Williams Companies Inc Valuation – January 2019 $WMB

Company Profile (excerpt from Reuters): The Williams Companies, Inc., incorporated on February 3, 1987, is an energy infrastructure company. The Company is focused on connecting North America’s hydrocarbon resource plays to markets for natural gas, natural gas liquids (NGL), and olefins. As of December 31, 2016, the Company’s interstate gas pipelines, midstream and olefins production interests were held through its investment in Williams Partners L.P. (WPZ). The Company’s segments include Williams Partners, Williams NGL & Petchem Services and Other. The Williams Partners segment includes its consolidated master limited partnership, WPZ. The Williams NGL & Petchem Services segment includes its Texas Belle pipeline and certain other domestic olefins pipeline assets. Other segment includes its corporate operations and Canadian construction services company.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WMB – 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 $30,487,499,623 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 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 -436.84% Fail
6. Moderate PEmg Ratio PEmg < 20 29.71 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.52 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 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -27.55 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.85
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $12.30
MG Value based on 0% Growth $7.21
Market Implied Growth Rate 10.60%
Current Price $25.19
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.37 in 2014 to an estimated $0.85 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.6% 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 Williams Companies Inc revealed the company was trading above its Graham Number of $11.58. The company pays a dividend of $1.2 per share, for a yield of 4.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 29.71, which was below the industry average of 41.28, 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 $-27.56.

Williams Companies 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) -$27.56
Graham Number $11.58
PEmg 29.71
Current Ratio 0.72
PB Ratio 1.52
Current Dividend $1.20
Dividend Yield 4.76%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,984,000,000
Total Current Liabilities $2,761,000,000
Long-Term Debt $21,409,000,000
Total Assets $47,153,000,000
Intangible Assets $8,324,000,000
Total Liabilities $30,194,000,000
Shares Outstanding (Diluted Average) 1,023,587,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.51
Dec2017 $2.62
Dec2016 -$0.57
Dec2015 -$0.76
Dec2014 $2.92
Dec2013 $0.62
Dec2012 $1.37
Dec2011 $0.63
Dec2010 -$1.88
Dec2009 $0.49
Dec2008 $2.40
Dec2007 $1.63
Dec2006 $0.51
Dec2005 $0.53
Dec2004 $0.31
Dec2003 -$1.01
Dec2002 -$1.64
Dec2001 -$0.95
Dec2000 $1.17
Dec1999 $0.35
Dec1998 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.85
Dec2017 $1.00
Dec2016 $0.37
Dec2015 $0.87
Dec2014 $1.37
Dec2013 $0.48
Dec2012 $0.47
Dec2011 $0.24
Dec2010 $0.24
Dec2009 $1.23
Dec2008 $1.43
Dec2007 $0.76
Dec2006 $0.13
Dec2005 -$0.22
Dec2004 -$0.54
Dec2003 -$0.78
Dec2002 -$0.50

Recommended Reading:

Other ModernGraham posts about the company

Williams Companies Inc Valuation – March 2018 $WMB
Williams Companies Inc Valuation – June 2016 $WMB
34 Companies in the Spotlight This Week – 2/7/15
Williams Companies Annual Valuation – 2015 $WMB
15 Companies in the Spotlight This Week – 2/1/14

Other ModernGraham posts about related companies

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Carbo Ceramics Inc Valuation – August 2018 $CRR
Murphy Oil Corp Valuation – August 2018 $MUR
Suncor Energy Inc Valuation – August 2018 $TSE:SU
Tidewater Inc Valuation – August 2018 $TDW
Carrizo Oil & Gas Inc Valuation – August 2018 $CRZO
Denbury Resources Inc Valuation – August 2018 $DNR

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.

Williams Companies Inc Valuation – March 2018 $WMB

Company Profile (obtained from Marketwatch): The Williams Cos., Inc. operates as an integrated natural gas company that explores, produces, transports, sells and processes natural gas and petroleum products. It operates through three segments: Williams Partners, Williams NGL & Petchem Services and Others. The Williams Partners segment includes gas pipeline and domestic midstream businesses. The gas pipeline business includes interstate natural gas pipelines and pipeline joint venture investments, and the midstream business provides natural gas gathering, treating and processing services; NGL production, fractionation, storage, marketing and transportation and deepwater production handling and crude oil transportation services. The Williams NGL & Petchem Services comprises Texas belle pipeline and certain other domestic olefins pipeline assets and certain canadian growth projects under development, including a propane dehydrogenation facility and a liquids extraction plant. The Other segment comprises of corporate operations and Canadian construction services company. The company was founded in 1908 by David Williams and Miller Williams and is headquartered in Tulsa, OK.

