Canadian Western Bank Valuation – Initial Coverage $TSE:CWB

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 Canadian Western Bank (TSE:CWB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Canadian Western Bank (CWB) is a Canada-based bank engaged in offering a range of financial services. The Bank specializes in mid-market commercial banking, real estate and construction financing, and equipment financing and leasing. The Bank offers financing solutions through CWB Equipment Financing, National Leasing, CWB Maxium Financial, CWB Franchise Finance and CWB Optimum Mortgage, trust services through Canadian Western Trust and wealth advisory services through CWB Wealth Management. It offers a range of loans, such as general commercial loans, real estate project loans, personal loans and mortgages, commercial mortgages, corporate lending, and oil and gas production loans. It focuses on general commercial, agriculture, healthcare, and golf and turf sectors. It offers a range of personal banking services, including checking and savings accounts, mortgages, home equity lines of credit, personal loans and investment products through its branch network across Western Canada.

CWB Chart

CWB data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-CWB – 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 $2,558,511,986 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 67.25% Pass
5. Moderate PEmg Ratio PEmg < 20 10.70 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.08 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 $2.69
MG Growth Estimate 3.88%
MG Value $43.69
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $38.99
MG Value based on 0% Growth $22.85
Market Implied Growth Rate 1.10%
Current Price $28.78
% of Intrinsic Value 65.87%

Canadian Western Bank 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 $2.14 in 2013 to an estimated $2.69 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.1% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Canadian Western Bank revealed the company was trading below its Graham Number of $36.05. The company pays a dividend of $0.92 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.7, which was below the industry average of 21.43, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Canadian Western Bank performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $36.05
PEmg 10.70
PB Ratio 1.08
Dividend Yield 3.20%
TTM Dividend $0.92
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2017
Long-Term Debt & Capital Lease Obligation $1,234,050,000
Total Assets $24,814,678,000
Intangible Assets $234,570,000
Total Liabilities $22,452,020,000
Shares Outstanding (Diluted Average) 88,492,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.43
Oct2016 $2.13
Oct2015 $3.97
Oct2014 $2.70
Oct2013 $2.35
Oct2012 $2.22
Oct2011 $1.95
Oct2010 $2.05
Oct2009 $1.47
Oct2008 $1.58
Oct2007 $1.50
Oct2006 $1.13
Oct2005 $0.87
Oct2004 $0.75
Oct2003 $0.67
Oct2002 $0.54
Oct2001 $0.58
Oct2000 $0.86
Oct1999 $0.66
Oct1998 $0.68
Oct1997 $0.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.69
Oct2016 $2.77
Oct2015 $2.94
Oct2014 $2.37
Oct2013 $2.14
Oct2012 $1.97
Oct2011 $1.80
Oct2010 $1.67
Oct2009 $1.42
Oct2008 $1.32
Oct2007 $1.12
Oct2006 $0.88
Oct2005 $0.73
Oct2004 $0.67
Oct2003 $0.64
Oct2002 $0.64
Oct2001 $0.67

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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 Low PE Stock Picks for the Defensive Investor – March 2018

Copy of defensive low PEThere are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the ten lowest PEmg (price / normalized earnings) companies reviewed by ModernGraham. Each company has been determined to be undervalued or fairly valued and suitable for the Defensive Investor according to the ModernGraham approach.

Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk.

Aflac (AFL)

AFLAC Incorporated 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 $6.07 in 2014 to an estimated $8.08 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.21% 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 AFLAC Incorporated revealed the company was trading below its Graham Number of $103.31. The company pays a dividend of $1.74 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 10.92, which was below the industry average of 22.76, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Newell Brands (NWL)

Newell Brands 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 Undervalued after growing its EPSmg (normalized earnings) from $1.28 in 2014 to an estimated $2.89 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.48% 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 Newell Brands Inc revealed the company was trading below its Graham Number of $41.25. The company pays a dividend of $0.88 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.46, which was below the industry average of 20.37, 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 $-26.44.  (See the full valuation)

Verizon Communications (VZ)

Verizon Communications 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 Undervalued after growing its EPSmg (normalized earnings) from $2.11 in 2014 to an estimated $4.58 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.11% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Verizon Communications Inc. revealed the company was trading above its Graham Number of $29.66. The company pays a dividend of $2.34 per share, for a yield of 4.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.71, which was below the industry average of 37.96, 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 $-45.  (See the full valuation)

Canadian Western Bank (TSE:CWB)

Canadian Western Bank 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.37 in 2014 to an estimated $2.77 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 2.15% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Canadian Western Bank revealed the company was trading below its Graham Number of $40.79. The company pays a dividend of $0.93 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.81, which was below the industry average of 24.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Invesco (IVZ)

Invesco Ltd. 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 Undervalued after growing its EPSmg (normalized earnings) from $1.89 in 2014 to an estimated $2.63 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.87% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Invesco Ltd. revealed the company was trading below its Graham Number of $38.6. The company pays a dividend of $1.15 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.24, 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 $-14.2.  (See the full valuation)

Foot Locker (FL)

Foot Locker, 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 $2.77 in 2015 to an estimated $3.66 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.67% 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 Foot Locker, Inc. revealed the company was trading above its Graham Number of $42.1. The company pays a dividend of $1.24 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 11.85, which was below the industry average of 40.48, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $9.15.  (See the full valuation)

Comcast (CMCSA)

Comcast Corporation 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 Undervalued after growing its EPSmg (normalized earnings) from $1.25 in 2014 to an estimated $2.67 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.58% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Comcast Corporation revealed the company was trading above its Graham Number of $26.79. The company pays a dividend of $0.63 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 13.67, which was below the industry average of 35.9, 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 $-21.64.  (See the full valuation)

