Verisk Analytics Inc Valuation – March 2019 #VRSK

Company Profile (excerpt from Reuters): Verisk Analytics, Inc., incorporated on May 23, 2008, is a data analytics provider serving customers in insurance, natural resources and financial services. The Company operates through two segments: Risk Assessment and Decision Analytics. Its Risk Assessment segment serves its property and casualty (P&C) insurance customers and focuses on prediction of loss, selection and pricing of risk, and compliance with their reporting requirements in each United States state in which they operate. In the Decision Analytics segment, the Company develops predictive models to forecast scenarios and produce both standard and customized analytics that help its customers manage their businesses, including predicting loss, selecting and pricing risk, detecting fraud before and after a loss event, and quantifying losses. The Company offers predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, natural resources intelligence, economic forecasting, and various other fields. In the United States, and around the world, the Company enables customers protect people, property, and financial assets. These solutions take various forms, including data, expert insight, statistical models and analytics all designed to allow its customers to make logical decisions. The Company also works with a range of companies, governments and institutions across the energy, and metals and mining value chains. The Company uses its data assets to develop predictive analytics and transformative models for its customers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VRSK – 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 $21,005,247,318 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.49 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 129.90% Pass
6. Moderate PEmg Ratio PEmg < 20 34.71 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.38 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 0.49 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.99 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.70
MG Growth Estimate 8.09%
MG Value $91.38
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $53.67
MG Value based on 0% Growth $31.46
Market Implied Growth Rate 13.10%
Current Price $128.47
% of Intrinsic Value 140.58%

Verisk Analytics, 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 $2.4 in 2015 to an estimated $3.7 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.1% 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 Verisk Analytics, Inc. revealed the company was trading above its Graham Number of $34.88. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 34.71, which was above the industry average of 32.74. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.03.

Verisk Analytics, 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) -$19.03
Graham Number $34.88
PEmg 34.71
Current Ratio 0.49
PB Ratio 10.38
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $644,500,000
Total Current Liabilities $1,324,600,000
Long-Term Debt $2,031,000,000
Total Assets $5,900,300,000
Intangible Assets $4,589,300,000
Total Liabilities $3,829,700,000
Shares Outstanding (Diluted Average) 167,347,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.30
Dec2018 $3.56
Dec2017 $3.29
Dec2016 $3.45
Dec2015 $3.01
Dec2014 $2.37
Dec2013 $2.02
Dec2012 $1.92
Dec2011 $1.63
Dec2010 $1.30
Dec2009 $0.70
Dec2008 $0.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.70
Dec2018 $3.31
Dec2017 $3.07
Dec2016 $2.82
Dec2015 $2.40
Dec2014 $2.02
Dec2013 $1.73
Dec2012 $1.48
Dec2011 $1.14
Dec2010 $0.79
Dec2009 $0.45
Dec2008 $0.28

Recommended Reading:

Other ModernGraham posts about the company

Verisk Analytics Inc Valuation – June 2018 $VRSK
Verisk Analytics Inc Valuation – Initial Coverage $VRSK

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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.

Verisk Analytics Inc Valuation – June 2018 $VRSK

Company Profile (excerpt from Reuters): Verisk Analytics, Inc., incorporated on May 23, 2008, is a data analytics provider serving customers in insurance, natural resources and financial services. The Company operates through two segments: Risk Assessment and Decision Analytics. Its Risk Assessment segment serves its property and casualty (P&C) insurance customers and focuses on prediction of loss, selection and pricing of risk, and compliance with their reporting requirements in each United States state in which they operate. In the Decision Analytics segment, the Company develops predictive models to forecast scenarios and produce both standard and customized analytics that help its customers manage their businesses, including predicting loss, selecting and pricing risk, detecting fraud before and after a loss event, and quantifying losses. The Company offers predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, natural resources intelligence, economic forecasting, and various other fields. In the United States, and around the world, the Company enables customers protect people, property, and financial assets. These solutions take various forms, including data, expert insight, statistical models and analytics all designed to allow its customers to make logical decisions. The Company also works with a range of companies, governments and institutions across the energy, and metals and mining value chains. The Company uses its data assets to develop predictive analytics and transformative models for its customers.

