Kohl’s Corporation Valuation – June 2018 $KSS

Company Profile (excerpt from Reuters): Kohl’s Corporation (Kohl’s), incorporated on March 23, 1993, is an operator of department stores. As of January 28, 2017, the Company operated 1,154 Kohl’s department stores, a Website (www.Kohls.com), 12 FILA outlets, and three Off-Aisle clearance centers. The Company’s stores and Website sell moderately-priced private label and national brand apparel, footwear, accessories, beauty and home products. The Company’s Website includes merchandise that is available in its stores, as well as merchandise that is available only online. The Company’s merchandise mix includes both national brands and private brands that are available only at Kohl’s.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of KSS – June 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 $11,502,360,460 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.76 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
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 18.69% Fail
6. Moderate PEmg Ratio PEmg < 20 15.57 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.13 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 1.76 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.07 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 $4.39
MG Growth Estimate 0.89%
MG Value $45.17
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $63.67
MG Value based on 0% Growth $37.33
Market Implied Growth Rate 3.53%
Current Price $68.37
% of Intrinsic Value 151.37%

Kohl’s Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the poor dividend history. 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 $4.14 in 2015 to an estimated $4.39 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.53% 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 Kohl’s Corporation revealed the company was trading above its Graham Number of $60.16. The company pays a dividend of $2.2 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 15.57, which was below the industry average of 37.1, 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 $-15.43.

Kohl’s Corporation receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$15.43
Graham Number $60.16
PEmg 15.57
Current Ratio 1.76
PB Ratio 2.13
Current Dividend $2.20
Dividend Yield 3.22%
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 4/1/2018
Total Current Assets $4,983,000,000
Total Current Liabilities $2,830,000,000
Long-Term Debt $2,301,000,000
Total Assets $12,916,000,000
Intangible Assets $0
Total Liabilities $7,560,000,000
Shares Outstanding (Diluted Average) 167,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.98
Jan2018 $5.12
Jan2017 $3.11
Jan2016 $3.46
Jan2015 $4.24
Jan2014 $4.05
Jan2013 $4.17
Jan2012 $4.30
Jan2011 $3.66
Jan2010 $3.17
Jan2009 $2.89
Jan2008 $3.39
Jan2007 $3.31
Jan2006 $2.43
Jan2005 $2.04
Jan2004 $1.59
Jan2003 $1.85
Jan2002 $1.45
Jan2001 $1.10
Jan2000 $0.77
Jan1999 $0.59

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.39
Jan2018 $4.06
Jan2017 $3.63
Jan2016 $3.94
Jan2015 $4.14
Jan2014 $4.02
Jan2013 $3.88
Jan2012 $3.65
Jan2011 $3.32
Jan2010 $3.11
Jan2009 $2.99
Jan2008 $2.88
Jan2007 $2.49
Jan2006 $2.02
Jan2005 $1.74
Jan2004 $1.51
Jan2003 $1.37

Recommended Reading:

Other ModernGraham posts about the company

Kohl’s Corporation Valuation – March 2017 $KSS
Kohl’s Corporation Valuation – November 2015 Update $KSS
The Best Companies of the Retail Industry – August 2015
15 Best Stocks For Value Investors This Week – 8/22/15
Kohl’s Corporation Analysis – August 2015 Update $KSS

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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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