Charter Communications Inc Valuation – February 2019 $CHTR

Company Profile (excerpt from Reuters): Charter Communications, Inc., incorporated on July 9, 2003, is a holding company. The Company is a cable operator in the United States and a broadband communications services company. The Company operates in cable services segment. As of December 31, 2016, the Company was engaged in providing video, Internet and voice services to approximately 26.2 million residential and business customers. In addition, it sells video and online advertising inventory to local, regional and national advertising customers and fiber-delivered communications and managed information technology (IT) solutions to enterprise customers. The Company also owns and operates regional sports networks and local sports, news and lifestyle channels and sells security and home management services to the residential marketplace.


Downloadable PDF version of this valuation:

ModernGraham Valuation of CHTR – 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 $78,923,408,111 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.23 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 -562.00% Fail
6. Moderate PEmg Ratio PEmg < 20 30.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.82 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 0.23 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.43 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 Pass


Stage 2: Determination of Intrinsic Value

EPSmg $11.58
MG Growth Estimate 15.00%
MG Value $445.83
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $167.91
MG Value based on 0% Growth $98.43
Market Implied Growth Rate 10.88%
Current Price $350.44
% of Intrinsic Value 78.60%

Charter Communications Inc 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 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 Fairly Valued after growing its EPSmg (normalized earnings) from $-2.46 in 2015 to an estimated $11.58 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 10.88% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Charter Communications Inc revealed the company was trading above its Graham Number of $124.38. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 30.26, which was below the industry average of 92.4, 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 $-430.86.

Charter Communications 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) -$430.86
Graham Number $124.38
PEmg 30.26
Current Ratio 0.23
PB Ratio 1.82
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 12/1/2018
Total Current Assets $2,730,000,000
Total Current Liabilities $12,095,000,000
Long-Term Debt $69,537,000,000
Total Assets $146,130,000,000
Intangible Assets $106,914,000,000
Total Liabilities $101,858,000,000
Shares Outstanding (Diluted Average) 230,069,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.27
Dec2018 $5.22
Dec2017 $34.09
Dec2016 $15.94
Dec2015 -$2.68
Dec2014 -$1.88
Dec2013 -$1.83
Dec2012 -$3.37
Dec2011 -$3.75
Dec2010 -$2.31
Dec2009 $0.00
Dec2008 -$7.26
Dec2007 -$4.61
Dec2006 -$4.57
Dec2005 -$3.46
Dec2004 -$16.00
Dec2003 -$0.91
Dec2002 -$9.46
Dec2001 -$4.79
Dec2000 -$4.20
Dec1999 -$2.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $11.58
Dec2018 $13.54
Dec2017 $14.71
Dec2016 $3.75
Dec2015 -$2.46
Dec2014 -$2.44
Dec2013 -$2.57
Dec2012 -$3.07
Dec2011 -$3.14
Dec2010 -$3.14
Dec2009 -$3.70
Dec2008 -$6.09
Dec2007 -$5.64
Dec2006 -$6.40
Dec2005 -$7.18
Dec2004 -$8.39
Dec2003 -$4.51

Recommended Reading:

Other ModernGraham posts about the company

Charter Communications Inc Valuation – May 2018 $CHTR
Charter Communications Inc Valuation – Initial Coverage $CHTR

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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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