Universal Health Services Inc Valuation – April 2019 #UHS

Company Profile (excerpt from Reuters): Universal Health Services, Inc. is a holding company. The Company’s principal business is owning and operating, through its subsidiaries, acute care hospitals and outpatient facilities, and behavioral healthcare facilities. The Company’s segments include Acute Care Hospital Services, Behavioral Health Services and Other. As of August 1, 2018, the Company owned and/or operated more than 326 inpatient facilities, and 32 outpatient and other facilities, located in 37 states, Washington, District of Columbia, the United Kingdom, Puerto Rico and the United States Virgin Islands. The Company’s hospitals provide a range of services, such as oncology, diagnostic care, coronary care, pediatric services, pharmacy services and/or behavioral health services. As of February 28, 2017, its acute care facilities located in the United States included 26 inpatient acute care hospitals; four free-standing emergency departments, and four outpatient surgery/cancer care centers and one surgical hospital.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of UHS – 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 $12,167,567,641 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 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 136.21% Pass
6. Moderate PEmg Ratio PEmg < 20 15.96 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.27 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.05 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 $8.40
MG Growth Estimate 7.49%
MG Value $197.22
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $121.76
MG Value based on 0% Growth $71.38
Market Implied Growth Rate 3.73%
Current Price $134.03
% of Intrinsic Value 67.96%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.6 in 2015 to an estimated $8.4 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.73% 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 Universal Health Services, Inc. Class B revealed the company was trading above its Graham Number of $112.47. The company pays a dividend of $0.4 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 15.96, which was below the industry average of 47.79, 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 $-41.66.

Universal Health Services, Inc. Class B performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$41.66
Graham Number $112.47
PEmg 15.96
Current Ratio 1.34
PB Ratio 2.27
Current Dividend $0.40
Dividend Yield 0.30%
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 12/1/2018
Total Current Assets $1,937,802,000
Total Current Liabilities $1,448,738,000
Long-Term Debt $3,935,187,000
Total Assets $11,265,480,000
Intangible Assets $3,844,628,000
Total Liabilities $5,799,687,000
Shares Outstanding (Diluted Average) 92,706,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.65
Dec2018 $8.31
Dec2017 $7.81
Dec2016 $7.14
Dec2015 $6.76
Dec2014 $5.42
Dec2013 $5.14
Dec2012 $4.53
Dec2011 $4.04
Dec2010 $2.34
Dec2009 $2.64
Dec2008 $1.96
Dec2007 $1.59
Dec2006 $2.28
Dec2005 $2.00
Dec2004 $1.38
Dec2003 $1.60
Dec2002 $1.37
Dec2001 $0.80
Dec2000 $0.75
Dec1999 $0.61

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.40
Dec2018 $7.54
Dec2017 $6.92
Dec2016 $6.25
Dec2015 $5.60
Dec2014 $4.78
Dec2013 $4.22
Dec2012 $3.54
Dec2011 $2.87
Dec2010 $2.24
Dec2009 $2.16
Dec2008 $1.89
Dec2007 $1.83
Dec2006 $1.87
Dec2005 $1.59
Dec2004 $1.32
Dec2003 $1.20

Recommended Reading:

Other ModernGraham posts about the company

Universal Health Services Inc Valuation – June 2018 $UHS
Universal Health Services Inc Valuation – August 2017 $UHS
Universal Health Services Inc Valuation – August 2016 $UHS
Universal Health Services Inc. Analysis – Initial Coverage $UHS

Other ModernGraham posts about related companies

Dentsply Sirona Inc Valuation – March 2019 #XRAY
McKesson Corp Valuation – March 2019 #MCK
IDEXX Laboratories Inc Valuation – March 2019 #IDXX
Hologic Inc Valuation – March 2019 #HOLX
Mettler-Toledo International Inc Valuation – March 2019 #MTD
DaVita Inc Valuation – March 2019 #DVA
Danaher Corp Valuation – March 2019 #DHR
Agilent Technologies Inc Valuation – March 2019 #A
ResMed Inc Valuation – March 2019 #RMD
Cooper Companies Inc Valuation – March 2019 #COO

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.

