FLIR Systems Inc Valuation – February 2019 $FLIR
Company Profile (excerpt from Reuters): FLIR Systems, Inc. (FLIR), incorporated on March 8, 1978, designs, develops, markets and distributes thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems and threat-detection solutions. The Company’s segments include Surveillance, Instruments, Security, OEM & Emerging Markets, Maritime and Detection. Its Surveillance segment provides enhanced imaging and recognition solutions under its commercially developed, military qualified (CDMQ) model to a range of military, law enforcement, public safety and other government customers. Its Instruments segment provides devices that image, measure and assess thermal energy, gases and other environmental elements for industrial, commercial, and scientific applications under the FLIR and Extech brands. Its Security segment develops and manufactures a range of cameras and video recording systems for use in commercial, critical infrastructure, and home monitoring applications. Its OEM & Emerging Markets segment provides thermal imaging camera cores and components that are utilized by third parties to create thermal and other types of imaging systems. Its Maritime segment develops and manufactures electronics and imaging instruments for the recreational and commercial maritime market under the FLIR and Raymarine brands. The Detection segment offers sensors, instruments and integrated platform solutions for the detection, identification, and suppression of chemical, biological, radiological, nuclear and explosives (CBRNE) threats.
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ModernGraham Valuation of FLIR – February 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 | $7,250,818,658 | Pass | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 4.09 | Pass | |
| 3. Earnings Stability | Positive EPS for 10 years prior | Pass | ||
| 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 | 16.70% | Fail | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 30.16 | Fail | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 3.87 | 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 | 4.09 | Pass | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | 0.43 | Pass | |
| 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 | $1.74 |
| MG Growth Estimate | 2.69% |
| MG Value | $24.14 |
| Opinion | Overvalued |
| MG Grade | C- |
| MG Value based on 3% Growth | $25.20 |
| MG Value based on 0% Growth | $14.77 |
| Market Implied Growth Rate | 10.83% |
| Current Price | $52.41 |
| % of Intrinsic Value | 217.11% |
FLIR Systems, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. 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 $1.47 in 2015 to an estimated $1.74 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.83% 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 FLIR Systems, Inc. revealed the company was trading above its Graham Number of $26.61. The company pays a dividend of $0.64 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 30.16, which was above the industry average of 29.46. Finally, the company was trading above its Net Current Asset Value (NCAV) of $2.8.
FLIR Systems, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | $2.80 |
| Graham Number | $26.61 |
| PEmg | 30.16 |
| Current Ratio | 4.09 |
| PB Ratio | 3.87 |
| Current Dividend | $0.64 |
| Dividend Yield | 1.22% |
| Number of Consecutive Years of Dividend Growth | 8 |
Useful Links:
| ModernGraham tagged articles | Morningstar |
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| GuruFocus | SEC Filings |
Most Recent Balance Sheet Figures
| Balance Sheet Information | 12/1/2018 |
| Total Current Assets | $1,292,647,000 |
| Total Current Liabilities | $316,014,000 |
| Long-Term Debt | $421,948,000 |
| Total Assets | $2,781,242,000 |
| Intangible Assets | $1,051,416,000 |
| Total Liabilities | $904,456,000 |
| Shares Outstanding (Diluted Average) | 138,509,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $2.32 |
| Dec2018 | $2.01 |
| Dec2017 | $0.77 |
| Dec2016 | $1.20 |
| Dec2015 | $1.72 |
| Dec2014 | $1.39 |
| Dec2013 | $1.22 |
| Dec2012 | $1.45 |
| Dec2011 | $1.38 |
| Dec2010 | $1.54 |
| Dec2009 | $1.45 |
| Dec2008 | $1.28 |
| Dec2007 | $0.89 |
| Dec2006 | $0.66 |
| Dec2005 | $0.58 |
| Dec2004 | $0.46 |
| Dec2003 | $0.29 |
| Dec2002 | $0.29 |
| Dec2001 | $0.20 |
| Dec2000 | -$0.23 |
| Dec1999 | -$0.48 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | $1.74 |
| Dec2018 | $1.44 |
| Dec2017 | $1.19 |
| Dec2016 | $1.40 |
| Dec2015 | $1.47 |
| Dec2014 | $1.37 |
| Dec2013 | $1.37 |
| Dec2012 | $1.44 |
| Dec2011 | $1.39 |
| Dec2010 | $1.32 |
| Dec2009 | $1.13 |
| Dec2008 | $0.90 |
| Dec2007 | $0.67 |
| Dec2006 | $0.52 |
| Dec2005 | $0.43 |
| Dec2004 | $0.30 |
| Dec2003 | $0.15 |
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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.
