Cardinal Financial Corp Valuation – Initial Coverage $CFNL

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 Cardinal Financial Corp (CFNL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cardinal Financial Corporation is a financial holding company. The Company owns Cardinal Bank (the Bank), a Virginia state-chartered community bank. The Bank operates in three business segments: commercial banking, mortgage banking and wealth management services. The commercial banking segment includes both commercial and consumer lending and provides customers such products as commercial loans, real estate loans, and other business financing and consumer loans. In addition, commercial banking segment provides customers with several choices of deposit products, including demand deposit accounts, savings accounts and certificates of deposit. The mortgage banking segment is engaged in the origination and acquisition of residential mortgages for sale into the secondary market. The wealth management services segment provides investment and financial advisory services to businesses and individuals, including financial planning, retirement/estate planning and investment management.

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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:


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 $1,046,959,564 Fail
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 608.93% Pass
5. Moderate PEmg Ratio PEmg < 20 24.97 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.43 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


EPSmg $1.30
MG Growth Estimate 6.09%
MG Value $26.98
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $18.92
MG Value based on 0% Growth $11.09
Market Implied Growth Rate 8.24%
Current Price $32.58
% of Intrinsic Value 120.77%

Cardinal Financial Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, high PEmg ratio. 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 Overvalued after growing its EPSmg (normalized earnings) from $0.93 in 2012 to an estimated $1.3 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.24% 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 below the price.

At the time of valuation, further research into Cardinal Financial Corporation revealed the company was trading above its Graham Number of $21.85. The company pays a dividend of $0.47 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 24.97, which was above the industry average of 13.43.

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

Stage 3: Information for Further Research


Graham Number $21.85
PEmg 24.97
PB Ratio 2.43
Dividend Yield 1.44%
TTM Dividend $0.47
Number of Consecutive Years of Dividend Growth 7


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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Long-Term Debt & Capital Lease Obligation $464,876,000
Total Assets $4,219,648,000
Intangible Assets $36,115,000
Total Liabilities $3,767,811,000
Shares Outstanding (Diluted Average) 33,767,000

Earnings Per Share History

Next Fiscal Year Estimate $1.54
Dec2015 $1.43
Dec2014 $1.00
Dec2013 $0.82
Dec2012 $1.51
Dec2011 $0.94
Dec2010 $0.62
Dec2009 $0.37
Dec2008 $0.01
Dec2007 $0.18
Dec2006 $0.30
Dec2005 $0.44
Dec2004 $0.19
Dec2003 $0.54
Dec2002 -$0.13
Dec2001 -$3.11
Dec2000 -$0.98
Dec1999 -$0.94
Dec1998 -$0.64
Dec1997 -$0.12

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.30
Dec2015 $1.17
Dec2014 $1.02
Dec2013 $0.97
Dec2012 $0.93
Dec2011 $0.57
Dec2010 $0.35
Dec2009 $0.23
Dec2008 $0.18
Dec2007 $0.29
Dec2006 $0.32
Dec2005 $0.08
Dec2004 -$0.30
Dec2003 -$0.67
Dec2002 -$1.23
Dec2001 -$1.58
Dec2000 -$0.72

Recommended Reading:

Other ModernGraham posts about the company

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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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