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Synchrony Financial Valuation – March 2019 #SYF

Company Profile (excerpt from Reuters): Synchrony Financial (Synchrony), incorporated on September 12, 2003, is a consumer financial services company. The Company provides a range of credit products through programs it has established with a group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers. The Company’s revenue activities are managed through three sales platforms: Retail Card, Payment Solutions and CareCredit. It offers its credit products through its subsidiary, Synchrony Bank (the Bank). Through the Bank, it offers a range of deposit products insured by the Federal Deposit Insurance Corporation (FDIC), including certificates of deposit, individual retirement accounts (IRAs), money market accounts and savings accounts.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SYF – 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 $23,645,504,194 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 347.91% Pass
5. Moderate PEmg Ratio PEmg < 20 9.91 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.64 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 $3.36
MG Growth Estimate 7.74%
MG Value $80.62
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $48.76
MG Value based on 0% Growth $28.58
Market Implied Growth Rate 0.70%
Current Price $33.31
% of Intrinsic Value 41.32%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.22 in 2015 to an estimated $3.36 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.7% 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 Synchrony Financial revealed the company was trading below its Graham Number of $43.03. The company pays a dividend of $0.72 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.91, 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.

Synchrony Financial fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $43.03
PEmg 9.91
PB Ratio 1.64
Dividend Yield 2.16%
TTM Dividend $0.72
Number of Consecutive Years of Dividend Growth 3

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 $23,996,000,000
Total Assets $106,792,000,000
Intangible Assets $2,161,000,000
Total Liabilities $92,114,000,000
Shares Outstanding (Diluted Average) 720,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.03
Dec2018 $3.74
Dec2017 $2.42
Dec2016 $2.71
Dec2015 $2.65
Dec2014 $2.78
Dec2013 $2.21
Dec2012 $0.00
Dec2011 $2.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.36
Dec2018 $2.97
Dec2017 $2.58
Dec2016 $2.46
Dec2015 $2.22
Dec2014 $1.82
Dec2013 $1.19
Dec2012 $0.61
Dec2011 $0.76

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Stocks for the Enterprising Investor – January 2019
Most Undervalued Stocks of the S&P 500 – August 2018
10 Undervalued Stocks for the Enterprising Investor – August 2018
10 Undervalued Stocks for the Enterprising Investor – July 2018
Synchrony Financial Valuation – June 2018 $SYF

Other ModernGraham posts about related companies

CBRE Group Inc Valuation – March 2019 #CBRE
Franklin Resources Inc Valuation – March 2019 #BEN
S&P Global Inc Valuation – March 2019 #SPGI
Equifax Inc Valuation – March 2019 #EFX
CME Group Inc Valuation – March 2019 #CME
Northern Trust Corp Valuation – March 2019 #NTRS
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

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.

Synchrony Financial Valuation – June 2018 $SYF

Company Profile (excerpt from Reuters): Synchrony Financial (Synchrony), incorporated on September 12, 2003, is a consumer financial services company. The Company provides a range of credit products through programs it has established with a group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers. The Company’s revenue activities are managed through three sales platforms: Retail Card, Payment Solutions and CareCredit. It offers its credit products through its subsidiary, Synchrony Bank (the Bank). Through the Bank, it offers a range of deposit products insured by the Federal Deposit Insurance Corporation (FDIC), including certificates of deposit, individual retirement accounts (IRAs), money market accounts and savings accounts.

SYF Chart

SYF data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SYF – June 2018

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $26,416,479,565 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 27833233.33% Pass
5. Moderate PEmg Ratio PEmg < 20 12.50 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.88 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 $2.80
MG Growth Estimate 15.00%
MG Value $107.77
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $40.59
MG Value based on 0% Growth $23.79
Market Implied Growth Rate 2.00%
Current Price $35.00
% of Intrinsic Value 32.48%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.93 in 2014 to an estimated $2.8 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2% 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 Synchrony Financial revealed the company was trading below its Graham Number of $36.58. The company pays a dividend of $0.56 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 12.5, which was below the industry average of 22.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Synchrony Financial performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $36.58
PEmg 12.50
PB Ratio 1.88
Dividend Yield 1.60%
TTM Dividend $0.56
Number of Consecutive Years of Dividend Growth 2

