State Street Corp Valuation – January 2019 $STT

Company Profile (excerpt from Reuters): State Street Corporation, incorporated on October 16, 1969, is a financial holding company. The Company operates through two lines of business: Investment Servicing and Investment Management. The Company, through its subsidiary, State Street Bank and Trust Company (State Street Bank), provides a range of financial products and services to institutional investors across the world. Its clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of STT – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $26,077,890,728 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 567.19% Pass
5. Moderate PEmg Ratio PEmg < 20 12.32 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.06 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.58
MG Growth Estimate 4.73%
MG Value $100.16
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $80.90
MG Value based on 0% Growth $47.42
Market Implied Growth Rate 1.91%
Current Price $68.71
% of Intrinsic Value 68.60%

State Street Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. 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 $4.24 in 2014 to an estimated $5.58 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.91% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into State Street Corp revealed the company was trading below its Graham Number of $89.66. The company pays a dividend of $1.6 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.32, which was below the industry average of 18, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

State Street Corp fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $89.66
PEmg 12.32
PB Ratio 1.06
Dividend Yield 2.33%
TTM Dividend $1.60
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 9/1/2018
Long-Term Debt & Capital Lease Obligation $10,335,000,000
Total Assets $234,007,000,000
Intangible Assets $7,477,000,000
Total Liabilities $209,454,000,000
Shares Outstanding (Diluted Average) 379,383,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.87
Dec2017 $5.24
Dec2016 $4.97
Dec2015 $4.47
Dec2014 $4.53
Dec2013 $4.43
Dec2012 $4.20
Dec2011 $3.79
Dec2010 $3.09
Dec2009 -$4.32
Dec2008 $4.30
Dec2007 $3.45
Dec2006 $3.29
Dec2005 $2.50
Dec2004 $2.35
Dec2003 $2.15
Dec2002 $3.10
Dec2001 $1.90
Dec2000 $1.82
Dec1999 $1.89
Dec1998 $1.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.58
Dec2017 $4.87
Dec2016 $4.63
Dec2015 $4.40
Dec2014 $4.24
Dec2013 $3.48
Dec2012 $2.74
Dec2011 $2.03
Dec2010 $1.42
Dec2009 $1.00
Dec2008 $3.50
Dec2007 $2.98
Dec2006 $2.73
Dec2005 $2.43
Dec2004 $2.35
Dec2003 $2.29
Dec2002 $2.24

Recommended Reading:

Other ModernGraham posts about the company

State Street Corp Valuation – March 2018 $STT
Best Stocks to Invest In: the Bank Industry – August 2016
12 Best Stocks For Value Investors This Week – 7/1/16
State Street Corp Valuation – June 2016 $STT
9 Best Stocks For Value Investors This Week – 11/28/15

Other ModernGraham posts about related companies

Morgan Stanley Valuation – January 2019 $MS
MSCI Inc Valuation – January 2019 $MSCI
BlackRock Inc Valuation – January 2019 $BLK
Ameriprise Financial Inc Valuation – January 2019 $AMP
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Capital One Financial Corp Valuation – January 2019 $COF
Total System Services Inc Valuation – December 2018 $TSS
Goldman Sachs Group Inc Valuation – November 2018 $GS
KKR & Co Inc Valuation – September 2018 $KKR
CorVel Corp Valuation – August 2018 $CRVL

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.

State Street Corp Valuation – March 2018 $STT

Company Profile (excerpt from Reuters): State Street Corporation, incorporated on October 16, 1969, is a financial holding company. The Company operates through two lines of business: Investment Servicing and Investment Management. The Company, through its subsidiary, State Street Bank and Trust Company (State Street Bank), provides a range of financial products and services to institutional investors across the world. Its clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers.

STT Chart

STT data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of STT – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $39,631,322,674 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 565.23% Pass
5. Moderate PEmg Ratio PEmg < 20 19.21 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.80 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.56
MG Growth Estimate 4.67%
MG Value $99.20
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $80.66
MG Value based on 0% Growth $47.28
Market Implied Growth Rate 5.36%
Current Price $106.87
% of Intrinsic Value 107.73%

State Street Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. 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 $4.24 in 2014 to an estimated $5.56 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.36% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into State Street Corp revealed the company was trading above its Graham Number of $89.34. The company pays a dividend of $1.6 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 19.21, which was below the industry average of 24.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