WMB Chart

WMB data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WMB – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,148,904,604 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.82 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 -426.32% Fail
6. Moderate PEmg Ratio PEmg < 20 34.09 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.41 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 0.82 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -43.76 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.82
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $11.91
MG Value based on 0% Growth $6.98
Market Implied Growth Rate 12.80%
Current Price $28.00
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.37 in 2014 to an estimated $0.82 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.8% 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 Williams Companies Inc revealed the company was trading above its Graham Number of $10.63. The company pays a dividend of $1.2 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 34.09, which was below the industry average of 104.43, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-41.61.

Williams Companies 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) -$41.61
Graham Number $10.63
PEmg 34.09
Current Ratio 0.82
PB Ratio 2.41
Current Dividend $1.20
Dividend Yield 4.29%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $2,179,000,000
Total Current Liabilities $2,646,000,000
Long-Term Debt $20,434,000,000
Total Assets $46,352,000,000
Intangible Assets $8,791,000,000
Total Liabilities $36,696,000,000
Shares Outstanding (Diluted Average) 829,622,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.43
Dec2017 $2.62
Dec2016 -$0.57
Dec2015 -$0.76
Dec2014 $2.92
Dec2013 $0.62
Dec2012 $1.37
Dec2011 $0.63
Dec2010 -$1.88
Dec2009 $0.49
Dec2008 $2.40
Dec2007 $1.63
Dec2006 $0.51
Dec2005 $0.53
Dec2004 $0.31
Dec2003 -$1.01
Dec2002 -$1.64
Dec2001 -$0.95
Dec2000 $1.17
Dec1999 $0.35
Dec1998 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.82
Dec2017 $1.00
Dec2016 $0.37
Dec2015 $0.87
Dec2014 $1.37
Dec2013 $0.48
Dec2012 $0.47
Dec2011 $0.24
Dec2010 $0.24
Dec2009 $1.23
Dec2008 $1.43
Dec2007 $0.76
Dec2006 $0.13
Dec2005 -$0.22
Dec2004 -$0.54
Dec2003 -$0.78
Dec2002 -$0.50

Recommended Reading:

Other ModernGraham posts about the company

34 Companies in the Spotlight This Week – 2/7/15
Williams Companies Annual Valuation – 2015 $WMB
15 Companies in the Spotlight This Week – 2/1/14
Williams Companies (WMB) Annual Valuation

Other ModernGraham posts about related companies

Exxon Mobil Corp Valuation – February 2018 $XOM
Chevron Corp Valuation – February 2018 $CVX
Seven Generations Energy Ltd Valuation – Initial Coverage $TSE:VII
Pioneer Natural Resources Valuation – September 2017 $PXD
Gulfport Energy Corp Valuation – Initial Coverage $GPOR
Schlumberger Limited Valuation – July 2017 $SLB
Tesco Corporation (USA) Valuation – Initial Coverage $TESO
Southwestern Energy Company Valuation – July 2017 $SWN
Apache Corp Valuation – April 2017 $APA
Anadarko Petroleum Co Valuation – April 2017 $APC

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.

Williams Companies Inc Valuation – June 2016 $WMB

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

Company Profile (obtained from Google Finance): The Williams Companies, Inc. is an energy infrastructure company focused on connecting North America’s hydrocarbon resource plays to markets for natural gas, natural gas liquids and olefins. The Company’s segments include Williams Partners, Williams NGL & Petchem Services, and Other. Its Williams Partners segment consists of its consolidated partnership in Williams Partners L.P., including gas pipeline, which consists of interstate natural gas pipelines and pipeline joint project investments, and midstream business, which provides natural gas gathering, treating, processing and compression services. Its Canadian midstream operations include an oilsands off gas processing plant, NGL/olefin fractionation facility and the Boreal Pipeline. The Williams NGL & Petchem Services segment consists of Texas Belle pipeline, domestic olefins pipeline assets and Canadian growth projects under development. Its Other segment includes corporate operations and Canadian construction services company.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of WMB – June 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $16,612,988,233 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.45 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 -49.12% Fail
6. Moderate PEmg Ratio PEmg < 20 36.61 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.91 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.45 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -15.51 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

