Tiffany & Co. Valuation – April 2018 $TIF

Company Profile (excerpt from Reuters): Tiffany & Co., incorporated on August 16, 1984, is a holding company that operates through its subsidiary companies. The Company’s principal subsidiary, Tiffany and Company (Tiffany), is a jeweler and specialty retailer. Through its subsidiaries, the Company designs and manufactures products and operates TIFFANY & CO. retail stores around the world, and also sells its products through Internet, catalog, business-to-business and wholesale operations. The Company’s segments include Americas, Asia-Pacific, Japan, Europe and Other. The Company also sells timepieces, leather goods, sterling silverware, china, crystal, stationery, fragrances and accessories.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of TIF – April 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 $11,890,010,196 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.50 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 26.73% Fail
6. Moderate PEmg Ratio PEmg < 20 26.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.70 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 5.50 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.27 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 $3.60
MG Growth Estimate 3.51%
MG Value $55.85
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $52.15
MG Value based on 0% Growth $30.57
Market Implied Growth Rate 9.04%
Current Price $95.58
% of Intrinsic Value 171.14%

Tiffany & Co. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. 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 Overvalued after growing its EPSmg (normalized earnings) from $2.91 in 2015 to an estimated $3.6 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.04% 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 Tiffany & Co. revealed the company was trading above its Graham Number of $49.01. The company pays a dividend of $1.95 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 26.57, which was below the industry average of 34.38, 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 $13.98.

Tiffany & Co. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $13.98
Graham Number $49.01
PEmg 26.57
Current Ratio 5.50
PB Ratio 3.70
Current Dividend $1.95
Dividend Yield 2.04%
Number of Consecutive Years of Dividend Growth 15

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Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2018
Total Current Assets $3,983,300,000
Total Current Liabilities $724,800,000
Long-Term Debt $882,900,000
Total Assets $5,468,100,000
Intangible Assets $66,700,000
Total Liabilities $2,234,700,000
Shares Outstanding (Diluted Average) 125,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.11
Jan2018 $2.96
Jan2017 $3.55
Jan2016 $3.59
Jan2015 $3.73
Jan2014 $1.41
Jan2013 $3.25
Jan2012 $3.40
Jan2011 $2.87
Jan2010 $2.11
Jan2009 $1.74
Jan2008 $2.34
Jan2007 $1.80
Jan2006 $1.75
Jan2005 $2.05
Jan2004 $1.45
Jan2003 $1.28
Jan2002 $1.15
Jan2001 $1.26
Jan2000 $0.97
Jan1999 $0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.60
Jan2018 $3.24
Jan2017 $3.29
Jan2016 $3.13
Jan2015 $2.91
Jan2014 $2.54
Jan2013 $2.96
Jan2012 $2.71
Jan2011 $2.30
Jan2010 $1.99
Jan2009 $1.93
Jan2008 $1.98
Jan2007 $1.76
Jan2006 $1.67
Jan2005 $1.56
Jan2004 $1.29
Jan2003 $1.16

Recommended Reading:

Other ModernGraham posts about the company

Tiffany & Company Valuation – February 2016 Update $TIF
Tiffany and Company Valuation – October 2015 Update $TIF
Tiffany & Company Analysis – July 2015 Update $TIF
27 Companies in the Spotlight This Week – 4/4/15
Tiffany & Company Quarterly Valuation – March 2015 $TIF

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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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