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 – January 2017. 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 Canadian Imperial Bank of Commerce (TSE:CM) fares in the ModernGraham valuation model.
Company Profile (obtained from Google Finance): Canadian Imperial Bank of Commerce (CIBC) is a global financial institution. The Company provides a range of financial products and services to approximately 11 million individual, small business, commercial, corporate and institutional clients in Canada and around the world. The Company operates through three segments: Retail and Business Banking, Wealth Management and Capital Markets. The Company’s Retail and Business Banking segment provides personal and business clients across Canada with financial advice, products and services in its banking centers or through remote channels, such as mobile advisors, telephone, online or mobile banking. The Company’s Wealth Management segment provides advice and investment solutions. The Company’s Capital Markets segment provides integrated credit and global markets products, investment banking advisory services and research to corporate, government and institutional clients around the world.
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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 TSE-CM – January 2017
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 | $44,071,398,789 | Pass | |
| 2. Earnings Stability | Positive EPS for 10 years prior | Fail | ||
| 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 | 1032.70% | Pass | |
| 5. Moderate PEmg Ratio | PEmg < 20 | 11.50 | Pass | |
| 6. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 1.87 | 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 | $9.62 |
| MG Growth Estimate | 5.40% |
| MG Value | $185.80 |
| Opinion | Undervalued |
| MG Grade | B |
| MG Value based on 3% Growth | $139.53 |
| MG Value based on 0% Growth | $81.79 |
| Market Implied Growth Rate | 1.50% |
| Current Price | $110.65 |
| % of Intrinsic Value | 59.55% |
Canadian Imperial Bank of Commerce is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. 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 Undervalued after growing its EPSmg (normalized earnings) from $7.07 in 2013 to an estimated $9.62 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.5% 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 Canadian Imperial Bank of Commerce revealed the company was trading below its Graham Number of $114.08. The company pays a dividend of $4.75 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.5, which was below the industry average of 21.43, which by some methods of valuation makes it one of the most undervalued stocks in its industry.
Canadian Imperial Bank of Commerce performs fairly well in the ModernGraham grading system, scoring a B.
Stage 3: Information for Further Research
| Graham Number | $114.08 |
| PEmg | 11.50 |
| PB Ratio | 1.87 |
| Dividend Yield | 4.29% |
| TTM Dividend | $4.75 |
| Number of Consecutive Years of Dividend Growth | 7 |
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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 | 10/1/2016 |
| Long-Term Debt & Capital Lease Obligation | $3,366,000,000 |
| Total Assets | $501,357,000,000 |
| Intangible Assets | $2,949,000,000 |
| Total Liabilities | $477,885,000,000 |
| Shares Outstanding (Diluted Average) | 395,919,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $10.22 |
| Oct2016 | $10.70 |
| Oct2015 | $8.87 |
| Oct2014 | $7.86 |
| Oct2013 | $8.11 |
| Oct2012 | $7.76 |
| Oct2011 | $6.71 |
| Oct2010 | $5.87 |
| Oct2009 | $2.65 |
| Oct2008 | -$5.89 |
| Oct2007 | $9.21 |
| Oct2006 | $7.43 |
| Oct2005 | -$0.46 |
| Oct2004 | $5.53 |
| Oct2003 | $5.18 |
| Oct2002 | $1.35 |
| Oct2001 | $4.13 |
| Oct2000 | $4.86 |
| Oct1999 | $2.22 |
| Oct1998 | $2.26 |
| Oct1997 | $3.51 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | $9.62 |
| Oct2016 | $9.10 |
| Oct2015 | $8.16 |
| Oct2014 | $7.62 |
| Oct2013 | $7.07 |
| Oct2012 | $5.51 |
| Oct2011 | $4.16 |
| Oct2010 | $3.21 |
| Oct2009 | $2.11 |
| Oct2008 | $2.29 |
| Oct2007 | $6.04 |
| Oct2006 | $4.24 |
| Oct2005 | $2.81 |
| Oct2004 | $4.37 |
| Oct2003 | $3.71 |
| Oct2002 | $2.97 |
| Oct2001 | $3.65 |
Recommended Reading:
Other ModernGraham posts about the company
Other ModernGraham posts about related companies
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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