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Alliant Energy Corp Valuation – March 2019 #LNT

Company Profile (excerpt from Reuters): Alliant Energy Corporation (Alliant Energy), incorporated on April 22, 1981, operates as a utility holding company. The Company’s segments include Utility and Non-regulated, Parent and Other. The Utility segment includes the operations of Interstate Power and Light Company (IPL) and Wisconsin Power and Light Company (WPL), which serve retail customers in Iowa and Wisconsin. The Utility segment includes utility electric operations, utility gas operations and utility other, which includes steam operations and the unallocated portions of the utility business. The Company’s Non-regulated, Parent and Other segment includes the operations of Alliant Energy Resources, LLC (Resources) and its subsidiaries; Alliant Energy Corporate Services, Inc. (Corporate Services); the Alliant Energy parent company, and any Alliant Energy parent company consolidating adjustments. As of December 31, 2016, the Company was focused on providing regulated electric and natural gas service to approximately 960,000 electric and approximately 410,000 natural gas customers in the Midwest through its two public utility subsidiaries, IPL and WPL.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LNT – 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 $11,189,931,660 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.48 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 55.77% Pass
6. Moderate PEmg Ratio PEmg < 20 23.05 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.33 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 0.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.11 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 $2.06
MG Growth Estimate 3.94%
MG Value $33.68
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $29.81
MG Value based on 0% Growth $17.48
Market Implied Growth Rate 7.28%
Current Price $47.40
% of Intrinsic Value 140.75%

Alliant Energy Corporation 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, high PEmg ratio. 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 $1.63 in 2015 to an estimated $2.06 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.28% 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 Alliant Energy Corporation revealed the company was trading above its Graham Number of $31.22. The company pays a dividend of $1.34 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.05, which was below the industry average of 23.71, 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 $-41.81.

Alliant Energy Corporation 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) -$41.81
Graham Number $31.22
PEmg 23.05
Current Ratio 0.48
PB Ratio 2.33
Current Dividend $1.34
Dividend Yield 2.83%
Number of Consecutive Years of Dividend Growth 15

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $785,100,000
Total Current Liabilities $1,644,100,000
Long-Term Debt $5,246,300,000
Total Assets $15,426,000,000
Intangible Assets $0
Total Liabilities $10,640,300,000
Shares Outstanding (Diluted Average) 235,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.23
Dec2018 $2.19
Dec2017 $1.99
Dec2016 $1.64
Dec2015 $1.68
Dec2014 $1.73
Dec2013 $1.62
Dec2012 $1.45
Dec2011 $1.37
Dec2010 $1.30
Dec2009 $0.51
Dec2008 $1.31
Dec2007 $1.89
Dec2006 $1.35
Dec2005 -$0.04
Dec2004 $0.64
Dec2003 $0.91
Dec2002 $0.59
Dec2001 $1.07
Dec2000 $2.52
Dec1999 $1.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.06
Dec2018 $1.93
Dec2017 $1.78
Dec2016 $1.65
Dec2015 $1.63
Dec2014 $1.57
Dec2013 $1.40
Dec2012 $1.26
Dec2011 $1.20
Dec2010 $1.17
Dec2009 $1.07
Dec2008 $1.25
Dec2007 $1.13
Dec2006 $0.73
Dec2005 $0.49
Dec2004 $0.88
Dec2003 $1.09

Recommended Reading:

Other ModernGraham posts about the company

Alliant Energy Corp Valuation – June 2018 $LNT
Alliant Energy Corp Valuation – Initial Coverage $LNT

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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.

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