SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC

Company Profile (excerpt from Reuters): SNC-Lavalin Group Inc is a Canada-based engineering and construction company. The Company’s segments include Mining & Metallurgy, which provides solutions for a range of projects in the aluminum, gold, copper, iron ore, nickel, fertilizers and sulfur product sectors, among others; Oil & Gas, which includes projects in the upstream, midstream and downstream (supporting infrastructure) sectors for oil and gas and resources companies, supporting these clients operating across the asset lifecycle from front end evaluation through decommissioning (capital expenditures and operational expenditures); Power, which includes projects and services in hydro, nuclear and thermal power generation, renewable power generation, energy from waste, and electrical transmission and distribution systems; Infrastructure, which is divided into the Infrastructure & Construction and Operations & Maintenance sub-segments, and Capital segment is the investment and asset management arm of the Company.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-SNC – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,166,080,301 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.94 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -3.51% Fail
6. Moderate PEmg Ratio PEmg < 20 18.10 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.96 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.94 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.37 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.12
MG Growth Estimate -3.05%
MG Value $7.49
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $45.30
MG Value based on 0% Growth $26.55
Market Implied Growth Rate 4.80%
Current Price $56.53
% of Intrinsic Value 755.24%

Snc-Lavalin Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.92 in 2014 to an estimated $3.12 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.8% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Snc-Lavalin Group Inc revealed the company was trading above its Graham Number of $49.52. The company pays a dividend of $1.09 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 18.1, which was below the industry average of 24.98, 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 $-24.99.

Snc-Lavalin Group Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.99
Graham Number $49.52
PEmg 18.10
Current Ratio 0.94
PB Ratio 1.96
Current Dividend $1.09
Dividend Yield 1.93%
Number of Consecutive Years of Dividend Growth 18

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $4,349,634,000
Total Current Liabilities $4,650,171,000
Long-Term Debt $2,815,686,000
Total Assets $13,797,845,000
Intangible Assets $7,548,369,000
Total Liabilities $8,737,437,000
Shares Outstanding (Diluted Average) 175,599,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.66
Dec2017 $2.34
Dec2016 $1.70
Dec2015 $2.68
Dec2014 $8.74
Dec2013 $0.24
Dec2012 $2.02
Dec2011 $2.49
Dec2010 $3.13
Dec2009 $2.36
Dec2008 $2.05
Dec2007 $1.00
Dec2006 $1.04
Dec2005 $0.85
Dec2004 $0.23
Dec2003 $0.56
Dec2002 $1.32
Dec2001 $0.18
Dec2000 $0.17
Dec1999 $0.25
Dec1998 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.12
Dec2017 $2.95
Dec2016 $3.20
Dec2015 $3.71
Dec2014 $3.92
Dec2013 $1.69
Dec2012 $2.41
Dec2011 $2.48
Dec2010 $2.29
Dec2009 $1.73
Dec2008 $1.29
Dec2007 $0.85
Dec2006 $0.78
Dec2005 $0.64
Dec2004 $0.52
Dec2003 $0.61
Dec2002 $0.58

Recommended Reading:

Other ModernGraham posts about the company

12 Best Stocks for Value Investors This Week – 2/4/17

Other ModernGraham posts about related companies

Aecom Valuation – July 2018 $ACM
Lowe’s Companies Inc Valuation – June 2018 $LOW
Acuity Brands Inc Valuation – June 2018 $AYI
Quanta Services Inc Valuation – May 2018 $PWR
Mohawk Industries Inc Valuation – May 2018 $MHK
Jacobs Engineering Group Inc Valuation – May 2018 $JEC
Masco Corp Valuation – May 2018 $MAS
D.R. Horton Inc Valuation – May 2018 $DHI
Martin Marietta Materials Inc Valuation – May 2018 $MLM
Fluor Corporation Valuation – April 2018 $FLR

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.

