Textron Inc Valuation – January 2019 $TXT

Company Profile (excerpt from Reuters): Textron Inc., incorporated on July 31, 1967, is a multi-industry company engaged in aircraft, defense, industrial and finance businesses to provide customers with products and services across the world. The Company operates through five segments: Textron Aviation, Bell, Textron Systems, Industrial and Finance.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TXT – 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 $11,701,001,722 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.06 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 891.58% Pass
6. Moderate PEmg Ratio PEmg < 20 15.69 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.17 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 2.06 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.06 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 $3.07
MG Growth Estimate 12.07%
MG Value $100.14
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $44.50
MG Value based on 0% Growth $26.08
Market Implied Growth Rate 3.60%
Current Price $48.16
% of Intrinsic Value 48.09%

Textron Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.7 in 2014 to an estimated $3.07 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.6% 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 Textron Inc. revealed the company was trading above its Graham Number of $48.04. The company pays a dividend of $0.08 per share, for a yield of 0.2% Its PEmg (price over earnings per share – ModernGraham) was 15.69, which was below the industry average of 47.17, 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 $-8.3.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.30
Graham Number $48.04
PEmg 15.69
Current Ratio 2.06
PB Ratio 2.17
Current Dividend $0.08
Dividend Yield 0.17%
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 9/1/2018
Total Current Assets $7,055,000,000
Total Current Liabilities $3,423,000,000
Long-Term Debt $3,857,000,000
Total Assets $14,669,000,000
Intangible Assets $2,209,000,000
Total Liabilities $9,126,000,000
Shares Outstanding (Diluted Average) 249,378,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.75
Dec2017 $1.14
Dec2016 $3.53
Dec2015 $2.50
Dec2014 $2.13
Dec2013 $1.75
Dec2012 $2.00
Dec2011 $0.79
Dec2010 $0.28
Dec2009 -$0.12
Dec2008 $1.94
Dec2007 $3.60
Dec2006 $2.31
Dec2005 $0.75
Dec2004 $1.31
Dec2003 $0.95
Dec2002 -$0.45
Dec2001 $0.58
Dec2000 $0.75
Dec1999 $1.91
Dec1998 $1.37

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.07
Dec2017 $2.22
Dec2016 $2.64
Dec2015 $2.07
Dec2014 $1.70
Dec2013 $1.30
Dec2012 $1.05
Dec2011 $0.81
Dec2010 $1.08
Dec2009 $1.56
Dec2008 $2.26
Dec2007 $2.20
Dec2006 $1.33
Dec2005 $0.76
Dec2004 $0.72
Dec2003 $0.54
Dec2002 $0.50

Recommended Reading:

Other ModernGraham posts about the company

Textron Inc Valuation – March 2018 $TXT
5 Undervalued Stocks for Value Investors with a High Beta – December 2016
12 Best Stocks For Value Investors This Week – 7/1/16
Textron Inc Valuation – June 2016 $TXT
13 Best Stocks For Value Investors This Week – 12/12/15

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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.

Textron Inc Valuation – March 2018 $TXT

Company Profile (excerpt from Reuters): Textron Inc., incorporated on July 31, 1967, is a multi-industry company engaged in aircraft, defense, industrial and finance businesses to provide customers with products and services across the world. The Company operates through five segments: Textron Aviation, Bell, Textron Systems, Industrial and Finance.

TXT Chart

TXT data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TXT – 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 $15,400,049,240 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.97 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 704.21% Pass
6. Moderate PEmg Ratio PEmg < 20 23.77 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.77 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 1.97 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.10 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 $2.48
MG Growth Estimate 6.83%
MG Value $54.87
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $35.89
MG Value based on 0% Growth $21.04
Market Implied Growth Rate 7.63%
Current Price $58.83
% of Intrinsic Value 107.22%

Textron Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and 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 $1.7 in 2014 to an estimated $2.48 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.63% 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 Textron Inc. revealed the company was trading above its Graham Number of $37.99. The company pays a dividend of $0.08 per share, for a yield of 0.1% Its PEmg (price over earnings per share – ModernGraham) was 23.77, which was below the industry average of 44.37, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.34.

