Bank of New York Mellon Corp Valuation – May 2018 $BK

Company Profile (excerpt from Reuters): The Bank of New York Mellon Corporation, incorporated on February 9, 2007, is an investments company. The Company operates businesses through two segments: Investment Management and Investment Services. The Company also has an Other segment, which includes the leasing portfolio, corporate treasury activities (including its investment securities portfolio), derivatives and other trading, corporate and bank-owned life insurance and renewable energy investments, and business exits. As of December 31, 2016, the Company had $29.9 trillion in assets under custody and/or administration and $1.6 trillion in assets under management.

BK Chart

BK data by YCharts


Downloadable PDF version of this valuation:

ModernGraham Valuation of BK – May 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 $55,043,947,962 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 269.62% Pass
5. Moderate PEmg Ratio PEmg < 20 15.81 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.33 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 $3.45
MG Growth Estimate 11.76%
MG Value $110.36
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $49.98
MG Value based on 0% Growth $29.30
Market Implied Growth Rate 3.65%
Current Price $54.49
% of Intrinsic Value 49.37%

Bank of New York Mellon Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability 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 Undervalued after growing its EPSmg (normalized earnings) from $1.93 in 2014 to an estimated $3.45 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.65% 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 above the price.

At the time of valuation, further research into Bank of New York Mellon Corp revealed the company was trading below its Graham Number of $57.58. The company pays a dividend of $0.86 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 15.81, which was below the industry average of 21.11, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Bank of New York Mellon Corp performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $57.58
PEmg 15.81
PB Ratio 1.33
Dividend Yield 1.58%
TTM Dividend $0.86
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
Long-Term Debt & Capital Lease Obligation $27,939,000,000
Total Assets $373,597,000,000
Intangible Assets $20,966,000,000
Total Liabilities $331,869,000,000
Shares Outstanding (Diluted Average) 1,021,731,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.96
Dec2017 $3.72
Dec2016 $3.15
Dec2015 $2.71
Dec2014 $2.15
Dec2013 $1.73
Dec2012 $1.73
Dec2011 $2.03
Dec2010 $2.06
Dec2009 -$1.16
Dec2008 $1.20
Dec2007 $2.18
Dec2006 $3.94
Dec2005 $2.03
Dec2004 $1.85
Dec2003 $1.52
Dec2002 $1.24
Dec2001 $1.81
Dec2000 $1.92
Dec1999 $2.27
Dec1998 $1.53

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.45
Dec2017 $3.02
Dec2016 $2.55
Dec2015 $2.19
Dec2014 $1.93
Dec2013 $1.64
Dec2012 $1.46
Dec2011 $1.30
Dec2010 $1.17
Dec2009 $1.03
Dec2008 $2.16
Dec2007 $2.53
Dec2006 $2.51
Dec2005 $1.76
Dec2004 $1.64
Dec2003 $1.61
Dec2002 $1.68

Recommended Reading:

Other ModernGraham posts about the company

15 Best Stocks for Value Investors This Week – 1/14/17
Bank of New York Mellon Corp Valuation – January 2017 $BK
10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016
5 Best Undervalued Stocks of the Week – 8/14/16
Bank of New York Mellon Corp Valuation – August 2016 $BK

Other ModernGraham posts about related companies

Citizens Financial Group Inc Valuation – April 2018 $CFG
BB&T Corporation Valuation – April 2018 $BBT
M&T Bank Corp Valuation – April 2018 $MTB
Bank of America Corp Valuation – March 2018 $BAC
Fifth Third Bancorp Valuation – March 2018 $FITB
Regions Financial Corp Valuation – March 2018 $RF
Huntington Bancshares Inc Valuation – March 2018 $HBAN
Zions Bancorp Valuation – March 2018 $ZION
State Street Corp Valuation – March 2018 $STT
PNC Financial Services Group Inc Valuation – March 2018 $PNC


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.






Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.