U.S. Bancorp Valuation – November 2015 Update $USB

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 Most Undervalued Companies for the Defensive Investor – October 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 stock analysis showing a specific look at how U.S. Bancorp (USB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): U.S. Bancorp is a multi-state financial services holding company. The Company operates through its banking subsidiary, U.S. Bank National Association, is engaged in the general banking business in domestic markets. The Company provides a range of financial services, including lending and depository services, cash management, capital markets, and trust and investment management services. It also engages in credit card services, merchant and automated teller machines (ATM) processing, mortgage banking, insurance, brokerage and leasing. U.S. Bank National Association provides a range of products and services to individuals, businesses, institutional organizations, governmental entities and other financial institutions. Its commercial and consumer lending services are offered to customers within the Company’s domestic markets, to domestic customers with foreign operations and to large national customers operating in specific industries targeted by the Company.


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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of USB – November 2015

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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $74,913,149,494 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 37.74% Pass
5. Moderate PEmg Ratio PEmg < 20 14.23 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.70 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

USB value Chart November 2015

EPSmg $2.99
MG Growth Estimate 9.22%
MG Value $80.58
Opinion Undervalued
MG Value based on 3% Growth $43.36
MG Value based on 0% Growth $25.42
Market Implied Growth Rate 2.86%
Current Price $42.55
% of Intrinsic Value 52.80%

U.S. Bancorp qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.85 in 2011 to an estimated $2.99 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.86% 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 above 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 U.S. Bancorp (USB)?  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.

Stage 3: Information for Further Research

USB Charts November 2015

Graham Number $39.50
PEmg 14.23
PB Ratio 1.70
Dividend Yield 2.33%
Number of Consecutive Years of Dividend Growth 5



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Most Recent Balance Sheet Figures

Long-Term Debt $34,141,000,000
Total Assets $419,075,000,000
Intangible Assets $12,599,000,000
Total Liabilities $374,538,000,000
Shares Outstanding (Diluted Average) 1,779,000,000

Earnings Per Share History

Next Fiscal Year Estimate $3.08
Dec14 $3.08
Dec13 $3.00
Dec12 $2.84
Dec11 $2.46
Dec10 $1.73
Dec09 $0.97
Dec08 $1.61
Dec07 $2.43
Dec06 $2.61
Dec05 $2.42
Dec04 $2.18
Dec03 $1.93
Dec02 $1.65
Dec01 $0.88
Dec00 $1.50
Dec99 $2.06
Dec98 $1.78
Dec97 $1.11
Dec96 $1.57
Dec95 $0.47

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.99
Dec14 $2.84
Dec13 $2.54
Dec12 $2.19
Dec11 $1.85
Dec10 $1.66
Dec09 $1.75
Dec08 $2.17
Dec07 $2.41
Dec06 $2.32
Dec05 $2.05
Dec04 $1.79
Dec03 $1.60
Dec02 $1.48
Dec01 $1.42
Dec00 $1.66
Dec99 $1.62

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Banking Industry – October 2015
The 8 Best Stocks For Value Investors This Week – 8/8/15
US Bancorp Analysis – August 2015 Update $USB
47 Companies in the Spotlight This Week – 5/16/15
U.S. Bancorp Quarterly Valuation – May 2015 $USB

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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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