Textron 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) -$9.34
Graham Number $37.99
PEmg 23.77
Current Ratio 1.97
PB Ratio 2.77
Current Dividend $0.08
Dividend Yield 0.14%
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 $7,210,000,000
Total Current Liabilities $3,660,000,000
Long-Term Debt $3,898,000,000
Total Assets $15,340,000,000
Intangible Assets $3,129,000,000
Total Liabilities $9,693,000,000
Shares Outstanding (Diluted Average) 265,798,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.97
Dec2017 $1.14
Dec2016 $3.53
Dec2015 $2.50
Dec2014 $2.13
Dec2013 $1.75
Dec2012 $2.00
Dec2011 $0.79
Dec2010 $0.28
Dec2009 -$0.12
Dec2008 $1.94
Dec2007 $3.60
Dec2006 $2.31
Dec2005 $0.75
Dec2004 $1.31
Dec2003 $0.95
Dec2002 -$0.45
Dec2001 $0.58
Dec2000 $0.75
Dec1999 $1.91
Dec1998 $1.37

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.48
Dec2017 $2.22
Dec2016 $2.64
Dec2015 $2.07
Dec2014 $1.70
Dec2013 $1.30
Dec2012 $1.05
Dec2011 $0.81
Dec2010 $1.08
Dec2009 $1.56
Dec2008 $2.26
Dec2007 $2.20
Dec2006 $1.33
Dec2005 $0.76
Dec2004 $0.72
Dec2003 $0.54
Dec2002 $0.50

Recommended Reading:

Other ModernGraham posts about the company

13 Best Stocks For Value Investors This Week – 12/12/15
Textron Inc Valuation – December 2015 Update $TXT
19 Best Stocks For Value Investors This Week – 8/29/15
Textron Inc. Analysis – August 2015 Update $TXT
The 12 Best Stocks For Value Investors This Week – 5/30/15

Other ModernGraham posts about related companies

Lockheed Martin Corp Valuation – February 2018 $LMT
United Technologies Corp Valuation – February 2018 $UTX
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General Dynamics Corp Valuation – March 2017 $GD
TASER International Inc Valuation – Initial Coverage $TASR
Cubic Corporation Valuation – Initial Coverage $CUB
Northrop Grumman Corp Valuation – February 2017 $NOC
Rockwell Collins Inc Valuation – January 2017 $COL
Raytheon Company Valuation – August 2016 $RTN

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.

Textron Inc Valuation – June 2016 $TXT

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Textron Inc (TXT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Textron Inc. is a multi-industry company engaged in aircraft, defense, industrial and finance businesses to provide customers with products and services across the world. The Company operates through five segments: Textron Aviation, Bell, Textron Systems, Industrial and Finance. Textron Aviation manufactures, sells and services Beechcraft and Cessna aircraft, and services the Hawker brand of business jets. Bell Helicopter is a supplier of military and commercial helicopters, tiltrotor aircraft, and related spare parts and services in the world. Textron Systems segment’s product lines consist of unmanned aircraft systems, marine and land systems, weapons and sensors, and simulation, training and other defense and aviation mission support products and services. The Industrial segment designs and manufactures a range of products under three principal product lines. The Finance segment provides financing to purchasers of Textron Aviation aircraft and Bell helicopters.

