Windstream Holdings Inc Valuation – September 2018 $WIN

Company Profile (excerpt from Reuters): Windstream Holdings, Inc., incorporated on May 23, 2013, is a holding company. The Company is a provider of advanced network communications and technology solutions for consumers, businesses, enterprise organizations and wholesale customers in the United States. The Company operates through four segments: ILEC Consumer and Small Business, Wholesale, Enterprise, and CLEC Consumer and Small Business. It provides data, cloud solutions, unified communications and managed services to small business and enterprise clients. The Company also offers bundled services, including broadband, security solutions, voice and digital television to consumers.


Downloadable PDF version of this valuation:

ModernGraham Valuation of WIN – 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 $164,000,000 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.70 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 -283.03% Fail
6. Moderate PEmg Ratio PEmg < 20 -0.15 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -0.11 Fail
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 0.70 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -14.44 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail


Stage 2: Determination of Intrinsic Value

EPSmg -$24.92
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$361.39
MG Value based on 0% Growth -$211.85
Market Implied Growth Rate -4.33%
Current Price $3.82
% of Intrinsic Value N/A

Windstream Holdings 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, low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. 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. 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 $6.74 in 2014 to an estimated $-24.92 for 2018. This level of negative earnings does not support a positive valuation.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 Windstream Holdings Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.5 per share, for a yield of 39.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -0.15, which was below the industry average of 43.01, 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 $-290.03.

Windstream Holdings 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) -$290.03
Graham Number $0.00
PEmg -0.15
Current Ratio 0.70
PB Ratio -0.11
Current Dividend $1.50
Dividend Yield 39.27%
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 $935,200,000
Total Current Liabilities $1,341,500,000
Long-Term Debt $5,867,900,000
Total Assets $10,839,800,000
Intangible Assets $4,223,300,000
Total Liabilities $12,246,300,000
Shares Outstanding (Diluted Average) 39,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$12.39
Dec2017 -$62.60
Dec2016 -$20.55
Dec2015 $1.20
Dec2014 -$2.25
Dec2013 $12.05
Dec2012 $8.40
Dec2011 $9.60
Dec2010 $19.80
Dec2009 $22.80
Dec2008 $27.90
Dec2007 $58.20
Dec2006 $37.50
Dec2005 $27.90
Dec2004 $28.80
Dec2003 $21.90
Dec2002 $5.10
Dec2001 -$23.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$24.92
Dec2017 -$25.60
Dec2016 -$4.81
Dec2015 $3.97
Dec2014 $6.74
Dec2013 $12.34
Dec2012 $14.22
Dec2011 $20.64
Dec2010 $28.52
Dec2009 $33.54
Dec2008 $37.96
Dec2007 $40.28
Dec2006 $28.96
Dec2005 $20.50
Dec2004 $13.38
Dec2003 $4.04
Dec2002 -$4.46

Recommended Reading:

Other ModernGraham posts about the company

Windstream Holdings Inc Valuation – March 2017 $WIN
Windstream Holdings Inc Valuation – August 2016 $WIN
Windstream Holdings Analysis – 2015 Update $WIN
16 Companies in the Spotlight This Week – 5/24/14
Windstream Holdings Inc. 2014 Annual Valuation $WIN

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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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