SNC-Lavalin Group Inc Valuation – Initial Coverage $TSE:SNC

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 – January 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 SNC-Lavalin Group Inc (TSE:SNC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Snc-Lavalin Group Inc is a Canada-based engineering and construction company. The Company’s segments include Mining & Metallurgy, which provides solutions for a range of projects in the aluminum, gold, copper, iron ore, nickel, fertilizers and sulfur product sectors, among others; Oil & Gas, which includes projects in the upstream, midstream and downstream (supporting infrastructure) sectors for oil and gas and resources companies, supporting these clients operating across the asset lifecycle from front end evaluation through decommissioning (capital expenditures and operational expenditures); Power, which includes projects and services in hydro, nuclear and thermal power generation, renewable power generation, energy from waste, and electrical transmission and distribution systems; Infrastructure, which is divided into the Infrastructure & Construction and Operations & Maintenance sub-segments, and Capital segment is the investment and asset management arm of the Company.

SNC Chart

SNC 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.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-SNC – February 2017

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,495,328,813 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.04 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 156.75% Pass
6. Moderate PEmg Ratio PEmg < 20 16.32 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.27 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.04 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.88 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.45
MG Growth Estimate 6.45%
MG Value $73.87
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $50.06
MG Value based on 0% Growth $29.35
Market Implied Growth Rate 3.91%
Current Price $56.35
% of Intrinsic Value 76.28%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.41 in 2012 to an estimated $3.45 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 3.91% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Snc-Lavalin Group Inc revealed the company was trading above its Graham Number of $37.17. The company pays a dividend of $1.03 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 16.32, which was below the industry average of 28.49, 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 $-8.39.

Snc-Lavalin Group Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.39
Graham Number $37.17
PEmg 16.32
Current Ratio 1.04
PB Ratio 2.27
Current Dividend $1.03
Dividend Yield 1.83%
Number of Consecutive Years of Dividend Growth 17

[/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 9/1/2016
Total Current Assets $4,246,001,000
Total Current Liabilities $4,077,635,000
Long-Term Debt $821,433,000
Total Assets $9,244,134,000
Intangible Assets $3,348,765,000
Total Liabilities $5,507,489,000
Shares Outstanding (Diluted Average) 150,442,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.47
Dec2015 $2.68
Dec2014 $8.74
Dec2013 $0.24
Dec2012 $2.02
Dec2011 $2.49
Dec2010 $3.13
Dec2009 $2.36
Dec2008 $2.05
Dec2007 $1.00
Dec2006 $1.04
Dec2005 $0.85
Dec2004 $0.23
Dec2003 $0.56
Dec2002 $1.32
Dec2001 $0.18
Dec2000 $0.17
Dec1999 $0.25
Dec1998 $0.31
Dec1997 $0.27
Dec1996 $0.25

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.45
Dec2015 $3.71
Dec2014 $3.92
Dec2013 $1.69
Dec2012 $2.41
Dec2011 $2.48
Dec2010 $2.29
Dec2009 $1.73
Dec2008 $1.29
Dec2007 $0.85
Dec2006 $0.78
Dec2005 $0.64
Dec2004 $0.52
Dec2003 $0.61
Dec2002 $0.58
Dec2001 $0.21
Dec2000 $0.24

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

Quanta Services Inc Valuation – August 2016 $PWR
Jacobs Engineering Group Inc Valuation – August 2016 $JEC
PPG Industries Inc Valuation – August 2016 $PPG
D.R. Horton Inc Valuation – August 2016 $DHI
Martin Marietta Materials Inc Valuation – August 2016 $MLM
Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI

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.

Johnson Controls International PC Valuation – January 2019 $JCI

Company Profile (excerpt from Reuters): Johnson Controls International plc, formerly Tyco International plc, incorporated on May 9, 2014, is a global diversified technology and multi industrial company. The Company’s segments include Buildings and Power Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JCI – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $30,244,450,646 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.05 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 0.53% Fail
6. Moderate PEmg Ratio PEmg < 20 21.66 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.36 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.05 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 16.85 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.51
MG Growth Estimate -3.52%
MG Value $2.20
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $21.91
MG Value based on 0% Growth $12.85
Market Implied Growth Rate 6.58%
Current Price $32.73
% of Intrinsic Value 1490.37%

Johnson Controls International PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or 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 $1.98 in 2015 to an estimated $1.51 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.58% 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 below the price.

At the time of valuation, further research into Johnson Controls International PLC revealed the company was trading above its Graham Number of $29.58. The company pays a dividend of $1.04 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 21.66, which was above the industry average of 18.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.6.

