Vulcan Materials Co Valuation – February 2019 $VMC

Company Profile (excerpt from Reuters): Vulcan Materials Company, incorporated on February 14, 2007, is a supplier of construction aggregates (primarily crushed stone, sand and gravel) and a producer of asphalt mix and ready-mixed concrete. The Company operates through four segments: Aggregates, Asphalt Mix, Concrete and Calcium. As of December 31, 2016, it had 337 active aggregates facilities. The Company sells aggregates that are used as ballast for construction and maintenance of railroad tracks. It also sells riprap and jetty stone for erosion control along roads and waterways. In addition, stone can be used as a feedstock for cement and lime plants and for making a variety of adhesives, fillers and extenders. It sells construction aggregates outside of the United States, principally in the areas surrounding its quarry on the Yucatan Peninsula in Mexico.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VMC – 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 $13,714,505,360 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.70 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 -1171.43% Fail
6. Moderate PEmg Ratio PEmg < 20 30.89 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.70 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 1.70 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.72 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 $3.36
MG Growth Estimate 15.00%
MG Value $129.44
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $48.75
MG Value based on 0% Growth $28.58
Market Implied Growth Rate 11.20%
Current Price $103.86
% of Intrinsic Value 80.24%

Vulcan Materials Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.36 in 2014 to an estimated $3.36 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.2% 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 Vulcan Materials Company revealed the company was trading above its Graham Number of $55.91. The company pays a dividend of $1 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 30.89, which was above the industry average of 20.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.54.

Vulcan Materials Company receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$26.54
Graham Number $55.91
PEmg 30.89
Current Ratio 1.70
PB Ratio 2.70
Current Dividend $1.00
Dividend Yield 0.96%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,175,912,000
Total Current Liabilities $690,415,000
Long-Term Debt $2,778,129,000
Total Assets $9,875,635,000
Intangible Assets $4,268,969,000
Total Liabilities $4,729,846,000
Shares Outstanding (Diluted Average) 133,894,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.70
Dec2017 $4.46
Dec2016 $3.09
Dec2015 $1.64
Dec2014 $1.54
Dec2013 $0.19
Dec2012 -$0.41
Dec2011 -$0.55
Dec2010 -$0.75
Dec2009 $0.25
Dec2008 $0.01
Dec2007 $4.54
Dec2006 $4.71
Dec2005 $3.74
Dec2004 $2.77
Dec2003 $1.90
Dec2002 $1.66
Dec2001 $2.17
Dec2000 $2.16
Dec1999 $2.35
Dec1998 $2.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.36
Dec2017 $2.86
Dec2016 $1.77
Dec2015 $0.90
Dec2014 $0.36
Dec2013 -$0.24
Dec2012 -$0.40
Dec2011 -$0.03
Dec2010 $0.74
Dec2009 $1.87
Dec2008 $2.84
Dec2007 $4.01
Dec2006 $3.49
Dec2005 $2.73
Dec2004 $2.20
Dec2003 $1.95
Dec2002 $2.04

Recommended Reading:

Other ModernGraham posts about the company

Vulcan Materials Co Valuation – April 2018 $VMC
Vulcan Materials Co Valuation – July 2016 $VMC
5 Speculative and Overvalued Companies to Avoid – June 2015
30 Companies in the Spotlight This Week – 5/23/15
Vulcan Materials Company Annual Valuation – 2015 $VMC

Other ModernGraham posts about related companies

PulteGroup Inc Valuation – January 2019 $PHM
Sherwin-Williams Co Valuation – January 2019 $SHW
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Cummins Inc Valuation – January 2019 $CMI
Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD

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.

Vulcan Materials Co Valuation – April 2018 $VMC

Company Profile (excerpt from Reuters): Vulcan Materials Company, incorporated on February 14, 2007, is a supplier of construction aggregates (primarily crushed stone, sand and gravel) and a producer of asphalt mix and ready-mixed concrete. The Company operates through four segments: Aggregates, Asphalt Mix, Concrete and Calcium. As of December 31, 2016, it had 337 active aggregates facilities. The Company sells aggregates that are used as ballast for construction and maintenance of railroad tracks. It also sells riprap and jetty stone for erosion control along roads and waterways. In addition, stone can be used as a feedstock for cement and lime plants and for making a variety of adhesives, fillers and extenders. It sells construction aggregates outside of the United States, principally in the areas surrounding its quarry on the Yucatan Peninsula in Mexico.

