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
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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
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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.

Seagate Technology PLC Valuation – March 2018 $STX

Company Profile (obtained from Marketwatch): Seagate Technology Plc engages in the development, production, and distribution of data storage products and electronic data storage solutions. The company’s products include hard disk drives, solid state hybrid drives, solid state drives, peripheral component interconnect express cards, serial advanced technology attachment controllers, storage subsystems and computing solutions. It offers its products under the Backup Plus and Expansion product lines, and Maxtor and LaCie brands. The company was founded by Finis Conner, Syed Iftikar, Doug Mahon, David Thomas Mitchell, and Alan F. Shugart in 1978 and is headquartered in Dublin, Ireland.

STX Chart

STX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of STX – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,705,383,820 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.58 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -405.53% Fail
6. Moderate PEmg Ratio PEmg < 20 18.81 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 15.12 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 1.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.40 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.93
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $42.50
MG Value based on 0% Growth $24.92
Market Implied Growth Rate 5.16%
Current Price $55.14
% of Intrinsic Value N/A

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 stability or 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 net current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.44 in 2014 to an estimated $2.93 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.16% 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 $18.43. The company pays a dividend of $2.52 per share, for a yield of 4.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.81, which was below the industry average of 41.95, 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 $-9.55.

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) -$9.55
Graham Number $18.43
PEmg 18.81
Current Ratio 1.58
PB Ratio 15.12
Current Dividend $2.52
Dividend Yield 4.57%
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
Total Current Assets $4,910,000,000
Total Current Liabilities $3,113,000,000
Long-Term Debt $4,316,000,000
Total Assets $8,750,000,000
Intangible Assets $1,460,000,000
Total Liabilities $7,689,000,000
Shares Outstanding (Diluted Average) 291,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.23
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 $2.93
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
Jun2002 $0.12

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Enterprising Investor – July 2016
Dividend Investors Should Research These 10 Stocks – July 2016
Benjamin Graham Would Love These 10 Companies Today
10 Low PE Stocks for the Enterprising Investor – July 2016
5 Companies for Value Investors with a High Beta – July 2016

Other ModernGraham posts about related companies

HP Inc Valuation – February 2018 $HPQ
Intel Corp Valuation – February 2018 $INTC
Apple Inc Valuation – February 2018 $AAPL
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Emerson Electric Co Valuation – August 2017 $EMR
General Cable Corporation Valuation – Initial Coverage $BGC
3D Systems Corp Valuation – Initial Coverage $DDD
Teradyne Inc Valuation – Initial Coverage $TER
Diebold Nixdorf Inc Valuation – Initial Coverage $DBD

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 – July 2016 $STX

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 – July 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 Seagate Technology PLC (STX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Seagate Technology plc (Seagate) is a provider of electronic data storage products. The Company’s products are hard disk drives (HDD). The Company produces a range of electronic data storage products, including solid state hybrid drives (SSHD), solid state drives (SSD), peripheral component interconnect express (PCIe) cards and Serial AT Attachment (SATA) controllers. The Company’s products are designed for enterprise servers and storage systems for applications, client compute applications and client non-compute applications. The Company’s product and solution portfolio for the enterprise data storage industry includes storage enclosures, integrated application platforms and high performance computing (HPC) data storage solutions. Its data storage services provide online backup, data protection and recovery solutions for small to medium-sized businesses. Its products include Enterprise Performance HDDs, Mobile HDDs and SSHDs, NAS HDDs, and Surveillance HDDs, among others.

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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 STX – July 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,724,496,510 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.59 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -537.90% Fail
6. Moderate PEmg Ratio PEmg < 20 8.56 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.67 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 1.59 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.08 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

STX value chart July 2016

EPSmg $3.74
MG Growth Estimate 8.52%
MG Value $95.51
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $54.24
MG Value based on 0% Growth $31.80
Market Implied Growth Rate 0.03%
Current Price $32.03
% of Intrinsic Value 33.54%

Seagate Technology PLC 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 poor dividend history. 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 Undervalued after growing its EPSmg (normalized earnings) from $2.39 in 2012 to an estimated $3.74 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.03% 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.

