Company ProfileÂ (excerpt from Reuters): SVB Financial Group (SVB Financial), incorporated on March 22, 1999, is a diversified financial services company, as well as a bank holding and a financial holding company. The Company operates through three segments: Global Commercial Bank, SVB Private Bank and SVB Capital. The Company, through its subsidiaries and divisions, offers a range of banking and financial products and services to clients across the United States. The Company offers services in the technology, life science/healthcare, private equity/venture capital and wine industries.
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||$12,930,426,391||Pass|
|2. Earnings Stability||Positive EPS for 10 years prior||Pass|
|3. Dividend Record||Dividend Payments for 10 years prior||Fail|
|4. Earnings Growth||Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end||361.84%||Pass|
|5. Moderate PEmg Ratio||PEmg < 20||16.91||Pass|
|6. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||2.50||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||Fail|
|3. Earnings Growth||EPSmg greater than 5 years ago||Pass|
Stage 2: Determination of Intrinsic Value
|MG Growth Estimate||15.00%|
|MG Value based on 3% Growth||$210.47|
|MG Value based on 0% Growth||$123.38|
|Market Implied Growth Rate||4.21%|
|% of Intrinsic Value||43.93%|
SVB Financial Group does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history. The Enterprising Investor has concerns regarding 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 Undervalued after growing its EPSmg (normalized earnings) from $5.34 in 2015 to an estimated $14.52 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.21% 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 above the price.
At the time of valuation, further research into SVB Financial Group revealed the company was trading above its Graham Number of $205.49. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 16.91, which was above the industry average of 16.75.
SVB Financial Group scores quite poorly in the ModernGraham grading system, with an overall grade of D+.
Stage 3: Information for Further Research
|Number of Consecutive Years of Dividend Growth||0|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||12/1/2018|
|Long-Term Debt & Capital Lease Obligation||$696,465,000|
|Shares Outstanding (Diluted Average)||53,688,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$19.29|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$14.52|
Other ModernGraham posts about the company
|SVB Financial Group Valuation â€“ June 2018 $SIVB|
|SVB Financial Group Valuation â€“ Initial Coverage $SIVB|
Other ModernGraham posts about related companies
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.