Viacom Inc Valuation – January 2019 $VIAB

Company Profile (excerpt from Reuters): Viacom Inc., incorporated on September 22, 2005, offers global media brands that create television programs, motion pictures, short-form content, applications, games, consumer products, social media experiences and other entertainment content. As of September 30, 2016, the Company offered its services for audiences in more than 180 countries. The Company operates through two segments: Media Networks and Filmed Entertainment. The Company’s Media Networks segment provides entertainment content and related branded products for advertisers, content distributors and retailers. The Company’s Filmed Entertainment segment produces, finances, acquires and distributes motion pictures, television programming and other entertainment content under the Paramount Pictures, Paramount Vantage, Paramount Classics, Paramount Animation, Insurge Pictures, Nickelodeon Movies, MTV Films and Paramount Television brands.

Downloadable PDF version of this valuation:

ModernGraham Valuation of VIAB – 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 $11,636,179,217 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.50 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 31.12% Fail
6. Moderate PEmg Ratio PEmg < 20 6.86 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.57 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 1.50 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.71 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.23
MG Growth Estimate -1.57%
MG Value $22.62
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $61.31
MG Value based on 0% Growth $35.94
Market Implied Growth Rate -0.82%
Current Price $28.99
% of Intrinsic Value 128.16%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.72 in 2015 to an estimated $4.23 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.82% annual earnings loss 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 Viacom, Inc. Class B revealed the company was trading below its Graham Number of $41.02. The company pays a dividend of $0.8 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 6.86, which was below the industry average of 27.83, 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 $-25.4.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$25.40
Graham Number $41.02
PEmg 6.86
Current Ratio 1.50
PB Ratio 1.57
Current Dividend $0.80
Dividend Yield 2.76%
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 $6,076,000,000
Total Current Liabilities $4,054,000,000
Long-Term Debt $9,515,000,000
Total Assets $23,783,000,000
Intangible Assets $11,922,000,000
Total Liabilities $16,318,000,000
Shares Outstanding (Diluted Average) 403,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.07
Sep2018 $4.27
Sep2017 $4.68
Sep2016 $3.61
Sep2015 $4.73
Sep2014 $5.43
Sep2013 $4.84
Sep2012 $3.69
Sep2011 $3.59
Dec2009 $2.65
Dec2008 $2.00
Dec2007 $2.72
Dec2006 $2.22
Dec2005 $1.73
Dec2004 $1.84
Dec2003 $1.52
Dec2002 $1.19
Dec2001 $0.58

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.23
Sep2018 $4.39
Sep2017 $4.52
Sep2016 $4.44
Sep2015 $4.72
Sep2014 $4.49
Sep2013 $3.80
Sep2012 $3.17
Sep2011 $2.81
Dec2009 $2.37
Dec2008 $2.19
Dec2007 $2.19
Dec2006 $1.85
Dec2005 $1.57
Dec2004 $1.33
Dec2003 $0.94
Dec2002 $0.55

Recommended Reading:

Other ModernGraham posts about the company

Viacom Inc Valuation – March 2018 $VIAB
Viacom Inc Valuation – June 2016 $VIAB
Viacom Inc. Annual Valuation – 2015 $VIAB
5 Undervalued Companies for the Enterprising Investor Near 52 Week Lows – November 2014
5 Undervalued Companies for the Enterprising Investor Near 52 Week Lows – October 2014

Other ModernGraham posts about related companies

Twenty-First Century Fox Inc Valuation – January 2019 $FOX
Walt Disney Co Valuation – November 2018 $DIS
Tegna Inc Valuation – August 2018 $TGNA
E.W. Scripps Co Valuation – August 2018 $SSP
Cinemark Holdings Inc Valuation – August 2018 $CNK
Corus Entertainment Inc Valuation – July 2018 $TSE:CJR.B
AMC Networks Inc Valuation – July 2018 $AMCX
International Speedway Corp Valuation – July 2018 $ISCA
Cineplex Inc Valuation – July 2018 $TSE-CGX
Graham Holdings Co Valuation – July 2018 $GHC

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.

