Simpson Manufacturing Co Inc Valuation – August 2018 $SSD

Company Profile (excerpt from Reuters): Simpson Manufacturing Co., Inc., incorporated on February 23, 1999, through its subsidiary, Simpson Strong-Tie Company Inc. (SST), designs, engineers and manufactures wood construction products, including connectors, truss plates, fastening systems, fasteners and pre-fabricated lateral systems used in light-frame construction. The Company’s segments are North America, Europe, Asia/Pacific, and Administrative & All Other. The North America segment includes operations primarily in the United States and Canada. The Europe segment includes operations primarily in France, the United Kingdom, Germany, Denmark, Switzerland, Portugal, Poland, the Netherlands and Belgium. The Asia/Pacific segment includes operations primarily in Australia, New Zealand, South Africa, China, Taiwan, and Vietnam.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SSD – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,375,258,071 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.81 Pass
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 257.22% Pass
6. Moderate PEmg Ratio PEmg < 20 34.31 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.76 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 3.81 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 $2.12
MG Growth Estimate 14.95%
MG Value $81.39
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $30.73
MG Value based on 0% Growth $18.01
Market Implied Growth Rate 12.90%
Current Price $72.71
% of Intrinsic Value 89.33%

Simpson Manufacturing Co, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.06 in 2014 to an estimated $2.12 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 12.9% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Simpson Manufacturing Co, Inc. revealed the company was trading above its Graham Number of $35.02. The company pays a dividend of $0.81 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 34.31, which was above the industry average of 24.98. Finally, the company was trading above its Net Current Asset Value (NCAV) of $9.81.

Simpson Manufacturing Co, 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) $9.81
Graham Number $35.02
PEmg 34.31
Current Ratio 3.81
PB Ratio 3.76
Current Dividend $0.81
Dividend Yield 1.11%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $640,166,000
Total Current Liabilities $167,992,000
Long-Term Debt $0
Total Assets $1,085,887,000
Intangible Assets $163,159,000
Total Liabilities $182,085,000
Shares Outstanding (Diluted Average) 46,677,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.88
Dec2017 $1.94
Dec2016 $1.86
Dec2015 $1.38
Dec2014 $1.29
Dec2013 $1.05
Dec2012 $0.87
Dec2011 $1.04
Dec2010 $0.58
Dec2009 $0.25
Dec2008 $1.10
Dec2007 $1.40
Dec2006 $2.10
Dec2005 $2.02
Dec2004 $1.67
Dec2003 $1.21
Dec2002 $1.05
Dec2001 $0.82
Dec2000 $0.80
Dec1999 $0.79
Dec1998 $0.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.12
Dec2017 $1.66
Dec2016 $1.44
Dec2015 $1.20
Dec2014 $1.06
Dec2013 $0.88
Dec2012 $0.79
Dec2011 $0.79
Dec2010 $0.81
Dec2009 $1.07
Dec2008 $1.54
Dec2007 $1.73
Dec2006 $1.80
Dec2005 $1.55
Dec2004 $1.25
Dec2003 $1.01
Dec2002 $0.88

Recommended Reading:

Other ModernGraham posts about the company

5 Best Stocks for Value Investors This Week – 2/18/17
Simpson Manufacturing Co Valuation – February 2017 $SSD

Other ModernGraham posts about related companies

KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ
Aecon Group Inc Valuation – July 2018 $TSE:ARE
Aecom Valuation – July 2018 $ACM
Lowe’s Companies Inc Valuation – June 2018 $LOW
Acuity Brands Inc Valuation – June 2018 $AYI
Quanta Services Inc Valuation – May 2018 $PWR
Mohawk Industries Inc Valuation – May 2018 $MHK

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.

Simpson Manufacturing Co Valuation – February 2017 $SSD

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 Simpson Manufacturing Co (SSD) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Simpson Manufacturing Co., Inc. through its subsidiary, Simpson Strong-Tie Company Inc. (SST), designs, engineers and manufactures wood construction products, including connectors, truss plates, fastening systems and lateral systems used in light-frame construction. It also offers concrete construction products used for concrete, masonry, steel and for concrete repair, protection and strengthening, including adhesives, chemicals, mechanical anchors, carbide drill bits, powder actuated tools and fiber reinforced materials. It operates in three segments: North America, Europe and Asia/Pacific. The North America segment includes operations in the United States and Canada. The Europe segment includes operations in France, the United Kingdom, Germany, Denmark, Switzerland, Portugal and Poland. The Asia/Pacific segment includes operations in China, Hong Kong, Thailand, Australia, New Zealand, South Africa and the Middle East. Its segments sell both wood and concrete construction products.