VMC Chart

VMC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VMC – April 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,110,179,709 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.66 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -1191.43% Fail
6. Moderate PEmg Ratio PEmg < 20 33.27 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.10 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 2.66 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.82 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 $3.43
MG Growth Estimate 15.00%
MG Value $132.13
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $49.76
MG Value based on 0% Growth $29.17
Market Implied Growth Rate 12.38%
Current Price $114.17
% of Intrinsic Value 86.41%

Vulcan Materials Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.36 in 2014 to an estimated $3.43 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 12.38% 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 Vulcan Materials Company revealed the company was trading above its Graham Number of $57.49. The company pays a dividend of $1 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 33.27, which was above the industry average of 28.14. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.87.

Vulcan Materials Company receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.87
Graham Number $57.49
PEmg 33.27
Current Ratio 2.66
PB Ratio 3.10
Current Dividend $1.00
Dividend Yield 0.88%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $1,180,101,000
Total Current Liabilities $442,872,000
Long-Term Debt $2,813,482,000
Total Assets $9,504,891,000
Intangible Assets $4,185,951,000
Total Liabilities $4,535,998,000
Shares Outstanding (Diluted Average) 134,953,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.91
Dec2017 $4.46
Dec2016 $3.09
Dec2015 $1.64
Dec2014 $1.54
Dec2013 $0.19
Dec2012 -$0.41
Dec2011 -$0.55
Dec2010 -$0.75
Dec2009 $0.25
Dec2008 $0.01
Dec2007 $4.54
Dec2006 $4.71
Dec2005 $3.74
Dec2004 $2.77
Dec2003 $1.90
Dec2002 $1.66
Dec2001 $2.17
Dec2000 $2.16
Dec1999 $2.35
Dec1998 $2.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.43
Dec2017 $2.86
Dec2016 $1.77
Dec2015 $0.90
Dec2014 $0.36
Dec2013 -$0.24
Dec2012 -$0.40
Dec2011 -$0.03
Dec2010 $0.74
Dec2009 $1.87
Dec2008 $2.84
Dec2007 $4.01
Dec2006 $3.49
Dec2005 $2.73
Dec2004 $2.20
Dec2003 $1.95
Dec2002 $2.04

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – June 2015
30 Companies in the Spotlight This Week – 5/23/15
Vulcan Materials Company Annual Valuation – 2015 $VMC
17 Companies in the Spotlight This Week – 5/10/14
Vulcan Materials Company (VMC) Annual Valuation – 2014

Other ModernGraham posts about related companies

Cummins Inc Valuation – March 2018 $CMI
Johnson Controls International PLC Valuation – March 2018 $JCI
Flowserve Corp Valuation – February 2018 $FLS
Corning Inc Valuation – February 2018 $GLW
Home Depot Inc Valuation – February 2018 $HD
Caterpillar Inc Valuation – February 2018 $CAT
Eagle Materials Inc Valuation – Initial Coverage $EXP
Louisiana-Pacific Corp Valuation – Initial Coverage $LPX
Lowe’s Companies Inc Valuation – March 2017 $LOW
Cavco Industries Inc Valuation – Initial Coverage $CVCO

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.

Vulcan Materials Co Valuation – July 2016 $VMC

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

Company Profile (obtained from Google Finance): Vulcan Materials Company is a producer of construction aggregates (primarily crushed stone, sand and gravel) and a producer of asphalt mix and ready-mixed concrete. The Company has four segments organized around its principal product lines: Aggregates, Asphalt Mix, Concrete and Calcium. The Company operates approximately 344 aggregates facilities. The Aggregates segment produces and sells aggregates (crushed stone, sand and gravel, sand, and other aggregates) and related products and services (transportation and other). The Company has approximately 15.7 billion tons of permitted and proven or probable aggregates reserves. The Company produces and sells asphalt mix in Arizona, California, New Mexico and Texas. The Company produces and sells ready-mixed concrete in Georgia, Maryland, New Mexico, Texas, Virginia, Washington D.C. and the Bahamas. The Calcium segment consists of a Florida facility that mines, produces and sells calcium products.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of VMC – July 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 $16,662,971,390 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.83 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 36.21% Pass
6. Moderate PEmg Ratio PEmg < 20 68.20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.84 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 2.83 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.04 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

VMC value chart July 2016

EPSmg $1.84
MG Growth Estimate 15.00%
MG Value $70.84
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $26.68
MG Value based on 0% Growth $15.64
Market Implied Growth Rate 29.85%
Current Price $125.49
% of Intrinsic Value 177.15%

Vulcan Materials Company does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability 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 $-0.4 in 2012 to an estimated $1.84 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 29.85% 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 below the price.

