Banks Stocks

People’s United Financial Inc Valuation – March 2018 $PBCT

Company Profile (obtained from Marketwatch): People’s United Financial, Inc. is a bank and financial holding company, which engages in the provision of commercial banking, retail and business banking, and wealth management services to individual, corporate and municipal customers. It operates through the Commercial Banking and Retail Banking segments. The Commercial Banking segment consists commercial real estate lending, commercial and industrial lending, and commercial deposit gathering activities. This segment also includes the equipment financing operations of People’s Capital and Leasing Corp. and People’s United Equipment Finance Corp, as well as cash management, correspondent banking and municipal banking. The Retail Banking segment comprises consumer lending, and consumer deposit gathering activities, consumer lending (including residential mortgage and home equity lending), and merchant services. This segment also provides brokerage, financial advisory services, investment management services and life insurance provided by People’s Securities, Inc. and non-institutional trust services. The company was founded on November 2, 2006 and is headquartered in Bridgeport, CT.

PBCT Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of PBCT – March 2018

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 $6,627,255,795 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
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 185.32% Pass
5. Moderate PEmg Ratio PEmg < 20 18.76 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.13 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 $1.02
MG Growth Estimate 6.53%
MG Value $21.99
Opinion Fairly Valued
MG Grade A
MG Value based on 3% Growth $14.79
MG Value based on 0% Growth $8.67
Market Implied Growth Rate 5.13%
Current Price $19.14
% of Intrinsic Value 87.04%

People’s United Financial, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value 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 $0.71 in 2014 to an estimated $1.02 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.13% 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 People’s United Financial, Inc. revealed the company was trading below its Graham Number of $21.22. The company pays a dividend of $0.69 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.76, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

People’s United Financial, Inc. fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $21.22
PEmg 18.76
PB Ratio 1.13
Dividend Yield 3.59%
TTM Dividend $0.69
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $3,883,800,000
Total Assets $44,453,400,000
Intangible Assets $2,560,000,000
Total Liabilities $38,633,500,000
Shares Outstanding (Diluted Average) 342,333,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.22
Dec2017 $0.97
Dec2016 $0.92
Dec2015 $0.86
Dec2014 $0.84
Dec2013 $0.74
Dec2012 $0.72
Dec2011 $0.55
Dec2010 $0.24
Dec2009 $0.30
Dec2008 $0.41
Dec2007 $0.52
Dec2006 $0.41
Dec2005 $0.46
Dec2004 $0.68
Dec2003 $0.22
Dec2002 $0.19
Dec2001 $0.26
Dec2000 $0.38
Dec1999 $0.81
Dec1998 $0.64

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.02
Dec2017 $0.90
Dec2016 $0.85
Dec2015 $0.79
Dec2014 $0.71
Dec2013 $0.60
Dec2012 $0.50
Dec2011 $0.40
Dec2010 $0.34
Dec2009 $0.40
Dec2008 $0.46
Dec2007 $0.48
Dec2006 $0.44
Dec2005 $0.42
Dec2004 $0.38
Dec2003 $0.28
Dec2002 $0.36

Recommended Reading:

Other ModernGraham posts about the company

People’s United Financial Inc Valuation – June 2016 $PBCT
10 Companies Benjamin Graham Would Invest In Today – March 2016
Dividend Growth Stocks for Intelligent Investors – February 2016
13 Best Stocks For Value Investors This Week – 12/12/15
People’s United Financial Corp Valuation – December 2015 Update $PBCT

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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.

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