Seagate Technology PLC performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

STX charts July 2016

Net Current Asset Value (NCAV) -$10.37
Graham Number $11.71
PEmg 8.56
Current Ratio 1.59
PB Ratio 5.67
Current Dividend $2.34
Dividend Yield 7.31%
Number of Consecutive Years of Dividend Growth 6

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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 3/1/2016
Total Current Assets $3,600,000,000
Total Current Liabilities $2,259,000,000
Long-Term Debt $4,130,000,000
Total Assets $8,374,000,000
Intangible Assets $1,730,000,000
Total Liabilities $6,691,000,000
Shares Outstanding (Diluted Average) 298,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.08
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

Next Fiscal Year Estimate $3.74
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
Jun2002 $0.12

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Enterprising Investor – July 2016
Dividend Investors Should Research These 10 Stocks – July 2016
Benjamin Graham Would Love These 10 Companies Today
10 Low PE Stocks for the Enterprising Investor – July 2016
5 Companies for Value Investors with a High Beta – July 2016

Other ModernGraham posts about related companies

Broadcom Limited Valuation – July 2016 $AVGO
Microchip Technology Inc Valuation – July 2016 $MCHP
Jabil Circuit Inc Valuation – July 2016 $JBL
KLA-Tencor Corp Valuation – July 2016 $KLAC
Linear Technology Corp Valuation – July 2016 $LLTC
Arrow Electronics Inc Valuation – July 2016 $ARW
Lam Research Corp Valuation – June 2016 $LRCX
TE Connectivity Ltd Valuation – June 2016 $TEL
Juniper Networks Inc Valuation – June 2016 $JNPR
Nvidia Corporation Valuation – June 2016 $NVDA

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 2016 Update $STX

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 Seagate Technology PLC (STX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Seagate Technology plc (Seagate) is a provider of electronic data storage products. The Company’s products are hard disk drives (HDD). The Company produces a range of electronic data storage products, including solid state hybrid drives (SSHD), solid state drives (SSD), peripheral component interconnect express (PCIe) cards and Serial AT Attachment (SATA) controllers. The Company’s products are designed for enterprise servers and storage systems for applications, client compute applications and client non-compute applications. The Company’s product and solution portfolio for the enterprise data storage industry includes storage enclosures, integrated application platforms and high performance computing (HPC) data storage solutions. Its data storage services provide online backup, data protection and recovery solutions for small to medium-sized businesses. Its products include Enterprise Performance HDDs, Mobile HDDs and SSHDs, NAS HDDs, and Surveillance HDDs, among others.

[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]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of STX

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 $7,911,553,069 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.80 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -586.29% Fail
6. Moderate PEmg Ratio PEmg < 20 6.70 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.45 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.80 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.91 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

STX value chart January 2016

EPSmg $4.14
MG Growth Estimate 11.03%
MG Value $126.55
Opinion Undervalued
MG Value based on 3% Growth $60.04
MG Value based on 0% Growth $35.20
Market Implied Growth Rate -0.90%
Current Price $27.74
% of Intrinsic Value 21.92%

Seagate Technology PLC 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 low current ratio, and the inconsistent dividend record.  The Enterprising Investor is only initially concerned by the level of debt relative to the net current assets. 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 $2.39 in 2012 to an estimated $4.14 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.9% annual earnings loss 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 Seagate Technology PLC (STX)?  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

STX charts January 2016

Net Current Asset Value (NCAV) -$7.39
Graham Number $18.06
PEmg 6.70
Current Ratio 1.80
PB Ratio 4.45
Dividend Yield 7.79%
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 Sep2015
Total Current Assets $4,882,000,000
Total Current Liabilities $2,718,000,000
Long-Term Debt $4,140,000,000
Total Assets $9,079,000,000
Intangible Assets $1,203,000,000
Total Liabilities $7,157,000,000
Shares Outstanding (Diluted Average) 308,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.28
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

