Wells Fargo & Co Valuation – April 2019 #WFC

Company Profile (excerpt from Reuters): Wells Fargo & Company, incorporated on January 24, 1929, is a bank holding company. The Company is a diversified financial services company. The Company has three operating segments: Community Banking, Wholesale Banking, and Wealth and Investment Management. The Company provides retail, commercial and corporate banking services through banking locations and offices, the Internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia and in other countries. The Company provides other financial services through its subsidiaries engaged in various businesses, principally: wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, insurance agency and brokerage services, computer and data processing services, trust services, investment advisory services, mortgage-backed securities servicing and venture capital investment. The Company has its administrative facilities at various locations, including Phoenix, Arizona; San Francisco, California; San Jose, California; Greenwood Village, Colorado; Littleton, Colorado; Rochester, Minnesota; St. Louis, Missouri; Las Vegas, Nevada; Portland, Oregon, and Austin, Texas. The Company offers approximately 13,000 automated teller machines (ATMs) and over 6,000 retail banking stores coast to coast.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WFC – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $220,466,305,698 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 55.90% Pass
5. Moderate PEmg Ratio PEmg < 20 11.21 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.16 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.33
MG Growth Estimate 1.75%
MG Value $52.06
Opinion Fairly Valued
MG Grade A-
MG Value based on 3% Growth $62.85
MG Value based on 0% Growth $36.84
Market Implied Growth Rate 1.36%
Current Price $48.61
% of Intrinsic Value 93.38%

Wells Fargo & Co qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.88 in 2015 to an estimated $4.33 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 1.36% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Wells Fargo & Co revealed the company was trading below its Graham Number of $63.18. The company pays a dividend of $1.64 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.21, which was below the industry average of 15.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Wells Fargo & Co fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $63.18
PEmg 11.21
PB Ratio 1.16
Dividend Yield 3.37%
TTM Dividend $1.64
Number of Consecutive Years of Dividend Growth 8

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
Long-Term Debt & Capital Lease Obligation $229,044,000,000
Total Assets $1,895,883,000,000
Intangible Assets $43,055,000,000
Total Liabilities $1,698,817,000,000
Shares Outstanding (Diluted Average) 4,698,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.70
Dec2018 $4.28
Dec2017 $4.10
Dec2016 $3.99
Dec2015 $4.12
Dec2014 $4.10
Dec2013 $3.89
Dec2012 $3.36
Dec2011 $2.82
Dec2010 $2.21
Dec2009 $1.75
Dec2008 $0.70
Dec2007 $2.38
Dec2006 $2.47
Dec2005 $2.25
Dec2004 $2.05
Dec2003 $1.83
Dec2002 $1.58
Dec2001 $0.99
Dec2000 $1.16
Dec1999 $1.15

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.33
Dec2018 $4.14
Dec2017 $4.06
Dec2016 $3.99
Dec2015 $3.88
Dec2014 $3.60
Dec2013 $3.17
Dec2012 $2.59
Dec2011 $2.13
Dec2010 $1.83
Dec2009 $1.73
Dec2008 $1.80
Dec2007 $2.30
Dec2006 $2.18
Dec2005 $1.94
Dec2004 $1.69
Dec2003 $1.46

Recommended Reading:

Other ModernGraham posts about the company

Wells Fargo & Co Valuation – June 2018 $WFC
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2018
Wells Fargo & Co Valuation – August 2017 $WFC
10 Undervalued Companies for the Defensive Dividend Stock Investor – January 2017
10 Undervalued Companies for the Defensive Dividend Stock Investor – December 2016

Other ModernGraham posts about related companies

Comerica Inc Valuation – March 2019 #CMA
SVB Financial Group Valuation – March 2019 #SIVB
US Bancorp Valuation – March 2019 #USB
Citizens Financial Group Inc Valuation – February 2019 $CFG
BB&T Corp Valuation – February 2019 $BBT
M&T Bank Corp Valuation – February 2019 $MTB
Bank of America Corp Valuation – January 2019 $BAC
Fifth Third Bancorp Valuation – January 2019 $FITB
Zions Bancorp Valuation – January 2019 $ZION
Regions Financial Corp Valuation – January 2019 $RF

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.

