Sensient Technologies Corp Valuation – March 2018 $SXT

Company Profile (obtained from Marketwatch): Sensient Technologies Corp. engages in manufacturing and marketing of colors, flavors and fragrances. The company’s principal products include flavors, flavor enhancers and bionutrients; fragrances and aroma chemicals; dehydrated vegetables and other food ingredients; natural and synthetic food and beverage colors; cosmetic and pharmaceutical colors and additives; and technical colors, inkjet colors & inks, and specialty dyes and pigments. It operates through the following segments: Flavors and Fragrances Group; Color Group; and Asia Pacific Group. The Flavors & Fragrances Group segment develops, manufactures and supplies flavor and fragrance systems for the food, beverage, pharmaceutical, personal care and household-products industries. It also produces flavor and fragrance products that impart a desired taste, texture, aroma and/or other characteristics to consumer and other products. The Color Group segment develops, manufactures and supplies colors for businesses worldwide. This segment provides natural and synthetic color systems for use in foods, beverages and pharmaceuticals; colors and other ingredients for cosmetics and pharmaceuticals; and technical colors for industrial applications and digital imaging. The Asia Pacific Group segment focuses on marketing the company’s diverse product line in the Pacific Rim under the Sensient name. The company was founded in 1882 and is headquartered in Milwaukee, WI.

SXT Chart

SXT data by YCharts


Downloadable PDF version of this valuation:

ModernGraham Valuation of SXT – 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 $3,201,564,366 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.39 Pass
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 35.06% Pass
6. Moderate PEmg Ratio PEmg < 20 26.67 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.76 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 3.39 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.17 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 $2.76
MG Growth Estimate 4.98%
MG Value $50.96
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $40.03
MG Value based on 0% Growth $23.47
Market Implied Growth Rate 9.09%
Current Price $73.64
% of Intrinsic Value 144.51%

Sensient Technologies Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. 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 $2.07 in 2014 to an estimated $2.76 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.09% 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 Sensient Technologies Corporation revealed the company was trading above its Graham Number of $40.61. The company pays a dividend of $1.23 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 26.67, which was below the industry average of 31.55, 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 $-3.19.

Sensient Technologies Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.19
Graham Number $40.61
PEmg 26.67
Current Ratio 3.39
PB Ratio 3.76
Current Dividend $1.23
Dividend Yield 1.67%
Number of Consecutive Years of Dividend Growth 12

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 $733,475,000
Total Current Liabilities $216,323,000
Long-Term Debt $604,159,000
Total Assets $1,724,340,000
Intangible Assets $416,206,000
Total Liabilities $872,039,000
Shares Outstanding (Diluted Average) 43,497,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.74
Dec2017 $2.03
Dec2016 $2.82
Dec2015 $2.31
Dec2014 $1.51
Dec2013 $2.27
Dec2012 $2.49
Dec2011 $2.41
Dec2010 $2.17
Dec2009 $1.78
Dec2008 $1.89
Dec2007 $1.65
Dec2006 $1.44
Dec2005 $0.94
Dec2004 $1.58
Dec2003 $1.73
Dec2002 $1.69
Dec2001 $1.54
Dec2000 $1.26
Sep1999 $1.61
Sep1998 $1.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.76
Dec2017 $2.24
Dec2016 $2.33
Dec2015 $2.12
Dec2014 $2.07
Dec2013 $2.31
Dec2012 $2.27
Dec2011 $2.10
Dec2010 $1.89
Dec2009 $1.68
Dec2008 $1.59
Dec2007 $1.45
Dec2006 $1.39
Dec2005 $1.41
Dec2004 $1.62
Dec2003 $1.61
Dec2002 $1.54

Recommended Reading:

Other ModernGraham posts about the company

Sensient Technologies Corp Valuation – Initial Coverage $SXT

Other ModernGraham posts about related companies

Praxair Inc Valuation – March 2018 $PX
Ingevity Corp Valuation – March 2018 $NGVT
PolyOne Corp Valuation – March 2018 $POL
Green Plains Inc Valuation – March 2018 $GPRE
Eastman Chemical Co Valuation – March 2018 $EMN
LyondellBasell Industries NV Valuation – March 2018 $LYB
DowDuPont Inc Valuation – February 2018 $DWDP
Green Plains Inc Valuation – Initial Coverage $GPRE
PolyOne Corp Valuation – Initial Coverage $POL
Ingevity Corp Valuation – Initial Coverage $NGVT


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.






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.