Universal Health Services Inc Valuation – June 2018 $UHS

Company Profile (excerpt from Reuters): Universal Health Services, Inc., incorporated on January 8, 1979, is a holding company. The Company’s principal business is owning and operating, through its subsidiaries, acute care hospitals and outpatient facilities, and behavioral healthcare facilities. The Company’s segments include Acute Care Hospital Services, Behavioral Health Services and Other. As of February 28, 2017, the Company owned and/or operated 319 inpatient facilities, and 33 outpatient and other facilities, located in 37 states, Washington, District of Columbia, the United Kingdom, Puerto Rico and the United States Virgin Islands. As of February 28, 2017, the Company’s acute care facilities located in the United States included 26 inpatient acute care hospitals; four free-standing emergency departments, and four outpatient surgery/cancer care centers and one surgical hospital. As of February 28, 2017, the Company’s behavioral healthcare facilities included 189 inpatient behavioral healthcare facilities and 20 outpatient behavioral healthcare facilities located in the United States; 100 inpatient behavioral healthcare facilities and two outpatient behavioral healthcare facilities located in the United Kingdom, and four inpatient behavioral healthcare facilities and two outpatient behavioral healthcare facilities located in Puerto Rico and the United States Virgin Islands.

UHS Chart

UHS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of UHS – June 2018

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,686,605,970 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.19 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 166.52% Pass
6. Moderate PEmg Ratio PEmg < 20 14.37 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.01 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 1.19 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 12.44 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.80
MG Growth Estimate 9.50%
MG Value $214.56
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $113.15
MG Value based on 0% Growth $66.33
Market Implied Growth Rate 2.94%
Current Price $112.14
% of Intrinsic Value 52.27%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.78 in 2014 to an estimated $7.8 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.94% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Universal Health Services, Inc. Class B revealed the company was trading above its Graham Number of $104.07. The company pays a dividend of $0.4 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 14.37, which was below the industry average of 46.81, 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 $-40.69.

Universal Health Services, Inc. Class B performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$40.69
Graham Number $104.07
PEmg 14.37
Current Ratio 1.19
PB Ratio 2.01
Current Dividend $0.40
Dividend Yield 0.36%
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 3/1/2018
Total Current Assets $1,884,726,000
Total Current Liabilities $1,579,577,000
Long-Term Debt $3,795,087,000
Total Assets $11,023,517,000
Intangible Assets $3,843,126,000
Total Liabilities $5,737,495,000
Shares Outstanding (Diluted Average) 94,683,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.09
Dec2017 $7.81
Dec2016 $7.14
Dec2015 $6.76
Dec2014 $5.42
Dec2013 $5.14
Dec2012 $4.53
Dec2011 $4.04
Dec2010 $2.34
Dec2009 $2.64
Dec2008 $1.96
Dec2007 $1.59
Dec2006 $2.28
Dec2005 $2.00
Dec2004 $1.38
Dec2003 $1.60
Dec2002 $1.37
Dec2001 $0.80
Dec2000 $0.75
Dec1999 $0.61
Dec1998 $0.60

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.80
Dec2017 $6.92
Dec2016 $6.25
Dec2015 $5.60
Dec2014 $4.78
Dec2013 $4.22
Dec2012 $3.54
Dec2011 $2.87
Dec2010 $2.24
Dec2009 $2.16
Dec2008 $1.89
Dec2007 $1.83
Dec2006 $1.87
Dec2005 $1.59
Dec2004 $1.32
Dec2003 $1.20
Dec2002 $0.94

Recommended Reading:

Other ModernGraham posts about the company

Universal Health Services Inc Valuation – August 2017 $UHS
Universal Health Services Inc Valuation – August 2016 $UHS
Universal Health Services Inc. Analysis – Initial Coverage $UHS

Other ModernGraham posts about related companies

Dentsply Sirona Inc Valuation – June 2018 $XRAY
IDEXX Laboratories Inc Valuation – June 2018 $IDXX
Hologic Inc Valuation – June 2018 $HOLX
Mettler-Toledo International Inc Valuation – June 2018 $MTD
Envision Healthcare Corp Valuation – June 2018 $EVHC
DaVita Inc Valuation – June 2018 $DVA
Danaher Corp Valuation – May 2018 $DHR
Agilent Technologies Inc Valuation – May 2018 $A
Cooper Companies Inc Valuation – May 2018 $COO
Edwards Lifesciences Corp Valuation – May 2018 $EW

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.

Universal Health Services Inc Valuation – August 2017 $UHS

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 Universal Health Services Inc (UHS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Universal Health Services, Inc. is a holding company. The Company’s principal business is owning and operating, through its subsidiaries, acute care hospitals and outpatient facilities, and behavioral healthcare facilities. The Company’s segments include Acute Care Hospital Services, Behavioral Health Services and Other. As of February 28, 2017, the Company owned and/or operated 319 inpatient facilities, and 33 outpatient and other facilities, located in 37 states, Washington, District of Columbia, the United Kingdom, Puerto Rico and the United States Virgin Islands. The Company’s hospitals provide a range of services, such as oncology, diagnostic care, coronary care, pediatric services, pharmacy services and/or behavioral health services. As of February 28, 2017, its acute care facilities located in the United States included 26 inpatient acute care hospitals; four free-standing emergency departments, and four outpatient surgery/cancer care centers and one surgical hospital.