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 3/1/2018
Long-Term Debt & Capital Lease Obligation $21,015,000,000
Total Assets $95,559,000,000
Intangible Assets $1,771,000,000
Total Liabilities $81,203,000,000
Shares Outstanding (Diluted Average) 770,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.22
Dec2017 $2.42
Dec2016 $2.71
Dec2015 $2.65
Dec2014 $2.78

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.80
Dec2017 $2.43
Dec2016 $2.17
Dec2015 $1.62
Dec2014 $0.93

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Large Cap Stocks for Value Investors – August 2017
11 Best Stocks for Value Investors This Week – 3/4/17
Synchrony Financial Valuation – Initial Coverage $SYF

Other ModernGraham posts about related companies

Franklin Resources Inc Valuation – May 2018 $BEN
S&P Global Inc Valuation – May 2018 $SPGI
Equifax Inc Valuation – May 2018 $EFX
CME Group Inc Valuation – May 2018 $CME
Discover Financial Services Valuation – May 2018 $DFS
Affiliated Managers Group Inc Valuation – May 2018 $AMG
The Western Union Co Valuation – April 2018 $WU
Northern Trust Corp Valuation – April 2018 $NTRS
Nasdaq Inc Valuation – April 2018 $NDAQ
Leucadia National Corp Valuation – March 2018 $LUK

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.

Synchrony Financial Valuation – Initial Coverage $SYF

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

Company Profile (obtained from Google Finance): Synchrony Financial is a consumer financial services company. The Company provides a range of credit products through programs it has established with a group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers. The Company’s revenue activities are managed through three sales platforms: Retail Card, Payment Solutions and CareCredit. It offers its credit products through its subsidiary, Synchrony Bank (the Bank). Through the Bank, it offers a range of deposit products insured by the Federal Deposit Insurance Corporation (FDIC), including certificates of deposit, individual retirement accounts (IRAs), money market accounts and savings accounts. The Company offers three types of credit products: credit cards, commercial credit products and consumer installment loans. The Company also offers a debt cancellation product. It offers two types of credit cards: private label credit cards and Dual Cards.

SYF Chart

SYF data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of SYF – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $29,835,641,645 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 27766566.67% Pass
5. Moderate PEmg Ratio PEmg < 20 12.91 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.12 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 $2.80
MG Growth Estimate 9.19%
MG Value $75.28
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $40.61
MG Value based on 0% Growth $23.81
Market Implied Growth Rate 2.20%
Current Price $36.15
% of Intrinsic Value 48.02%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.74 in 2013 to an estimated $2.8 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.2% 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 Synchrony Financial revealed the company was trading above its Graham Number of $34.07. The company pays a dividend of $0.26 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 12.91, which was below the industry average of 21.33, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Synchrony Financial receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Graham Number $34.07
PEmg 12.91
PB Ratio 2.12
Dividend Yield 0.72%
TTM Dividend $0.26
Number of Consecutive Years of Dividend Growth 2

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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 12/1/2016
Long-Term Debt & Capital Lease Obligation $20,147,000,000
Total Assets $90,207,000,000
Intangible Assets $1,661,000,000
Total Liabilities $76,011,000,000
Shares Outstanding (Diluted Average) 831,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.97
Dec2016 $2.71
Dec2015 $2.65
Dec2014 $2.78
Dec2013 $2.81
Dec2012 $3.00

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.80
Dec2016 $2.74
Dec2015 $2.59
Dec2014 $2.28
Dec2013 $1.74
Dec2012 $1.00

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Franklin Resources Inc Valuation – February 2017 $BEN
S&P Global Inc Valuation – Initial Coverage $SPGI
CME Group Inc Valuation – February 2017 $CME
Equifax Inc Valuation – February 2017 $EFX
Janus Capital Group Inc Valuation – Initial Coverage $JNS
Jones Lang LaSalle Inc Valuation – Initial Coverage $JLL
Sun Life Financial Inc Valuation – Initial Coverage $TSE:SLF
Capstead Mortgage Corporation Valuation – Initial Coverage $CMO
Affiliated Managers Group Inc Valuation – January 2017 $AMG
Investment Technology Group Valuation – Initial Coverage $ITG

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.

