Amphenol Corp Valuation – March 2019 #APH

Company Profile (excerpt from Reuters): Amphenol Corporation (Amphenol), incorporated on December 19, 1986, is a designer, manufacturer and marketer of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor- based products, and coaxial and specialty cable. The Company operates through two segments, which include Interconnect Products and Assemblies, and Cable Products and Solutions.


Downloadable PDF version of this valuation:

ModernGraham Valuation of APH – March 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 $28,058,928,491 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.86 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 112.11% Pass
6. Moderate PEmg Ratio PEmg < 20 29.03 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.18 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 1.86 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.32 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 $3.25
MG Growth Estimate 8.07%
MG Value $80.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $47.09
MG Value based on 0% Growth $27.60
Market Implied Growth Rate 10.26%
Current Price $94.26
% of Intrinsic Value 117.83%

Amphenol Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. 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 $2.11 in 2015 to an estimated $3.25 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.26% 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 Amphenol Corporation revealed the company was trading above its Graham Number of $34.36. The company pays a dividend of $0.88 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 29.03, which was below the industry average of 35.5, 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 $-4.55.

Amphenol Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$4.55
Graham Number $34.36
PEmg 29.03
Current Ratio 1.86
PB Ratio 7.18
Current Dividend $0.88
Dividend Yield 0.93%
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,571,600,000
Total Current Liabilities $2,451,300,000
Long-Term Debt $2,806,400,000
Total Assets $10,044,900,000
Intangible Assets $4,501,100,000
Total Liabilities $5,980,700,000
Shares Outstanding (Diluted Average) 309,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.90
Dec2018 $3.85
Dec2017 $2.06
Dec2016 $2.61
Dec2015 $2.41
Dec2014 $2.21
Dec2013 $1.96
Dec2012 $1.69
Dec2011 $1.53
Dec2010 $1.41
Dec2009 $0.92
Dec2008 $1.17
Dec2007 $0.97
Dec2006 $0.70
Dec2005 $0.57
Dec2004 $0.46
Dec2003 $0.30
Dec2002 $0.23
Dec2001 $0.24
Dec2000 $0.32
Dec1999 $0.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.25
Dec2018 $2.82
Dec2017 $2.29
Dec2016 $2.33
Dec2015 $2.11
Dec2014 $1.89
Dec2013 $1.66
Dec2012 $1.45
Dec2011 $1.29
Dec2010 $1.12
Dec2009 $0.94
Dec2008 $0.89
Dec2007 $0.70
Dec2006 $0.53
Dec2005 $0.42
Dec2004 $0.33
Dec2003 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Amphenol Corp Valuation – May 2018 $APH
5 Best Stocks for Value Investors This Week – 2/25/17
Amphenol Corp Valuation – February 2017 $APH
21 Best Undervalued Stocks of the Week – 8/27/16
Amphenol Corporation Valuation – August 2016 $APH

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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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