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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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
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.

T. Rowe Price Group Inc Valuation – June 2018 $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.

TROW Chart

TROW data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TROW – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $28,836,464,613 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.87 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 148.03% Pass
6. Moderate PEmg Ratio PEmg < 20 20.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.07 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.87 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.76
MG Growth Estimate 7.81%
MG Value $138.96
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $83.51
MG Value based on 0% Growth $48.95
Market Implied Growth Rate 6.15%
Current Price $119.74
% of Intrinsic Value 86.17%

T. Rowe Price Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.79 in 2014 to an estimated $5.76 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.15% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to 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 $60.69. The company pays a dividend of $2.28 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 20.79, 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. Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.21.

T. Rowe Price Group Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $3.21
Graham Number $60.69
PEmg 20.79
Current Ratio 3.87
PB Ratio 5.07
Current Dividend $2.28
Dividend Yield 1.90%
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 3/1/2018
Total Current Assets $2,275,000,000
Total Current Liabilities $588,200,000
Long-Term Debt $0
Total Assets $7,374,300,000
Intangible Assets $665,700,000
Total Liabilities $1,472,400,000
Shares Outstanding (Diluted Average) 249,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.89
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
Dec1998 $0.67

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.76
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
Dec2002 $0.83

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – August 2017
10 Best Stocks for Value Investors This Week – 7/22/17
T.Rowe Price Group Inc Valuation – July 2017 $TROW
T.Rowe Price Group Inc Valuation – June 2017 $TROW
Best Dividend Paying Stocks for Dividend Growth Investors – March 2017

Other ModernGraham posts about related companies

Charles Schwab Corp Valuation – June 2018 $SCHW
Willis Towers Watson PLC Valuation – Initial Coverage June 2018 $WLTW
PayPal Holdings Inc Valuation – June 2018 $PYPL
Synchrony Financial Valuation – June 2018 $SYF
CBRE Group Inc Valuation – June 2018 $CBRE
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

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 – July 2017 $TROW

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 – March 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 T.Rowe Price Group Inc (TROW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): T. Rowe Price Group, Inc. 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. The Company distributes its products in countries located within three geographical regions: North America, Europe Middle East and Africa (EMEA), and Asia Pacific (APAC). It also offers specialized advisory services, including management of stable value investment contracts and a distribution management service for the disposition of equity securities its clients receive from third-party venture capital investment pools. As of December 31, 2016, it serviced clients in 45 countries across the world.

TROW Chart

TROW data by YCharts

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

Learn More About Premium Membership

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of TROW – July 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $19,611,175,233 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.53 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 152.00% Pass
6. Moderate PEmg Ratio PEmg < 20 16.13 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.94 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.53 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 $4.97
MG Growth Estimate 8.11%
MG Value $122.94
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $72.10
MG Value based on 0% Growth $42.27
Market Implied Growth Rate 3.82%
Current Price $80.23
% of Intrinsic Value 65.26%

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 $3.23 in 2013 to an estimated $4.97 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.82% 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 $51.41.  The company pays a dividend of $2.16 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 16.13, which was below the industry average of 21.55, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.21.

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) $3.21
Graham Number $51.41
PEmg 16.13
Current Ratio 2.53
PB Ratio 3.94
Current Dividend $2.16
Dividend Yield 2.69%
Number of Consecutive Years of Dividend Growth 20

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2017
Total Current Assets $2,063,300,000
Total Current Liabilities $816,300,000
Long-Term Debt $0
Total Assets $6,275,600,000
Intangible Assets $665,700,000
Total Liabilities $1,275,400,000
Shares Outstanding (Diluted Average) 245,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.74
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
Dec1998 $0.67
Dec1997 $0.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.97
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
Dec2002 $0.83
Dec2001 $0.84

Recommended Reading:

Other ModernGraham posts about the company

T.Rowe Price Group Inc Valuation – June 2017 $TROW
Best Dividend Paying Stocks for Dividend Growth Investors – March 2017
Best Dividend Paying Stocks for Dividend Growth Investors – February 2017
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2017
10 Undervalued Companies for the Defensive Dividend Stock Investor – January 2017

