Seven Generations Energy Ltd Valuation – Initial Coverage $TSE:VII

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 Seven Generations Energy Ltd (TSE:VII) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Seven Generations Energy Ltd. is a Canada-based natural gas developer. The Company focuses on exploration, development and production of oil and natural gas properties in western Canada. The Company focuses on the acquisition, development and value optimization of tight and shale hydrocarbon resource plays. The Company focuses on Montney Kakwa River Project, which is located approximately 100 kilometers south of its operations in Grande Prairie, Alberta. The Kakwa River Project covers an area of approximately 544,000 net acres in the Kakwa area of northwest Alberta. The Company’s natural gas production is processed at its Lator 1 Plant, Lator 2 Plant and Cutbank Plant, as well as at the Kakwa River Gas Plant. The Company’s processing capacity at its Lator 1 Plant and Lator 2 Plant combined is approximately 260 million cubic feet per day (MMcf/d). The Company has an inventory of over 80 wells at various stages of construction and approximately 230 Montney horizontal wells.

 

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Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-VII – September 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 $6,773,177,276 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.69 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -366.67% Fail
6. Moderate PEmg Ratio PEmg < 20 119.94 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.64 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 6.84 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $0.16
MG Growth Estimate 15.00%
MG Value $6.13
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $2.31
MG Value based on 0% Growth $1.35
Market Implied Growth Rate 55.72%
Current Price $19.11
% of Intrinsic Value 311.53%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.03 in 2013 to an estimated $0.16 for 2017.  This level of demonstrated earnings growth does not support the market’s implied estimate of 55.72% 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 Seven Generations Energy Ltd revealed the company was trading above its Graham Number of $13.66.  The company does not pay a dividend.  Its PEmg (price over earnings per share – ModernGraham) was 119.94, which was above the industry average of 63.11.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.97.

Seven Generations Energy Ltd 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) -$5.97
Graham Number $13.66
PEmg 119.94
Current Ratio 1.69
PB Ratio 1.64
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $733,200,000
Total Current Liabilities $434,500,000
Long-Term Debt $2,041,900,000
Total Assets $7,172,000,000
Intangible Assets $0
Total Liabilities $2,914,200,000
Shares Outstanding (Diluted Average) 365,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.76
Dec2016 -$0.09
Dec2015 -$0.75
Dec2014 $0.64
Dec2013 -$0.08

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.16
Dec2016 -$0.11
Dec2015 -$0.10
Dec2014 $0.19
Dec2013 -$0.03

Recommended Reading:

Other ModernGraham posts about the company

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

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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.

ONEOK Inc Valuation – March 2018 $OKE

Company Profile (excerpt from Reuters): ONEOK, Inc., incorporated on May 16, 1997, is an energy midstream service provider in the United States. The Company owns and operates natural gas liquids (NGL) systems, and is engaged in the gathering, processing, storage and transportation of natural gas. The Company’s operations include a 38,000-mile integrated network of NGL and natural gas pipelines, processing plants, fractionators and storage facilities in the Mid-Continent, Williston, Permian and Rocky Mountain regions. The Company operates through three business segments. The Natural Gas Gathering and Processing segment provides midstream services to contracted producers in North Dakota, Montana, Wyoming, Kansas and Oklahoma. The Natural Gas Liquids segment owns and operates facilities that gather, fractionate, treat and distribute NGLs and store NGL products primarily in the Mid-Continental, Permian Basin and the Rocky Mountain regions. The Natural Gas Pipelines segment provides transportation and storage services to end users.

OKE Chart

OKE data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of OKE – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,389,721,549 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.66 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 15.33% Fail
6. Moderate PEmg Ratio PEmg < 20 32.74 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.00 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 0.66 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -8.96 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 $1.74
MG Growth Estimate 2.35%
MG Value $22.95
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $25.23
MG Value based on 0% Growth $14.79
Market Implied Growth Rate 12.12%
Current Price $56.96
% of Intrinsic Value 248.15%

ONEOK, 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, and the 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 Overvalued after growing its EPSmg (normalized earnings) from $1.5 in 2014 to an estimated $1.74 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.12% 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 ONEOK, Inc. revealed the company was trading above its Graham Number of $27.88. The company pays a dividend of $2.72 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 32.74, which was below the industry average of 104.43, 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 $-24.62.