VRSK Chart

VRSK data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VRSK – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,916,797,057 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.45 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 194.49% Pass
6. Moderate PEmg Ratio PEmg < 20 31.78 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.47 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.45 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.39 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.44
MG Growth Estimate 10.61%
MG Value $102.35
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $49.93
MG Value based on 0% Growth $29.27
Market Implied Growth Rate 11.64%
Current Price $109.42
% of Intrinsic Value 106.91%

Verisk Analytics, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.02 in 2014 to an estimated $3.44 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.64% 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 Verisk Analytics, Inc. revealed the company was trading above its Graham Number of $32.22. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 31.78, which was below the industry average of 34.82, 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 $-19.85.

Verisk Analytics, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$19.85
Graham Number $32.22
PEmg 31.78
Current Ratio 0.45
PB Ratio 8.47
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 3/1/2018
Total Current Assets $708,600,000
Total Current Liabilities $1,558,100,000
Long-Term Debt $2,028,300,000
Total Assets $6,246,900,000
Intangible Assets $4,810,800,000
Total Liabilities $4,062,600,000
Shares Outstanding (Diluted Average) 168,993,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.95
Dec2017 $3.29
Dec2016 $3.45
Dec2015 $3.01
Dec2014 $2.37
Dec2013 $2.02
Dec2012 $1.92
Dec2011 $1.63
Dec2010 $1.30
Dec2009 $0.70
Dec2008 $0.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.44
Dec2017 $3.07
Dec2016 $2.82
Dec2015 $2.40
Dec2014 $2.02
Dec2013 $1.73
Dec2012 $1.48
Dec2011 $1.14
Dec2010 $0.79
Dec2009 $0.45
Dec2008 $0.28

Recommended Reading:

Other ModernGraham posts about the company

Verisk Analytics Inc Valuation – Initial Coverage $VRSK

Other ModernGraham posts about related companies

Alliance Data Systems Corp Valuation – May 2018 $ADS
Whirlpool Corporation Valuation – April 2018 $WHR
IHS Markit Ltd Valuation – Initial Coverage April 2018 $INFO
Automatic Data Processing Inc Valuation – April 2018 $ADP
Accenture PLC Valuation – April 2018 $ACN
Fiserv Inc Valuation – April 2018 $FISV
Iron Mountain Inc Valuation – April 2018 $IRM
Cintas Corp Valuation – April 2018 $CTAS
Xerox Corp Valuation – March 2018 $XRX
Avery Dennison Corp Valuation – March 2018 $AVY

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.

Verisk Analytics Inc Valuation – Initial Coverage $VRSK

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Verisk Analytics Inc (VRSK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Verisk Analytics, Inc. is a data analytics provider serving customers in insurance, natural resources, healthcare, financial services, government and risk management. The Company provides predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence and economic forecasting, among others. The Company operates through two segments: Risk Assessment and Decision Analytics. The Risk Assessment segment provides statistical, actuarial and underwriting data for the United States property and casualty (P&C) insurance industry. The Decision Analytics segment provides predictive models to forecast scenarios and produce both standard and customized analytics that help its customers manage their businesses, including predicting loss, selecting and pricing risk, detecting fraud before and after a loss event, and quantifying losses.

VRSK Chart

VRSK data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of VRSK – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,011,080,882 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.81 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 243.11% Pass
6. Moderate PEmg Ratio PEmg < 20 27.47 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.78 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 0.81 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -18.89 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.06
MG Growth Estimate 11.48%
MG Value $96.12
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $44.31
MG Value based on 0% Growth $25.98
Market Implied Growth Rate 9.49%
Current Price $83.95
% of Intrinsic Value 87.34%

Verisk Analytics, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.73 in 2013 to an estimated $3.06 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 9.49% 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 Verisk Analytics, Inc. revealed the company was trading above its Graham Number of $24.12. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 27.47, which was below the industry average of 38.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.35.