Molson Coors Brewing Company (TAP)

Molson Coors Brewing Co 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 Undervalued after growing its EPSmg (normalized earnings) from $2.97 in 2014 to an estimated $5.76 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.78% 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 Molson Coors Brewing Co revealed the company was trading below its Graham Number of $83.53. The company pays a dividend of $1.64 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 14.06, which was below the industry average of 25.91, 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 $-68.5.  (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 2.32% 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 above its Graham Number of $84.49. The company pays a dividend of $2.09 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.14, which was below the industry average of 30.04, 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 $-53.31.  (See the full valuation)

Cardinal Health (CAH)

Cardinal Health 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 Undervalued after growing its EPSmg (normalized earnings) from $2.48 in 2014 to an estimated $4.43 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.14% 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 Cardinal Health Inc revealed the company was trading above its Graham Number of $50.88. The company pays a dividend of $1.81 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 14.78, which was below the industry average of 43.8, 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 $-32.02.  (See the full valuation)

What do you think?  Are these companies a good value for Defensive Investors?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:

The author held a long position in 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.

Canadian Western Bank Valuation – March 2018 $TSE-CWB

Company Profile (obtained from Marketwatch): Canadian Western Bank engages in the provision of business banking services for small and medium-sizes companies. The firm provides general commercial banking; equipment financing and leasing; commercial real estate financing; real estate construction financing; and energy lending. The firm also offers full-service personal banking options, including checking and savings accounts, loans, mortgages, and investment products. The company was founded by Charles R. Allard and Eugene Pechet on November 1, 1987 and is headquartered in Edmonton, Canada.

CWB Chart

CWB data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-CWB – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,151,882,003 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 37.66% Pass
5. Moderate PEmg Ratio PEmg < 20 12.81 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.29 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 $2.77
MG Growth Estimate 2.58%
MG Value $37.87
Opinion Fairly Valued
MG Grade A-
MG Value based on 3% Growth $40.22
MG Value based on 0% Growth $23.58
Market Implied Growth Rate 2.15%
Current Price $35.53
% of Intrinsic Value 93.81%

Canadian Western Bank 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.37 in 2014 to an estimated $2.77 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 2.15% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Canadian Western Bank revealed the company was trading below its Graham Number of $40.79. The company pays a dividend of $0.93 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.81, which was below the industry average of 24.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Canadian Western Bank fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $40.79
PEmg 12.81
PB Ratio 1.29
Dividend Yield 2.62%
TTM Dividend $0.93
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 10/1/2017
Long-Term Debt & Capital Lease Obligation $1,476,336,000
Total Assets $26,447,453,000
Intangible Assets $80,638,000
Total Liabilities $23,986,408,000
Shares Outstanding (Diluted Average) 89,114,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.98
Oct2017 $2.42
Oct2016 $2.13
Oct2015 $3.97
Oct2014 $2.70
Oct2013 $2.35
Oct2012 $2.22
Oct2011 $1.95
Oct2010 $2.05
Oct2009 $1.47
Oct2008 $1.58
Oct2007 $1.50
Oct2006 $1.13
Oct2005 $0.87
Oct2004 $0.75
Oct2003 $0.67
Oct2002 $0.54
Oct2001 $0.58
Oct2000 $0.86
Oct1999 $0.66
Oct1998 $0.68

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.77
Oct2017 $2.69
Oct2016 $2.77
Oct2015 $2.94
Oct2014 $2.37
Oct2013 $2.14
Oct2012 $1.97
Oct2011 $1.80
Oct2010 $1.67
Oct2009 $1.42
Oct2008 $1.32
Oct2007 $1.12
Oct2006 $0.88
Oct2005 $0.73
Oct2004 $0.67
Oct2003 $0.64
Oct2002 $0.64

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Defensive Investor – August 2017
6 Best Stocks for Value Investors This Week – 3/26/17
Canadian Western Bank Valuation – Initial Coverage $TSE:CWB

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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.

JPMorgan Chase & Co Valuation – February 2018 $JPM

Company Profile (obtained from Marketwatch): JPMorgan Chase & Co. is a financial holding company, which provides financial and investment banking services. It offers a range of investment banking products and services in all capital markets, including advising on corporate strategy and structure; capital raising in equity and debt markets; sophisticated risk management; market making in cash securities and derivative instruments; and prime brokerage and research. It also offers investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management and private equity. The company operates its business through the following segments: Consumer and Community Banking; Corporate and Investment Bank; Commercial Banking; and Asset & Wealth Management. The Consumer and Community Banking segment serves consumers and businesses through personal service at bank branches and through automated teller machine, online, mobile, and telephone banking. It is organized into Consumer and Business Banking, Mortgage Banking and Card, Merchant Services and Auto Card. The segment’s Consumer and Business banking offers deposit and investment products and services to consumers, and lending, deposit, and cash management and payment solutions to small businesses; Mortgage Banking includes mortgage origination and servicing activities, as well as portfolios comprised of residential mortgages and home equity loans, including the purchased credit impaired portfolio acquired in the Washington Mutual transaction; and Auto Card issues credit cards to consumers and small businesses, provides payment services to corporate and public sector clients through its commercial card products, offers payment processing services to merchants, and provides auto and student loan services. The Corporate and Investment Bank segment offers a suite of investment banking, market-making, prime brokerage, and treasury and securities products and services to a global client base of corporations, investors, financial institutions, government and municipal entities. It offers a range of investment banking products and services in all capital markets, including advising on corporate strategy and structure, capital-raising in equity and debt markets, as well as loan origination and syndication. The Commercial Banking segment delivers industry knowledge, local expertise and dedicated service to United States and its multinational clients, including corporations, municipalities, financial institutions, and non profit entities. This segment provides financing to real estate investors and owners as well as financial solutions, including lending, treasury services, investment banking, and asset management to meet its client’s domestic and international financial needs. The Asset & Wealth Management segment provides asset and wealth management services. It offers investment management across all major asset services, including equities, fixed income, alternatives, and money market funds. JPMorgan Chase was founded in 1968 and is headquartered in New York, NY.