Goldman Sachs Group Inc Valuation – April 2019 #GS

Company Profile (excerpt from Reuters): The Goldman Sachs Group, Inc., incorporated on July 21, 1998, is an investment banking, securities and investment management company that provides a range of financial services to corporations, financial institutions, governments and individuals. The Company operates in four business segments: Investment Banking, Institutional Client Services, Investing & Lending, and Investment Management. As of December 2016, it had offices in over 30 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GS – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $74,225,517,968 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 62.01% Pass
5. Moderate PEmg Ratio PEmg < 20 11.71 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.86 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 $17.28
MG Growth Estimate 3.68%
MG Value $274.01
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $250.54
MG Value based on 0% Growth $146.87
Market Implied Growth Rate 1.61%
Current Price $202.38
% of Intrinsic Value 73.86%

Goldman Sachs Group Inc 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 $13.88 in 2015 to an estimated $17.28 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.61% 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 Goldman Sachs Group Inc revealed the company was trading below its Graham Number of $287.24. The company pays a dividend of $3.15 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 11.71, which was below the industry average of 21.66, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Goldman Sachs Group Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $287.24
PEmg 11.71
PB Ratio 0.86
Dividend Yield 1.56%
TTM Dividend $3.15
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 $245,582,000,000
Total Assets $931,796,000,000
Intangible Assets $4,082,000,000
Total Liabilities $841,611,000,000
Shares Outstanding (Diluted Average) 383,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.27
Dec2018 $25.27
Dec2017 $9.01
Dec2016 $16.29
Dec2015 $12.14
Dec2014 $17.07
Dec2013 $15.46
Dec2012 $14.13
Dec2011 $4.51
Dec2010 $13.18
Dec2009 $22.13
Nov2008 $4.47
Nov2007 $24.73
Nov2006 $19.69
Nov2005 $11.21
Nov2004 $8.92
Nov2003 $5.87
Nov2002 $4.03
Nov2001 $4.26
Nov2000 $6.00
Nov1999 $5.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $17.28
Dec2018 $16.84
Dec2017 $13.08
Dec2016 $15.08
Dec2015 $13.88
Dec2014 $14.12
Dec2013 $13.06
Dec2012 $11.80
Dec2011 $11.69
Dec2010 $15.80
Dec2009 $16.89
Nov2008 $14.11
Nov2007 $17.32
Nov2006 $12.39
Nov2005 $8.11
Nov2004 $6.31
Nov2003 $5.05

Recommended Reading:

Other ModernGraham posts about the company

Goldman Sachs Group Inc Valuation – November 2018 $GS
Goldman Sachs Group Inc Valuation – February 2018 $GS
Goldman Sachs Group Inc Valuation – June 2016 $GS
10 Low PE Stocks for the Enterprising Investor – June 2016
Stocks Trading Below Their Graham Number – May 2016

Other ModernGraham posts about related companies

American Express Co Valuation – April 2019 #AXP
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T.Rowe Price Group Inc Valuation – March 2019 #TROW
Moody’s Corp Valuation – March 2019 #MCO
Charles Schwab Corp Valuation – March 2019 #SCHW
Willis Towers Watson PLC Valuation – March 2019 #WLTW
Paypal Holdings Inc Valuation – March 2019 #PYPL
Synchrony Financial Valuation – March 2019 #SYF
CBRE Group Inc Valuation – March 2019 #CBRE
Franklin Resources Inc Valuation – March 2019 #BEN

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.

