Banks Stocks

Huntington Bancshares Inc Valuation – March 2018 $HBAN

Company Profile (excerpt from Reuters): Huntington Bancshares Incorporated (Huntington), incorporated on April 14, 1966, is a bank holding company. Through its subsidiaries, including its bank subsidiary, The Huntington National Bank (the Bank), the Company provides commercial and consumer banking services, mortgage banking services, automobile financing, recreational vehicle and marine financing, equipment leasing, investment management, trust services, brokerage services, insurance programs, and other financial products and services. Its segments include Consumer and Business Banking, Commercial Banking, Commercial Real Estate and Vehicle Finance, Regional Banking and The Huntington Private Client Group, Home Lending and Treasury/Other.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of HBAN – 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 $17,227,469,674 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
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 -152.43% Fail
5. Moderate PEmg Ratio PEmg < 20 17.23 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.81 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 $0.93
MG Growth Estimate 6.15%
MG Value $19.41
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $13.52
MG Value based on 0% Growth $7.93
Market Implied Growth Rate 4.37%
Current Price $16.07
% of Intrinsic Value 82.80%

Huntington Bancshares Incorporated 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. 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.66 in 2014 to an estimated $0.93 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 4.37% 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 Huntington Bancshares Incorporated revealed the company was trading above its Graham Number of $15.07. The company pays a dividend of $0.35 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 17.23, which was below the industry average of 24.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Huntington Bancshares Incorporated performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Graham Number $15.07
PEmg 17.23
PB Ratio 1.81
Dividend Yield 2.18%
TTM Dividend $0.35
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $12,931,000,000
Total Assets $104,185,000,000
Intangible Assets $2,577,000,000
Total Liabilities $93,371,000,000
Shares Outstanding (Diluted Average) 1,221,110,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.11
Dec2017 $1.00
Dec2016 $0.70
Dec2015 $0.81
Dec2014 $0.72
Dec2013 $0.72
Dec2012 $0.69
Dec2011 $0.59
Dec2010 $0.19
Dec2009 -$6.14
Dec2008 -$0.44
Dec2007 $0.25
Dec2006 $1.92
Dec2005 $1.77
Dec2004 $1.71
Dec2003 $1.61
Dec2002 $1.33
Dec2001 $0.54
Dec2000 $1.29
Dec1999 $1.62
Dec1998 $1.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.93
Dec2017 $0.83
Dec2016 $0.74
Dec2015 $0.74
Dec2014 $0.66
Dec2013 $0.16
Dec2012 -$0.42
Dec2011 -$1.02
Dec2010 -$1.50
Dec2009 -$1.74
Dec2008 $0.65
Dec2007 $1.28
Dec2006 $1.76
Dec2005 $1.58
Dec2004 $1.42
Dec2003 $1.28
Dec2002 $1.14

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Huntington Bancshares Valuation – January 2016 Update $HBAN
The Best Companies of the Banking Industry – October 2015
13 Best Stocks For Value Investors This Week – 10/3/15
Huntington Bancshares Inc. Analysis – October 2015 Update $HBAN

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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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