ONEOK, 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) -$24.62
Graham Number $27.88
PEmg 32.74
Current Ratio 0.66
PB Ratio 4.00
Current Dividend $2.72
Dividend Yield 4.78%
Number of Consecutive Years of Dividend Growth 15

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $1,764,458,000
Total Current Liabilities $2,667,335,000
Long-Term Debt $8,091,629,000
Total Assets $16,845,937,000
Intangible Assets $993,460,000
Total Liabilities $11,318,070,000
Shares Outstanding (Diluted Average) 388,073,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.43
Dec2017 $1.29
Dec2016 $1.66
Dec2015 $1.16
Dec2014 $1.49
Dec2013 $1.27
Dec2012 $1.71
Dec2011 $1.68
Dec2010 $1.55
Dec2009 $1.44
Dec2008 $1.48
Dec2007 $1.40
Dec2006 $1.34
Dec2005 $2.53
Dec2004 $1.15
Dec2003 $0.61
Dec2002 $0.70
Dec2001 $0.43
Dec2000 $0.62
Aug1999 $0.56
Aug1998 $0.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.74
Dec2017 $1.39
Dec2016 $1.44
Dec2015 $1.38
Dec2014 $1.50
Dec2013 $1.52
Dec2012 $1.62
Dec2011 $1.55
Dec2010 $1.47
Dec2009 $1.50
Dec2008 $1.55
Dec2007 $1.52
Dec2006 $1.48
Dec2005 $1.39
Dec2004 $0.78
Dec2003 $0.59
Dec2002 $0.58

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – March 2015
28 Companies in the Spotlight This Week – 2/28/15
OneOK Inc. Annual Valuation – 2015 $OKE
16 Companies in the Spotlight This Week – 3/1/14
OneOK Inc. (OKE) Annual Valuation

Other ModernGraham posts about related companies

Marathon Oil Corp Valuation – March 2018 $MRO
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Cimarex Energy Co Valuation – Initial Coverage $XEC
EQT Corporation Valuation – March 2018 $EQT
Helmerich & Payne Inc Valuation – March 2018 $HP
Chesapeake Energy Corp Valuation – March 2018 $CHK
Williams Companies Inc Valuation – March 2018 $WMB
Exxon Mobil Corp Valuation – February 2018 $XOM
Chevron Corp Valuation – February 2018 $CVX
Seven Generations Energy Ltd Valuation – Initial Coverage $TSE:VII

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.

Marathon Oil Corp Valuation – March 2018 $MRO

Company Profile (excerpt from Reuters): Marathon Oil Corporation, incorporated on May 30, 2001, is an exploration and production (E&P) company. The Company operates through three segments: North America E&P, International E&P and Oil Sands Mining. The North America E&P segment explores for, produces and markets crude oil and condensate, natural gas liquids (NGLs) and natural gas in North America. The International E&P segment explores for, produces and markets crude oil and condensate, NGLs and natural gas outside of North America, and produces and markets products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol, in Equatorial Guinea (E.G.). The Oil Sands Mining segment mines, extracts and transports bitumen from oil sands deposits in Alberta, Canada, and upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil.

MRO Chart

MRO data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MRO – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,824,028,886 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 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 -195.31% Fail
6. Moderate PEmg Ratio PEmg < 20 -6.63 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.18 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 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.19 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 -$2.45
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$35.58
MG Value based on 0% Growth -$20.86
Market Implied Growth Rate -7.56%
Current Price $16.27
% of Intrinsic Value N/A

Marathon Oil 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 and PB ratios. 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 $3.38 in 2014 to an estimated $-2.45 for 2018. This level of negative earnings does not support a positive valuation.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 Marathon Oil revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.2 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was -6.63, which was below the industry average of 104.43, 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 $-9.1.

Marathon Oil scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.10
Graham Number $0.00
PEmg -6.63
Current Ratio 1.30
PB Ratio 1.18
Current Dividend $0.20
Dividend Yield 1.23%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $2,566,000,000
Total Current Liabilities $1,968,000,000
Long-Term Debt $5,494,000,000
Total Assets $22,012,000,000
Intangible Assets $115,000,000
Total Liabilities $10,304,000,000
Shares Outstanding (Diluted Average) 850,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.00
Dec2017 -$6.73
Dec2016 -$2.61
Dec2015 -$3.26
Dec2014 $4.46
Dec2013 $2.47
Dec2012 $2.23
Dec2011 $4.13
Dec2010 $3.61
Dec2009 $2.06
Dec2008 $4.95
Dec2007 $5.69
Dec2006 $7.25
Dec2005 $4.22
Dec2004 $1.86
Dec2003 $2.13
Dec2002 $0.83
Dec2001 $0.53
Dec2000 $0.68
Dec1999 $0.87
Dec1998 $0.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.45
Dec2017 -$2.83
Dec2016 -$0.37
Dec2015 $1.17
Dec2014 $3.38
Dec2013 $2.86
Dec2012 $3.17
Dec2011 $3.79
Dec2010 $3.98
Dec2009 $4.39
Dec2008 $5.30
Dec2007 $5.06
Dec2006 $4.25
Dec2005 $2.47
Dec2004 $1.47
Dec2003 $1.18
Dec2002 $0.72

