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City Holding Co Valuation – July 2018 $CHCO

Company Profile (excerpt from Reuters): City Holding Company, incorporated on March 12, 1981, is a financial holding company. The Company conducts its principal activities through its subsidiary, City National Bank of West Virginia (City National). As of December 31, 2016, the City National provided banking, trust and investment management and other financial solutions through its network of 85 banking offices located in the states of West Virginia, Virginia, eastern Kentucky and southeastern Ohio. City National offers various products and services, including commercial banking, consumer banking, mortgage banking, and wealth management and trust services. City National provides credit, deposit and investment advisory products and services to rural and small community markets in addition to cities, including Charleston, Huntington, Martinsburg, Winchester, Staunton, Virginia Beach, Ashland and Lexington.


Downloadable PDF version of this valuation:

ModernGraham Valuation of CHCO – July 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 $1,223,181,659 Fail
2. Earnings Stability Positive EPS for 10 years prior Pass
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 48.59% Pass
5. Moderate PEmg Ratio PEmg < 20 20.84 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.46 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 $3.88
MG Growth Estimate 4.52%
MG Value $67.98
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $56.22
MG Value based on 0% Growth $32.96
Market Implied Growth Rate 6.17%
Current Price $80.81
% of Intrinsic Value 118.87%

City Holding Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, high PEmg ratio. 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 $2.98 in 2014 to an estimated $3.88 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.17% 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 below the price.

At the time of valuation, further research into City Holding Company revealed the company was trading above its Graham Number of $58.27. The company pays a dividend of $1.75 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.84, which was above the industry average of 20.05.

City Holding Company receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Graham Number $58.27
PEmg 20.84
PB Ratio 2.46
Dividend Yield 2.17%
TTM Dividend $1.75
Number of Consecutive Years of Dividend Growth 6

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Long-Term Debt & Capital Lease Obligation $16,495,000
Total Assets $4,374,383,000
Intangible Assets $78,342,000
Total Liabilities $3,870,629,000
Shares Outstanding (Diluted Average) 15,345,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.69
Dec2017 $3.48
Dec2016 $3.45
Dec2015 $3.53
Dec2014 $3.38
Dec2013 $3.04
Dec2012 $2.61
Dec2011 $2.67
Dec2010 $2.47
Dec2009 $2.68
Dec2008 $1.74
Dec2007 $3.01
Dec2006 $2.99
Dec2005 $2.84
Dec2004 $2.75
Dec2003 $2.58
Dec2002 $1.90
Dec2001 -$1.54
Dec2000 -$2.27
Dec1999 $0.37
Dec1998 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.88
Dec2017 $3.44
Dec2016 $3.35
Dec2015 $3.21
Dec2014 $2.98
Dec2013 $2.75
Dec2012 $2.55
Dec2011 $2.52
Dec2010 $2.49
Dec2009 $2.55
Dec2008 $2.54
Dec2007 $2.91
Dec2006 $2.77
Dec2005 $2.35
Dec2004 $1.63
Dec2003 $0.78
Dec2002 -$0.16

Recommended Reading:

Other ModernGraham posts about the company

City Holding Company Valuation – Initial Coverage $CHCO

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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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