Other ModernGraham posts about related companies

T.Rowe Price Group Inc Valuation – June 2017 $TROW
Tricon Capital Group Inc Valuation – Initial Coverage $TSE:TCN
Moody’s Corporation Valuation – March 2017 $MCO
KKR & Co Ltd Valuation – March 2017 $KKR
Charles Schwab Corp Valuation – March 2017 $SCHW
Synchrony Financial Valuation – Initial Coverage $SYF
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

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 – June 2017 $TROW

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 – March 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 T. Rowe Price Group Inc (TROW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): T. Rowe Price Group, Inc. 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. The Company distributes its products in countries located within three geographical regions: North America, Europe Middle East and Africa (EMEA), and Asia Pacific (APAC). It also offers specialized advisory services, including management of stable value investment contracts and a distribution management service for the disposition of equity securities its clients receive from third-party venture capital investment pools. As of December 31, 2016, it serviced clients in 45 countries across the world.

TROW Chart

TROW data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

Learn More About Premium Membership

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of TROW – June 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 $18,168,532,991 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 148.00% Pass
5. Moderate PEmg Ratio PEmg < 20 15.34 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.68 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 $4.89
MG Growth Estimate 7.74%
MG Value $117.33
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $70.94
MG Value based on 0% Growth $41.59
Market Implied Growth Rate 3.42%
Current Price $75.04
% of Intrinsic Value 63.96%

T. Rowe Price Group Inc 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 $3.23 in 2013 to an estimated $4.89 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.42% 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 T. Rowe Price Group Inc revealed the company was trading above its Graham Number of $50.32.  The company pays a dividend of $2.16 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 15.34, which was below the industry average of 21.55, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

T. Rowe Price Group Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Graham Number $50.32
PEmg 15.34
PB Ratio 3.68
Dividend Yield 2.88%
TTM Dividend $2.16
Number of Consecutive Years of Dividend Growth 20

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2017
Long-Term Debt & Capital Lease Obligation $0
Total Assets $6,275,600,000
Intangible Assets $665,700,000
Total Liabilities $1,275,400,000
Shares Outstanding (Diluted Average) 245,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.50
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
Dec1998 $0.67
Dec1997 $0.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.89
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
Dec2002 $0.83
Dec2001 $0.84

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2016
Dividend Growth Stocks for Intelligent Investors – July 2016
Dividend Growth Stocks for Intelligent Investors – June 2016
T.Rowe Price Group Inc Stock Valuation – February 2016 $TROW
Dividend Growth Stocks for Intelligent Investors – February 2016

Other ModernGraham posts about related companies

Tricon Capital Group Inc Valuation – Initial Coverage $TSE:TCN
Moody’s Corporation Valuation – March 2017 $MCO
KKR & Co Ltd Valuation – March 2017 $KKR
Charles Schwab Corp Valuation – March 2017 $SCHW
Synchrony Financial Valuation – Initial Coverage $SYF
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

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 – August 2016 $TROW

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 – August 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 T Rowe Price Group Inc (TROW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): T. Rowe Price Group, Inc. is a financial services holding company. The Company provides global investment management services to individual and institutional investors in the sponsored T. Rowe Price mutual funds distributed in the United States and other investment portfolios. It operates through investment advisory business segment. Its assets under management are accumulated from a client base across over four primary distribution channels, including third-party financial intermediaries that distribute its managed investment portfolios in the United States and other countries; individual the United States investors on a direct basis; the United States defined contribution retirement plans, and institutional investors across the globe. It manages assets, including the United States and international stock, blended asset, bond and money market mutual funds, and other investment portfolios. The Company offers advisory services, distribution management and administrative services.

TROW Chart

TROW data by YCharts

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of TROW – August 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 $16,908,450,052 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.79 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 124.19% Pass
6. Moderate PEmg Ratio PEmg < 20 16.27 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.56 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.79 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

TROW value chart August 2016

EPSmg $4.22
MG Growth Estimate 8.03%
MG Value $103.50
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $61.12
MG Value based on 0% Growth $35.83
Market Implied Growth Rate 3.89%
Current Price $68.59
% of Intrinsic Value 66.27%

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 $2.75 in 2012 to an estimated $4.22 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.89% 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 $41.69. The company pays a dividend of $2.12 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 16.27, which was below the industry average of 19.87, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.07.