Verisk Analytics, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$16.35
Graham Number $24.12
PEmg 27.47
Current Ratio 0.81
PB Ratio 10.78
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $500,900,000
Total Current Liabilities $621,600,000
Long-Term Debt $2,280,200,000
Total Assets $4,631,200,000
Intangible Assets $3,588,900,000
Total Liabilities $3,298,800,000
Shares Outstanding (Diluted Average) 171,172,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.25
Dec2016 $3.45
Dec2015 $3.01
Dec2014 $2.37
Dec2013 $2.02
Dec2012 $1.92
Dec2011 $1.63
Dec2010 $1.30
Dec2009 $0.70
Dec2008 $0.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.06
Dec2016 $2.82
Dec2015 $2.40
Dec2014 $2.02
Dec2013 $1.73
Dec2012 $1.48
Dec2011 $1.14
Dec2010 $0.79
Dec2009 $0.45
Dec2008 $0.28

Recommended Reading:

Other ModernGraham posts about the company

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

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Disclaimer:

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

Jack Henry & Associates Inc Valuation – April 2019 #JKHY

Company Profile (excerpt from Reuters): Jack Henry & Associates, Inc., incorporated on October 4, 1985, is a provider of information processing solutions for community banks. The Company offers a range of products and services, including processing transactions, automating business processes, and managing information financial institutions and diverse corporate entities. The Company operates in two segments, which include bank systems and services (Bank) and credit union systems and services (Credit Union). The Company provides its products and services through approximately three business brands, which include Jack Henry Banking, Symitar and ProfitStars. The Core software system consists of the integrated applications required to process deposit, loan, and general ledger transactions, and to maintain centralized customer/member information. Jack Henry Banking markets over three core software systems to banks and Symitar markets over two core software systems to credit unions. The Company’s subsidiaries include Jack Henry Services, Inc., Jack Henry Software/Commlink, Inc., Symitar Systems, Inc., Check Collect, Inc. and Bayside Business Solutions, Inc.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JKHY – 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 $10,937,524,534 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.07 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 142.89% Pass
6. Moderate PEmg Ratio PEmg < 20 38.72 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.88 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 1.07 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.66
MG Growth Estimate 10.26%
MG Value $106.22
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $53.07
MG Value based on 0% Growth $31.11
Market Implied Growth Rate 15.11%
Current Price $141.73
% of Intrinsic Value 133.43%

Jack Henry & Associates, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the low current ratio. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.17 in 2015 to an estimated $3.66 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.11% 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 Jack Henry & Associates, Inc. revealed the company was trading above its Graham Number of $35.7. The company pays a dividend of $1.36 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 38.72, which was above the industry average of 32.68. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.81.

Jack Henry & Associates, 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) -$2.81
Graham Number $35.70
PEmg 38.72
Current Ratio 1.07
PB Ratio 7.88
Current Dividend $1.36
Dividend Yield 0.96%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $362,639,000
Total Current Liabilities $340,074,000
Long-Term Debt $0
Total Assets $1,971,777,000
Intangible Assets $1,113,794,000
Total Liabilities $579,822,000
Shares Outstanding (Diluted Average) 77,409,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.45
Jun2018 $4.85
Jun2017 $3.14
Jun2016 $3.12
Jun2015 $2.59
Jun2014 $2.19
Jun2013 $1.94
Jun2012 $1.74
Jun2011 $1.59
Jun2010 $1.38
Jun2009 $1.22
Jun2008 $1.16
Jun2007 $1.14
Jun2006 $0.96
Jun2005 $0.81
Jun2004 $0.68
Jun2003 $0.55
Jun2002 $0.62
Jun2001 $0.61
Jun2000 $0.40
Jun1999 $0.38

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.66
Jun2018 $3.57
Jun2017 $2.82
Jun2016 $2.54
Jun2015 $2.17
Jun2014 $1.90
Jun2013 $1.69
Jun2012 $1.52
Jun2011 $1.37
Jun2010 $1.23
Jun2009 $1.13
Jun2008 $1.04
Jun2007 $0.93
Jun2006 $0.79
Jun2005 $0.68
Jun2004 $0.61
Jun2003 $0.55

Recommended Reading:

Other ModernGraham posts about the company

Jack Henry & Associates Inc Valuation – August 2018 $JKHY
Jack Henry & Associates Inc Valuation – Initial Coverage $JKHY

Other ModernGraham posts about related companies

United Rentals Inc Valuation – April 2019 #URI
Verisk Analytics Inc Valuation – March 2019 #VRSK
Global Payments Inc Valuation – March 2019 #GPN
Robert Half International Inc Valuation – March 2019 #RHI
Alliance Data Systems Corp Valuation – March 2019 #ADS
IHS Markit Ltd Valuation – February 2019 $INFO
Automatic Data Processing Inc Valuation – February 2019 $ADP
Fiserv Inc Valuation – February 2019 $FISV
Rollins Inc Valuation – February 2019 $ROL
Iron Mountain Inc Valuation – February 2019 $IRM

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.