Vulcan Materials Company scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

VMC charts July 2016

Net Current Asset Value (NCAV) -$20.81
Graham Number $49.54
PEmg 68.20
Current Ratio 2.83
PB Ratio 3.84
Current Dividend $0.50
Dividend Yield 0.40%
Number of Consecutive Years of Dividend Growth 3

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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 $1,007,503,000
Total Current Liabilities $356,485,000
Long-Term Debt $1,981,425,000
Total Assets $8,247,025,000
Intangible Assets $3,848,196,000
Total Liabilities $3,825,972,000
Shares Outstanding (Diluted Average) 135,452,000

Earnings Per Share History

Next Fiscal Year Estimate $3.29
Dec2015 $1.64
Dec2014 $1.54
Dec2013 $0.19
Dec2012 -$0.41
Dec2011 -$0.55
Dec2010 -$0.75
Dec2009 $0.25
Dec2008 -$0.04
Dec2007 $4.54
Dec2006 $4.69
Dec2005 $3.73
Dec2004 $2.77
Dec2003 $1.90
Dec2002 $1.66
Dec2001 $2.17
Dec2000 $2.16
Dec1999 $2.35
Dec1998 $2.50
Dec1997 $2.03
Dec1996 $1.79

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.84
Dec2015 $0.90
Dec2014 $0.36
Dec2013 -$0.24
Dec2012 -$0.40
Dec2011 -$0.04
Dec2010 $0.73
Dec2009 $1.85
Dec2008 $2.82
Dec2007 $4.01
Dec2006 $3.48
Dec2005 $2.73
Dec2004 $2.20
Dec2003 $1.95
Dec2002 $2.04
Dec2001 $2.24
Dec2000 $2.24

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – June 2015
30 Companies in the Spotlight This Week – 5/23/15
Vulcan Materials Company Annual Valuation – 2015 $VMC
17 Companies in the Spotlight This Week – 5/10/14
Vulcan Materials Company (VMC) Annual Valuation – 2014

Other ModernGraham posts about related companies

PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI
Corning Inc Valuation – May 2016 $GLW
Flowserve Corporation Valuation – May 2016 $FLS
Lennar Corporation Valuation – May 2016 $LEN
Quanta Services Inc Valuation – February 2016 $PWR
Martin Marietta Materials Inc Valuation – February 2016 Update $MLM
Fluor Corp Valuation – February 2016 Update $FLR
Jacobs Engineering Group Inc Valuation – January 2016 Update $JEC

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.

Vulcan Materials Company Annual Valuation – 2015 $VMC

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

Company Profile (obtained from Google Finance): Vulcan Materials Company is a producer of construction aggregates primarily crushed stone, sand and gravel. The Company is a producer of aggregates-based construction materials including asphalt and ready-mixed concrete. The Company produces these materials from natural deposits such as granite, limestone and trap rock. The Company operates in four segments: Aggregates, Concrete, Asphalt Mix and Cement. The Company has 342 active aggregates facilities. In March 2014, Vulcan Materials Co completed the sale of the Company’s cement and concrete businesses in the Florida area to Cementos Argos.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

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

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 – 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 – FAIL
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $91.94
MG Value $35.45
MG Opinion Overvalued
Value Based on 3% Growth $13.35
Value Based on 0% Growth $7.83
Market Implied Growth Rate 45.68%
Net Current Asset Value (NCAV) $8.69
PEmg 99.86
Current Ratio 1.70
PB Ratio 1.47

Balance Sheet – March 2015

Current Assets $1,195,000,000
Current Liabilities $703,000,000
Total Debt $1,912,000,000
Total Assets $8,351,000,000
Intangible Assets $3,859,000,000
Total Liabilities $41,900,000
Outstanding Shares 132,700,000

Earnings Per Share

2015 (estimate) $1.69
2014 $1.54
2013 $0.19
2012 -$0.41
2011 -$0.55
2010 -$0.75
2009 $0.25
2008 $0.01
2007 $4.54
2006 $4.71
2005 $3.74

Earnings Per Share – ModernGraham

2015 (estimate) $0.92
2014 $0.36
2013 -$0.24
2012 -$0.40
2011 -$0.03
2010 $0.74

Dividend History

Conclusion:

Vulcan Materials Company is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the insufficient earnings stability or growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor is concerned with the level of debt relative to the net current assets, and the lack of earnings stability over the last five years.  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 overvalued despite growing its EPSmg (normalized earnings) from a loss of $0.03 in 2011 to an estimated $0.92 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 45.68% 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 below 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 Vulcan Materials Company (VMC)?  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.