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

Stage 3: Information for Further Research

TROW charts August 2016

Net Current Asset Value (NCAV) -$0.07
Graham Number $41.69
PEmg 16.27
Current Ratio 2.79
PB Ratio 3.56
Current Dividend $2.12
Dividend Yield 3.09%
Number of Consecutive Years of Dividend Growth 20

[/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 6/1/2016
Total Current Assets $1,702,600,000
Total Current Liabilities $610,400,000
Long-Term Debt $0
Total Assets $6,581,700,000
Intangible Assets $665,700,000
Total Liabilities $1,720,800,000
Shares Outstanding (Diluted Average) 252,100,000

Earnings Per Share History

Next Fiscal Year Estimate $3.98
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
Dec1998 $0.67
Dec1997 $0.57
Dec1996 $0.40

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.22
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
Dec2002 $0.83
Dec2001 $0.84
Dec2000 $0.83

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2016
Dividend Growth Stocks for Intelligent Investors – July 2016
Dividend Growth Stocks for Intelligent Investors – June 2016
T.Rowe Price Group Inc Stock Valuation – February 2016 $TROW
Dividend Growth Stocks for Intelligent Investors – February 2016

Other ModernGraham posts about related companies

Franklin Resources Inc Valuation – August 2016 $BEN
Equifax Inc Valuation – August 2016 $EFX
Charles Schwab Corp Valuation – August 2016 $SCHW
Northern Trust Corp Valuation – July 2016 $NTRS
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
Invesco Ltd Valuation – July 2016 $IVZ
Nasdaq Inc Valuation – July 2016 $NDAQ
Leucadia National Corp Valuation – July 2016 $LUK
E*Trade Financial Corp Valuation – July 2016 $ETFC
CBRE Group Inc Valuation – July 2016 $CBG

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 Stock Valuation – February 2016 $TROW

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 – February 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 T.Rowe Price Group Inc (TROW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): T. Rowe Price Group, Inc. is a financial services holding company. The Company provides global investment management services to individual and institutional investors in the sponsored T. Rowe Price mutual funds distributed in the United States and other investment portfolios. Its assets under management are accumulated from a client base across four primary distribution channels: third-party financial intermediaries that distribute its managed investment portfolios in the United States and other countries; individual United States investors on a direct basis; the United States defined contribution retirement plans, and institutional investors globally. The assets that it manages include a range of the United States and international stock, blended asset, bond and money market mutual funds, and other investment portfolios. It offers advisory services and a distribution management service. It provides administrative services as ancillary services to its investment advisory clients.

[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 TROW

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 $17,674,556,183 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.69 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 125.89% Pass
6. Moderate PEmg Ratio PEmg < 20 16.54 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.85 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 4.69 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

TROW value chart February 2016

EPSmg $4.25
MG Growth Estimate 8.21%
MG Value $105.86
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $61.61
MG Value based on 0% Growth $36.11
Market Implied Growth Rate 4.02%
Current Price $70.26
% of Intrinsic Value 66.37%

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 $2.75 in 2012 to an estimated $4.25 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.02% 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. T. Rowe Price Group Inc fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

TROW charts February 2016

Net Current Asset Value (NCAV) $4.88
Graham Number $41.77
PEmg 16.54
Current Ratio 4.69
PB Ratio 3.85
Dividend Yield 2.96%
Number of Consecutive Years of Dividend Growth 20

[/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 Dec2015
Total Current Assets $1,618,300,000
Total Current Liabilities $344,900,000
Long-Term Debt $0
Total Assets $5,106,900,000
Intangible Assets $665,700,000
Total Liabilities $344,900,000
Shares Outstanding (Diluted Average) 260,900,000

Earnings Per Share History

Next Fiscal Year Estimate $4.08
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
Dec1998 $0.67
Dec1997 $0.57
Dec1996 $0.40

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.25
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
Dec2002 $0.83
Dec2001 $0.84
Dec2000 $0.83

Recommended Reading:

Other ModernGraham posts about the company

Dividend Growth Stocks for Intelligent Investors – February 2016
T.Rowe Price Group Inc. Analysis – September 2015 Update $TROW
The Best Stocks of the Financial Services Industry – September 2015
10 Undervalued Companies for the Defensive Dividend Stock Investor – August 2015
The 10 Best Stocks For Value Investors This Week – 6/20/15