Next Fiscal Year Estimate $4.14
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
Jun2002 $0.12

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stocks for the Enterprising Investor – January 2016
10 Undervalued Companies for Enterprising Dividend Investors – November 2015
10 Low PE Stocks for the Enterprising Investor – November 2015
5 Undervalued Companies for Value Investors with a High Beta – November 2015
10 Most Undervalued Companies for the Enterprising Investor – November 2015

Other ModernGraham posts about related companies

Microchip Technology Inc Valuation – January 2016 Update $MCHP
Avago Technologies Ltd Valuation – January 2016 Update $AVGO
KLA-Tencor Corp Valuation – January 2016 Update $KLAC
Lam Research Corp Valuation – January 2016 Update $LRCX
Amphenol Corporation Valuation – January 2016 Update $APH
Arrow Electronics Inc Valuation – December 2015 Update $ARW
TE Connectivity Ltd Valuation – December 2015 Update $TEL
Broadcom Corp Valuation – November 2015 Update $BRCM
SanDisk Corp Valuation – November 2015 Update $SNDK
Corning Inc Valuation – November 2015 Update $GLW

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 Analysis – September 2015 Update $STX

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 – August 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 Seagate Technology PLC (STX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Seagate Technology plc (Seagate) is the provider of electronic data storage products. The Company’s principal products are hard disk drives, commonly referred to as disk drives, hard drives or HDDs. The Company produces a range of disk drive products addressing enterprise applications, where its products are designed for enterprise servers, mainframes and workstations; client compute applications, where its products are designed for desktop and notebook computers, 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 and digital media systems. In April 2014, Seagate completed the acquisition of Xyratex Ltd. In September 2014, Seagate Technology PLC completes acquisition of the assets of LSI’s Accelerated Solutions Division (ASD) and Flash Components Division (FCD) from Avago Technologies Limited.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of STX – September 2015

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 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 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 Fail
6. Moderate PEmg Ratio PEmg < 20 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Fail
Score
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 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $4.63
MG Growth Estimate 14.13%
MG Value $170.37
Opinion Undervalued
MG Value based on 3% Growth $67.19
MG Value based on 0% Growth $39.39
Market Implied Growth Rate 1.11%
Current Price $49.72
% of Intrinsic Value 29.18%

Seagate Technology PLC 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, the short dividend history, and the high PB ratio.  The Enterprising Investor is only initially concerned with the level of debt relative to the net current assets.  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 $2.39 in 2012 to an estimated $4.63 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.11% 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 Seagate Technology PLC (STX)?  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

STX Charts September 2015

Net Current Asset Value (NCAV) -$3.91
Graham Number $28.16
PEmg 10.73
Current Ratio 2.38
PB Ratio 5.30
Dividend Yield 4.12%
Number of Consecutive Years of Dividend Growth 6

 

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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

Total Current Assets $5,568,000,000
Total Current Liabilities $2,343,000,000
Long-Term Debt $4,155,000,000
Total Assets $9,845,000,000
Intangible Assets $1,244,000,000
Total Liabilities $6,827,000,000
Shares Outstanding (Diluted Average) 322,000,000

Earnings Per Share History

Next Fiscal Year Estimate $3.76
Jun15 $5.26
Jun14 $4.52
Jun13 $4.81
Jun12 $6.49
Jun11 $1.09
Jun10 $3.14
Jun09 -$6.40
Jun08 $2.36
Jun07 $1.56
Jun06 $1.60
Jun05 $1.41
Jun04 $1.06
Jun03 $1.36
Jun02 $0.36

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.63
Jun15 $4.86
Jun14 $4.44
Jun13 $3.54
Jun12 $2.39
Jun11 $0.34
Jun10 $0.13
Jun09 -$0.88
Jun08 $1.78
Jun07 $1.46
Jun06 $1.33
Jun05 $1.07
Jun04 $0.79
Jun03 $0.55
Jun02 $0.12

