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Spok Holdings Inc Valuation – March 2018 $SPOK

Company Profile (obtained from Marketwatch): Spok Holdings, Inc. engages in the provision of communication solutions. It offers call center operations, clinical alerting and notifications, one-way and advanced two-way wireless messaging services, mobile communications and public safety solutions. The company was founded on November 16, 2004 and is headquartered in Springfield, VA.

SPOK Chart

SPOK data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SPOK – 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 $317,291,300 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.89 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 -108.34% Fail
6. Moderate PEmg Ratio PEmg < 20 61.52 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.03 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 2.89 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.24
MG Growth Estimate -4.25%
MG Value $4.34
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $3.52
MG Value based on 0% Growth $2.06
Market Implied Growth Rate 26.51%
Current Price $14.93
% of Intrinsic Value 343.64%

Spok Holdings, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings stability or growth 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 Overvalued after seeing its EPSmg (normalized earnings) decline from $1.62 in 2014 to an estimated $0.24 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 26.51% 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 Spok Holdings, Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.5 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 61.52, which was above the industry average of 37.61. Finally, the company was trading above its Net Current Asset Value (NCAV) of $4.34.

Spok Holdings, Inc. 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) $4.34
Graham Number $0.00
PEmg 61.52
Current Ratio 2.89
PB Ratio 1.03
Current Dividend $0.50
Dividend Yield 3.35%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $146,860,000
Total Current Liabilities $50,894,000
Long-Term Debt $0
Total Assets $350,561,000
Intangible Assets $140,948,000
Total Liabilities $60,032,000
Shares Outstanding (Diluted Average) 19,985,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.76
Dec2017 -$0.76
Dec2016 $0.68
Dec2015 $3.74
Dec2014 $0.96
Dec2013 $1.25
Dec2012 $1.20
Dec2011 $3.72
Dec2010 $3.45
Dec2009 $2.90
Dec2008 -$5.83
Dec2007 -$0.19
Dec2006 $1.46
Dec2005 $0.47
Dec2004 $0.58
Dec2003 $0.65
Dec2002 $18.84
Dec2001 -$8.83
Dec2000 -$4.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.24
Dec2017 $0.89
Dec2016 $1.66
Dec2015 $2.16
Dec2014 $1.62
Dec2013 $2.13
Dec2012 $2.08
Dec2011 $1.95
Dec2010 $0.83
Dec2009 -$0.40
Dec2008 -$1.60
Dec2007 $0.54
Dec2006 $2.07
Dec2005 $2.36
Dec2004 $2.68
Dec2003 $2.93
Dec2002 $3.11

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Enterprising Investor – July 2017
10 Low PE Stock Picks for the Enterprising Investor – April 2017
Best Stocks Below Their Graham Number – March 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017
10 Low PE Stock Picks for the Enterprising Investor – March 2017

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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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