Software Stocks

Symantec Corp Valuation – August 2017 $SYMC

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 Symantec Corp (SYMC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Symantec Corporation is a United States-based cyber security company. The Company offers products under categories, such as threat protection, information protection, cyber security services and Website security. Under threat protection, it offers Advanced Threat Protection, Endpoint Protection, Endpoint Protection Cloud, IT Management Suite, Email Security.Cloud, Data Center Security and Cloud Workload Protection products. Under the information protection category, it offers Data Loss Prevention, Encryption, Managed PKI, Service, VIP Access Manager, and Data Loss Prevention and CloudSOC products. The Company also offers consulting services, customer success services, cyber security services and education services. Its cyber security services include DeepSight Intelligence software, which provides an analysis of attacks. The Company offers the Blue Coat Security Platform, which provides Web security solutions for global enterprises and governments.

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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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of SYMC – August 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 $17,336,140,568 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.02 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 -182.87% Fail
6. Moderate PEmg Ratio PEmg < 20 17.94 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.08 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 1.02 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 119.27 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 Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.58
MG Growth Estimate 4.93%
MG Value $28.95
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $22.86
MG Value based on 0% Growth $13.40
Market Implied Growth Rate 4.72%
Current Price $28.29
% of Intrinsic Value 97.73%

Symantec Corporation 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 poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.19 in 2014 to an estimated $1.58 for 2018.  This level of demonstrated earnings growth supports the market’s implied estimate of 4.72% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Symantec Corporation revealed the company was trading above its Graham Number of $15.62.  The company pays a dividend of $0.3 per share, for a yield of 1.1%  Its PEmg (price over earnings per share – ModernGraham) was 17.94, which was below the industry average of 38.79, 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 $-15.28.

Symantec Corporation 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) -$15.28
Graham Number $15.62
PEmg 17.94
Current Ratio 1.02
PB Ratio 5.08
Current Dividend $0.30
Dividend Yield 1.06%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $3,173,000,000
Total Current Liabilities $3,121,000,000
Long-Term Debt $6,202,000,000
Total Assets $15,868,000,000
Intangible Assets $11,530,000,000
Total Liabilities $12,479,000,000
Shares Outstanding (Diluted Average) 609,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.88
Mar2017 -$0.17
Mar2016 $3.71
Mar2015 $1.26
Mar2014 $1.28
Mar2013 $1.06
Mar2012 $1.59
Mar2011 $0.76
Mar2010 $0.87
Mar2009 -$8.17
Mar2008 $0.52
Mar2007 $0.41
Mar2006 $0.15
Mar2005 $0.74
Mar2004 $0.54
Mar2003 $0.39
Mar2002 -$0.05
Mar2001 $0.12
Mar2000 $0.34
Mar1999 $0.11
Mar1998 $0.18

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.58
Mar2017 $1.43
Mar2016 $2.08
Mar2015 $1.24
Mar2014 $1.19
Mar2013 $0.50
Mar2012 -$0.15
Mar2011 -$1.05
Mar2010 -$1.72
Mar2009 -$2.43
Mar2008 $0.45
Mar2007 $0.42
Mar2006 $0.40
Mar2005 $0.47
Mar2004 $0.31
Mar2003 $0.19
Mar2002 $0.11

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Stocks for the Enterprising Investor – December 2016
21 Best Undervalued Stocks of the Week – 8/27/16
Symantec Corporation Valuation – August 2016 $SYMC
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – February 2016
Symantec Corp Valuation – February 2016 $SYMC

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Symantec Corporation Valuation – August 2016 $SYMC

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.

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