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stocks for the Enterprising Investor – August 2015
10 Undervalued Companies for the Enterprising Dividend Stock Investor – August 2015
10 Most Undervalued Companies for the Enterprising Investor – August 2015
10 Companies Benjamin Graham Would Invest In Today – August 2015
5 Undervalued Companies for Value Investors with a High Beta – August 2015

Other ModernGraham posts about related companies

KLA-Tencor Corporation Analysis – September 2015 Update $KLAC
Avago Technologies Ltd Analysis – Initial Coverage $AVGO
Arrow Electronics Inc. Analysis – Initial Coverage $ARW
TE Connectivity Limited Analysis – August 2015 Update $TEL
Broadcom Corporation Analysis – August 2015 Update $BRCM
SanDisk Corporation Analysis – August 2015 Update $SNDK
Corning Inc. Analysis – August 2015 Update $GLW
Intel Corporation Analysis – August 2015 Update $INTC
Advanced Micro Devices Inc. Analysis – Initial Coverage $AMD
Nvidia Corporation Analysis – August 2015 Update $NVDA

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 Analysis – June 2015 Quarterly Update $STX

220px-Seagate_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – May 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 Seagate Technology (STX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Seagate Technology plc (Seagate) is the provider of electronic data storage products. The Company’s principal products are hard disk drives, commonly referred to as disk drives, hard drives or HDDs. The Company produces a range of disk drive products addressing enterprise applications, where its products are designed for enterprise servers, mainframes and workstations; client compute applications, where its products are designed for desktop and notebook computers, 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 and digital media systems. In April 2014, Seagate completed the acquisition of Xyratex Ltd. In September 2014, Seagate Technology PLC completes acquisition of the assets of LSI’s Accelerated Solutions Division (ASD) and Flash Components Division (FCD) from Avago Technologies Limited.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. 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
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $55.20
MG Value $192.96
MG Opinion Undervalued
Value Based on 3% Growth $72.67
Value Based on 0% Growth $42.60
Market Implied Growth Rate 1.26%
Net Current Asset Value (NCAV) -$3.07
PEmg 11.01
Current Ratio 1.92
PB Ratio 5.71

Balance Sheet – March 2015

Current Assets $5,831,000,000
Current Liabilities $3,043,000,000
Total Debt $3,457,000,000
Total Assets $10,036,000,000
Intangible Assets $1,281,000,000
Total Liabilities $6,845,000,000
Outstanding Shares 330,000,000

Earnings Per Share

2015 (estimate) $5.72
2014 $4.52
2013 $4.81
2012 $6.49
2011 $1.09
2010 $3.14
2009 -$6.40
2008 $2.36
2007 $1.56
2006 $1.60
2005 $1.41

Earnings Per Share – ModernGraham

2015 (estimate) $5.01
2014 $4.44
2013 $3.54
2012 $2.39
2011 $0.34
2010 $0.13

Dividend History

Conclusion:

As this stock analysis shows, Seagate Technology is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, lack of earnings stability over the last ten years, inconsistent dividend record, and the high PB ratio.  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 based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.34 in 2011 to an estimated $5.01 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 1.26% annual earnings growth over the next 7-10 years and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Seagate Technology (STX)?  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 company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Seagate Technology Quarterly Valuation – February 2015 $STX

Seagate Technology does fairly well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the inconsistent dividend history, lack of earnings stability over the last ten years, and the high PB ratio, while the Enterprising Investor has no initial concerns. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $0.34 in 2011 to an estimated $4.68 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of only 2.27% annual earnings growth over the next 7-10 years. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.

Be sure to check out previous ModernGraham valuations o Seagate Technology (STX) for a greater perspective!

Read the full valuation on Seeking Alpha!

