Superior Industries International Inc Valuation – Initial Coverage $SUP

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 Superior Industries International Inc (SUP) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Superior Industries International, Inc. is engaged in the design and manufacture of aluminum wheels for sale to original equipment manufacturers (OEMs). The Company supplies cast aluminum wheels to automobile and light truck manufacturers, with wheel manufacturing operations in the United States and Mexico. The Company offers wheels in a range of finishes, which include Bright Machined, Polished Face with Painted Window, Fully Painted, Premium Paint, Polished, Chrome Clad and Mirror Finish Ultra Bright Machining. The Company’s products, which are manufactured in its North American facilities, are delivered primarily to automotive assembly operations in North America for global OEMs. Its OEM aluminum wheels are primarily sold for factory installation, as either optional or standard equipment, on various vehicle models. As of December 31, 2015, the Company operated five manufacturing facilities in the United States and Mexico.

SUP Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of SUP – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $650,874,289 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.95 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
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 -269.38% Fail
6. Moderate PEmg Ratio PEmg < 20 19.77 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.68 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 2.95 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 $1.33
MG Growth Estimate 3.24%
MG Value $19.90
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $19.26
MG Value based on 0% Growth $11.29
Market Implied Growth Rate 5.63%
Current Price $26.25
% of Intrinsic Value 131.92%

Superior Industries International Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth 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 Overvalued after growing its EPSmg (normalized earnings) from $1.09 in 2013 to an estimated $1.33 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.63% 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 Superior Industries International Inc revealed the company was trading above its Graham Number of $25.53. The company pays a dividend of $0.72 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.77, which was above the industry average of 18.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $4.31.

Superior Industries International 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) $4.31
Graham Number $25.53
PEmg 19.77
Current Ratio 2.95
PB Ratio 1.68
Current Dividend $0.72
Dividend Yield 2.74%
Number of Consecutive Years of Dividend Growth 0


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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $254,100,000
Total Current Liabilities $86,000,000
Long-Term Debt $0
Total Assets $542,800,000
Intangible Assets $0
Total Liabilities $144,600,000
Shares Outstanding (Diluted Average) 25,428,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.85
Dec2016 $1.62
Dec2015 $0.90
Dec2014 $0.33
Dec2013 $0.83
Dec2012 $1.13
Dec2011 $2.46
Dec2010 $1.93
Dec2009 -$3.53
Dec2008 -$0.98
Dec2007 $0.35
Dec2006 -$0.40
Dec2005 -$0.27
Dec2004 $1.99
Dec2003 $2.97
Dec2002 $3.07
Dec2001 $2.10
Dec2000 $3.04
Dec1999 $2.62
Dec1998 $1.88
Dec1997 $1.96

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.33
Dec2016 $1.03
Dec2015 $0.87
Dec2014 $1.01
Dec2013 $1.09
Dec2012 $0.88
Dec2011 $0.52
Dec2010 -$0.47
Dec2009 -$1.44
Dec2008 -$0.22
Dec2007 $0.42
Dec2006 $0.79
Dec2005 $1.58
Dec2004 $2.55
Dec2003 $2.81
Dec2002 $2.67
Dec2001 $2.42

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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