UHS Chart

UHS data by YCharts

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

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of UHS – August 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,381,065,518 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.33 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 215.99% Pass
6. Moderate PEmg Ratio PEmg < 20 15.50 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.19 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 1.33 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.05 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $7.00
MG Growth Estimate 9.89%
MG Value $197.91
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $101.47
MG Value based on 0% Growth $59.48
Market Implied Growth Rate 3.50%
Current Price $108.48
% of Intrinsic Value 54.81%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.22 in 2013 to an estimated $7 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.5% 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 Universal Health Services, Inc. revealed the company was trading above its Graham Number of $92.07.  The company pays a dividend of $0.4 per share, for a yield of 0.4%  Its PEmg (price over earnings per share – ModernGraham) was 15.5, which was below the industry average of 37.66, 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 $-40.98.

Universal Health Services, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$40.98
Graham Number $92.07
PEmg 15.50
Current Ratio 1.33
PB Ratio 2.19
Current Dividend $0.40
Dividend Yield 0.37%
Number of Consecutive Years of Dividend Growth 3

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $1,763,160,000
Total Current Liabilities $1,322,229,000
Long-Term Debt $3,988,912,000
Total Assets $10,552,487,000
Intangible Assets $3,803,386,000
Total Liabilities $5,739,633,000
Shares Outstanding (Diluted Average) 97,042,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.03
Dec2016 $7.14
Dec2015 $6.76
Dec2014 $5.42
Dec2013 $5.14
Dec2012 $4.53
Dec2011 $4.04
Dec2010 $2.34
Dec2009 $2.64
Dec2008 $1.96
Dec2007 $1.59
Dec2006 $2.28
Dec2005 $2.00
Dec2004 $1.38
Dec2003 $1.60
Dec2002 $1.37
Dec2001 $0.80
Dec2000 $0.75
Dec1999 $0.61
Dec1998 $0.60
Dec1997 $0.51

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.00
Dec2016 $6.25
Dec2015 $5.60
Dec2014 $4.78
Dec2013 $4.22
Dec2012 $3.54
Dec2011 $2.87
Dec2010 $2.24
Dec2009 $2.16
Dec2008 $1.89
Dec2007 $1.83
Dec2006 $1.87
Dec2005 $1.59
Dec2004 $1.32
Dec2003 $1.20
Dec2002 $0.94
Dec2001 $0.70

Recommended Reading:

Other ModernGraham posts about the company

Universal Health Services Inc. Analysis – Initial Coverage $UHS

Other ModernGraham posts about related companies

Telefex Inc Valuation – Initial Coverage $TFX
BIO-TECHNE Corp Valuation – Initial Coverage $TECH
LifePoint Health Inc Valuation – Initial Coverage $LPNT
Psychemedics Corp Valuation – April 2017 $PMD
Community Health Systems Valuation – Initial Coverage $CYH
Patterson Companies Inc Valuation – April 2017 $PDCO
Luminex Corp Valuation – Initial Coverage $LMNX
C R Bard Inc Valuation – March 2017 $BCR
LHC Group Inc Valuation – Initial Coverage $LHCG
Dentsply Sirona Inc Valuation – March 2017 $XRAY

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.

Universal Health Services Inc Valuation – August 2016 $UHS

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Universal Health Services Inc (UHS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Universal Health Services, Inc. is a holding company. The Company, through its subsidiaries, is engaged in owning and operating acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers and radiation oncology centers. Its segment is acute care hospital services and behavioral healthcare services. The Other segment includes centralized services, including information services, purchasing, reimbursement, accounting, taxation, legal, advertising, design and construction and patient accounting, as well as the operating results for its other entities, including outpatient surgery and radiation centers. Its services include general and specialty surgery, internal medicine, obstetrics, radiology, oncology, diagnostic care, coronary care, pediatric services and pharmacy. It operates over 20 inpatient acute care hospitals, over three free-standing emergency departments, and over 210 inpatient and over 20 outpatient behavioral healthcare facilities.

UHS Chart

UHS data by YCharts

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of UHS – August 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,592,776,660 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.27 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 212.76% Pass
6. Moderate PEmg Ratio PEmg < 20 19.17 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.75 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 1.27 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 10.33 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

UHS value chart August 2016

EPSmg $6.27
MG Growth Estimate 11.57%
MG Value $198.32
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $90.88
MG Value based on 0% Growth $53.27
Market Implied Growth Rate 5.33%
Current Price $120.12
% of Intrinsic Value 60.57%

Universal Health Services, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high 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 Undervalued after growing its EPSmg (normalized earnings) from $3.54 in 2012 to an estimated $6.27 for 2016. This level of demonstrated earnings growth outpaces 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 above the price.