United Rentals Inc Valuation – April 2019 #URI

Company Profile (excerpt from Reuters): United Rentals, Inc., incorporated on July 20, 1998, is a holding company. The Company is an equipment rental company, which operates throughout the United States and Canada. It operates through two segments: general rentals, and trench, power and pump. The general rentals segment includes the rental of construction, aerial, industrial and homeowner equipment and related services and activities. The trench, power and pump segment includes the rental of specialty construction products and related services. As of October 17, 2018, the Company had an integrated network of 1075 rental locations in North America and 11 in Europe. The Company conducts its operations through its subsidiaries, NES Rentals Holdings II, Inc., United Rentals (North America), Inc. (URNA) and subsidiaries of URNA.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of URI – 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 $9,549,825,287 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.83 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 2565.90% Pass
6. Moderate PEmg Ratio PEmg < 20 8.87 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.90 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.83 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -30.55 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 $13.67
MG Growth Estimate 15.00%
MG Value $526.14
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $198.16
MG Value based on 0% Growth $116.16
Market Implied Growth Rate 0.18%
Current Price $121.20
% of Intrinsic Value 23.04%

United Rentals, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability 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 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 $4.32 in 2015 to an estimated $13.67 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.18% 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 United Rentals, Inc. revealed the company was trading below its Graham Number of $128.67. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 8.87, which was below the industry average of 32.68, 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 $-159.15.

United Rentals, 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) -$159.15
Graham Number $128.67
PEmg 8.87
Current Ratio 0.83
PB Ratio 2.90
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 $1,761,000,000
Total Current Liabilities $2,116,000,000
Long-Term Debt $10,844,000,000
Total Assets $18,133,000,000
Intangible Assets $6,142,000,000
Total Liabilities $14,730,000,000
Shares Outstanding (Diluted Average) 81,487,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.27
Dec2018 $13.12
Dec2017 $15.73
Dec2016 $6.45
Dec2015 $6.07
Dec2014 $5.15
Dec2013 $3.64
Dec2012 $0.79
Dec2011 $1.38
Dec2010 -$0.44
Dec2009 -$1.02
Dec2008 -$12.62
Dec2007 $3.25
Dec2006 $2.06
Dec2005 $1.80
Dec2004 -$0.88
Dec2003 -$3.29
Dec2002 -$4.88
Dec2001 $1.18
Dec2000 $1.89
Dec1999 $1.53

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $13.67
Dec2018 $11.01
Dec2017 $9.11
Dec2016 $5.34
Dec2015 $4.32
Dec2014 $3.00
Dec2013 $1.57
Dec2012 -$0.43
Dec2011 -$1.33
Dec2010 -$2.37
Dec2009 -$2.66
Dec2008 -$2.75
Dec2007 $1.66
Dec2006 $0.23
Dec2005 -$0.86
Dec2004 -$1.86
Dec2003 -$1.81

Recommended Reading:

Other ModernGraham posts about the company

United Rentals Inc Valuation – June 2018 $URI
United Rentals Inc Valuation – September 2017 $URI
United Rentals Inc Valuation – August 2016 $URI
United Rentals Inc. Analysis – Initial Coverage $URI

Other ModernGraham posts about related companies

Verisk Analytics Inc Valuation – March 2019 #VRSK
Global Payments Inc Valuation – March 2019 #GPN
Robert Half International Inc Valuation – March 2019 #RHI
Alliance Data Systems Corp Valuation – March 2019 #ADS
IHS Markit Ltd Valuation – February 2019 $INFO
Automatic Data Processing Inc Valuation – February 2019 $ADP
Fiserv Inc Valuation – February 2019 $FISV
Rollins Inc Valuation – February 2019 $ROL
Iron Mountain Inc Valuation – February 2019 $IRM
Cintas Corp Valuation – February 2019 $CTAS

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.

Strategic Education Inc Valuation – August 2018 $STRA

Company Profile (excerpt from Reuters): Strategic Education, Inc., formerly Strayer Education, Inc., incorporated on May 10, 1996, is an education services holding company. The Company provides post-secondary education and other academic programs, through its subsidiaries, Strayer University (the University), New York Code and Design Academy (NYCDA) and Capella Education Company (Capella). As of December 31, 2016, the University offered undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, nursing, public administration and criminal justice at 74 physical campuses located in the Mid-Atlantic and Southern regions of the United States, and online. The University also offers an executive Master of Business Administration (MBA) online through its Jack Welch Management Institute. Its subsidiary, NYCDA, provides non-degree courses in Web and application software development, primarily at its campus in New York City.

