Comerica Inc Valuation – March 2019 #CMA
Company Profile (excerpt from Reuters): Comerica Incorporated, incorporated on November 13, 1972, is a financial services company. The Company’s principal activity is lending to and accepting deposits from businesses and individuals. The Company’s segments include the Business Bank, the Retail Bank, Wealth Management, Finance and Other. The Business Bank serves middle market businesses, multinational corporations and governmental entities by offering various products and services, including commercial loans and lines of credit, deposits, cash management, capital market products, international trade finance, letters of credit, foreign exchange management services and loan syndication services. The Retail Bank includes small business banking and personal financial services, consisting of consumer lending, consumer deposit gathering and mortgage loan origination. In addition to a range of financial services provided to small business customers, this business segment offers a range of consumer products, including deposit accounts, installment loans, credit cards, student loans, home equity lines of credit and residential mortgage loans.
Downloadable PDF version of this valuation:
ModernGraham Valuation of CMA – 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 all 6 of the following tests. | ||||
| 1. Adequate Size of the Enterprise | Market Cap > $2Bil | $12,991,666,519 | Pass | |
| 2. Earnings Stability | Positive EPS for 10 years prior | Pass | ||
| 3. Dividend Record | Dividend Payments for 10 years prior | Pass | ||
| 4. Earnings Growth | Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end | 238.83% | Pass | |
| 5. Moderate PEmg Ratio | PEmg < 20 | 13.98 | Pass | |
| 6. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 1.81 | 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 | Pass | ||
| 3. Earnings Growth | EPSmg greater than 5 years ago | Pass | ||
Stage 2: Determination of Intrinsic Value
| EPSmg | $5.88 |
| MG Growth Estimate | 15.00% |
| MG Value | $226.56 |
| Opinion | Undervalued |
| MG Grade | A |
| MG Value based on 3% Growth | $85.33 |
| MG Value based on 0% Growth | $50.02 |
| Market Implied Growth Rate | 2.74% |
| Current Price | $82.27 |
| % of Intrinsic Value | 36.31% |
Comerica Incorporated qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.85 in 2015 to an estimated $5.88 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.74% 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 Comerica Incorporated revealed the company was trading below its Graham Number of $90.55. The company pays a dividend of $1.84 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.98, which was below the industry average of 16.75, which by some methods of valuation makes it one of the most undervalued stocks in its industry.
Comerica Incorporated fares extremely well in the ModernGraham grading system, scoring an A.
Stage 3: Information for Further Research
| Graham Number | $90.55 |
| PEmg | 13.98 |
| PB Ratio | 1.81 |
| Dividend Yield | 2.24% |
| TTM Dividend | $1.84 |
| Number of Consecutive Years of Dividend Growth | 9 |
Useful Links:
| ModernGraham tagged articles | Morningstar |
| Google Finance | MSN Money |
| Yahoo Finance | Seeking Alpha |
| GuruFocus | SEC Filings |
Most Recent Balance Sheet Figures
| Balance Sheet Information | 12/1/2018 |
| Long-Term Debt & Capital Lease Obligation | $6,463,000,000 |
| Total Assets | $70,818,000,000 |
| Intangible Assets | $0 |
| Total Liabilities | $63,311,000,000 |
| Shares Outstanding (Diluted Average) | 165,000,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $7.77 |
| Dec2018 | $7.20 |
| Dec2017 | $4.14 |
| Dec2016 | $2.68 |
| Dec2015 | $2.84 |
| Dec2014 | $3.16 |
| Dec2013 | $2.85 |
| Dec2012 | $2.67 |
| Dec2011 | $2.09 |
| Dec2010 | $0.88 |
| Dec2009 | -$0.79 |
| Dec2008 | $1.28 |
| Dec2007 | $4.43 |
| Dec2006 | $5.49 |
| Dec2005 | $5.11 |
| Dec2004 | $4.36 |
| Dec2003 | $3.75 |
| Dec2002 | $3.40 |
| Dec2001 | $3.88 |
| Dec2000 | $4.31 |
| Dec1999 | $4.14 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | $5.88 |
| Dec2018 | $4.63 |
| Dec2017 | $3.27 |
| Dec2016 | $2.84 |
| Dec2015 | $2.85 |
| Dec2014 | $2.68 |
| Dec2013 | $2.14 |
| Dec2012 | $1.60 |
| Dec2011 | $1.24 |
| Dec2010 | $1.30 |
| Dec2009 | $2.04 |
| Dec2008 | $3.68 |
| Dec2007 | $4.79 |
| Dec2006 | $4.79 |
| Dec2005 | $4.33 |
| Dec2004 | $3.94 |
| Dec2003 | $3.78 |
Recommended Reading:
Other ModernGraham posts about the company
Other ModernGraham posts about related companies
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.