Johnson Controls International PLC scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$15.60
Graham Number $29.58
PEmg 21.66
Current Ratio 1.05
PB Ratio 1.36
Current Dividend $1.04
Dividend Yield 3.18%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $11,823,000,000
Total Current Liabilities $11,250,000,000
Long-Term Debt $9,654,000,000
Total Assets $48,797,000,000
Intangible Assets $25,821,000,000
Total Liabilities $26,339,000,000
Shares Outstanding (Diluted Average) 930,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.70
Sep2018 $2.32
Sep2017 $1.71
Sep2016 -$1.30
Sep2015 $2.36
Sep2014 $1.80
Sep2013 $1.71
Sep2012 $1.72
Sep2011 $2.06
Sep2010 $1.92
Sep2009 -$0.57
Sep2008 $1.63
Sep2007 $2.09
Sep2006 $1.74
Sep2005 $1.56
Sep2004 $1.41
Sep2003 $1.20
Sep2002 $1.06
Sep2001 $0.85
Sep2000 $0.85
Sep1999 $0.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.51
Sep2018 $1.40
Sep2017 $1.05
Sep2016 $0.90
Sep2015 $1.98
Sep2014 $1.80
Sep2013 $1.66
Sep2012 $1.54
Sep2011 $1.44
Sep2010 $1.21
Sep2009 $1.00
Sep2008 $1.75
Sep2007 $1.74
Sep2006 $1.51
Sep2005 $1.33
Sep2004 $1.17
Sep2003 $1.02

Recommended Reading:

Other ModernGraham posts about the company

Johnson Controls International PLC Valuation – March 2018 $JCI
Johnson Controls Inc Valuation – July 2016 $JCI
28 Companies in the Spotlight This Week – 2/28/15
Johnson Controls Inc. Annual Valuation – 2015 $JCI
14 Companies in the Spotlight This Week – 2/22/14

Other ModernGraham posts about related companies

Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ

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.

Cummins Inc Valuation – January 2019 $CMI

Company Profile (excerpt from Reuters): Cummins Inc., incorporated on February 3, 1919, designs, manufactures, distributes and services diesel and natural gas engines and engine-related component products, including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems and electric power generation systems. The Company’s segments include Engine, Distribution, Components and Power Systems. The Company sells its products to original equipment manufacturers (OEMs), distributors and other customers around the world. As of December 31, 2016, the Company served its customers through a network of approximately 600 distributor locations and over 7,400 dealer locations in over 190 countries and territories.

Downloadable PDF version of this valuation:

ModernGraham Valuation of CMI – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,174,063,768 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.54 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 61.15% Pass
6. Moderate PEmg Ratio PEmg < 20 16.23 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.02 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.54 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.45 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $9.28
MG Growth Estimate 1.42%
MG Value $105.22
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $134.53
MG Value based on 0% Growth $78.86
Market Implied Growth Rate 3.86%
Current Price $150.56
% of Intrinsic Value 143.09%

Cummins 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 Overvalued after growing its EPSmg (normalized earnings) from $8.48 in 2014 to an estimated $9.28 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.86% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Cummins Inc. revealed the company was trading above its Graham Number of $113.98. The company pays a dividend of $4.21 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.23, which was below the industry average of 18.63, 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 $-6.61.

Cummins Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$6.61
Graham Number $113.98
PEmg 16.23
Current Ratio 1.54
PB Ratio 3.02
Current Dividend $4.21
Dividend Yield 2.80%
Number of Consecutive Years of Dividend Growth 12

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $9,863,000,000
Total Current Liabilities $6,416,000,000
Long-Term Debt $1,563,000,000
Total Assets $18,992,000,000
Intangible Assets $2,060,000,000
Total Liabilities $10,932,000,000
Shares Outstanding (Diluted Average) 161,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.18
Dec2017 $5.97
Dec2016 $8.23
Dec2015 $7.84
Dec2014 $9.02
Dec2013 $7.91
Dec2012 $8.67
Dec2011 $9.55
Dec2010 $5.28
Dec2009 $2.16
Dec2008 $3.84
Dec2007 $3.70
Dec2006 $3.55
Dec2005 $2.75
Dec2004 $1.85
Dec2003 $0.32
Dec2002 $0.53
Dec2001 -$0.68
Dec2000 $0.09
Dec1999 $1.03
Dec1998 -$0.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.28
Dec2017 $7.48
Dec2016 $8.27
Dec2015 $8.39
Dec2014 $8.48
Dec2013 $7.71
Dec2012 $7.04
Dec2011 $5.78
Dec2010 $3.83
Dec2009 $3.14
Dec2008 $3.47
Dec2007 $3.00
Dec2006 $2.37
Dec2005 $1.50
Dec2004 $0.72
Dec2003 $0.19
Dec2002 $0.14

Recommended Reading:

Other ModernGraham posts about the company

Cummins Inc Valuation – March 2018 $CMI
Cummins Inc Valuation – July 2016 $CMI
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2016
10 Companies Benjamin Graham Would Invest In Today – February 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2016

Other ModernGraham posts about related companies

Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ

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.

