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AmerisourceBergen Corp Valuation – February 2019 $ABC

Company Profile (excerpt from Reuters): AmerisourceBergen Corporation, incorporated on March 16, 2001, is a pharmaceutical sourcing and distribution services company. The Company’s segments include Pharmaceutical Distribution and Other. The Company provides services to healthcare providers, and pharmaceutical and biotech manufacturers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ABC – 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 $18,168,516,235 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.94 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 107.14% Pass
6. Moderate PEmg Ratio PEmg < 20 16.20 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.87 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 0.94 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.22 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.30
MG Growth Estimate 15.00%
MG Value $204.05
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $76.85
MG Value based on 0% Growth $45.05
Market Implied Growth Rate 3.85%
Current Price $85.84
% of Intrinsic Value 42.07%

AmerisourceBergen Corp. 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 over the last ten years, and the high PB 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. 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 $1.01 in 2015 to an estimated $5.3 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.85% 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 above the price.

At the time of valuation, further research into AmerisourceBergen Corp. revealed the company was trading above its Graham Number of $44.49. The company pays a dividend of $1.52 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 16.2, which was below the industry average of 51.18, 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 $-39.87.

AmerisourceBergen Corp. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$39.87
Graham Number $44.49
PEmg 16.20
Current Ratio 0.94
PB Ratio 5.87
Current Dividend $1.52
Dividend Yield 1.77%
Number of Consecutive Years of Dividend Growth 13

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
Total Current Assets $27,476,207,000
Total Current Liabilities $29,351,737,000
Long-Term Debt $4,165,400,000
Total Assets $39,267,823,000
Intangible Assets $9,622,245,000
Total Liabilities $36,103,090,000
Shares Outstanding (Diluted Average) 216,360,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.49
Sep2018 $7.53
Sep2017 $1.64
Sep2016 $6.32
Sep2015 -$0.63
Sep2014 $1.16
Sep2013 $1.84
Sep2012 $2.80
Sep2011 $2.54
Sep2010 $2.22
Sep2009 $1.66
Sep2008 $0.77
Sep2007 $1.25
Sep2006 $1.13
Sep2005 $0.62
Sep2004 $1.02
Sep2003 $0.98
Sep2002 $0.79
Sep2001 $0.53
Sep2000 $0.48
Sep1999 $0.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.30
Sep2018 $4.20
Sep2017 $2.38
Sep2016 $2.60
Sep2015 $1.01
Sep2014 $1.92
Sep2013 $2.27
Sep2012 $2.33
Sep2011 $1.96
Sep2010 $1.58
Sep2009 $1.20
Sep2008 $0.97
Sep2007 $1.04
Sep2006 $0.93
Sep2005 $0.81
Sep2004 $0.86
Sep2003 $0.73

Recommended Reading:

Other ModernGraham posts about the company

AmerisourceBergen Corp Valuation – April 2018 $ABC
AmerisourceBergen Corp Valuation – July 2016 $ABC
27 Companies in the Spotlight This Week – 4/4/15
AmerisourceBergen Corporation Annual Valuation – 2015 $ABC
14 Companies in the Spotlight This Week – 4/5/14

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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.

AmerisourceBergen Corp Valuation – April 2018 $ABC

Company Profile (excerpt from Reuters): AmerisourceBergen Corporation, incorporated on March 16, 2001, is a pharmaceutical sourcing and distribution services company. The Company’s segments include Pharmaceutical Distribution and Other. The Company provides services to healthcare providers, and pharmaceutical and biotech manufacturers.

ABC Chart

ABC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ABC – April 2018

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 $18,678,378,621 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.95 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 124.45% Pass
6. Moderate PEmg Ratio PEmg < 20 22.73 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.71 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 0.95 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.96 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.84
MG Growth Estimate 14.97%
MG Value $147.82
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $55.75
MG Value based on 0% Growth $32.68
Market Implied Growth Rate 7.11%
Current Price $87.38
% of Intrinsic Value 59.11%

AmerisourceBergen Corp. 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 over the last ten years, and the high PEmg and PB ratios. 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. 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 $1.92 in 2014 to an estimated $3.84 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.11% 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 above the price.

