Core-Mark Holding Company Inc Valuation – Initial Coverage $CORE

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 Core-Mark Holding Company Inc (CORE) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Core-Mark Holding Company, Inc. is a wholesale distributor to the convenience retail industry in North America. The Company provides sales, marketing, distribution and logistics services to over 36,500 customer locations across the United States and Canada through over 30 distribution centers. The Company’s segments include the United States, Canada and Corporate. The Company’s primary customer base consists of traditional convenience stores, as well as alternative outlets selling consumer packaged goods. The Company’s product categories include cigarettes; food; candy; other tobacco products; health, beauty and general; beverages, and equipment/other. The Company’s food products include fast food, candy, snacks, groceries, beverages and fresh products, such as sandwiches, juices, salads, produce, dairy and bread. The Company’s non-food products include cigars, tobacco, health and beauty care products, general merchandise and equipment.

CORE Chart

CORE 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 CORE – February 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,598,593,331 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.07 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 58.64% Pass
6. Moderate PEmg Ratio PEmg < 20 32.55 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.08 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 2.07 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.47 Pass
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 $1.05
MG Growth Estimate 9.50%
MG Value $28.86
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $15.21
MG Value based on 0% Growth $8.92
Market Implied Growth Rate 12.03%
Current Price $34.15
% of Intrinsic Value 118.34%

Core-Mark Holding Company, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, poor dividend history, and the high PEmg and PB ratios. 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 $0.64 in 2012 to an estimated $1.05 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.03% 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 below the price.

At the time of valuation, further research into Core-Mark Holding Company, Inc. revealed the company was trading above its Graham Number of $17.44. The company pays a dividend of $0.32 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 32.55, which was above the industry average of 19.87. Finally, the company was trading above its Net Current Asset Value (NCAV) of $4.71.

Core-Mark Holding Company, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $4.71
Graham Number $17.44
PEmg 32.55
Current Ratio 2.07
PB Ratio 3.08
Current Dividend $0.32
Dividend Yield 0.94%
Number of Consecutive Years of Dividend Growth 3


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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $1,086,400,000
Total Current Liabilities $525,400,000
Long-Term Debt $262,000,000
Total Assets $1,383,800,000
Intangible Assets $77,000,000
Total Liabilities $867,500,000
Shares Outstanding (Diluted Average) 46,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.21
Dec2015 $1.11
Dec2014 $0.92
Dec2013 $0.90
Dec2012 $0.73
Dec2011 $0.56
Dec2010 $0.39
Dec2009 $1.09
Dec2008 $0.41
Dec2007 $0.54
Dec2006 $0.47
Dec2005 $0.34
Dec2004 $1.43
Dec2003 -$6.84
Dec2002 $1.02
Dec2001 $0.45

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.05
Dec2015 $0.93
Dec2014 $0.79
Dec2013 $0.73
Dec2012 $0.64
Dec2011 $0.60
Dec2010 $0.60
Dec2009 $0.66
Dec2008 $0.51
Dec2007 $0.11
Dec2006 -$0.31
Dec2005 -$0.71
Dec2004 -$1.08
Dec2003 -$1.92
Dec2002 $0.46
Dec2001 $0.15

Recommended Reading:

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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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