Honeywell International Inc Valuation – March 2019 #HON

Company Profile (excerpt from Reuters): Honeywell International Inc., incorporated on November 24, 1999, is a technology and manufacturing company. The Company operates through four segments: Aerospace, Home and Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HON – 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 $115,752,559,066 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.29 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 111.25% Pass
6. Moderate PEmg Ratio PEmg < 20 23.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.44 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 1.29 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.79 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 $6.63
MG Growth Estimate 4.55%
MG Value $116.54
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $96.07
MG Value based on 0% Growth $56.32
Market Implied Growth Rate 7.74%
Current Price $158.92
% of Intrinsic Value 136.37%

Honeywell International 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 $5.08 in 2015 to an estimated $6.63 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.74% 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 Honeywell International Inc. revealed the company was trading above its Graham Number of $66.13. The company pays a dividend of $3.06 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 23.99, which was below the industry average of 25.04, 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 $-20.23.

Honeywell International 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) -$20.23
Graham Number $66.13
PEmg 23.99
Current Ratio 1.29
PB Ratio 6.44
Current Dividend $3.06
Dividend Yield 1.92%
Number of Consecutive Years of Dividend Growth 8

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 $24,362,000,000
Total Current Liabilities $18,924,000,000
Long-Term Debt $9,756,000,000
Total Assets $57,773,000,000
Intangible Assets $19,685,000,000
Total Liabilities $39,415,000,000
Shares Outstanding (Diluted Average) 744,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.80
Dec2018 $8.98
Dec2017 $2.00
Dec2016 $6.21
Dec2015 $6.04
Dec2014 $5.33
Dec2013 $4.92
Dec2012 $3.69
Dec2011 $2.61
Dec2010 $2.59
Dec2009 $2.05
Dec2008 $3.76
Dec2007 $3.16
Dec2006 $2.52
Dec2005 $1.92
Dec2004 $1.45
Dec2003 $1.52
Dec2002 -$0.31
Dec2001 -$0.12
Dec2000 $2.05
Dec1999 $1.90

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.63
Dec2018 $5.93
Dec2017 $4.57
Dec2016 $5.65
Dec2015 $5.08
Dec2014 $4.35
Dec2013 $3.63
Dec2012 $2.97
Dec2011 $2.68
Dec2010 $2.75
Dec2009 $2.78
Dec2008 $2.95
Dec2007 $2.40
Dec2006 $1.82
Dec2005 $1.28
Dec2004 $0.95
Dec2003 $0.80

Recommended Reading:

Other ModernGraham posts about the company

Honeywell International Inc Valuation – June 2018 $HON
Honeywell International Inc Valuation – July 2017 $HON
Honeywell International Inc Valuation – February 2016 $HON
7 Best Stocks For Value Investors This Week – 10/24/15
Honeywell International Inc. Valuation – October 2015 Update $HON

Other ModernGraham posts about related companies

Ingersoll-Rand PLC Valuation – January 2019 $IR
General Electric Co Valuation – November 2018 $GE
3M Co Valuation – November 2018 $MMM
ITT Inc Valuation – July 2018 $ITT
Illinois Tool Works Inc Valuation – June 2018 $ITW
Honeywell International Inc Valuation – June 2018 $HON
General Electric Co Valuation – February 2018 $GE
3M Company Valuation – February 2018 $MMM
Raven Industries Inc Valuation – September 2017 $RAVN
Illinois Tool Works Inc Valuation – August 2017 $ITW

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.