At the time of valuation, further research into AmerisourceBergen Corp. revealed the company was trading above its Graham Number of $37.07. The company pays a dividend of $1.46 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 22.73, which was below the industry average of 29.14, 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 $-37.09.

AmerisourceBergen Corp. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$37.09
Graham Number $37.07
PEmg 22.73
Current Ratio 0.95
PB Ratio 6.71
Current Dividend $1.46
Dividend Yield 1.67%
Number of Consecutive Years of Dividend Growth 12

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 12/1/2017
Total Current Assets $25,296,432,000
Total Current Liabilities $26,740,291,000
Long-Term Debt $4,266,757,000
Total Assets $36,361,510,000
Intangible Assets $8,901,145,000
Total Liabilities $33,486,928,000
Shares Outstanding (Diluted Average) 220,822,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.45
Sep2017 $1.64
Sep2016 $6.32
Sep2015 -$0.63
Sep2014 $1.16
Sep2013 $1.84
Sep2012 $2.80
Sep2011 $2.54
Sep2010 $2.22
Sep2009 $1.66
Sep2008 $0.77
Sep2007 $1.25
Sep2006 $1.13
Sep2005 $0.62
Sep2004 $1.02
Sep2003 $0.98
Sep2002 $0.79
Sep2001 $0.53
Sep2000 $0.48
Sep1999 $0.33
Sep1998 $0.21

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.84
Sep2017 $2.38
Sep2016 $2.60
Sep2015 $1.01
Sep2014 $1.92
Sep2013 $2.27
Sep2012 $2.33
Sep2011 $1.96
Sep2010 $1.58
Sep2009 $1.20
Sep2008 $0.97
Sep2007 $1.04
Sep2006 $0.93
Sep2005 $0.81
Sep2004 $0.86
Sep2003 $0.73
Sep2002 $0.56

Recommended Reading:

Other ModernGraham posts about the company

27 Companies in the Spotlight This Week – 4/4/15
AmerisourceBergen Corporation Annual Valuation – 2015 $ABC
14 Companies in the Spotlight This Week – 4/5/14
Amerisource Bergen (ABC) Annual Valuation – 2014
14 Companies in the Spotlight This Week – 1/4/14

Other ModernGraham posts about related companies

AbbVie Inc Valuation – April 2018 $ABBV
Eli Lilly and Co. Valuation – March 2018 $LLY
Zoetis Inc Valuation – March 2018 $ZTS
Gilead Sciences Inc Valuation – March 2018 $GILD
Pfizer Inc Valuation – February 2018 $PFE
Merck & Co Inc Valuation – February 2018 $MRK
Johnson & Johnson Valuation – February 2018 $JNJ
Bristol-Myers Squibb Co Valuation – September 2017 $BMY
Momenta Pharmaceuticals Inc Valuation – Initial Coverage $MNTA
Depomed Inc Valuation – Initial Coverage $DEPO

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.

AmerisourceBergen Corp Valuation – July 2016 $ABC

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today - July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how AmerisourceBergen Corp (ABC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): AmerisourceBergen Corporation is a pharmaceutical sourcing and distribution services company. The Company operates through two segments: Pharmaceutical Distribution and Other. The Company also provides data and other services to its manufacturing customers. The Company provides services to healthcare providers, and pharmaceutical and biotech manufacturers. The Company provides pharmacy services to certain specialty drug patients. Additionally, the Company offers healthcare providers and pharmaceutical manufacturers with services, including reimbursement and pharmaceutical consulting services, logistics services, inventory management, pharmacy automation and pharmacy management. The Company has a distribution facility network totaling approximately 30 distribution facilities in the United States.