At the time of valuation, further research into Universal Health Services, Inc. revealed the company was trading above its Graham Number of $84.63. The company pays a dividend of $0.4 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 19.17, which was below the industry average of 40.07, 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 $-36.91.

Universal Health Services, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

UHS charts August 2016

Net Current Asset Value (NCAV) -$36.91
Graham Number $84.63
PEmg 19.17
Current Ratio 1.27
PB Ratio 2.75
Current Dividend $0.40
Dividend Yield 0.33%
Number of Consecutive Years of Dividend Growth 3

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $1,606,753,000
Total Current Liabilities $1,268,034,000
Long-Term Debt $3,499,375,000
Total Assets $9,540,930,000
Intangible Assets $3,585,892,000
Total Liabilities $5,237,952,000
Shares Outstanding (Diluted Average) 98,389,000

Earnings Per Share History

Next Fiscal Year Estimate $7.18
Dec2015 $6.76
Dec2014 $5.42
Dec2013 $5.14
Dec2012 $4.53
Dec2011 $4.04
Dec2010 $2.34
Dec2009 $2.64
Dec2008 $1.96
Dec2007 $1.59
Dec2006 $2.28
Dec2005 $2.00
Dec2004 $1.38
Dec2003 $1.60
Dec2002 $1.37
Dec2001 $0.80
Dec2000 $0.75
Dec1999 $0.61
Dec1998 $0.60
Dec1997 $0.51
Dec1996 $0.41

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $6.27
Dec2015 $5.60
Dec2014 $4.78
Dec2013 $4.22
Dec2012 $3.54
Dec2011 $2.87
Dec2010 $2.24
Dec2009 $2.16
Dec2008 $1.89
Dec2007 $1.83
Dec2006 $1.87
Dec2005 $1.59
Dec2004 $1.32
Dec2003 $1.20
Dec2002 $0.94
Dec2001 $0.70
Dec2000 $0.63

Recommended Reading:

Other ModernGraham posts about the company

Universal Health Services Inc. Analysis – Initial Coverage $UHS

Other ModernGraham posts about related companies

C R Bard Inc Valuation – August 2016 $BCR
Psychemedics Corp Valuation – August 2016 $PMD
Patterson Companies Inc Valuation – August 2016 $PDCO
Edwards Lifesciences Corp Valuation – August 2016 $EW
Baxter International Inc Valuation – August 2016 $BAX
Cerner Corporation Valuation – August 2016 $CERN
Stryker Corporation Valuation – August 2016 $SYK
Henry Schein Inc Valuation – July 2016 $HSIC
Quest Diagnostics Inc Valuation – July 2016 $DGX
Tenet Healthcare Corp Valuation – July 2016 $THC

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.

Universal Health Services Inc. Analysis – Initial Coverage $UHS

UHS_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 – June 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 Universal Health Services Inc. (UHS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Universal Health Services, Inc. is a holding company. The Company operates through its subsidiaries, which owns and operates acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers and radiation oncology centers. The Company’s segments include acute care hospital services, behavioral health care services and Other. The Company’s ambulatory treatment centers division includes managing and/or owning or in partnerships with physicians, five surgical hospitals and surgery and radiation oncology centers located in four states. Its services include general and specialty surgery, internal medicine, obstetrics, emergency room care, radiology, oncology, diagnostic care, coronary care, pediatric services, pharmacy services and/or behavioral health services. It provides capital resources, as well as various management services to its facilities. The Company’s subsidiary is UHS of Delaware, Inc.

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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  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 – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  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 $140.72
MG Value $196.52
MG Opinion Undervalued
Value Based on 3% Growth $79.46
Value Based on 0% Growth $46.58
Market Implied Growth Rate 8.59%
Net Current Asset Value (NCAV) -$34.39
PEmg 25.68
Current Ratio 1.37
PB Ratio 3.62

Balance Sheet – March 2015

Current Assets $1,717,000,000
Current Liabilities $1,255,000,000
Total Debt $3,052,000,000
Total Assets $9,084,000,000
Intangible Assets $3,297,000,000
Total Liabilities $5,177,000,000
Outstanding Shares 100,600,000

Earnings Per Share

2015 (estimate) $6.40
2014 $5.42
2013 $5.14
2012 $4.53
2011 $4.04
2010 $2.34
2009 $2.64
2008 $1.96
2007 $1.59
2006 $2.28
2005 $1.38

Earnings Per Share – ModernGraham

2015 (estimate) $5.48
2014 $4.78
2013 $4.22
2012 $3.54
2011 $2.87
2010 $2.24

Dividend History

Conclusion:

Universal Health Services Inc. (UHS) does not qualify for either the Defensive Investor and the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a speculative attitude.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.87 in 2011 to an estimated $5.48 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.59% 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 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 Universal Health Services Inc. (UHS)?  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.