Viacom Inc Valuation – March 2018 $VIAB

Company Profile (obtained from Marketwatch): Viacom, Inc. is a global entertainment content company, which connects with audiences through compelling television programs, motion pictures, short-form video, applications, games, brands for consumer products, social media and other entertainment content. The company operates business through the following business segments: Media Networks and Filmed Entertainment. The Media Networks segment provides entertainment content and related branded products for consumers in targeted demographics attractive to advertisers, content distributors and retailers. It creates, acquires and distributes programming and other content to its audiences across multiple platforms. The Media Networks segment produces, finances, acquires and distributes motion pictures, television programming and other entertainment content under the Paramount Pictures, Paramount Vantage, Paramount Classics, Insurge Pictures, MTV Films, Nickelodeon Movies and Paramount Television brands. Viacom was founded by Sumner M. Redstone on December 31, 2005 and is headquartered in New York, NY.

VIAB Chart

VIAB data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VIAB – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,447,741,229 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.41 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 41.50% Pass
6. Moderate PEmg Ratio PEmg < 20 8.01 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 1.41 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.86 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.09
MG Growth Estimate -1.36%
MG Value $23.60
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $59.25
MG Value based on 0% Growth $34.73
Market Implied Growth Rate -0.25%
Current Price $32.72
% of Intrinsic Value 138.63%

Viacom, 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, poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.49 in 2014 to an estimated $4.09 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.25% annual earnings loss 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 Viacom, Inc. revealed the company was trading below its Graham Number of $33.72. The company pays a dividend of $0.8 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.01, which was below the industry average of 35.9, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-28.01.

Viacom, 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) -$28.01
Graham Number $33.72
PEmg 8.01
Current Ratio 1.41
PB Ratio 2.01
Current Dividend $0.80
Dividend Yield 2.44%
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 $5,005,000,000
Total Current Liabilities $3,538,000,000
Long-Term Debt $10,069,000,000
Total Assets $22,831,000,000
Intangible Assets $11,965,000,000
Total Liabilities $16,281,000,000
Shares Outstanding (Diluted Average) 402,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.37
Sep2017 $4.68
Sep2016 $3.61
Sep2015 $4.73
Sep2014 $5.43
Sep2013 $4.84
Sep2012 $3.69
Sep2011 $3.59
Dec2009 $2.65
Dec2008 $2.00
Dec2007 $2.72
Dec2006 $2.22
Dec2005 $1.73
Dec2004 $1.84
Dec2003 $1.52
Dec2002 $1.19
Dec2001 $0.58

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.09
Sep2017 $4.52
Sep2016 $4.44
Sep2015 $4.72
Sep2014 $4.49
Sep2013 $3.80
Sep2012 $3.17
Sep2011 $2.81
Dec2009 $2.37
Dec2008 $2.19
Dec2007 $2.19
Dec2006 $1.85
Dec2005 $1.57
Dec2004 $1.33
Dec2003 $0.94
Dec2002 $0.55
Dec2001 $0.19

Recommended Reading:

Other ModernGraham posts about the company

Viacom Inc. Annual Valuation – 2015 $VIAB
5 Undervalued Companies for the Enterprising Investor Near 52 Week Lows – November 2014
5 Undervalued Companies for the Enterprising Investor Near 52 Week Lows – October 2014
17 Companies in the Spotlight This Week – 9/27/2014
Viacom Inc. Quarterly Stock Valuation – September 2014 $VIAB

Other ModernGraham posts about related companies

Twenty-First Century Fox Inc Valuation – March 2018 $FOXA
Walt Disney Co Valuation – February 2018 $DIS
Live Nation Entertainment Inc Valuation – Initial Coverage $LYV
Walt Disney Co Valuation – March 2017 $DIS
Tegna Inc Valuation – February 2017 $TGNA
E.W. Scripps Co Valuation – Initial Coverage $SSP
News Corp Valuation – February 2017 $NWSA
Cinemark Holdings Inc Valuation – Initial Coverage $CNK
International Speedway Corp Valuation – Initial Coverage $ISCA
Corus Entertainment Inc Valuation – Initial Coverage $TSE:CJR.B

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.