State Street Corp receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Graham Number $89.34
PEmg 19.21
PB Ratio 1.80
Dividend Yield 1.50%
TTM Dividend $1.60
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 12/1/2017
Long-Term Debt & Capital Lease Obligation $11,620,000,000
Total Assets $238,425,000,000
Intangible Assets $7,635,000,000
Total Liabilities $216,108,000,000
Shares Outstanding (Diluted Average) 375,515,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.82
Dec2017 $5.24
Dec2016 $4.97
Dec2015 $4.47
Dec2014 $4.53
Dec2013 $4.43
Dec2012 $4.20
Dec2011 $3.79
Dec2010 $3.09
Dec2009 -$4.32
Dec2008 $4.30
Dec2007 $3.45
Dec2006 $3.29
Dec2005 $2.50
Dec2004 $2.35
Dec2003 $2.15
Dec2002 $3.10
Dec2001 $1.90
Dec2000 $1.82
Dec1999 $1.89
Dec1998 $1.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.56
Dec2017 $4.87
Dec2016 $4.63
Dec2015 $4.40
Dec2014 $4.24
Dec2013 $3.48
Dec2012 $2.74
Dec2011 $2.03
Dec2010 $1.42
Dec2009 $1.00
Dec2008 $3.50
Dec2007 $2.98
Dec2006 $2.73
Dec2005 $2.43
Dec2004 $2.35
Dec2003 $2.29
Dec2002 $2.24

Recommended Reading:

Other ModernGraham posts about the company

State Street Corp Valuation – June 2016 $STT
9 Best Stocks For Value Investors This Week – 11/28/15
State Street Corp Valuation – November 2015 Update $STT
The Best Companies of the Banking Industry – October 2015
19 Best Stocks For Value Investors This Week – 8/29/15

Other ModernGraham posts about related companies

KeyCorp Valuation – March 2018 $KEY
Canadian Western Bank Valuation – March 2018 $TSE-CWB
Simmons First National Corp Valuation – March 2018 $SFNC
Citigroup Inc Valuation – March 2018 $C
People’s United Financial Inc Valuation – March 2018 $PBCT
JPMorgan Chase & Co Valuation – February 2018 $JPM
Opus Bank Valuation – Initial Coverage $OPB
Wells Fargo & Co Valuation – August 2017 $WFC
Old National Bancorp Valuation – Initial Coverage $ONB
Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM

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.

State Street Corp Valuation – June 2016 $STT

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 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how State Street Corp (STT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): State Street Corporation, the parent company, is a financial holding company. The parent company provides financial and managerial support to its legal and operating subsidiaries. The Company, through its subsidiary, State Street Bank, provides a range of financial services and products to institutional investors across the world. Its clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers. It has approximately two lines of business: Investment Servicing and Investment Management. Its Investment Servicing line of business performs core custody and related value-added functions, such as providing institutional investors with clearing, payment and settlement services. Its Investment Management services through State Street Global Advisors (SSGA). SSGA provides a range of investment management, investment research and investment advisory services.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and 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 STT – June 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $22,435,356,597 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 290.38% Pass
5. Moderate PEmg Ratio PEmg < 20 12.35 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.03 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

STT value chart June 2016

EPSmg $4.45
MG Growth Estimate 9.38%
MG Value $121.35
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $64.55
MG Value based on 0% Growth $37.84
Market Implied Growth Rate 1.93%
Current Price $54.99
% of Intrinsic Value 45.32%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.74 in 2012 to an estimated $4.45 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.93% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

State Street Corp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

STT charts June 2016

Graham Number $68.19
PEmg 12.35
PB Ratio 1.03
Dividend Yield 2.47%
TTM Dividend $1.36
Number of Consecutive Years of Dividend Growth 6

[/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 3/1/2016
Long-Term Debt $10,323,000,000
Total Assets $243,685,000,000
Intangible Assets $7,482,000,000
Total Liabilities $222,189,000,000
Shares Outstanding (Diluted Average) 403,615,000

Earnings Per Share History

Next Fiscal Year Estimate $4.35
Dec2015 $4.47
Dec2014 $4.57
Dec2013 $4.62
Dec2012 $4.20
Dec2011 $3.79
Dec2010 $3.09
Dec2009 -$4.32
Dec2008 $4.30
Dec2007 $3.45
Dec2006 $3.29
Dec2005 $2.50
Dec2004 $2.35
Dec2003 $2.15
Dec2002 $3.10
Dec2001 $1.90
Dec2000 $1.82
Dec1999 $1.89
Dec1998 $1.33
Dec1997 $1.16
Dec1996 $0.89

