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AGCO Corp Valuation – August 2018 $AGCO

Company Profile (excerpt from Reuters): AGCO Corporation, incorporated on April 22, 1991, is a manufacturer and distributor of agricultural equipment and related replacement parts throughout the world. The Company sells a range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment, seeding and tillage equipment, implements, and grain storage and protein production systems. The Company’s segments are North America, South America, Europe/Middle East, and Asia/Pacific/Africa. The Company’s products are marketed under various brands, including Challenger, Fendt, GSI, Massey Ferguson and Valtra. As of December 31, 2016, the Company distributed its products through over 3,000 independent dealers and distributors in more than 150 countries. In addition, the Company also provides retail and wholesale financing through its finance joint ventures with Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AGCO – August 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 $5,205,484,047 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.42 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 -23.04% Fail
6. Moderate PEmg Ratio PEmg < 20 23.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.71 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 1.42 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.51 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.77
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $40.11
MG Value based on 0% Growth $23.51
Market Implied Growth Rate 7.31%
Current Price $63.96
% of Intrinsic Value N/A

AGCO 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, insufficient earnings growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth 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 seeing its EPSmg (normalized earnings) decline from $5.06 in 2014 to an estimated $2.77 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.31% 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 AGCO Corporation revealed the company was trading above its Graham Number of $52.12. The company pays a dividend of $0.56 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 23.12, which was below the industry average of 29.32, 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 $-14.74.

AGCO 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) -$14.74
Graham Number $52.12
PEmg 23.12
Current Ratio 1.42
PB Ratio 1.71
Current Dividend $0.56
Dividend Yield 0.88%
Number of Consecutive Years of Dividend Growth 5

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 6/1/2018
Total Current Assets $3,843,900,000
Total Current Liabilities $2,700,500,000
Long-Term Debt $1,728,000,000
Total Assets $8,024,100,000
Intangible Assets $2,111,800,000
Total Liabilities $5,026,000,000
Shares Outstanding (Diluted Average) 80,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.17
Dec2017 $2.32
Dec2016 $1.96
Dec2015 $3.06
Dec2014 $4.36
Dec2013 $6.01
Dec2012 $5.30
Dec2011 $5.95
Dec2010 $2.29
Dec2009 $1.44
Dec2008 $3.95
Dec2007 $2.55
Dec2006 -$0.71
Dec2005 $0.35
Dec2004 $1.71
Dec2003 $0.98
Dec2002 -$1.14
Dec2001 $0.31
Dec2000 $0.06
Dec1999 -$0.20
Dec1998 $0.99

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.77
Dec2017 $2.89
Dec2016 $3.50
Dec2015 $4.49
Dec2014 $5.06
Dec2013 $5.01
Dec2012 $4.27
Dec2011 $3.58
Dec2010 $2.23
Dec2009 $1.97
Dec2008 $2.02
Dec2007 $1.02
Dec2006 $0.25
Dec2005 $0.64
Dec2004 $0.65
Dec2003 $0.08
Dec2002 -$0.25

Recommended Reading:

Other ModernGraham posts about the company

AGCO Corporation Valuation – February 2017 $AGCO
AGCO Corporation Valuation – August 2016 $AGCO
15 Best Stocks For Value Investors This Week – 2/13/16
AGCO Corporation Valuation – February 2016 $AGCO
10 Low PE Stocks for the Enterprising Investor – January 2016

Other ModernGraham posts about related companies

Stanley Black & Decker Inc Valuation – June 2018 $SWK
Pentair PLC Valuation – June 2018 $PNR
Snap-on Inc Valuation – May 2018 $SNA
Paccar Inc Valuation – May 2018 $PCAR
W.W. Grainger Inc Valuation – May 2018 $GWW
Allegion PLC Valuation – May 2018 $ALLE
Xylem Inc Valuation – May 2018 $XYL
Arconic Inc Valuation – April 2018 $ARNC
Rockwell Automation Inc Valuation – April 2018 $ROK
Roper Technologies Inc Valuation – April 2018 $ROP

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.