Vulcan Materials Company (VMC) Annual Valuation – 2014

Vulcan_Materials_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 5 Undervalued Companies for the Enterprising Investor Near 52 Week Lows.  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 Vulcan Materials Company (VMC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Vulcan Materials Company, is a producer of construction aggregates primarily crushed stone, sand, and gravel. The Company is a producer of aggregates-based construction materials including asphalt and ready-mixed concrete. The Company produces these materials from natural deposits such as granite, limestone and trap rock. The Company operates in four segments: Aggregates, Concrete, Asphalt Mix, And Cement. The Company has 341 active aggregates facilities. The Company also is a producer of asphalt mix and ready-mixed concrete, as well as a producer of cement in Florida. The Company is a construction materials business in the country with aggregates operations. In March 2014, Vulcan Materials Co Completed the sale of the Company’s cement and concrete businesses in the Florida area to Cementos Argos.
VMC Chart

VMC data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

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

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 2/5

  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 – FAIL
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Balance Sheet – 12/31/2013

Current Assets $951,500,000
Current Liabilities $299,100,000
Total Debt $2,522,200,000
Total Assets $8,259,100,000
Intangible Assets $3,779,100,000
Total Liabilities $4,321,000,000
Outstanding Shares 130,200,000

Earnings Per Share

2013 $0.16
2012 -$0.42
2011 -$0.58
2010 -$0.80
2009 $0.16
2008 -$0.02
2007 $4.66
2006 $4.79
2005 $3.30
2004 $2.52

Earnings Per Share – ModernGraham

2013 -$0.27
2012 -$0.43
2011 -$0.07
2010 $0.71
2009 $1.84
2008 $2.80

Dividend History

VMC Dividend Chart

VMC Dividend data by YCharts

Conclusion:

Vulcan Materials Company is not suitable for either the Defensive Investor or the Enterprising Investor.  The company only satisfies the Defensive Investor’s requirements regarding size, current ratio, and a long dividend history (though it should be noted the company is currently barely paying a dividend).  The Enterprising Investor has serious concerns with 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, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through a review of 5 Low PEmg Companies for the Defensive Investor or 5 Low PEmg Companies for the Enterprising Investor.  From a valuation side of things, the company appears significantly overvalued due to the drop in EPSmg (normalized earnings) from $1.84 in 2009 to -$0.27 for 2013.  This demonstrated lack of growth leads the ModernGraham valuation model to return an estimate of intrinsic value that falls well below 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 Vulcan Materials Company (VMC)?  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 did not hold a position in Vulcan Materials Company (VMC) or any other company mentioned in the 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.

Home Depot Inc Valuation – April 2019 #HD

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HD – 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 $223,054,839,544 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.11 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 257.09% Pass
6. Moderate PEmg Ratio PEmg < 20 23.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -120.72 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 1.11 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 14.79 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 $8.51
MG Growth Estimate 14.05%
MG Value $311.32
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $123.35
MG Value based on 0% Growth $72.31
Market Implied Growth Rate 7.63%
Current Price $202.06
% of Intrinsic Value 64.90%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.39 in 2016 to an estimated $8.51 for 2020. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.63% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Home Depot Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $4.12 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 23.75, which was above the industry average of 21.52. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.38.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.38
Graham Number $0.00
PEmg 23.75
Current Ratio 1.11
PB Ratio -120.72
Current Dividend $4.12
Dividend Yield 2.04%
Number of Consecutive Years of Dividend Growth 9

