Cerner Corporation Quarterly Valuation – November 2014 $CERN


After looking over the company’s fundamentals, Cerner qualifies for the Enterprising Investor, as the investor type’s only concern is the lack of dividend payments. As for the Defensive Investor, there are numerous concerns including the lack of dividends, along with the high PEmg and PB ratios. As a result, only Enterprising Investors should feel comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

Estimating the intrinsic value requires examining the company’s earnings history. Cerner has grown its EPSmg (normalized earnings) from $0.58 in 2010 to only an estimated $1.24 for 2014. This demonstrated level of earnings growth does not support the market’s implied estimate of 21.41% earnings growth. In recent years, the company has seen an average annual growth in earnings of around 23.15%. However, such a high rate is not sustainable for a long period of time, and value investors who are conservative by nature will be very cautious regarding an earnings growth estimate. The ModernGraham model limits the growth to only 15% to create an additional safety margin. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.

Be sure to check out previous ModernGraham valuations of Cerner Corporation for better perspective!

Read the full valuation on Seeking Alpha!

CERN Chart

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Disclaimer:  The author did not hold a position in Cerner Corporation (CERN) 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.

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