SSD Chart

SSD 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 SSD – 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 $2,055,537,481 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.38 Pass
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 167.36% Pass
6. Moderate PEmg Ratio PEmg < 20 26.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.39 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 5.38 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 $1.65
MG Growth Estimate 13.07%
MG Value $57.28
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $23.98
MG Value based on 0% Growth $14.06
Market Implied Growth Rate 8.87%
Current Price $43.39
% of Intrinsic Value 75.75%

Simpson Manufacturing Co, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PEmg ratio. The Enterprising Investor has no initial concerns. 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.88 in 2013 to an estimated $1.65 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 8.87% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Simpson Manufacturing Co, Inc. revealed the company was trading above its Graham Number of $28.05. The company pays a dividend of $0.7 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 26.23, which was below the industry average of 28.49, 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 $9.87.

Simpson Manufacturing Co, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $9.87
Graham Number $28.05
PEmg 26.23
Current Ratio 5.38
PB Ratio 2.39
Current Dividend $0.70
Dividend Yield 1.61%
Number of Consecutive Years of Dividend Growth 4

[/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 $585,247,000
Total Current Liabilities $108,796,000
Long-Term Debt $0
Total Assets $979,974,000
Intangible Assets $124,479,000
Total Liabilities $114,132,000
Shares Outstanding (Diluted Average) 47,754,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.92
Dec2016 $1.86
Dec2015 $1.38
Dec2014 $1.29
Dec2013 $1.05
Dec2012 $0.87
Dec2011 $1.04
Dec2010 $0.58
Dec2009 $0.25
Dec2008 $1.10
Dec2007 $1.40
Dec2006 $2.10
Dec2005 $2.02
Dec2004 $1.67
Dec2003 $1.21
Dec2002 $1.05
Dec2001 $0.82
Dec2000 $0.80
Dec1999 $0.79
Dec1998 $0.65
Dec1997 $0.54

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.65
Dec2016 $1.44
Dec2015 $1.20
Dec2014 $1.06
Dec2013 $0.88
Dec2012 $0.79
Dec2011 $0.79
Dec2010 $0.81
Dec2009 $1.07
Dec2008 $1.54
Dec2007 $1.73
Dec2006 $1.80
Dec2005 $1.55
Dec2004 $1.25
Dec2003 $1.01
Dec2002 $0.88
Dec2001 $0.77

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

Quanta Services Inc Valuation – August 2016 $PWR
Jacobs Engineering Group Inc Valuation – August 2016 $JEC
PPG Industries Inc Valuation – August 2016 $PPG
D.R. Horton Inc Valuation – August 2016 $DHI
Martin Marietta Materials Inc Valuation – August 2016 $MLM
Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI

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.

Western Digital Corp Valuation – March 2019 #WDC

Company Profile (excerpt from Reuters): Western Digital Corporation (Western Digital), incorporated on October 26, 2000, is a developer, manufacturer and provider of data storage devices and solutions that address the needs of the information technology (IT) industry and the infrastructure that enables the proliferation of data in virtually every industry. The Company’s portfolio of offerings addresses three categories: Datacenter Devices and Solutions (capacity and performance enterprise hard disk drives (HDDs), enterprise solid state drives (SSDs), datacenter software and system solutions); Client Devices (mobile, desktop, gaming and digital video hard drives, client SSDs, embedded products and wafers), and Client Solutions (removable products, hard drive content solutions and flash content solutions). The Company also generates license and royalty revenue related to its intellectual property which is included in each of the three categories.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WDC – 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 $14,501,831,037 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.24 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 -73.33% Fail
6. Moderate PEmg Ratio PEmg < 20 31.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.32 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.24 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.92 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.61
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $23.30
MG Value based on 0% Growth $13.66
Market Implied Growth Rate 11.26%
Current Price $49.84
% of Intrinsic Value N/A

Western Digital Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the poor dividend history, and the high PEmg ratio. 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 $5.72 in 2015 to an estimated $1.61 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.26% 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 Western Digital Corp revealed the company was trading above its Graham Number of $23.31. The company pays a dividend of $2 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 31.02, which was below the industry average of 35.5, 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 $-25.12.