AGCO Corporation Valuation – February 2017 $AGCO

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 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  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 AGCO Corporation (AGCO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): AGCO Corporation is a manufacturer and distributor of agricultural equipment and related replacement parts around the world. The Company sells a range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment, seeding and tillage, implements, and grain storage and protein production systems. Its segments include North America, South America, Europe/Africa/Middle East, and Asia/Pacific. The Company’s Chinese harvesting business operates within the Asia/Pacific segment. The former sprayer reporting unit operates within the North American segment. The Company’s products include tractors, combines, application equipment, hay tools and forage equipment, implements and other equipment, grain storage and protein production systems, and replacement parts. Its AGCO Power engines division produces diesel engines, gears and generating sets. Its products are marketed under brands, including Challenger, Fendt, GSI, Massey Ferguson and Valtra.

AGCO Chart

AGCO data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AGCO – February 2017

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 $5,108,926,073 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.59 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 16.88% Fail
6. Moderate PEmg Ratio PEmg < 20 18.40 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.78 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 1.59 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.48 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 Fail

Stage 2: Determination of Intrinsic Value

EPSmg $3.46
MG Growth Estimate -2.83%
MG Value $9.86
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $50.21
MG Value based on 0% Growth $29.43
Market Implied Growth Rate 4.96%
Current Price $63.75
% of Intrinsic Value 646.70%

AGCO 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, insufficient earnings growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings growth 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 seeing its EPSmg (normalized earnings) decline from $4.27 in 2012 to an estimated $3.46 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.95% 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 AGCO Corporation revealed the company was trading above its Graham Number of $38.89. The company pays a dividend of $0.51 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 18.4, which was below the industry average of 22.25, 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 $-15.

AGCO 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) -$15.00
Graham Number $38.89
PEmg 18.40
Current Ratio 1.59
PB Ratio 1.78
Current Dividend $0.51
Dividend Yield 0.80%
Number of Consecutive Years of Dividend Growth 4

[/not-level-free]

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 9/1/2016
Total Current Assets $3,429,100,000
Total Current Liabilities $2,158,000,000
Long-Term Debt $1,875,800,000
Total Assets $7,541,000,000
Intangible Assets $2,053,800,000
Total Liabilities $4,640,800,000
Shares Outstanding (Diluted Average) 80,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.86
Dec2015 $3.06
Dec2014 $4.36
Dec2013 $6.01
Dec2012 $5.30
Dec2011 $5.95
Dec2010 $2.29
Dec2009 $1.44
Dec2008 $3.95
Dec2007 $2.55
Dec2006 -$0.71
Dec2005 $0.35
Dec2004 $1.71
Dec2003 $0.98
Dec2002 -$1.14
Dec2001 $0.33
Dec2000 $0.06
Dec1999 -$0.20
Dec1998 $0.99
Dec1997 $2.71
Dec1996 $2.20

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.46
Dec2015 $4.49
Dec2014 $5.06
Dec2013 $5.01
Dec2012 $4.27
Dec2011 $3.58
Dec2010 $2.23
Dec2009 $1.97
Dec2008 $2.02
Dec2007 $1.02
Dec2006 $0.25
Dec2005 $0.64
Dec2004 $0.65
Dec2003 $0.08
Dec2002 -$0.24
Dec2001 $0.40
Dec2000 $0.67

Recommended Reading:

Other ModernGraham posts about the company

15 Best Stocks For Value Investors This Week – 2/13/16
AGCO Corporation Valuation – February 2016 $AGCO
10 Low PE Stocks for the Enterprising Investor – January 2016
10 Low PE Stocks for the Enterprising Investor – November 2015
12 Best Stocks For Value Investors This Week – 11/7/15

Other ModernGraham posts about related companies

Kaman Corporation Valuation – Initial Coverage $KAMN
John Bean Technologies Corp Valuation – Initial Coverage $JBT
W. W. Grainger Inc Valuation – January 2017 $GWW
Allegion PLC Valuation – January 2017 $ALLE
Xylem Inc Valuation – January 2017 $XYL
Clarcor Inc Valuation – Initial Coverage $CLC
Caterpillar Inc Valuation – August 2016 $CAT
Regal Beloit Corp Valuation – August 2016 $RBC
Snap-on Incorporated Valuation – August 2016 $SNA
AGCO Corporation Valuation – August 2016 $AGCO

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.