National Oilwell Varco Inc Valuation – February 2019 $NOV

Company Profile (excerpt from Reuters): National Oilwell Varco, Inc. (NOV), incorporated on July 14, 1995, is an oilfield equipment manufacturer and technology provider. The Company operates through four segments: Rig Technologies, Wellbore Technologies and Completion & Production Solutions. The Rig Technologies segment designs, manufactures, sells, and supports land rigs, offshore drilling equipment packages, and drilling rig components. The Wellbore Technologies segment designs, manufactures, rents and sells a range of equipment and technologies used to perform drilling operations. The Completion & Production Solutions segment integrates technologies for well completions and oil and gas production.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NOV – 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 $10,920,171,664 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.11 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 -106.13% Fail
6. Moderate PEmg Ratio PEmg < 20 -23.84 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.78 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 3.11 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.55 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$1.19
MG Growth Estimate -4.25%
MG Value $3.63
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$17.32
MG Value based on 0% Growth -$10.15
Market Implied Growth Rate -16.17%
Current Price $28.48
% of Intrinsic Value 784.65%

National-Oilwell Varco, Inc. 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 or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.07 in 2015 to an estimated $-1.19 for 2019. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into National-Oilwell Varco, Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.2 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was -23.84, which was below the industry average of 43.92, 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 $3.63.

National-Oilwell Varco, 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) $3.63
Graham Number $0.00
PEmg -23.84
Current Ratio 3.11
PB Ratio 0.78
Current Dividend $0.20
Dividend Yield 0.70%
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 $7,279,000,000
Total Current Liabilities $2,341,000,000
Long-Term Debt $2,704,000,000
Total Assets $19,796,000,000
Intangible Assets $9,284,000,000
Total Liabilities $5,907,000,000
Shares Outstanding (Diluted Average) 378,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.18
Dec2018 -$0.08
Dec2017 -$0.63
Dec2016 -$6.41
Dec2015 -$1.99
Dec2014 $5.82
Dec2013 $5.44
Dec2012 $5.83
Dec2011 $4.70
Dec2010 $3.98
Dec2009 $3.52
Dec2008 $4.90
Dec2007 $3.76
Dec2006 $1.94
Dec2005 $0.91
Dec2004 $0.67
Dec2003 $0.47
Dec2002 $0.45
Dec2001 $0.64
Dec2000 $0.08
Dec1999 -$0.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.19
Dec2018 -$1.35
Dec2017 -$1.18
Dec2016 -$0.39
Dec2015 $3.07
Dec2014 $5.45
Dec2013 $5.07
Dec2012 $4.79
Dec2011 $4.24
Dec2010 $3.88
Dec2009 $3.55
Dec2008 $3.19
Dec2007 $2.07
Dec2006 $1.11
Dec2005 $0.68
Dec2004 $0.53
Dec2003 $0.41

Recommended Reading:

Other ModernGraham posts about the company

10 Most Overvalued Stocks of the S&P 500 – July 2018
National Oilwell Varco Inc Valuation – May 2018 $NOV
National-Oilwell Varco Valuation – December 2016 $NOV
5 of the Worst Stocks to Invest In – August 2016
National-Oilwell Varco Inc Valuation – August 2016 $NOV

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EOG Resources Inc Valuation – February 2019 $EOG
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Devon Energy Corp Valuation – January 2019 $DVN
Noble Energy Inc Valuation – January 2019 $NBL
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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.

Rockwell Automation Inc Valuation – February 2019 $ROK

Company Profile (excerpt from Reuters): Rockwell Automation, Inc. (Rockwell Automation), incorporated on August 29, 1996, is a provider of industrial automation power, control and information solutions for manufacturers. The Company operates through two segments: Architecture & Software and Control Products & Solutions. In the United States, Canada and certain other countries the Company sells primarily through the independent distributors. In the remaining countries, the Company sells through a combination of direct sales and sales through distributors. The Company sells large systems and service offerings through its direct sales force.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ROK – 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 $20,445,610,174 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.21 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 43.31% Pass
6. Moderate PEmg Ratio PEmg < 20 26.97 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 16.30 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.21 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.62 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.34
MG Growth Estimate 1.72%
MG Value $75.72
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $91.93
MG Value based on 0% Growth $53.89
Market Implied Growth Rate 9.24%
Current Price $171.00
% of Intrinsic Value 225.84%

Rockwell Automation 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 $5.69 in 2015 to an estimated $6.34 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.24% 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 Rockwell Automation revealed the company was trading above its Graham Number of $49.82. The company pays a dividend of $3.51 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 26.97, which was above the industry average of 24.89. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.83.

