Northern Trust Corp Valuation – July 2016 $NTRS

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 - July 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 Northern Trust Corp (NTRS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Northern Trust Corporation is a financial holding company. The Company provides asset servicing, fund administration, asset management, fiduciary and banking solutions for corporations, institutions, families and individuals around the world. The Company’s segments include Corporate & Institutional Services (C&IS), Wealth Management, and Treasury and Other. The Company conducts its business through various the United States and non-United States subsidiaries, including The Northern Trust Company (Bank). The Company has a network of offices in over 20 states in the United States, Washington, District of Columbia (D.C), and approximately 20 international locations in Canada, Europe, the Middle East and the Asia-Pacific region. Asset Management, through the Company’s subsidiaries, supports the C&IS and Wealth Management segments by providing a range of asset management and related services, and other products to customers around the world.


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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 NTRS – July 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 $15,546,618,082 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 16.41% Fail
5. Moderate PEmg Ratio PEmg < 20 18.22 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.73 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

NTRS value chart July 2016

EPSmg $3.72
MG Growth Estimate 4.94%
MG Value $68.35
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $53.90
MG Value based on 0% Growth $31.60
Market Implied Growth Rate 4.86%
Current Price $67.74
% of Intrinsic Value 99.11%

Northern Trust Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.8 in 2012 to an estimated $3.72 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 4.86% 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 within a margin of safety relative to the price.

Northern Trust Corporation receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

NTRS charts July 2016

Graham Number $60.74
PEmg 18.22
PB Ratio 1.73
Dividend Yield 2.13%
TTM Dividend $1.44
Number of Consecutive Years of Dividend Growth 5


Useful Links:

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Long-Term Debt $3,192,400,000
Total Assets $121,509,600,000
Intangible Assets $527,800,000
Total Liabilities $112,558,100,000
Shares Outstanding (Diluted Average) 229,197,000

Earnings Per Share History

Next Fiscal Year Estimate $4.18
Dec2015 $3.99
Dec2014 $3.32
Dec2013 $3.07
Dec2012 $2.81
Dec2011 $2.47
Dec2010 $2.74
Dec2009 $3.16
Dec2008 $3.47
Dec2007 $3.24
Dec2006 $3.00
Dec2005 $2.64
Dec2004 $2.27
Dec2003 $1.80
Dec2002 $1.97
Dec2001 $2.11
Dec2000 $2.08
Dec1999 $1.74
Dec1998 $1.52
Dec1997 $1.33
Dec1996 $1.10

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.72
Dec2015 $3.37
Dec2014 $3.00
Dec2013 $2.84
Dec2012 $2.80
Dec2011 $2.86
Dec2010 $3.08
Dec2009 $3.20
Dec2008 $3.12
Dec2007 $2.83
Dec2006 $2.53
Dec2005 $2.25
Dec2004 $2.05
Dec2003 $1.94
Dec2002 $1.97
Dec2001 $1.90
Dec2000 $1.71

Recommended Reading:

Other ModernGraham posts about the company

Northern Trust Corp Valuation – January 2016 Update $NTRS
Northern Trust Corporation Analysis – September 2015 Update $NTRS
5 Speculative and Overvalued Companies to Avoid – November 2014
20 Companies to Research This Week – 9/6/14

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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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