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 1/1/2019
Total Current Assets $18,529,000,000
Total Current Liabilities $16,716,000,000
Long-Term Debt $26,807,000,000
Total Assets $44,003,000,000
Intangible Assets $2,252,000,000
Total Liabilities $45,881,000,000
Shares Outstanding (Diluted Average) 1,122,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.69
Jan2019 $9.73
Jan2018 $7.29
Jan2017 $6.45
Jan2016 $5.46
Jan2015 $4.71
Jan2014 $3.76
Jan2013 $3.00
Jan2012 $2.47
Jan2011 $2.01
Jan2010 $1.57
Jan2009 $1.34
Jan2008 $2.37
Jan2007 $2.79
Jan2006 $2.72
Jan2005 $2.26
Jan2004 $1.88
Jan2003 $1.56
Jan2002 $1.29
Jan2001 $1.10
Jan2000 $1.00

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.51
Jan2019 $7.52
Jan2018 $6.12
Jan2017 $5.25
Jan2016 $4.39
Jan2015 $3.64
Jan2014 $2.92
Jan2013 $2.36
Jan2012 $2.01
Jan2011 $1.86
Jan2010 $1.91
Jan2009 $2.15
Jan2008 $2.50
Jan2007 $2.46
Jan2006 $2.18
Jan2005 $1.81
Jan2004 $1.51

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Lowe’s Companies Inc Valuation – March 2019 #LOW
Quanta Services Inc Valuation – March 2019 #PWR
Mohawk Industries Inc Valuation – March 2019 #MHK
Jacobs Engineering Group Inc Valuation – March 2019 #JEC
Masco Corp Valuation – February 2019 $MAS
D.R. Horton Inc Valuation – February 2019 $DHI
Martin Marietta Materials Inc Valuation – February 2019 $MLM
Fluor Corp Valuation – February 2019 $FLR
Lennar Corp Valuation – February 2019 $LEN
Vulcan Materials Co Valuation – February 2019 $VMC

Disclaimer:

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

Lowe’s Companies Inc Valuation – March 2019 #LOW

Company Profile (excerpt from Reuters): Lowe’s Companies, Inc. (Lowe’s), incorporated on August 1, 1952, is a home improvement company. The Company operates approximately 2,370 home improvement and hardware stores. The Company offers a range of products for maintenance, repair, remodeling and decorating. The Company offers home improvement products in categories, including Lumber and Building Materials; Tools and Hardware; Appliances; Fashion Fixtures; Rough Plumbing and Electrical; Lawn and Garden; Seasonal and Outdoor Living; Paint; Flooring; Millwork, and Kitchens. The Company also supports the communities that focus on K-12 public education and community improvement projects. The Company serves its customers in the United States, Canada and Mexico.

LOW Chart

LOW data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LOW – 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 $84,769,831,466 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.98 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 184.80% Pass
6. Moderate PEmg Ratio PEmg < 20 25.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 23.25 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 0.98 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -53.50 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 $4.22
MG Growth Estimate 11.58%
MG Value $133.62
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $61.19
MG Value based on 0% Growth $35.87
Market Implied Growth Rate 8.28%
Current Price $105.79
% of Intrinsic Value 79.17%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.38 in 2016 to an estimated $4.22 for 2020. This level of demonstrated earnings growth supports the market’s implied estimate of 8.28% 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 Lowe’s Companies, Inc. revealed the company was trading above its Graham Number of $24.75. The company pays a dividend of $1.85 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 25.07, which was above the industry average of 20.99. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.77.

Lowe’s Companies, 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) -$20.77
Graham Number $24.75
PEmg 25.07
Current Ratio 0.98
PB Ratio 23.25
Current Dividend $1.85
Dividend Yield 1.75%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $14,228,000,000
Total Current Liabilities $14,497,000,000
Long-Term Debt $14,391,000,000
Total Assets $34,508,000,000
Intangible Assets $303,000,000
Total Liabilities $30,864,000,000
Shares Outstanding (Diluted Average) 801,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.00
Jan2019 $2.84
Jan2018 $4.09
Jan2017 $3.47
Jan2016 $2.73
Jan2015 $2.71
Jan2014 $2.14
Jan2013 $1.69
Jan2012 $1.43
Jan2011 $1.42
Jan2010 $1.21
Jan2009 $1.49
Jan2008 $1.86
Jan2007 $1.99
Jan2006 $1.73
Jan2005 $1.35
Jan2004 $1.13
Jan2003 $0.93
Jan2002 $0.65
Jan2001 $0.52
Jan2000 $0.44

