Comerica Inc Valuation – March 2017 $CMA

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 Comerica Inc (CMA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Comerica Incorporated is a financial services company. The Company’s principal activity is lending to and accepting deposits from businesses and individuals. The Company’s segments include the Business Bank, the Retail Bank, Wealth Management, Finance and Other. The Business Bank serves middle market businesses, multinational corporations and governmental entities by offering various products and services, including commercial loans and lines of credit, deposits, cash management, capital market products, international trade finance, letters of credit, foreign exchange management services and loan syndication services. The Retail Bank includes small business banking and personal financial services, consisting of consumer lending, consumer deposit gathering and mortgage loan origination. The Wealth Management segment offers products and services consisting of fiduciary services, private banking, retirement services, investment advisory services, investment banking and brokerage services.

CMA Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CMA – March 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 $13,722,751,735 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 575.91% Pass
5. Moderate PEmg Ratio PEmg < 20 23.75 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.69 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 $3.14
MG Growth Estimate 6.97%
MG Value $70.45
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $45.54
MG Value based on 0% Growth $26.70
Market Implied Growth Rate 7.62%
Current Price $74.58
% of Intrinsic Value 105.86%

Comerica Incorporated 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, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.14 in 2013 to an estimated $3.14 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 7.62% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Comerica Incorporated revealed the company was trading above its Graham Number of $61.17. The company pays a dividend of $0.89 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 23.75, which was above the industry average of 21.43.

Comerica Incorporated receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Graham Number $61.17
PEmg 23.75
PB Ratio 1.69
Dividend Yield 1.19%
TTM Dividend $0.89
Number of Consecutive Years of Dividend Growth 8


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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Long-Term Debt & Capital Lease Obligation $5,160,000,000
Total Assets $72,978,000,000
Intangible Assets $643,000,000
Total Liabilities $65,182,000,000
Shares Outstanding (Diluted Average) 177,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.74
Dec2016 $2.68
Dec2015 $2.84
Dec2014 $3.16
Dec2013 $2.85
Dec2012 $2.67
Dec2011 $2.09
Dec2010 $0.88
Dec2009 -$0.79
Dec2008 $1.28
Dec2007 $4.43
Dec2006 $5.49
Dec2005 $5.11
Dec2004 $4.36
Dec2003 $3.75
Dec2002 $3.40
Dec2001 $3.88
Dec2000 $4.31
Dec1999 $4.14
Dec1998 $3.72
Dec1997 $3.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.14
Dec2016 $2.84
Dec2015 $2.85
Dec2014 $2.68
Dec2013 $2.14
Dec2012 $1.60
Dec2011 $1.24
Dec2010 $1.30
Dec2009 $2.04
Dec2008 $3.68
Dec2007 $4.79
Dec2006 $4.79
Dec2005 $4.33
Dec2004 $3.94
Dec2003 $3.78
Dec2002 $3.83
Dec2001 $3.98

Recommended Reading:

Other ModernGraham posts about the company

Comerica Inc Valuation – August 2016 $CMA
Best Stocks to Invest In: the Bank Industry – August 2016
Comerica Inc Stock Valuation – February 2016 $CMA
7 Best Stocks For Value Investors This Week – 10/24/15
The Best Companies of the Banking Industry – October 2015

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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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