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:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|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
|MG Growth Estimate||15.00%|
|MG Value based on 3% Growth||$33.94|
|MG Value based on 0% Growth||$19.90|
|Market Implied Growth Rate||7.30%|
|% 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
|Number of Consecutive Years of Dividend Growth||0|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||3/1/2018|
|Long-Term Debt & Capital Lease Obligation||$340,500,000|
|Shares Outstanding (Diluted Average)||18,859,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$3.69|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$2.34|
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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.