JPM Chart

JPM data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JPM – February 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 $407,033,491,576 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 88.97% Pass
5. Moderate PEmg Ratio PEmg < 20 17.65 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.61 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 $6.65
MG Growth Estimate 5.68%
MG Value $131.95
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $96.38
MG Value based on 0% Growth $56.50
Market Implied Growth Rate 4.57%
Current Price $117.31
% of Intrinsic Value 88.90%

JPMorgan Chase & Co. 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 Fairly Valued after growing its EPSmg (normalized earnings) from $4.82 in 2014 to an estimated $6.65 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 4.57% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into JPMorgan Chase & Co. revealed the company was trading above its Graham Number of $107.91. The company pays a dividend of $2.12 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 17.65, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

JPMorgan Chase & Co. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Graham Number $107.91
PEmg 17.65
PB Ratio 1.61
Dividend Yield 1.81%
TTM Dividend $2.12
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $284,080,000,000
Total Assets $2,533,600,000,000
Intangible Assets $54,392,000,000
Total Liabilities $2,277,907,000,000
Shares Outstanding (Diluted Average) 3,512,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.72
Dec2017 $6.31
Dec2016 $6.19
Dec2015 $6.00
Dec2014 $5.29
Dec2013 $4.34
Dec2012 $5.20
Dec2011 $4.48
Dec2010 $3.96
Dec2009 $2.26
Dec2008 $1.35
Dec2007 $4.38
Dec2006 $4.04
Dec2005 $2.38
Dec2004 $1.55
Dec2003 $3.24
Dec2002 $0.80
Dec2001 $0.80
Dec2000 $2.86
Dec1999 $3.69
Dec1998 $2.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.65
Dec2017 $5.95
Dec2016 $5.65
Dec2015 $5.27
Dec2014 $4.82
Dec2013 $4.41
Dec2012 $4.11
Dec2011 $3.47
Dec2010 $3.05
Dec2009 $2.69
Dec2008 $2.85
Dec2007 $3.44
Dec2006 $2.78
Dec2005 $2.01
Dec2004 $1.84
Dec2003 $2.08
Dec2002 $1.73

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stocks for the Defensive Investor – July 2016
5 Undervalued Dow Components to Research – July 2016
10 Low PE Stocks for the Defensive Investor – June 2016
10 Low PE Stocks for the Defensive Investor – May 2016
18 Best Stocks For Value Investors This Week – 1/30/16

Other ModernGraham posts about related companies

Opus Bank Valuation – Initial Coverage $OPB
Wells Fargo & Co Valuation – August 2017 $WFC
Old National Bancorp Valuation – Initial Coverage $ONB
Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB
SunTrust Banks Inc Valuation – April 2017 $STI
Toronto-Dominion Bank Valuation – Initial Coverage $TSE:TD
Texas Capital Banchares Inc Valuation – Initial Coverage $TCBI
TCF Financial Corp Valuation – Initial Coverage $TCB
Canadian Western Bank Valuation – Initial Coverage $TSE:CWB

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 Low PE Stock Picks for the Defensive Investor – August 2017

Copy of defensive low PEThere are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the ten lowest PEmg (price / normalized earnings) companies reviewed by ModernGraham. Each company has been determined to be undervalued and suitable for the Defensive Investor according to the ModernGraham approach.

Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk.

Bed Bath & Beyond Inc. (BBBY)

Bed Bath & Beyond 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 is only concerned with the lack of dividends. 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 $3.63 in 2013 to an estimated $4.91 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.18% 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.  (See the full valuation)

TFI International Inc (TSE:TFII)

TFI International 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 Undervalued after growing its EPSmg (normalized earnings) from $1 in 2013 to an estimated $3 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.38% 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 TFI International Inc revealed the company was trading above its Graham Number of $26.97.  The company pays a dividend of $0.7 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 9.26, which was below the industry average of 31.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.36.  (See the full valuation)

Gap Inc (GPS)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.87 in 2013 to an estimated $2.21 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.94% 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 Gap Inc revealed the company was trading above its Graham Number of $15.43. The company pays a dividend of $0.92 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.37, which was below the industry average of 22.16, 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 $-1.53.  (See the full valuation)

Canadian Western Bank (TSE:CWB)

Canadian Western Bank 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 $2.14 in 2013 to an estimated $2.69 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.1% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Canadian Western Bank revealed the company was trading below its Graham Number of $36.05. The company pays a dividend of $0.92 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.7, which was below the industry average of 21.43, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Discover Financial Services (DFS)

Discover Financial Services qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.98 in 2013 to an estimated $5.5 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.03% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Discover Financial Services revealed the company was trading above its Graham Number of $62.08. The company pays a dividend of $1.16 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 12.56, which was below the industry average of 23.3, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Urban Outfitters, Inc. (URBN)

Urban Outfitters, 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 is only concerned with the lack of dividends. 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 $1.43 in 2013 to an estimated $1.77 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 4.01% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.  (See the full valuation)

URBN charts July 2016

Kroger Co (KR)