Other ModernGraham posts about related companies

Moody’s Corporation Stock Valuation – February 2016 $MCO
KKR & Co LP Stock Valuation – February 2016 $KKR
Capital One Financial Corp Valuation – January 2016 Update $COF
Franklin Resources Inc Valuation – January 2016 Update $BEN
Northern Trust Corp Valuation – January 2016 Update $NTRS
Northern Trust Corp Valuation – January 2016 Update $NTRS
Invesco Ltd Valuation – January 2016 Update $IVZ
Legg Mason Inc Valuation – December 2015 Update $LM
Visa Inc Valuation – November 2015 Update $V
Ameriprise Financial Inc. Valuation – November 2015 Update $AMP

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. Analysis – September 2015 Update $TROW

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 T.Rowe Price Group Inc. (TROW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): T. Rowe Price Group, Inc. is a financial services holding company. The Company provides global investment management services to individual and institutional investors in the sponsored T. Rowe Price mutual funds distributed in the United States and other investment portfolios. Its assets under management are accumulated from a client base across four primary distribution channels: third-party financial intermediaries that distribute its managed investment portfolios in the United States and other countries; individual United States investors on a direct basis; the United States defined contribution retirement plans, and institutional investors globally. The assets that it manages include a range of the United States and international stock, blended asset, bond and money market mutual funds, and other investment portfolios. It offers advisory services and a distribution management service. It provides administrative services as ancillary services to its investment advisory clients.

[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 TROW – 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 $17,645,373,141 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.83 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 112.75% Pass
6. Moderate PEmg Ratio PEmg < 20 16.56 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.67 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 3.83 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

TROW value Chart September 2015

EPSmg $4.16
MG Growth Estimate 11.21%
MG Value $128.58
Opinion Undervalued
MG Value based on 3% Growth $60.31
MG Value based on 0% Growth $35.35
Market Implied Growth Rate 4.03%
Current Price $68.87
% of Intrinsic Value 53.56%

T.Rowe Price Group Inc. qualifies for both the Defensive Investor and for the Enterprising Investor.  The Defensive Investor is only concerned by the high PB ratio while the Enterprising Investor has no initial concerns.  As a result, all value 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 $2.38 in 2011 to an estimated $4.16 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.03% 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 T.Rowe Price Group Inc. (TROW)?  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

TROW Charts September 2015

Net Current Asset Value (NCAV) $4.80
Graham Number $44.22
PEmg 16.56
Current Ratio 3.83
PB Ratio 3.67
Dividend Yield 2.79%
Number of Consecutive Years of Dividend Growth 20

 

[/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

Total Current Assets $1,718,600,000
Total Current Liabilities $448,400,000
Long-Term Debt $0
Total Assets $5,415,500,000
Intangible Assets $665,700,000
Total Liabilities $448,400,000
Shares Outstanding (Diluted Average) 264,600,000

Earnings Per Share History

Next Fiscal Year Estimate $4.57
Dec14 $4.55
Dec13 $3.90
Dec12 $3.36
Dec11 $2.92
Dec10 $2.53
Dec09 $1.65
Dec08 $1.82
Dec07 $2.40
Dec06 $1.90
Dec05 $1.58
Dec04 $1.26
Dec03 $0.89
Dec02 $0.76
Dec01 $0.76
Dec00 $1.04
Dec99 $0.93
Dec98 $0.67
Dec97 $0.57
Dec96 $0.40
Dec95 $0.31

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.16
Dec14 $3.79
Dec13 $3.23
Dec12 $2.75
Dec11 $2.38
Dec10 $2.09
Dec09 $1.87
Dec08 $1.92
Dec07 $1.85
Dec06 $1.47
Dec05 $1.19
Dec04 $0.98
Dec03 $0.85
Dec02 $0.83
Dec01 $0.84
Dec00 $0.83
Dec99 $0.67

Recommended Reading:

Other ModernGraham posts about the company

The Best Stocks of the Financial Services Industry – September 2015
10 Undervalued Companies for the Defensive Dividend Stock Investor – August 2015
The 10 Best Stocks For Value Investors This Week – 6/20/15
T.Rowe Price Analysis – June 2015 Update $TROW
18 Companies in the Spotlight This Week – 3/15/15