Rockwell Automation 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) -$15.83
Graham Number $49.82
PEmg 26.97
Current Ratio 1.21
PB Ratio 16.30
Current Dividend $3.51
Dividend Yield 2.05%
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 12/1/2018
Total Current Assets $2,737,900,000
Total Current Liabilities $2,265,500,000
Long-Term Debt $1,235,400,000
Total Assets $5,935,400,000
Intangible Assets $1,272,300,000
Total Liabilities $4,661,100,000
Shares Outstanding (Diluted Average) 121,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.40
Sep2018 $4.21
Sep2017 $6.35
Sep2016 $5.56
Sep2015 $6.09
Sep2014 $5.91
Sep2013 $5.36
Sep2012 $5.13
Sep2011 $4.88
Sep2010 $3.22
Sep2009 $1.55
Sep2008 $3.90
Sep2007 $9.23
Sep2006 $3.37
Sep2005 $2.39
Sep2004 $1.65
Sep2003 $1.51
Sep2002 $0.64
Sep2001 $0.65
Sep2000 $1.86
Sep1999 $1.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.34
Sep2018 $5.41
Sep2017 $5.96
Sep2016 $5.72
Sep2015 $5.69
Sep2014 $5.29
Sep2013 $4.66
Sep2012 $4.12
Sep2011 $3.93
Sep2010 $3.72
Sep2009 $4.01
Sep2008 $4.86
Sep2007 $4.77
Sep2006 $2.33
Sep2005 $1.67
Sep2004 $1.29
Sep2003 $1.15

Recommended Reading:

Other ModernGraham posts about the company

Rockwell Automation Inc Valuation – April 2018 $ROK
14 Best Undervalued Stocks of the Week – 8/6/16
Rockwell Automation Inc Valuation – July 2016 $ROK
26 Best Stocks For Value Investors This Week – 2/6/16
Rockwell Automation Inc Valuation – February 2016 Update $ROK

Other ModernGraham posts about related companies

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Dover Corp Valuation – January 2019 $DOV
Caterpillar Inc Valuation – November 2018 $CAT
Lindsay Corp Valuation – October 2018 $LNN
Lennox International Inc Valuation – October 2018 $LII
Standex International Corp Valuation – September 2018 $SXI

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.

Newell Brands Inc Valuation – January 2019 $NWL

Company Profile (excerpt from Reuters): Newell Brands Inc., incorporated on February 23, 1987, is a marketer of consumer and commercial products. The Company’s segments include Writing, Home Solutions, Commercial Products, Baby & Parenting, Branded Consumables, Consumer Solutions, Outdoor Solutions and Process Solutions. The Company’s products are marketed under a portfolio of brands, including Paper Mate, Sharpie, Dymo, Expo, Parker, Elmer’s, Coleman, Marmot, Oster, Sunbeam, FoodSaver, Mr. Coffee, Rubbermaid Commercial Products, Graco, Baby Jogger, NUK, Calphalon, Rubbermaid, Contigo, First Alert and Yankee Candle. As of December 31, 2016, the Company sold its products in 200 countries throughout the world and had operated on the ground in 100 of these countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NWL – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,529,348,480 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.98 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 -425.11% Fail
6. Moderate PEmg Ratio PEmg < 20 -7.22 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.60 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 2.98 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.15 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$2.83
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$40.99
MG Value based on 0% Growth -$24.03
Market Implied Growth Rate -7.86%
Current Price $20.41
% of Intrinsic Value N/A

Newell Brands Inc 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 or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.28 in 2014 to an estimated $-2.83 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Newell Brands Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.88 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -7.22, which was below the industry average of 20, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-8.84.