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Chartwell Retirement Residences Valuation – August 2018 $TSE:CSH.UN

Company Profile (excerpt from Reuters): Chartwell Retirement Residences is an unincorporated, open-ended trust. The Company indirectly owns, manages and operates a range of seniors housing communities from independent living through assisted living to long term care. Its segments include Canadian Retirement Operations and Canadian Long Term Care Operations. It owns and operates senior residences in Canada. Its portfolio of residences includes independent living residences for seniors that include retirement units/townhouses/bungalows providing meals and general services; independent supported living residences for seniors that include retirement units/townhouses/bungalows with household general services; assisted living residences for seniors requiring personal care services; memory care units for seniors having Alzheimer’s or other form of dementia and requiring personal care services, and Long term care residences for people requiring professional nursing care on a daily basis and over 24-hour supervision.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-CSH.UN – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,254,692,829 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.14 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 -112.80% Fail
6. Moderate PEmg Ratio PEmg < 20 48.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.30 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 0.14 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.89 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.32
MG Growth Estimate 15.00%
MG Value $12.36
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $4.65
MG Value based on 0% Growth $2.73
Market Implied Growth Rate 19.78%
Current Price $15.43
% of Intrinsic Value 124.85%

Chartwell Retirement Residences 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 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 growing its EPSmg (normalized earnings) from $-0.22 in 2014 to an estimated $0.32 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 19.78% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Chartwell Retirement Residences revealed the company was trading above its Graham Number of $3.45. The company pays a dividend of $0.57 per share, for a yield of 3.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 48.07, which was above the industry average of 44.66. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.83.

Chartwell Retirement Residences 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) -$10.83
Graham Number $3.45
PEmg 48.07
Current Ratio 0.14
PB Ratio 3.30
Current Dividend $0.57
Dividend Yield 3.71%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $52,301,000
Total Current Liabilities $378,657,000
Long-Term Debt $1,923,491,000
Total Assets $3,311,179,000
Intangible Assets $55,343,000
Total Liabilities $2,328,737,000
Shares Outstanding (Diluted Average) 210,226,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.11
Dec2017 $0.06
Dec2016 $0.03
Dec2015 $1.99
Dec2014 -$0.05
Dec2013 $0.14
Dec2012 -$0.80
Dec2011 -$0.43
Dec2010 -$0.43
Dec2009 -$0.68
Dec2008 -$1.03
Dec2007 -$0.76
Dec2006 -$0.24
Dec2005 -$0.28
Dec2004 -$0.19
Dec2003 -$0.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.32
Dec2017 $0.43
Dec2016 $0.50
Dec2015 $0.54
Dec2014 -$0.22
Dec2013 -$0.36
Dec2012 -$0.63
Dec2011 -$0.58
Dec2010 -$0.65
Dec2009 -$0.70
Dec2008 -$0.64
Dec2007 -$0.40
Dec2006 -$0.20
Dec2005 -$0.15
Dec2004 -$0.08
Dec2003 -$0.02

Recommended Reading:

Other ModernGraham posts about the company

Chartwell Retirement Residences Valuation – Initial Coverage $TSE:CSH.UN

Other ModernGraham posts about related companies

Charles River Laboratories International Inc Valuation – August 2018 $CRL
Surmodics Inc Valuation – August 2018 $SRDX
Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC
Select Medical Holdings Corp Valuation – July 2018 $SEM
Chemed Corp Valuation – July 2018 $CHE
Inogen Inc Valuation – July 2018 $INGN
Tenet Healthcare Corp Valuation – June 2018 $THC
Universal Health Services Inc Valuation – June 2018 $UHS
Dentsply Sirona Inc Valuation – June 2018 $XRAY

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.

