INTL FCStone Inc Valuation – July 2018 $INTL

Company Profile (excerpt from Reuters): INTL FCStone Inc., incorporated on October 26, 1987, is a financial services organization. The Company provides financial products, and advisory and execution service. The Company operates through five segments: Commercial Hedging, Global Payments, Securities, Physical Commodities, and Clearing and Execution Services (CES). The Company focuses on the development of financial services in commodities, securities, global payments, foreign exchange and other markets. The Company’s services include risk management advisory services for commercial customers; execution of listed futures and options on futures contracts on commodity exchanges; structured over-the-counter (OTC) products in a range of commodities; physical trading and hedging of precious and base metals and select other commodities; trading of approximately 150 foreign currencies; market-making in international equities; fixed income, and debt origination and asset management. The Company’s clients include producers, processors and end users of physical commodities; commercial counterparties who are end users of its products and services; governmental and non-governmental organizations, and commercial banks, asset managers, insurance companies, brokers, institutional investors and investment banks.

Downloadable PDF version of this valuation:

ModernGraham Valuation of INTL – 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 $1,009,549,467 Fail
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 39.96% Pass
5. Moderate PEmg Ratio PEmg < 20 23.10 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.19 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 Fail
3. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $2.34
MG Growth Estimate 15.00%
MG Value $90.12
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $33.94
MG Value based on 0% Growth $19.90
Market Implied Growth Rate 7.30%
Current Price $54.08
% of Intrinsic Value 60.01%

INTL Fcstone 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, poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of dividends. 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 Undervalued after growing its EPSmg (normalized earnings) from $0.98 in 2014 to an estimated $2.34 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.3% 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 INTL Fcstone Inc revealed the company was trading above its Graham Number of $44.66. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 23.1, which was above the industry average of 21.47.

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

Stage 3: Information for Further Research

Graham Number $44.66
PEmg 23.10
PB Ratio 2.19
Dividend Yield 0.00%
TTM Dividend $0.00
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Long-Term Debt & Capital Lease Obligation $340,500,000
Total Assets $7,203,700,000
Intangible Assets $57,100,000
Total Liabilities $6,737,100,000
Shares Outstanding (Diluted Average) 18,859,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.69
Sep2017 $0.31
Sep2016 $2.90
Sep2015 $2.87
Sep2014 $0.98
Sep2013 $0.97
Sep2012 $0.64
Sep2011 $1.83
Sep2010 $0.30
Sep2009 $2.80
Sep2008 $2.95
Sep2007 -$0.56
Sep2006 $0.41
Sep2005 $0.33
Sep2004 -$0.02
Sep2003 $0.33
Sep2002 -$0.11
Sep2001 -$1.47
Sep2000 $0.12
Sep1999 $0.18
Sep1998 -$0.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.34
Sep2017 $1.65
Sep2016 $2.10
Sep2015 $1.62
Sep2014 $0.98
Sep2013 $1.09
Sep2012 $1.33
Sep2011 $1.61
Sep2010 $1.39
Sep2009 $1.68
Sep2008 $0.96
Sep2007 $0.01
Sep2006 $0.26
Sep2005 $0.06
Sep2004 -$0.13
Sep2003 -$0.19
Sep2002 -$0.39

Recommended Reading:

Other ModernGraham posts about the company

INTL Fcstone Inc Valuation – Initial Coverage $INTL

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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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