Newell Brands 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) -$8.84
Graham Number $0.00
PEmg -7.22
Current Ratio 2.98
PB Ratio 1.60
Current Dividend $0.88
Dividend Yield 4.31%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $12,208,500,000
Total Current Liabilities $4,096,700,000
Long-Term Debt $9,296,800,000
Total Assets $22,398,100,000
Intangible Assets $8,745,000,000
Total Liabilities $16,371,900,000
Shares Outstanding (Diluted Average) 471,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$14.52
Dec2017 $5.63
Dec2016 $1.25
Dec2015 $1.29
Dec2014 $1.35
Dec2013 $1.63
Dec2012 $1.37
Dec2011 $0.42
Dec2010 $0.96
Dec2009 $0.97
Dec2008 -$0.18
Dec2007 $1.68
Dec2006 $1.40
Dec2005 $0.91
Dec2004 -$0.42
Dec2003 -$0.17
Dec2002 -$0.76
Dec2001 $0.99
Dec2000 $1.57
Dec1999 $0.34
Dec1998 $1.70

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.83
Dec2017 $2.76
Dec2016 $1.34
Dec2015 $1.33
Dec2014 $1.28
Dec2013 $1.19
Dec2012 $0.88
Dec2011 $0.68
Dec2010 $0.86
Dec2009 $0.86
Dec2008 $0.76
Dec2007 $1.05
Dec2006 $0.55
Dec2005 $0.12
Dec2004 -$0.10
Dec2003 $0.17
Dec2002 $0.48

Recommended Reading:

Other ModernGraham posts about the company

5 Low P/E Companies In The S&P 500 – August 2018
Best Stocks Below Their Graham Number – August 2018
10 Low PE Stock Picks for the Defensive Investor – August 2018
10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2018
Best Stocks Below Their Graham Number – June 2018

Other ModernGraham posts about related companies

Sleep Number Corp Valuation – July 2018 $SNBR
National Presto Industries Inc Valuation – June 2018 $NPK
Leggett & Platt Inc Valuation – June 2018 $LEG
Clorox Co Valuation – May 2018 $CLX
Newell Brands Inc Valuation – March 2018 $NWL
La-Z-Boy Inc Valuation – Initial Coverage $LZB
Tupperware Brands Corp Valuation – Initial Coverage $TUP
Leggett & Platt Inc Valuation – March 2017 $LEG
Newell Brands Inc Valuation – February 2017 $NWL
Clorox Company Valuation – January 2017 $CLX

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.

Welltower Inc Valuation – January 2019 $WELL

Company Profile (excerpt from Reuters):Welltower Inc., incorporated on April 4, 1985, invests with seniors housing operators, post-acute providers and health systems to fund real estate and infrastructure. The Company invests in seniors housing and healthcare real estate. It operates in three segments: triple-net, seniors housing operating and outpatient medical. Welltower, a real estate investment trust (REIT), owns interests in properties concentrated in markets in the United States, Canada and the United Kingdom, consisting of seniors housing and post-acute communities, and outpatient medical properties. The Company’s primary objectives are to protect stockholder capital and enhance stockholder value.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WELL – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $26,411,528,722 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.23 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 91.93% Pass
6. Moderate PEmg Ratio PEmg < 20 34.98 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.72 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 1.23 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 54.93 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.01
MG Growth Estimate 15.00%
MG Value $77.39
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $29.15
MG Value based on 0% Growth $17.09
Market Implied Growth Rate 13.24%
Current Price $70.31
% of Intrinsic Value 90.86%

Welltower 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 ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.93 in 2014 to an estimated $2.01 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 13.24% 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 Welltower Inc revealed the company was trading above its Graham Number of $41.84. The company pays a dividend of $3.48 per share, for a yield of 4.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 34.98, which was below the industry average of 70.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-36.48.