Downloadable PDF version of this valuation:

ModernGraham Valuation of STRA – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,564,597,123 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.09 Pass
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 -68.41% Fail
6. Moderate PEmg Ratio PEmg < 20 46.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.04 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 3.09 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.99
MG Growth Estimate -4.25%
MG Value $8.90
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $43.40
MG Value based on 0% Growth $25.44
Market Implied Growth Rate 18.86%
Current Price $138.38
% of Intrinsic Value 1555.37%

Strategic Education Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.85 in 2014 to an estimated $2.99 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 18.86% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Strategic Education Inc revealed the company was trading above its Graham Number of $36.84. The company pays a dividend of $1 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 46.23, which was above the industry average of 33.97. Finally, the company was trading above its Net Current Asset Value (NCAV) of $8.9.

Strategic Education 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) $8.90
Graham Number $36.84
PEmg 46.23
Current Ratio 3.09
PB Ratio 7.04
Current Dividend $1.00
Dividend Yield 0.72%
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 6/1/2018
Total Current Assets $214,172,000
Total Current Liabilities $69,204,000
Long-Term Debt $0
Total Assets $336,765,000
Intangible Assets $17,919,000
Total Liabilities $112,925,000
Shares Outstanding (Diluted Average) 11,380,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.22
Dec2017 $1.84
Dec2016 $3.21
Dec2015 $3.73
Dec2014 $4.35
Dec2013 $1.55
Dec2012 $5.76
Dec2011 $8.88
Dec2010 $9.70
Dec2009 $7.60
Dec2008 $5.67
Dec2007 $4.47
Dec2006 $3.61
Dec2005 $3.26
Dec2004 $2.74
Dec2003 $2.27
Dec2002 $1.78
Dec2001 $1.55
Dec2000 $1.41
Dec1999 $1.23
Dec1998 $1.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.99
Dec2017 $2.90
Dec2016 $3.53
Dec2015 $4.07
Dec2014 $4.85
Dec2013 $5.63
Dec2012 $7.62
Dec2011 $8.12
Dec2010 $7.23
Dec2009 $5.64
Dec2008 $4.42
Dec2007 $3.62
Dec2006 $3.04
Dec2005 $2.61
Dec2004 $2.18
Dec2003 $1.81
Dec2002 $1.53

Recommended Reading:

Other ModernGraham posts about the company

Strayer Education Inc Valuation – Initial Coverage $STRA

Other ModernGraham posts about related companies

Korn/Ferry International Valuation – August 2018 $KFY
Kelly Services Inc Valuation – August 2018 $KELYA
Jack Henry & Associates Inc Valuation – August 2018 $JKHY
Dun & Bradstreet Corp Valuation – July 2018 $DNB
CoreLogic Inc Valuation – July 2018 $CLGX
Pitney Bowes Inc Valuation – June 2018 $PBI
United Rentals Inc Valuation – June 2018 $URI
Global Payments Inc Valuation – June 2018 $GPN
Verisk Analytics Inc Valuation – June 2018 $VRSK
Robert Half International Inc Valuation – June 2018 $RHI

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.

Multi-Color Corp Valuation – August 2018 $LABL

Company Profile (excerpt from Reuters): Multi-Color Corporation (Multi-Color), incorporated on April 15, 1985, is engaged in label solutions business, supporting brands, including producers of home and personal care, wine and spirit, food and beverage, healthcare and specialty consumer products. The Company serves international brand owners in North, Central and South America, Europe, Australia, New Zealand, South Africa and China and Southeast Asia with a range of label technologies in Pressure Sensitive, Glue-Applied (Cut and Stack), In-Mold, Shrink Sleeve and Heat Transfer. The Company also provides a range of print methods, including flexographic, lithographic, rotogravure, letterpress and digital, and in-house prepress services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LABL – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,252,349,622 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.97 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 202.06% Pass
6. Moderate PEmg Ratio PEmg < 20 16.39 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.76 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 1.97 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.41 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 $3.73
MG Growth Estimate 12.99%
MG Value $128.53
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $54.06
MG Value based on 0% Growth $31.69
Market Implied Growth Rate 3.94%
Current Price $61.10
% of Intrinsic Value 47.54%

Multi-Color Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2 in 2015 to an estimated $3.73 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.94% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Multi-Color Corporation revealed the company was trading above its Graham Number of $59.67. The company pays a dividend of $0.2 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 16.39, which was below the industry average of 33.97, 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 $-73.5.