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ABC Chart

ABC data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of ABC – July 2016

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 $18,259,502,620 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.93 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 95.38% Pass
6. Moderate PEmg Ratio PEmg < 20 31.39 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.77 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 0.93 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.57 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

ABC value chart July 2016

EPSmg $2.71
MG Growth Estimate 2.49%
MG Value $36.60
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $39.35
MG Value based on 0% Growth $23.07
Market Implied Growth Rate 11.44%
Current Price $85.19
% of Intrinsic Value 232.78%

AmerisourceBergen Corp. 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 over the last ten years, and the high PEmg and PB ratios. 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. 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 $2.33 in 2012 to an estimated $2.71 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.44% 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 below the price.

AmerisourceBergen Corp. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

ABC charts July 2016

Net Current Asset Value (NCAV) -$36.52
Graham Number $38.23
PEmg 31.39
Current Ratio 0.93
PB Ratio 8.77
Current Dividend $1.26
Dividend Yield 1.48%
Number of Consecutive Years of Dividend Growth 11

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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 3/1/2016
Total Current Assets $22,070,068,000
Total Current Liabilities $23,770,910,000
Long-Term Debt $4,368,586,000
Total Assets $32,495,355,000
Intangible Assets $9,028,488,000
Total Liabilities $30,304,193,000
Shares Outstanding (Diluted Average) 225,450,000

Earnings Per Share History

Next Fiscal Year Estimate $6.64
Sep2015 -$0.62
Sep2014 $1.17
Sep2013 $1.84
Sep2012 $2.80
Sep2011 $2.54
Sep2010 $2.22
Sep2009 $1.66
Sep2008 $0.77
Sep2007 $1.25
Sep2006 $1.13
Sep2005 $0.62
Sep2004 $1.02
Sep2003 $0.97
Sep2002 $0.79
Sep2001 $0.53
Sep2000 $0.48
Sep1999 $0.33
Sep1998 $0.26
Sep1997 $0.24
Sep1996 $0.19

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.71
Sep2015 $1.02
Sep2014 $1.93
Sep2013 $2.27
Sep2012 $2.33
Sep2011 $1.96
Sep2010 $1.58
Sep2009 $1.20
Sep2008 $0.97
Sep2007 $1.04
Sep2006 $0.93
Sep2005 $0.81
Sep2004 $0.86
Sep2003 $0.73
Sep2002 $0.56
Sep2001 $0.42
Sep2000 $0.34

Recommended Reading:

Other ModernGraham posts about the company

27 Companies in the Spotlight This Week – 4/4/15
AmerisourceBergen Corporation Annual Valuation – 2015 $ABC
14 Companies in the Spotlight This Week – 4/5/14
Amerisource Bergen (ABC) Annual Valuation – 2014
14 Companies in the Spotlight This Week – 1/4/14

Other ModernGraham posts about related companies

AbbVie Inc Valuation – July 2016 $ABBV
Gilead Sciences Inc Valuation – July 2016 $GILD
Eli Lilly and Company Valuation – July 2016 $LLY
Zoetis Inc Valuation – June 2016 $ZTS
Merck & Co Inc Valuation – March 2016 $MRK
Bristol-Myers Squibb Company Valuation – February 2016 $BMY
Amgen Inc Valuation – February 2016 $AMGN
Merck & Co Inc Valuation – March 2016 $MRK
Bristol-Myers Squibb Company Valuation – February 2016 $BMY
Amgen Inc Valuation – February 2016 $AMGN

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.

AmerisourceBergen Corporation Annual Valuation – 2015 $ABC

500px-AmerisourceBergen_logo.svg

AmerisourceBergen does not qualify for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is concerned with the low current ratio, and the high PEmg and PB ratios. The Enterprising Investor takes issue with the level of debt relative to the current assets. As a result, any purchase of the company is made with a speculative nature behind it. That said, any speculator interested in pursuing the company should still proceed to the next part of the analysis, which is a determination of the company’s intrinsic value.

With regard to the intrinsic value, the company has grown its EPSmg (normalized earnings) from $2.05 in 2011 to an estimated $2.73 for 2015. This level of demonstrated growth does not support the market’s implied estimate for earnings growth of 16.57% annually over the next 7-10 years. The ModernGraham valuation model therefore returns an estimate of intrinsic value below the current price, indicating the company is overvalued at the present time.