STX Chart

STX data by YCharts

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

Seagate Technology PLC Quarterly Valuation – November 2014 $STX

220px-Seagate_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – November 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Seagate Technology PLC (STX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Seagate Technology plc (Seagate) is the provider of electronic data storage products. The Company’s principal products are hard disk drives, commonly referred to as disk drives, hard drives or HDDs. The Company produces a range of disk drive products addressing enterprise applications, where its products are designed for enterprise servers, mainframes and workstations; client compute applications, where its products are designed for desktop and notebook computers, 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 and digital media systems. In April 2014, Seagate completed the acquisition of Xyratex Ltd. In September 2014, Seagate Technology PLC completes acquisition of the assets of LSI’s Accelerated Solutions Division (ASD) and Flash Components Division (FCD) from Avago Technologies Limited.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. 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
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $66.25
MG Value $181.54
MG Opinion Undervalued
Value Based on 3% Growth $68.37
Value Based on 0% Growth $40.08
Market Implied Growth Rate 2.77%
Net Current Asset Value (NCAV) -$3.67
PEmg 14.05
Current Ratio 2.15
PB Ratio 7.58

Balance Sheet – September 2014

Current Assets $5,583,000,000
Current Liabilities $2,596,000,000
Total Debt $3,809,000,000
Total Assets $9,765,000,000
Intangible Assets $1,341,000,000
Total Liabilities $6,819,000,000
Outstanding Shares 337,000,000

Earnings Per Share

2015 (estimate) $4.83
2014 $4.52
2013 $4.81
2012 $6.49
2011 $1.09
2010 $3.14
2009 -$6.40
2008 $2.36
2007 $1.56
2006 $1.60
2005 $1.41

Earnings Per Share – ModernGraham

2015 (estimate) $4.72
2014 $4.44
2013 $3.54
2012 $2.39
2011 $0.34
2010 $0.13

Dividend History

Conclusion:

Seagate Technology is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings or dividend stability over the last ten years as well as the high PB ratio, while the Enterprising Investor is only concerned by the level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.34 in 2011 to an estimated $4.72 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 2.77% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return 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 Seagate Technology (STX)?  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 Seagate Technology (STX) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Advanced Micro Devices Inc Valuation – February 2019 $AMD

Company Profile (excerpt from Reuters): Advanced Micro Devices, Inc. (AMD), incorporated on May 1, 1969, is a global semiconductor company. The Company is engaged in offering x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs) and professional graphics, and, server and embedded processors and semi-custom System-on-Chip (SoC) products and technology for game consoles. The Company’s segments include the Computing and Graphics segment, and the Enterprise, Embedded and Semi-Custom segment. The Computing and Graphics segment primarily includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics. The Enterprise, Embedded and Semi-Custom segment primarily includes server and embedded processors, semi-custom SoC products, development services, technology for game consoles and licensing portions of its intellectual property portfolio. The Company sells its products through its direct sales force and through independent distributors and sales representatives in both domestic and international markets. Its microprocessor customers consist primarily of original equipment manufacturers (OEMs), original design manufacturers (ODMs), system builders and independent distributors in both domestic and international markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMD – 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 $24,489,084,253 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.78 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -333.33% Fail
6. Moderate PEmg Ratio PEmg < 20 304.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 20.82 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 1.78 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.72 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.08
MG Growth Estimate 15.00%
MG Value $3.08
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $1.16
MG Value based on 0% Growth $0.68
Market Implied Growth Rate 148.00%
Current Price $24.36
% of Intrinsic Value 790.91%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.61 in 2015 to an estimated $0.08 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 148% 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 Advanced Micro Devices, Inc. revealed the company was trading above its Graham Number of $3.42. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 304.5, which was above the industry average of 29.46. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.23.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.23
Graham Number $3.42
PEmg 304.50
Current Ratio 1.78
PB Ratio 20.82
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,540,000,000
Total Current Liabilities $1,984,000,000
Long-Term Debt $1,114,000,000
Total Assets $4,556,000,000
Intangible Assets $515,000,000
Total Liabilities $3,290,000,000
Shares Outstanding (Diluted Average) 1,082,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.41
Dec2018 $0.32
Dec2017 -$0.03
Dec2016 -$0.60
Dec2015 -$0.84
Dec2014 -$0.53
Dec2013 -$0.11
Dec2012 -$1.60
Dec2011 $0.66
Dec2010 $0.64
Dec2009 $0.45
Dec2008 -$5.15
Dec2007 -$6.06
Dec2006 -$0.34
Dec2005 $0.40
Dec2004 $0.25
Dec2003 -$0.79
Dec2002 -$3.81
Dec2001 -$0.18
Dec2000 $2.89
Dec1999 -$0.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.08
Dec2018 -$0.17
Dec2017 -$0.42
Dec2016 -$0.65
Dec2015 -$0.61
Dec2014 -$0.40
Dec2013 -$0.22
Dec2012 -$0.51
Dec2011 -$0.61
Dec2010 -$1.53
Dec2009 -$2.45
Dec2008 -$3.33
Dec2007 -$2.05
Dec2006 -$0.32
Dec2005 -$0.48
Dec2004 -$0.72
Dec2003 -$0.95