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.45
Dec2015 $4.45
Dec2014 $4.31
Dec2013 $3.54
Dec2012 $2.74
Dec2011 $2.03
Dec2010 $1.42
Dec2009 $1.00
Dec2008 $3.50
Dec2007 $2.98
Dec2006 $2.73
Dec2005 $2.43
Dec2004 $2.35
Dec2003 $2.29
Dec2002 $2.24
Dec2001 $1.75
Dec2000 $1.59

Recommended Reading:

Other ModernGraham posts about the company

9 Best Stocks For Value Investors This Week – 11/28/15
State Street Corp Valuation – November 2015 Update $STT
The Best Companies of the Banking Industry – October 2015
19 Best Stocks For Value Investors This Week – 8/29/15
State Street Corporation Analysis – August 2015 Update $STT

Other ModernGraham posts about related companies

PNC Financial Services Group Inc Valuation – June 2016 $PNC
People’s United Financial Inc Valuation – June 2016 $PBCT
BB&T Corporation Valuation – May 2016 $BBT
SunTrust Banks Inc Valuation – February 2016 $STI
Comerica Inc Stock Valuation – February 2016 $CMA
U.S. Bancorp Valuation – February 2016 $USB
JP Morgan Chase Valuation – January 2016 Update $JPM
Comerica Inc Stock Valuation – February 2016 $CMA
U.S. Bancorp Valuation – February 2016 $USB
JP Morgan Chase Valuation – January 2016 Update $JPM

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.

State Street Corp Valuation – November 2015 Update $STT

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 Most Undervalued Companies for the Defensive Investor – November 2015.  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 State Street Corp (STT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): State Street Corporation (State Street), the parent company, is a financial holding company. The parent company provides financial and managerial support to its legal and operating subsidiaries. The Company, through its subsidiary, State Street Bank, provides financial services and products to institutional investors across the world. Its clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers. It has two lines of business: Investment Servicing and Investment Management. The Investment Servicing line of business performs core custody and related value-added functions, such as providing institutional investors with clearing, payment and settlement services. It provides Investment Management services through State Street Global Advisors (SSGA) .SSGA provides an array of investment management, investment research and investment advisory services.

[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. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of STT

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $29,276,952,753 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 21.83% Fail
5. Moderate PEmg Ratio PEmg < 20 16.58 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.39 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

STT value chart November 2015

EPSmg $4.38
MG Growth Estimate 15.00%
MG Value $168.45
Opinion Undervalued
MG Value based on 3% Growth $63.44
MG Value based on 0% Growth $37.19
Market Implied Growth Rate 4.04%
Current Price $72.56
% of Intrinsic Value 43.08%

State Street Corp qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years.  The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.03 in 2011 to an estimated $4.38 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.04% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

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

Stage 3: Information for Further Research

STT charts November 2015

Graham Number $66.44
PEmg 16.58
PB Ratio 1.39
Dividend Yield 1.76%
Number of Consecutive Years of Dividend Growth 5

 

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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 Sep15
Long-Term Debt $12,025,000,000
Total Assets $247,274,000,000
Intangible Assets $7,536,000,000
Total Liabilities $225,774,000,000
Shares Outstanding (Diluted Average) 412,167,000

Earnings Per Share History

Next Fiscal Year Estimate $4.26
Dec14 $4.57
Dec13 $4.62
Dec12 $4.20
Dec11 $3.79
Dec10 $3.09
Dec09 -$4.32
Dec08 $4.30
Dec07 $3.45
Dec06 $3.29
Dec05 $2.50
Dec04 $2.35
Dec03 $2.15
Dec02 $3.10
Dec01 $1.90
Dec00 $1.82
Dec99 $1.89
Dec98 $1.33
Dec97 $1.16
Dec96 $0.89
Dec95 $0.74

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.38
Dec14 $4.31
Dec13 $3.54
Dec12 $2.74
Dec11 $2.03
Dec10 $1.42
Dec09 $1.00
Dec08 $3.50
Dec07 $2.98
Dec06 $2.73
Dec05 $2.43
Dec04 $2.35
Dec03 $2.29
Dec02 $2.24
Dec01 $1.75
Dec00 $1.59
Dec99 $1.38