STERIS PLC Valuation – August 2018 $STE

Company Profile (excerpt from Reuters): STERIS plc provides infection prevention and other procedural products and services. The Company operates through four segments: Healthcare Products, which offers infection prevention and procedural solutions for healthcare providers, including capital equipment and related maintenance, and installation services, as well as consumables; Healthcare Specialty Services, which provides a range of specialty services for healthcare providers, including hospital sterilization services, instrument and scope repairs, and linen management; Life Sciences, which offers capital equipment and consumable products, and equipment maintenance and specialty services for pharmaceutical manufacturers and research facilities, and Applied Sterilization Technologies, which offers contract sterilization and laboratory services for medical device and pharmaceutical customers and others. Its Corporate and other segment includes the Defense and Industrial business unit.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of STE – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,719,200,529 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.65 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 75.38% Pass
6. Moderate PEmg Ratio PEmg < 20 37.43 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.17 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 2.65 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.15 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.07
MG Growth Estimate 5.59%
MG Value $60.45
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $44.53
MG Value based on 0% Growth $26.11
Market Implied Growth Rate 14.46%
Current Price $114.95
% of Intrinsic Value 190.15%

Steris PLC is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.24 in 2015 to an estimated $3.07 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.46% 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 Steris PLC revealed the company was trading above its Graham Number of $62.94. The company pays a dividend of $1.21 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 37.43, which was below the industry average of 44.66, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.27.

Steris PLC receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.27
Graham Number $62.94
PEmg 37.43
Current Ratio 2.65
PB Ratio 3.17
Current Dividend $1.21
Dividend Yield 1.05%
Number of Consecutive Years of Dividend Growth 13

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $988,889,000
Total Current Liabilities $373,842,000
Long-Term Debt $1,320,064,000
Total Assets $5,051,814,000
Intangible Assets $3,032,408,000
Total Liabilities $1,952,626,000
Shares Outstanding (Diluted Average) 85,509,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.66
Mar2018 $3.39
Mar2017 $1.28
Mar2016 $1.56
Mar2015 $2.25
Mar2014 $2.17
Mar2013 $2.72
Mar2012 $2.31
Mar2011 $0.85
Mar2010 $2.16
Mar2009 $1.86
Mar2008 $1.20
Mar2007 $1.25
Mar2006 $1.02
Mar2005 $1.23
Mar2004 $1.33
Mar2003 $1.12
Mar2002 $0.65
Mar2001 $0.02
Mar2000 $0.15
Mar1999 $1.20

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.07
Mar2018 $2.23
Mar2017 $1.76
Mar2016 $2.07
Mar2015 $2.24
Mar2014 $2.17
Mar2013 $2.10
Mar2012 $1.76
Mar2011 $1.47
Mar2010 $1.69
Mar2009 $1.41
Mar2008 $1.19
Mar2007 $1.19
Mar2006 $1.13
Mar2005 $1.08
Mar2004 $0.88
Mar2003 $0.65

Recommended Reading:

Other ModernGraham posts about the company

Steris PLC Valuation – Initial Coverage $STE

Other ModernGraham posts about related companies

Charles River Laboratories International Inc Valuation – August 2018 $CRL
Surmodics Inc Valuation – August 2018 $SRDX
Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC
Select Medical Holdings Corp Valuation – July 2018 $SEM
Chemed Corp Valuation – July 2018 $CHE
Inogen Inc Valuation – July 2018 $INGN
Tenet Healthcare Corp Valuation – June 2018 $THC
Universal Health Services Inc Valuation – June 2018 $UHS
Dentsply Sirona Inc Valuation – June 2018 $XRAY

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.

CryoLife Inc Valuation – August 2018 $CRY

Company Profile (excerpt from Reuters): CryoLife, Inc. (CryoLife), incorporated on January 19, 1984, is a medical device manufacturer and processor, and is engaged in the distribution of medical devices and implantable human tissues used in cardiac surgical procedures. The Company operates through two segments: Medical Devices and Preservation Services. The Medical Devices segment includes medical devices, such as BioGlue Surgical Adhesive (BioGlue), BioFoam Surgical Matrix (BioFoam), On-X Life Technologies Holdings, Inc. (ON-X) valves and surgical products, CardioGenesis cardiac laser therapy product line, PerClot and PhotoFix. The Preservation Services segment includes external services, such as preservation of cardiac and vascular tissues. The cardiac and vascular human tissues distributed by CryoLife include the CryoValve SG pulmonary heart valve (CryoValve SGPV) and the CryoPatch SG pulmonary cardiac patch (CryoPatch SG), both of which are processed using CryoLife’s SynerGraft technology.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CRY – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,252,181,333 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.97 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -56.34% Fail
6. Moderate PEmg Ratio PEmg < 20 384.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.67 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 4.97 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.60 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 $0.09
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $1.29
MG Value based on 0% Growth $0.75
Market Implied Growth Rate 187.76%
Current Price $34.05
% of Intrinsic Value N/A

Cryolife Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability 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 net 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 $0.34 in 2014 to an estimated $0.09 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 187.76% 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 Cryolife Inc 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 384.02, which was above the industry average of 44.66. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.47.

