Signet Jewelers Ltd Valuation – March 2018 $SIG

Company Profile (obtained from Marketwatch): Signet Jewelers Ltd. engages in retailing of jewelry, watches and associated services. It operates through the following divisions: Sterling Jewelers, Zale and UK Jewelry. The Sterling Jewelers division stores operate in malls and off-mall locations, such as Kay Jewelers, Kay Jewelers Outlet, Jared The Galleria Of Jewelry and Jared Vault. The Zale division consists of Zale Jewelry and Piercing Pagoda. The UK Jewelry division stores operate in shopping malls and off-mall locations, includes H.Samuel and Ernest Jones. The company was founded in 1949 and is headquartered in Hamilton, Bermuda.

SIG Chart

SIG data by YCharts


Downloadable PDF version of this valuation:

ModernGraham Valuation of SIG – 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 $2,959,236,111 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.63 Pass
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 -4176.60% Fail
6. Moderate PEmg Ratio PEmg < 20 8.06 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.37 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 2.63 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.32 Pass
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 $6.07
MG Growth Estimate 8.60%
MG Value $156.00
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $88.01
MG Value based on 0% Growth $51.59
Market Implied Growth Rate -0.22%
Current Price $48.90
% of Intrinsic Value 31.35%

Signet Jewelers Ltd. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. 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 Undervalued after growing its EPSmg (normalized earnings) from $3.86 in 2014 to an estimated $6.07 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.22% annual earnings loss 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 Signet Jewelers Ltd. revealed the company was trading below its Graham Number of $61.99. The company pays a dividend of $1.04 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.06, which was below the industry average of 30.22, 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 $-3.32.

Signet Jewelers Ltd. fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.32
Graham Number $61.99
PEmg 8.06
Current Ratio 2.63
PB Ratio 1.37
Current Dividend $1.04
Dividend Yield 2.13%
Number of Consecutive Years of Dividend Growth 6

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Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2017
Total Current Assets $3,462,200,000
Total Current Liabilities $1,317,500,000
Long-Term Debt $696,800,000
Total Assets $5,800,700,000
Intangible Assets $1,277,500,000
Total Liabilities $3,661,700,000
Shares Outstanding (Diluted Average) 60,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.21
Jan2017 $7.08
Jan2016 $5.87
Jan2015 $4.75
Jan2014 $4.56
Jan2013 $4.35
Jan2012 $3.73
Jan2011 $2.32
Jan2010 $1.83
Jan2009 -$4.62
Jan2008 $2.55
Jan2007 $3.07
Jan2006 $2.71
Jan2005 $2.94
Jan2004 $0.10
Jan2003 $2.47
Jan2002 $1.98
Jan2001 $1.90
Jan2000 $1.71
Jan1999 $0.13
Jan1998 $0.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.07
Jan2017 $5.77
Jan2016 $4.96
Jan2015 $4.32
Jan2014 $3.86
Jan2013 $2.84
Jan2012 $1.78
Jan2011 $0.88
Jan2010 $0.48
Jan2009 $0.31
Jan2008 $2.61
Jan2007 $2.51
Jan2006 $2.17
Jan2005 $1.89
Jan2004 $1.45
Jan2003 $1.97
Jan2002 $1.57

Recommended Reading:

Other ModernGraham posts about the company

Best Stocks Below Their Graham Number – August 2017
10 Undervalued Stocks for the Enterprising Investor – August 2017
10 Low PE Stock Picks for the Enterprising Investor – July 2017
10 Undervalued Stocks for the Enterprising Investor – July 2017
Best Stocks Below Their Graham Number – March 2017

Other ModernGraham posts about related companies

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Signet Jewelers Ltd Valuation – Initial Coverage $SIG
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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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