Western Digital Corp 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) -$25.12
Graham Number $23.31
PEmg 31.02
Current Ratio 2.24
PB Ratio 1.32
Current Dividend $2.00
Dividend Yield 4.01%
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 $9,742,000,000
Total Current Liabilities $4,350,000,000
Long-Term Debt $10,370,000,000
Total Assets $27,939,000,000
Intangible Assets $12,222,000,000
Total Liabilities $17,027,000,000
Shares Outstanding (Diluted Average) 290,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.62
Jun2018 $2.20
Jun2017 $1.34
Jun2016 $1.00
Jun2015 $6.18
Jun2014 $6.68
Jun2013 $3.98
Jun2012 $6.58
Jun2011 $3.09
Jun2010 $5.93
Jun2009 $2.08
Jun2008 $3.84
Jun2007 $2.50
Jun2006 $1.76
Jun2005 $0.90
Jun2004 $0.69
Jun2003 $0.87
Jun2002 $0.34
Jun2001 -$0.31
Jun2000 -$2.69
Jun1999 -$5.51

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.61
Jun2018 $2.56
Jun2017 $3.11
Jun2016 $4.29
Jun2015 $5.72
Jun2014 $5.41
Jun2013 $4.63
Jun2012 $4.74
Jun2011 $3.71
Jun2010 $3.75
Jun2009 $2.51
Jun2008 $2.46
Jun2007 $1.63
Jun2006 $1.10
Jun2005 $0.68
Jun2004 $0.31
Jun2003 -$0.41

Recommended Reading:

Other ModernGraham posts about the company

Western Digital Corp Valuation – May 2018 $WDC
Western Digital Corporation Valuation – February 2017 $WDC
Best Stocks Below Their Graham Number – August 2016
Western Digital Corporation Valuation – August 2016 $WDC
10 Low PE Stock Picks for the Defensive Investor – August 2016

Other ModernGraham posts about related companies

Qualcomm Inc Valuation – March 2019 #QCOM
Ametek Inc Valuation – March 2019 #AME
Advanced Micro Devices Inc Valuation – February 2019 $AMD
Qorvo Inc Valuation – February 2019 $QRVO
FLIR Systems Inc Valuation – February 2019 $FLIR
NetApp Inc Valuation – February 2019 $NTAP
Applied Materials Inc Valuation – February 2019 $AMAT
Microchip Technology Inc Valuation – February 2019 $MCHP
Broadcom Inc Valuation – February 2019 $AVGO
KLA-Tencor Corp Valuation – January 2019 $KLAC

Disclaimer:

The author held a long position in WDC but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  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.

Vulcan Materials Co Valuation – February 2019 $VMC

Company Profile (excerpt from Reuters): Vulcan Materials Company, incorporated on February 14, 2007, is a supplier of construction aggregates (primarily crushed stone, sand and gravel) and a producer of asphalt mix and ready-mixed concrete. The Company operates through four segments: Aggregates, Asphalt Mix, Concrete and Calcium. As of December 31, 2016, it had 337 active aggregates facilities. The Company sells aggregates that are used as ballast for construction and maintenance of railroad tracks. It also sells riprap and jetty stone for erosion control along roads and waterways. In addition, stone can be used as a feedstock for cement and lime plants and for making a variety of adhesives, fillers and extenders. It sells construction aggregates outside of the United States, principally in the areas surrounding its quarry on the Yucatan Peninsula in Mexico.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VMC – 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 $13,714,505,360 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.70 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 -1171.43% Fail
6. Moderate PEmg Ratio PEmg < 20 30.89 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.70 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 1.70 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.72 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.36
MG Growth Estimate 15.00%
MG Value $129.44
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $48.75
MG Value based on 0% Growth $28.58
Market Implied Growth Rate 11.20%
Current Price $103.86
% of Intrinsic Value 80.24%

Vulcan Materials Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.36 in 2014 to an estimated $3.36 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.2% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Vulcan Materials Company revealed the company was trading above its Graham Number of $55.91. The company pays a dividend of $1 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 30.89, which was above the industry average of 20.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.54.