Cryolife Inc 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) -$3.47
Graham Number $0.00
PEmg 384.02
Current Ratio 4.97
PB Ratio 4.67
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $169,698,000
Total Current Liabilities $34,121,000
Long-Term Debt $216,933,000
Total Assets $570,448,000
Intangible Assets $357,541,000
Total Liabilities $298,961,000
Shares Outstanding (Diluted Average) 37,249,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.12
Dec2017 $0.11
Dec2016 $0.32
Dec2015 $0.14
Dec2014 $0.25
Dec2013 $0.57
Dec2012 $0.28
Dec2011 $0.26
Dec2010 $0.14
Dec2009 $0.31
Dec2008 $1.13
Dec2007 $0.26
Dec2006 -$0.02
Dec2005 -$0.85
Dec2004 -$0.81
Dec2003 -$1.64
Dec2002 -$1.43
Dec2001 $0.47
Dec2000 $0.41
Dec1999 $0.24
Dec1998 $0.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.09
Dec2017 $0.22
Dec2016 $0.29
Dec2015 $0.28
Dec2014 $0.34
Dec2013 $0.36
Dec2012 $0.31
Dec2011 $0.35
Dec2010 $0.39
Dec2009 $0.40
Dec2008 $0.27
Dec2007 -$0.31
Dec2006 -$0.71
Dec2005 -$0.99
Dec2004 -$0.90
Dec2003 -$0.76
Dec2002 -$0.21

Recommended Reading:

Other ModernGraham posts about the company

Cryolife Inc Valuation – Initial Coverage $CRY

Other ModernGraham posts about related companies

Charles River Laboratories International Inc Valuation – August 2018 $CRL
Surmodics Inc Valuation – August 2018 $SRDX
Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC
Select Medical Holdings Corp Valuation – July 2018 $SEM
Chemed Corp Valuation – July 2018 $CHE
Inogen Inc Valuation – July 2018 $INGN
Tenet Healthcare Corp Valuation – June 2018 $THC
Universal Health Services Inc Valuation – June 2018 $UHS
Dentsply Sirona Inc Valuation – June 2018 $XRAY

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.

Charles River Laboratories International Inc Valuation – August 2018 $CRL

Company Profile (excerpt from Reuters): Charles River Laboratories International, Inc., incorporated on February 3, 1994, is an early-stage contract research company. The Company is engaged in laboratory animal medicine and science (research model technologies) and develop a portfolio of discovery and safety assessment services, both good laboratory practice (GLP) and non-GLP, which supports its clients from target identification through non-clinical development. The Company operates in three segments: Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Support (Manufacturing). The RMS segment includes Research Models and Research Model Services. The DSA segment includes Discovery Services and Safety Assessment. The Manufacturing segment includes Microbial Solutions, Avian, Biologics and Contract Manufacturing. The Company also provides a suite of products and services to support its clients’ manufacturing activities.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CRL – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,755,920,910 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.72 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 -820.67% Fail
6. Moderate PEmg Ratio PEmg < 20 33.52 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.99 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 1.72 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.84 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.60
MG Growth Estimate 15.00%
MG Value $138.52
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $52.17
MG Value based on 0% Growth $30.58
Market Implied Growth Rate 12.51%
Current Price $120.59
% of Intrinsic Value 87.05%

Charles River Laboratories Intl. 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 poor dividend history, 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 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.78 in 2014 to an estimated $3.6 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 12.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Charles River Laboratories Intl. Inc revealed the company was trading above its Graham Number of $50. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 33.52, which was below the industry average of 44.66, 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 $-36.52.

Charles River Laboratories Intl. 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) -$36.52
Graham Number $50.00
PEmg 33.52
Current Ratio 1.72
PB Ratio 4.99
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $889,530,000
Total Current Liabilities $518,140,000
Long-Term Debt $1,796,451,000
Total Assets $3,865,883,000
Intangible Assets $1,903,580,000
Total Liabilities $2,680,678,000
Shares Outstanding (Diluted Average) 49,043,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.04
Dec2017 $2.54
Dec2016 $3.23
Dec2015 $3.13
Dec2014 $2.66
Dec2013 $2.12
Dec2012 $2.01
Dec2011 $2.14
Dec2010 -$5.38
Dec2009 $1.74
Dec2008 -$7.76
Dec2007 $2.25
Dec2006 -$0.81
Dec2005 $1.96
Dec2004 $1.67
Dec2003 $1.64
Dec2002 $1.06
Dec2001 $0.80
Dec2000 -$0.40
Dec1999 $0.86
Dec1998 $2.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.60
Dec2017 $2.83
Dec2016 $2.86
Dec2015 $2.59
Dec2014 $1.78
Dec2013 $1.07
Dec2012 -$0.12
Dec2011 -$1.26
Dec2010 -$2.64
Dec2009 -$1.02
Dec2008 -$1.78
Dec2007 $1.26
Dec2006 $0.88
Dec2005 $1.62
Dec2004 $1.29
Dec2003 $0.99
Dec2002 $0.75