Be sure to check out previous ModernGraham valuations of AmerisourceBergen Corporation (ABC) for a greater perspective!

Read the full valuation on Seeking Alpha!

ABC Chart

ABC data by YCharts

Disclaimer: The author did not hold a position in AmerisourceBergen Corporation (ABC) at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Amerisource Bergen (ABC) Annual Valuation – 2014

500px-AmerisourceBergen_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Amerisource Bergen fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): AmerisourceBergen Corporation (AmerisourceBergenis) is a pharmaceutical services company serving the United States, Canada and select global markets. The Company distributes a range of pharmaceuticalsgeneric pharmaceuticals, over-the-counter healthcare products, home healthcare supplies and equipment, and related services to a range of healthcare providers located in the United States, Canada and selected global markets, including acute care hospitals and health systems, independent and chain retail pharmacies, mail order pharmacies, medical and dialysis clinics, physicians and physician group practices, long-term care and other alternate site pharmacies, and other customers. In May 2013, the Company completed the divestiture of its contract packaging business, AndersonBrecon. In June 2013, the Company announced that has completed the divestiture of AmerisourceBergen Canada Corporation (ABCC).

ABC Chart

ABC data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $65.59
MG Value $76.76
MG Opinion Fairly Valued
Value Based on 3% Growth $40.82
Value Based on 0% Growth $23.93
Market Implied Growth Rate 7.40%
Net Current Asset Value (NCAV) -$10.07
PEmg 23.30
Current Ratio 0.96
PB Ratio 6.73

Balance Sheet – 12/31/2013

Current Assets $15,228,300,000
Current Liabilities $15,828,900,000
Total Debt $1,396,800,000
Total Assets $19,796,100,000
Intangible Assets $3,501,300,000
Total Liabilities $17,548,300,000
Outstanding Shares 230,490,000

Earnings Per Share

2014 (estimate) $3.65
2013 $2.10
2012 $2.76
2011 $2.54
2010 $2.22
2009 $1.69
2008 $1.45
2007 $1.32
2006 $1.13
2005 $0.68
2004 $0.99

Earnings Per Share – ModernGraham

2014 (estimate) $2.82
2013 $2.35
2012 $2.36
2011 $2.06
2010 $1.73
2009 $1.41

Dividend History

ABC Dividend Chart

ABC Dividend data by YCharts

Conclusion:

Amerisource Bergen is not suitable for either the Defensive Investor or the Enterprising Investor at this time.  For the Defensive Investor, the company’s current ratio is too low, and it is trading at high PEmg and PB ratios.  For the Enterprising Investor, the company has too much debt relative to its current assets.  As a result, value investors seeking to follow the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities, through a review of ModernGraham’s valuation of Cardinal Health (CAH) and 5 Undervalued Companies for the Enterprising Investor.  From a valuation perspective, the company appears to be fairly valued, having grown its EPSmg (normalized earnings) from $1.73 in 2010 to an estimated $2.82 for 2014.  This level of demonstrated earnings growth supports the market’s implied estimate of 7.40% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Amerisource Bergen (ABC)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Amerisource Bergen (ABC) or any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

ModernGraham Valuation: Amerisource Bergen Corp. (ABC)

moneyCompany Profile (obtained from Google Finance): AmerisourceBergen Corporation (AmerisourceBergenis) is a pharmaceutical services company serving the United States, Canada and select global markets. The Company distributes a range of pharmaceuticalsgeneric pharmaceuticals, over-the-counter healthcare products, home healthcare supplies and equipment, and related services to a range of healthcare providers located in the United States, Canada and selected global markets, including acute care hospitals and health systems, independent and chain retail pharmacies, mail order pharmacies, medical and dialysis clinics, physicians and physician group practices, long-term care and other alternate site pharmacies, and other customers. In May 2013, the Company completed the divestiture of its contract packaging business, AndersonBrecon. In June 2013, the Company announced that has completed the divestiture of AmerisourceBergen Canada Corporation (ABCC).

