Amphenol Corporation Valuation – August 2016 $APH

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 Amphenol Corporation (APH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Amphenol Corporation (Amphenol) is a designer, manufacturer and marketer of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor-based products, and coaxial and specialty cable. The Company operates through two segments: Interconnect Products and Assemblies, and Cable Products and Solutions. The Interconnect Product and Assemblies segment primarily is engaged in designing, manufacturing and marketing a range of connector and connector systems, value-add products and other products, including antennas and sensors, used in a range of applications in various end markets. The Cable Products and Solutions segment primarily engages in designing, manufacturing and marketing cables, value-added products and components for use primarily in the broadband communications and information technology markets. It designs, manufactures and assembles its products at facilities in the Americas, Europe, Asia, Australia and Africa.

APH Chart

APH data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of APH – August 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $19,064,133,914 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.87 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 134.04% Pass
6. Moderate PEmg Ratio PEmg < 20 26.58 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.46 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.87 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.38 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

APH value chart August 2016

EPSmg $2.30
MG Growth Estimate 8.78%
MG Value $59.99
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $33.38
MG Value based on 0% Growth $19.57
Market Implied Growth Rate 9.04%
Current Price $61.19
% of Intrinsic Value 101.99%

Amphenol Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. 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 $1.45 in 2012 to an estimated $2.3 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 9.04% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Amphenol Corporation revealed the company was trading above its Graham Number of $25.53. The company pays a dividend of $0.56 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 26.58, which was above the industry average of 22.64. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.23.

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

Stage 3: Information for Further Research

APH charts August 2016

Net Current Asset Value (NCAV) -$4.23
Graham Number $25.53
PEmg 26.58
Current Ratio 2.87
PB Ratio 5.46
Current Dividend $0.56
Dividend Yield 0.92%
Number of Consecutive Years of Dividend Growth 5


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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $3,158,100,000
Total Current Liabilities $1,100,000,000
Long-Term Debt $2,834,600,000
Total Assets $8,027,000,000
Intangible Assets $3,944,500,000
Total Liabilities $4,492,400,000
Shares Outstanding (Diluted Average) 315,400,000

Earnings Per Share History

Next Fiscal Year Estimate $2.53
Dec2015 $2.41
Dec2014 $2.21
Dec2013 $1.96
Dec2012 $1.69
Dec2011 $1.53
Dec2010 $1.41
Dec2009 $0.92
Dec2008 $1.17
Dec2007 $0.97
Dec2006 $0.70
Dec2005 $0.57
Dec2004 $0.46
Dec2003 $0.30
Dec2002 $0.23
Dec2001 $0.24
Dec2000 $0.32
Dec1999 $0.12
Dec1998 $0.13
Dec1997 $0.06
Dec1996 $0.09

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.30
Dec2015 $2.11
Dec2014 $1.89
Dec2013 $1.66
Dec2012 $1.45
Dec2011 $1.29
Dec2010 $1.12
Dec2009 $0.94
Dec2008 $0.89
Dec2007 $0.70
Dec2006 $0.53
Dec2005 $0.42
Dec2004 $0.33
Dec2003 $0.26
Dec2002 $0.23
Dec2001 $0.21
Dec2000 $0.18

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Amphenol Corporation Valuation – January 2016 Update $APH
13 Best Stocks For Value Investors This Week – 10/3/15
Amphenol Corporation Analysis – October 2015 Update $APH
Amphenol Corporation Analysis – October 2015 Update $APH

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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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