Bemis Company (BMS) Quarterly Valuation
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.  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 Bemis Company fares in the ModernGraham valuation model.
Company Profile (obtained from Google Finance): Bemis Company, Inc., is a manufacturer of packaging products and pressure sensitive materials. The Company’s business activities are organized around its three reportable business segments, U.S. Packaging , Global Packaging and Pressure Sensitive Materials. The majority of the Company’s products are sold to customers in the food industry. Other customers include companies businesses, such as chemical, agribusiness, medical, pharmaceutical, personal care, electronics, automotive, construction, graphic industries and other consumer goods. In July 2013, Bemis Company Inc acquired all of the common stock of Foshan New Changsheng Plastics Films Co., LTD.
Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7
- Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
- Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
- Earnings Stability – positive earnings per share for at least 10 straight years – PASS
- Dividend Record – has paid a dividend for at least 10 straight years – PASS
- 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
- Moderate PEmg ratio – PEmg is less than 20 – FAIL
- Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL
Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5
- Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
- Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
- Earnings Stability – positive earnings per share for at least 5 years – PASS
- Dividend Record – currently pays a dividend – PASS
- Earnings growth – EPSmg greater than 5 years ago – PASS
Valuation Summary
Key Data:
| Recent Price | $39.03 |
| MG Value | $22.75 |
| MG Opinion | Overvalued |
| Value Based on 3% Growth | $26.30 |
| Value Based on 0% Growth | $15.42 |
| Market Implied Growth Rate | 6.51% |
| NCAV | -$9.04 |
| PEmg | 21.52 |
| Current Ratio | 2.50 |
| PB Ratio | 2.36 |
Balance Sheet – 12/31/2013
| Current Assets | $1,504,500,000 |
| Current Liabilities | $601,900,000 |
| Total Debt | $1,421,400,000 |
| Total Assets | $4,110,200,000 |
| Intangible Assets | $1,242,800,000 |
| Total Liabilities | $2,425,400,000 |
| Outstanding Shares | 101,900,000 |
Earnings Per Share
| 2013 | $2.05 |
| 2012 | $1.66 |
| 2011 | $1.73 |
| 2010 | $1.83 |
| 2009 | $1.47 |
| 2008 | $1.65 |
| 2007 | $1.74 |
| 2006 | $1.65 |
| 2005 | $1.51 |
| 2004 | $1.67 |
| 2003 | $1.37 |
| 2002 | $1.54 |
Earnings Per Share – ModernGrahamÂ
| 2013 | $1.81 |
| 2012 | $1.69 |
| 2011 | $1.69 |
| 2010 | $1.67 |
| 2009 | $1.60 |
| 2008 | $1.66 |
Dividend History
BMS Dividend data by YCharts
Conclusion:
Bemis Company is not suitable for the Defensive Investor, but is suitable for the Enterprising Investor. Â The company has not shown sufficient earnings growth over the ten year historical period and has a PEmg too high for the Defensive Investor. Â The Enterprising Investor only has an issue with the company’s debt level relative to its current assets. Â As a result, Enterprising Investors seeking to follow the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company. Â Such research should also include a review of some other potential investments, including 5 Undervalued Companies for the Enterprising Investor and 5 Low PEmg Companies for the Defensive Investor. Â From a valuation side of things, the company has barely grown its EPSmg (normalized earnings), going from $1.60 in 2009 to $1.81 in 2013. Â This low level of historically demonstrated growth does not support the market’s implied estimate of 6.51% earnings growth, and the ModernGraham valuation model therefore returns an estimate of intrinsic value that trails the market price.
The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Bemis Company (BMS)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.
If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!
Disclaimer: Â The author did not hold a position in Bemis Company (BMS) 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 Wikipedia; this article is not affiliated with the company in any manner.
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the company is capable of delivering hefty payouts to shareholders, as its history has shown