Viacom Inc Valuation – June 2016 $VIAB

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 – March 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 Viacom Inc (VIAB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Viacom Inc. (Viacom) is an entertainment content company that connects with audiences in over 160 countries and territories and creates compelling television programs, motion pictures, short-form video, applications, games, consumer products, social media and other entertainment content. The Company operates through two segments: Media Networks and Filmed Entertainment. Viacom Media Networks’ program services reached approximately 700 million households in over 160 countries. Viacom Media Networks operates the international extensions of the multimedia brands MTV, VH1, Nickelodeon, Comedy Central and BET, as well as certain program services. The Company’s Filmed Entertainment segment produces, finances, acquires and distributes motion pictures and other entertainment content. under the Paramount Pictures, Paramount Vantage, Paramount Classics, Insurge Pictures, MTV Films and Nickelodeon Movies brands.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of VIAB – 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 $16,829,289,322 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.06 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 98.78% Pass
6. Moderate PEmg Ratio PEmg < 20 8.87 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.29 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 1.06 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 43.55 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

VIAB value chart June 2016

EPSmg $4.74
MG Growth Estimate 7.33%
MG Value $109.65
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $68.66
MG Value based on 0% Growth $40.25
Market Implied Growth Rate 0.19%
Current Price $42.02
% of Intrinsic Value 38.32%

Viacom, 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, poor dividend history. 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 $3.18 in 2012 to an estimated $4.74 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.19% 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.

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

Stage 3: Information for Further Research

VIAB charts June 2016

Net Current Asset Value (NCAV) -$35.08
Graham Number $31.49
PEmg 8.87
Current Ratio 1.06
PB Ratio 4.29
Current Dividend $1.60
Dividend Yield 3.81%
Number of Consecutive Years of Dividend Growth 7

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $4,734,000,000
Total Current Liabilities $4,470,000,000
Long-Term Debt $11,496,000,000
Total Assets $22,565,000,000
Intangible Assets $11,769,000,000
Total Liabilities $18,676,000,000
Shares Outstanding (Diluted Average) 397,400,000

Earnings Per Share History

Next Fiscal Year Estimate $4.49
Sep2015 $4.73
Sep2014 $5.43
Sep2013 $4.84
Sep2012 $3.69
Sep2011 $3.59
Sep2010 $2.54
Dec2009 $2.65
Dec2008 $2.00
Dec2007 $2.72
Dec2006 $2.22
Dec2005 $1.67
Dec2004 $1.84
Dec2003 $1.52
Dec2002 $1.19
Dec2001 $0.58

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.74
Sep2015 $4.72
Sep2014 $4.49
Sep2013 $3.83
Sep2012 $3.18
Sep2011 $2.85
Sep2010 $2.46
Dec2009 $2.37
Dec2008 $2.18
Dec2007 $2.18
Dec2006 $1.84
Dec2005 $1.55
Dec2004 $1.33
Dec2003 $0.94
Dec2002 $0.55
Dec2001 $0.19

Recommended Reading:

Other ModernGraham posts about the company

Viacom Inc. Annual Valuation – 2015 $VIAB
5 Undervalued Companies for the Enterprising Investor Near 52 Week Lows – November 2014
5 Undervalued Companies for the Enterprising Investor Near 52 Week Lows – October 2014
17 Companies in the Spotlight This Week – 9/27/2014
Viacom Inc. Quarterly Stock Valuation – September 2014 $VIAB

Other ModernGraham posts about related companies

CBS Corporation Valuation – May 2016 $CBS
Graham Holdings Company Valuation – May 2016 $GHC
Twenty-First Century Fox Inc Valuation – February 2016 Update $FOXA
Scripps Networks Interactive Inc Valuation – February 2016 Update $SNI
Walt Disney Co Valuation – December 2015 Update $DIS
Twenty-First Century Fox Inc Valuation – February 2016 Update $FOXA
Scripps Networks Interactive Inc Valuation – February 2016 Update $SNI
Walt Disney Co Valuation – December 2015 Update $DIS
Wal-Mart Stores Inc. Valuation – November 2015 Update $WMT
CBS Corporation Valuation – November 2015 Update $CBS

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.

Viacom Inc. Annual Valuation – 2015 $VIAB

500px-Viacom_logo.svgBenjamin 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 – December 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 Viacom Inc. (VIAB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Viacom Inc. (Viacom) is an entertainment content company that connects with audiences in over 160 countries and territories and creates compelling television programs, motion pictures, short-form video, applications (apps), games, consumer products, social media and other entertainment content. The Company operates through two segments: Media Networks and Filmed Entertainment. In September 2014, Viacom International Media Networks (VIMN), a division of Viacom Inc. acquired Channel 5 Broadcasting Limited from Northern & Shell Media Group.