Kroger Co 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 Undervalued after growing its EPSmg (normalized earnings) from $1.07 in 2014 to an estimated $1.96 for 2018.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.51% 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 Kroger Co revealed the company was trading above its Graham Number of $18.2.  The company pays a dividend of $0.45 per share, for a yield of 2%  Its PEmg (price over earnings per share – ModernGraham) was 11.52, which was below the industry average of 36.19, 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 $-21.75.  (See the full valuation)

Baxter International Inc (BAX)

Baxter International 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 $3.6 in 2012 to an estimated $5.16 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.31% 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 Baxter International Inc revealed the company was trading below its Graham Number of $56.96. The company pays a dividend of $0.49 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 9.12, which was below the industry average of 32.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.96.  (See the full valuation)

Twenty-First Century Fox Inc (FOX)

Twenty-First Century Fox Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the insufficient earnings stability over the last ten years. 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 $1.39 in 2013 to an estimated $2.23 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.9% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Twenty-First Century Fox Inc revealed the company was trading above its Graham Number of $17.36. The company pays a dividend of $0.33 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 12.31, which was below the industry average of 40.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.68.  (See the full valuation)

foxa-charts-november-2016

AFLAC Incorporated (AFL)

 

 

AFLAC Incorporated 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 $4.72 in 2012 to an estimated $6.22 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.36% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into AFLAC Incorporated revealed the company was trading below its Graham Number of $87.98. The company pays a dividend of $1.64 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.22, which was below the industry average of 18.78, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

 

 

 

 

 

 

 

What do you think?  Are these companies a good value for Defensive Investors?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:

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

Opus Bank Valuation – Initial Coverage $OPB

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 Undervalued Stocks for the Enterprising Investor – August 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 Opus Bank (OPB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Opus Bank is a commercial bank. The Company provides banking products, services and solutions to its clients through its Retail Bank, Commercial Bank, Merchant Bank, and Correspondent Bank. The Company’s Commercial Bank consists Commercial Banking, Business Banking, Healthcare Banking, Technology Banking, Fiduciary Banking, Institutional Syndications and Commercial Real Estate Banking (CREB), which includes Income Property Banking, its Structured Finance Group and Capital Markets Group. Through its Merchant Bank, the Company offers transaction support, and debt and equity capital to entrepreneurs, small and mid-sized business and middle-market companies. Through its Retail Bank, the Company provides banking solutions for small and mid-sized companies, entrepreneurs, real estate investors, professional and high net worth individuals. Through its Correspondent Bank, the Company offers loan and depository services to other financial institutions.

OPB Chart

OPB data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of OPB – August 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 $727,869,597 Fail
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 11866566.67% Pass
5. Moderate PEmg Ratio PEmg < 20 15.65 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.44
MG Growth Estimate -1.86%
MG Value $6.90
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $20.89
MG Value based on 0% Growth $12.25
Market Implied Growth Rate 3.58%
Current Price $22.55
% of Intrinsic Value 326.81%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.64 in 2013 to an estimated $1.44 for 2017.  This level of demonstrated earnings growth does not support the market’s implied estimate of 3.58% 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 below the price.

At the time of valuation, further research into Opus Bank revealed the company was trading below its Graham Number of $29.57.  The company pays a dividend of $0.53 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 15.65, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Opus Bank receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Graham Number $29.57
PEmg 15.65
PB Ratio 0.86
Dividend Yield 2.35%
TTM Dividend $0.53
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 $197,479,000
Total Assets $7,882,563,000
Intangible Assets $382,550,000
Total Liabilities $6,956,628,000
Shares Outstanding (Diluted Average) 35,513,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.44
Dec2016 $0.33
Dec2015 $1.79
Dec2014 $1.38
Dec2013 $4.96
Dec2012 $0.79
Dec2011 -$1.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.44
Dec2016 $1.58
Dec2015 $1.99
Dec2014 $1.79
Dec2013 $1.64
Dec2012 -$0.03
Dec2011 -$0.37

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Wells Fargo & Co Valuation – August 2017 $WFC
Old National Bancorp Valuation – Initial Coverage $ONB
Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB
SunTrust Banks Inc Valuation – April 2017 $STI
Toronto-Dominion Bank Valuation – Initial Coverage $TSE:TD
Texas Capital Banchares Inc Valuation – Initial Coverage $TCBI
TCF Financial Corp Valuation – Initial Coverage $TCB
Canadian Western Bank Valuation – Initial Coverage $TSE:CWB
CVB Financial Corp Valuation – Initial Coverage $CVBF

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.

Best Stocks Below Their Graham Number – August 2017

Graham Number Stocks

One popular approach to investing based on Benjamin Graham’s methods is to use the so-called “Graham Number.”  There are some important differences between the Graham Number and the Graham Formula, but using the Graham Number is definitely useful even if the investor only uses it as a screening tactic.

I’ve selected the best companies reviewed by ModernGraham which trade below their Graham Number.  The companies selected all are found suitable for the Defensive Investor and/or the Enterprising Investor, and have been valued as undervalued based on the ModernGraham valuation model.  Further, the overall screen found 36 companies meeting these criteria (out of the 897+ companies covered by ModernGraham), and the full list can be found near the end of this article; however, to cut down on the length of the post, I’ve selected the ten which trade furthest below their Graham Number.

Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

These companies have demonstrated strong financial positions through passing the rigorous requirements of the ModernGraham Investor and show potential for capital growth based on their current price in relation to intrinsic value.  As such, these graham number stocks may be a great investment if they prove to be suitable for your portfolio after your own additional research.

