C.H. Robinson Worldwide Inc. Annual Valuation – 2014 $CHRW

CH_Robinson_LogoBenjamin 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 Undervalued Companies to Research for the Enterprising Investor.  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 C.H. Robinson Worldwide (CHRW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): C.H. Robinson Worldwide, Inc. (C.H. Robinson) is a third party logistics company. The Company provides freight transportation services and logistics solutions to companies of all sizes, in a range of industries. The Company operates through a network of 276 offices, which the Company calls branches, in North America, Europe, Asia, South America, and Australia. The Company has developed global transportation and distribution networks to provide transportation and supply chain services worldwide. In addition to transportation, the Company provides sourcing services (Sourcing). The Company’s Sourcing business is primarily the buying, selling, and marketing of fresh produce. The Company supplies fresh produce through its network of independent produce growers and suppliers. The Company’s customers include grocery retailers and restaurants, produce wholesalers, and foodservice distributors.
CHRW Chart

CHRW data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  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 – 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 = 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 $66.10
MG Value $54.89
MG Opinion Overvalued
Value Based on 3% Growth $41.50
Value Based on 0% Growth $24.33
Market Implied Growth Rate 7.30%
Net Current Asset Value (NCAV) -$1.05
PEmg 23.10
Current Ratio 1.32
PB Ratio 10.00

Balance Sheet – 3/31/2014

Current Assets $1,823,100,000
Current Liabilities $1,380,500,000
Total Debt $500,000,000
Total Assets $2,960,200,000
Intangible Assets $941,700,000
Total Liabilities $1,978,600,000
Outstanding Shares 148,520,000

Earnings Per Share

2014 (estimate) $2.75
2013 $2.65
2012 $3.67
2011 $2.62
2010 $2.33
2009 $2.13
2008 $2.08
2007 $1.86
2006 $1.53
2005 $1.16
2004 $0.79

Earnings Per Share – ModernGraham

2014 (estimate) $2.86
2013 $2.84
2012 $2.81
2011 $2.32
2010 $2.11
2009 $1.92

Dividend History
CHRW Dividend Chart

CHRW Dividend data by YCharts


C.H. Robinson Worldwide does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned by the low current ratio and the high PEmg and PB ratios, while the Enterprising Investor is concerned with the high level of debt relative to current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.11 in 2010 to only an estimated $2.86 for 2014. This low level of demonstrated growth does not support the market’s implied estimate of 7.30% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below 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 C.H. Robinson (CHRW)?  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 C.H. Robinson (CHRW) or in any other company mentioned in this article 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.






Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.