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 – FAIL
  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 – PASS
  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 $75.40
MG Value $158.81
MG Opinion Undervalued
Value Based on 3% Growth $65.16
Value Based on 0% Growth $38.20
Market Implied Growth Rate 4.14%
Net Current Asset Value (NCAV) -$33.18
PEmg 16.78
Current Ratio 1.33
PB Ratio 8.64

Balance Sheet – September 2014

Current Assets $5,252,000,000
Current Liabilities $3,935,000,000
Total Debt $12,751,000,000
Total Assets $23,117,000,000
Intangible Assets $11,934,000,000
Total Liabilities $19,398,000,000
Outstanding Shares 426,400,000

Earnings Per Share

2014 $5.43
2013 $4.84
2012 $3.69
2011 $3.59
2010 $2.65
2009 $2.00
2008 $2.72
2007 $2.22
2006 $1.73
2005 $1.84
2004 $1.52

Earnings Per Share – ModernGraham

2014 $4.49
2013 $3.80
2012 $3.17
2011 $2.81
2010 $2.37
2009 $2.19

Dividend History

Conclusion:

Viacom is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, short dividend history, and the poor PB ratio.  The Enterprising Investor is concerned with the level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.37 in 2010 to $4.49 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.14% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out previous ModernGraham valuations of Viacom Inc. (VIAB) 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 Viacom Inc. (VIAB)?  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 Viacom Inc. (VIAB) 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.

Viacom Inc. Quarterly Stock Valuation – September 2014 $VIAB

500px-Viacom_logo.svgBenjamin 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 Undervalued Companies for the Defensive Investor With Low PEmg Ratios – September 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 Viacom Inc. (VIAB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Viacom Inc. (Viacom) is an entertainment content company that connects with audiences in over 160 countries and territories and creates compelling television programs, motion pictures, short-form video, applications (apps), games, consumer products, social media and other entertainment content. The Company operates through two segments: Media Networks and Filmed Entertainment. In September 2014, Viacom International Media Networks (VIMN), a division of Viacom Inc. acquired Channel 5 Broadcasting Limited from Northern & Shell Media Group.
VIAB Chart

VIAB data by YCharts

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 – FAIL
  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 – PASS
  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 $77.17
MG Value $177.90
MG Opinion Undervalued
Value Based on 3% Growth $67.00
Value Based on 0% Growth $39.28
Market Implied Growth Rate 4.10%
Net Current Asset Value (NCAV) -$30.86
PEmg 16.70
Current Ratio 1.69
PB Ratio 7.89

Balance Sheet – 6/30/2014

Current Assets $5,704,000,000
Current Liabilities $3,383,000,000
Total Debt $12,758,000,000
Total Assets $22,948,000,000
Intangible Assets $11,323,000,000
Total Liabilities $18,797,000,000
Outstanding Shares 424,300,000

Earnings Per Share

2014 (estimate) $5.39
2013 $4.86
2012 $4.36
2011 $3.61
2010 $2.62
2009 $1.97
2008 $2.41
2007 $2.19
2006 $1.73
2005 $1.85
2004 $1.52

Earnings Per Share – ModernGraham

2014 (estimate) $4.62
2013 $3.99
2012 $3.36
2011 $2.76
2010 $2.29
2009 $2.09

Dividend History
VIAB Dividend Chart

VIAB Dividend data by YCharts

Conclusion:

Viacom is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has numerous concerns including the low current ratio, the short dividend history and the high PB ratio.  The Enterprising Investor’s only initial concern is the high 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 research into the company and comparing it to other opportunities. As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.29 in 2010 to an estimated $4.62 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.10% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out the previous ModernGraham valuations of Viacom Inc. (VIAB) for more 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 Viacom Inc. (VIAB)?  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 Viacom Inc. (VIAB) 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.