Flowserve Corp Valuation – January 2019 $FLS

Company Profile (excerpt from Reuters): Flowserve Corporation, incorporated on May 1, 1912, is a manufacturer and aftermarket service provider of flow control systems. The Company’s segments include Engineered Product Division (EPD), Industrial Product Division (IPD) and Flow Control Division (FCD). The Company’s geographic segment includes North America, Europe, Asia Pacific, Middle East and Africa, and Latin America. The Company develops and manufactures precision-engineered flow control equipment integral to the movement, control and protection of the flow of materials in its customer’s critical processes. The Company’s product portfolio of pumps, valves, seals, automation and aftermarket services supports infrastructure industries, including oil and gas, chemical, power generation (including nuclear, fossil and renewable) and water management, as well as certain general industrial markets where its products and services add value. The Company offers a range of aftermarket equipment services, such as installation, diagnostics, repair and retrofitting through manufacturing platform and network of Quick Response Centers (QRCs). The Company’s products include oil and gas, general industries, chemical, power generation and water management.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FLS – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $4,975,183,199 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.24 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -72.74% Fail
6. Moderate PEmg Ratio PEmg < 20 36.58 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.06 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.24 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.12 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.04
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $15.07
MG Value based on 0% Growth $8.83
Market Implied Growth Rate 14.04%
Current Price $38.02
% of Intrinsic Value N/A

Flowserve Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.21 in 2014 to an estimated $1.04 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.04% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Flowserve Corp revealed the company was trading above its Graham Number of $16.73. The company pays a dividend of $0.76 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 36.58, which was above the industry average of 20.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.95.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$4.95
Graham Number $16.73
PEmg 36.58
Current Ratio 2.24
PB Ratio 3.06
Current Dividend $0.76
Dividend Yield 2.00%
Number of Consecutive Years of Dividend Growth 11

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,324,667,000
Total Current Liabilities $1,040,080,000
Long-Term Debt $1,436,746,000
Total Assets $4,605,064,000
Intangible Assets $1,399,632,000
Total Liabilities $2,974,337,000
Shares Outstanding (Diluted Average) 131,350,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.98
Dec2017 $0.02
Dec2016 $1.01
Dec2015 $1.93
Dec2014 $3.72
Dec2013 $3.41
Dec2012 $2.84
Dec2011 $2.55
Dec2010 $2.29
Dec2009 $2.53
Dec2008 $2.58
Dec2007 $1.49
Dec2006 $0.67
Dec2005 $0.10
Dec2004 $0.16
Dec2003 $0.27
Dec2002 $0.16
Dec2001 -$0.14
Dec2000 $0.12
Dec1999 $0.11
Dec1998 $0.41

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.04
Dec2017 $1.39
Dec2016 $2.24
Dec2015 $2.87
Dec2014 $3.21
Dec2013 $2.88
Dec2012 $2.59
Dec2011 $2.41
Dec2010 $2.20
Dec2009 $1.93
Dec2008 $1.42
Dec2007 $0.73
Dec2006 $0.33
Dec2005 $0.14
Dec2004 $0.15
Dec2003 $0.13
Dec2002 $0.08

Recommended Reading:

Other ModernGraham posts about the company

Flowserve Corp Valuation – February 2018 $FLS
Flowserve Corporation Valuation – May 2016 $FLS
11 Best Stocks For Value Investors This Week – 11/21/15
Flowserve Corp Valuation – November 2015 Update $FLS
The Best Companies of the Construction Industry – October 2015

Other ModernGraham posts about related companies

Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ
Aecon Group Inc Valuation – July 2018 $TSE:ARE

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.