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Banking Industry – October 2015
19 Best Stocks For Value Investors This Week – 8/29/15
State Street Corporation Analysis – August 2015 Update $STT
A Glimpse at the Banking Industry – May 2015
30 Companies in the Spotlight This Week – 5/23/15

Other ModernGraham posts about related companies

BB&T Corporation Valuation – November 2015 Update $BBT
PNC Financial Services Group Valuation – November 2015 Update $PNC
SunTrust Banks Inc. Valuation – November 2015 Update $STI
U.S. Bancorp Valuation – November 2015 Update $USB
Starwood Property Trust Inc. Valuation – October 2015 Update $STWD
The Best Companies of the Banking Industry – October 2015
Comerica Inc. Valuation – October 2015 Update $CMA
Bank of New York Mellon Corporation Analysis – October 2015 Update $BK
Fifth Third Bancorp Analysis – October 2015 Update $FITB
Huntington Bancshares Inc. Analysis – October 2015 Update $HBAN

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.

State Street Corporation Analysis – August 2015 Update $STT

In the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.

We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.

In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

What follows is a specific look at how State Street Corporation (STT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): State Street Corporation (State Street), the parent company, is a financial holding company. The parent company provides financial and managerial support to its legal and operating subsidiaries. The Company, through its subsidiary, State Street Bank, provides financial services and products to institutional investors across the world. Its clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers. It has two lines of business: Investment Servicing and Investment Management. The Investment Servicing line of business performs core custody and related value-added functions, such as providing institutional investors with clearing, payment and settlement services. It provides Investment Management services through State Street Global Advisors (SSGA) .SSGA provides an array of investment management, investment research and investment advisory services.
[level-free]

To read the rest 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. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of STT

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

What kind of Intelligent Investor are you?

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

Stage 2: Determination of Intrinsic Value

EPSmg 3.57
MG Growth Estimate 11.41%
MG Value $111.79
Opinion Undervalued
MG Value based on 3% Growth $51.75
MG Value based on 0% Growth $30.33
Market Implied Growth Rate 6.10%
Current Price $73.88
% of Intrinsic Value 66.09%

State Street Corporation qualifies 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 as well as the high PEmg ratio.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.03 in 2011 to an estimated $3.57 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.1% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

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

Stage 3: Information for Further Research

STT Charts - August 2015

PEmg 20.70
PB Ratio 1.43
Dividend Yield 1.68%
Number of Consecutive Years of Dividend Growth 5

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

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

Most Recent Balance Sheet Figures

Long-Term Debt $9,085,000,000
Total Assets $294,571,000,000
Intangible Assets $7,600,000,000
Total Liabilities $273,071,000,000
Shares Outstanding (Diluted Average) 416,712,000

Earnings Per Share History

Next Fiscal Year Estimate $1.84
Dec14 $4.57
Dec13 $4.62
Dec12 $4.20
Dec11 $3.79
Dec10 $3.09
Dec09 -$4.32
Dec08 $4.30
Dec07 $3.45
Dec06 $3.29
Dec05 $2.50
Dec04 $2.35
Dec03 $2.15
Dec02 $3.10
Dec01 $1.90
Dec00 $1.82
Dec99 $1.89
Dec98 $1.33
Dec97 $1.16
Dec96 $0.89
Dec95 $0.74

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.57
Dec14 $4.31
Dec13 $3.54
Dec12 $2.74
Dec11 $2.03
Dec10 $1.42
Dec09 $1.00
Dec08 $3.50
Dec07 $2.98
Dec06 $2.73
Dec05 $2.43
Dec04 $2.35
Dec03 $2.29
Dec02 $2.24
Dec01 $1.75
Dec00 $1.59
Dec99 $1.38

Recommended Reading:

Other ModernGraham posts about the company

A Glimpse at the Banking Industry – May 2015
30 Companies in the Spotlight This Week – 5/23/15
State Street Corporation Quarterly Valuation – May 2015 $STT
28 Companies in the Spotlight This Week – 2/28/15
State Street Corporation Quarterly Valuation – February 2015 $STT

Other ModernGraham posts about related companies

BB&T Corporation Analysis – August 2015 Update $BBT
PNC Financial Services Group Inc. Analysis – August 2015 Update $PNC
US Bancorp Analysis – August 2015 Update $USB
Comerica Incorporated Analysis – July 2015 Update $CMA
Starwood Property Trust Inc. Analysis – Initial Coverage $STWD
Fifth Third Bancorp Analysis – July 2015 Update $FITB
Huntington Bancshares Analysis – June 2015 Update $HBAN
JPMorgan Chase Analysis – June 2015 Update $JPM
Wells Fargo Stock Analysis – May 2015 Quarterly Update $WFC
M&T Bank Corporation Quarterly Valuation – May 2015 $MTB

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.  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.