[level-free]

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of TXT – June 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,678,944,461 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.75 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 33.15% Fail
6. Moderate PEmg Ratio PEmg < 20 15.44 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.97 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 1.75 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.27 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

TXT value chart May 2016

EPSmg $2.33
MG Growth Estimate 15.00%
MG Value $89.55
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $33.73
MG Value based on 0% Growth $19.77
Market Implied Growth Rate 3.47%
Current Price $35.91
% of Intrinsic Value 40.10%

Textron Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.05 in 2012 to an estimated $2.33 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.47% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

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

Stage 3: Information for Further Research

TXT charts June 2016

Net Current Asset Value (NCAV) -$12.15
Graham Number $32.81
PEmg 15.44
Current Ratio 1.75
PB Ratio 1.97
Current Dividend $0.08
Dividend Yield 0.22%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $6,792,000,000
Total Current Liabilities $3,877,000,000
Long-Term Debt $3,688,000,000
Total Assets $15,099,000,000
Intangible Assets $2,114,000,000
Total Liabilities $10,110,000,000
Shares Outstanding (Diluted Average) 273,022,000

Earnings Per Share History

Next Fiscal Year Estimate $2.60
Dec2015 $2.50
Dec2014 $2.13
Dec2013 $1.75
Dec2012 $2.00
Dec2011 $0.79
Dec2010 $0.28
Dec2009 -$0.12
Dec2008 $1.95
Dec2007 $3.60
Dec2006 $2.31
Dec2005 $0.75
Dec2004 $1.31
Dec2003 $0.95
Dec2002 -$0.45
Dec2001 $0.58
Dec2000 $0.75
Dec1999 $7.24
Dec1998 $1.84
Dec1997 $1.65
Dec1996 $0.74

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.33
Dec2015 $2.07
Dec2014 $1.70
Dec2013 $1.30
Dec2012 $1.05
Dec2011 $0.81
Dec2010 $1.09
Dec2009 $1.56
Dec2008 $2.26
Dec2007 $2.20
Dec2006 $1.33
Dec2005 $0.76
Dec2004 $0.72
Dec2003 $0.89
Dec2002 $1.24
Dec2001 $2.20
Dec2000 $2.82

Recommended Reading:

Other ModernGraham posts about the company

13 Best Stocks For Value Investors This Week – 12/12/15
Textron Inc Valuation – December 2015 Update $TXT
19 Best Stocks For Value Investors This Week – 8/29/15
Textron Inc. Analysis – August 2015 Update $TXT
The 12 Best Stocks For Value Investors This Week – 5/30/15

Other ModernGraham posts about related companies

Boeing Company Valuation – June 2016 $BA
Textron Inc Valuation – December 2015 Update $TXT
Boeing Company Valuation – November 2015 Update $BA
Textron Inc. Analysis – August 2015 Update $TXT
Boeing Company Analysis – August 2015 Update $BA
Textron Inc. Quarterly Valuation – May 2015 $TXT
Boeing Company Quarterly Valuation – May 2015 $BA
Boeing Company Quarterly Valuation – February 2015 $BA
Textron Inc. Quarterly Valuation – February 2015 $TXT
Boeing Company Quarterly Valuation – November 2014 $BA

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.

Textron Inc Valuation – December 2015 Update $TXT

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Textron Inc (TXT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Textron Inc. is a multi-industry company engaged in aircraft, defense, industrial and finance businesses to provide customers with products and services worldwide. It operates in five segments: Textron Aviation, Bell, Textron Systems, Industrial and Finance. Textron Aviation manufactures, sells and services Beechcraft and Cessna aircraft, and services the Hawker brand of business jets. Bell Helicopter is a supplier of military and commercial helicopters, tiltrotor aircraft, and related spare parts and services in the world. Textron Systems’ product lines consist of unmanned aircraft systems, marine and land systems, weapons and sensors, simulation, training and other defense and aviation mission support products and services. The Industrial segment designs and manufactures a range of products under three principal product lines. The Finance segment provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters.