AGCO Corporation Valuation – August 2016 $AGCO

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 AGCO Corporation (AGCO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): AGCO Corporation is a manufacturer and distributor of agricultural equipment and related replacement parts around the world. The Company sells a range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment, seeding and tillage, implements, and grain storage and protein production systems. Its segments include North America, South America, Europe/Africa/Middle East, and Asia/Pacific. The Company’s Chinese harvesting business operates within the Asia/Pacific segment. The former sprayer reporting unit operates within the North American segment. The Company’s products include tractors, combines, application equipment, hay tools and forage equipment, implements and other equipment, grain storage and protein production systems, and replacement parts. Its AGCO Power engines division produces diesel engines, gears and generating sets. Its products are marketed under brands, including Challenger, Fendt, GSI, Massey Ferguson and Valtra.

AGCO Chart

AGCO data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AGCO – August 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 $3,735,526,052 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.54 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 15.37% Fail
6. Moderate PEmg Ratio PEmg < 20 13.63 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.31 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 1.54 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.19 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 Fail

Stage 2: Determination of Intrinsic Value

AGCO value chart August 2016

EPSmg $3.42
MG Growth Estimate -2.97%
MG Value $8.78
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $49.63
MG Value based on 0% Growth $29.09
Market Implied Growth Rate 2.57%
Current Price $46.66
% of Intrinsic Value 531.36%

AGCO 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, insufficient earnings growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings growth 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 seeing its EPSmg (normalized earnings) decline from $4.27 in 2012 to an estimated $3.42 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.57% 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 AGCO Corporation revealed the company was trading above its Graham Number of $37.26. The company pays a dividend of $0.5 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 13.63, which was below the industry average of 20.76, 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 $-9.57.

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

Stage 3: Information for Further Research

AGCO charts August 2016

Net Current Asset Value (NCAV) -$9.57
Graham Number $37.26
PEmg 13.63
Current Ratio 1.54
PB Ratio 1.31
Current Dividend $0.50
Dividend Yield 1.07%
Number of Consecutive Years of Dividend Growth 4

[/not-level-free]

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 6/1/2016
Total Current Assets $3,306,200,000
Total Current Liabilities $2,146,100,000
Long-Term Debt $1,378,700,000
Total Assets $7,015,900,000
Intangible Assets $1,696,900,000
Total Liabilities $4,092,200,000
Shares Outstanding (Diluted Average) 82,100,000

Earnings Per Share History

Next Fiscal Year Estimate $1.74
Dec2015 $3.06
Dec2014 $4.36
Dec2013 $6.01
Dec2012 $5.30
Dec2011 $5.95
Dec2010 $2.29
Dec2009 $1.44
Dec2008 $3.95
Dec2007 $2.55
Dec2006 -$0.71
Dec2005 $0.35
Dec2004 $1.71
Dec2003 $0.98
Dec2002 -$1.14
Dec2001 $0.33
Dec2000 $0.06
Dec1999 -$0.20
Dec1998 $0.99
Dec1997 $2.71
Dec1996 $2.20

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.42
Dec2015 $4.49
Dec2014 $5.06
Dec2013 $5.01
Dec2012 $4.27
Dec2011 $3.58
Dec2010 $2.23
Dec2009 $1.97
Dec2008 $2.02
Dec2007 $1.02
Dec2006 $0.25
Dec2005 $0.64
Dec2004 $0.65
Dec2003 $0.08
Dec2002 -$0.24
Dec2001 $0.40
Dec2000 $0.67

Recommended Reading:

Other ModernGraham posts about the company

15 Best Stocks For Value Investors This Week – 2/13/16
AGCO Corporation Valuation – February 2016 $AGCO
10 Low PE Stocks for the Enterprising Investor – January 2016
10 Low PE Stocks for the Enterprising Investor – November 2015
12 Best Stocks For Value Investors This Week – 11/7/15

Other ModernGraham posts about related companies

PACCAR Inc Valuation – August 2016 $PCAR
W.W. Grainger Inc Valuation – August 2016 $GWW
Allegion PLC Valuation – August 2016 $ALLE
Xylem Inc Valuation – August 2016 $XYL
Rockwell Automation Inc Valuation – July 2016 $ROK
Roper Technologies Inc Valuation – July 2016 $ROP
Eaton Corp Valuation – July 2016 $ETN
Parker-Hannifin Corp Valuation – July 2016 $PH
Dover Corporation Valuation – July 2016 $DOV
Fastenal Company Valuation – July 2016 $FAST

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.