Welltower 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) -$36.48
Graham Number $41.84
PEmg 34.98
Current Ratio 1.23
PB Ratio 1.72
Current Dividend $3.48
Dividend Yield 4.95%
Number of Consecutive Years of Dividend Growth 10

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 $1,319,537,000
Total Current Liabilities $1,074,994,000
Long-Term Debt $13,432,683,000
Total Assets $30,249,119,000
Intangible Assets $68,321,000
Total Liabilities $14,979,918,000
Shares Outstanding (Diluted Average) 374,487,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.11
Dec2017 $1.26
Dec2016 $2.81
Dec2015 $2.34
Dec2014 $1.45
Dec2013 $0.28
Dec2012 $0.98
Dec2011 $0.90
Dec2010 $0.83
Dec2009 $1.49
Dec2008 $2.76
Dec2007 $1.43
Dec2006 $1.31
Dec2005 $1.15
Dec2004 $1.39
Dec2003 $1.60
Dec2002 $1.48
Dec2001 $1.52
Dec2000 $1.91
Dec1999 $2.21
Dec1998 $2.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.01
Dec2017 $1.85
Dec2016 $1.95
Dec2015 $1.41
Dec2014 $0.93
Dec2013 $0.74
Dec2012 $1.12
Dec2011 $1.28
Dec2010 $1.50
Dec2009 $1.77
Dec2008 $1.81
Dec2007 $1.35
Dec2006 $1.33
Dec2005 $1.37
Dec2004 $1.52
Dec2003 $1.63
Dec2002 $1.72

Recommended Reading:

Other ModernGraham posts about the company

Welltower Inc Valuation – March 2018 $WELL

Other ModernGraham posts about related companies

Boston Properties Inc Valuation – January 2019 $BXP
AvalonBay Communities Inc Valuation – December 2018 $AVB
Weyerhaeuser Co Valuation – December 2018 $WY
Alexandria Real Estate Equities Inc Valuation – November 2018 $ARE
LaSalle Hotel Properties Valuation – September 2018 $LHO
Cousins Properties Inc Valuation – September 2018 $CUZ
Cominar Real Estate Investment Trust Valuation – September 2018 $TSE:CUF.UN
CareTrust REIT Inc Valuation – August 2018 $CTRE
Lamar Advertising Co Valuation – August 2018 $LAMR
Uniti Group Inc Valuation – August 2018 $UNIT

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.

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

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-CSH.UN – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,254,692,829 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.14 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -112.80% Fail
6. Moderate PEmg Ratio PEmg < 20 48.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.30 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.14 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.89 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

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

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

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

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

Chartwell Retirement Residences scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$10.83
Graham Number $3.45
PEmg 48.07
Current Ratio 0.14
PB Ratio 3.30
Current Dividend $0.57
Dividend Yield 3.71%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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

Most Recent Balance Sheet Figures

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

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

Wells Fargo & Co Valuation – June 2018 $WFC

Company Profile (excerpt from Reuters): Wells Fargo & Company, incorporated on January 24, 1929, is a bank holding company. The Company is a diversified financial services company. The Company has three operating segments: Community Banking, Wholesale Banking, and Wealth and Investment Management. The Company provides retail, commercial and corporate banking services through banking locations and offices, the Internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia and in other countries. The Company provides other financial services through its subsidiaries engaged in various businesses, principally: wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, insurance agency and brokerage services, computer and data processing services, trust services, investment advisory services, mortgage-backed securities servicing and venture capital investment. The Company has its administrative facilities at various locations, including Phoenix, Arizona; San Francisco, California; San Jose, California; Greenwood Village, Colorado; Littleton, Colorado; Rochester, Minnesota; St. Louis, Missouri; Las Vegas, Nevada; Portland, Oregon, and Austin, Texas. The Company offers approximately 13,000 automated teller machines (ATMs) and over 6,000 retail banking stores coast to coast.

