Whirlpool Corp (WHR) Quarterly Valuation – May 2014

200px-Whirlpool_Corporation_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing 5 Undervalued Companies for the Enterprising Investor Near 52 Week Lows.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Whirlpool Corp (WHR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Whirlpool Corporation (Whirlpool) is a manufacturer and marketer of home appliances. Whirlpool operates in four segments: North America, Latin America, EMEA (Europe, Middle East and Africa) and Asia. Whirlpool manufactures and markets a line of home appliances and related products. Its principal products are laundry appliances, refrigerators and freezers, cooking appliances, dishwashers, mixers and other portable household appliances. The Company also produces hermetic compressors for refrigeration systems. It is a producer of home appliances in North America and Latin America and has a presence in markets throughout Europe and India. Its portfolio of brands includes Whirlpool, Maytag, KitchenAid, Brastemp and Consul.

WHR Chart

WHR data by YCharts

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

  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 – PASS
  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 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – 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 – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $152.83
MG Value $186.43
MG Opinion Fairly Valued
Value Based on 3% Growth $130.84
Value Based on 0% Growth $76.70
Market Implied Growth Rate 4.22%
Net Current Asset Value (NCAV) -$43.61
PEmg 16.94
Current Ratio 1.17
PB Ratio 2.31

Balance Sheet – 3/31/2014

Current Assets $7,583,000,000
Current Liabilities $6,454,000,000
Total Debt $2,662,000,000
Total Assets $16,040,000,000
Intangible Assets $3,419,000,000
Total Liabilities $10,941,000,000
Outstanding Shares 77,000,000

Earnings Per Share

2014 (estimate) $12.25
2013 $10.24
2012 $5.06
2011 $4.99
2010 $7.98
2009 $4.34
2008 $5.50
2007 $8.10
2006 $6.35
2005 $6.18
2004 $5.90

Earnings Per Share – ModernGraham

2014 (estimate) $9.02
2013 $7.11
2012 $5.56
2011 $5.93
2010 $6.42
2009 $5.79

Dividend History

WHR Dividend Chart

WHR Dividend data by YCharts


Whirlpool Corp is suitable for both Defensive Investors and Enterprising Investors.  The Defensive Investor’s only concern is the low current ratio and while the Enterprising Investor is concerned with the level of debt relative to the current assets, the company qualifies for the Enterprising Investor by default as it is suitable for Defensive Investors.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research into the company and comparison to other opportunities such as through a review of 5 Outstanding Dow Components and other screens from MG Stocks & Screens.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $6.42 in 2010 to an estimated $9.02 for 2014.  This demonstrated level of growth supports the market’s implied estimate of 4.22% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the price.

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

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

Disclaimer:  The author did not hold a position in Whirlpool Corp (WHR) or any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

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

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