Home Depot Inc Valuation – November 2018 $HD

Company Profile (excerpt from Reuters): The Home Depot, Inc. (The Home Depot), incorporated on June 29, 1978, is a home improvement retailer. The Company sells an assortment of building materials, home improvement products, and lawn and garden products, and provides various services. The Home Depot stores averaged approximately 104,000 square feet of enclosed space, with over 24,000 additional square feet of outside garden area, as of January 29, 2017. The Home Depot stores serve three primary customer groups: do-it-yourself (DIY) customers, do-it-for-me (DIFM) customers and professional customers. The Company had approximately 2,278 stores located throughout the United States, including the Commonwealth of Puerto Rico and the territories of the United States Virgin Islands and Guam, Canada and Mexico, as of January 29, 2017.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HD – November 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $202,535,298,071 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.09 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 288.26% Pass
6. Moderate PEmg Ratio PEmg < 20 23.52 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 153.02 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.09 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 14.46 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.53
MG Growth Estimate 15.00%
MG Value $289.75
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $109.13
MG Value based on 0% Growth $63.97
Market Implied Growth Rate 7.51%
Current Price $177.02
% of Intrinsic Value 61.09%

Home Depot Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.64 in 2015 to an estimated $7.53 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.51% 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 Home Depot Inc revealed the company was trading above its Graham Number of $16.6. The company pays a dividend of $3.56 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 23.52, which was above the industry average of 20.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-21.1.

Home Depot Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$21.10
Graham Number $16.60
PEmg 23.52
Current Ratio 1.09
PB Ratio 153.02
Current Dividend $3.56
Dividend Yield 2.01%
Number of Consecutive Years of Dividend Growth 8

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 10/1/2018
Total Current Assets $19,809,000,000
Total Current Liabilities $18,196,000,000
Long-Term Debt $23,332,000,000
Total Assets $45,200,000,000
Intangible Assets $2,258,000,000
Total Liabilities $43,880,000,000
Shares Outstanding (Diluted Average) 1,141,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.75
Jan2018 $7.29
Jan2017 $6.45
Jan2016 $5.46
Jan2015 $4.71
Jan2014 $3.76
Jan2013 $3.00
Jan2012 $2.47
Jan2011 $2.01
Jan2010 $1.57
Jan2009 $1.34
Jan2008 $2.37
Jan2007 $2.79
Jan2006 $2.72
Jan2005 $2.26
Jan2004 $1.88
Jan2003 $1.56
Jan2002 $1.29
Jan2001 $1.10
Jan2000 $1.00
Jan1999 $0.71

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.53
Jan2018 $6.12
Jan2017 $5.25
Jan2016 $4.39
Jan2015 $3.64
Jan2014 $2.92
Jan2013 $2.36
Jan2012 $2.01
Jan2011 $1.86
Jan2010 $1.91
Jan2009 $2.15
Jan2008 $2.50
Jan2007 $2.46
Jan2006 $2.18
Jan2005 $1.81
Jan2004 $1.51
Jan2003 $1.26

Recommended Reading:

Other ModernGraham posts about the company

Home Depot Inc Valuation – February 2018 $HD
Home Depot Inc Valuation – February 2017 $HD
Home Depot Inc. Valuation – November 2015 Update $HD
30 Companies in the Spotlight This Week – 11/15/14
Home Depot Inc. Annual Valuation – 2014 $HD

Other ModernGraham posts about related companies

Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ
Aecon Group Inc Valuation – July 2018 $TSE:ARE
Aecom Valuation – July 2018 $ACM

Disclaimer:

The author held a long position in HD 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.

Cavco Industries Inc Valuation – September 2018 $CVCO

Company Profile (excerpt from Reuters): Cavco Industries, Inc., incorporated on January 14, 2003, designs and produces factory-built homes. The Company operates through two segments: factory-built housing, which includes wholesale and retail systems-built housing operations, and financial services, which includes manufactured housing consumer finance and insurance. The Company’s factory-built homes are primarily distributed through a network of independent and the Company-owned retailers, planned community operators and residential developers. The Company markets its products under the brands, including Cavco Homes, Fleetwood Homes, Palm Harbor Homes, Fairmont Homes and Chariot Eagle. The Company is also a builder of park model recreational vehicle (RVs), vacation cabins and systems-built commercial structures, as well as modular homes built primarily under the Nationwide Homes brand.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CVCO – September 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,291,046,820 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.44 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 771.15% Pass
6. Moderate PEmg Ratio PEmg < 20 44.84 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.92 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.44 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.13 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.63
MG Growth Estimate 15.00%
MG Value $216.93
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $81.70
MG Value based on 0% Growth $47.89
Market Implied Growth Rate 18.17%
Current Price $252.65
% of Intrinsic Value 116.46%