WMB value chart June 2016

EPSmg $0.60
MG Growth Estimate 4.05%
MG Value $9.99
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $8.73
MG Value based on 0% Growth $5.12
Market Implied Growth Rate 14.06%
Current Price $22.04
% of Intrinsic Value 220.53%

Williams Companies Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, 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 $0.47 in 2012 to an estimated $0.6 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.06% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

Williams Companies Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

WMB charts June 2016

Net Current Asset Value (NCAV) -$55.78
Graham Number $4.89
PEmg 36.61
Current Ratio 0.45
PB Ratio 2.91
Current Dividend $2.51
Dividend Yield 11.39%
Number of Consecutive Years of Dividend Growth 13

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $1,261,000,000
Total Current Liabilities $2,789,000,000
Long-Term Debt $23,701,000,000
Total Assets $48,807,000,000
Intangible Assets $9,928,000,000
Total Liabilities $43,116,000,000
Shares Outstanding (Diluted Average) 750,332,000

Earnings Per Share History

Next Fiscal Year Estimate $0.14
Dec2015 -$0.76
Dec2014 $2.92
Dec2013 $0.62
Dec2012 $1.37
Dec2011 $0.63
Dec2010 -$1.88
Dec2009 $0.49
Dec2008 $2.40
Dec2007 $1.63
Dec2006 $0.51
Dec2005 $0.53
Dec2004 $0.31
Dec2003 -$1.01
Dec2002 -$1.63
Dec2001 -$0.96
Dec2000 $1.17
Dec1999 $0.50
Dec1998 $0.28
Dec1997 $0.80
Dec1996 $1.07

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.60
Dec2015 $0.87
Dec2014 $1.37
Dec2013 $0.48
Dec2012 $0.47
Dec2011 $0.24
Dec2010 $0.24
Dec2009 $1.23
Dec2008 $1.43
Dec2007 $0.76
Dec2006 $0.13
Dec2005 -$0.22
Dec2004 -$0.54
Dec2003 -$0.77
Dec2002 -$0.48
Dec2001 $0.18
Dec2000 $0.76

Recommended Reading:

Other ModernGraham posts about the company

34 Companies in the Spotlight This Week – 2/7/15
Williams Companies Annual Valuation – 2015 $WMB
15 Companies in the Spotlight This Week – 2/1/14
Williams Companies (WMB) Annual Valuation

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National Oilwell Varco Inc Valuation – February 2016 Update $NOV
Southwestern Energy Company Valuation – February 2016 Update $SWN
Apache Corporation Valuation – January 2016 Update $APA
Anadarko Petroleum Corp Valuation – January 2016 Update $APC
Cabot Oil & Gas Corp Valuation – December 2015 Update $COG

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.

Williams Companies Annual Valuation – 2015 $WMB

williams_logo_2c_large2Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – January 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Williams Companies (WMB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Williams Companies, Inc. (Williams), is an energy infrastructure company focused on connecting North America’s hydrocarbon resource plays to markets for natural gas, natural gas liquids (NGLs), and olefins. The Company’s operations span from the deepwater Gulf of Mexico to the Canadian oil sands. It operates in three segments: Williams Partners, Midstream Canada & Olefins and Other. Williams’s interstate gas pipeline and domestic midstream interests are held through its investment in Williams Partners L.P. (WPZ). It owns the general-partner interest and a 70% limited-partner interest in WPZ. Williams also owns a Canadian midstream and domestic olefins production business, which processes oil sands off-gas and produces olefins for petrochemical feedstocks. In January 2012, the Company completed the process of separating the Company’s businesses into two stand-alone operations. In March 2014, Williams Partners L.P. acquired Williams’ in-service Alberta, Canada operations.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

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

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

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $44.83
MG Value $24.95
MG Opinion Overvalued
Value Based on 3% Growth $9.40
Value Based on 0% Growth $5.51
Market Implied Growth Rate 30.34%
Net Current Asset Value (NCAV) -$51.56
PEmg 69.18
Current Ratio 0.65
PB Ratio 3.69

Balance Sheet – September 2014

Current Assets $1,898,000,000
Current Liabilities $2,931,000,000
Total Debt $19,922,000,000
Total Assets $49,807,000,000
Intangible Assets $12,794,000,000
Total Liabilities $40,678,000,000
Outstanding Shares 752,100,000

Earnings Per Share

2014 (estimate) $0.75
2013 $0.62
2012 $1.37
2011 $0.63
2010 -$1.88
2009 $0.49
2008 $2.40
2007 $1.63
2006 $0.51
2005 $0.53
2004 $0.31

Earnings Per Share – ModernGraham

2014 (estimate) $0.65
2013 $0.48
2012 $0.47
2011 $0.24
2010 $0.24
2009 $1.23

Dividend History

Conclusion:

Williams Companies (WMB) is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, lack of earnings stability or growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the current assets along with the lack of earnings stability over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.24 in 2010 to only an estimated $0.65 for 2014.  This level of growth does not support the market’s implied estimate of 30.34% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.