Vulcan Materials Company receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$26.54
Graham Number $55.91
PEmg 30.89
Current Ratio 1.70
PB Ratio 2.70
Current Dividend $1.00
Dividend Yield 0.96%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,175,912,000
Total Current Liabilities $690,415,000
Long-Term Debt $2,778,129,000
Total Assets $9,875,635,000
Intangible Assets $4,268,969,000
Total Liabilities $4,729,846,000
Shares Outstanding (Diluted Average) 133,894,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.70
Dec2017 $4.46
Dec2016 $3.09
Dec2015 $1.64
Dec2014 $1.54
Dec2013 $0.19
Dec2012 -$0.41
Dec2011 -$0.55
Dec2010 -$0.75
Dec2009 $0.25
Dec2008 $0.01
Dec2007 $4.54
Dec2006 $4.71
Dec2005 $3.74
Dec2004 $2.77
Dec2003 $1.90
Dec2002 $1.66
Dec2001 $2.17
Dec2000 $2.16
Dec1999 $2.35
Dec1998 $2.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.36
Dec2017 $2.86
Dec2016 $1.77
Dec2015 $0.90
Dec2014 $0.36
Dec2013 -$0.24
Dec2012 -$0.40
Dec2011 -$0.03
Dec2010 $0.74
Dec2009 $1.87
Dec2008 $2.84
Dec2007 $4.01
Dec2006 $3.49
Dec2005 $2.73
Dec2004 $2.20
Dec2003 $1.95
Dec2002 $2.04

Recommended Reading:

Other ModernGraham posts about the company

Vulcan Materials Co Valuation – April 2018 $VMC
Vulcan Materials Co Valuation – July 2016 $VMC
5 Speculative and Overvalued Companies to Avoid – June 2015
30 Companies in the Spotlight This Week – 5/23/15
Vulcan Materials Company Annual Valuation – 2015 $VMC

Other ModernGraham posts about related companies

PulteGroup Inc Valuation – January 2019 $PHM
Sherwin-Williams Co Valuation – January 2019 $SHW
Johnson Controls International PC Valuation – January 2019 $JCI
Cummins Inc Valuation – January 2019 $CMI
Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD

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.

PulteGroup Inc Valuation – January 2019 $PHM

Company Profile (excerpt from Reuters): PulteGroup, Inc., incorporated on September 17, 1987, is a homebuilder in the United States. The Company’s segments include Homebuilding and Financial Services. Its Homebuilding operations are engaged in the acquisition and development of land primarily for residential purposes within the United States and the construction of housing on such land. Its Financial Services operations consist principally of mortgage banking and title operations. The Company’s subsidiaries are engaged in the homebuilding business. The Company offers a product line to meet the needs of homebuyers in its focused markets. Through its brands, which include Centex, Pulte Homes, Del Webb, DiVosta Homes, and John Wieland Homes and Neighborhoods, the Company offers a range of home designs, including single-family detached, townhouses, condominiums and duplexes.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PHM – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,392,261,434 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.77 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 -187.42% Fail
6. Moderate PEmg Ratio PEmg < 20 12.60 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.58 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 4.77 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.50 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 $2.09
MG Growth Estimate 0.26%
MG Value $18.86
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $30.30
MG Value based on 0% Growth $17.76
Market Implied Growth Rate 2.05%
Current Price $26.32
% of Intrinsic Value 139.57%

PulteGroup, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history. 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 $2.05 in 2014 to an estimated $2.09 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.05% 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 PulteGroup, Inc. revealed the company was trading below its Graham Number of $32.65. The company pays a dividend of $0.36 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 12.6, which was below the industry average of 18.63, 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 $10.27.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $10.27
Graham Number $32.65
PEmg 12.60
Current Ratio 4.77
PB Ratio 1.58
Current Dividend $0.36
Dividend Yield 1.37%
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 9/1/2018
Total Current Assets $8,248,466,000
Total Current Liabilities $1,727,675,000
Long-Term Debt $3,256,151,000
Total Assets $10,055,080,000
Intangible Assets $130,642,000
Total Liabilities $5,326,202,000
Shares Outstanding (Diluted Average) 284,672,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.27
Dec2017 $1.44
Dec2016 $1.75
Dec2015 $1.36
Dec2014 $1.26
Dec2013 $6.72
Dec2012 $0.54
Dec2011 -$0.55
Dec2010 -$2.90
Dec2009 -$3.94
Dec2008 -$5.81
Dec2007 -$8.94
Dec2006 $2.66
Dec2005 $5.68
Dec2004 $3.79
Dec2003 $2.48
Dec2002 $1.84
Dec2001 $1.50
Dec2000 $1.12
Dec1999 $1.02
Dec1998 $0.58

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.09
Dec2017 $1.83
Dec2016 $2.13
Dec2015 $2.17
Dec2014 $2.05
Dec2013 $1.62
Dec2012 -$1.46
Dec2011 -$3.12
Dec2010 -$4.19
Dec2009 -$3.92
Dec2008 -$2.78
Dec2007 -$0.46
Dec2006 $3.61
Dec2005 $3.75
Dec2004 $2.57
Dec2003 $1.83
Dec2002 $1.41