Cavco Industries, 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, and the high PEmg and PB ratios. 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 Overvalued after growing its EPSmg (normalized earnings) from $1.86 in 2015 to an estimated $5.63 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 18.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Cavco Industries, Inc. revealed the company was trading above its Graham Number of $90.95. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 44.84, which was above the industry average of 25.8. Finally, the company was trading above its Net Current Asset Value (NCAV) of $22.81.

Cavco Industries, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $22.81
Graham Number $90.95
PEmg 44.84
Current Ratio 2.44
PB Ratio 4.92
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $429,237,000
Total Current Liabilities $175,626,000
Long-Term Debt $33,884,000
Total Assets $693,561,000
Intangible Assets $82,936,000
Total Liabilities $217,874,000
Shares Outstanding (Diluted Average) 9,267,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.27
Mar2018 $6.68
Mar2017 $4.17
Mar2016 $3.15
Mar2015 $2.64
Mar2014 $1.94
Mar2013 $0.71
Mar2012 $2.19
Mar2011 $0.41
Mar2010 -$0.52
Mar2009 $0.07
Mar2008 $0.95
Mar2007 $1.74
Mar2006 $2.23
Mar2005 $1.54
Mar2004 $0.97

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.63
Mar2018 $4.45
Mar2017 $3.06
Mar2016 $2.38
Mar2015 $1.86
Mar2014 $1.29
Mar2013 $0.84
Mar2012 $0.81
Mar2011 $0.25
Mar2010 $0.42
Mar2009 $1.02
Mar2008 $1.50
Mar2007 $1.61
Mar2006 $1.35
Mar2005 $0.77
Mar2004 $0.32

Recommended Reading:

Other ModernGraham posts about the company

6 Best Stocks for Value Investors This Week – 3/26/17
Cavco Industries Inc Valuation – Initial Coverage $CVCO

Other ModernGraham posts about related companies

LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ
Aecon Group Inc Valuation – July 2018 $TSE:ARE
Aecom Valuation – July 2018 $ACM
Lowe’s Companies Inc Valuation – June 2018 $LOW

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.

LGI Homes Inc Valuation – September 2018 $LGIH

Company Profile (excerpt from Reuters): LGI Homes, Inc., incorporated on June 26, 2013, is a homebuilder and land developer. The Company is engaged in the design, construction, marketing and sale of new homes in markets in Texas, Arizona, Florida, Georgia, New Mexico, South Carolina, North Carolina, Colorado, Washington and Tennessee. The Company operates through five segments: the Texas division, the Southwest division, the Southeast division, the Florida division and the Northwest division. The Texas division includes homebuilding operations in Houston, Dallas/Fort Worth, San Antonio and Austin locations. The Southwest division includes homebuilding operations in Phoenix, Tucson, Albuquerque, Denver and Colorado Springs locations. The Southeast division includes homebuilding operations in Atlanta, Charlotte and Nashville locations. The Florida division includes homebuilding operations in Tampa, Orlando, Fort Myers and Jacksonville locations. The Northwest division includes homebuilding operations in Seattle location.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LGIH – September 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,307,283,805 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.21 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 47733.33% Pass
6. Moderate PEmg Ratio PEmg < 20 13.01 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.21 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.10 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.43
MG Growth Estimate 15.00%
MG Value $170.45
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $64.20
MG Value based on 0% Growth $37.63
Market Implied Growth Rate 2.26%
Current Price $57.60
% of Intrinsic Value 33.79%

LGI Homes Inc is suitable for the Enterprising Investor but not 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 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 $0.74 in 2014 to an estimated $4.43 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.26% 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 LGI Homes Inc revealed the company was trading above its Graham Number of $55.97. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 13.01, which was below the industry average of 25.8, 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 $21.67.