Recommended Reading:

Other ModernGraham posts about the company

5 Best Stocks for Value Investors This Week – 2/25/17
Charles River Laboratories Intl Inc Valuation – Initial Coverage $CRL

Other ModernGraham posts about related companies

Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC
Select Medical Holdings Corp Valuation – July 2018 $SEM
Chemed Corp Valuation – July 2018 $CHE
Inogen Inc Valuation – July 2018 $INGN
Tenet Healthcare Corp Valuation – June 2018 $THC
Universal Health Services Inc Valuation – June 2018 $UHS
Dentsply Sirona Inc Valuation – June 2018 $XRAY
IDEXX Laboratories Inc Valuation – June 2018 $IDXX
Hologic Inc Valuation – June 2018 $HOLX

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.

Surmodics Inc Valuation – August 2018 $SRDX

Company Profile (excerpt from Reuters): Surmodics, Inc., incorporated on June 27, 1979, is a provider of medical device and in vitro diagnostic technologies to the healthcare industry. The Company operates through two segments: Medical Device and In Vitro Diagnostics. The Company’s business segments partner with medical device, diagnostic and life science companies to develop and commercialize products designed to improve patient diagnosis and treatment. As of September 30, 2016, the Company had over 150 licensed product classes (customer products utilizing Surmodics technology) in the market generating royalties and over 100 customer product classes incorporating its technology in various stages of pre-commercialization.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SRDX – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $918,403,843 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.50 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -750.00% Fail
6. Moderate PEmg Ratio PEmg < 20 222.01 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.55 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 2.50 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
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 $0.32
MG Growth Estimate -4.25%
MG Value $2.09
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $4.60
MG Value based on 0% Growth $2.70
Market Implied Growth Rate 106.75%
Current Price $70.45
% of Intrinsic Value 3369.63%

SurModics, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability 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 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 $0.46 in 2014 to an estimated $0.32 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 106.75% 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 SurModics, Inc. 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 222.01, which was above the industry average of 44.66. Finally, the company was trading above its Net Current Asset Value (NCAV) of $2.09.

SurModics, Inc. 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) $2.09
Graham Number $0.00
PEmg 222.01
Current Ratio 2.50
PB Ratio 8.55
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $78,846,000
Total Current Liabilities $31,585,000
Long-Term Debt $0
Total Assets $159,987,000
Intangible Assets $45,562,000
Total Liabilities $51,242,000
Shares Outstanding (Diluted Average) 13,203,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.27
Sep2017 $0.29
Sep2016 $0.76
Sep2015 $0.90
Sep2014 $0.87
Sep2013 $1.03
Sep2012 $0.59
Sep2011 -$1.06
Sep2010 -$1.21
Sep2009 $2.15
Sep2008 $0.80
Sep2007 $0.18
Sep2006 $1.09
Sep2005 -$0.45
Sep2004 $0.41
Sep2003 $0.78
Sep2002 $0.44
Sep2001 $0.29
Sep2000 $0.25
Sep1999 $0.14
Sep1998 $0.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.32
Sep2017 $0.66
Sep2016 $0.84
Sep2015 $0.75
Sep2014 $0.46
Sep2013 $0.27
Sep2012 $0.01
Sep2011 -$0.13
Sep2010 $0.43
Sep2009 $1.08
Sep2008 $0.50
Sep2007 $0.37
Sep2006 $0.46
Sep2005 $0.19
Sep2004 $0.49
Sep2003 $0.48
Sep2002 $0.30

Recommended Reading:

Other ModernGraham posts about the company

5 Best Stocks for Value Investors This Week – 2/18/17
SurModics Inc Valuation – Initial Coverage $SRDX

Other ModernGraham posts about related companies

Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC
Select Medical Holdings Corp Valuation – July 2018 $SEM
Chemed Corp Valuation – July 2018 $CHE
Inogen Inc Valuation – July 2018 $INGN
Tenet Healthcare Corp Valuation – June 2018 $THC
Universal Health Services Inc Valuation – June 2018 $UHS
Dentsply Sirona Inc Valuation – June 2018 $XRAY
IDEXX Laboratories Inc Valuation – June 2018 $IDXX
Hologic Inc Valuation – June 2018 $HOLX

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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