Multi-Color Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$73.50
Graham Number $59.67
PEmg 16.39
Current Ratio 1.97
PB Ratio 1.76
Current Dividend $0.20
Dividend Yield 0.33%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $594,478,000
Total Current Liabilities $301,932,000
Long-Term Debt $1,581,974,000
Total Assets $2,819,043,000
Intangible Assets $1,705,262,000
Total Liabilities $2,104,478,000
Shares Outstanding (Diluted Average) 20,545,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.27
Mar2018 $3.87
Mar2017 $3.58
Mar2016 $2.82
Mar2015 $2.71
Mar2014 $1.70
Mar2013 $1.86
Mar2012 $1.32
Mar2011 $1.40
Mar2010 $1.16
Mar2009 $0.92
Mar2008 $2.18
Mar2007 $1.08
Mar2006 $0.95
Mar2005 $0.80
Mar2004 $0.66
Mar2003 $0.66
Mar2002 $0.51
Mar2001 $0.40
Mar2000 $0.60
Mar1999 $0.15

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.73
Mar2018 $3.28
Mar2017 $2.84
Mar2016 $2.34
Mar2015 $2.00
Mar2014 $1.59
Mar2013 $1.47
Mar2012 $1.31
Mar2011 $1.32
Mar2010 $1.28
Mar2009 $1.28
Mar2008 $1.36
Mar2007 $0.91
Mar2006 $0.78
Mar2005 $0.67
Mar2004 $0.59
Mar2003 $0.53

Recommended Reading:

Other ModernGraham posts about the company

11 Best Stocks for Value Investors This Week – 3/4/17
Multi-Color Corporation Valuation – Initial Coverage $LABL

Other ModernGraham posts about related companies

Korn/Ferry International Valuation – August 2018 $KFY
Kelly Services Inc Valuation – August 2018 $KELYA
Jack Henry & Associates Inc Valuation – August 2018 $JKHY
Dun & Bradstreet Corp Valuation – July 2018 $DNB
CoreLogic Inc Valuation – July 2018 $CLGX
Pitney Bowes Inc Valuation – June 2018 $PBI
United Rentals Inc Valuation – June 2018 $URI
Global Payments Inc Valuation – June 2018 $GPN
Verisk Analytics Inc Valuation – June 2018 $VRSK
Robert Half International Inc Valuation – June 2018 $RHI

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.

Korn/Ferry International Valuation – August 2018 $KFY

Company Profile (excerpt from Reuters): Korn/Ferry International (Korn Ferry), incorporated on October 13, 1999, is a people and organizational advisory company. The Company and its subsidiaries are engaged in the business of providing talent management solutions, including executive search on a retained basis, recruitment for non-executive professionals, recruitment process outsourcing, and leadership and talent consulting services. Its segments include Executive Search, Hay Group and Futurestep. Its executive search business is managed on a geographic basis throughout various regions, such as North America, Europe, the Middle East and Africa (EMEA), Asia Pacific and Latin America. Hay Group and Futurestep are managed on a global basis with operations in North America, Europe, Asia Pacific and Latin America. The Company has a network of approximately 150 offices in over 50 countries across the world that enables it to meet the needs of its clients in all industries. Its clients include public and private companies, middle market and emerging growth companies, as well as government and nonprofit organizations.

KFY Chart

KFY data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KFY – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,767,418,511 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.82 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 175.20% Pass
6. Moderate PEmg Ratio PEmg < 20 30.94 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 1.82 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.46 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 $2.17
MG Growth Estimate 8.97%
MG Value $57.42
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $31.49
MG Value based on 0% Growth $18.46
Market Implied Growth Rate 11.22%
Current Price $67.20
% of Intrinsic Value 117.04%

Korn/Ferry International 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, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.36 in 2015 to an estimated $2.17 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.22% 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 Korn/Ferry International revealed the company was trading above its Graham Number of $39.18. The company pays a dividend of $0.4 per share, for a yield of 0.6% Its PEmg (price over earnings per share – ModernGraham) was 30.94, which was below the industry average of 33.97, 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 $-0.96.