AGCO Corporation Valuation – February 2016 $AGCO

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 – February 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 AGCO Corporation (AGCO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): AGCO Corporation is a manufacturer and distributor of agricultural equipment and related replacement parts around the world. The Company sells a range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment, seeding and tillage, implements, and grain storage and protein production systems. Its products are marketed under various brands, including Challenger, Fendt, GSI, Massey Ferguson and Valtra. It also provides retail financing through its finance joint ventures with Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. The Company’s geographical segments include North America, South America, Europe/Africa/Middle East and Asia/Pacific. The Company’s AGCO Power engines division produces diesel engines, gears and generating sets. It also offers precision farming technologies, which are installed in its products and include satellite-based steering, field data collection, yield mapping and telemetry-based fleet management systems.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AGCO

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 $3,930,355,617 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.58 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 119.17% Pass
6. Moderate PEmg Ratio PEmg < 20 10.94 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.39 Pass
Score
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 1.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.95 Pass
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

AGCO value chart February 2016

EPSmg $4.24
MG Growth Estimate 2.78%
MG Value $59.61
Opinion Fairly Valued
MG Value based on 3% Growth $61.50
MG Value based on 0% Growth $36.05
Market Implied Growth Rate 1.22%
Current Price $46.38
% of Intrinsic Value 77.80%

AGCO Corp qualifies for the Enterprising Investor but not 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 short dividend record.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.58 in 2011 to an estimated $4.24 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 1.22% 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 within a margin of safety relative to the price.

Stage 3: Information for Further Research

AGCO charts February 2016

Net Current Asset Value (NCAV) -$7.33
Graham Number $42.19
PEmg 10.94
Current Ratio 1.58
PB Ratio 1.39
Dividend Yield 1.01%
Number of Consecutive Years of Dividend Growth 3

 

[/not-level-free]

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 Sep2015
Total Current Assets $3,500,500,000
Total Current Liabilities $2,212,200,000
Long-Term Debt $1,230,200,000
Total Assets $7,071,600,000
Intangible Assets $1,644,400,000
Total Liabilities $4,144,200,000
Shares Outstanding (Diluted Average) 87,800,000

Earnings Per Share History

Next Fiscal Year Estimate $2.32
Dec2014 $4.36
Dec2013 $6.01
Dec2012 $5.30
Dec2011 $5.95
Dec2010 $2.29
Dec2009 $1.44
Dec2008 $3.95
Dec2007 $2.55
Dec2006 -$0.71
Dec2005 $0.35
Dec2004 $1.71
Dec2003 $0.98
Dec2002 -$1.14
Dec2001 $0.31
Dec2000 $0.06
Dec1999 -$0.20
Dec1998 $0.99
Dec1997 $2.71
Dec1996 $2.20

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.24
Dec2014 $5.06
Dec2013 $5.01
Dec2012 $4.27
Dec2011 $3.58
Dec2010 $2.23
Dec2009 $1.97
Dec2008 $2.02
Dec2007 $1.02
Dec2006 $0.25
Dec2005 $0.64
Dec2004 $0.65
Dec2003 $0.08
Dec2002 -$0.25
Dec2001 $0.39
Dec2000 $0.67
Dec1999 $1.03

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stocks for the Enterprising Investor – January 2016
The Best Companies of the Machinery Industry – August 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15
AGCO Corporation Analysis – Initial Coverage $AGCO

Other ModernGraham posts about related companies

Joy Global Inc Valuation – February 2016 $JOY
Allegion PLC Valuation – February 2016 Update $ALLE
Rockwell Automation Inc Valuation – February 2016 Update $ROK
Parker Hannifin Corp Valuation – January 2016 Update $PH
Stanley Black & Decker Inc Valuation – January 2016 Update $SWK
Paccar Inc Valuation – January 2016 Update $PCAR
Xylem Inc Valuation – January 2016 Update $XYL
Xylem Inc Valuation – January 2016 Update $XYL
Roper Technologies Inc Valuation – January 2016 Update $ROP
W W Grainger Inc Valuation – January 2016 Update $GWW

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.