[level-free]

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of TXT – December 2015

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,365,247,021 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.61 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 -19.36% Fail
6. Moderate PEmg Ratio PEmg < 20 19.92 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.42 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.32 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

TXT value Chart December 2015

EPSmg $2.05
MG Growth Estimate 15.00%
MG Value $79.08
Opinion Undervalued
MG Value based on 3% Growth $29.78
MG Value based on 0% Growth $17.46
Market Implied Growth Rate 5.71%
Current Price $40.92
% of Intrinsic Value 51.75%

Textron Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, and the insufficient earnings growth or stability over the last ten years.  The Enterprising Investor is only initially concerned by the level of debt relative to the net current assets . As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.81 in 2011 to an estimated $2.05 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.71% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Textron Inc (TXT)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

TXT Charts December 2015

Net Current Asset Value (NCAV) -$12.46
Graham Number $30.75
PEmg 19.92
Current Ratio 1.61
PB Ratio 2.42
Dividend Yield 0.20%
Number of Consecutive Years of Dividend Growth 0

 

[/level-mg-stocks-screens-subscriber]

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 Sep15
Total Current Assets $6,737,000,000
Total Current Liabilities $4,189,000,000
Long-Term Debt $3,358,000,000
Total Assets $14,898,000,000
Intangible Assets $2,026,000,000
Total Liabilities $10,202,000,000
Shares Outstanding (Diluted Average) 278,039,000

Earnings Per Share History

Next Fiscal Year Estimate $2.45
Dec14 $2.13
Dec13 $1.75
Dec12 $2.00
Dec11 $0.79
Dec10 $0.28
Dec09 -$0.12
Dec08 $1.94
Dec07 $3.60
Dec06 $2.31
Dec05 $0.75
Dec04 $1.31
Dec03 $0.95
Dec02 -$0.45
Dec01 $0.58
Dec00 $0.75
Dec99 $1.91
Dec98 $1.37
Dec97 $1.65
Dec96 $0.74
Dec95 $1.38

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.05
Dec14 $1.70
Dec13 $1.30
Dec12 $1.05
Dec11 $0.81
Dec10 $1.08
Dec09 $1.56
Dec08 $2.26
Dec07 $2.20
Dec06 $1.33
Dec05 $0.76
Dec04 $0.72
Dec03 $0.54
Dec02 $0.50
Dec01 $1.07
Dec00 $1.30
Dec99 $1.52

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 8/29/15
Textron Inc. Analysis – August 2015 Update $TXT
The 12 Best Stocks For Value Investors This Week – 5/30/15
Textron Inc. Quarterly Valuation – May 2015 $TXT
40 Companies in the Spotlight This Week – 2/21/15

Other ModernGraham posts about related companies

Boeing Company Valuation – November 2015 Update $BA
Textron Inc. Analysis – August 2015 Update $TXT
Boeing Company Analysis – August 2015 Update $BA
Textron Inc. Quarterly Valuation – May 2015 $TXT
Boeing Company Quarterly Valuation – May 2015 $BA
Boeing Company Quarterly Valuation – February 2015 $BA
Textron Inc. Quarterly Valuation – February 2015 $TXT
Boeing Company Quarterly Valuation – November 2014 $BA
Textron Inc. Quarterly Valuation – November 2014 $TXT
Boeing Company Quarterly Valuation – August 2014 $BA

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.

Textron Inc. Analysis – August 2015 Update $TXT

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Textron Inc. (TXT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Textron Inc. is a multi-industry company engaged in aircraft, defense, industrial and finance businesses to provide customers with products and services worldwide. It operates in five segments: Textron Aviation, Bell, Textron Systems, Industrial and Finance. Textron Aviation manufactures, sells and services Beechcraft and Cessna aircraft, and services the Hawker brand of business jets. Bell Helicopter is a supplier of military and commercial helicopters, tiltrotor aircraft, and related spare parts and services in the world. Textron Systems’ product lines consist of unmanned aircraft systems, marine and land systems, weapons and sensors, simulation, training and other defense and aviation mission support products and services. The Industrial segment designs and manufactures a range of products under three principal product lines. The Finance segment provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of TXT – August 2015

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 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 Fail
6. Moderate PEmg Ratio PEmg < 20 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 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 2.04
MG Growth Estimate 15.00%
MG Value $78.69
Opinion Undervalued
MG Value based on 3% Growth $29.64
MG Value based on 0% Growth $17.37
Market Implied Growth Rate 5.22%
Current Price $38.70
% of Intrinsic Value 49.18%