Other ModernGraham posts about related companies

Moody’s Corporation Analysis – September 2015 Update $MCO
The Best Stocks of the Financial Services Industry – September 2015
Franklin Resources Inc. Analysis – September 2015 $BEN
Northern Trust Corporation Analysis – September 2015 Update $NTRS
Legg Mason Analysis – August 2015 Update $LM
Capital One Financial Corporation Analysis – August 2015 Update $COF
Affiliated Managers Group Analysis – Initial Coverage $AMG
Visa Inc. Analysis – August 2015 Update $V
Ameriprise Financial Inc. Analysis – August 2015 Update $AMP
SLM Corporation Analysis – August 2015 Update $SLM

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 Analysis – June 2015 Update $TROW

220px-T-Rowe-Price-logoT.Rowe Price (TROW) has shown very strong earnings growth over the last several years, which when combined with the company’s healthy dividend yield will immediately intrigue many investors. For example, Cory Renauer of Moaty Chowder recently wrote that the company’s strong earnings growth may lead to significant dividend growth in the future. In addition, Dividend Growth Investor described the company’s history of dividend growthin a recent analysis. These are great qualitative concerns that must be taken into consideration when making investment decisions.

However, Benjamin Graham, the father of value investing, taught that investors must take emotion out of the equation, as the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here’s a look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

TROW Chart

TROW data by YCharts

[level-free]
To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
[/level-free]
[level-mg-stocks-screens-subscriber]

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

  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 – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) 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 = 5/5

  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 – PASS
  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 $78.07
MG Value $133.91
MG Opinion Undervalued
Value Based on 3% Growth $61.23
Value Based on 0% Growth $35.89
Market Implied Growth Rate 4.99%
Net Current Asset Value (NCAV) $4.89
PEmg 18.49
Current Ratio 2.35
PB Ratio 4.15

Balance Sheet – March 2015

Current Assets $2,258,000,000
Current Liabilities $960,000,000
Total Debt $0
Total Assets $5,962,000,000
Intangible Assets $666,000,000
Total Liabilities $960,000,000
Outstanding Shares 265,700,000

Earnings Per Share

2015 (estimate) $4.76
2014 $4.55
2013 $3.90
2012 $3.36
2011 $2.92
2010 $2.53
2009 $1.65
2008 $1.82
2007 $2.40
2006 $1.90
2005 $1.58

Earnings Per Share – ModernGraham

2015 (estimate) $4.22
2014 $3.79
2013 $3.23
2012 $2.75
2011 $2.38
2010 $2.09

Dividend History

TROW Dividend Chart

TROW Dividend data by YCharts

Competitive Comparison

T.Rowe Price is very attractive when compared to some of its competitors. For example, a ModernGraham valuation of Charles Schwab (SCHW) indicates that company is overvalued and not suitable for either Enterprising Investors or Defensive Investors. Similarly, Morgan Stanley was also found to be overvalued and not suitable for either investor type in its most recent ModernGraham valuation.

Conclusion

T.Rowe Price performs well in the ModernGraham model and is suitable for both Defensive Investors and Enterprising Investors. The Defensive Investor is only concerned with the high PB ratio, while the Enterprising Investor has no initial concerns. As a result, all value 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 $2.38 in 2011 to an estimated $4.22 for 2015. This is a strong level of growth and is well above the market’s implied estimate of only 4.99% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged nearly 15.5% annually, so the market is expecting a very significant drop in earnings growth. 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.

All value investors should take this information regarding the company’s valuation and proceed with further research into whether the company would be suitable for individual portfolios, as it has passed a ModernGraham review.

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.