Be sure to check out previous ModernGraham valuations of Williams Companies (WMB) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Williams Companies (WMB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Williams Companies (WMB) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Williams Companies (WMB) Annual Valuation

 

williams_logo_2c_large2

The energy sector can be a tricky one for value investors following Benjamin Graham methods.  On one hand, energy companies often offer strong dividends, which is a cornerstone of any Intelligent Investor’s portfolio qualities.  But on the other hand, there is often limited growth in the earnings, which brings into question (1) whether the dividends will be able to stand up to the threat of inflation, and (2) whether the investment will miss out on capital gains if the company is failing to grow.  As a result, it is critical to examine an energy company through the same lens as other industries, in order to accurately compare the companies as potential investments.  By using a ModernGraham analysis, one can maintain a systematic analysis across companies and even industries to easily compare one potential investment’s risk level and opportunity for value against another potential investment.  What follows is a specific look at how Williams Companies fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Williams Companies, Inc. (Williams) is an energy infrastructure company focused on connecting North America’s hydrocarbon resource plays to markets for natural gas, natural gas liquids (NGLs), and olefins. Its operations span from the deepwater Gulf of Mexico to the Canadian oil sands. It operates in three segments: Williams Partners, Midstream Canada & Olefins and Other. Its interstate gas pipeline and domestic midstream interests are held through its investment in Williams Partners L.P. (WPZ). It owns the general-partner interest and a 70% limited-partner interest in WPZ. Williams also owns a Canadian midstream and domestic olefins production business, which processes oil sands off-gas and produces olefins for petrochemical feedstocks. In November 2012, Williams Partners LP acquired Williams Companies Inc’s approximately 83% interest in the Geismar olefins production facility In December 2012, it acquired Access Midstream Partners GP, L.L.C. and Access Midstream Partners LP.

Defensive and Enterprising Investor Tests:

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

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

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 1/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

MG Opinion Overvalued
Value Based on 3% Growth $9.45
Value Based on 0% Growth $5.54
Market Implied Growth Rate 25.63%
Net Current Asset Value (NCAV) -$28.88
PEmg 59.77
Current Ratio 0.85
PB Ratio 5.38

Balance Sheet – 9/30/2013 

Current Assets $1,782,000,000
Current Liabilities $2,086,000,000
Total Debt $10,359,000,000
Total Assets $26,455,000,000
Intangible Assets $2,305,000,000
Total Liabilities $21,507,000,000
Outstanding Shares 683,000,000

Earnings Per Share

2013 (estimate) $0.83
2012 $1.15
2011 $1.34
2010 -$1.87
2009 $0.75
2008 $2.26
2007 $1.40
2006 $0.55
2005 $0.53
2004 $0.18
1999 -$0.03

Earnings Per Share – ModernGraham 

2013 (estimate) $0.65
2012 $0.62
2011 $0.49
2010 $0.25
2009 $1.24
2008 $1.32

Conclusion:

Williams Companies has one strong quality, and that is the high dividend yield.  However, Defensive Investors and Enterprising Investors will not be interested in the company as it does not pass their requirements.  The Defensive Investor will be off-put by the poor current ratio, lack of earnings stability over the ten year period, and high PEmg and PB ratios.  The company similarly fails the requirements of the Enterprising Investor because of the high debt relative to current assets, the lack of earnings stability over the five year period, and the lack of earnings growth over the five year period.  Therefore, value investors seeking to follow Benjamin Graham’s methods may wish to seek out other opportunities, such as by reviewing the ModernGraham valuation of Exxon Mobil (XOM).  From a valuation perspective, the company’s EPSmg (normalized earnings) have dropped from $1.32 in 2008 to an estimated $0.65 for 2013.  This lack of growth raises concerns over whether the company will be able to maintain growth in order to continue to grow its dividend over time, and whether the company presents an opportunity for capital gains on investment.  Due to the lack of growth, the ModernGraham valuation model returns a poor valuation that is nowhere near what the market price is currently.  As a result, the company would appear to be overvalued.