American Express Co Valuation – April 2019 #AXP

Company Profile (excerpt from Reuters): American Express Company, incorporated on June 10, 1965, together with its subsidiaries, is a global services company. The Company’s principal products and services are charge and credit card products, and travel-related services offered to consumers and businesses around the world. The Company’s segments include the Global Consumer Services Group (GCSG), Global Merchant and Network Services (GMNS), and Global Commercial Services (GCS). The Company’s range of products and services includes network services; merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants; other fee services, including fraud prevention services and the design and operation of customer loyalty programs; expense management products and services, and stored value/prepaid products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AXP – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $93,000,342,672 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 83.98% Pass
5. Moderate PEmg Ratio PEmg < 20 15.56 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.24 Fail
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 $7.13
MG Growth Estimate 6.66%
MG Value $155.42
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $103.32
MG Value based on 0% Growth $60.57
Market Implied Growth Rate 3.53%
Current Price $110.86
% of Intrinsic Value 71.33%

American Express Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.94 in 2015 to an estimated $7.13 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.53% 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 American Express Company revealed the company was trading above its Graham Number of $76.95. The company pays a dividend of $1.48 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 15.56, which was below the industry average of 21.66, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

American Express Company performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Graham Number $76.95
PEmg 15.56
PB Ratio 4.24
Dividend Yield 1.34%
TTM Dividend $1.48
Number of Consecutive Years of Dividend Growth 3

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 $58,423,000,000
Total Assets $188,602,000,000
Intangible Assets $3,347,000,000
Total Liabilities $166,312,000,000
Shares Outstanding (Diluted Average) 853,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.00
Dec2018 $7.91
Dec2017 $2.99
Dec2016 $5.61
Dec2015 $5.05
Dec2014 $5.56
Dec2013 $4.88
Dec2012 $3.89
Dec2011 $4.12
Dec2010 $3.35
Dec2009 $1.54
Dec2008 $2.32
Dec2007 $3.36
Dec2006 $2.99
Dec2005 $2.97
Dec2004 $2.68
Dec2003 $2.30
Dec2002 $2.01
Dec2001 $0.98
Dec2000 $2.07
Dec1999 $1.81

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.13
Dec2018 $5.60
Dec2017 $4.57
Dec2016 $5.24
Dec2015 $4.94
Dec2014 $4.71
Dec2013 $4.04
Dec2012 $3.43
Dec2011 $3.11
Dec2010 $2.64
Dec2009 $2.40
Dec2008 $2.84
Dec2007 $3.02
Dec2006 $2.77
Dec2005 $2.50
Dec2004 $2.18
Dec2003 $1.90

Recommended Reading:

Other ModernGraham posts about the company

American Express Co Valuation – November 2018 $AXP
American Express Co. Valuation – February 2018 $AXP
5 Undervalued Dow Components to Research – March 2017
5 Undervalued Dow Components to Research – February 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017

Other ModernGraham posts about related companies

Broadridge Financial Solutions Inc Valuation – April 2019 #BR
T.Rowe Price Group Inc Valuation – March 2019 #TROW
Moody’s Corp Valuation – March 2019 #MCO
Charles Schwab Corp Valuation – March 2019 #SCHW
Willis Towers Watson PLC Valuation – March 2019 #WLTW
Paypal Holdings Inc Valuation – March 2019 #PYPL
Synchrony Financial Valuation – March 2019 #SYF
CBRE Group Inc Valuation – March 2019 #CBRE
Franklin Resources Inc Valuation – March 2019 #BEN
S&P Global Inc Valuation – March 2019 #SPGI

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.

Broadridge Financial Solutions Inc Valuation – April 2019 #BR

Company Profile (excerpt from Reuters): Broadridge Financial Solutions, Inc. (Broadridge), incorporated on December 6, 2006, is a provider of investor communications and technology-driven solutions to banks, broker-dealers, mutual funds and corporate issuers. The Company’s segments include Investor Communication Solutions, and Global Technology and Operations. The Company’s services include investor and customer communications, securities processing, and data and analytics solutions. The Company delivers a range of solutions that helps its clients serve their retail and institutional customers across the entire investment lifecycle, including pre-trade, trade, and post-trade processing functionality. The Company serves a client base across four client groups: capital markets, asset management, wealth management and corporations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BR – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,145,347,942 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.02 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 185.25% Pass
6. Moderate PEmg Ratio PEmg < 20 31.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.13 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 1.02 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 78.56 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.37
MG Growth Estimate 11.73%
MG Value $107.83
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $48.93
MG Value based on 0% Growth $28.68
Market Implied Growth Rate 11.29%
Current Price $104.87
% of Intrinsic Value 97.25%

Broadridge Financial Solutions, 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, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.89 in 2015 to an estimated $3.37 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 11.29% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Broadridge Financial Solutions, Inc. revealed the company was trading above its Graham Number of $29.75. The company pays a dividend of $1.46 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 31.08, which was above the industry average of 21.66. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.65.