WFC Chart

WFC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WFC – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $260,454,214,103 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 81.86% Pass
5. Moderate PEmg Ratio PEmg < 20 12.95 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.28 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.13
MG Growth Estimate 2.20%
MG Value $53.25
Opinion Fairly Valued
MG Grade A-
MG Value based on 3% Growth $59.85
MG Value based on 0% Growth $35.08
Market Implied Growth Rate 2.22%
Current Price $53.43
% of Intrinsic Value 100.35%

Wells Fargo & Co qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.6 in 2014 to an estimated $4.13 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 2.22% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Wells Fargo & Co revealed the company was trading below its Graham Number of $59.51. The company pays a dividend of $1.54 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.95, which was below the industry average of 21.57, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Wells Fargo & Co fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $59.51
PEmg 12.95
PB Ratio 1.28
Dividend Yield 2.88%
TTM Dividend $1.54
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Long-Term Debt & Capital Lease Obligation $227,302,000,000
Total Assets $1,915,388,000,000
Intangible Assets $44,240,000,000
Total Liabilities $1,709,478,000,000
Shares Outstanding (Diluted Average) 4,930,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.24
Dec2017 $4.10
Dec2016 $3.99
Dec2015 $4.12
Dec2014 $4.10
Dec2013 $3.89
Dec2012 $3.36
Dec2011 $2.82
Dec2010 $2.21
Dec2009 $1.75
Dec2008 $0.70
Dec2007 $2.38
Dec2006 $2.47
Dec2005 $2.25
Dec2004 $2.05
Dec2003 $1.83
Dec2002 $1.58
Dec2001 $0.99
Dec2000 $1.16
Dec1999 $1.15
Dec1998 $0.59

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.13
Dec2017 $4.06
Dec2016 $3.99
Dec2015 $3.88
Dec2014 $3.60
Dec2013 $3.17
Dec2012 $2.59
Dec2011 $2.13
Dec2010 $1.83
Dec2009 $1.73
Dec2008 $1.80
Dec2007 $2.30
Dec2006 $2.18
Dec2005 $1.94
Dec2004 $1.69
Dec2003 $1.46
Dec2002 $1.21

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2018
Wells Fargo & Co Valuation – August 2017 $WFC
10 Undervalued Companies for the Defensive Dividend Stock Investor – January 2017
10 Undervalued Companies for the Defensive Dividend Stock Investor – December 2016
10 Best Dividend Paying Stocks for the Defensive Investor – August 2016

Other ModernGraham posts about related companies

SunTrust Banks Inc Valuation – June 2018 $STI
Comerica Inc Valuation – June 2018 $CMA
SVB Financial Group Valuation – June 2018 $SIVB
US Bancorp Valuation – May 2018 $USB
Bank of New York Mellon Corp Valuation – May 2018 $BK
Citizens Financial Group Inc Valuation – April 2018 $CFG
BB&T Corporation Valuation – April 2018 $BBT
M&T Bank Corp Valuation – April 2018 $MTB
Bank of America Corp Valuation – March 2018 $BAC
Fifth Third Bancorp Valuation – March 2018 $FITB

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.

Honeywell International Inc Valuation – June 2018 $HON

Company Profile (excerpt from Reuters): Honeywell International Inc., incorporated on November 24, 1999, is a technology and manufacturing company. The Company operates through four segments: Aerospace, Home and Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions.

HON Chart

HON data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HON – 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 $107,565,365,180 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.36 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 124.28% Pass
6. Moderate PEmg Ratio PEmg < 20 25.66 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.17 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.36 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.86 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.61
MG Growth Estimate 4.36%
MG Value $96.64
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $81.36
MG Value based on 0% Growth $47.70
Market Implied Growth Rate 8.58%
Current Price $144.01
% of Intrinsic Value 149.01%

Honeywell International 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 $4.35 in 2014 to an estimated $5.61 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.58% 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 Honeywell International Inc. revealed the company was trading above its Graham Number of $64.03. The company pays a dividend of $2.74 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 25.66, which was below the industry average of 30.55, 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 $-23.11.