State Street Corporation Quarterly Valuation – May 2015 $STT

220px-State_Street_Corporation_logo.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how State Street Corporation (STT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): State Street Corporation is a financial holding company. The Company provides financial products and services to institutional investors. The Company’s clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers. The Company has two lines of business: Investment Servicing and Investment Management. The Company’s investment servicing products and services include: custody; product- and participant-level accounting; daily pricing and administration; master trust and master custody; record-keeping; cash management; foreign exchange, brokerage and other trading services. The Company provides Investment Management services through State Street Global Advisors (SSgA). SSgA provides an array of investment management, investment research and investment advisory services to corporations, public funds and other sophisticated investors.

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

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

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

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

Valuation Summary

Key Data:

Recent Price $78.99
MG Value $179.36
MG Opinion Undervalued
Value Based on 3% Growth $67.55
Value Based on 0% Growth $39.60
Market Implied Growth Rate 4.23%
PEmg 16.96
PB Ratio 1.59

Balance Sheet – March 2015

Total Debt $9,174,000,000
Total Assets $279,476,000,000
Intangible Assets $7,555,000,000
Total Liabilities $258,657,000,000
Outstanding Shares 418,800,000

Earnings Per Share

2015 (estimate) $5.11
2014 $4.57
2013 $4.62
2012 $4.20
2011 $3.79
2010 $3.09
2009 -$4.32
2008 $4.30
2007 $3.45
2006 $3.29
2005 $2.50

Earnings Per Share – ModernGraham 

2015 (estimate) $4.66
2014 $4.31
2013 $3.54
2012 $2.74
2011 $2.03
2010 $1.42

Dividend History

Conclusion

State Street Corporation qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability or growth over the last ten years, while the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $2.03 in 2011 to an estimated $4.66 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 4.23% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

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

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

State Street Corporation Quarterly Valuation – February 2015 $STT

220px-State_Street_Corporation_logo.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how State Street Corporation (STT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): State Street Corporation is a financial holding company. The Company provides financial products and services to institutional investors. The Company’s clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers. The Company has two lines of business: Investment Servicing and Investment Management. The Company’s investment servicing products and services include: custody; product- and participant-level accounting; daily pricing and administration; master trust and master custody; record-keeping; cash management; foreign exchange, brokerage and other trading services. The Company provides Investment Management services through State Street Global Advisors (SSgA). SSgA provides an array of investment management, investment research and investment advisory services to corporations, public funds and other sophisticated investors.

Defensive Investor – must pass all 6 of the following tests: Score = 5/6

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

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

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

Valuation Summary

Key Data:

Recent Price $77.63
MG Value $167.35
MG Opinion Undervalued
Value Based on 3% Growth $63.03
Value Based on 0% Growth $36.95
Market Implied Growth Rate 4.68%
PEmg 17.86
PB Ratio 1.53

Balance Sheet – December 2014

Total Debt $10,042,000,000
Total Assets $274,119,000,000
Intangible Assets $7,851,000,000
Total Liabilities $252,595,000,000
Outstanding Shares 424,300,000

Earnings Per Share

2014 $4.69
2013 $4.62
2012 $4.20
2011 $3.79
2010 $3.09
2009 -$4.32
2008 $4.30
2007 $3.45
2006 $3.29
2005 $2.50

Earnings Per Share – ModernGraham 

2014 $4.35
2013 $3.54
2012 $2.74
2011 $2.03
2010 $1.42
2009 $1.00

Dividend History

Conclusion:

State Street Corporation qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability over the last ten years, while the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.42 in 2010 to $4.35 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.68% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

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

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

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

State Street Corporation Quarterly Valuation – November 2014 $STT

220px-State_Street_Corporation_logo.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how State Street Corporation (STT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): State Street Corporation (State Street) is a financial holding company. Through its subsidiaries, including its principal banking subsidiary, State Street Bank and Trust Company (State Street Bank), the Company provides a range of financial products and services to institutional investors worldwide. The Company has two lines of business: Investment Servicing and Investment Management. At December 31, 2011, it had consolidated total deposits of $157.29 billion. Its clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers. State Street operates in 29 countries and in more than 100 geographic markets worldwide. In January 2014, its joint venture Boston Financial acquired assets and staff of The Colbent Corporation.