Recommended Reading:

Other ModernGraham posts about the company

PulteGroup Inc Valuation – March 2018 $PHM
10 Undervalued Stocks for the Enterprising Investor – July 2017
10 Low PE Stock Picks for the Enterprising Investor – April 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017
10 Low PE Stock Picks for the Enterprising Investor – March 2017

Other ModernGraham posts about related companies

Sherwin-Williams Co Valuation – January 2019 $SHW
Johnson Controls International PC Valuation – January 2019 $JCI
Cummins Inc Valuation – January 2019 $CMI
Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR

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.

Sherwin-Williams Co Valuation – January 2019 $SHW

Company Profile (excerpt from Reuters): The Sherwin-Williams Company (Sherwin-Williams), incorporated on July 16, 1884, is engaged in the development, manufacture, distribution and sale of paint, coatings and related products to professional, industrial, commercial and retail customers primarily in North and South America with additional operations in the Caribbean region, Europe and Asia. The Company’s segments are Paint Stores Group, Consumer Group, Global Finishes Group, Latin America Coatings Group and Administrative.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SHW – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $36,779,226,028 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.04 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 269.25% Pass
6. Moderate PEmg Ratio PEmg < 20 27.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.40 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 1.04 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 44.45 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 $14.16
MG Growth Estimate 15.00%
MG Value $545.08
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $205.29
MG Value based on 0% Growth $120.34
Market Implied Growth Rate 9.62%
Current Price $392.83
% of Intrinsic Value 72.07%

Sherwin-Williams Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, 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 Undervalued after growing its EPSmg (normalized earnings) from $6.9 in 2014 to an estimated $14.16 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.62% 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 Sherwin-Williams Co revealed the company was trading above its Graham Number of $111.82. The company pays a dividend of $3.4 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 27.75, which was above the industry average of 18.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-115.29.

Sherwin-Williams Co receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$115.29
Graham Number $111.82
PEmg 27.75
Current Ratio 1.04
PB Ratio 9.40
Current Dividend $3.40
Dividend Yield 0.87%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $5,038,032,000
Total Current Liabilities $4,842,065,000
Long-Term Debt $8,710,831,000
Total Assets $19,980,696,000
Intangible Assets $12,253,184,000
Total Liabilities $16,005,857,000
Shares Outstanding (Diluted Average) 95,135,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $14.13
Dec2017 $18.67
Dec2016 $11.99
Dec2015 $11.15
Dec2014 $8.77
Dec2013 $7.26
Dec2012 $6.02
Dec2011 $4.14
Dec2010 $4.21
Dec2009 $3.78
Dec2008 $4.00
Dec2007 $4.70
Dec2006 $4.19
Dec2005 $3.28
Dec2004 $2.72
Dec2003 $2.26
Dec2002 $0.84
Dec2001 $1.68
Dec2000 $0.10
Dec1999 $1.80
Dec1998 $1.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $14.16
Dec2017 $13.30
Dec2016 $10.09
Dec2015 $8.59
Dec2014 $6.90
Dec2013 $5.67
Dec2012 $4.72
Dec2011 $4.11
Dec2010 $4.12
Dec2009 $4.04
Dec2008 $4.04
Dec2007 $3.85
Dec2006 $3.17
Dec2005 $2.49
Dec2004 $1.91
Dec2003 $1.45
Dec2002 $1.09

Recommended Reading:

Other ModernGraham posts about the company

Sherwin-Williams Co Valuation – March 2018 $SHW
Sherwin-Williams Co Valuation – July 2016 $SHW
47 Companies in the Spotlight This Week – 5/16/15
Sherwin Williams Company Annual Valuation – 2015 $SHW
16 Companies in the Spotlight This Week – 5/24/14

Other ModernGraham posts about related companies

Johnson Controls International PC Valuation – January 2019 $JCI
Cummins Inc Valuation – January 2019 $CMI
Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH

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.