Broadridge Financial Solutions, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$10.65
Graham Number $29.75
PEmg 31.08
Current Ratio 1.02
PB Ratio 11.13
Current Dividend $1.46
Dividend Yield 1.39%
Number of Consecutive Years of Dividend Growth 12

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $966,400,000
Total Current Liabilities $951,200,000
Long-Term Debt $1,194,100,000
Total Assets $3,357,600,000
Intangible Assets $1,699,700,000
Total Liabilities $2,235,000,000
Shares Outstanding (Diluted Average) 119,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.18
Jun2018 $3.56
Jun2017 $2.70
Jun2016 $2.53
Jun2015 $2.32
Jun2014 $2.12
Jun2013 $1.69
Jun2012 $0.97
Jun2011 $1.32
Jun2010 $1.37
Jun2009 $1.58
Jun2008 $1.36
Jun2007 $1.42
Jun2006 $1.20

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.37
Jun2018 $2.86
Jun2017 $2.43
Jun2016 $2.18
Jun2015 $1.89
Jun2014 $1.62
Jun2013 $1.37
Jun2012 $1.25
Jun2011 $1.40
Jun2010 $1.42
Jun2009 $1.33
Jun2008 $1.07
Jun2007 $0.79
Jun2006 $0.40

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

T.Rowe Price Group Inc Valuation – March 2019 #TROW
Moody’s Corp Valuation – March 2019 #MCO
Charles Schwab Corp Valuation – March 2019 #SCHW
Willis Towers Watson PLC Valuation – March 2019 #WLTW
Paypal Holdings Inc Valuation – March 2019 #PYPL
Synchrony Financial Valuation – March 2019 #SYF
CBRE Group Inc Valuation – March 2019 #CBRE
Franklin Resources Inc Valuation – March 2019 #BEN
S&P Global Inc Valuation – March 2019 #SPGI
Equifax Inc Valuation – March 2019 #EFX

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.

T.Rowe Price Group Inc Valuation – March 2019 #TROW

Company Profile (excerpt from Reuters): T. Rowe Price Group, Inc., incorporated on February 4, 2000, is a financial services holding company. The Company provides global investment management services through its subsidiaries to investors across the world. The Company provides an array of Company sponsored the United States mutual funds, other sponsored pooled investment vehicles, sub advisory services, separate account management, recordkeeping, and related services to individuals, advisors, institutions, financial intermediaries and retirement plan sponsors.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TROW – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,699,005,370 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.99 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 119.75% Pass
6. Moderate PEmg Ratio PEmg < 20 16.37 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.97 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 6.99 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.11
MG Growth Estimate 6.95%
MG Value $136.92
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $88.66
MG Value based on 0% Growth $51.97
Market Implied Growth Rate 3.94%
Current Price $100.12
% of Intrinsic Value 73.12%

T. Rowe Price Group Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.18 in 2015 to an estimated $6.11 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.94% 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 T. Rowe Price Group Inc revealed the company was trading above its Graham Number of $59.52. The company pays a dividend of $2.8 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.37, 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. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.69.