Defensive Investor – must pass all 6 of the following tests: Score = 5/6

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

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

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

Valuation Summary

Key Data:

Recent Price $75.49
MG Value $170.43
MG Opinion Undervalued
Value Based on 3% Growth $64.19
Value Based on 0% Growth $37.63
Market Implied Growth Rate 4.28%
PEmg 17.05
PB Ratio 1.53

Balance Sheet – September 2014

Total Debt $9,016,000,000
Total Assets $274,805,000,000
Intangible Assets $11,551,000,000
Total Liabilities $253,649,000,000
Outstanding Shares 429,700,000

Earnings Per Share

2014 (estimate) $4.93
2013 $4.62
2012 $4.20
2011 $3.79
2010 $3.09
2009 -$4.32
2008 $4.30
2007 $3.45
2006 $3.29
2005 $2.50

Earnings Per Share – ModernGraham 

2014 (estimate) $4.43
2013 $3.54
2012 $2.74
2011 $2.03
2010 $1.42
2009 $1.00

Dividend History

Conclusion:

State Street Corporation qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability over the last ten years, while the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.42 in 2010 to an estimated $4.43 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.28% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

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

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

Northern Trust Corp Valuation – March 2019 #NTRS

Company Profile (excerpt from Reuters): Northern Trust Corporation, incorporated on August 23, 1971, is a financial holding company. The Company provides asset servicing, fund administration, asset management, fiduciary and banking solutions for corporations, institutions, families and individuals around the world. The Company’s segments include Corporate & Institutional Services (C&IS), Wealth Management, and Treasury and Other. The Company conducts its business through various subsidiaries, including The Northern Trust Company (Bank). The Asset Management business, through the Company’s subsidiaries, supports the C&IS and Wealth Management segments by providing a range of asset management and related services, and other products to customers around the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NTRS – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,238,028,921 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 121.45% Pass
5. Moderate PEmg Ratio PEmg < 20 16.36 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.95 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.66
MG Growth Estimate 10.34%
MG Value $165.23
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $82.12
MG Value based on 0% Growth $48.14
Market Implied Growth Rate 3.93%
Current Price $92.66
% of Intrinsic Value 56.08%

Northern Trust Corporation qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . 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 Undervalued after growing its EPSmg (normalized earnings) from $3.35 in 2015 to an estimated $5.66 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.93% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Northern Trust Corporation revealed the company was trading above its Graham Number of $78.3. The company pays a dividend of $1.94 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 16.36, which was below the industry average of 21.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Northern Trust Corporation performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $78.30
PEmg 16.36
PB Ratio 1.95
Dividend Yield 2.09%
TTM Dividend $1.94
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 12/1/2018
Long-Term Debt & Capital Lease Obligation $11,303,000,000
Total Assets $132,212,500,000
Intangible Assets $669,300,000
Total Liabilities $121,704,200,000
Shares Outstanding (Diluted Average) 221,469,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.20
Dec2018 $6.64
Dec2017 $4.92
Dec2016 $4.32
Dec2015 $3.99
Dec2014 $3.32
Dec2013 $2.99
Dec2012 $2.81
Dec2011 $2.47
Dec2010 $2.74
Dec2009 $3.16
Dec2008 $3.47
Dec2007 $3.24
Dec2006 $3.00
Dec2005 $2.64
Dec2004 $2.27
Dec2003 $1.80
Dec2002 $1.97
Dec2001 $2.11
Dec2000 $2.08
Dec1999 $1.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.66
Dec2018 $5.14
Dec2017 $4.23
Dec2016 $3.75
Dec2015 $3.35
Dec2014 $2.98
Dec2013 $2.82
Dec2012 $2.80
Dec2011 $2.86
Dec2010 $3.08
Dec2009 $3.20
Dec2008 $3.12
Dec2007 $2.83
Dec2006 $2.53
Dec2005 $2.25
Dec2004 $2.05
Dec2003 $1.94

Recommended Reading:

Other ModernGraham posts about the company

Northern Trust Corp Valuation – April 2018 $NTRS
7 Best Stocks For Value Investors This Week – 7/30/16
Northern Trust Corp Valuation – July 2016 $NTRS
18 Best Stocks For Value Investors This Week – 1/30/16
Northern Trust Corp Valuation – January 2016 Update $NTRS