AGCO Corporation Valuation – November 2015 Update $AGCO

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 Most Undervalued Companies for the Defensive Investor – October 2015.  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 AGCO Corporation (AGCO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): AGCO Corporation is a manufacturer and distributor of agricultural equipment and related replacement parts around the world. The Company sells a range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment, seeding and tillage, implements, and grain storage and protein production systems. Its products are marketed under various brands, including Challenger, Fendt, GSI, Massey Ferguson and Valtra. It also provides retail financing through its finance joint ventures with Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. The Company’s geographical segments include North America, South America, Europe/Africa/Middle East and Asia/Pacific. The Company’s AGCO Power engines division produces diesel engines, gears and generating sets. It also offers precision farming technologies, which are installed in its products and include satellite-based steering, field data collection, yield mapping and telemetry-based fleet management systems.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AGCO – November 2015

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 $4,194,266,803 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.58 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 130.57% Pass
6. Moderate PEmg Ratio PEmg < 20 10.79 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.43 Pass
Score
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 1.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.95 Pass
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

AGCO value Chart November 2015

EPSmg $4.46
MG Growth Estimate 3.70%
MG Value $70.93
Opinion Undervalued
MG Value based on 3% Growth $64.69
MG Value based on 0% Growth $37.92
Market Implied Growth Rate 1.14%
Current Price $48.13
% of Intrinsic Value 67.85%

AGCO Corporation qualifies for the Enterprising Investor but not 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 inconsistent dividend record.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.58 in 2011 to an estimated $4.46 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.14% 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.

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 AGCO Corporation (AGCO)?  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.

Stage 3: Information for Further Research

AGCO Charts November 2015

Net Current Asset Value (NCAV) -$7.42
Graham Number $47.46
PEmg 10.79
Current Ratio 1.58
PB Ratio 1.43
Dividend Yield 0.98%
Number of Consecutive Years of Dividend Growth 3

 

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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

Total Current Assets $3,500,500,000
Total Current Liabilities $2,212,200,000
Long-Term Debt $1,230,200,000
Total Assets $7,071,600,000
Intangible Assets $1,644,400,000
Total Liabilities $4,144,200,000
Shares Outstanding (Diluted Average) 86,700,000

Earnings Per Share History

Next Fiscal Year Estimate $2.98
Dec14 $4.36
Dec13 $6.01
Dec12 $5.30
Dec11 $5.95
Dec10 $2.29
Dec09 $1.44
Dec08 $3.95
Dec07 $2.55
Dec06 -$0.71
Dec05 $0.35
Dec04 $1.71
Dec03 $0.98
Dec02 -$1.14
Dec01 $0.31
Dec00 $0.06
Dec99 -$0.20
Dec98 $0.99
Dec97 $2.71
Dec96 $2.20
Dec95 $2.30

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.46
Dec14 $5.06
Dec13 $5.01
Dec12 $4.27
Dec11 $3.58
Dec10 $2.23
Dec09 $1.97
Dec08 $2.02
Dec07 $1.02
Dec06 $0.25
Dec05 $0.64
Dec04 $0.65
Dec03 $0.08
Dec02 -$0.25
Dec01 $0.39
Dec00 $0.67
Dec99 $1.19

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Machinery Industry – August 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15
AGCO Corporation Analysis – Initial Coverage $AGCO

Other ModernGraham posts about related companies

Joy Global Inc. Valuation – November 2015 Update $JOY
Rockwell Automation Inc. Valuation – October 2015 Update $ROK
Paccar Inc. Analysis – October 2015 Update $PCAR
W.W. Grainger Inc. Analysis – October 2015 Update $GWW
My Personal Holdings: Deere & Company – October 2015 Update $DE
Allegion PLC Analysis – September 2015 Update $ALLE
Parker Hannifin Corporation Analysis – September 2015 Update $PH
Roper Technologies Inc. Analysis – September 2015 Update $ROP
My Personal Holdings: Dover Corporation – September 2015 Update $DOV
Xylem Inc. Analysis – August 2015 Update $XYL

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.