Korn/Ferry International receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.96
Graham Number $39.18
PEmg 30.94
Current Ratio 1.82
PB Ratio 3.10
Current Dividend $0.40
Dividend Yield 0.60%
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 4/1/2018
Total Current Assets $1,014,259,000
Total Current Liabilities $558,460,000
Long-Term Debt $211,311,000
Total Assets $2,287,914,000
Intangible Assets $787,438,000
Total Liabilities $1,068,299,000
Shares Outstanding (Diluted Average) 56,308,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.17
Apr2018 $2.35
Apr2017 $1.47
Apr2016 $0.58
Apr2015 $1.76
Apr2014 $1.48
Apr2013 $0.70
Apr2012 $1.15
Apr2011 $1.27
Apr2010 $0.12
Apr2009 -$0.23
Apr2008 $1.46
Apr2007 $1.24
Apr2006 $1.32
Apr2005 $0.90
Apr2004 $0.13
Apr2003 -$0.63
Apr2002 -$2.62
Apr2001 $0.81
Apr2000 $0.82
Apr1999 -$2.37

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.17
Apr2018 $1.62
Apr2017 $1.24
Apr2016 $1.13
Apr2015 $1.36
Apr2014 $1.09
Apr2013 $0.79
Apr2012 $0.81
Apr2011 $0.69
Apr2010 $0.52
Apr2009 $0.80
Apr2008 $1.21
Apr2007 $0.92
Apr2006 $0.45
Apr2005 -$0.09
Apr2004 -$0.49
Apr2003 -$0.80

Recommended Reading:

Other ModernGraham posts about the company

14 Best Stocks for Value Investors This Week – 2/11/17
Korn-Ferry International Valuation – Initial Coverage $KFY

Other ModernGraham posts about related companies

Kelly Services Inc Valuation – August 2018 $KELYA
Jack Henry & Associates Inc Valuation – August 2018 $JKHY
Dun & Bradstreet Corp Valuation – July 2018 $DNB
CoreLogic Inc Valuation – July 2018 $CLGX
Pitney Bowes Inc Valuation – June 2018 $PBI
United Rentals Inc Valuation – June 2018 $URI
Global Payments Inc Valuation – June 2018 $GPN
Verisk Analytics Inc Valuation – June 2018 $VRSK
Robert Half International Inc Valuation – June 2018 $RHI
Alliance Data Systems Corp Valuation – May 2018 $ADS

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.

Kelly Services Inc Valuation – August 2018 $KELYA

Company Profile (excerpt from Reuters): Kelly Services, Inc., incorporated on August 27, 1952, is a workforce solutions provider, which is engaged in offering a range of specialty services. The Company provides workforce solutions in three regions: the Americas; Europe, the Middle East and Africa (EMEA), and Asia Pacific (APAC). The Company’s segments are Americas Commercial, Americas Professional and Technical (Americas PT), EMEA Commercial, EMEA Professional and Technical (EMEA PT), and Outsourcing and Consulting Group (OCG). The Company places professional and technical employees at various levels in engineering, information technology (IT), law, healthcare and finance.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KELYA – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $937,235,822 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.50 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 -1283.33% Fail
6. Moderate PEmg Ratio PEmg < 20 11.83 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.80 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 1.50 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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 $2.06
MG Growth Estimate 11.87%
MG Value $66.46
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $29.89
MG Value based on 0% Growth $17.52
Market Implied Growth Rate 1.66%
Current Price $24.38
% of Intrinsic Value 36.68%

Kelly Services, Inc. Class A is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the low current ratio. 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 $1.15 in 2014 to an estimated $2.06 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.66% 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 Kelly Services, Inc. Class A revealed the company was trading below its Graham Number of $38.61. The company pays a dividend of $0.3 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 11.83, which was below the industry average of 33.97, 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 $3.92.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $3.92
Graham Number $38.61
PEmg 11.83
Current Ratio 1.50
PB Ratio 0.80
Current Dividend $0.30
Dividend Yield 1.23%
Number of Consecutive Years of Dividend Growth 2