Defensive and Enterprising Investor Tests (What is the significance of these tests, and what is PEmg ratio?):

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary (Explanation of the ModernGraham Valuation Model)

Key Data:

MG Value $67.18
MG Opinion Fairly Valued
Value Based on 3% Growth $34.11
Value Based on 0% Growth $20.00
Market Implied Growth Rate 10.60%
Net Current Asset Value (NCAV) -$9.59
PEmg 29.71
Current Ratio 0.97
PB Ratio 6.93

Balance Sheet – 9/30/2013 

Current Assets $14,393,700,000
Current Liabilities $14,870,600,000
Total Debt $1,396,600,000
Total Assets $18,918,600,000
Intangible Assets $3,499,700,000
Total Liabilities $16,598,900,000
Outstanding Shares 229,990,000

Earnings Per Share

2013 $2.10
2012 $2.76
2011 $2.54
2010 $2.22
2009 $1.69
2008 $1.45
2007 $1.32
2006 $1.13
2005 $0.68
2004 $0.99
2003 $0.98
2002 $0.79

Earnings Per Share – ModernGraham 

2013 $2.35
2012 $2.36
2011 $2.06
2010 $1.73
2009 $1.41
2008 $1.22

Conclusion:

Amerisource Bergen Corp. is a company that has potential but doesn’t quite qualify for Intelligent Investors following Benjamin Graham’s methods.  The company does not qualify for the Defensive Investor because of its poor current ratio and high PEmg ratio, and fails to qualify for the Enterprising Investor because of its high level of current liabilities.  If the company could lessen its current liabilities significantly and improve its current ratio, the company would become attractive to value investors.  As it stands, investors may find better opportunities elsewhere, beginning by reviewing some companies that pass the requirements set forth by Benjamin Graham.  From a valuation perspective, the company has grown EPSmg (normalized earnings) from $1.22 in 2008 to $2.35 for 2013.  This level of growth supports the market’s implied estimate of 10.6%, which indicates the company may be fairly valued at the current time.

What do you think?  Do you agree that Amerisource Bergen Corp is fairly valued?  What would be your assessment?  Is the company not suitable for Defensive Investors or Enterprising Investors?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Amerisource Bergen Corp (ABC) at the time of publication and had no intention of changing that position within the next 72 hours.

Photo Credit:  Andrew Magill

Becton Dickinson and Co Valuation – February 2019 $BDX

Company Profile (excerpt from Reuters): Becton, Dickinson and Company (BD), incorporated in November 1906, is a global medical technology company engaged in the development, manufacture and sale of a range of medical supplies, devices, laboratory equipment and diagnostic products. The Company operates through two segments: BD Medical and BD Life Sciences. It provides customer solutions that are focused on managing medication management and patient safety; supporting infection prevention practices; equipping surgical and interventional procedures; managing drug delivery; aiding anesthesiology care; managing the diagnosis of infectious diseases and cancers; advancing cellular research and applications, and supporting the management of diabetes. The Company caters to markets, such as healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. The Company’s subsidiaries include Accuri Cytometers, Inc., BD Norge AS, CareFusion Canada 307 ULC, Vital Signs Hong Kong Limited and Dantor S.A.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BDX – 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 $66,862,230,050 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.97 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 3.35% Fail
6. Moderate PEmg Ratio PEmg < 20 41.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.18 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 0.97 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -87.34 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 $5.92
MG Growth Estimate 2.31%
MG Value $77.69
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $85.87
MG Value based on 0% Growth $50.34
Market Implied Growth Rate 16.73%
Current Price $248.50
% of Intrinsic Value 319.88%

Becton Dickinson and Co 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 growth over the last ten years, and the high PEmg and PB ratios. 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 $5.13 in 2015 to an estimated $5.92 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.73% 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 Becton Dickinson and Co revealed the company was trading above its Graham Number of $145.91. The company pays a dividend of $3 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 41.96, which was below the industry average of 51.18, 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 $-89.65.

