CNX Resources Corp Valuation – September 2018 $CNX
Company Profile (excerpt from Reuters): CNX Resources Corp., formerly CONSOL Energy Inc., incorporated on October 31, 1991, is an integrated energy company. The Company’s divisions include Exploration and Production (E&P), Pennsylvania (PA) Mining Operations and Other. The E&P division operates through three segments: Marcellus Shale, Coalbed Methane (CBM) and Other Gas, which produce pipeline quality natural gas for sale primarily to gas wholesalers. Its E&P division focuses on Appalachian area natural gas and liquids activities, including production, gathering, processing and acquisition of natural gas properties in the Appalachian Basin. The Company’s E&P operations are located throughout Appalachia. Its Other Gas properties include Shallow Oil and Gas, Chattanooga and Huron. The Other Gas segment is primarily related to shallow oil and gas production and the Chattanooga Shale in Tennessee. The principal activities of the PA Mining Operations division are mining, preparation and marketing of thermal coal, sold primarily to power generators. The PA Mining Operations division focuses on the extraction and preparation of coal in the Appalachian Basin. The Other division includes business activities, such as coal terminal operations and water operations.
Downloadable PDF version of this valuation:
ModernGraham Valuation of CNX – September 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 | $3,178,842,385 | Pass | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 0.67 | Fail | |
| 3. Earnings Stability | Positive EPS for 10 years prior | Fail | ||
| 4. Dividend Record | Dividend Payments for 10 years prior | Fail | ||
| 5. Earnings Growth | Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end | -93.16% | Fail | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 39.47 | Fail | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 0.65 | 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 | 0.67 | Fail | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | -14.96 | Fail | |
| 3. Earnings Stability | Positive EPS for 5 years prior | Fail | ||
| 4. Dividend Record | Currently Pays Dividend | Fail | ||
| 5. Earnings Growth | EPSmg greater than 5 years ago | Fail | ||
Stage 2: Determination of Intrinsic Value
| EPSmg | $0.38 |
| MG Growth Estimate | -4.25% |
| MG Value | $0.00 |
| Opinion | Overvalued |
| MG Grade | C- |
| MG Value based on 3% Growth | $5.48 |
| MG Value based on 0% Growth | $3.21 |
| Market Implied Growth Rate | 15.49% |
| Current Price | $14.92 |
| % of Intrinsic Value | N/A |
CNX Resources Corp 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 or growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years, and 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 Overvalued after seeing its EPSmg (normalized earnings) decline from $1.81 in 2014 to an estimated $0.38 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.49% 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 CNX Resources Corp revealed the company was trading below its Graham Number of $31.62. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 39.47, which was below the industry average of 58.86, 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 $-13.02.
CNX Resources Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | -$13.02 |
| Graham Number | $31.62 |
| PEmg | 39.47 |
| Current Ratio | 0.67 |
| PB Ratio | 0.65 |
| Current Dividend | $0.00 |
| Dividend Yield | 0.00% |
| Number of Consecutive Years of Dividend Growth | 0 |
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Most Recent Balance Sheet Figures
| Balance Sheet Information | 6/1/2018 |
| Total Current Assets | $319,146,000 |
| Total Current Liabilities | $474,991,000 |
| Long-Term Debt | $2,330,780,000 |
| Total Assets | $8,207,758,000 |
| Intangible Assets | $902,835,000 |
| Total Liabilities | $3,168,835,000 |
| Shares Outstanding (Diluted Average) | 218,930,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $2.55 |
| Dec2017 | $1.65 |
| Dec2016 | -$3.70 |
| Dec2015 | -$1.64 |
| Dec2014 | $0.70 |
| Dec2013 | $2.87 |
| Dec2012 | $1.70 |
| Dec2011 | $2.76 |
| Dec2010 | $1.60 |
| Dec2009 | $2.95 |
| Dec2008 | $2.40 |
| Dec2007 | $1.45 |
| Dec2006 | $2.20 |
| Dec2005 | $3.13 |
| Dec2004 | $1.09 |
| Dec2003 | -$0.05 |
| Dec2002 | $0.08 |
| Jun2001 | $1.17 |
| Jun2000 | $0.68 |
| Jun1999 | $0.31 |
| Dec1998 | $0.87 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | $0.38 |
| Dec2017 | -$0.48 |
| Dec2016 | -$1.03 |
| Dec2015 | $0.62 |
| Dec2014 | $1.81 |
| Dec2013 | $2.37 |
| Dec2012 | $2.18 |
| Dec2011 | $2.35 |
| Dec2010 | $2.14 |
| Dec2009 | $2.42 |
| Dec2008 | $2.12 |
| Dec2007 | $1.84 |
| Dec2006 | $1.78 |
| Dec2005 | $1.41 |
| Dec2004 | $0.57 |
| Dec2003 | $0.35 |
| Dec2002 | $0.57 |
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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.