Recommended Reading:

Other ModernGraham posts about the company

18 Companies in the Spotlight This Week – 3/21/15
Marathon Oil Corporation Annual Valuation – 2015 $MRO
19 Companies in the Spotlight This Week – 3/15/14
Marathon Oil Corp (MRO) Annual Valuation

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Chesapeake Energy Corp Valuation – March 2018 $CHK
Williams Companies Inc Valuation – March 2018 $WMB
Exxon Mobil Corp Valuation – February 2018 $XOM
Chevron Corp Valuation – February 2018 $CVX
Seven Generations Energy Ltd Valuation – Initial Coverage $TSE:VII
Pioneer Natural Resources Valuation – September 2017 $PXD
Gulfport Energy Corp Valuation – Initial Coverage $GPOR
Schlumberger Limited Valuation – July 2017 $SLB

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.

Hess Corp Valuation – March 2018 $HES

Company Profile (excerpt from Reuters): Hess Corporation, incorporated on February 7, 1920, is an exploration and production company. The Company is engaged in exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids (NGL) and natural gas. The Company’s segments include Exploration and Production, and Bakken Midstream. Its Exploration and Production segment explores for, develops, produces, purchases and sells crude oil, NGLs and natural gas with production operations primarily in the United States, Denmark, the Malaysia/Thailand Joint Development Area (JDA), Malaysia and Norway. The Bakken Midstream segment provides fee-based services, including crude oil and natural gas gathering, processing of natural gas and the fractionation of NGLs, transportation of crude oil by rail car, terminaling and loading crude oil and NGLs, and the storage and terminaling of propane, primarily in the Bakken shale play of North Dakota.

HES Chart

HES data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HES – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,582,549,729 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.53 Pass
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 -364.15% Fail
6. Moderate PEmg Ratio PEmg < 20 -5.20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.40 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.53 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.72 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 -$9.51
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$137.91
MG Value based on 0% Growth -$80.85
Market Implied Growth Rate -6.85%
Current Price $49.46
% of Intrinsic Value N/A

Hess 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 stability or 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 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 $8.75 in 2014 to an estimated $-9.51 for 2018. This level of negative earnings does not support a positive valuation.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 Hess Corp. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was -5.2, which was below the industry average of 104.43, 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 $-18.83.

Hess Corp. 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) -$18.83
Graham Number $0.00
PEmg -5.20
Current Ratio 2.53
PB Ratio 1.40
Current Dividend $1.00
Dividend Yield 2.02%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $6,157,000,000
Total Current Liabilities $2,435,000,000
Long-Term Debt $6,397,000,000
Total Assets $23,112,000,000
Intangible Assets $360,000,000
Total Liabilities $12,061,000,000
Shares Outstanding (Diluted Average) 313,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$3.28
Dec2017 -$13.12
Dec2016 -$19.92
Dec2015 -$10.78
Dec2014 $7.53
Dec2013 $14.82
Dec2012 $5.95
Dec2011 $5.01
Dec2010 $6.47
Dec2009 $2.27
Dec2008 $7.24
Dec2007 $5.74
Dec2006 $6.08
Dec2005 $3.93
Dec2004 $3.19
Dec2003 $2.37
Dec2002 -$0.83
Dec2001 $3.42
Dec2000 $3.79
Dec1999 $1.62
Dec1998 -$1.71

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$9.51
Dec2017 -$9.85
Dec2016 -$5.64
Dec2015 $2.51
Dec2014 $8.75
Dec2013 $8.54
Dec2012 $5.40
Dec2011 $5.20
Dec2010 $5.38
Dec2009 $4.91
Dec2008 $5.90
Dec2007 $4.90
Dec2006 $3.97
Dec2005 $2.75
Dec2004 $2.24
Dec2003 $1.87
Dec2002 $1.50

Recommended Reading:

Other ModernGraham posts about the company

47 Companies in the Spotlight This Week – 5/16/15
Hess Corporation Annual Valuation – 2015 $HES
10 Companies Benjamin Graham Would Invest In Today – May 2015
5 Most Undervalued Companies for the Defensive Investor – April 2015
5 Companies to Research with the Lowest PEmg Ratio for the Defensive Investor – March 2015

Other ModernGraham posts about related companies

EQT Corporation Valuation – March 2018 $EQT
Helmerich & Payne Inc Valuation – March 2018 $HP
Chesapeake Energy Corp Valuation – March 2018 $CHK
Williams Companies Inc Valuation – March 2018 $WMB
Exxon Mobil Corp Valuation – February 2018 $XOM
Chevron Corp Valuation – February 2018 $CVX
Seven Generations Energy Ltd Valuation – Initial Coverage $TSE:VII
Pioneer Natural Resources Valuation – September 2017 $PXD
Gulfport Energy Corp Valuation – Initial Coverage $GPOR
Schlumberger Limited Valuation – July 2017 $SLB

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.

