Company Profile (excerpt from Reuters): Whirlpool Corporation, incorporated on August 10, 1955, is a manufacturer and marketer of home appliances. As of December 31, 2016, the Company manufactured products in 14 countries and markets products throughout the world under brand names, such as Whirlpool, KitchenAid, Maytag, Consul, Brastemp, Amana, Bauknecht, Jenn-Air and Indesit. The Company’s segments include North America; Europe, Middle East and Africa (EMEA); Latin America, and Asia. The Company manufactures and markets a line of home appliances and related products. Its principal products are laundry appliances, refrigerators and freezers, cooking appliances, dishwashers, mixers and other small domestic appliances. It also produces hermetic compressors for refrigeration systems.
Downloadable PDF version of this valuation:
ModernGraham Valuation of WHR – 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 | $10,593,784,367 | Pass | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 0.90 | Fail | |
| 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 | 76.36% | Pass | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 15.28 | Pass | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 2.61 | 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 | 0.90 | Fail | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | -4.92 | 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 | $10.18 |
| MG Growth Estimate | 4.93% |
| MG Value | $186.78 |
| Opinion | Fairly Valued |
| MG Grade | B |
| MG Value based on 3% Growth | $147.59 |
| MG Value based on 0% Growth | $86.52 |
| Market Implied Growth Rate | 3.39% |
| Current Price | $155.48 |
| % of Intrinsic Value | 83.24% |
Whirlpool Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value 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 $7.66 in 2014 to an estimated $10.18 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 3.39% 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 within a margin of safety relative to the price.
At the time of valuation, further research into Whirlpool Corporation revealed the company was trading above its Graham Number of $137.98. The company pays a dividend of $4.3 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 15.28, which was below the industry average of 19.19, 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 $-110.39.
Whirlpool Corporation performs fairly well in the ModernGraham grading system, scoring a B.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | -$110.39 |
| Graham Number | $137.98 |
| PEmg | 15.28 |
| Current Ratio | 0.90 |
| PB Ratio | 2.61 |
| Current Dividend | $4.30 |
| Dividend Yield | 2.77% |
| Number of Consecutive Years of Dividend Growth | 7 |
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 | 3/1/2018 |
| Total Current Assets | $8,091,000,000 |
| Total Current Liabilities | $8,943,000,000 |
| Long-Term Debt | $4,190,000,000 |
| Total Assets | $20,339,000,000 |
| Intangible Assets | $5,761,000,000 |
| Total Liabilities | $16,050,000,000 |
| Shares Outstanding (Diluted Average) | 72,100,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $14.31 |
| Dec2017 | $4.70 |
| Dec2016 | $11.50 |
| Dec2015 | $9.83 |
| Dec2014 | $8.17 |
| Dec2013 | $10.24 |
| Dec2012 | $5.06 |
| Dec2011 | $4.99 |
| Dec2010 | $7.97 |
| Dec2009 | $4.34 |
| Dec2008 | $5.50 |
| Dec2007 | $8.01 |
| Dec2006 | $5.67 |
| Dec2005 | $6.19 |
| Dec2004 | $5.90 |
| Dec2003 | $5.91 |
| Dec2002 | -$5.79 |
| Dec2001 | $0.31 |
| Dec2000 | $5.20 |
| Dec1999 | $4.56 |
| Dec1998 | $4.25 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | $10.18 |
| Dec2017 | $8.37 |
| Dec2016 | $9.79 |
| Dec2015 | $8.51 |
| Dec2014 | $7.66 |
| Dec2013 | $7.11 |
| Dec2012 | $5.56 |
| Dec2011 | $5.92 |
| Dec2010 | $6.36 |
| Dec2009 | $5.68 |
| Dec2008 | $6.32 |
| Dec2007 | $6.60 |
| Dec2006 | $5.12 |
| Dec2005 | $4.07 |
| Dec2004 | $2.77 |
| Dec2003 | $1.49 |
| Dec2002 | $0.08 |
Recommended Reading:
Other ModernGraham posts about the company
Other ModernGraham posts about related companies
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.