Johnson Controls International PC Valuation – January 2019 $JCI

Company Profile (excerpt from Reuters): Johnson Controls International plc, formerly Tyco International plc, incorporated on May 9, 2014, is a global diversified technology and multi industrial company. The Company’s segments include Buildings and Power Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JCI – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $30,244,450,646 Pass
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 Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 0.53% Fail
6. Moderate PEmg Ratio PEmg < 20 21.66 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.36 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.05 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 16.85 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 $1.51
MG Growth Estimate -3.52%
MG Value $2.20
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $21.91
MG Value based on 0% Growth $12.85
Market Implied Growth Rate 6.58%
Current Price $32.73
% of Intrinsic Value 1490.37%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.98 in 2015 to an estimated $1.51 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.58% 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 Johnson Controls International PLC revealed the company was trading above its Graham Number of $29.58. The company pays a dividend of $1.04 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.66, which was above the industry average of 18.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.6.

Johnson Controls International PLC 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) -$15.60
Graham Number $29.58
PEmg 21.66
Current Ratio 1.05
PB Ratio 1.36
Current Dividend $1.04
Dividend Yield 3.18%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $11,823,000,000
Total Current Liabilities $11,250,000,000
Long-Term Debt $9,654,000,000
Total Assets $48,797,000,000
Intangible Assets $25,821,000,000
Total Liabilities $26,339,000,000
Shares Outstanding (Diluted Average) 930,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.70
Sep2018 $2.32
Sep2017 $1.71
Sep2016 -$1.30
Sep2015 $2.36
Sep2014 $1.80
Sep2013 $1.71
Sep2012 $1.72
Sep2011 $2.06
Sep2010 $1.92
Sep2009 -$0.57
Sep2008 $1.63
Sep2007 $2.09
Sep2006 $1.74
Sep2005 $1.56
Sep2004 $1.41
Sep2003 $1.20
Sep2002 $1.06
Sep2001 $0.85
Sep2000 $0.85
Sep1999 $0.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.51
Sep2018 $1.40
Sep2017 $1.05
Sep2016 $0.90
Sep2015 $1.98
Sep2014 $1.80
Sep2013 $1.66
Sep2012 $1.54
Sep2011 $1.44
Sep2010 $1.21
Sep2009 $1.00
Sep2008 $1.75
Sep2007 $1.74
Sep2006 $1.51
Sep2005 $1.33
Sep2004 $1.17
Sep2003 $1.02

Recommended Reading:

Other ModernGraham posts about the company

Johnson Controls International PLC Valuation – March 2018 $JCI
Johnson Controls Inc Valuation – July 2016 $JCI
28 Companies in the Spotlight This Week – 2/28/15
Johnson Controls Inc. Annual Valuation – 2015 $JCI
14 Companies in the Spotlight This Week – 2/22/14

Other ModernGraham posts about related companies

Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ

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.

Cummins Inc Valuation – January 2019 $CMI

Company Profile (excerpt from Reuters): Cummins Inc., incorporated on February 3, 1919, designs, manufactures, distributes and services diesel and natural gas engines and engine-related component products, including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems and electric power generation systems. The Company’s segments include Engine, Distribution, Components and Power Systems. The Company sells its products to original equipment manufacturers (OEMs), distributors and other customers around the world. As of December 31, 2016, the Company served its customers through a network of approximately 600 distributor locations and over 7,400 dealer locations in over 190 countries and territories.

Downloadable PDF version of this valuation:

ModernGraham Valuation of CMI – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,174,063,768 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.54 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 61.15% Pass
6. Moderate PEmg Ratio PEmg < 20 16.23 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.02 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 1.54 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.45 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 $9.28
MG Growth Estimate 1.42%
MG Value $105.22
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $134.53
MG Value based on 0% Growth $78.86
Market Implied Growth Rate 3.86%
Current Price $150.56
% of Intrinsic Value 143.09%

Cummins Inc. 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 no initial concerns. 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 Overvalued after growing its EPSmg (normalized earnings) from $8.48 in 2014 to an estimated $9.28 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.86% 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 Cummins Inc. revealed the company was trading above its Graham Number of $113.98. The company pays a dividend of $4.21 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.23, which was below the industry average of 18.63, 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 $-6.61.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$6.61
Graham Number $113.98
PEmg 16.23
Current Ratio 1.54
PB Ratio 3.02
Current Dividend $4.21
Dividend Yield 2.80%
Number of Consecutive Years of Dividend Growth 12