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.22
Jan2019 $3.28
Jan2018 $3.34
Jan2017 $2.82
Jan2016 $2.38
Jan2015 $2.10
Jan2014 $1.72
Jan2013 $1.49
Jan2012 $1.42
Jan2011 $1.47
Jan2010 $1.55
Jan2009 $1.71
Jan2008 $1.75
Jan2007 $1.61
Jan2006 $1.33
Jan2005 $1.06
Jan2004 $0.85

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – February 2019
Best Dividend Paying Stocks for Dividend Growth Investors – August 2018
Best Dividend Paying Stocks for Dividend Growth Investors – June 2018
Lowe’s Companies Inc Valuation – June 2018 $LOW
Lowe’s Companies Inc Valuation – March 2017 $LOW

Other ModernGraham posts about related companies

Quanta Services Inc Valuation – March 2019 #PWR
Mohawk Industries Inc Valuation – March 2019 #MHK
Jacobs Engineering Group Inc Valuation – March 2019 #JEC
Masco Corp Valuation – February 2019 $MAS
D.R. Horton Inc Valuation – February 2019 $DHI
Martin Marietta Materials Inc Valuation – February 2019 $MLM
Fluor Corp Valuation – February 2019 $FLR
Lennar Corp Valuation – February 2019 $LEN
Vulcan Materials Co Valuation – February 2019 $VMC
PulteGroup Inc Valuation – January 2019 $PHM

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.

Quanta Services Inc Valuation – March 2019 #PWR

Company Profile (excerpt from Reuters): Quanta Services, Inc. (Quanta), incorporated on August 19, 1997, is a provider of specialty contracting services, offering infrastructure solutions primarily to the electric power and oil and gas industries in the United States, Canada and Australia, and selected other international markets. The Company operates through two segments: Electric Power Infrastructure Services, and Oil and Gas Infrastructure Services. The services it provides include the design, installation, upgrade, repair and maintenance of infrastructure within each of the industries it serves, such as electric power transmission and distribution networks, substation facilities, renewable energy facilities, pipeline transmission and distribution systems and facilities, and infrastructure services for the offshore and inland water energy markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PWR – 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 $4,963,069,313 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.84 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 158.99% Pass
6. Moderate PEmg Ratio PEmg < 20 15.34 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.47 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 1.84 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.68 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.28
MG Growth Estimate 7.85%
MG Value $55.18
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $33.07
MG Value based on 0% Growth $19.39
Market Implied Growth Rate 3.42%
Current Price $34.99
% of Intrinsic Value 63.41%

Quanta Services Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.5 in 2015 to an estimated $2.28 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.42% 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 Quanta Services Inc revealed the company was trading below its Graham Number of $41.66. The company pays a dividend of $0.04 per share, for a yield of 0.1% Its PEmg (price over earnings per share – ModernGraham) was 15.34, which was below the industry average of 20.99, 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 $-0.95.

Quanta Services Inc performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.95
Graham Number $41.66
PEmg 15.34
Current Ratio 1.84
PB Ratio 1.47
Current Dividend $0.04
Dividend Yield 0.11%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,326,104,000
Total Current Liabilities $1,806,127,000
Long-Term Debt $1,040,532,000
Total Assets $7,075,787,000
Intangible Assets $2,180,059,000
Total Liabilities $3,470,334,000
Shares Outstanding (Diluted Average) 151,310,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.30
Dec2018 $1.90
Dec2017 $2.00
Dec2016 $1.26
Dec2015 $1.59
Dec2014 $1.35
Dec2013 $1.87
Dec2012 $1.44
Dec2011 $0.62
Dec2010 $0.72
Dec2009 $0.81
Dec2008 $0.87
Dec2007 $0.89
Dec2006 $0.15
Dec2005 $0.25
Dec2004 -$0.08
Dec2003 -$0.30
Dec2002 -$7.77
Dec2001 $1.10
Dec2000 $1.42
Dec1999 $0.67

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.28
Dec2018 $1.72
Dec2017 $1.63
Dec2016 $1.46
Dec2015 $1.50
Dec2014 $1.37
Dec2013 $1.28
Dec2012 $0.96
Dec2011 $0.74
Dec2010 $0.76
Dec2009 $0.72
Dec2008 $0.59
Dec2007 $0.36
Dec2006 -$0.46
Dec2005 -$0.96
Dec2004 -$1.42
Dec2003 -$1.72

