INTL Fcstone Inc Valuation – Initial Coverage $INTL

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 – December 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 INTL Fcstone Inc (INTL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): INTL Fcstone Inc. is a financial services company. The Company provides financial products, and advisory and execution service. The Company operates through five segments: Commercial Hedging, Global Payments, Securities, Physical Commodities, and Clearing and Execution Services (CES). The Commercial Hedging segment serves its commercial clients through its team of risk management consultants. The Global Payments segment provides global payment solutions to banks and commercial businesses, as well as charities and non-governmental organizations and government organizations. The Securities segment provides solutions that facilitate cross-border trading. The Physical Commodities segment consists of its physical precious metals trading and physical agricultural and energy commodity businesses. The CES segment seeks to provide clearing and execution of exchange-traded futures and options for the institutional and trader market segments.

INTL 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.


Downloadable PDF version of this valuation:

ModernGraham Valuation of INTL – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $778,013,835 Fail
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 54.21% Pass
5. Moderate PEmg Ratio PEmg < 20 15.27 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.79 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 Fail
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.73
MG Growth Estimate 15.00%
MG Value $105.08
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $39.58
MG Value based on 0% Growth $23.20
Market Implied Growth Rate 3.39%
Current Price $41.69
% of Intrinsic Value 39.67%

INTL Fcstone Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, and the poor dividend history. The Enterprising Investor has concerns regarding the lack of dividends. 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 $1.09 in 2013 to an estimated $2.73 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.39% 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 above the price.

At the time of valuation, further research into INTL Fcstone Inc revealed the company was trading below its Graham Number of $43.19. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 15.27, which was below the industry average of 21.33, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

INTL Fcstone Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Graham Number $43.19
PEmg 15.27
PB Ratio 1.79
Dividend Yield 0.00%
TTM Dividend $0.00
Number of Consecutive Years of Dividend Growth 0


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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Long-Term Debt & Capital Lease Obligation $228,300,000
Total Assets $5,951,300,000
Intangible Assets $56,600,000
Total Liabilities $5,517,500,000
Shares Outstanding (Diluted Average) 18,625,000

Earnings Per Share History

Next Fiscal Year Estimate $3.56
Sep2016 $2.90
Sep2015 $2.87
Sep2014 $0.98
Sep2013 $0.97
Sep2012 $0.64
Sep2011 $1.83
Sep2010 $0.30
Sep2009 $2.80
Sep2008 $2.95
Sep2007 -$0.56
Sep2006 $0.41
Sep2005 $0.33
Sep2004 -$0.02
Sep2003 $0.33
Sep2002 -$0.11
Sep2001 -$1.47
Sep2000 $0.12
Sep1999 $0.18
Sep1998 -$0.12
Sep1997 $0.36

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.73
Sep2016 $2.10
Sep2015 $1.62
Sep2014 $0.98
Sep2013 $1.09
Sep2012 $1.33
Sep2011 $1.61
Sep2010 $1.39
Sep2009 $1.68
Sep2008 $0.96
Sep2007 $0.01
Sep2006 $0.26
Sep2005 $0.06
Sep2004 -$0.13
Sep2003 -$0.19
Sep2002 -$0.39
Sep2001 -$0.41

Recommended Reading:

Other ModernGraham posts about the company

None.  This is the first time ModernGraham has covered 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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