CBS Corporation Valuation – August 2016 $CBS

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 CBS Corporation (CBS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CBS Corporation is a mass media company. The Company’s segments include Entertainment, Cable Networks, Publishing and Local Broadcasting. Its Entertainment segment is composed of the CBS Television Network; CBS Television Studios; CBS Global Distribution Group (composed of CBS Studios International and CBS Television Distribution); CBS Interactive, and CBS Films. The Company’s Cable Networks segment is composed of Showtime Networks; CBS Sports Network, and Smithsonian Networks. The Publishing segment is composed of Simon & Schuster, which publishes and distributes consumer books under imprints, such as Simon & Schuster, Pocket Books, Scribner, Gallery Books, Touchstone and Atria Books. The Local Broadcasting segment is composed of CBS Television Stations, its approximately 30 owned broadcast television stations, and CBS Radio, through which it owns and operates radio stations in the United States markets. It operates businesses, which span the media and entertainment industries.

CBS Chart

CBS 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. 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.


Downloadable PDF version of this valuation:

ModernGraham Valuation of CBS – 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 $23,052,888,078 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.65 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 -178.59% Fail
6. Moderate PEmg Ratio PEmg < 20 14.10 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.39 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 1.65 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.09 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

CBS value chart August 2016

EPSmg $3.69
MG Growth Estimate 15.00%
MG Value $142.14
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $53.53
MG Value based on 0% Growth $31.38
Market Implied Growth Rate 2.80%
Current Price $52.04
% of Intrinsic Value 36.61%

CBS Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PB ratio. 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 Undervalued after growing its EPSmg (normalized earnings) from $0.4 in 2012 to an estimated $3.69 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.8% 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 CBS Corporation revealed the company was trading above its Graham Number of $32.64. The company pays a dividend of $0.6 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 14.1, which was below the industry average of 40.02, 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 $-27.81.

CBS Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

CBS charts August 2016

Net Current Asset Value (NCAV) -$27.81
Graham Number $32.64
PEmg 14.10
Current Ratio 1.65
PB Ratio 4.39
Current Dividend $0.60
Dividend Yield 1.15%
Number of Consecutive Years of Dividend Growth 6


Useful Links:

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $5,096,000,000
Total Current Liabilities $3,087,000,000
Long-Term Debt $8,223,000,000
Total Assets $23,138,000,000
Intangible Assets $12,035,000,000
Total Liabilities $17,750,000,000
Shares Outstanding (Diluted Average) 455,000,000

Earnings Per Share History

Next Fiscal Year Estimate $3.92
Dec2015 $2.89
Dec2014 $5.27
Dec2013 $3.01
Dec2012 $2.39
Dec2011 $1.92
Dec2010 $1.04
Dec2009 $0.33
Dec2008 -$17.43
Dec2007 $1.73
Dec2006 $2.15
Dec2005 -$8.98
Dec2004 -$20.37
Dec2003 $1.61
Dec2002 $0.82
Dec2001 -$0.26
Dec2000 -$1.34
Dec1999 $0.90
Dec1998 -$0.42
Dec1997 $2.08
Dec1996 $6.46

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.69
Dec2015 $3.42
Dec2014 $3.36
Dec2013 $2.19
Dec2012 $0.40
Dec2011 -$1.23
Dec2010 -$2.68
Dec2009 -$4.50
Dec2008 -$7.47
Dec2007 -$3.25
Dec2006 -$5.48
Dec2005 -$8.01
Dec2004 -$6.32
Dec2003 $0.58
Dec2002 $0.03
Dec2001 -$0.18
Dec2000 $0.42

Recommended Reading:

Other ModernGraham posts about the company

6 Best Stocks For Value Investors This Week – 5/14/16
CBS Corporation Valuation – May 2016 $CBS
5 Undervalued Companies for Value Investors with a High Beta – January 2016
12 Best Stocks For Value Investors This Week – 11/14/15
CBS Corporation Valuation – November 2015 Update $CBS

Other ModernGraham posts about related companies

Twenty-First Century Fox Inc Valuation – August 2016 $FOXA
Discovery Communications Inc Valuation – August 2016 $DISCA
Scripps Networks Valuation – July 2016 $SNI
Cablevision Systems Corp Valuation – July 2016 $CVC
Time Warner Inc Valuation – July 2016 $TWX
Comcast Corporation Valuation – June 2016 $CMCSA
Viacom Inc Valuation – June 2016 $VIAB
CBS Corporation Valuation – May 2016 $CBS
Graham Holdings Company Valuation – May 2016 $GHC
Twenty-First Century Fox Inc Valuation – February 2016 Update $FOXA


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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