What do you think?  What value would you put on Williams Companies (WMB)?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

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

Disclaimer:  The author did not hold a position in Williams Companies (WMB) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from the company’s website; this article is not affiliated with the company in any manner.

ConocoPhillips Valuation – February 2019 $COP

Company Profile (excerpt from Reuters): ConocoPhillips, incorporated on November 16, 2001, is an independent exploration and production (E&P) company. The Company explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG) and natural gas liquids. The Company operates through six segments: Alaska, Lower 48, Canada, Europe and North Africa, Asia Pacific and Middle East, and Other International. As of December 31, 2016, its operations were in the United States, Norway, the United Kingdom, Canada, Australia, Timor-Leste, Indonesia, China, Malaysia, Qatar and Libya. Its portfolio includes North American unconventional assets and oil sands assets in Canada; conventional assets in North America, Europe, Asia and Australia; LNG developments, and an inventory of conventional and unconventional exploration prospects. The Company’s subsidiaries include ConocoPhillips Company, ConocoPhillips Canada Funding Company I and Burlington Resources, Inc.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of COP – 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 $78,819,282,328 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.99 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 -98.62% Fail
6. Moderate PEmg Ratio PEmg < 20 167.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 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 1.99 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.04 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.41
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $6.01
MG Value based on 0% Growth $3.52
Market Implied Growth Rate 79.31%
Current Price $69.30
% of Intrinsic Value N/A

ConocoPhillips 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 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 $6.85 in 2014 to an estimated $0.41 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 79.31% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into ConocoPhillips revealed the company was trading above its Graham Number of $47.64. The company pays a dividend of $1.06 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 167.12, which was above the industry average of 43.92. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.26.

ConocoPhillips 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) -$20.26
Graham Number $47.64
PEmg 167.12
Current Ratio 1.99
PB Ratio 2.53
Current Dividend $1.06
Dividend Yield 1.53%
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 9/1/2018
Total Current Assets $14,723,000,000
Total Current Liabilities $7,401,000,000
Long-Term Debt $14,902,000,000
Total Assets $70,556,000,000
Intangible Assets $0
Total Liabilities $38,477,000,000
Shares Outstanding (Diluted Average) 1,172,694,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.88
Dec2017 -$0.70
Dec2016 -$2.91
Dec2015 -$3.58
Dec2014 $5.51
Dec2013 $7.38
Dec2012 $6.72
Dec2011 $8.97
Dec2010 $7.62
Dec2009 $2.94
Dec2008 -$10.73
Dec2007 $7.22
Dec2006 $9.66
Dec2005 $9.55
Dec2004 $5.80
Dec2003 $3.46
Dec2002 -$0.31
Dec2001 $2.82
Dec2000 $3.63
Dec1999 $1.20
Dec1998 $0.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.41
Dec2017 -$0.50
Dec2016 $0.61
Dec2015 $3.25
Dec2014 $6.85
Dec2013 $7.26
Dec2012 $5.83
Dec2011 $4.66
Dec2010 $2.78
Dec2009 $1.49
Dec2008 $1.94
Dec2007 $7.90
Dec2006 $7.37
Dec2005 $5.57
Dec2004 $3.41
Dec2003 $2.20
Dec2002 $1.56

Recommended Reading:

Other ModernGraham posts about the company

ConocoPhillips Valuation – April 2018 $COP
ConocoPhillips Valuation – July 2016 $COP
58 Companies in the Spotlight This Week – 1/31/15
Conoco Phillips Annual Valuation – 2015 $COP
14 Companies in the Spotlight This Week – 1/18/14

Other ModernGraham posts about related companies

Devon Energy Corp Valuation – January 2019 $DVN
Noble Energy Inc Valuation – January 2019 $NBL
ONEOK Inc Valuation – January 2019 $OKE
Marathon Oil Corp Valuation – January 2019 $MRO
HollyFrontier Corp Valuation – January 2019 $HFC
Hess Corp Valuation – January 2019 $HES
Cimarex Energy Co Valuation – January 2019 $XEC
EQT Corp Valuation – January 2019 $EQT
Helmerich & Payne Inc Valuation – January 2019 $HP
Williams Companies Inc Valuation – January 2019 $WMB

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.

