Consol Energy Inc Valuation – March 2017 $CNX

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 – March 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 Consol Energy Inc (CNX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CONSOL Energy Inc. (CONSOL Energy) is an integrated energy company. The Company’s divisions include Exploration and Production (E&P), Pennsylvania (PA) Mining Operations and Other. The E&P division operates through four segments: Marcellus Shale, Utica Shale, Coalbed Methane (CBM) and Other Gas, which produce pipeline quality natural gas for sale primarily to gas wholesalers. Its E&P division focuses on Appalachian area natural gas and liquids activities, including production, gathering, processing and acquisition of natural gas properties in the Appalachian Basin. The Other Gas segment is primarily related to shallow oil and gas production and the Chattanooga Shale in Tennessee. The principal activities of the PA Mining Operations division are mining, preparation and marketing of thermal coal, sold primarily to power generators. The Other division includes business activities, such as coal terminal operations and water operations.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CNX – 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 $3,469,177,967 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.67 Fail
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 -174.96% Fail
6. Moderate PEmg Ratio PEmg < 20 -15.32 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.91 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 0.67 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -8.68 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg -$0.99
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$14.31
MG Value based on 0% Growth -$8.39
Market Implied Growth Rate -11.91%
Current Price $15.12
% of Intrinsic Value N/A

CONSOL Energy Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.37 in 2013 to an estimated $-0.99 for 2017. This level of negative earnings does not support a positive valuation.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 CONSOL Energy Inc. revealed the company was trading above its Graham Number of $6.96. The company pays a dividend of $0.02 per share, for a yield of 0.1% Its PEmg (price over earnings per share – ModernGraham) was -15.32, which was below the industry average of 47.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.75.

CONSOL Energy Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$20.75
Graham Number $6.96
PEmg -15.32
Current Ratio 0.67
PB Ratio 0.91
Current Dividend $0.02
Dividend Yield 0.13%
Number of Consecutive Years of Dividend Growth 1


Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $626,139,000
Total Current Liabilities $940,014,000
Long-Term Debt $2,722,995,000
Total Assets $9,183,981,000
Intangible Assets $0
Total Liabilities $5,385,586,000
Shares Outstanding (Diluted Average) 229,387,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.13
Dec2016 -$3.70
Dec2015 -$1.64
Dec2014 $0.70
Dec2013 $2.87
Dec2012 $1.70
Dec2011 $2.76
Dec2010 $1.60
Dec2009 $2.95
Dec2008 $2.40
Dec2007 $1.45
Dec2006 $2.20
Dec2005 $3.13
Dec2004 $1.09
Dec2003 -$0.05
Dec2002 $0.08
Jun2001 $1.17
Jun2000 $0.68
Jun1999 $0.31
Dec1998 $0.87
Dec1997 $0.85

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.99
Dec2016 -$1.03
Dec2015 $0.62
Dec2014 $1.81
Dec2013 $2.37
Dec2012 $2.18
Dec2011 $2.35
Dec2010 $2.14
Dec2009 $2.42
Dec2008 $2.12
Dec2007 $1.84
Dec2006 $1.78
Dec2005 $1.41
Dec2004 $0.57
Dec2003 $0.35
Dec2002 $0.57
Jun2001 $0.80

Recommended Reading:

Other ModernGraham posts about the company

Consol Energy Inc Valuation – November 2015 Update $CNX
22 Companies in the Spotlight This Week – 11/29/14
Consol Energy Inc. Annual Valuation – 2014 $CNX

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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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