T. Rowe Price Group Inc fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.69
Graham Number $59.52
PEmg 16.37
Current Ratio 6.99
PB Ratio 3.97
Current Dividend $2.80
Dividend Yield 2.80%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,974,800,000
Total Current Liabilities $282,700,000
Long-Term Debt $0
Total Assets $7,689,300,000
Intangible Assets $665,700,000
Total Liabilities $1,565,000,000
Shares Outstanding (Diluted Average) 243,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.12
Dec2018 $7.27
Dec2017 $5.97
Dec2016 $4.75
Dec2015 $4.63
Dec2014 $4.55
Dec2013 $3.90
Dec2012 $3.36
Dec2011 $2.92
Dec2010 $2.53
Dec2009 $1.65
Dec2008 $1.82
Dec2007 $2.40
Dec2006 $1.90
Dec2005 $1.58
Dec2004 $1.26
Dec2003 $0.88
Dec2002 $0.76
Dec2001 $0.76
Dec2000 $1.04
Dec1999 $0.93

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.11
Dec2018 $5.89
Dec2017 $5.05
Dec2016 $4.47
Dec2015 $4.18
Dec2014 $3.79
Dec2013 $3.23
Dec2012 $2.75
Dec2011 $2.38
Dec2010 $2.09
Dec2009 $1.87
Dec2008 $1.92
Dec2007 $1.85
Dec2006 $1.47
Dec2005 $1.19
Dec2004 $0.98
Dec2003 $0.85

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Best Dividend Paying Stocks for Dividend Growth Investors – February 2019
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T. Rowe Price Group Inc Valuation – June 2018 $TROW
Best Dividend Paying Stocks for Dividend Growth Investors – August 2017

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Synchrony Financial Valuation – March 2019 #SYF
CBRE Group Inc Valuation – March 2019 #CBRE
Franklin Resources Inc Valuation – March 2019 #BEN
S&P Global Inc Valuation – March 2019 #SPGI
Equifax Inc Valuation – March 2019 #EFX
CME Group Inc Valuation – March 2019 #CME

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.

Moody’s Corp Valuation – March 2019 #MCO

Company Profile (excerpt from Reuters): Moody’s Corporation (Moody’s), incorporated on June 2, 2000, is a provider of credit ratings; credit, capital markets and economic related research, data and analytical tools; software solutions and related risk management services, quantitative credit risk measures, financial services training and certification services, and research and analytical services to financial institution customers. The Company operates in two segments: Moody’s Investors Service (MIS) and Moody’s Analytics (MA). The Company’s MIS segment consists of the Company’s ratings operations. The Company’s MA segment develops a range of products and services that support financial analysis and risk management activities of institutional participants in financial markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MCO – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $33,481,677,645 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.61 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 146.68% Pass
6. Moderate PEmg Ratio PEmg < 20 31.24 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 52.53 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 1.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.06 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.68
MG Growth Estimate 5.95%
MG Value $115.79
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $82.32
MG Value based on 0% Growth $48.26
Market Implied Growth Rate 11.37%
Current Price $177.38
% of Intrinsic Value 153.19%

Moody’s Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the 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 Overvalued after growing its EPSmg (normalized earnings) from $4.07 in 2015 to an estimated $5.68 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.37% 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 below the price.

At the time of valuation, further research into Moody’s Corporation revealed the company was trading above its Graham Number of $19.55. The company pays a dividend of $1.76 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 31.24, which was above the industry average of 21.22. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-28.2.

Moody’s Corporation receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$28.20
Graham Number $19.55
PEmg 31.24
Current Ratio 1.61
PB Ratio 52.53
Current Dividend $1.76
Dividend Yield 0.99%
Number of Consecutive Years of Dividend Growth 9

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 $3,386,900,000
Total Current Liabilities $2,098,500,000
Long-Term Debt $5,226,100,000
Total Assets $9,526,200,000
Intangible Assets $5,347,400,000
Total Liabilities $8,869,700,000
Shares Outstanding (Diluted Average) 194,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.08
Dec2018 $6.74
Dec2017 $5.15
Dec2016 $1.36
Dec2015 $4.63
Dec2014 $4.61
Dec2013 $3.60
Dec2012 $3.05
Dec2011 $2.49
Dec2010 $2.15
Dec2009 $1.69
Dec2008 $1.87
Dec2007 $2.58
Dec2006 $2.58
Dec2005 $1.84
Dec2004 $1.40
Dec2003 $1.19
Dec2002 $0.92
Dec2001 $0.66
Dec2000 $0.49
Dec1999 $0.48