Recommended Reading:

Other ModernGraham posts about the company

Quanta Services Inc Valuation – May 2018 $PWR
14 Best Stocks for Value Investors This Week – 2/11/17
Quanta Services Inc Valuation – February 2017 $PWR
15 Best Undervalued Stocks of the Week – 8/20/16
Quanta Services Inc Valuation – August 2016 $PWR

Other ModernGraham posts about related companies

Mohawk Industries Inc Valuation – March 2019 #MHK
Jacobs Engineering Group Inc Valuation – March 2019 #JEC
Masco Corp Valuation – February 2019 $MAS
D.R. Horton Inc Valuation – February 2019 $DHI
Martin Marietta Materials Inc Valuation – February 2019 $MLM
Fluor Corp Valuation – February 2019 $FLR
Lennar Corp Valuation – February 2019 $LEN
Vulcan Materials Co Valuation – February 2019 $VMC
PulteGroup Inc Valuation – January 2019 $PHM
Sherwin-Williams Co Valuation – January 2019 $SHW

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.

Mohawk Industries Inc Valuation – March 2019 #MHK

Company Profile (excerpt from Reuters): Mohawk Industries, Inc., incorporated on December 22, 1988, is a flooring manufacturer that creates products for residential and commercial spaces around the world. The Company operates in three segments: Global Ceramic, Flooring North America (Flooring NA) and Flooring Rest of the World (Flooring ROW). The Company’s manufacturing and distribution processes provide carpet, rugs, ceramic tile, laminate, wood, stone, luxury vinyl tile (LVT) and vinyl flooring. The Company has operations in Australia, Brazil, Canada, Europe, India, Malaysia, Mexico, New Zealand, Russia and the United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MHK – 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 $9,606,383,941 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.38 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 294.08% Pass
6. Moderate PEmg Ratio PEmg < 20 11.80 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.32 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 1.38 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.22 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $11.26
MG Growth Estimate 11.73%
MG Value $359.73
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $163.21
MG Value based on 0% Growth $95.68
Market Implied Growth Rate 1.65%
Current Price $132.85
% of Intrinsic Value 36.93%

Mohawk Industries, 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 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 Undervalued after growing its EPSmg (normalized earnings) from $6.32 in 2015 to an estimated $11.26 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.65% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Mohawk Industries, Inc. revealed the company was trading below its Graham Number of $151.26. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 11.8, which was below the industry average of 20.99, 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 $-15.5.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$15.50
Graham Number $151.26
PEmg 11.80
Current Ratio 1.38
PB Ratio 1.32
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 $4,509,296,000
Total Current Liabilities $3,266,239,000
Long-Term Debt $1,515,601,000
Total Assets $13,099,123,000
Intangible Assets $3,482,776,000
Total Liabilities $5,659,064,000
Shares Outstanding (Diluted Average) 74,161,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.15
Dec2018 $11.47
Dec2017 $12.98
Dec2016 $12.48
Dec2015 $8.31
Dec2014 $7.25
Dec2013 $4.82
Dec2012 $3.61
Dec2011 $2.52
Dec2010 $2.65
Dec2009 -$0.08
Dec2008 -$21.32
Dec2007 $10.32
Dec2006 $6.70
Dec2005 $5.72
Dec2004 $5.49
Dec2003 $4.62
Dec2002 $4.39
Dec2001 $3.55
Dec2000 $3.00
Dec1999 $2.61

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $11.26
Dec2018 $11.37
Dec2017 $10.60
Dec2016 $8.71
Dec2015 $6.32
Dec2014 $4.94
Dec2013 $3.42
Dec2012 $0.97
Dec2011 -$0.62
Dec2010 -$1.58
Dec2009 -$2.37
Dec2008 -$1.89
Dec2007 $7.41
Dec2006 $5.77
Dec2005 $5.12
Dec2004 $4.61
Dec2003 $3.99

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Stocks for the Enterprising Investor – January 2019
Most Undervalued Stocks of the S&P 500 – August 2018
Mohawk Industries Inc Valuation – May 2018 $MHK
Mohawk Industries Inc Valuation – February 2017 $MHK
Mohawk Industries Inc. Analysis – October 2015 Update $MHK

Other ModernGraham posts about related companies

Jacobs Engineering Group Inc Valuation – March 2019 #JEC
Masco Corp Valuation – February 2019 $MAS
D.R. Horton Inc Valuation – February 2019 $DHI
Martin Marietta Materials Inc Valuation – February 2019 $MLM
Fluor Corp Valuation – February 2019 $FLR
Lennar Corp Valuation – February 2019 $LEN
Vulcan Materials Co Valuation – February 2019 $VMC
PulteGroup Inc Valuation – January 2019 $PHM
Sherwin-Williams Co Valuation – January 2019 $SHW
Johnson Controls International PC Valuation – January 2019 $JCI

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.