LGI Homes Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $21.67
Graham Number $55.97
PEmg 13.01
Current Ratio 2.21
PB Ratio 2.53
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $1,172,890,000
Total Current Liabilities $529,853,000
Long-Term Debt $67,235,000
Total Assets $1,199,919,000
Intangible Assets $12,018,000
Total Liabilities $631,237,000
Shares Outstanding (Diluted Average) 25,001,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.21
Dec2017 $4.73
Dec2016 $3.41
Dec2015 $2.44
Dec2014 $1.33
Dec2013 $0.34
Dec2012 $1.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.43
Dec2017 $3.17
Dec2016 $2.17
Dec2015 $1.38
Dec2014 $0.74
Dec2013 $0.39
Dec2012 $0.35

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for Value Investors with a Low Beta – July 2017
Stocks Trading Closest to Net Current Asset Value – April 2017
Best Stocks Below Their Graham Number – March 2017
5 Best Stocks for Value Investors This Week – 3/18/17
LGI Homes Inc Valuation – Initial Coverage $LGIH

Other ModernGraham posts about related companies

Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ
Aecon Group Inc Valuation – July 2018 $TSE:ARE
Aecom Valuation – July 2018 $ACM
Lowe’s Companies Inc Valuation – June 2018 $LOW
Acuity Brands Inc Valuation – June 2018 $AYI
Quanta Services Inc Valuation – May 2018 $PWR

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.

Stantec Inc Valuation – August 2018 $TSE-STN

Company Profile (excerpt from Reuters): Stantec Inc. is a provider of professional services in the area of infrastructure and facilities for clients in the public and private sectors. The Company’s operates through four segments Consulting Services-Canada, Consulting Services-United States, Consulting Services-Global and Construction Services. The Company’s services include engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, construction services, project management, and project economics, from initial project concept and planning through to design, construction, commissioning, maintenance, decommissioning and remediation. The Company provides professional consulting services in engineering, architecture, interior design, landscape architecture, surveying, environmental services, project management and project economics in the area of infrastructure and facilities, principally under fee-for-service agreements with clients.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-STN – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,760,000,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.69 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 125.73% Pass
6. Moderate PEmg Ratio PEmg < 20 23.44 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.90 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.22 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.40
MG Growth Estimate 0.70%
MG Value $13.90
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $20.35
MG Value based on 0% Growth $11.93
Market Implied Growth Rate 7.47%
Current Price $32.90
% of Intrinsic Value 236.76%

Stantec Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.34 in 2014 to an estimated $1.4 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.47% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Stantec Inc. revealed the company was trading above its Graham Number of $25.88. The company pays a dividend of $0.5 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 23.44, which was below the industry average of 24.98, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.86.

Stantec Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.86
Graham Number $25.88
PEmg 23.44
Current Ratio 1.69
PB Ratio 1.90
Current Dividend $0.50
Dividend Yield 1.52%
Number of Consecutive Years of Dividend Growth 6

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 6/1/2018
Total Current Assets $1,721,600,000
Total Current Liabilities $1,019,100,000
Long-Term Debt $860,300,000
Total Assets $4,141,000,000
Intangible Assets $1,909,800,000
Total Liabilities $2,162,100,000
Shares Outstanding (Diluted Average) 113,988,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.79
Dec2017 $0.85
Dec2016 $1.22
Dec2015 $1.65
Dec2014 $1.74
Dec2013 $1.57
Dec2012 $1.32
Dec2011 $0.07
Dec2010 $1.03
Dec2009 $0.61
Dec2008 $0.32
Dec2007 $0.75
Dec2006 $0.66
Dec2005 $0.50
Dec2004 $0.40
Dec2003 $0.33
Dec2002 $0.28
Dec2001 $0.22
Dec2000 $0.18
Dec1999 $0.14
Dec1998 $0.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.40
Dec2017 $1.28
Dec2016 $1.49
Dec2015 $1.51
Dec2014 $1.34
Dec2013 $1.07
Dec2012 $0.77
Dec2011 $0.51
Dec2010 $0.71
Dec2009 $0.56
Dec2008 $0.53
Dec2007 $0.60
Dec2006 $0.49
Dec2005 $0.39
Dec2004 $0.32
Dec2003 $0.26
Dec2002 $0.21

Recommended Reading:

Other ModernGraham posts about the company

Stantec Inc Valuation – Initial Coverage $TSE:STN

Other ModernGraham posts about related companies

Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ
Aecon Group Inc Valuation – July 2018 $TSE:ARE
Aecom Valuation – July 2018 $ACM
Lowe’s Companies Inc Valuation – June 2018 $LOW
Acuity Brands Inc Valuation – June 2018 $AYI
Quanta Services Inc Valuation – May 2018 $PWR

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.

