Company Profile (excerpt from Reuters): Ingredion Incorporated, incorporated on March 27, 1997, is an ingredients solutions provider. The Company manufactures and sells sweetener, starches, nutrition ingredients and biomaterial solutions derived from the wet milling and processing of corn and other starch-based materials to a range of industries, both domestically and internationally. It operates through four segments: North America, South America, Asia Pacific, and Europe, Middle East and Africa (EMEA). It turns corn, tapioca, potatoes, and other vegetables and fruits into ingredients and biomaterials for the food, beverage, paper and corrugating, brewing and other industries. The Company’s product line includes animal feed products and edible corn oil. Its sweetener products include glucose syrups, high maltose syrup, high fructose corn syrup (HFCS), caramel color, dextrose, polyols, maltodextrins and glucose and syrup solids. Its starch-based products include both food-grade and industrial starches, and biomaterials. It also offers specialty ingredients. The Company supplies a range of customers in diverse industries around the world, including the food, beverage, paper and corrugating, brewing, pharmaceutical, textile and personal care industries, as well as the global animal feed and corn oil markets.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass 6 out of the following 7 tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$6,969,584,519||Pass|
|2. Sufficiently Strong Financial Condition||Current Ratio > 2||2.52||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||161.41%||Pass|
|6. Moderate PEmg Ratio||PEmg < 20||14.34||Pass|
|7. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||2.32||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||2.52||Pass|
|2. Sufficiently Strong Financial Condition||Debt to NCA < 1.1||1.09||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
|MG Growth Estimate||5.70%|
|MG Value based on 3% Growth||$97.59|
|MG Value based on 0% Growth||$57.21|
|Market Implied Growth Rate||2.92%|
|% of Intrinsic Value||72.03%|
Ingredion Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. . The Enterprising Investor has no initial concerns. 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 Undervalued after growing its EPSmg (normalized earnings) from $4.88 in 2014 to an estimated $6.73 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.92% 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 above the price.
At the time of valuation, further research into Ingredion Inc revealed the company was trading above its Graham Number of $82.1. The company pays a dividend of $2.2 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.34, which was below the industry average of 25.4, 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 $-8.41.
Ingredion Inc performs fairly well in the ModernGraham grading system, scoring a B+.
Stage 3: Information for Further Research
|Net Current Asset Value (NCAV)||-$8.41|
|Number of Consecutive Years of Dividend Growth||7|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||3/1/2018|
|Total Current Assets||$2,292,000,000|
|Total Current Liabilities||$909,000,000|
|Shares Outstanding (Diluted Average)||73,600,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$7.46|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$6.73|
Other ModernGraham posts about the company
|9 Best Stocks for Value Investors This Week – 12/17/16|
|Ingredion Inc Valuation – Initial Coverage $INGR|
Other ModernGraham posts about related companies
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.