Viacom Inc. Quarterly Valuation – June 2014 $VIAB

500px-Viacom_logo.svgBenjamin 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 Highest Dividend Yields Among Undervalued Companies for the Enterprising Investor.  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 Viacom Inc. (VIAB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Viacom Inc. (Viacom) is an entertainment content company that connects with audiences in over 160 countries and territories and creates compelling television programs, motion pictures, short-form video, applications (apps), games, consumer products, social media and other entertainment content. The Company operates through two segments: Media Networks and Filmed Entertainment. The Company’s Media Networks segment provides entertainment content and related branded products for consumers in targeted demographics attractive to advertisers, content distributors and retailers. The Company’s Filmed Entertainment segment produces, finances, acquires and distributes motion pictures and other entertainment content under the Paramount Pictures, Paramount Vantage, Paramount Classics, Insurge Pictures, MTV Films and Nickelodeon Movies brands.

VIAB Chart

VIAB data by YCharts

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 – FAIL
  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 – PASS
  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 $84.97
MG Value $177.90
MG Opinion Undervalued
Value Based on 3% Growth $67.00
Value Based on 0% Growth $39.28
Market Implied Growth Rate 4.94%
Net Current Asset Value (NCAV) -$29.76
PEmg 18.39
Current Ratio 1.69
PB Ratio 8.29

Balance Sheet – 3/31/2014

Current Assets $6,596,000,000
Current Liabilities $3,914,000,000
Total Debt $12,761,000,000
Total Assets $23,862,000,000
Intangible Assets $11,354,000,000
Total Liabilities $19,438,000,000
Outstanding Shares 431,500,000

Earnings Per Share

2014 (estimate) $5.39
2013 $4.86
2012 $4.36
2011 $3.61
2010 $2.62
2009 $1.97
2008 $2.41
2007 $2.19
2006 $1.73
2005 $1.85
2004 $1.52

Earnings Per Share – ModernGraham

2014 (estimate) $4.62
2013 $3.99
2012 $3.36
2011 $2.76
2010 $2.29
2009 $2.09

Dividend History

VIAB Dividend Chart

VIAB Dividend data by YCharts

Conclusion:

Viacom is suitable for the Enterprising Investor but not the Defensive Investor, who has concerns with the poor current ratio, short dividend and high PB ratio.  The Enterprising Investor’s only issue with the company is the level of debt relative to 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 including a review of ModernGraham’s valuation of Time Warner (TWX) and ModernGraham’s valuation of Comcast (CMCSA).  From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.29 in 2010 to an estimated $4.62 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.94% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out the previous ModernGraham valuations of Viacom Inc. (VIAB) for more 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 Viacom Inc. (VIAB)?  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 Viacom Inc. (VIAB) 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.

Viacom Inc. (VIAB) Quarterly Valuation – March 2014

500px-Viacom_logo.svgBenjamin 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.  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 Viacom Inc. fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Viacom Inc. (Viacom) is an entertainment content company that connects with audiences in over 160 countries and territories and creates compelling television programs, motion pictures, short-form video, applications (apps), games, consumer products, social media and other entertainment content. The Company operates through two segments: Media Networks and Filmed Entertainment. The Company’s Media Networks segment provides entertainment content and related branded products for consumers in targeted demographics attractive to advertisers, content distributors and retailers. The Company’s Filmed Entertainment segment produces, finances, acquires and distributes motion pictures and other entertainment content under the Paramount Pictures, Paramount Vantage, Paramount Classics, Insurge Pictures, MTV Films and Nickelodeon Movies brands.

VIAB Chart

VIAB data by YCharts

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 – FAIL
  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 – PASS
  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 $85.42
MG Value $178.02
MG Opinion Undervalued
Value Based on 3% Growth $67.05
Value Based on 0% Growth $39.30
Market Implied Growth Rate 4.99%
Net Current Asset Value (NCAV) -$28.51
PEmg 18.47
Current Ratio 1.69
PB Ratio 7.82

Balance Sheet – 12/31/2013

Current Assets $5,447,000,000
Current Liabilities $3,223,000,000
Total Debt $11,868,000,000
Total Assets $22,778,000,000
Intangible Assets $11,358,000,000
Total Liabilities $17,976,000,000
Outstanding Shares 439,500,000

Earnings Per Share

2014 (estimate) $5.40
2013 $4.86
2012 $4.36
2011 $3.61
2010 $2.62
2009 $1.97
2008 $2.41
2007 $2.19
2006 $1.73
2005 $1.85
2004 $1.52