Cimarex Energy Co Valuation – Initial Coverage $XEC

Company Profile (excerpt from Reuters): Cimarex Energy Co., incorporated on February 14, 2002, is an independent oil and gas exploration and production company. The Company operates in exploration and production (E&P) segment. The Company’s operations are located mainly in Oklahoma, Texas and New Mexico. The Company’s E&P activities take place primarily in two areas: the Permian Basin and the Mid-Continent region. Its Permian Basin region encompasses west Texas and southeast New Mexico. Its Mid-Continent region consists of Oklahoma and the Texas Panhandle. As of fiscal year ended December 31, 2016 (fiscal 2016), its activities in the Mid-Continent were focused in the Woodford shale and the Meramec horizon, both in Oklahoma. During fiscal 2016, production from the Mid-Continent averaged 457 millions of cubic feet equivalent (MMcfe) per day, or 47% of total company production.

XEC Chart

XEC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of XEC – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,879,268,868 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.38 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 -33.78% Fail
6. Moderate PEmg Ratio PEmg < 20 -87.22 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.40 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 1.38 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.81 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 -$1.07
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$15.50
MG Value based on 0% Growth -$9.08
Market Implied Growth Rate -47.86%
Current Price $93.21
% of Intrinsic Value N/A

Cimarex Energy Co 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 and PB ratios. 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 $5.81 in 2014 to an estimated $-1.07 for 2018. This level of negative earnings does not support a positive valuation.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 Cimarex Energy Co revealed the company was trading above its Graham Number of $55.95. The company pays a dividend of $0.32 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was -87.22, which was below the industry average of 104.43, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.43.

Cimarex Energy Co 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) -$16.43
Graham Number $55.95
PEmg -87.22
Current Ratio 1.38
PB Ratio 3.40
Current Dividend $0.32
Dividend Yield 0.34%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $935,635,000
Total Current Liabilities $679,574,000
Long-Term Debt $1,486,920,000
Total Assets $5,042,639,000
Intangible Assets $620,232,000
Total Liabilities $2,474,361,000
Shares Outstanding (Diluted Average) 93,641,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.17
Dec2017 $5.19
Dec2016 -$4.38
Dec2015 -$27.75
Dec2014 $6.00
Dec2013 $6.47
Dec2012 $4.07
Dec2011 $6.15
Dec2010 $6.70
Dec2009 -$3.82
Dec2008 -$11.22
Dec2007 $4.09
Dec2006 $4.11
Dec2005 $4.90
Dec2004 $3.59
Dec2003 $2.22
Dec2002 $1.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.07
Dec2017 -$3.76
Dec2016 -$6.53
Dec2015 -$5.40
Dec2014 $5.81
Dec2013 $5.11
Dec2012 $3.08
Dec2011 $1.85
Dec2010 -$0.21
Dec2009 -$2.57
Dec2008 -$0.93
Dec2007 $4.07
Dec2006 $3.78
Dec2005 $3.21
Dec2004 $2.05
Dec2003 $1.09
Dec2002 $0.44

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

EQT Corporation Valuation – March 2018 $EQT
Helmerich & Payne Inc Valuation – March 2018 $HP
Chesapeake Energy Corp Valuation – March 2018 $CHK
Williams Companies Inc Valuation – March 2018 $WMB
Exxon Mobil Corp Valuation – February 2018 $XOM
Chevron Corp Valuation – February 2018 $CVX
Seven Generations Energy Ltd Valuation – Initial Coverage $TSE:VII
Pioneer Natural Resources Valuation – September 2017 $PXD
Gulfport Energy Corp Valuation – Initial Coverage $GPOR
Schlumberger Limited Valuation – July 2017 $SLB

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.

EQT Corporation Valuation – March 2018 $EQT

Company Profile (excerpt from Reuters): EQT Corporation (EQT), incorporated on June 10, 2008, is a natural gas company. The Company operates through three segments: EQT Production, EQT Gathering and EQT Transmission. EQT Production is a natural gas producer in the Appalachian Basin. EQT Gathering and EQT Transmission provide gathering, transmission and storage services for the Company’s produced gas, as well as for independent third parties across the Appalachian Basin.

