Delphi Automotive PLC Valuation – August 2016 $DLPH

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 Delphi Automotive PLC (DLPH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Delphi Automotive PLC is a vehicle components manufacturer. The Company operates through three segments: Electrical/Electronic Architecture; Powertrain Systems, and Electronics and Safety. It serves automotive and commercial vehicle markets. Its Electrical/Electronic Architecture segment includes electrical architecture and component products. Its Powertrain Systems segment provides systems integration of end-to-end gasoline and diesel engine management systems, including fuel handling, fuel injection, combustion, electronic controls, test and validation capabilities, aftermarket and original equipment services. Its Electronics and Safety segment includes component and systems integration in infotainment and connectivity, body controls and security systems, displays, mechatronics, passive and active safety electronics and electric and hybrid electric vehicle power electronics, as well as advanced development of software.

DLPH Chart

DLPH data by YCharts

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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 DLPH – 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 $17,879,974,329 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 49633.33% Pass
6. Moderate PEmg Ratio PEmg < 20 13.67 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.50 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 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.45 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

DLPH value chart August 2016

EPSmg $4.78
MG Growth Estimate 15.00%
MG Value $184.00
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $69.30
MG Value based on 0% Growth $40.62
Market Implied Growth Rate 2.58%
Current Price $65.31
% of Intrinsic Value 35.49%

Delphi Automotive PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, the poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.02 in 2012 to an estimated $4.78 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.58% 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 above the price.

At the time of valuation, further research into Delphi Automotive PLC revealed the company was trading above its Graham Number of $32.51. The company pays a dividend of $1.08 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 13.67, which was below the industry average of 17.79, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.55.

Delphi Automotive PLC receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

DLPH charts August 2016

Net Current Asset Value (NCAV) -$16.55
Graham Number $32.51
PEmg 13.67
Current Ratio 1.30
PB Ratio 7.50
Current Dividend $1.08
Dividend Yield 1.65%
Number of Consecutive Years of Dividend Growth 1


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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $5,051,000,000
Total Current Liabilities $3,899,000,000
Long-Term Debt $3,969,000,000
Total Assets $11,957,000,000
Intangible Assets $2,916,000,000
Total Liabilities $9,576,000,000
Shares Outstanding (Diluted Average) 273,370,000

Earnings Per Share History

Next Fiscal Year Estimate $5.38
Dec2015 $5.06
Dec2014 $4.48
Dec2013 $3.89
Dec2012 $3.33
Dec2011 $2.72
Dec2010 $0.92

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.78
Dec2015 $4.28
Dec2014 $3.62
Dec2013 $2.85
Dec2012 $2.02
Dec2011 $1.15
Dec2010 $0.31

Recommended Reading:

Other ModernGraham posts about the company

Delphi Automotive Analysis – 2015 Update $DLPH
17 Companies in the Spotlight This Week – June 21, 2014
Delphi Automotive Annual Valuation – 2014 $DLPH

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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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