Earnings Per Share – ModernGraham

2014 (estimate) $4.62
2013 $3.99
2012 $3.36
2011 $2.76
2010 $2.29
2009 $2.09

Dividend History

VIAB Dividend Chart

VIAB Dividend data by YCharts

Conclusion:

Viacom is an intriguing company for the Enterprising Investor, having passed all but one of the investor type’s requirements.  The company does not qualify for the Defensive Investor, though, due to the low current ratio, lack of long enough dividend history, and high PB ratio.  As a result, Enterprising Investors should feel comfortable conducting further research into the company and its competitors, such as through a review of ModernGraham’s valuation of Time Warner (TWX) and ModernGraham’s valuation of The Walt Disney Company (DIS).  From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.29 in 2010 to an estimated $4.62 for 2014.  This solid level of demonstrated growth outpaces the market’s implied estimate of 4.99% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market 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 Viacom Inc. (VIAB)?  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.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author held a long position in The Walt Disney Company (DIS) but did not hold a position in Viacom Inc. (VIAB) or any of the other companies listed 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; this article is not affiliated with the company in any manner.

News Corp Valuation – March 2019 #NWSA

Company Profile (excerpt from Reuters): News Corporation, incorporated on December 11, 2012, is a global diversified media and information services company focused on creating and distributing content to consumers and businesses throughout the world. The Company’s operations are organized into five segments: News and Information Services; Book Publishing; Digital Real Estate Services; Cable Network Programming, and Other. The Company comprises businesses across a range of media, including news and information services, book publishing, digital real estate services, cable network programming in Australia and pay-television distribution in Australia, that are distributed under brands, including The Wall Street Journal, Dow Jones, The Australian, Herald Sun, The Sun, The Times, HarperCollins Publishers, FOX SPORTS Australia, realestate.com.au, realtor.com and Foxtel, among others. The Company also owns a stake in Foxtel, a pay-television provider in Australia, which is accounted for as an equity investment. The Company operates primarily in the United States, Australia and the United Kingdom, and its content is distributed and consumed across the world. The Company delivers its content to consumers across numerous distribution platforms consisting not only of traditional print and television, but also through an array of digital platforms, including Websites, applications for mobile devices and tablets, social media and e-book devices.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NWSA – 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 $7,577,227,483 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.19 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 46.47% Pass
6. Moderate PEmg Ratio PEmg < 20 -15.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.73 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 1.19 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.31 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.81
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$11.76
MG Value based on 0% Growth -$6.90
Market Implied Growth Rate -12.23%
Current Price $12.95
% of Intrinsic Value N/A

News Corp Class A 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 over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. 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 $-0.2 in 2015 to an estimated $-0.81 for 2019. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into News Corp Class A revealed the company was trading above its Graham Number of $11.04. The company pays a dividend of $0.2 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was -15.96, which was below the industry average of 35.38, 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 $-2.32.

News Corp Class A 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) -$2.32
Graham Number $11.04
PEmg -15.96
Current Ratio 1.19
PB Ratio 0.73
Current Dividend $0.20
Dividend Yield 1.54%
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 $4,429,000,000
Total Current Liabilities $3,712,000,000
Long-Term Debt $936,000,000
Total Assets $16,227,000,000
Intangible Assets $7,796,000,000
Total Liabilities $5,793,000,000
Shares Outstanding (Diluted Average) 587,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.34
Jun2018 -$2.60
Jun2017 -$1.27
Jun2016 $0.30
Jun2015 -$0.26
Jun2014 $0.41
Jun2013 $0.87
Jun2012 -$3.58
Jun2011 $1.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.81
Jun2018 -$1.15
Jun2017 -$0.28
Jun2016 -$0.01
Jun2015 -$0.20
Jun2014 -$0.19
Jun2013 -$0.43
Jun2012 -$0.88
Jun2011 $0.39

Recommended Reading:

Other ModernGraham posts about the company

News Corp Valuation – February 2017 $NWSA
5 Speculative and Overvalued Companies to Avoid – November 2015
News Corporation Valuation – November 2015 Update $NWSA
27 Companies in the Spotlight This Week – 11/8/14
News Corp Annual Valuation – 2014 $NWSA

Other ModernGraham posts about related companies

CBS Corp Valuation – February 2019 $CBS
Discovery Inc Valuation – February 2019 $DISCA
Comcast Corp Valuation – January 2019 $CMCSA
Viacom Inc Valuation – January 2019 $VIAB
Twenty-First Century Fox Inc Valuation – January 2019 $FOX
Walt Disney Co Valuation – November 2018 $DIS
Tegna Inc Valuation – August 2018 $TGNA
E.W. Scripps Co Valuation – August 2018 $SSP
Cinemark Holdings Inc Valuation – August 2018 $CNK
Corus Entertainment Inc Valuation – July 2018 $TSE:CJR.B

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.