Textron Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, and the insufficient earnings stability or growth over the last ten years.  The Enterprising Investor is only initially concerned with the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.81 in 2011 to an estimated $2.04 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.22% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Textron Inc. (TXT)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

TXT charts August 2015

Net Current Asset Value (NCAV) -$12.76
PEmg 18.93
Current Ratio 1.67
PB Ratio 2.35
Dividend Yield 0.21%
Number of Consecutive Years of Dividend Growth 0

 

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Useful Links:

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

Most Recent Balance Sheet Figures

Total Current Assets $6,773,000,000
Total Current Liabilities $4,063,000,000
Long-Term Debt $3,621,000,000
Total Assets $14,948,000,000
Intangible Assets $2,015,000,000
Total Liabilities $10,346,000,000
Shares Outstanding (Diluted Average) 279,935,000

Earnings Per Share History

Next Fiscal Year Estimate $2.42
Dec14 $2.13
Dec13 $1.75
Dec12 $2.00
Dec11 $0.79
Dec10 $0.28
Dec09 -$0.12
Dec08 $1.94
Dec07 $3.60
Dec06 $2.31
Dec05 $0.75
Dec04 $1.31
Dec03 $0.95
Dec02 -$0.45
Dec01 $0.58
Dec00 $0.75
Dec99 $1.91
Dec98 $1.37
Dec97 $1.65
Dec96 $0.74
Dec95 $1.38

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.04
Dec14 $1.70
Dec13 $1.30
Dec12 $1.05
Dec11 $0.81
Dec10 $1.08
Dec09 $1.56
Dec08 $2.26
Dec07 $2.20
Dec06 $1.33
Dec05 $0.76
Dec04 $0.72
Dec03 $0.54
Dec02 $0.50
Dec01 $1.07
Dec00 $1.30
Dec99 $1.52

Recommended Reading:

Other ModernGraham posts about the company

The 12 Best Stocks For Value Investors This Week – 5/30/15
Textron Inc. Quarterly Valuation – May 2015 $TXT
40 Companies in the Spotlight This Week – 2/21/15
Textron Inc. Quarterly Valuation – February 2015 $TXT
30 Companies in the Spotlight This Week – 11/15/14

Other ModernGraham posts about related companies

Boeing Company Analysis – August 2015 Update $BA
Textron Inc. Quarterly Valuation – May 2015 $TXT
Boeing Company Quarterly Valuation – May 2015 $BA
Boeing Company Quarterly Valuation – February 2015 $BA
Textron Inc. Quarterly Valuation – February 2015 $TXT
Boeing Company Quarterly Valuation – November 2014 $BA
Textron Inc. Quarterly Valuation – November 2014 $TXT
Boeing Company Quarterly Valuation – August 2014 $BA
Boeing Company (BA) Quarterly Valuation – May 2014

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.  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.

Textron Inc. Quarterly Valuation – May 2015 $TXT

220px-Textron_logoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – May 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Textron Inc. (TXT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Textron Inc. is a multi-industry company engaged in aircraft, defense, industrial and finance businesses to provide customers with products and services worldwide. It operates in five segments: Cessna, Bell, Textron Systems and Industrial, which represent its manufacturing businesses and Finance, which represents its finance business. Cessna is a general aviation Company with two principal lines of business: aircraft sales and aftermarket services. Bell Helicopter is a supplier of military and commercial helicopters, tiltrotor aircraft and related spare parts and services in the world. Textron Systems is a supplier to the defense, aerospace, homeland security and general aviation markets. Industrial segment designs and manufactures a range of products under three principal product lines. The Company’s Finance segment, or the Finance group, is a commercial finance business that consists of Textron Financial Corporation (TFC) and its consolidated subsidiaries.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $46.35
MG Value $78.95
MG Opinion Undervalued
Value Based on 3% Growth $29.73
Value Based on 0% Growth $17.43
Market Implied Growth Rate 7.05%
Net Current Asset Value (NCAV) -$13.76
PEmg 22.60
Current Ratio 1.74
PB Ratio 2.96