Capital One Financial Corp. (COF)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.15 in 2012 to an estimated $7.13 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.05% 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.  (See the full valuation)

COF charts July 2016

Celestica Inc (TSE:CLS)

Celestica Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, 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 lack of dividends. 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 $0.29 in 2012 to an estimated $0.98 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4% 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 Celestica Inc revealed the company was trading below its Graham Number of $20.71. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 16.51, which was below the industry average of 28.12, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $6.81.  (See the full valuation)

Foot Locker, Inc. (FL)

Foot Locker, 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 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 $2.16 in 2014 to an estimated $4.47 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.23% 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 Foot Locker, Inc. revealed the company was trading above its Graham Number of $48.72. The company pays a dividend of $1.1 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 16.96, which was below the industry average of 50.09, 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 $11.28.  (See the full valuation)

Kelly Services, Inc. (KELYA)

Kelly Services, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.1 in 2013 to an estimated $1.8 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.74% 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 Kelly Services, Inc. revealed the company was trading below its Graham Number of $30.13. The company pays a dividend of $0.28 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 11.99, which was below the industry average of 21.9, 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 $5.19.  (See the full valuation)

Signet Jewelers Ltd. (SIG)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.84 in 2013 to an estimated $5.77 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.39% 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 Signet Jewelers Ltd. revealed the company was trading above its Graham Number of $71.41. The company pays a dividend of $1 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 15.29, which was below the industry average of 26.36, 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 $4.06.  (See the full valuation)

Starwood Property Trust, Inc. (STWD)

Starwood Property Trust, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.5 in 2013 to an estimated $1.87 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 1.84% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Starwood Property Trust, Inc. revealed the company was trading below its Graham Number of $29.28. The company pays a dividend of $1.92 per share, for a yield of 8.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.17, which was below the industry average of 51.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (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 $2.04 in 2012 to an estimated $5.16 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.12% 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.  (See the full valuation)

LNC charts May 2016

Canadian Western Bank (TSE:CWB)

Canadian Western Bank 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 $2.14 in 2013 to an estimated $2.69 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.1% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Canadian Western Bank revealed the company was trading below its Graham Number of $36.05. The company pays a dividend of $0.92 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.7, which was below the industry average of 21.43, which by some methods of valuation makes it one of the most undervalued stocks in its industry.    (See the full valuation)

Citigroup Inc (C)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-2.31 in 2012 to an estimated $4.1 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.16% 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.  (See the full valuation)

C charts July 2016

Linamar Corporation (TSE:LNR)

 

Linamar Corporation 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 over the last ten years. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.22 in 2013 to an estimated $6.93 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.1% 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 Linamar Corporation revealed the company was trading below its Graham Number of $83.15. The company pays a dividend of $0.4 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 8.7, which was below the industry average of 18.47, 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 $-7.49.  (See the full valuation)

 

The Full List

[not-level-free]
Clicking on the company name will take you to the company’s latest valuation.  For the investor type, a “D” indicates the company is suitable for the Defensive Investor, an “E” indicates the company is suitable for the Enterprising Investor, and an “S” indicates the company is considered speculative at this time.

Ticker Name with Link Investor Type Latest Valuation Date MG Value Recent Price Price as a percent of Value PEmg Ratio Div. Yield Graham Number
AFL AFLAC Incorporated D 12/19/2016 $112.32 $79.84 71.08% 12.84 2.05% $87.98
AHL Aspen Insurance Holdings Limited E 12/13/2016 $173.48 $46.75 26.95% 10.37 1.84% $82.44
ARW Arrow Electronics, Inc. E 7/3/2016 $124.11 $74.23 59.81% 14.11 0.00% $81.27
ASH Ashland Global Holdings Inc. E 7/27/2016 $161.82 $60.98 37.68% 12.65 2.56% $73.88
BAC Bank of America Corp E 7/14/2016 $35.60 $23.62 66.35% 25.67 0.85% $23.92
BBBY Bed Bath & Beyond Inc. D 6/14/2016 $93.73 $27.27 29.09% 5.55 0.00% $41.96
C Citigroup Inc E 7/19/2016 $157.95 $66.58 42.15% 16.24 0.30% $85.07
CNO CNO Financial Group Inc E 1/28/2017 $42.30 $22.31 52.74% 20.28 1.34% $24.73
COF Capital One Financial Corp. E 7/6/2016 $142.36 $81.53 57.27% 11.43 1.96% $122.14
CVG Convergys Corp E 3/18/2017 $45.02 $22.92 50.91% 15.38 1.53% $23.70
DFS Discover Financial Services D 1/28/2017 $109.91 $59.43 54.07% 10.81 1.95% $62.08
FL Foot Locker, Inc. E 3/6/2017 $172.17 $34.38 19.97% 7.69 3.20% $48.72
KBH KB Home E 2/4/2017 $84.55 $22.21 26.27% 10.10 0.45% $25.21
KELYA Kelly Services, Inc. E 2/7/2017 $50.08 $21.37 42.67% 11.87 1.31% $30.13
LNC Lincoln National Corporation E 5/20/2016 $198.66 $68.02 34.24% 13.18 1.62% $89.07
MET Metlife Inc E 12/13/2016 $119.73 $47.02 39.27% 11.64 3.30% $78.35
NAVI Navient Corp E 8/31/2016 $92.14 $13.60 14.76% 5.69 4.71% $21.98
PBCT People’s United Financial, Inc. D 6/20/2016 $22.89 $16.63 72.65% 20.04 4.03% $17.28
RF Regions Financial Corp E 6/27/2016 $29.52 $14.06 47.63% 18.26 1.71% $14.93
SANM Sanmina Corp E 12/5/2016 $106.05 $35.20 33.19% 12.80 0.00% $36.05
SENEA Seneca Foods Corp E 12/22/2016 $69.62 $28.90 41.51% 10.63 0.00% $69.20
SIG Signet Jewelers Ltd. E 1/9/2017 $222.15 $53.59 24.12% 9.29 1.87% $71.41
SPOK Spok Holdings, Inc. E 2/9/2017 $54.43 $16.25 29.85% 5.74 3.08% $38.13
STI SunTrust Banks, Inc. E 4/11/2017 $135.29 $56.13 41.49% 15.99 1.78% $61.96
STWD Starwood Property Trust, Inc. E 4/11/2017 $29.84 $22.08 73.99% 11.81 8.70% $29.28
SUP Superior Industries International Inc E 3/7/2017 $19.90 $14.35 72.11% 10.79 5.02% $25.53
SYF Synchrony Financial E 3/2/2017 $75.28 $30.07 39.94% 10.74 0.86% $34.07
SYKE Sykes Enterprises, Incorporated E 3/20/2017 $62.24 $26.14 42.00% 16.14 0.00% $27.43
TCF TCF Financial Corporation E 3/26/2017 $41.61 $14.93 35.88% 13.82 2.01% $18.02
TRV Travelers Companies Inc D 12/1/2016 $320.65 $127.89 39.88% 12.96 1.52% $134.38
TSE:CLS Celestica Inc E 1/11/2017 $37.85 $14.38 37.99% 14.67 0.00% $20.71
TSE:CM Canadian Imperial Bank of Commerce E 1/12/2017 $185.80 $106.94 57.56% 11.12 4.44% $114.08
TSE:CWB Canadian Western Bank D 3/25/2017 $43.69 $28.00 64.09% 10.41 3.29% $36.05
TSE:LNR Linamar Corporation E 3/26/2017 $266.91 $67.67 25.35% 9.76 0.59% $83.15
TSE:TD Toronto-Dominion Bank D 4/11/2017 $103.85 $63.73 61.37% 13.79 3.45% $65.31
URBN Urban Outfitters, Inc. D 7/19/2016 $27.71 $19.27 69.54% 10.89 0.00% $20.09