Honeywell International 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) -$23.11
Graham Number $64.03
PEmg 25.66
Current Ratio 1.36
PB Ratio 6.17
Current Dividend $2.74
Dividend Yield 1.90%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $25,587,000,000
Total Current Liabilities $18,755,000,000
Long-Term Debt $12,738,000,000
Total Assets $60,948,000,000
Intangible Assets $22,982,000,000
Total Liabilities $43,174,000,000
Shares Outstanding (Diluted Average) 761,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.92
Dec2017 $2.14
Dec2016 $6.20
Dec2015 $6.04
Dec2014 $5.33
Dec2013 $4.92
Dec2012 $3.69
Dec2011 $2.61
Dec2010 $2.59
Dec2009 $2.05
Dec2008 $3.76
Dec2007 $3.16
Dec2006 $2.52
Dec2005 $1.92
Dec2004 $1.45
Dec2003 $1.52
Dec2002 -$0.31
Dec2001 -$0.12
Dec2000 $2.05
Dec1999 $1.90
Dec1998 $2.34

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.61
Dec2017 $4.61
Dec2016 $5.65
Dec2015 $5.08
Dec2014 $4.35
Dec2013 $3.63
Dec2012 $2.97
Dec2011 $2.68
Dec2010 $2.75
Dec2009 $2.78
Dec2008 $2.95
Dec2007 $2.40
Dec2006 $1.82
Dec2005 $1.28
Dec2004 $0.95
Dec2003 $0.80
Dec2002 $0.68

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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.

Rockwell Collins Inc Valuation – May 2018 $COL

Company Profile (excerpt from Reuters): Rockwell Collins, Inc., incorporated on March 1, 2001, designs, produces and supports communications and aviation systems for commercial and military customers. The Company provides information management services through voice and data communication networks and solutions across the world. The Company operates through three segments: Commercial Systems, Government Systems and Information Management Services. The Company also provides a range of services to its customers through a network of service centers, including equipment repair and overhaul, service parts, field service engineering, training, technical information services and aftermarket used equipment sales.

COL Chart

COL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of COL – May 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 $21,767,121,031 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.61 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 49.43% Pass
6. Moderate PEmg Ratio PEmg < 20 23.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.31 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 1.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.31 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 $5.56
MG Growth Estimate 4.39%
MG Value $95.99
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $80.59
MG Value based on 0% Growth $47.24
Market Implied Growth Rate 7.67%
Current Price $132.54
% of Intrinsic Value 138.08%

Rockwell Collins, 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 level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.3 in 2014 to an estimated $5.56 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.67% 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 Rockwell Collins, Inc. revealed the company was trading above its Graham Number of $74.24. The company pays a dividend of $1.32 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 23.85, which was below the industry average of 42.88, 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 $-39.35.

Rockwell Collins, 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) -$39.35
Graham Number $74.24
PEmg 23.85
Current Ratio 1.61
PB Ratio 3.31
Current Dividend $1.32
Dividend Yield 1.00%
Number of Consecutive Years of Dividend Growth 3

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $5,143,000,000
Total Current Liabilities $3,193,000,000
Long-Term Debt $6,456,000,000
Total Assets $18,300,000,000
Intangible Assets $11,187,000,000
Total Liabilities $11,667,000,000
Shares Outstanding (Diluted Average) 165,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.60
Sep2017 $4.79
Sep2016 $5.51
Sep2015 $5.13
Sep2014 $4.42
Sep2013 $4.58
Sep2012 $4.15
Sep2011 $4.06
Sep2010 $3.52
Sep2009 $3.73
Sep2008 $4.16
Sep2007 $3.45
Sep2006 $2.73
Sep2005 $2.20
Sep2004 $1.67
Sep2003 $1.43
Sep2002 $1.28
Sep2001 $0.76

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.56
Sep2017 $4.99
Sep2016 $4.98
Sep2015 $4.63
Sep2014 $4.30
Sep2013 $4.16
Sep2012 $3.94
Sep2011 $3.82
Sep2010 $3.64
Sep2009 $3.55
Sep2008 $3.26
Sep2007 $2.64
Sep2006 $2.11
Sep2005 $1.69
Sep2004 $1.29
Sep2003 $0.97
Sep2002 $0.63

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Other ModernGraham posts about the company

Rockwell Collins Inc Valuation – January 2017 $COL
Rockwell Collins Inc Valuation – August 2016 $COL
Rockwell Collins Inc Valuation – January 2016 Update $COL
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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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