Becton Dickinson and Co receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$89.65
Graham Number $145.91
PEmg 41.96
Current Ratio 0.97
PB Ratio 3.18
Current Dividend $3.00
Dividend Yield 1.21%
Number of Consecutive Years of Dividend Growth 20

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
Total Current Assets $6,941,000,000
Total Current Liabilities $7,145,000,000
Long-Term Debt $17,817,000,000
Total Assets $52,932,000,000
Intangible Assets $39,565,000,000
Total Liabilities $31,528,000,000
Shares Outstanding (Diluted Average) 274,256,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.06
Sep2018 $0.60
Sep2017 $4.60
Sep2016 $4.49
Sep2015 $3.35
Sep2014 $5.99
Sep2013 $6.49
Sep2012 $5.59
Sep2011 $5.62
Sep2010 $5.49
Sep2009 $4.99
Sep2008 $4.46
Sep2007 $3.49
Sep2006 $2.93
Sep2005 $2.77
Sep2004 $1.77
Sep2003 $2.07
Sep2002 $1.79
Sep2001 $1.49
Sep2000 $1.49
Sep1999 $1.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.92
Sep2018 $3.17
Sep2017 $4.63
Sep2016 $4.83
Sep2015 $5.13
Sep2014 $5.96
Sep2013 $5.84
Sep2012 $5.42
Sep2011 $5.16
Sep2010 $4.71
Sep2009 $4.13
Sep2008 $3.49
Sep2007 $2.87
Sep2006 $2.46
Sep2005 $2.15
Sep2004 $1.80
Sep2003 $1.73

Recommended Reading:

Other ModernGraham posts about the company

Becton Dickinson and Co Valuation – May 2018 $BDX
5 of the Worst Stocks to Invest In – January 2017
Becton Dickinson and Co Valuation – January 2017 $BDX
Becton Dickinson & Company Analysis – August 2015 Update $BDX
30 Companies in the Spotlight This Week – 5/23/15

Other ModernGraham posts about related companies

Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK
Align Technology Inc Valuation – February 2019 $ALGN
Quest Diagnostics Inc Valuation – February 2019 $DGX
AmerisourceBergen Corp Valuation – February 2019 $ABC
Abiomed Inc Valuation – February 2019 $ABMD

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.

IQVIA Holdings Inc Valuation – February 2019 $IQV

Company Profile (excerpt from Reuters): IQVIA Holdings Inc., formerly Quintiles IMS Holdings, Inc., incorporated on October 3, 2016, provides integrated information and technology-enabled healthcare services. The Company operates through segments, including Commercial Solutions; Research & Development Solutions, and Integrated Engagement Services. It serves pharmaceutical, biotechnology, medical device and healthcare companies. The Company has its operations in the Americas, Europe and Africa, and the Asia-Pacific.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IQV – 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 $27,790,759,500 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.10 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 841.73% Pass
6. Moderate PEmg Ratio PEmg < 20 37.22 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.13 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 1.10 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 32.08 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.78
MG Growth Estimate 9.77%
MG Value $106.06
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $54.86
MG Value based on 0% Growth $32.16
Market Implied Growth Rate 14.36%
Current Price $140.82
% of Intrinsic Value 132.77%

Iqvia Holdings 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 over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, 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 Overvalued after growing its EPSmg (normalized earnings) from $2.29 in 2015 to an estimated $3.78 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.36% 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 Iqvia Holdings Inc revealed the company was trading above its Graham Number of $68.27. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 37.22, which was below the industry average of 51.18, 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 $-57.46.