Balance Sheet – March 2015

Current Assets $6,493,000,000
Current Liabilities $3,734,000,000
Total Debt $3,811,000,000
Total Assets $14,738,000,000
Intangible Assets $2,013,000,000
Total Liabilities $10,348,000,000
Outstanding Shares 280,100,000

Earnings Per Share

2015 (estimate) $2.44
2014 $2.13
2013 $1.75
2012 $2.00
2011 $0.79
2010 $0.28
2009 -$0.12
2008 $1.94
2007 $3.60
2006 $2.31
2005 $0.75

Earnings Per Share – ModernGraham

2015 (estimate) $2.05
2014 $1.70
2013 $1.30
2012 $1.05
2011 $0.81
2010 $1.08

Dividend History

Conclusion:

Textron Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios, while the Enterprising Investor is only initially concerned by the level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.81 in 2011 to an estimated $2.05 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 7.05% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Textron Inc. (TXT)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Textron Inc. Quarterly Valuation – February 2015 $TXT

220px-Textron_logoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – February 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Textron Inc. (TXT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Textron Inc. is a multi-industry company engaged in aircraft, defense, industrial and finance businesses to provide customers with products and services worldwide. It operates in five segments: Cessna, Bell, Textron Systems and Industrial, which represent its manufacturing businesses and Finance, which represents its finance business. Cessna is a general aviation Company with two principal lines of business: aircraft sales and aftermarket services. Bell Helicopter is a supplier of military and commercial helicopters, tiltrotor aircraft and related spare parts and services in the world. Textron Systems is a supplier to the defense, aerospace, homeland security and general aviation markets. Industrial segment designs and manufactures a range of products under three principal product lines. The Company’s Finance segment, or the Finance group, is a commercial finance business that consists of Textron Financial Corporation (TFC) and its consolidated subsidiaries.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $44.79
MG Value $43.53
MG Opinion Fairly Valued
Value Based on 3% Growth $24.66
Value Based on 0% Growth $14.46
Market Implied Growth Rate 8.92%
Net Current Asset Value (NCAV) -$14.51
PEmg 26.34
Current Ratio 1.72
PB Ratio 2.93

Balance Sheet – December 2014

Current Assets $6,273,000,000
Current Liabilities $3,638,000,000
Total Debt $2,803,000,000
Total Assets $14,605,000,000
Intangible Assets $2,027,000,000
Total Liabilities $10,333,000,000
Outstanding Shares 279,800,000

Earnings Per Share

2014 $2.13
2013 $1.75
2012 $2.00
2011 $0.79
2010 $0.28
2009 -$0.12
2008 $1.94
2007 $3.60
2006 $2.31
2005 $0.75
2004 $1.31

Earnings Per Share – ModernGraham

2014 $1.70
2013 $1.30
2012 $1.05
2011 $0.81
2010 $1.08
2009 $1.56

Dividend History

Conclusion:

Textron Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, insufficient earnings growth or stability over the last ten years, and the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.08 in 2010 to $1.70 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 8.92% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out previous ModernGraham valuations of Textron Inc. (TXT) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Textron Inc. (TXT)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Textron Inc. (TXT) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Textron Inc. Quarterly Valuation – November 2014 $TXT

220px-Textron_logoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – November 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Textron Inc. (TXT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Textron Inc., is a multi-industry company engaged in aircraft, defense, industrial and finance businesses to provide customers with products and services worldwide. It operates in five segments: Cessna, Bell, Textron Systems and Industrial, which represent its manufacturing businesses, and Finance, which represents its finance business. Cessna is a general aviation company with two principal lines of business: Aircraft sales and aftermarket services. Bell Helicopter is a supplier of military and commercial helicopters, tiltrotor aircraft, and related spare parts and services in the world. Textron Systems is a supplier to the defense, aerospace, homeland security and general aviation markets. Industrial segment designs and manufactures a range of products under three principal product lines. The Company’s Finance segment is a commercial finance business. In July 2014, Textron Inc announced that its TRU Simulation + Training Inc acquired ProFlight, LLC, , a provider of pilot training.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $41.95
MG Value $42.09
MG Opinion Fairly Valued
Value Based on 3% Growth $24.37
Value Based on 0% Growth $14.29
Market Implied Growth Rate 8.23%
Net Current Asset Value (NCAV) -$13.83
PEmg 24.96
Current Ratio 1.61
PB Ratio 2.58