Recommended Reading:

Other ModernGraham posts about the company

Advanced Micro Devices Inc Valuation – May 2018 $AMD
Advanced Micro Devices Inc Valuation – January 2017 $AMD
Advanced Micro Devices Inc. Analysis – Initial Coverage $AMD
Valuation: Advanced Micro Devices (AMD)

Other ModernGraham posts about related companies

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
TE Connectivity Ltd Valuation – January 2019 $TEL
NVIDIA Corp Valuation – January 2019 $NVDA
Seagate Technology PLC Valuation – January 2019 $STX

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.

Qorvo Inc Valuation – February 2019 $QRVO

Company Profile (excerpt from Reuters): Qorvo, Inc., incorporated on December 13, 2013, is a provider of technologies and radio frequency (RF) solutions for mobile, infrastructure and defense and aerospace applications. The Company designs, develops, manufactures and markets its products to the United States and international original equipment manufacturers (OEMs) and original design manufacturers (ODMs). Its segments include Mobile Products (MP) and Infrastructure and Defense Products (IDP). The Company operates design, sales and manufacturing facilities located throughout Asia, Europe and North America. Its primary manufacturing facilities are located in North Carolina, Oregon, Texas and Florida, and its primary assembly and test facilities are located in China, Costa Rica and Texas.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of QRVO – 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 $8,086,883,614 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.90 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 3733.33% Pass
6. Moderate PEmg Ratio PEmg < 20 122.87 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.83 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 3.90 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.59 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.54
MG Growth Estimate -3.57%
MG Value $3.05
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $7.77
MG Value based on 0% Growth $4.56
Market Implied Growth Rate 57.19%
Current Price $65.86
% of Intrinsic Value 2161.04%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.7 in 2015 to an estimated $0.54 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 57.19% 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 Qorvo Inc revealed the company was trading above its Graham Number of $36.89. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 122.87, which was above the industry average of 29.46. Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.05.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $3.05
Graham Number $36.89
PEmg 122.87
Current Ratio 3.90
PB Ratio 1.83
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,615,536,000
Total Current Liabilities $413,932,000
Long-Term Debt $714,402,000
Total Assets $5,806,291,000
Intangible Assets $2,637,248,000
Total Liabilities $1,228,971,000
Shares Outstanding (Diluted Average) 126,842,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.60
Mar2018 -$0.32
Mar2017 -$0.13
Mar2016 -$0.20
Mar2015 $2.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.54
Mar2018 $0.10
Mar2017 $0.33
Mar2016 $0.50
Mar2015 $0.70

Recommended Reading:

Other ModernGraham posts about the company

Qorvo Inc Valuation – April 2018 $QRVO
Qorvo Inc Valuation – December 2016 Update $QRVO
Qorvo Inc. Analysis – Initial Coverage $QRVO

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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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