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

To view the MG Value and PEmg information,  you must be logged in as a premium member.  Clicking on the company name will take you to the company’s latest valuation.

For the investor type, a “D” indicates the company is suitable for the Defensive Investor, an “E” indicates the company is suitable for the Enterprising Investor, and an “S” indicates the company is considered speculative at this time.

Ticker Name with Link Investor Type Latest Valuation Date MG Value Recent Price Price as a percent of Value PEmg Ratio Div. Yield Graham Number
AFL AFLAC Incorporated D 12/19/2016 $79.84 2.05% $87.98
AHL Aspen Insurance Holdings Limited E 12/13/2016 $46.75 1.84% $82.44
ARW Arrow Electronics, Inc. E 7/3/2016 $74.23 0.00% $81.27
ASH Ashland Global Holdings Inc. E 7/27/2016 $60.98 2.56% $73.88
BAC Bank of America Corp E 7/14/2016 $23.62 0.85% $23.92
BBBY Bed Bath & Beyond Inc. D 6/14/2016 $27.27 0.00% $41.96
C Citigroup Inc E 7/19/2016 $66.58 0.30% $85.07
CNO CNO Financial Group Inc E 1/28/2017 $22.31 1.34% $24.73
COF Capital One Financial Corp. E 7/6/2016 $81.53 1.96% $122.14
CVG Convergys Corp E 3/18/2017 $22.92 1.53% $23.70
DFS Discover Financial Services D 1/28/2017 $59.43 1.95% $62.08
FL Foot Locker, Inc. E 3/6/2017 $34.38 3.20% $48.72
KBH KB Home E 2/4/2017 $22.21 0.45% $25.21
KELYA Kelly Services, Inc. E 2/7/2017 $21.37 1.31% $30.13
LNC Lincoln National Corporation E 5/20/2016 $68.02 1.62% $89.07
MET Metlife Inc E 12/13/2016 $47.02 3.30% $78.35
NAVI Navient Corp E 8/31/2016 $13.60 4.71% $21.98
PBCT People’s United Financial, Inc. D 6/20/2016 $16.63 4.03% $17.28
RF Regions Financial Corp E 6/27/2016 $14.06 1.71% $14.93
SANM Sanmina Corp E 12/5/2016 $35.20 0.00% $36.05
SENEA Seneca Foods Corp E 12/22/2016 $28.90 0.00% $69.20
SIG Signet Jewelers Ltd. E 1/9/2017 $53.59 1.87% $71.41
SPOK Spok Holdings, Inc. E 2/9/2017 $16.25 3.08% $38.13
STI SunTrust Banks, Inc. E 4/11/2017 $56.13 1.78% $61.96
STWD Starwood Property Trust, Inc. E 4/11/2017 $22.08 8.70% $29.28
SUP Superior Industries International Inc E 3/7/2017 $14.35 5.02% $25.53
SYF Synchrony Financial E 3/2/2017 $30.07 0.86% $34.07
SYKE Sykes Enterprises, Incorporated E 3/20/2017 $26.14 0.00% $27.43
TCF TCF Financial Corporation E 3/26/2017 $14.93 2.01% $18.02
TRV Travelers Companies Inc D 12/1/2016 $127.89 1.52% $134.38
TSE:CLS Celestica Inc E 1/11/2017 $14.38 0.00% $20.71
TSE:CM Canadian Imperial Bank of Commerce E 1/12/2017 $106.94 4.44% $114.08
TSE:CWB Canadian Western Bank D 3/25/2017 $28.00 3.29% $36.05
TSE:LNR Linamar Corporation E 3/26/2017 $67.67 0.59% $83.15
TSE:TD Toronto-Dominion Bank D 4/11/2017 $63.73 3.45% $65.31
URBN Urban Outfitters, Inc. D 7/19/2016 $19.27 0.00% $20.09

[/level-free]

Disclaimer: 

The author held a long position in Starwood Property Trust (STWD) but did not hold a position in any other company mentioned in this article at the time of publication and had no specific intention of changing that position within the next 72 hours; however, the author does intend to make some trades in the next 72 hours and may select a company from this list.  See my current holdings here.  This article is not investment advice and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions.  Please also read our full disclaimer.

