Financial Services Stocks

Invesco Ltd Valuation – March 2018 $IVZ

IVZ Chart

IVZ data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IVZ – 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 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,114,229,621 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.17 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
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 136.83% Pass
6. Moderate PEmg Ratio PEmg < 20 12.24 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.48 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 1.17 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.76 Fail
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 $2.63
MG Growth Estimate 5.87%
MG Value $53.25
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $38.15
MG Value based on 0% Growth $22.37
Market Implied Growth Rate 1.87%
Current Price $32.21
% of Intrinsic Value 60.49%

Invesco Ltd. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. 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 Undervalued after growing its EPSmg (normalized earnings) from $1.89 in 2014 to an estimated $2.63 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.87% 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 above the price.

At the time of valuation, further research into Invesco Ltd. revealed the company was trading below its Graham Number of $38.6. The company pays a dividend of $1.15 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 12.24, which was below the industry average of 21.55, 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 $-14.2.

Invesco Ltd. fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$14.20
Graham Number $38.60
PEmg 12.24
Current Ratio 1.17
PB Ratio 1.48
Current Dividend $1.15
Dividend Yield 3.57%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $17,309,000,000
Total Current Liabilities $14,820,100,000
Long-Term Debt $6,875,600,000
Total Assets $31,668,800,000
Intangible Assets $8,149,400,000
Total Liabilities $22,972,700,000
Shares Outstanding (Diluted Average) 398,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.10
Dec2017 $2.75
Dec2016 $2.06
Dec2015 $2.26
Dec2014 $2.27
Dec2013 $2.10
Dec2012 $1.49
Dec2011 $1.57
Dec2010 $1.01
Dec2009 $0.76
Dec2008 $1.21
Dec2007 $1.64
Dec2006 $1.19
Dec2005 $0.54
Dec2004 -$0.10
Dec2003 $0.61
Dec2002 $0.03
Dec2001 $0.28
Dec2000 $0.63
Dec1999 $0.44
Dec1998 $0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.63
Dec2017 $2.36
Dec2016 $2.12
Dec2015 $2.08
Dec2014 $1.89
Dec2013 $1.60
Dec2012 $1.30
Dec2011 $1.22
Dec2010 $1.08
Dec2009 $1.10
Dec2008 $1.14
Dec2007 $1.00
Dec2006 $0.60
Dec2005 $0.30
Dec2004 $0.21
Dec2003 $0.38
Dec2002 $0.27

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – July 2016
5 Companies for Value Investors with a High Beta – July 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2016
10 Companies Benjamin Graham Would Invest In Today – June 2016
10 Companies Benjamin Graham Would Invest In Today – May 2016

Other ModernGraham posts about related companies

Total System Services Inc Valuation – February 2018 $TSS
Visa Inc Valuation – February 2018 $V
Goldman Sachs Group Inc Valuation – February 2018 $GS
American Express Co. Valuation – February 2018 $AXP
Encore Capital Group Inc Valuation – Initial Coverage $ECPG
T.Rowe Price Group Inc Valuation – July 2017 $TROW
T.Rowe Price Group Inc Valuation – June 2017 $TROW
Tricon Capital Group Inc Valuation – Initial Coverage $TSE:TCN
Moody’s Corporation Valuation – March 2017 $MCO
KKR & Co Ltd Valuation – March 2017 $KKR

Disclaimer:

The author held a long position in IVZ but did not hold a position in any other 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.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top