Iqvia Holdings 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) -$57.46
Graham Number $68.27
PEmg 37.22
Current Ratio 1.10
PB Ratio 4.13
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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
Total Current Assets $3,874,000,000
Total Current Liabilities $3,534,000,000
Long-Term Debt $10,907,000,000
Total Assets $22,549,000,000
Intangible Assets $17,751,000,000
Total Liabilities $15,595,000,000
Shares Outstanding (Diluted Average) 204,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.11
Dec2018 $1.24
Dec2017 $5.74
Dec2016 $0.47
Dec2015 $3.08
Dec2014 $2.72
Dec2013 $1.77
Dec2012 $1.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.78
Dec2018 $2.63
Dec2017 $3.14
Dec2016 $1.85
Dec2015 $2.29
Dec2014 $1.66
Dec2013 $0.96
Dec2012 $0.46

Recommended Reading:

Other ModernGraham posts about the company

IQVIA Holdings Inc Valuation – Initial Coverage May 2018 $IQV

Other ModernGraham posts about related companies

Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK
Align Technology Inc Valuation – February 2019 $ALGN
Quest Diagnostics Inc Valuation – February 2019 $DGX
AmerisourceBergen Corp Valuation – February 2019 $ABC
Abiomed Inc Valuation – February 2019 $ABMD

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.

Thermo Fisher Scientific Inc Valuation – February 2019 $TMO

Company Profile (excerpt from Reuters): Thermo Fisher Scientific Inc., incorporated on October 11, 1960, develops, manufactures and sells a range of products. The Company provides analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics. The Company operates through four segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services. The Company serves various markets, such as pharmaceutical and biotech; academic and government; industrial and applied; as well as healthcare and diagnostics. The Company serves its customers through its brands, such as Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific and Unity Lab Services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TMO – 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 $101,078,782,817 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.71 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
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 170.43% Pass
6. Moderate PEmg Ratio PEmg < 20 31.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.69 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 1.71 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.01 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 $8.07
MG Growth Estimate 13.48%
MG Value $286.31
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $117.04
MG Value based on 0% Growth $68.61
Market Implied Growth Rate 11.30%
Current Price $251.09
% of Intrinsic Value 87.70%

Thermo Fisher Scientific Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the 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 Fairly Valued after growing its EPSmg (normalized earnings) from $4.25 in 2015 to an estimated $8.07 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 11.3% 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 Thermo Fisher Scientific Inc. revealed the company was trading above its Graham Number of $136.3. The company pays a dividend of $0.68 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 31.11, which was below the industry average of 51.18, 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 $-44.33.

Thermo Fisher Scientific Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$44.33
Graham Number $136.30
PEmg 31.11
Current Ratio 1.71
PB Ratio 3.69
Current Dividend $0.68
Dividend Yield 0.27%
Number of Consecutive Years of Dividend Growth 1

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
Total Current Assets $10,640,000,000
Total Current Liabilities $6,223,000,000
Long-Term Debt $17,719,000,000
Total Assets $56,181,000,000
Intangible Assets $40,325,000,000
Total Liabilities $28,595,000,000
Shares Outstanding (Diluted Average) 405,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.05
Dec2018 $7.24
Dec2017 $5.59
Dec2016 $5.09
Dec2015 $4.92
Dec2014 $4.71
Dec2013 $3.48
Dec2012 $3.21
Dec2011 $3.46
Dec2010 $2.53
Dec2009 $2.01
Dec2008 $2.25
Dec2007 $1.72
Dec2006 $0.84
Dec2005 $1.36
Dec2004 $2.17
Dec2003 $1.20
Dec2002 $1.73
Dec2001 $0.00
Dec2000 -$0.22
Dec1999 -$1.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.07
Dec2018 $5.89
Dec2017 $5.06
Dec2016 $4.63
Dec2015 $4.25
Dec2014 $3.77
Dec2013 $3.18
Dec2012 $2.92
Dec2011 $2.64
Dec2010 $2.11
Dec2009 $1.82
Dec2008 $1.70
Dec2007 $1.44
Dec2006 $1.35
Dec2005 $1.50
Dec2004 $1.37
Dec2003 $0.76

Recommended Reading:

Other ModernGraham posts about the company

Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
8 Best Stocks for Value Investors of the Week – 12/10/16
Thermo Fisher Scientific Inc Valuation – December 2016 $TMO
Thermo Fisher Scientific Inc Valuation – November 2016 $TMO
Thermo Fisher Scientific Inc. Analysis – 2015 Update $TMO

Other ModernGraham posts about related companies

Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK
Align Technology Inc Valuation – February 2019 $ALGN
Quest Diagnostics Inc Valuation – February 2019 $DGX
AmerisourceBergen Corp Valuation – February 2019 $ABC
Abiomed Inc Valuation – February 2019 $ABMD
Laboratory Corp of America Holdings Inc Valuation – January 2019 $LH

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.