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $9,863,000,000
Total Current Liabilities $6,416,000,000
Long-Term Debt $1,563,000,000
Total Assets $18,992,000,000
Intangible Assets $2,060,000,000
Total Liabilities $10,932,000,000
Shares Outstanding (Diluted Average) 161,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.18
Dec2017 $5.97
Dec2016 $8.23
Dec2015 $7.84
Dec2014 $9.02
Dec2013 $7.91
Dec2012 $8.67
Dec2011 $9.55
Dec2010 $5.28
Dec2009 $2.16
Dec2008 $3.84
Dec2007 $3.70
Dec2006 $3.55
Dec2005 $2.75
Dec2004 $1.85
Dec2003 $0.32
Dec2002 $0.53
Dec2001 -$0.68
Dec2000 $0.09
Dec1999 $1.03
Dec1998 -$0.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.28
Dec2017 $7.48
Dec2016 $8.27
Dec2015 $8.39
Dec2014 $8.48
Dec2013 $7.71
Dec2012 $7.04
Dec2011 $5.78
Dec2010 $3.83
Dec2009 $3.14
Dec2008 $3.47
Dec2007 $3.00
Dec2006 $2.37
Dec2005 $1.50
Dec2004 $0.72
Dec2003 $0.19
Dec2002 $0.14

Recommended Reading:

Other ModernGraham posts about the company

Cummins Inc Valuation – March 2018 $CMI
Cummins Inc Valuation – July 2016 $CMI
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2016
10 Companies Benjamin Graham Would Invest In Today – February 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2016

Other ModernGraham posts about related companies

Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ

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.

Seagate Technology PLC Valuation – January 2019 $STX

Company Profile (excerpt from Reuters): Seagate Technology public limited company, incorporated on January 22, 2010, is a provider of electronic data storage technology and solutions. The Company’s principal products are hard disk drives (HDDs). In addition to HDDs, the Company produces a range of electronic data storage products, including solid state hybrid drives (SSHDs), solid state drives (SSDs), peripheral component interconnect express (PCIe) cards and serial advanced technology architecture (SATA) controllers. Its storage technology portfolio also includes storage subsystems and high performance computing (HPC) solutions. Its products are designed for applications in enterprise servers and storage systems; client compute applications, where its products are designed primarily for desktop and mobile computing, and client non-compute applications, where its products are designed for a range of end user devices, such as digital video recorders (DVRs), personal data backup systems, portable external storage systems, digital media systems and surveillance systems.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of STX – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,915,705,965 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.42 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 6.16% Fail
6. Moderate PEmg Ratio PEmg < 20 10.48 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.03 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 1.42 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.21 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 $3.64
MG Growth Estimate -3.76%
MG Value $3.53
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $52.77
MG Value based on 0% Growth $30.93
Market Implied Growth Rate 0.99%
Current Price $38.14
% of Intrinsic Value 1079.09%

Seagate Technology PLC 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, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.86 in 2015 to an estimated $3.64 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.99% 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 Seagate Technology PLC revealed the company was trading above its Graham Number of $24.89. The company pays a dividend of $2.52 per share, for a yield of 6.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.48, which was below the industry average of 33.25, 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 $-10.99.

Seagate Technology PLC 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) -$10.99
Graham Number $24.89
PEmg 10.48
Current Ratio 1.42
PB Ratio 6.03
Current Dividend $2.52
Dividend Yield 6.61%
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 9/1/2018
Total Current Assets $4,523,000,000
Total Current Liabilities $3,175,000,000
Long-Term Debt $4,322,000,000
Total Assets $9,578,000,000
Intangible Assets $1,406,000,000
Total Liabilities $7,732,000,000
Shares Outstanding (Diluted Average) 292,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.75
Jun2018 $4.05
Jun2017 $2.58
Jun2016 $0.82
Jun2015 $5.26
Jun2014 $4.52
Jun2013 $4.81
Jun2012 $6.49
Jun2011 $1.09
Jun2010 $3.14
Jun2009 -$6.40
Jun2008 $2.36
Jun2007 $1.56
Jun2006 $1.60
Jun2005 $1.41
Jun2004 $1.06
Jun2003 $1.36
Jun2002 $0.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.64
Jun2018 $3.20
Jun2017 $3.05
Jun2016 $3.65
Jun2015 $4.86
Jun2014 $4.44
Jun2013 $3.54
Jun2012 $2.39
Jun2011 $0.34
Jun2010 $0.13
Jun2009 -$0.88
Jun2008 $1.78
Jun2007 $1.46
Jun2006 $1.33
Jun2005 $1.07
Jun2004 $0.79
Jun2003 $0.55

Recommended Reading:

Other ModernGraham posts about the company

Seagate Technology PLC Valuation – March 2018 $STX
10 Low PE Stock Picks for the Enterprising Investor – July 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017
5 Undervalued Stocks for Value Investors with a High Beta – February 2017
10 Best Dividend Paying Stocks for the Enterprising Investor – February 2017

Other ModernGraham posts about related companies

Corning Inc Valuation – January 2019 $GLW
HP Inc Valuation – December 2018 $HPQ
Intel Corp Valuation – November 2018 $INTC
Apple Inc Valuation – November 2018 $AAPL
Littelfuse Inc Valuation – September 2018 $LFUS
CTS Corporation Valuation – August 2018 $CTS
Kopin Corp Valuation – August 2018 $KOPN
Knowles Corp Valuation – August 2018 $KN
Cree Inc Valuation – August 2018 $CREE
Cray Inc Valuation – August 2018 $CRAY

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.

Flowserve Corp Valuation – January 2019 $FLS

Company Profile (excerpt from Reuters): Flowserve Corporation, incorporated on May 1, 1912, is a manufacturer and aftermarket service provider of flow control systems. The Company’s segments include Engineered Product Division (EPD), Industrial Product Division (IPD) and Flow Control Division (FCD). The Company’s geographic segment includes North America, Europe, Asia Pacific, Middle East and Africa, and Latin America. The Company develops and manufactures precision-engineered flow control equipment integral to the movement, control and protection of the flow of materials in its customer’s critical processes. The Company’s product portfolio of pumps, valves, seals, automation and aftermarket services supports infrastructure industries, including oil and gas, chemical, power generation (including nuclear, fossil and renewable) and water management, as well as certain general industrial markets where its products and services add value. The Company offers a range of aftermarket equipment services, such as installation, diagnostics, repair and retrofitting through manufacturing platform and network of Quick Response Centers (QRCs). The Company’s products include oil and gas, general industries, chemical, power generation and water management.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FLS – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $4,975,183,199 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.24 Pass
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 -72.74% Fail
6. Moderate PEmg Ratio PEmg < 20 36.58 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.06 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 2.24 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.12 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.04
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $15.07
MG Value based on 0% Growth $8.83
Market Implied Growth Rate 14.04%
Current Price $38.02
% of Intrinsic Value N/A

Flowserve Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of 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 $3.21 in 2014 to an estimated $1.04 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.04% 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 Flowserve Corp revealed the company was trading above its Graham Number of $16.73. The company pays a dividend of $0.76 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 36.58, which was above the industry average of 20.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.95.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$4.95
Graham Number $16.73
PEmg 36.58
Current Ratio 2.24
PB Ratio 3.06
Current Dividend $0.76
Dividend Yield 2.00%
Number of Consecutive Years of Dividend Growth 11

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,324,667,000
Total Current Liabilities $1,040,080,000
Long-Term Debt $1,436,746,000
Total Assets $4,605,064,000
Intangible Assets $1,399,632,000
Total Liabilities $2,974,337,000
Shares Outstanding (Diluted Average) 131,350,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.98
Dec2017 $0.02
Dec2016 $1.01
Dec2015 $1.93
Dec2014 $3.72
Dec2013 $3.41
Dec2012 $2.84
Dec2011 $2.55
Dec2010 $2.29
Dec2009 $2.53
Dec2008 $2.58
Dec2007 $1.49
Dec2006 $0.67
Dec2005 $0.10
Dec2004 $0.16
Dec2003 $0.27
Dec2002 $0.16
Dec2001 -$0.14
Dec2000 $0.12
Dec1999 $0.11
Dec1998 $0.41

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.04
Dec2017 $1.39
Dec2016 $2.24
Dec2015 $2.87
Dec2014 $3.21
Dec2013 $2.88
Dec2012 $2.59
Dec2011 $2.41
Dec2010 $2.20
Dec2009 $1.93
Dec2008 $1.42
Dec2007 $0.73
Dec2006 $0.33
Dec2005 $0.14
Dec2004 $0.15
Dec2003 $0.13
Dec2002 $0.08

Recommended Reading:

Other ModernGraham posts about the company

Flowserve Corp Valuation – February 2018 $FLS
Flowserve Corporation Valuation – May 2016 $FLS
11 Best Stocks For Value Investors This Week – 11/21/15
Flowserve Corp Valuation – November 2015 Update $FLS
The Best Companies of the Construction Industry – October 2015

Other ModernGraham posts about related companies

Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ
Aecon Group Inc Valuation – July 2018 $TSE:ARE

Disclaimer:

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

Back To Top