EQT Chart

EQT data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EQT – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,829,588,036 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.94 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 6.55% Fail
6. Moderate PEmg Ratio PEmg < 20 22.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.84 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 -105.86 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 $2.18
MG Growth Estimate -0.80%
MG Value $15.05
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $31.65
MG Value based on 0% Growth $18.55
Market Implied Growth Rate 6.86%
Current Price $48.51
% of Intrinsic Value 322.31%

EQT Corporation 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 $2.31 in 2014 to an estimated $2.18 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.86% 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 EQT Corporation revealed the company was trading above its Graham Number of $33.84. The company pays a dividend of $0.12 per share, for a yield of 0.2% Its PEmg (price over earnings per share – ModernGraham) was 22.23, which was below the industry average of 104.43, 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 $-65.34.

EQT Corporation 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) -$65.34
Graham Number $33.84
PEmg 22.23
Current Ratio 0.94
PB Ratio 0.84
Current Dividend $0.12
Dividend Yield 0.25%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $1,163,055,000
Total Current Liabilities $1,232,237,000
Long-Term Debt $7,323,555,000
Total Assets $29,522,604,000
Intangible Assets $2,735,086,000
Total Liabilities $16,202,986,000
Shares Outstanding (Diluted Average) 230,192,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.01
Dec2017 $8.04
Dec2016 -$2.71
Dec2015 $0.56
Dec2014 $2.54
Dec2013 $2.57
Dec2012 $1.22
Dec2011 $3.19
Dec2010 $1.57
Dec2009 $1.19
Dec2008 $2.00
Dec2007 $2.10
Dec2006 $1.80
Dec2005 $2.10
Dec2004 $2.22
Dec2003 $1.34
Dec2002 $1.14
Dec2001 $1.13
Dec2000 $0.80
Dec1999 $0.51
Dec1998 -$0.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.18
Dec2017 $2.58
Dec2016 $0.18
Dec2015 $1.75
Dec2014 $2.31
Dec2013 $2.11
Dec2012 $1.86
Dec2011 $2.13
Dec2010 $1.64
Dec2009 $1.73
Dec2008 $2.01
Dec2007 $1.99
Dec2006 $1.86
Dec2005 $1.79
Dec2004 $1.53
Dec2003 $1.12
Dec2002 $0.90

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – May 2015
47 Companies in the Spotlight This Week – 5/16/15
EQT Corporation Annual Valuation – 2015 $EQT
58 Companies in the Spotlight This Week – 1/31/15
EQT Corporation Quarterly Valuation – January 2015 $EQT

Other ModernGraham posts about related companies

Helmerich & Payne Inc Valuation – March 2018 $HP
Chesapeake Energy Corp Valuation – March 2018 $CHK
Williams Companies Inc Valuation – March 2018 $WMB
Exxon Mobil Corp Valuation – February 2018 $XOM
Chevron Corp Valuation – February 2018 $CVX
Seven Generations Energy Ltd Valuation – Initial Coverage $TSE:VII
Pioneer Natural Resources Valuation – September 2017 $PXD
Gulfport Energy Corp Valuation – Initial Coverage $GPOR
Schlumberger Limited Valuation – July 2017 $SLB
Tesco Corporation (USA) Valuation – Initial Coverage $TESO

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.

Helmerich & Payne Inc Valuation – March 2018 $HP

Company Profile (obtained from Marketwatch): Helmerich & Payne, Inc. engages in contract drilling of oil and gas well. It operates through the following segments: U.S. Land, Offshore, and International Land. The U.S. Land segment operates its drilling business primarily in Oklahoma, California, Texas, Wyoming, Colorado, Louisiana, Mississippi, Pennsylvania, Ohio, Utah, New Mexico, Montana, North Dakota, West Virginia and Nevada. The Offshore segment conducts its business in the Gulf of Mexico and Equatorial Guinea. The International Land segment operates in six international locations including Ecuador, Colombia, Argentina, Bahrain, United Arab Emirates, and Mozambique. The company was founded by Walter Helmerich II and William Payne in 1920 and is headquartered in Tulsa, OK.

HP Chart

HP data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HP – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,033,884,725 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.28 Pass
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 -124.91% Fail
6. Moderate PEmg Ratio PEmg < 20 175.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.54 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.28 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.61 Pass
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 $0.37
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $5.34
MG Value based on 0% Growth $3.13
Market Implied Growth Rate 83.54%
Current Price $64.61
% of Intrinsic Value N/A

Helmerich & Payne, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding 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 $5.65 in 2014 to an estimated $0.37 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 83.54% 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 Helmerich & Payne, Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $2.8 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 175.57, which was above the industry average of 104.43. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.55.