Devon Energy Corp Valuation – January 2019 $DVN

Company Profile (excerpt from Reuters): Devon Energy Corporation, incorporated on May 18, 1999, is an independent energy company. The Company’s segments include U.S. and Canada. The Company’s U.S. and Canada segments are primarily engaged in oil and gas exploration and production activities. The Company is engaged primarily in the exploration, development and production of oil, natural gas and natural gas liquids (NGLs). The Company’s operations are concentrated in various North American onshore areas in the United States and Canada.

DVN Chart

DVN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DVN – 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 $12,435,391,749 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.48 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 -77.66% Fail
6. Moderate PEmg Ratio PEmg < 20 -10.16 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.46 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 1.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.78 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 -$2.61
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth -$37.89
MG Value based on 0% Growth -$22.21
Market Implied Growth Rate -9.33%
Current Price $26.56
% of Intrinsic Value N/A

Devon Energy Corp 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 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 $3.37 in 2014 to an estimated $-2.61 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 Devon Energy Corp revealed the company was trading below its Graham Number of $39.63. The company pays a dividend of $0.24 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was -10.16, which was below the industry average of 41.28, 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 $-13.33.

Devon Energy Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$13.33
Graham Number $39.63
PEmg -10.16
Current Ratio 1.48
PB Ratio 1.46
Current Dividend $0.24
Dividend Yield 0.90%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $4,757,000,000
Total Current Liabilities $3,224,000,000
Long-Term Debt $5,791,000,000
Total Assets $20,172,000,000
Intangible Assets $841,000,000
Total Liabilities $11,274,000,000
Shares Outstanding (Diluted Average) 489,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.96
Dec2017 $1.70
Dec2016 -$2.09
Dec2015 -$31.72
Dec2014 $3.91
Dec2013 -$0.06
Dec2012 -$0.52
Dec2011 $11.25
Dec2010 $10.31
Dec2009 -$5.58
Dec2008 -$4.85
Dec2007 $8.00
Dec2006 $6.34
Dec2005 $6.26
Dec2004 $4.38
Dec2003 $4.04
Dec2002 $0.31
Dec2001 $0.36
Dec2000 $2.75
Dec1999 -$0.84
Dec1998 -$1.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.61
Dec2017 -$5.82
Dec2016 -$8.42
Dec2015 -$8.86
Dec2014 $3.37
Dec2013 $3.09
Dec2012 $3.82
Dec2011 $5.27
Dec2010 $2.47
Dec2009 -$0.29
Dec2008 $2.91
Dec2007 $6.46
Dec2006 $5.22
Dec2005 $4.13
Dec2004 $2.83
Dec2003 $1.81
Dec2002 $0.53

Recommended Reading:

Other ModernGraham posts about the company

Devon Energy Corp Valuation – March 2018 $DVN
Devon Energy Corp Valuation – July 2016 $DVN
58 Companies in the Spotlight This Week – 1/31/15
Devon Energy Corporation Annual Valuation – 2015 $DVN
14 Companies in the Spotlight This Week – 1/18/14

Other ModernGraham posts about related companies

Noble Energy Inc Valuation – January 2019 $NBL
ONEOK Inc Valuation – January 2019 $OKE
Marathon Oil Corp Valuation – January 2019 $MRO
HollyFrontier Corp Valuation – January 2019 $HFC
Hess Corp Valuation – January 2019 $HES
Cimarex Energy Co Valuation – January 2019 $XEC
EQT Corp Valuation – January 2019 $EQT
Helmerich & Payne Inc Valuation – January 2019 $HP
Williams Companies Inc Valuation – January 2019 $WMB
Exxon Mobil Corp Valuation – November 2018 $XOM

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.

Noble Energy Inc Valuation – January 2019 $NBL

Company Profile (excerpt from Reuters): Noble Energy, Inc., incorporated on December 29, 1969, is an independent energy company. The Company is engaged in crude oil, natural gas and natural gas liquids (NGLs) exploration, development, production and acquisition. The Company’s segments include United States, including the onshore DJ Basin, Permian Basin and Eagle Ford Shale; Eastern Mediterranean, including offshore Israel and Cyprus; West Africa, including offshore Equatorial Guinea, Cameroon and Gabon; Other International and Corporate, including new ventures, such as offshore the Falkland Islands, Suriname and Newfoundland; and Midstream. The Company’s portfolio of assets is diversified through the United States and international projects and production mix among crude oil, natural gas and NGLs. Its business focuses on both the United States unconventional basins and certain global conventional basins.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NBL – 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 $10,521,992,216 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.81 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 -208.97% Fail
6. Moderate PEmg Ratio PEmg < 20 -18.33 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.93 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.81 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -16.07 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 -$1.20
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth -$17.35
MG Value based on 0% Growth -$10.17
Market Implied Growth Rate -13.41%
Current Price $21.93
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.69 in 2014 to an estimated $-1.2 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 Noble Energy, Inc. revealed the company was trading below its Graham Number of $26.07. The company pays a dividend of $0.4 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was -18.33, which was below the industry average of 41.28, 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 $-18.65.