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,397,700,000
Total Current Liabilities $934,200,000
Long-Term Debt $0
Total Assets $2,436,600,000
Intangible Assets $107,300,000
Total Liabilities $1,245,300,000
Shares Outstanding (Diluted Average) 38,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.21
Dec2017 $1.81
Dec2016 $3.08
Dec2015 $1.39
Dec2014 $0.61
Dec2013 $1.54
Dec2012 $1.32
Dec2011 $1.69
Dec2010 $0.71
Dec2009 -$3.00
Dec2008 -$2.37
Dec2007 $1.67
Dec2006 $1.75
Dec2005 $1.09
Dec2004 $0.60
Dec2003 $0.14
Dec2002 $0.51
Dec2001 $0.47
Dec2000 $2.43
Dec1999 $2.36
Dec1998 $2.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.06
Dec2017 $1.89
Dec2016 $1.81
Dec2015 $1.22
Dec2014 $1.15
Dec2013 $1.10
Dec2012 $0.47
Dec2011 -$0.05
Dec2010 -$0.70
Dec2009 -$0.99
Dec2008 $0.19
Dec2007 $1.33
Dec2006 $1.05
Dec2005 $0.65
Dec2004 $0.56
Dec2003 $0.76
Dec2002 $1.24

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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.

Jack Henry & Associates Inc Valuation – August 2018 $JKHY

Company Profile (excerpt from Reuters): Jack Henry & Associates, Inc., incorporated on October 4, 1985, is a provider of information processing solutions for community banks. The Company offers a range of products and services, including processing transactions, automating business processes, and managing information financial institutions and diverse corporate entities. The Company operates in two segments, which include bank systems and services (Bank) and credit union systems and services (Credit Union). The Company provides its products and services through approximately three business brands, which include Jack Henry Banking, Symitar and ProfitStars. The Core software system consists of the integrated applications required to process deposit, loan, and general ledger transactions, and to maintain centralized customer/member information. Jack Henry Banking markets over three core software systems to banks and Symitar markets over two core software systems to credit unions. The Company’s subsidiaries include Jack Henry Services, Inc., Jack Henry Software/Commlink, Inc., Symitar Systems, Inc., Check Collect, Inc. and Bayside Business Solutions, Inc.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JKHY – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,609,021,562 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.25 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 161.34% Pass
6. Moderate PEmg Ratio PEmg < 20 39.43 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.79 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 1.25 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.44 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.52
MG Growth Estimate 12.77%
MG Value $119.67
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $50.98
MG Value based on 0% Growth $29.89
Market Implied Growth Rate 15.46%
Current Price $138.63
% of Intrinsic Value 115.85%

Jack Henry & Associates, 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 Overvalued after growing its EPSmg (normalized earnings) from $1.9 in 2014 to an estimated $3.52 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.46% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Jack Henry & Associates, Inc. revealed the company was trading above its Graham Number of $37.51. The company pays a dividend of $1.18 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 39.43, which was above the industry average of 33.97. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.13.

Jack Henry & Associates, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$4.13
Graham Number $37.51
PEmg 39.43
Current Ratio 1.25
PB Ratio 8.79
Current Dividend $1.18
Dividend Yield 0.85%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $362,030,000
Total Current Liabilities $289,238,000
Long-Term Debt $105,000,000
Total Assets $1,905,368,000
Intangible Assets $1,088,493,000
Total Liabilities $682,283,000
Shares Outstanding (Diluted Average) 77,546,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.69
Jun2017 $3.14
Jun2016 $3.12
Jun2015 $2.59
Jun2014 $2.19
Jun2013 $1.94
Jun2012 $1.74
Jun2011 $1.59
Jun2010 $1.38
Jun2009 $1.22
Jun2008 $1.16
Jun2007 $1.14
Jun2006 $0.96
Jun2005 $0.81
Jun2004 $0.68
Jun2003 $0.55
Jun2002 $0.62
Jun2001 $0.61
Jun2000 $0.40
Jun1999 $0.38
Jun1998 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.52
Jun2017 $2.82
Jun2016 $2.54
Jun2015 $2.17
Jun2014 $1.90
Jun2013 $1.69
Jun2012 $1.52
Jun2011 $1.37
Jun2010 $1.23
Jun2009 $1.13
Jun2008 $1.04
Jun2007 $0.93
Jun2006 $0.79
Jun2005 $0.68
Jun2004 $0.61
Jun2003 $0.55
Jun2002 $0.52

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Other ModernGraham posts about the company

Jack Henry & Associates Inc Valuation – Initial Coverage $JKHY

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IHS Markit Ltd Valuation – Initial Coverage April 2018 $INFO
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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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