.84.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $5.84
Graham Number $13.47
PEmg 107.82
Current Ratio 2.84
PB Ratio 11.52
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 $289,554,000
Total Current Liabilities $101,912,000
Long-Term Debt $0
Total Assets $356,681,000
Intangible Assets $0
Total Liabilities $133,266,000
Shares Outstanding (Diluted Average) 26,749,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.29
Dec2017 $0.98
Dec2016 $0.55
Dec2015 $0.69
Dec2014 -$0.01
Dec2013 -$0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.89
Dec2017 $0.57
Dec2016 $0.28
Dec2015 $0.10
Dec2014 -$0.17
Dec2013 -$0.21

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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.

CSG Systems International Inc Valuation – August 2018 $CSGS

Company Profile (excerpt from Reuters): CSG Systems International, Inc. (CSG), incorporated on October 17, 1994, is a provider of business support solutions primarily serving the communications industry. The Company provides business support solutions (BSS) to the communications service providers (CSPs), as well as clients in various industries. CSG’s solutions coordinate and manage various aspects of a service provider’s customer interactions, from the initial activation of customer accounts, to the support and fulfillment of various services, and through the calculation, presentment, and accounts receivables management of monthly customer statements. Its primary product solutions include Revenue Management & Customer Experience Solutions; Customer Interaction Management; Managed Services; Mediation and Data Management, and Wholesale Settlement and Routing. The Company employs professional services across various sectors, including solution architecture, project management, systems implementation and business consultancy.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSGS – 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 $1,240,700,031 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.68 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 89.41% Pass
6. Moderate PEmg Ratio PEmg < 20 18.80 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.48 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 2.68 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.10 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 $1.97
MG Growth Estimate 8.84%
MG Value $51.54
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $28.55
MG Value based on 0% Growth $16.73
Market Implied Growth Rate 5.15%
Current Price $37.02
% of Intrinsic Value 71.83%

CSG Systems International, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, poor dividend history, 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 $1.24 in 2014 to an estimated $1.97 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.15% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into CSG Systems International, Inc. revealed the company was trading above its Graham Number of $23.05. The company pays a dividend of $0.79 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.8, which was below the industry average of 47.04, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.92.

CSG Systems International, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.92
Graham Number $23.05
PEmg 18.80
Current Ratio 2.68
PB Ratio 3.48
Current Dividend $0.79
Dividend Yield 2.13%
Number of Consecutive Years of Dividend Growth 5

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 $514,245,000
Total Current Liabilities $191,766,000
Long-Term Debt $353,904,000
Total Assets $927,231,000
Intangible Assets $318,631,000
Total Liabilities $577,371,000
Shares Outstanding (Diluted Average) 32,908,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.31
Dec2017 $1.87
Dec2016 $1.90
Dec2015 $1.87
Dec2014 $1.06
Dec2013 $1.38
Dec2012 $1.51
Dec2011 $1.28
Dec2010 $0.67
Dec2009 $1.26
Dec2008 $1.54
Dec2007 $1.52
Dec2006 $1.27
Dec2005 $1.09
Dec2004 $0.92
Dec2003 -$0.51
Dec2002 $0.85
Dec2001 $2.08
Dec2000 $1.60
Dec1999 $1.10
Dec1998 $1.62

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.97
Dec2017 $1.74
Dec2016 $1.63
Dec2015 $1.47
Dec2014 $1.24
Dec2013 $1.29
Dec2012 $1.25
Dec2011 $1.16
Dec2010 $1.15
Dec2009 $1.38
Dec2008 $1.38
Dec2007 $1.15
Dec2006 $0.89
Dec2005 $0.76
Dec2004 $0.72
Dec2003 $0.76
Dec2002 $1.41

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Disclaimer:

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

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