Helmerich & Payne, 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) -$5.55
Graham Number $0.00
PEmg 175.57
Current Ratio 3.28
PB Ratio 1.54
Current Dividend $2.80
Dividend Yield 4.33%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $1,166,346,000
Total Current Liabilities $355,762,000
Long-Term Debt $493,168,000
Total Assets $6,362,096,000
Intangible Assets $147,983,000
Total Liabilities $1,771,746,000
Shares Outstanding (Diluted Average) 109,095,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.44
Sep2017 -$1.20
Sep2016 -$0.54
Sep2015 $3.85
Sep2014 $6.44
Sep2013 $6.79
Sep2012 $5.34
Sep2011 $3.99
Sep2010 $1.45
Sep2009 $3.31
Sep2008 $4.34
Sep2007 $4.27
Sep2006 $2.77
Sep2005 $1.23
Sep2004 $0.05
Sep2003 $0.18
Sep2002 $0.53
Sep2001 $0.79
Sep2000 $0.82
Sep1999 $0.43
Sep1998 $1.00

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.37
Sep2017 $1.54
Sep2016 $3.40
Sep2015 $5.34
Sep2014 $5.65
Sep2013 $4.90
Sep2012 $3.86
Sep2011 $3.24
Sep2010 $2.99
Sep2009 $3.57
Sep2008 $3.31
Sep2007 $2.43
Sep2006 $1.32
Sep2005 $0.58
Sep2004 $0.33
Sep2003 $0.50
Sep2002 $0.68

Recommended Reading:

Other ModernGraham posts about the company

Helmerich & Payne Inc Valuation – November 2015 Update $HP
Dividend Growth Stocks for the Intelligent Investor – November 2015
10 Undervalued Companies for the Defensive Dividend Stock Investor – November 2015
10 Companies Benjamin Graham Would Invest In Today – October 2015
Dividend Growth Stocks for the Intelligent Investor – October 2015

Other ModernGraham posts about related companies

Williams Companies Inc Valuation – March 2018 $WMB
Exxon Mobil Corp Valuation – February 2018 $XOM
Chevron Corp Valuation – February 2018 $CVX
Seven Generations Energy Ltd Valuation – Initial Coverage $TSE:VII
Pioneer Natural Resources Valuation – September 2017 $PXD
Gulfport Energy Corp Valuation – Initial Coverage $GPOR
Schlumberger Limited Valuation – July 2017 $SLB
Tesco Corporation (USA) Valuation – Initial Coverage $TESO
Southwestern Energy Company Valuation – July 2017 $SWN
Apache Corp Valuation – April 2017 $APA

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.

Chesapeake Energy Corp Valuation – March 2018 $CHK

Company Profile (obtained from Marketwatch): Chesapeake Energy Corp. engages as a natural gas and oil exploration and production company. It operates through the following segments: Exploration and Production; and Marketing, Gathering and Compression. The Exploration and Production segment focuses on finding and producing natural gas, oil and natural gas liquids. The Marketing, Gathering, and Compression segment deals with the marketing, gathering, and compression of natural gas, oil, and natural gas liquids primarily from Chesapeake-operated wells. The company was founded by Aubrey K. McClendon and Tom L. Ward on May 18, 1989 and is headquartered in Oklahoma City, OK.

CHK Chart

CHK data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CHK – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,753,318,242 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.65 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 6.33% Fail
6. Moderate PEmg Ratio PEmg < 20 -0.81 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -5.50 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 0.65 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.94 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$3.73
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$54.03
MG Value based on 0% Growth -$31.67
Market Implied Growth Rate -4.66%
Current Price $3.03
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1 in 2014 to an estimated $-3.73 for 2018. This level of negative earnings does not support a positive valuation.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 Chesapeake Energy Corporation revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -0.81, which was below the industry average of 104.43, 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 $-12.66.