Wells Fargo & Co Valuation – August 2017 $WFC

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 Wells Fargo & Co (WFC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Wells Fargo & Company is a bank holding company. The Company is a diversified financial services company. It has three operating segments: Community Banking, Wholesale Banking, and Wealth and Investment Management. The Company offers its services under three categories: personal, small business and commercial. It provides retail, commercial and corporate banking services through banking locations and offices, the Internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia and in other countries. It provides other financial services through its subsidiaries engaged in various businesses, including wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, computer and data processing services, investment advisory services, mortgage-backed securities servicing and venture capital investment.

WFC Chart

WFC 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 WFC – August 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 $257,827,293,159 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 159.23% Pass
5. Moderate PEmg Ratio PEmg < 20 12.93 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.27 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 $4.02
MG Growth Estimate 4.02%
MG Value $66.46
Opinion Fairly Valued
MG Grade B+
MG Value based on 3% Growth $58.25
MG Value based on 0% Growth $34.15
Market Implied Growth Rate 2.21%
Current Price $51.94
% of Intrinsic Value 78.15%

Wells Fargo & Co 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 Fairly Valued after growing its EPSmg (normalized earnings) from $3.17 in 2013 to an estimated $4.02 for 2017.  This level of demonstrated earnings growth supports the market’s implied estimate of 2.21% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Wells Fargo & Co revealed the company was trading below its Graham Number of $55.83.  The company pays a dividend of $1.52 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 12.93, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Wells Fargo & Co performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $55.83
PEmg 12.93
PB Ratio 1.27
Dividend Yield 2.92%
TTM Dividend $1.52
Number of Consecutive Years of Dividend Growth 6

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Long-Term Debt & Capital Lease Obligation $238,869,000,000
Total Assets $1,930,871,000,000
Intangible Assets $40,761,000,000
Total Liabilities $1,725,641,000,000
Shares Outstanding (Diluted Average) 5,037,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.97
Dec2016 $3.99
Dec2015 $4.12
Dec2014 $4.10
Dec2013 $3.89
Dec2012 $3.36
Dec2011 $2.82
Dec2010 $2.21
Dec2009 $1.75
Dec2008 $0.70
Dec2007 $2.38
Dec2006 $2.47
Dec2005 $2.25
Dec2004 $2.05
Dec2003 $1.83
Dec2002 $1.58
Dec2001 $0.99
Dec2000 $1.16
Dec1999 $1.15
Dec1998 $0.59
Dec1997 $0.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.02
Dec2016 $3.99
Dec2015 $3.88
Dec2014 $3.60
Dec2013 $3.17
Dec2012 $2.59
Dec2011 $2.13
Dec2010 $1.83
Dec2009 $1.73
Dec2008 $1.80
Dec2007 $2.30
Dec2006 $2.18
Dec2005 $1.94
Dec2004 $1.69
Dec2003 $1.46
Dec2002 $1.21
Dec2001 $0.99

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – May 2016
13 Best Stocks For Value Investors This Week – 12/12/15
Wells Fargo & Co Valuation – December 2015 Update $WFC
The Best Companies of the Banking Industry – October 2015
10 Most Undervalued Companies for the Defensive Investor – September 2015

Other ModernGraham posts about related companies

Old National Bancorp Valuation – Initial Coverage $ONB
Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB
SunTrust Banks Inc Valuation – April 2017 $STI
Toronto-Dominion Bank Valuation – Initial Coverage $TSE:TD
Texas Capital Banchares Inc Valuation – Initial Coverage $TCBI
TCF Financial Corp Valuation – Initial Coverage $TCB
Canadian Western Bank Valuation – Initial Coverage $TSE:CWB
CVB Financial Corp Valuation – Initial Coverage $CVBF
Customers Bancorp Inc Valuation – Initial Coverage $CUBI

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.

Old National Bancorp Valuation – Initial Coverage $ONB

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 Old National Bancorp (ONB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Old National Bancorp is a financial holding company. The Company, through its banking subsidiary, provides a range of services, including commercial and consumer loan and depository services, private banking, brokerage, trust, investment advisory and other traditional banking services. The Company focuses on community banking. The Company’s banking segment operates through its subsidiary, Old National Bank. As of December 31, 2016, Old National Bank operated approximately 203 banking centers located in Indiana, Kentucky, Michigan and Wisconsin. As of December 31, 2016, Old National Bank leased 81 banking centers from unaffiliated third parties. Each of the branches of Old National Bank provide a group of similar community banking services, including products and services, such as commercial, real estate and consumer loans, time deposits, checking and savings accounts, cash management, brokerage, trust and investment advisory services.