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.68
Dec2018 $4.82
Dec2017 $3.86
Dec2016 $3.29
Dec2015 $4.07
Dec2014 $3.58
Dec2013 $2.91
Dec2012 $2.46
Dec2011 $2.16
Dec2010 $2.06
Dec2009 $2.04
Dec2008 $2.17
Dec2007 $2.18
Dec2006 $1.85
Dec2005 $1.39
Dec2004 $1.09
Dec2003 $0.87

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Moody’s Corporation – June 2018 $MCO
Moody’s Corporation Valuation – March 2017 $MCO
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Moody’s Corporation Valuation – August 2016 $MCO
Moody’s Corporation Stock Valuation – February 2016 $MCO

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Franklin Resources Inc Valuation – March 2019 #BEN
S&P Global Inc Valuation – March 2019 #SPGI
Equifax Inc Valuation – March 2019 #EFX
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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.

10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2019

Out of the multitude of companies, which ones would legendary value investor Benjamin Graham buy today?  I’ve compiled ten great companies that fit the ModernGraham criteria, based on Benjamin Graham’s methods. The companies in this list pass the rigorous requirements of either the Defensive Investor or the Enterprising Investor and are either fairly valued or undervalued by the market.

Citizens Financial Group Inc (CFG)

Citizens Financial Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.08 in 2015 to an estimated $3.21 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.47% 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 Citizens Financial Group Inc revealed the company was trading below its Graham Number of $60.22. The company pays a dividend of $0.98 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.44, which was below the industry average of 16.24, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Citizens Financial Group Inc fares extremely well in the ModernGraham grading system, scoring an A-.  (See the full valuation)

Eastman Chemical Company (EMN)

Eastman Chemical Company qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.02 in 2014 to an estimated $7.69 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.46% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Eastman Chemical Company revealed the company was trading below its Graham Number of $86.45. The company pays a dividend of $2.09 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.42, which was below the industry average of 20.47, 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 $-47.19.

Eastman Chemical Company fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

Gilead Sciences, Inc. (GILD)

Gilead Sciences, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. 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 $3.61 in 2014 to an estimated $6.87 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.69% 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 Gilead Sciences, Inc. revealed the company was trading above its Graham Number of $44.37. The company pays a dividend of $2.08 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.88, which was below the industry average of 35.4, 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 $-4.88.

Gilead Sciences, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Invesco Ltd. (IVZ)

Invesco Ltd. 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 $1.89 in 2014 to an estimated $2.39 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.65% 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.

At the time of valuation, further research into Invesco Ltd. revealed the company was trading below its Graham Number of $33.89. The company pays a dividend of $1.15 per share, for a yield of 6.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.21, 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.

Invesco Ltd. fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

Lincoln National Corporation (LNC)

Lincoln National Corporation 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 $4.25 in 2014 to an estimated $7.01 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.58% 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.

At the time of valuation, further research into Lincoln National Corporation revealed the company was trading below its Graham Number of $117.31. The company pays a dividend of $0.87 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 7.33, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Lincoln National Corporation performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

LyondellBasell Industries NV (LYB)

LyondellBasell Industries NV 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 $6.13 in 2014 to an estimated $10.84 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.41% annual earnings loss 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 LyondellBasell Industries NV revealed the company was trading above its Graham Number of $77.64. The company pays a dividend of $3.55 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.68, which was below the industry average of 20.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.01.

LyondellBasell Industries NV performs fairly well in the ModernGraham grading system, scoring a B.  (See the full valuation)

Macy’s Inc (M)

Macy’s Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.61 in 2015 to an estimated $3.68 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 0.75% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Macy’s Inc revealed the company was trading below its Graham Number of $39.21. The company pays a dividend of $1.51 per share, for a yield of 5.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.01, which was below the industry average of 25.4, 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 $-19.38.

Macy’s Inc fares extremely well in the ModernGraham grading system, scoring an A-.  (See the full valuation)

Principal Financial Group Inc (PFG)

Principal Financial Group Inc 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 $2.9 in 2014 to an estimated $5.72 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.29% 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.