Netflix Inc Valuation – March 2019 #NFLX

Company Profile (excerpt from Reuters): Netflix, Inc., incorporated on August 29, 1997, is a provider an Internet television network. The Company operates through three segments: Domestic streaming, International streaming and Domestic DVD. The Domestic streaming segment includes services that streams content to its members in the United States. The International streaming segment includes services that streams content to its members outside the United States. The Domestic DVD segment includes services, such as digital optical disc (DVD)-by-mail.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NFLX – 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 $156,739,041,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.49 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 616.45% Pass
6. Moderate PEmg Ratio PEmg < 20 159.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 30.93 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 1.49 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.23 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 $2.26
MG Growth Estimate 15.00%
MG Value $86.91
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $32.73
MG Value based on 0% Growth $19.19
Market Implied Growth Rate 75.31%
Current Price $359.17
% of Intrinsic Value 413.28%

Netflix, 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, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.36 in 2015 to an estimated $2.26 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 75.31% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Netflix, Inc. revealed the company was trading above its Graham Number of $31.39. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 159.11, which was above the industry average of 35.38. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.48.

Netflix, 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) -$24.48
Graham Number $31.39
PEmg 159.11
Current Ratio 1.49
PB Ratio 30.93
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $9,694,135,000
Total Current Liabilities $6,487,320,000
Long-Term Debt $10,360,058,000
Total Assets $25,974,400,000
Intangible Assets $0
Total Liabilities $20,735,635,000
Shares Outstanding (Diluted Average) 451,127,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.65
Dec2018 $2.68
Dec2017 $1.25
Dec2016 $0.43
Dec2015 $0.28
Dec2014 $0.62
Dec2013 $0.26
Dec2012 $0.04
Dec2011 $0.59
Dec2010 $0.42
Dec2009 $0.28
Dec2008 $0.19
Dec2007 $0.14
Dec2006 $0.10
Dec2005 $0.09
Dec2004 $0.05
Dec2003 $0.01
Dec2002 -$0.05
Dec2001 -$0.77
Dec2000 -$1.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.26
Dec2018 $1.39
Dec2017 $0.69
Dec2016 $0.38
Dec2015 $0.36
Dec2014 $0.39
Dec2013 $0.29
Dec2012 $0.31
Dec2011 $0.40
Dec2010 $0.28
Dec2009 $0.19
Dec2008 $0.14
Dec2007 $0.10
Dec2006 $0.06
Dec2005 -$0.01
Dec2004 -$0.19
Dec2003 -$0.36

Recommended Reading:

Other ModernGraham posts about the company

Netflix Inc Valuation – June 2018 $NFLX
Netflix Inc Valuation – February 2017 $NFLX
5 Speculative and Overvalued Companies to Avoid – November 2015
Netflix Inc Valuation – November 2015 Update $NFLX
5 Speculative and Overvalued Companies to Avoid – November 2014

Other ModernGraham posts about related companies

CBS Corp Valuation – February 2019 $CBS
Discovery Inc Valuation – February 2019 $DISCA
Comcast Corp Valuation – January 2019 $CMCSA
Viacom Inc Valuation – January 2019 $VIAB
Twenty-First Century Fox Inc Valuation – January 2019 $FOX
Walt Disney Co Valuation – November 2018 $DIS
Tegna Inc Valuation – August 2018 $TGNA
E.W. Scripps Co Valuation – August 2018 $SSP
Cinemark Holdings Inc Valuation – August 2018 $CNK
Corus Entertainment Inc Valuation – July 2018 $TSE:CJR.B

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.

