Kimberly-Clark Corp Valuation – January 2019 $KMB

Company Profile (excerpt from Reuters): Kimberly-Clark Corporation, incorporated on June 29, 1928, is engaged in the manufacturing and marketing of a range of products made from natural or synthetic fibers. The Company’s segments include Personal Care, Consumer Tissue, K-C Professional and Corporate & Other. The Company sells its products to supermarkets, mass merchandisers, drugstores, warehouse clubs, variety and department stores, and other retail outlets. It sells its products for away-from-home use through distributors and directly to manufacturing, lodging, office building, food service and public facilities. As of December 31, 2016, the Company and its equity companies had manufacturing facilities in 38 countries, and it sold products in more than 175 countries. The Company’s business outside North America includes Developing and Emerging Markets (D&E) and Developed Markets. D&E markets consist of Eastern Europe, the Middle East and Africa, Latin America and Asia-Pacific, excluding Australia and South Korea. Its Developed Markets consist of Western and Central Europe, Australia and South Korea.


Downloadable PDF version of this valuation:

ModernGraham Valuation of KMB – January 2019

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 $40,257,491,250 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.75 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
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 29.94% Fail
6. Moderate PEmg Ratio PEmg < 20 23.13 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 362.04 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 0.75 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.38 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 $5.03
MG Growth Estimate 1.63%
MG Value $59.11
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $72.89
MG Value based on 0% Growth $42.73
Market Implied Growth Rate 7.31%
Current Price $116.25
% of Intrinsic Value 196.66%

Kimberly Clark 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 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. 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 $4.53 in 2014 to an estimated $5.03 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.31% 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 Kimberly Clark Corp revealed the company was trading above its Graham Number of $13.39. The company pays a dividend of $3.88 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.13, which was above the industry average of 20. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.84.

Kimberly Clark 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) -$26.84
Graham Number $13.39
PEmg 23.13
Current Ratio 0.75
PB Ratio 362.04
Current Dividend $3.88
Dividend Yield 3.34%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $5,108,000,000
Total Current Liabilities $6,805,000,000
Long-Term Debt $5,739,000,000
Total Assets $14,583,000,000
Intangible Assets $1,480,000,000
Total Liabilities $14,471,000,000
Shares Outstanding (Diluted Average) 348,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.45
Dec2017 $6.40
Dec2016 $5.99
Dec2015 $2.77
Dec2014 $4.04
Dec2013 $5.53
Dec2012 $4.42
Dec2011 $3.99
Dec2010 $4.45
Dec2009 $4.52
Dec2008 $4.04
Dec2007 $4.09
Dec2006 $3.25
Dec2005 $3.28
Dec2004 $3.61
Dec2003 $3.33
Dec2002 $3.22
Dec2001 $3.02
Dec2000 $3.31
Dec1999 $3.09
Dec1998 $1.99

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.03
Dec2017 $5.19
Dec2016 $4.58
Dec2015 $3.96
Dec2014 $4.53
Dec2013 $4.71
Dec2012 $4.30
Dec2011 $4.23
Dec2010 $4.26
Dec2009 $4.05
Dec2008 $3.77
Dec2007 $3.59
Dec2006 $3.34
Dec2005 $3.35
Dec2004 $3.36
Dec2003 $3.22
Dec2002 $3.09

Recommended Reading:

Other ModernGraham posts about the company

Kimberly-Clark Corp Valuation – March 2018 $KMB
Kimberly-Clark Corporation Valuation – June 2016 $KMB
34 Companies in the Spotlight This Week – 2/7/15
Kimberly Clark Corporation Annual Valuation – 2015 $KMB
15 Companies in the Spotlight This Week – 2/1/14

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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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