Financial Services Stocks

Jones Lang LaSalle Inc Valuation – August 2018 $JLL

Company Profile (excerpt from Reuters): Jones Lang LaSalle Incorporated (JLL), incorporated on April 15, 1997, is a financial and professional services company specializing in real estate. The Company operates through four business segments: Americas; Europe, Middle East and Africa (EMEA); Asia Pacific, and LaSalle. The Company offers integrated services on a local, regional and global basis to owner, occupier, investor and developer clients seeking increased value by owning, occupying, or investing in real estate. As of December 31, 2016, it had more than 280 corporate offices around the world from which it provided services to clients in more than 80 countries. It delivers a range of real estate services (RES) across three geographic business segments: the Americas, EMEA and Asia Pacific. Its real estate services include agency leasing, capital markets, corporate finance, energy and sustainability services, investment management, lease administration, logistics and supply-chain management, mortgage origination and servicing, real estate investment banking/merchant banking, tenant representation, transaction management, and value recovery and receivership services. It also offers services locally, regionally and globally to real estate owners, occupiers, investors and developers for various property types, including critical environments and data centers, cultural facilities, educational facilities, government facilities, infrastructure projects, military housing, office properties and sports facilities.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JLL – August 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 $7,698,980,327 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.14 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 215.13% Pass
6. Moderate PEmg Ratio PEmg < 20 21.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.22 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 1.14 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.84 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.98
MG Growth Estimate 4.67%
MG Value $142.37
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $115.72
MG Value based on 0% Growth $67.84
Market Implied Growth Rate 6.30%
Current Price $168.45
% of Intrinsic Value 118.32%

Jones Lang LaSalle Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. 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 growing its EPSmg (normalized earnings) from $6.09 in 2014 to an estimated $7.98 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.3% 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 below the price.

At the time of valuation, further research into Jones Lang LaSalle Inc revealed the company was trading above its Graham Number of $125.23. The company pays a dividend of $0.72 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 21.11, which was below the industry average of 21.12, 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 $-29.17.

Jones Lang LaSalle 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) -$29.17
Graham Number $125.23
PEmg 21.11
Current Ratio 1.14
PB Ratio 2.22
Current Dividend $0.72
Dividend Yield 0.43%
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $4,389,500,000
Total Current Liabilities $3,838,300,000
Long-Term Debt $1,012,800,000
Total Assets $9,204,200,000
Intangible Assets $3,046,300,000
Total Liabilities $5,728,500,000
Shares Outstanding (Diluted Average) 45,905,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.75
Dec2017 $5.55
Dec2016 $6.98
Dec2015 $9.65
Dec2014 $8.52
Dec2013 $5.98
Dec2012 $4.63
Dec2011 $3.70
Dec2010 $3.48
Dec2009 -$0.11
Dec2008 $2.44
Dec2007 $7.64
Dec2006 $5.24
Dec2005 $3.12
Dec2004 $1.96
Dec2003 $1.12
Dec2002 $0.85
Dec2001 -$0.51
Dec2000 -$2.30
Dec1999 -$4.20
Dec1998 $1.25

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.98
Dec2017 $7.18
Dec2016 $7.71
Dec2015 $7.55
Dec2014 $6.09
Dec2013 $4.42
Dec2012 $3.37
Dec2011 $2.97
Dec2010 $2.99
Dec2009 $3.05
Dec2008 $4.45
Dec2007 $4.90
Dec2006 $3.18
Dec2005 $1.87
Dec2004 $0.90
Dec2003 -$0.09
Dec2002 -$0.79

Recommended Reading:

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Jones Lang LaSalle Inc Valuation – Initial Coverage $JLL

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Disclaimer:

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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