ONB Chart

ONB 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 ONB – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,275,268,310 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 104.58% Pass
5. Moderate PEmg Ratio PEmg < 20 16.21 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.23 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 $1.03
MG Growth Estimate 4.21%
MG Value $17.49
Opinion Fairly Valued
MG Grade B+
MG Value based on 3% Growth $14.98
MG Value based on 0% Growth $8.78
Market Implied Growth Rate 3.85%
Current Price $16.75
% of Intrinsic Value 95.75%

Old National Bancorp 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.81 in 2013 to an estimated $1.03 for 2017.  This level of demonstrated earnings growth supports the market’s implied estimate of 3.85% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Old National Bancorp revealed the company was trading below its Graham Number of $18.06.  The company pays a dividend of $0.52 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 16.21, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Old National Bancorp performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $18.06
PEmg 16.21
PB Ratio 1.23
Dividend Yield 3.10%
TTM Dividend $0.52
Number of Consecutive Years of Dividend Growth 5

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2017
Long-Term Debt & Capital Lease Obligation $1,660,051,000
Total Assets $14,869,645,000
Intangible Assets $715,121,000
Total Liabilities $13,023,286,000
Shares Outstanding (Diluted Average) 135,431,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.08
Dec2016 $1.05
Dec2015 $1.00
Dec2014 $0.95
Dec2013 $1.00
Dec2012 $0.95
Dec2011 $0.76
Dec2010 $0.44
Dec2009 $0.14
Dec2008 $0.95
Dec2007 $1.14
Dec2006 $1.20
Dec2005 $0.93
Dec2004 $0.90
Dec2003 $0.93
Dec2002 $1.67
Dec2001 $1.29
Dec2000 $0.85
Dec1999 $1.30
Dec1998 $1.01
Dec1997 $1.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.03
Dec2016 $1.00
Dec2015 $0.96
Dec2014 $0.90
Dec2013 $0.81
Dec2012 $0.69
Dec2011 $0.60
Dec2010 $0.61
Dec2009 $0.75
Dec2008 $1.04
Dec2007 $1.07
Dec2006 $1.06
Dec2005 $1.04
Dec2004 $1.11
Dec2003 $1.21
Dec2002 $1.31
Dec2001 $1.12

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

Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM
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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.

Dime Community Bancshares Inc Valuation – Initial Coverage $DCOM

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 Dime Community Bancshares Inc (DCOM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Dime Community Bancshares, Inc. operates as a holding company for Dime Community Bank (the Bank), a chartered savings bank. The Company is a unitary savings and loan holding company. The Company operates through Community Banking segment. The Bank’s principal business is gathering retail deposits, and lending them primarily in multifamily residential, commercial real estate and mixed use loans, as well as investing in mortgage-backed securities (MBS), obligations of the United States Government and Government Sponsored Entities (GSEs), and corporate debt and equity securities. The Bank’s primary sources of funds are, in general, deposits; loan amortization, prepayments and maturities; MBS amortization, prepayments and maturities; investment securities maturities and sales, and advances from the Federal Home Loan Bank of New York (FHLBNY).

DCOM Chart

DCOM data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of DCOM – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $758,308,676 Fail
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 55.90% Pass
5. Moderate PEmg Ratio PEmg < 20 13.99 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.33 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 $1.45
MG Growth Estimate 2.80%
MG Value $20.39
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $20.99
MG Value based on 0% Growth $12.30
Market Implied Growth Rate 2.75%
Current Price $20.25
% of Intrinsic Value 99.30%

Dime Community Bancshares, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the  small size. The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.22 in 2013 to an estimated $1.45 for 2017.  This level of demonstrated earnings growth supports the market’s implied estimate of 2.75% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Dime Community Bancshares, Inc. revealed the company was trading below its Graham Number of $20.94.  The company pays a dividend of $0.56 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 13.99, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Dime Community Bancshares, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Graham Number $20.94
PEmg 13.99
PB Ratio 1.33
Dividend Yield 2.77%
TTM Dividend $0.56
Number of Consecutive Years of Dividend Growth 0

[/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 $763,725,000
Total Assets $6,095,370,000
Intangible Assets $55,638,000
Total Liabilities $5,522,145,000
Shares Outstanding (Diluted Average) 37,550,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.29
Dec2016 $1.97
Dec2015 $1.23
Dec2014 $1.23
Dec2013 $1.23
Dec2012 $1.17
Dec2011 $1.40
Dec2010 $1.24
Dec2009 $0.79
Dec2008 $0.85
Dec2007 $0.67
Dec2006 $0.87
Dec2005 $1.02
Dec2004 $1.28
Dec2003 $1.37
Jun2002 $1.03
Jun2001 $1.00
Jun2000 $0.56
Jun1999 $0.50
Jun1998 $0.32
Jun1997 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.45
Dec2016 $1.47
Dec2015 $1.23
Dec2014 $1.24
Dec2013 $1.22
Dec2012 $1.17
Dec2011 $1.11
Dec2010 $0.94
Dec2009 $0.81
Dec2008 $0.86
Dec2007 $0.92
Dec2006 $1.07
Dec2005 $1.16
Dec2004 $1.17
Dec2003 $1.04
Jun2002 $0.81
Jun2001 $0.65

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

SunTrust Banks Inc Valuation – April 2017 $STI
Toronto-Dominion Bank Valuation – Initial Coverage $TSE:TD
Texas Capital Banchares Inc Valuation – Initial Coverage $TCBI
TCF Financial Corp Valuation – Initial Coverage $TCB
Canadian Western Bank Valuation – Initial Coverage $TSE:CWB
CVB Financial Corp Valuation – Initial Coverage $CVBF
Customers Bancorp Inc Valuation – Initial Coverage $CUBI
Comerica Inc Valuation – March 2017 $CMA
Sterling Bancorp Valuation – Initial Coverage $STL
S&T Bancorp Inc Valuation – Initial Coverage $STBA

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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