Chesapeake Energy Corporation 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) -$12.66
Graham Number $0.00
PEmg -0.81
Current Ratio 0.65
PB Ratio -5.50
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $1,525,000,000
Total Current Liabilities $2,356,000,000
Long-Term Debt $9,921,000,000
Total Assets $12,425,000,000
Intangible Assets $0
Total Liabilities $12,921,000,000
Shares Outstanding (Diluted Average) 900,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.49
Dec2017 $0.90
Dec2016 -$6.43
Dec2015 -$22.26
Dec2014 $1.87
Dec2013 $0.73
Dec2012 -$1.46
Dec2011 $2.32
Dec2010 $2.51
Dec2009 -$9.57
Dec2008 $0.93
Dec2007 $2.62
Dec2006 $4.35
Dec2005 $2.51
Dec2004 $1.53
Dec2003 $1.21
Dec2002 $0.17
Dec2001 $1.25
Dec2000 $3.01
Dec1999 $0.16
Dec1998 $3.01

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$3.73
Dec2017 -$5.57
Dec2016 -$7.71
Dec2015 -$6.82
Dec2014 $1.00
Dec2013 $0.01
Dec2012 -$0.58
Dec2011 -$0.17
Dec2010 -$0.89
Dec2009 -$1.67
Dec2008 $2.32
Dec2007 $2.82
Dec2006 $2.60
Dec2005 $1.59
Dec2004 $1.23
Dec2003 $1.11
Dec2002 $1.21

Recommended Reading:

Other ModernGraham posts about the company

58 Companies in the Spotlight This Week – 1/31/15
Chesapeake Energy Corporation Annual Valuation – 2015 $CHK
14 Companies in the Spotlight This Week – 1/11/14
ModernGraham Valuation: Chesapeake Energy Corp (CHK)

Other ModernGraham posts about related companies

Williams Companies Inc Valuation – March 2018 $WMB
Exxon Mobil Corp Valuation – February 2018 $XOM
Chevron Corp Valuation – February 2018 $CVX
Seven Generations Energy Ltd Valuation – Initial Coverage $TSE:VII
Pioneer Natural Resources Valuation – September 2017 $PXD
Gulfport Energy Corp Valuation – Initial Coverage $GPOR
Schlumberger Limited Valuation – July 2017 $SLB
Tesco Corporation (USA) Valuation – Initial Coverage $TESO
Southwestern Energy Company Valuation – July 2017 $SWN
Apache Corp Valuation – April 2017 $APA

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.

Williams Companies Inc Valuation – March 2018 $WMB

Company Profile (obtained from Marketwatch): The Williams Cos., Inc. operates as an integrated natural gas company that explores, produces, transports, sells and processes natural gas and petroleum products. It operates through three segments: Williams Partners, Williams NGL & Petchem Services and Others. The Williams Partners segment includes gas pipeline and domestic midstream businesses. The gas pipeline business includes interstate natural gas pipelines and pipeline joint venture investments, and the midstream business provides natural gas gathering, treating and processing services; NGL production, fractionation, storage, marketing and transportation and deepwater production handling and crude oil transportation services. The Williams NGL & Petchem Services comprises Texas belle pipeline and certain other domestic olefins pipeline assets and certain canadian growth projects under development, including a propane dehydrogenation facility and a liquids extraction plant. The Other segment comprises of corporate operations and Canadian construction services company. The company was founded in 1908 by David Williams and Miller Williams and is headquartered in Tulsa, OK.

WMB Chart

WMB data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WMB – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,148,904,604 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.82 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 -426.32% Fail
6. Moderate PEmg Ratio PEmg < 20 34.09 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.41 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 0.82 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -43.76 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 $0.82
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $11.91
MG Value based on 0% Growth $6.98
Market Implied Growth Rate 12.80%
Current Price $28.00
% of Intrinsic Value N/A

Williams Companies Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the 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 $1.37 in 2014 to an estimated $0.82 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.8% 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 Williams Companies Inc revealed the company was trading above its Graham Number of $10.63. The company pays a dividend of $1.2 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 34.09, which was below the industry average of 104.43, 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 $-41.61.

Williams Companies 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) -$41.61
Graham Number $10.63
PEmg 34.09
Current Ratio 0.82
PB Ratio 2.41
Current Dividend $1.20
Dividend Yield 4.29%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $2,179,000,000
Total Current Liabilities $2,646,000,000
Long-Term Debt $20,434,000,000
Total Assets $46,352,000,000
Intangible Assets $8,791,000,000
Total Liabilities $36,696,000,000
Shares Outstanding (Diluted Average) 829,622,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.43
Dec2017 $2.62
Dec2016 -$0.57
Dec2015 -$0.76
Dec2014 $2.92
Dec2013 $0.62
Dec2012 $1.37
Dec2011 $0.63
Dec2010 -$1.88
Dec2009 $0.49
Dec2008 $2.40
Dec2007 $1.63
Dec2006 $0.51
Dec2005 $0.53
Dec2004 $0.31
Dec2003 -$1.01
Dec2002 -$1.64
Dec2001 -$0.95
Dec2000 $1.17
Dec1999 $0.35
Dec1998 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.82
Dec2017 $1.00
Dec2016 $0.37
Dec2015 $0.87
Dec2014 $1.37
Dec2013 $0.48
Dec2012 $0.47
Dec2011 $0.24
Dec2010 $0.24
Dec2009 $1.23
Dec2008 $1.43
Dec2007 $0.76
Dec2006 $0.13
Dec2005 -$0.22
Dec2004 -$0.54
Dec2003 -$0.78
Dec2002 -$0.50