At the time of valuation, further research into Principal Financial Group Inc revealed the company was trading below its Graham Number of $76.24. The company pays a dividend of $1.87 per share, for a yield of 4.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.92, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Principal Financial Group Inc fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

Synchrony Financial (SYF)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.22 in 2015 to an estimated $3.36 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.7% 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 Synchrony Financial revealed the company was trading below its Graham Number of $43.03. The company pays a dividend of $0.72 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.91, 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.

Synchrony Financial fares extremely well in the ModernGraham grading system, scoring an A-.  (See the full valuation)

Unum Group (UNM)

Unum Group 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 $2.71 in 2015 to an estimated $4.02 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.17% 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 Unum Group revealed the company was trading below its Graham Number of $68.83. The company pays a dividend of $0.98 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.85, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Unum Group fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

Disclaimer:

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

Charles Schwab Corp Valuation – March 2019 #SCHW

Company Profile (excerpt from Reuters): The Charles Schwab Corporation (CSC), incorporated on November 25, 1986, is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, money management and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services and other corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services as well as retirement business services. The Company’s subsidiaries include Charles Schwab & Co., Inc. (Schwab), which is a securities broker-dealer with over 335 domestic branch offices in 46 states, as well as a branch in each of the Commonwealth of Puerto Rico and London, England, and serves clients in Hong Kong through one of the Company’s subsidiaries, as of December 31, 2016; Charles Schwab Bank (Schwab Bank), which is a federal savings bank located in Nevada, and Charles Schwab Investment Management, Inc. (CSIM), which is the investment advisor for Schwab’s mutual funds referred to as the Schwab Funds, and Schwab’s exchange-traded funds (ETFs), referred to as the Schwab ETFs.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SCHW – 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 $55,714,926,383 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 279.10% Pass
5. Moderate PEmg Ratio PEmg < 20 19.89 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.74 Fail
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 $2.10
MG Growth Estimate 15.00%
MG Value $80.93
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $30.48
MG Value based on 0% Growth $17.87
Market Implied Growth Rate 5.69%
Current Price $41.80
% of Intrinsic Value 51.65%

Charles Schwab Corporation Common Stock is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.89 in 2015 to an estimated $2.1 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.69% 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 Charles Schwab Corporation Common Stock revealed the company was trading above its Graham Number of $28.09. The company pays a dividend of $0.46 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 19.89, 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.

Charles Schwab Corporation Common Stock performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Graham Number $28.09
PEmg 19.89
PB Ratio 2.74
Dividend Yield 1.10%
TTM Dividend $0.46
Number of Consecutive Years of Dividend Growth 3

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $6,878,000,000
Total Assets $296,482,000,000
Intangible Assets $1,379,000,000
Total Liabilities $275,812,000,000
Shares Outstanding (Diluted Average) 1,355,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.65
Dec2018 $2.45
Dec2017 $1.61
Dec2016 $1.31
Dec2015 $1.03
Dec2014 $0.95
Dec2013 $0.78
Dec2012 $0.69
Dec2011 $0.70
Dec2010 $0.38
Dec2009 $0.68
Dec2008 $1.05
Dec2007 $1.97
Dec2006 $0.95
Dec2005 $0.55
Dec2004 $0.21
Dec2003 $0.35
Dec2002 $0.08
Dec2001 $0.14
Dec2000 $0.51
Dec1999 $0.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.10
Dec2018 $1.71
Dec2017 $1.27
Dec2016 $1.05
Dec2015 $0.89
Dec2014 $0.78
Dec2013 $0.68
Dec2012 $0.65
Dec2011 $0.74
Dec2010 $0.84
Dec2009 $1.06
Dec2008 $1.15
Dec2007 $1.07
Dec2006 $0.56
Dec2005 $0.33
Dec2004 $0.23
Dec2003 $0.27

Recommended Reading:

Other ModernGraham posts about the company

Charles Schwab Corp Valuation – June 2018 $SCHW
Charles Schwab Corp Valuation – March 2017 $SCHW
Charles Schwab Corp Valuation – August 2016 $SCHW
27 Companies in the Spotlight This Week – 4/4/15
Charles Schwab Corporation Annual Valuation – 2015 $SCHW

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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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