IT Hardware Stocks

AMETEK Inc Valuation – December 2016 $AME

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 AMETEK Inc (AME) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): AMETEK, Inc. (AMETEK) is a manufacturer of electronic instruments and electromechanical devices. The Company operates through two segments: Electronic Instruments (EIG) and Electromechanical (EMG). EIG designs and manufactures advanced instruments for the process, aerospace, power and industrial markets. EIG supplies the aerospace industry with aircraft and engine sensors, monitoring systems, power supplies, fuel and fluid measurement systems and data acquisition systems. EMG is a supplier of electrical interconnects, precision motion control solutions, specialty metals, thermal management systems, and floor care and specialty motors. EMG offers electrical connectors and electronics packaging used in aerospace and defense, medical and industrial applications, as well as its advanced technical motor and motion control products, which are used in a range of medical devices, office and business equipment, factory automation, robotics and other applications.

AME Chart

AME data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AME – December 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 $11,996,025,428 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.39 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 152.93% Pass
6. Moderate PEmg Ratio PEmg < 20 22.15 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.51 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 1.39 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.21 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

EPSmg $2.30
MG Growth Estimate 8.51%
MG Value $58.58
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $33.29
MG Value based on 0% Growth $19.52
Market Implied Growth Rate 6.82%
Current Price $50.85
% of Intrinsic Value 86.80%

AMETEK, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.47 in 2012 to an estimated $2.3 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 6.82% 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 AMETEK, Inc. revealed the company was trading above its Graham Number of $27.4. The company pays a dividend of $0.36 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 22.15, which was below the industry average of 22.64, 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 $-8.19.

AMETEK, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.19
Graham Number $27.40
PEmg 22.15
Current Ratio 1.39
PB Ratio 3.51
Current Dividend $0.36
Dividend Yield 0.71%
Number of Consecutive Years of Dividend Growth 7

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $1,696,890,000
Total Current Liabilities $1,216,738,000
Long-Term Debt $1,540,742,000
Total Assets $6,977,062,000
Intangible Assets $4,626,391,000
Total Liabilities $3,603,863,000
Shares Outstanding (Diluted Average) 232,721,000

Earnings Per Share History

Next Fiscal Year Estimate $2.29
Dec2015 $2.45
Dec2014 $2.37
Dec2013 $2.10
Dec2012 $1.88
Dec2011 $1.58
Dec2010 $1.18
Dec2009 $0.85
Dec2008 $1.02
Dec2007 $0.94
Dec2006 $0.76
Dec2005 $0.57
Dec2004 $0.47
Dec2003 $0.37
Dec2002 $0.37
Dec2001 $0.29
Dec2000 $0.31
Dec1999 $0.27
Dec1998 $0.18
Dec1997 $0.22
Dec1996 $0.23

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.30
Dec2015 $2.22
Dec2014 $2.02
Dec2013 $1.73
Dec2012 $1.47
Dec2011 $1.21
Dec2010 $1.00
Dec2009 $0.88
Dec2008 $0.85
Dec2007 $0.72
Dec2006 $0.57
Dec2005 $0.46
Dec2004 $0.39
Dec2003 $0.34
Dec2002 $0.31
Dec2001 $0.28
Dec2000 $0.26

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Stocks Near Lows for Enterprising Value Investors – Aug 2016
5 Companies for Enterprising Investors Near 52 Week Lows – June 2016
26 Best Stocks For Value Investors This Week – 2/6/16
Ametek Inc Valuation – February 2016 Update $AME
12 Best Stocks For Value Investors This Week – 11/7/15

Other ModernGraham posts about related companies

Sanmina Corp Valuation – Initial Coverage $SANM
Qorvo Inc Valuation – December 2016 Update $QRVO
IIVI Inc Valuation – Initial Coverage $IIVI
CEVA Inc Valuation – Initial Coverage $CEVA
NetApp Inc Valuation – August 2016 $NTAP
Applied Materials Inc Valuation – August 2016 $AMAT
Skyworks Solutions Inc Valuation – August 2016 $SWKS
Garmin Limited Valuation – August 2016 $GRMN
Analog Devices Inc Valuation – August 2016 $ADI
Amphenol Corporation Valuation – August 2016 $APH

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.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top