Company ProfileÂ (excerpt from Reuters): CVB Financial Corp. (CVB), incorporated on April 27, 1981, is the bank holding company for Citizens Business Bank (the Bank). The Bank operates through two segments: Business Financial and Commercial Banking Centers (Centers), and Other Operations. The Company’s all administrative and other smaller operating departments are combined into the Other segment. As of August 10, 2018, the Bank operated through 67 banking centers and three trust office locations serving the Inland Empire, Los Angeles County, Orange County, San Diego County, Ventura County, Santa Barbara County, and the Central Valley area of California. Its trust offices are located in Ontario, Newport Beach and Pasadena. These offices serve as sales offices for the Bank’s wealth management, trust and investment products.
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||$2,635,094,908||Pass|
|2. Earnings Stability||Positive EPS for 10 years prior||Pass|
|3. Dividend Record||Dividend Payments for 10 years prior||Pass|
|4. Earnings Growth||Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end||49.48%||Pass|
|5. Moderate PEmg Ratio||PEmg < 20||24.95||Fail|
|6. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||2.43||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||Pass|
|3. Earnings Growth||EPSmg greater than 5 years ago||Pass|
Stage 2: Determination of Intrinsic Value
|MG Growth Estimate||1.71%|
|MG Value based on 3% Growth||$13.88|
|MG Value based on 0% Growth||$8.14|
|Market Implied Growth Rate||8.23%|
|% of Intrinsic Value||209.33%|
CVB Financial Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.86 in 2014 to an estimated $0.96 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.23% 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 below the price.
At the time of valuation, further research into CVB Financial Corp. revealed the company was trading above its Graham Number of $14.63. The company pays a dividend of $0.54 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.95, which was above the industry average of 19.22.
CVB Financial Corp. receives an average overall rating in the ModernGraham grading system, scoring a C.
Stage 3: Information for Further Research
|Number of Consecutive Years of Dividend Growth||1|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||6/1/2018|
|Long-Term Debt & Capital Lease Obligation||$25,774,000|
|Shares Outstanding (Diluted Average)||110,355,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$0.98|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$0.96|
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The author did not hold aÂ position in any company mentioned in this articleÂ at the time of publication and had no intention of changing that position within the next 72 hours. Â See my current holdings here. Â This article is not investment advice; any reader should speak to aÂ registeredÂ investment adviser prior to making any investment decisions. Â ModernGraham is not affiliated with the company in any manner. Â Please be sure to review our detailed disclaimer.