CBS Corp Valuation – February 2019 $CBS

Company Profile (excerpt from Reuters): CBS Corporation, incorporated on November 10, 1986, is a mass media company. The Company operates through four segment: Entertainment, Cable Networks, Publishing and Local Media. The Entertainment segment comprises the CBS Television Network; CBS Television Studios; CBS Studios International and CBS Television Distribution; CBS Interactive; CBS Films; and the Company’s digital streaming services, CBS All Access and CBSN. The Cable Networks segment comprises Showtime Networks, which operates its subscription program services, Showtime, The Movie Channel, and Flix. The Publishing segment comprises Simon & Schuster, which publishes and distributes consumer books under imprints, such as Simon & Schuster, Pocket Books, Scribner and Gallery Books. The Local Media segment comprises CBS TV Stations, and CBS Local Digital Media. Its businesses span the media and entertainment industries, including the CBS TV Network, cable networks, content production and distribution, television stations, Internet-based businesses, and consumer publishing. It focuses on exhibiting its content on multiple digital platforms, including digital streaming services, as well as third-party live television streaming offerings.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CBS – February 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 $18,347,191,065 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.51 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 168.39% Pass
6. Moderate PEmg Ratio PEmg < 20 15.10 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.39 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 1.51 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.62 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.25
MG Growth Estimate -0.52%
MG Value $24.24
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $47.08
MG Value based on 0% Growth $27.60
Market Implied Growth Rate 3.30%
Current Price $49.02
% of Intrinsic Value 202.26%

CBS Corporation Common Stock 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 net current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.36 in 2014 to an estimated $3.25 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.3% 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 CBS Corporation Common Stock revealed the company was trading above its Graham Number of $24.44. The company pays a dividend of $0.72 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 15.1, which was below the industry average of 31.72, 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 $-33.02.

CBS Corporation Common Stock 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) -$33.02
Graham Number $24.44
PEmg 15.10
Current Ratio 1.51
PB Ratio 7.39
Current Dividend $0.72
Dividend Yield 1.47%
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $6,040,000,000
Total Current Liabilities $3,993,000,000
Long-Term Debt $9,465,000,000
Total Assets $21,068,000,000
Intangible Assets $7,571,000,000
Total Liabilities $18,554,000,000
Shares Outstanding (Diluted Average) 379,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.14
Dec2017 $0.88
Dec2016 $2.81
Dec2015 $2.89
Dec2014 $5.27
Dec2013 $3.01
Dec2012 $2.39
Dec2011 $1.92
Dec2010 $1.04
Dec2009 $0.33
Dec2008 -$17.43
Dec2007 $1.73
Dec2006 $2.15
Dec2005 -$8.98
Dec2004 -$20.37
Dec2003 $1.61
Dec2002 $0.82
Dec2001 -$0.26
Dec2000 -$1.34
Dec1999 $0.90
Dec1998 -$0.42

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.25
Dec2017 $2.52
Dec2016 $3.32
Dec2015 $3.42
Dec2014 $3.36
Dec2013 $2.19
Dec2012 $0.40
Dec2011 -$1.23
Dec2010 -$2.68
Dec2009 -$4.50
Dec2008 -$7.47
Dec2007 -$3.25
Dec2006 -$5.48
Dec2005 -$8.01
Dec2004 -$6.32
Dec2003 $0.58
Dec2002 $0.03

Recommended Reading:

Other ModernGraham posts about the company

CBS Corporation Valuation – April 2018 $CBS
7 Best Undervalued Stocks of the Week – 9/3/16
CBS Corporation Valuation – August 2016 $CBS
6 Best Stocks For Value Investors This Week – 5/14/16
CBS Corporation Valuation – May 2016 $CBS

Other ModernGraham posts about related companies

Discovery Inc Valuation – February 2019 $DISCA
Comcast Corp Valuation – January 2019 $CMCSA
Viacom Inc Valuation – January 2019 $VIAB
Twenty-First Century Fox Inc Valuation – January 2019 $FOX
Walt Disney Co Valuation – November 2018 $DIS
Tegna Inc Valuation – August 2018 $TGNA
E.W. Scripps Co Valuation – August 2018 $SSP
Cinemark Holdings Inc Valuation – August 2018 $CNK
Corus Entertainment Inc Valuation – July 2018 $TSE:CJR.B
AMC Networks Inc Valuation – July 2018 $AMCX

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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