State Street Corp Valuation – June 2016 $STT

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 Companies Benjamin Graham Would Invest In Today - June 2016.  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 State Street Corp (STT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): State Street Corporation, the parent company, is a financial holding company. The parent company provides financial and managerial support to its legal and operating subsidiaries. The Company, through its subsidiary, State Street Bank, provides a range of financial services and products to institutional investors across the world. Its clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers. It has approximately two lines of business: Investment Servicing and Investment Management. Its Investment Servicing line of business performs core custody and related value-added functions, such as providing institutional investors with clearing, payment and settlement services. Its Investment Management services through State Street Global Advisors (SSGA). SSGA provides a range of investment management, investment research and investment advisory services.


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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 STT – June 2016

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 $22,435,356,597 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
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 290.38% Pass
5. Moderate PEmg Ratio PEmg < 20 12.35 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.03 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

STT value chart June 2016

EPSmg $4.45
MG Growth Estimate 9.38%
MG Value $121.35
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $64.55
MG Value based on 0% Growth $37.84
Market Implied Growth Rate 1.93%
Current Price $54.99
% of Intrinsic Value 45.32%

State Street Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.74 in 2012 to an estimated $4.45 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.93% 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.

State Street Corp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

STT charts June 2016

Graham Number $68.19
PEmg 12.35
PB Ratio 1.03
Dividend Yield 2.47%
TTM Dividend $1.36
Number of Consecutive Years of Dividend Growth 6


Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Long-Term Debt $10,323,000,000
Total Assets $243,685,000,000
Intangible Assets $7,482,000,000
Total Liabilities $222,189,000,000
Shares Outstanding (Diluted Average) 403,615,000

Earnings Per Share History

Next Fiscal Year Estimate $4.35
Dec2015 $4.47
Dec2014 $4.57
Dec2013 $4.62
Dec2012 $4.20
Dec2011 $3.79
Dec2010 $3.09
Dec2009 -$4.32
Dec2008 $4.30
Dec2007 $3.45
Dec2006 $3.29
Dec2005 $2.50
Dec2004 $2.35
Dec2003 $2.15
Dec2002 $3.10
Dec2001 $1.90
Dec2000 $1.82
Dec1999 $1.89
Dec1998 $1.33
Dec1997 $1.16
Dec1996 $0.89

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.45
Dec2015 $4.45
Dec2014 $4.31
Dec2013 $3.54
Dec2012 $2.74
Dec2011 $2.03
Dec2010 $1.42
Dec2009 $1.00
Dec2008 $3.50
Dec2007 $2.98
Dec2006 $2.73
Dec2005 $2.43
Dec2004 $2.35
Dec2003 $2.29
Dec2002 $2.24
Dec2001 $1.75
Dec2000 $1.59

Recommended Reading:

Other ModernGraham posts about the company

9 Best Stocks For Value Investors This Week – 11/28/15
State Street Corp Valuation – November 2015 Update $STT
The Best Companies of the Banking Industry – October 2015
19 Best Stocks For Value Investors This Week – 8/29/15
State Street Corporation Analysis – August 2015 Update $STT

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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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