SpartanNash Co Valuation – Initial Coverage $SPTN
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 – February 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 SpartanNash Co (SPTN) fares in the ModernGraham valuation model.
Company Profile (obtained from Google Finance): Spartannash Company, formerly Spartan Stores, Inc., is a multi-regional grocery distributor and grocery retailer, and a distributor of grocery products to military commissaries in the United States. The Company’s core businesses include distributing food to military commissaries and exchanges, and independent and corporate-owned retail stores located in over 40 states and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain, Egypt, Honduras, Afghanistan and Bosnia. It operates through three segments: Military, which sells and distributes grocery products to military commissaries and exchanges in the United States and overseas; Food Distribution, which uses a multi-platform sales approach to distribute groceries to independent retail locations and corporate-owned retail stores, and Retail, which operates retail supermarkets. The products it distributes are delivered to over 170 military commissaries and over 440 exchanges located in over 40 states across the United States.
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Downloadable PDF version of this valuation:
ModernGraham Valuation of SPTN – 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 | $1,465,921,969 | Fail | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 1.79 | 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 | 9.73% | Fail | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 24.98 | Fail | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 1.76 | Pass | |
| 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 | 1.79 | Pass | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | 0.00 | 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 | $1.56 |
| MG Growth Estimate | 1.74% |
| MG Value | $18.67 |
| Opinion | Overvalued |
| MG Grade | C- |
| MG Value based on 3% Growth | $22.60 |
| MG Value based on 0% Growth | $13.25 |
| Market Implied Growth Rate | 8.24% |
| Current Price | $38.93 |
| % of Intrinsic Value | 208.49% |
SpartanNash Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings growth over the last ten years, and the 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 $1.4 in 2012 to an estimated $1.56 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 the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.
At the time of valuation, further research into SpartanNash Co revealed the company was trading above its Graham Number of $28.34. The company pays a dividend of $0.59 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 24.98, which was above the industry average of 19.87. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-6.47.
SpartanNash Co receives an average overall rating in the ModernGraham grading system, scoring a C-.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | -$6.47 |
| Graham Number | $28.34 |
| PEmg | 24.98 |
| Current Ratio | 1.79 |
| PB Ratio | 1.76 |
| Current Dividend | $0.59 |
| Dividend Yield | 1.50% |
| Number of Consecutive Years of Dividend Growth | 5 |
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Most Recent Balance Sheet Figures
| Balance Sheet Information | 9/1/2016 |
| Total Current Assets | $939,748,000 |
| Total Current Liabilities | $525,072,000 |
| Long-Term Debt | $0 |
| Total Assets | $1,993,879,000 |
| Intangible Assets | $322,686,000 |
| Total Liabilities | $1,178,296,000 |
| Shares Outstanding (Diluted Average) | 36,892,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $1.64 |
| Dec2015 | $1.66 |
| Dec2014 | $1.55 |
| Mar2013 | $1.25 |
| Mar2012 | $1.39 |
| Mar2011 | $1.42 |
| Mar2010 | $1.14 |
| Mar2009 | $1.66 |
| Mar2008 | $1.58 |
| Mar2007 | $1.18 |
| Mar2006 | $0.86 |
| Mar2005 | $0.91 |
| Mar2004 | -$0.33 |
| Mar2003 | -$6.15 |
| Mar2002 | $0.50 |
| Mar2001 | $1.35 |
| Mar2000 | $1.28 |
| Mar1999 | $1.02 |
| Mar1998 | $0.94 |
| Mar1997 | $7.99 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | $1.56 |
| Dec2015 | $1.50 |
| Dec2014 | $1.39 |
| Mar2013 | $1.33 |
| Mar2012 | $1.40 |
| Mar2011 | $1.40 |
| Mar2010 | $1.35 |
| Mar2009 | $1.39 |
| Mar2008 | $1.11 |
| Mar2007 | $0.35 |
| Mar2006 | -$0.32 |
| Mar2005 | -$0.86 |
| Mar2004 | -$1.38 |
| Mar2003 | -$1.41 |
| Mar2002 | $0.98 |
| Mar2001 | $1.65 |
| Mar2000 | $1.95 |
Recommended Reading:
Other ModernGraham posts about the company
None. This is the first time ModernGraham has covered the company.
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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.