Recommended Reading:

Other ModernGraham posts about the company

34 Companies in the Spotlight This Week – 2/7/15
Williams Companies Annual Valuation – 2015 $WMB
15 Companies in the Spotlight This Week – 2/1/14
Williams Companies (WMB) Annual Valuation

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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.

Exxon Mobil Corp Valuation – February 2018 $XOM

Company Profile (obtained from Marketwatch): Exxon Mobil Corp. engages in the exploration, development, and distribution of oil, gas, and petroleum products. It operates through the following segments: Upstream, Downstream, and Chemical. The Upstream segment produces crude oil and natural gas. The Downstream segment manufactures and trades petroleum products. The Chemical segment offers petrochemicals. The company was founded by John D. Rockefeller in 1882 and is headquartered in Irving, TX.

XOM Chart

XOM data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of XOM – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $328,502,862,703 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.85 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 -50.69% Fail
6. Moderate PEmg Ratio PEmg < 20 19.55 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.82 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 0.85 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.10 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 $3.97
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $57.51
MG Value based on 0% Growth $33.71
Market Implied Growth Rate 5.52%
Current Price $77.53
% of Intrinsic Value N/A

Exxon Mobil Corporation 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 $7.82 in 2013 to an estimated $3.97 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.52% 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 Exxon Mobil Corporation revealed the company was trading above its Graham Number of $56.92. The company pays a dividend of $2.98 per share, for a yield of 3.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.55, which was below the industry average of 63.11, 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 $-28.42.

Exxon Mobil Corporation 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) -$28.42
Graham Number $56.92
PEmg 19.55
Current Ratio 0.85
PB Ratio 1.82
Current Dividend $2.98
Dividend Yield 3.84%
Number of Consecutive Years of Dividend Growth 14

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 9/1/2017
Total Current Assets $45,752,000,000
Total Current Liabilities $53,777,000,000
Long-Term Debt $24,869,000,000
Total Assets $349,427,000,000
Intangible Assets $0
Total Liabilities $167,151,000,000
Shares Outstanding (Diluted Average) 4,271,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.57
Dec2016 $1.88
Dec2015 $3.85
Dec2014 $7.60
Dec2013 $7.37
Dec2012 $9.70
Dec2011 $8.42
Dec2010 $6.22
Dec2009 $3.98
Dec2008 $8.66
Dec2007 $7.26
Dec2006 $6.62
Dec2005 $5.71
Dec2004 $3.89
Dec2003 $3.23
Dec2002 $1.68
Dec2001 $2.21
Dec2000 $2.52
Dec1999 $1.13
Dec1998 $1.14
Dec1997 $1.69

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.97
Dec2016 $4.80
Dec2015 $6.64
Dec2014 $7.98
Dec2013 $7.82
Dec2012 $7.83
Dec2011 $6.90
Dec2010 $6.28
Dec2009 $6.35
Dec2008 $7.17
Dec2007 $6.06
Dec2006 $5.05
Dec2005 $3.96
Dec2004 $2.96
Dec2003 $2.38
Dec2002 $1.88
Dec2001 $1.90

Recommended Reading:

Other ModernGraham posts about the company

Most Overvalued Stocks of the S&P 500 – March 2017
5 Overvalued Dow Components – February 2017
Exxon Mobil Corp Valuation – February 2017 $XOM
5 Overvalued Dow Components – December 2016
Exxon Mobil Corporation Valuation – August 2016 $XOM

Other ModernGraham posts about related companies

Seven Generations Energy Ltd Valuation – Initial Coverage $TSE:VII
Pioneer Natural Resources Valuation – September 2017 $PXD
Gulfport Energy Corp Valuation – Initial Coverage $GPOR
Schlumberger Limited Valuation – July 2017 $SLB
Tesco Corporation (USA) Valuation – Initial Coverage $TESO
Southwestern Energy Company Valuation – July 2017 $SWN
Apache Corp Valuation – April 2017 $APA
Anadarko Petroleum Co Valuation – April 2017 $APC
Cenovus Energy Inc Valuation – Initial Coverage $TSE:CVE
Cabot Oil & Gas Corp Valuation – March 2017 $COG

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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