Jacobs Engineering Group Inc Valuation – March 2019 #JEC

Company Profile (excerpt from Reuters): Jacobs Engineering Group Inc., incorporated on January 8, 1987, is a technical professional services company. The Company provides a range of technical, professional and construction services to industrial, commercial and governmental clients. The Company’s services include Project Services; Process, Scientific, and Systems Consulting Services; Construction Services, and Operations and Maintenance Services. The Company operates four lines of business (LOBs): Petroleum and Chemicals; Buildings and Infrastructure; Aerospace and Technology, and Industrial. It caters its services to various sectors, such as oil and gas exploration, production and refining; chemicals and polymers; programs for various national governments, including aerospace, defense, and environmental programs; buildings (including specialized buildings for clients operating in the fields of healthcare, education, and high technology; governmental complexes; other specialized civic and mission critical buildings, installations, and laboratories; and retail and commercial buildings); infrastructure and telecommunications; mining and minerals; pharmaceuticals and biotechnology; power; pulp and paper; technology and manufacturing, and food and consumer products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JEC – 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 $10,214,039,442 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.58 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 2.27% Fail
6. Moderate PEmg Ratio PEmg < 20 28.76 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.80 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 1.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.48 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 $2.55
MG Growth Estimate -0.71%
MG Value $18.04
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $36.93
MG Value based on 0% Growth $21.65
Market Implied Growth Rate 10.13%
Current Price $73.24
% of Intrinsic Value 405.88%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.67 in 2015 to an estimated $2.55 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.13% 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 Jacobs Engineering Group Inc revealed the company was trading above its Graham Number of $61.47. The company pays a dividend of $0.75 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 28.76, which was above the industry average of 20.99. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.36.

Jacobs Engineering Group 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) -$15.36
Graham Number $61.47
PEmg 28.76
Current Ratio 1.58
PB Ratio 1.80
Current Dividend $0.75
Dividend Yield 1.02%
Number of Consecutive Years of Dividend Growth 2

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,898,862,000
Total Current Liabilities $3,094,724,000
Long-Term Debt $2,668,993,000
Total Assets $12,945,259,000
Intangible Assets $5,323,116,000
Total Liabilities $7,104,225,000
Shares Outstanding (Diluted Average) 143,578,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.08
Sep2018 $1.17
Sep2017 $2.42
Sep2016 $1.73
Sep2015 $2.40
Sep2014 $2.48
Sep2013 $3.23
Sep2012 $2.94
Sep2011 $2.60
Sep2010 $1.96
Sep2009 $3.21
Sep2008 $3.38
Sep2007 $2.35
Sep2006 $1.64
Sep2005 $1.12
Sep2004 $1.01
Sep2003 $1.00
Sep2002 $0.99
Sep2001 $0.81
Sep2000 $0.48
Sep1999 $0.62

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.55
Sep2018 $1.87
Sep2017 $2.29
Sep2016 $2.34
Sep2015 $2.67
Sep2014 $2.75
Sep2013 $2.86
Sep2012 $2.72
Sep2011 $2.64
Sep2010 $2.61
Sep2009 $2.73
Sep2008 $2.30
Sep2007 $1.65
Sep2006 $1.25
Sep2005 $1.03
Sep2004 $0.94
Sep2003 $0.86

Recommended Reading:

Other ModernGraham posts about the company

Jacobs Engineering Group Inc Valuation – May 2018 $JEC
Jacobs Engineering Group Inc Valuation – January 2017 $JEC
Jacobs Engineering Group Inc Valuation – August 2016 $JEC
Jacobs Engineering Group Inc Valuation – January 2016 Update $JEC
Jacobs Engineering Group Analysis – October 2015 Update $JEC

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Sherwin-Williams Co Valuation – January 2019 $SHW
Johnson Controls International PC Valuation – January 2019 $JCI
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Disclaimer:

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

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