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Freight Stocks

C.H. Robinson Worldwide Inc Valuation – August 2016 $CHRW

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 Stocks for Using A Benjamin Graham Value Investing Strategy – August 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 C.H. Robinson Worldwide Inc (CHRW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): C.H. Robinson Worldwide, Inc. (C.H. Robinson) is a third-party logistics company. The Company provides freight transportation services and logistics solutions to companies of all sizes, in a variety of industries. C.H. Robinson has handled approximately 16.9 million shipments, and worked with over 110,000 active customers. It operates through a network of offices in North America, Europe, Asia and South America. The Company also has developed global transportation and distribution networks to provide transportation and supply chain services across the world. In addition to transportation, the Company provides sourcing services (Sourcing) through Robinson Fresh (Robinson Fresh). The Company’s network of contracted transportation providers includes contract motor carriers, railroads, air freight carriers and ocean carriers. The Company’s sourcing business involves the buying, selling and marketing of fresh fruits, vegetables and other perishable items.

CHRW Chart

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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. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CHRW – 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 $9,887,230,225 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.26 Fail
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 66.89% Pass
6. Moderate PEmg Ratio PEmg < 20 20.82 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.87 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 1.26 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.29 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

CHRW value chart August 2016

EPSmg $3.33
MG Growth Estimate 2.79%
MG Value $46.96
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $48.34
MG Value based on 0% Growth $28.34
Market Implied Growth Rate 6.16%
Current Price $69.43
% of Intrinsic Value 147.84%

C.H. Robinson Worldwide, Inc. 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, high PEmg and PB ratios. 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 Overvalued after growing its EPSmg (normalized earnings) from $2.81 in 2012 to an estimated $3.33 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.16% 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 below the price.

At the time of valuation, further research into C.H. Robinson Worldwide, Inc. revealed the company was trading above its Graham Number of $26.65. The company pays a dividend of $1.67 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.82, which was below the industry average of 21.6, 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 $-1.45.

C.H. Robinson Worldwide, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

CHRW charts August 2016

Net Current Asset Value (NCAV) -$1.45
Graham Number $26.65
PEmg 20.82
Current Ratio 1.26
PB Ratio 7.87
Current Dividend $1.67
Dividend Yield 2.41%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $1,879,102,000
Total Current Liabilities $1,491,457,000
Long-Term Debt $500,000,000
Total Assets $3,349,070,000
Intangible Assets $1,216,833,000
Total Liabilities $2,086,230,000
Shares Outstanding (Diluted Average) 143,216,000

Earnings Per Share History

Next Fiscal Year Estimate $3.57
Dec2015 $3.51
Dec2014 $3.05
Dec2013 $2.65
Dec2012 $3.67
Dec2011 $2.62
Dec2010 $2.33
Dec2009 $2.13
Dec2008 $2.08
Dec2007 $1.86
Dec2006 $1.53
Dec2005 $1.16
Dec2004 $0.79
Dec2003 $0.62
Dec2002 $0.52
Dec2001 $0.47
Dec2000 $0.41
Dec1999 $0.32
Dec1998 $0.26
Dec1997 $0.17
Dec1996 $0.21

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.33
Dec2015 $3.18
Dec2014 $2.96
Dec2013 $2.84
Dec2012 $2.81
Dec2011 $2.32
Dec2010 $2.11
Dec2009 $1.92
Dec2008 $1.70
Dec2007 $1.41
Dec2006 $1.09
Dec2005 $0.82
Dec2004 $0.62
Dec2003 $0.51
Dec2002 $0.44
Dec2001 $0.37
Dec2000 $0.31

Recommended Reading:

Other ModernGraham posts about the company

C.H. Robinson Worldwide Inc. Analysis – 2015 Update $CHRW
19 Companies in the Spotlight This Week – 7/26/14
C.H. Robinson Worldwide Inc. Annual Valuation – 2014 $CHRW

Other ModernGraham posts about related companies

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FedEx Corporation Analysis – August 2015 Update $FDX
C.H. Robinson Worldwide Inc. Analysis – 2015 Update $CHRW
Expeditors International of Washington Analysis – June 2015 Update $EXPD

Disclaimer:

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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