Noble Energy, 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) -$18.65
Graham Number $26.07
PEmg -18.33
Current Ratio 0.81
PB Ratio 0.93
Current Dividend $0.40
Dividend Yield 1.82%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,727,000,000
Total Current Liabilities $2,124,000,000
Long-Term Debt $6,381,000,000
Total Assets $22,147,000,000
Intangible Assets $1,719,000,000
Total Liabilities $10,753,000,000
Shares Outstanding (Diluted Average) 484,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.48
Dec2017 -$2.38
Dec2016 -$2.32
Dec2015 -$6.07
Dec2014 $3.27
Dec2013 $2.69
Dec2012 $2.86
Dec2011 $1.27
Dec2010 $2.06
Dec2009 -$0.38
Dec2008 $3.79
Dec2007 $2.73
Dec2006 $1.90
Dec2005 $2.06
Dec2004 $1.39
Dec2003 $0.34
Dec2002 $0.04
Dec2001 $0.59
Dec2000 $0.86
Dec1999 $0.22
Dec1998 -$0.72

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.20
Dec2017 -$2.01
Dec2016 -$1.19
Dec2015 -$0.15
Dec2014 $2.69
Dec2013 $2.16
Dec2012 $1.91
Dec2011 $1.58
Dec2010 $1.83
Dec2009 $1.82
Dec2008 $2.74
Dec2007 $2.03
Dec2006 $1.51
Dec2005 $1.17
Dec2004 $0.70
Dec2003 $0.37
Dec2002 $0.32

Recommended Reading:

Other ModernGraham posts about the company

Noble Energy Inc Valuation – March 2018 $NBL
5 Speculative and Overvalued Companies to Avoid – July 2016
Noble Energy Inc Valuation – July 2016 $NBL
27 Companies in the Spotlight This Week – 2/14/15
Noble Energy Inc. Annual Valuation – 2015 $NBL

Other ModernGraham posts about related companies

ONEOK Inc Valuation – January 2019 $OKE
Marathon Oil Corp Valuation – January 2019 $MRO
HollyFrontier Corp Valuation – January 2019 $HFC
Hess Corp Valuation – January 2019 $HES
Cimarex Energy Co Valuation – January 2019 $XEC
EQT Corp Valuation – January 2019 $EQT
Helmerich & Payne Inc Valuation – January 2019 $HP
Williams Companies Inc Valuation – January 2019 $WMB
Exxon Mobil Corp Valuation – November 2018 $XOM
Chevron Corp Valuation – November 2018 $CVX

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.

ONEOK Inc Valuation – January 2019 $OKE

Company Profile (excerpt from Reuters): ONEOK, Inc., incorporated on May 16, 1997, is an energy midstream service provider in the United States. The Company owns and operates natural gas liquids (NGL) systems, and is engaged in the gathering, processing, storage and transportation of natural gas. The Company’s operations include a 38,000-mile integrated network of NGL and natural gas pipelines, processing plants, fractionators and storage facilities in the Mid-Continent, Williston, Permian and Rocky Mountain regions. The Company operates through three business segments. The Natural Gas Gathering and Processing segment provides midstream services to contracted producers in North Dakota, Montana, Wyoming, Kansas and Oklahoma. The Natural Gas Liquids segment owns and operates facilities that gather, fractionate, treat and distribute NGLs and store NGL products primarily in the Mid-Continental, Permian Basin and the Rocky Mountain regions. The Natural Gas Pipelines segment provides transportation and storage services to end users.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of OKE – 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 $25,627,821,136 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.74 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 22.19% Fail
6. Moderate PEmg Ratio PEmg < 20 33.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.89 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 0.74 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -12.96 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 $1.85
MG Growth Estimate 3.41%
MG Value $28.29
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $26.78
MG Value based on 0% Growth $15.70
Market Implied Growth Rate 12.62%
Current Price $62.32
% of Intrinsic Value 220.30%

ONEOK, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the 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 $1.5 in 2014 to an estimated $1.85 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.62% 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 ONEOK, Inc. revealed the company was trading above its Graham Number of $29.66. The company pays a dividend of $2.72 per share, for a yield of 4.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 33.75, which was below the industry average of 41.28, 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 $-22.78.