Balance Sheet – September 2014

Current Assets $6,281,000,000
Current Liabilities $3,893,000,000
Total Debt $3,585,000,000
Total Assets $14,739,000,000
Intangible Assets $2,020,000,000
Total Liabilities $10,167,000,000
Outstanding Shares 281,000,000

Earnings Per Share

2014 (estimate) $2.07
2013 $1.75
2012 $2.00
2011 $0.79
2010 $0.28
2009 -$0.12
2008 $1.94
2007 $3.60
2006 $2.31
2005 $0.75
2004 $1.31

Earnings Per Share – ModernGraham

2014 (estimate) $1.68
2013 $1.30
2012 $1.05
2011 $0.81
2010 $1.08
2009 $1.56

Dividend History

Conclusion:

Textron Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability or growth over the last ten years, the low current ratio, and the high PEmg and PB ratios.  The Enterprising Investor is only concerned by the level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.08 in 2010 to an estimated $1.68 for 2014.  This level of demonstrated growth supports than the market’s implied estimate of 8.23% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Textron Inc. (TXT)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Textron Inc. (TXT) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Boeing Co Valuation – April 2019 #BA

Company Profile (excerpt from Reuters): The Boeing Company, incorporated on July 19, 1934, is an aerospace firm. The Company operates in four segments: Commercial Airplanes (BCA); Defense, Space & Security (BDS); Global Services (BGS), and Boeing Capital (BCC).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BA – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $221,355,979,748 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.08 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 236.24% Pass
6. Moderate PEmg Ratio PEmg < 20 25.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 552.21 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 1.08 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.71 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 $15.20
MG Growth Estimate 15.00%
MG Value $585.33
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $220.45
MG Value based on 0% Growth $129.23
Market Implied Growth Rate 8.65%
Current Price $392.11
% of Intrinsic Value 66.99%

Boeing 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, 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 $6.68 in 2015 to an estimated $15.2 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.65% 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 Boeing Co revealed the company was trading above its Graham Number of $15.72. The company pays a dividend of $6.84 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 25.79, which was above the industry average of 24.41. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-50.43.

Boeing 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) -$50.43
Graham Number $15.72
PEmg 25.79
Current Ratio 1.08
PB Ratio 552.21
Current Dividend $6.84
Dividend Yield 1.74%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $87,830,000,000
Total Current Liabilities $81,590,000,000
Long-Term Debt $10,657,000,000
Total Assets $117,359,000,000
Intangible Assets $11,269,000,000
Total Liabilities $116,949,000,000
Shares Outstanding (Diluted Average) 577,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $18.40
Dec2018 $17.85
Dec2017 $13.85
Dec2016 $7.83
Dec2015 $7.44
Dec2014 $7.38
Dec2013 $5.96
Dec2012 $5.11
Dec2011 $5.34
Dec2010 $4.45
Dec2009 $1.84
Dec2008 $3.67
Dec2007 $5.28
Dec2006 $2.85
Dec2005 $3.20
Dec2004 $2.30
Dec2003 $0.89
Dec2002 $0.61
Dec2001 $3.41
Dec2000 $2.44
Dec1999 $2.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $15.20
Dec2018 $12.69
Dec2017 $9.57
Dec2016 $7.21
Dec2015 $6.68
Dec2014 $6.08
Dec2013 $5.13
Dec2012 $4.51
Dec2011 $4.18
Dec2010 $3.60
Dec2009 $3.24
Dec2008 $3.78
Dec2007 $3.53
Dec2006 $2.42
Dec2005 $2.17
Dec2004 $1.74
Dec2003 $1.63

Recommended Reading:

Other ModernGraham posts about the company

Boeing Co Valuation – November 2018 $BA
Boeing Co. Valuation – February 2018 $BA
5 Undervalued Dow Components to Research – March 2017
5 Undervalued Dow Components to Research – February 2017
5 Undervalued Dow Components to Research – December 2016

Other ModernGraham posts about related companies

Boeing Co. Valuation – February 2018 $BA
AAR Corp Valuation – Initial Coverage $AIR
TransDigm Group Inc Valuation – Initial Coverage $TDG
Textron Inc Valuation – June 2016 $TXT
Boeing Company Valuation – June 2016 $BA
Textron Inc Valuation – December 2015 Update $TXT
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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.

Raytheon Co Valuation – March 2019 #RTN

Company Profile (excerpt from Reuters): Raytheon Company, incorporated on December 17, 1953, is a technology company, which specializes in defense and other government markets. The Company develops integrated products, services and solutions in various markets, including sensing; effects; command, control, communications, computers, cyber and intelligence; mission support, and cybersecurity. The Company operates through five segments: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS), and Forcepoint. The Company serves both domestic and international customers, primarily as a prime contractor or subcontractor on a range of defense and related programs for government customers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RTN – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $50,836,887,301 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.46 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 80.90% Pass
6. Moderate PEmg Ratio PEmg < 20 19.17 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.47 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 1.46 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.24 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 $9.40
MG Growth Estimate 6.50%
MG Value $202.10
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $136.26
MG Value based on 0% Growth $79.88
Market Implied Growth Rate 5.33%
Current Price $180.12
% of Intrinsic Value 89.12%

Raytheon Company 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 PB 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 explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $6.56 in 2015 to an estimated $9.4 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 5.33% 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 Raytheon Company revealed the company was trading above its Graham Number of $102.6. The company pays a dividend of $3.47 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 19.17, which was below the industry average of 51.79, 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 $-29.

Raytheon Company 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) -$29.00
Graham Number $102.60
PEmg 19.17
Current Ratio 1.46
PB Ratio 4.47
Current Dividend $3.47
Dividend Yield 1.93%
Number of Consecutive Years of Dividend Growth 14

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $12,136,000,000
Total Current Liabilities $8,288,000,000
Long-Term Debt $4,755,000,000
Total Assets $31,864,000,000
Intangible Assets $15,486,000,000
Total Liabilities $20,392,000,000
Shares Outstanding (Diluted Average) 284,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.50
Dec2018 $10.15
Dec2017 $6.95
Dec2016 $7.55
Dec2015 $6.91
Dec2014 $7.18
Dec2013 $6.16
Dec2012 $5.65
Dec2011 $5.28
Dec2010 $4.88
Dec2009 $4.89
Dec2008 $3.92
Dec2007 $5.79
Dec2006 $2.85
Dec2005 $1.92
Dec2004 $0.94
Dec2003 $0.88
Dec2002 -$1.59
Dec2001 -$2.12
Dec2000 $0.41
Dec1999 $1.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.40
Dec2018 $8.15
Dec2017 $7.08
Dec2016 $6.99
Dec2015 $6.56
Dec2014 $6.20
Dec2013 $5.59
Dec2012 $5.18
Dec2011 $4.95
Dec2010 $4.68
Dec2009 $4.34
Dec2008 $3.74
Dec2007 $3.26
Dec2006 $1.66
Dec2005 $0.71
Dec2004 -$0.03
Dec2003 -$0.42

Recommended Reading:

Other ModernGraham posts about the company

Raytheon Co Valuation – June 2018 $RTN
Raytheon Company Valuation – April 2017 $RTN
Raytheon Company Valuation – August 2016 $RTN
Raytheon Co Valuation – February 2016 $RTN
10 Best Stocks For Value Investors This Week – 10/31/15

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Textron Inc Valuation – January 2019 $TXT
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United Technologies Corp Valuation – November 2018 $UTX
Boeing Co Valuation – November 2018 $BA
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Disclaimer:

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

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