Simpson Manufacturing Co Inc Valuation – August 2018 $SSD

Company Profile (excerpt from Reuters): Simpson Manufacturing Co., Inc., incorporated on February 23, 1999, through its subsidiary, Simpson Strong-Tie Company Inc. (SST), designs, engineers and manufactures wood construction products, including connectors, truss plates, fastening systems, fasteners and pre-fabricated lateral systems used in light-frame construction. The Company’s segments are North America, Europe, Asia/Pacific, and Administrative & All Other. The North America segment includes operations primarily in the United States and Canada. The Europe segment includes operations primarily in France, the United Kingdom, Germany, Denmark, Switzerland, Portugal, Poland, the Netherlands and Belgium. The Asia/Pacific segment includes operations primarily in Australia, New Zealand, South Africa, China, Taiwan, and Vietnam.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SSD – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,375,258,071 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.81 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 257.22% Pass
6. Moderate PEmg Ratio PEmg < 20 34.31 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.76 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.81 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.12
MG Growth Estimate 14.95%
MG Value $81.39
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $30.73
MG Value based on 0% Growth $18.01
Market Implied Growth Rate 12.90%
Current Price $72.71
% of Intrinsic Value 89.33%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.06 in 2014 to an estimated $2.12 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 12.9% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Simpson Manufacturing Co, Inc. revealed the company was trading above its Graham Number of $35.02. The company pays a dividend of $0.81 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 34.31, which was above the industry average of 24.98. Finally, the company was trading above its Net Current Asset Value (NCAV) of $9.81.

Simpson Manufacturing Co, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $9.81
Graham Number $35.02
PEmg 34.31
Current Ratio 3.81
PB Ratio 3.76
Current Dividend $0.81
Dividend Yield 1.11%
Number of Consecutive Years of Dividend Growth 4

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 6/1/2018
Total Current Assets $640,166,000
Total Current Liabilities $167,992,000
Long-Term Debt $0
Total Assets $1,085,887,000
Intangible Assets $163,159,000
Total Liabilities $182,085,000
Shares Outstanding (Diluted Average) 46,677,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.88
Dec2017 $1.94
Dec2016 $1.86
Dec2015 $1.38
Dec2014 $1.29
Dec2013 $1.05
Dec2012 $0.87
Dec2011 $1.04
Dec2010 $0.58
Dec2009 $0.25
Dec2008 $1.10
Dec2007 $1.40
Dec2006 $2.10
Dec2005 $2.02
Dec2004 $1.67
Dec2003 $1.21
Dec2002 $1.05
Dec2001 $0.82
Dec2000 $0.80
Dec1999 $0.79
Dec1998 $0.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.12
Dec2017 $1.66
Dec2016 $1.44
Dec2015 $1.20
Dec2014 $1.06
Dec2013 $0.88
Dec2012 $0.79
Dec2011 $0.79
Dec2010 $0.81
Dec2009 $1.07
Dec2008 $1.54
Dec2007 $1.73
Dec2006 $1.80
Dec2005 $1.55
Dec2004 $1.25
Dec2003 $1.01
Dec2002 $0.88

Recommended Reading:

Other ModernGraham posts about the company

5 Best Stocks for Value Investors This Week – 2/18/17
Simpson Manufacturing Co Valuation – February 2017 $SSD

Other ModernGraham posts about related companies

KBR Inc Valuation – August 2018 $KBR
KB Home Valuation – August 2018 $KBH
SNC-Lavalin Group Inc Valuation – August 2018 $TSE:SNC
Stella-Jones Inc Valuation – July 2018 $TSE-SJ
Aecon Group Inc Valuation – July 2018 $TSE:ARE
Aecom Valuation – July 2018 $ACM
Lowe’s Companies Inc Valuation – June 2018 $LOW
Acuity Brands Inc Valuation – June 2018 $AYI
Quanta Services Inc Valuation – May 2018 $PWR
Mohawk Industries Inc Valuation – May 2018 $MHK

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.

Back To Top