ONEOK, 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) -$22.78
Graham Number $29.66
PEmg 33.75
Current Ratio 0.74
PB Ratio 3.89
Current Dividend $2.72
Dividend Yield 4.36%
Number of Consecutive Years of Dividend Growth 15

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 $1,807,908,000
Total Current Liabilities $2,450,206,000
Long-Term Debt $8,325,708,000
Total Assets $17,911,314,000
Intangible Assets $970,117,000
Total Liabilities $11,258,556,000
Shares Outstanding (Diluted Average) 414,847,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.75
Dec2017 $1.29
Dec2016 $1.66
Dec2015 $1.16
Dec2014 $1.49
Dec2013 $1.27
Dec2012 $1.71
Dec2011 $1.68
Dec2010 $1.55
Dec2009 $1.44
Dec2008 $1.48
Dec2007 $1.40
Dec2006 $1.34
Dec2005 $2.53
Dec2004 $1.15
Dec2003 $0.61
Dec2002 $0.70
Dec2001 $0.43
Dec2000 $0.62
Aug1999 $0.56
Aug1998 $0.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.85
Dec2017 $1.39
Dec2016 $1.44
Dec2015 $1.38
Dec2014 $1.50
Dec2013 $1.52
Dec2012 $1.62
Dec2011 $1.55
Dec2010 $1.47
Dec2009 $1.50
Dec2008 $1.55
Dec2007 $1.52
Dec2006 $1.48
Dec2005 $1.39
Dec2004 $0.78
Dec2003 $0.59
Dec2002 $0.58

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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.

Marathon Oil Corp Valuation – January 2019 $MRO

Company Profile (excerpt from Reuters): Marathon Oil Corporation, incorporated on May 30, 2001, is an exploration and production (E&P) company. The Company operates through two segments: United States E&P, International E&P. The United States E&P segment explores for, produces and markets crude oil and condensate, natural gas liquids (NGLs) and natural gas in the United States. The International E&P segment explores for, produces and markets crude oil and condensate, NGLs and natural gas outside of the United States, and produces and markets products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol, in Equatorial Guinea (E.G.).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MRO – 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 $13,312,884,632 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.43 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 -186.73% Fail
6. Moderate PEmg Ratio PEmg < 20 -7.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.13 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 1.43 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.96 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 -$2.17
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth -$31.52
MG Value based on 0% Growth -$18.48
Market Implied Growth Rate -7.93%
Current Price $16.02
% of Intrinsic Value N/A

Marathon Oil Corporation 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 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 $3.38 in 2014 to an estimated $-2.17 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 Marathon Oil Corporation revealed the company was trading below its Graham Number of $16.13. The company pays a dividend of $0.2 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was -7.37, which was below the industry average of 41.28, 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 $-7.86.

Marathon Oil Corporation receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.86
Graham Number $16.13
PEmg -7.37
Current Ratio 1.43
PB Ratio 1.13
Current Dividend $0.20
Dividend Yield 1.25%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,065,000,000
Total Current Liabilities $2,142,000,000
Long-Term Debt $5,498,000,000
Total Assets $21,778,000,000
Intangible Assets $97,000,000
Total Liabilities $9,734,000,000
Shares Outstanding (Diluted Average) 849,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.84
Dec2017 -$6.73
Dec2016 -$2.61
Dec2015 -$3.26
Dec2014 $4.46
Dec2013 $2.47
Dec2012 $2.23
Dec2011 $4.13
Dec2010 $3.61
Dec2009 $2.06
Dec2008 $4.95
Dec2007 $5.69
Dec2006 $7.25
Dec2005 $4.22
Dec2004 $1.86
Dec2003 $2.13
Dec2002 $0.83
Dec2001 $0.53
Dec2000 $0.68
Dec1999 $0.87
Dec1998 $0.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.17
Dec2017 -$2.83
Dec2016 -$0.37
Dec2015 $1.17
Dec2014 $3.38
Dec2013 $2.86
Dec2012 $3.17
Dec2011 $3.79
Dec2010 $3.98
Dec2009 $4.39
Dec2008 $5.30
Dec2007 $5.06
Dec2006 $4.25
Dec2005 $2.47
Dec2004 $1.47
Dec2003 $1.18
Dec2002 $0.72

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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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