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T. Rowe Price Group Inc. Quarterly Valuation – March 2015 $TROW

220px-T-Rowe-Price-logoBenjamin 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 – March 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 specific look at how T. Rowe Price Group Inc. (TROW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): T. Rowe Price Group, Inc. is a financial services holding company that provides global investment management services through its subsidiaries to individual and institutional investors in the sponsored T. Rowe Price mutual funds, investment portfolios, sponsored investment portfolios, and portfolios offered through annuity life insurance plans in the United States. The Company derives their revenue and income from investment advisory services provided by its subsidiaries, T. Rowe Price Associates and T. Rowe Price International Ltd. The Company’s advisory services include management of stable value investment contracts and a distribution management service for the disposition of equity securities its clients receive from third-party venture capital investment pools. The Company also provides certain administrative services as ancillary services to its investment advisory clients which include mutual fund transfer agent, accounting, distribution, shareholder services and other services.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  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 – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  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 – FAIL
  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 = 5/5

  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 – PASS
  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 $82.18
MG Value $124.01
MG Opinion Undervalued
Value Based on 3% Growth $54.91
Value Based on 0% Growth $32.19
Market Implied Growth Rate 6.60%
Net Current Asset Value (NCAV) $6.42
PEmg 21.70
Current Ratio 7.83
PB Ratio 4.04

Balance Sheet – December 2014

Current Assets $1,949,000,000
Current Liabilities $249,000,000
Total Debt $0
Total Assets $5,644,000,000
Intangible Assets $666,000,000
Total Liabilities $249,000,000
Outstanding Shares 265,000,000

Earnings Per Share

2014 $4.55
2013 $3.90
2012 $3.36
2011 $2.92
2010 $2.53
2009 $1.65
2008 $1.82
2007 $2.40
2006 $1.90
2005 $1.58
2004 $1.26

Earnings Per Share – ModernGraham

2014 $3.79
2013 $3.23
2012 $2.75
2011 $2.38
2010 $2.09
2009 $1.87

Dividend History

Conclusion:

T. Rowe Price Group Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  As a result, 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 $2.09 in 2010 to $3.79 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 6.6% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of T. Rowe Price Group Inc. (TROW) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on T. Rowe Price Group Inc. (TROW)?  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 T. Rowe Price Group Inc. (TROW) 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.

T. Rowe Price Group Inc. Quarterly Valuation – December 2014 $TROW

220px-T-Rowe-Price-logoBenjamin 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 T. Rowe Price Group (TROW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): T. Rowe Price Group, Inc. is a financial services holding company, which provides global investment management services through its subsidiaries to individual and institutional investors in the sponsored T. Rowe Price mutual funds and other investment portfolios, including separately managed accounts, sub-advised funds, and other sponsored investment funds offered to investors outside the United States and through variable annuity life insurance plans in the United States. The Company derives revenue from investment advisory services provided by its subsidiaries, such as T. Rowe Price Associates, Inc. and T. Rowe Price International Ltd. Its revenues depend on the total value and composition of assets under its management. Its assets under management are accumulated from a client base across four distribution channels. Effective August 20, 2013, T Rowe Price Group Inc acquired an undisclosed interest in GrubHub Inc, a provider of online food delivery services.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  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 – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  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 – FAIL
  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 = 5/5

  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 – PASS
  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 $84.49
MG Value $121.42
MG Opinion Undervalued
Value Based on 3% Growth $54.47
Value Based on 0% Growth $31.93
Market Implied Growth Rate 7.00%
Net Current Asset Value (NCAV) $5.71
PEmg 22.49
Current Ratio 3.82
PB Ratio 4.32

Balance Sheet – September 2014

Current Assets $2,068,000,000
Current Liabilities $541,000,000
Total Debt $0
Total Assets $5,768,000,000
Intangible Assets $666,000,000
Total Liabilities $541,000,000
Outstanding Shares 267,400,000

Earnings Per Share

2014 (estimate) $4.46
2013 $3.90
2012 $3.36
2011 $2.92
2010 $2.53
2009 $1.65
2008 $1.82
2007 $2.40
2006 $1.90
2005 $1.58
2004 $1.26

Earnings Per Share – ModernGraham

2014 (estimate) $3.76
2013 $3.23
2012 $2.75
2011 $2.38
2010 $2.09
2009 $1.87

Dividend History

Conclusion:

T.Rowe Price Group is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios.  The Enterprising Investor, on the other hand, has no initial concerns.  As a result, 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.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.09 in 2010 to an estimated $3.76 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 7% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out previous ModernGraham valuations of T.Rowe Price Group Inc. (TROW) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on T.Rowe Price Group Inc. (TROW)?  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 T.Rowe Price Group Inc. (TROW) 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.

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