Other ModernGraham posts about related companies

Affiliated Managers Group Inc Valuation – February 2019 $AMG
Bank of New York Mellon Corp Valuation – February 2019 $BK
Western Union Co Valuation – February 2019 $WU
Raymond James Financial Valuation – February 2019 $RJF
Nasdaq Inc Valuation – February 2019 $NDAQ
E*Trade Financial Corp Valuation – January 2019 $ETFC
Marsh & McLennan Companies Inc Valuation – January 2019 $MMC
Intercontinental Exchange Inc Valuation – January 2019 $ICE
H&R Block Inc Valuation – January 2019 $HRB
State Street Corp Valuation – January 2019 $STT

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.

Affiliated Managers Group Inc Valuation – February 2019 $AMG

Company Profile (excerpt from Reuters): Affiliated Managers Group, Inc., incorporated on December 29, 1993, is an asset management company with equity investments in boutique investment management firms (Affiliates). The Company is focused on investing around the globe in investment management firms that manage active return-oriented strategies, including traditional, alternative and wealth management firms. The Company operates through three business segments, which represent its principal distribution channels: Institutional, Mutual Fund and High Net Worth. The equity method investments in the Institutional distribution channel are made in relationships with public and private client entities, including foundations, endowments, sovereign wealth funds and retirement plans for corporations and municipalities. The equity method investments in the Mutual Fund distribution channel are made in advisory or sub-advisory relationships with active return-oriented mutual funds, Undertakings for Collective Investment in Transferable Securities (UCITS) and other retail products. The equity method investments in the High Net Worth distribution channel are made in relationships with high net worth and ultra-high net worth individuals, families, trusts, foundations, endowments and retirement plans.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMG – 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 $5,732,676,828 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.45 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 224.67% Pass
6. Moderate PEmg Ratio PEmg < 20 11.23 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.40 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.45 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.40 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 $9.81
MG Growth Estimate 5.82%
MG Value $197.46
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $142.18
MG Value based on 0% Growth $83.35
Market Implied Growth Rate 1.37%
Current Price $110.14
% of Intrinsic Value 55.78%

Affiliated Managers Group, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history. 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 $7.06 in 2015 to an estimated $9.81 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.37% 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 Affiliated Managers Group, Inc. revealed the company was trading below its Graham Number of $140.26. The company pays a dividend of $1.2 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 11.23, which was below the industry average of 20.29, 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 $-56.9.

Affiliated Managers Group, 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) -$56.90
Graham Number $140.26
PEmg 11.23
Current Ratio 1.45
PB Ratio 1.40
Current Dividend $1.20
Dividend Yield 1.09%
Number of Consecutive Years of Dividend Growth 2

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,085,400,000
Total Current Liabilities $746,600,000
Long-Term Debt $1,829,600,000
Total Assets $8,219,100,000
Intangible Assets $3,943,300,000
Total Liabilities $4,084,200,000
Shares Outstanding (Diluted Average) 52,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.32
Dec2018 $4.52
Dec2017 $12.03
Dec2016 $8.57
Dec2015 $9.17
Dec2014 $7.70
Dec2013 $6.55
Dec2012 $3.28
Dec2011 $3.11
Dec2010 $2.81
Dec2009 $1.38
Dec2008 -$0.03
Dec2007 $4.55
Dec2006 $3.74
Dec2005 $2.81
Dec2004 $2.02
Dec2003 $1.05
Dec2002 $1.65
Dec2001 $1.47
Dec2000 $1.66
Dec1999 $2.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.81
Dec2018 $8.16
Dec2017 $9.59
Dec2016 $7.93
Dec2015 $7.06
Dec2014 $5.57
Dec2013 $4.15
Dec2012 $2.67
Dec2011 $2.36
Dec2010 $2.15
Dec2009 $2.05
Dec2008 $2.46
Dec2007 $3.42
Dec2006 $2.65
Dec2005 $2.00
Dec2004 $1.59
Dec2003 $1.45

Recommended Reading:

Other ModernGraham posts about the company

Affiliated Managers Group Inc Valuation – May 2018 $AMG
Affiliated Managers Group Inc Valuation – January 2017 $AMG
Affiliated Managers Group Analysis – Initial Coverage $AMG

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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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