Illumina Inc Valuation – February 2019 $ILMN

Company Profile (excerpt from Reuters): Illumina, Inc. (Illumina), incorporated on May 16, 2000, is a provider of sequencing- and array-based solutions for genetic analysis. The Company operates through two segments: Core Illumina and the consolidated variable interest entities (VIEs), which include the activities of GRAIL, Inc. (GRAIL) and Helix Holdings I, LLC (Helix). Core Illumina consists of its core operations. Core Illumina’s products and services serve customers in the research, clinical and applied markets, and enable the adoption of a range of genomic solutions. GRAIL is engaged in developing a blood test for early-stage cancer detection. Helix was established to enable individuals to explore their genetic information by providing sequencing and database services for consumers through third-party partners.

ILMN Chart

ILMN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ILMN – 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 $44,073,541,076 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.49 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
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 543.51% Pass
6. Moderate PEmg Ratio PEmg < 20 57.55 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.85 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 2.49 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.33 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.21
MG Growth Estimate 15.00%
MG Value $200.56
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $75.54
MG Value based on 0% Growth $44.28
Market Implied Growth Rate 24.53%
Current Price $299.82
% of Intrinsic Value 149.49%

Illumina, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. 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 $2.04 in 2015 to an estimated $5.21 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 24.53% 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 Illumina, Inc. revealed the company was trading above its Graham Number of $60.58. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 57.55, which was above the industry average of 51.18. Finally, the company was trading above its Net Current Asset Value (NCAV) of $9.05.

Illumina, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $9.05
Graham Number $60.58
PEmg 57.55
Current Ratio 2.49
PB Ratio 11.85
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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
Total Current Assets $4,490,000,000
Total Current Liabilities $1,804,000,000
Long-Term Debt $890,000,000
Total Assets $6,959,000,000
Intangible Assets $1,016,000,000
Total Liabilities $3,114,000,000
Shares Outstanding (Diluted Average) 152,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.38
Dec2018 $5.56
Dec2017 $4.92
Dec2016 $3.07
Dec2015 $3.10
Dec2014 $2.37
Dec2013 $0.90
Dec2012 $1.13
Dec2011 $0.62
Dec2010 $0.87
Dec2009 $0.53
Dec2008 $0.30
Dec2007 -$2.57
Dec2006 $0.41
Dec2005 -$0.26
Dec2004 -$0.09
Dec2003 -$0.43
Dec2002 -$0.66
Dec2001 -$0.42
Dec2000 -$0.69
Dec1999 -$1.96

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.21
Dec2018 $4.35
Dec2017 $3.45
Dec2016 $2.52
Dec2015 $2.04
Dec2014 $1.40
Dec2013 $0.88
Dec2012 $0.81
Dec2011 $0.41
Dec2010 $0.18
Dec2009 -$0.22
Dec2008 -$0.54
Dec2007 -$0.84
Dec2006 -$0.05
Dec2005 -$0.31
Dec2004 -$0.37
Dec2003 -$0.62

Recommended Reading:

Other ModernGraham posts about the company

Illumina Inc Valuation – April 2018 $ILMN
Illumina Inc Valuation – Initial Coverage $ILMN

Other ModernGraham posts about related companies

Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK
Align Technology Inc Valuation – February 2019 $ALGN
Quest Diagnostics Inc Valuation – February 2019 $DGX
AmerisourceBergen Corp Valuation – February 2019 $ABC
Abiomed Inc Valuation – February 2019 $ABMD
Laboratory Corp of America Holdings Inc Valuation – January 2019 $LH
Intuitive Surgical Inc Valuation – January 2019 $ISRG
PerkinElmer Inc Valuation – January 2019 $PKI

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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