Pitney Bowes Inc Valuation – June 2018 $PBI

Company Profile (excerpt from Reuters): Pitney Bowes Inc., incorporated on April 23, 1920, is a global technology company. The Company offers customer information management, location intelligence and customer engagement products and solutions to help its clients market to their customers, and shipping, mailing, and cross border e-commerce products and solutions that enable the sending of parcels and packages across the globe. The Company’s segments include Small & Medium Business Solutions (SMB), Enterprise Business Solutions and Digital Commerce Solutions. The SMB segment includes North America Mailing and International Mailing business. The Enterprise Business Solutions segment includes presort services business. The Digital Commerce Solutions segment includes software solutions and global e-commerce business. The Company markets its products and services through a direct and inside sales force, direct mailings, telemarketing, independent dealers and distributors and Web channels. The Company sells its products to a range of business, governmental, institutional and other organizations, and in its e-commerce business, the Company sells its products to consumers. The Company has a client care service organization that provides telephone, online and on-site support to diagnose and repair its mailing equipment.


Downloadable PDF version of this valuation:

ModernGraham Valuation of PBI – 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 $1,639,641,754 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.14 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 -53.85% Fail
6. Moderate PEmg Ratio PEmg < 20 7.01 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.50 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 1.14 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 11.41 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 Fail


Stage 2: Determination of Intrinsic Value

EPSmg $1.22
MG Growth Estimate -4.06%
MG Value $0.46
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $17.72
MG Value based on 0% Growth $10.39
Market Implied Growth Rate -0.74%
Current Price $8.57
% of Intrinsic Value 1877.63%

Pitney Bowes Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings growth over the last ten years, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.68 in 2014 to an estimated $1.22 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.74% annual earnings loss 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 Pitney Bowes Inc. revealed the company was trading above its Graham Number of $5.04. The company pays a dividend of $0.75 per share, for a yield of 8.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.01, which was below the industry average of 34.82, 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 $-20.28.

Pitney Bowes Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$20.28
Graham Number $5.04
PEmg 7.01
Current Ratio 1.14
PB Ratio 7.50
Current Dividend $0.75
Dividend Yield 8.75%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $2,289,033,000
Total Current Liabilities $2,004,226,000
Long-Term Debt $3,248,713,000
Total Assets $6,319,618,000
Intangible Assets $2,227,302,000
Total Liabilities $6,104,725,000
Shares Outstanding (Diluted Average) 188,175,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.12
Dec2017 $1.39
Dec2016 $0.49
Dec2015 $2.03
Dec2014 $1.64
Dec2013 $0.70
Dec2012 $2.21
Dec2011 $3.05
Dec2010 $1.41
Dec2009 $2.04
Dec2008 $2.00
Dec2007 $1.66
Dec2006 $0.47
Dec2005 $2.19
Dec2004 $1.97
Dec2003 $2.02
Dec2002 $1.97
Dec2001 $1.97
Dec2000 $2.41
Dec1999 $2.34
Dec1998 $2.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.22
Dec2017 $1.27
Dec2016 $1.27
Dec2015 $1.75
Dec2014 $1.68
Dec2013 $1.76
Dec2012 $2.24
Dec2011 $2.18
Dec2010 $1.67
Dec2009 $1.75
Dec2008 $1.63
Dec2007 $1.51
Dec2006 $1.54
Dec2005 $2.05
Dec2004 $2.01
Dec2003 $2.07
Dec2002 $2.11

Recommended Reading:

Other ModernGraham posts about the company

Pitney Bowes Inc Valuation – July 2016 $PBI
23 Companies in the Spotlight This Week – 3/9/15
Pitney Bowes Inc. Annual Valuation – 2015 $PBI
16 Companies in the Spotlight This Week – 3/1/14
Pitney Bowes Inc (PBI) Annual Valuation

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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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