AGCO Corporation Analysis – Initial Coverage $AGCO

220px-Agco_logo_rgbBenjamin 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 5 Most Undervalued Companies for the Defensive Investor – July 2015.  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 AGCO Corporation (AGCO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): AGCO Corporation is a manufacturer and distributor of agricultural equipment and related replacement parts around the world. The Company sells a range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment, seeding and tillage, implements, and grain storage and protein production systems. Its products are marketed under various brands, including Challenger, Fendt, GSI, Massey Ferguson and Valtra. It also provides retail financing through its finance joint ventures with Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. The Company’s geographical segments include North America, South America, Europe/Africa/Middle East and Asia/Pacific. The Company’s AGCO Power engines division produces diesel engines, gears and generating sets. It also offers precision farming technologies, which are installed in its products and include satellite-based steering, field data collection, yield mapping and telemetry-based fleet management systems.

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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 - FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years - FAIL
  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 - PASS
  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 = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  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 $56.93
MG Value $63.80
MG Opinion Fairly Valued
Value Based on 3% Growth $62.71
Value Based on 0% Growth $36.76
Market Implied Growth Rate 2.33%
Net Current Asset Value (NCAV) -$5.87
PEmg 13.16
Current Ratio 1.60
PB Ratio 1.58

Balance Sheet – June 2015

Current Assets $3,790,000,000
Current Liabilities $2,373,000,000
Total Debt $1,216,000,000
Total Assets $7,470,000,000
Intangible Assets $1,686,000,000
Total Liabilities $4,305,000,000
Outstanding Shares 87,700,000

Earnings Per Share

2015 (estimate) $2.57
2014 $4.36
2013 $6.01
2012 $5.30
2011 $5.95
2010 $2.29
2009 $1.44
2008 $3.95
2007 $2.55
2006 -$0.71
2005 $0.35

Earnings Per Share – ModernGraham

2015 (estimate) $4.32
2014 $5.06
2013 $5.01
2012 $4.27
2011 $3.58
2010 $2.23

Dividend History

Free Cash Flow

Conclusion:

AGCO Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short dividend record, insufficient earnings stability over the last ten years, and the low current ratio.  The Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.58 in 2011 to an estimated $4.32 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 2.33% 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 within a margin of safety relative to the 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 AGCO Corporation (AGCO)?  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.

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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

[/level-mg-stocks-screens-subscriber]

Parker-Hannifin Corp Valuation – January 2019 $PH

Company Profile (excerpt from Reuters): Parker-Hannifin Corporation, incorporated on December 30, 1938, is a manufacturer of motion and control technologies and systems, providing precision engineered solutions for a range of mobile, industrial and aerospace markets. The Company operates through segments: Diversified Industrial and Aerospace Systems. The Diversified Industrial Segment is an aggregation of several business units, which manufacture motion-control and fluid power system components for builders and users of various types of manufacturing, packaging, processing, transportation, agricultural, construction, and military vehicles and equipment. The Aerospace Systems Segment produces hydraulic, fuel, pneumatic and electro-mechanical systems and components, which are utilized on domestic commercial, military and general aviation aircrafts.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PH – January 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 $20,028,374,412 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.60 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 48.03% Pass
6. Moderate PEmg Ratio PEmg < 20 18.33 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.34 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 1.60 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.17 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 $8.26
MG Growth Estimate 3.15%
MG Value $122.19
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $119.74
MG Value based on 0% Growth $70.19
Market Implied Growth Rate 4.91%
Current Price $151.33
% of Intrinsic Value 123.84%

Parker-Hannifin Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. 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 $6.83 in 2015 to an estimated $8.26 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.91% 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 Parker-Hannifin Corp revealed the company was trading above its Graham Number of $101.81. The company pays a dividend of $2.74 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 18.33, which was below the industry average of 23.62, 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 $-29.85.

Parker-Hannifin Corp performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$29.85
Graham Number $101.81
PEmg 18.33
Current Ratio 1.60
PB Ratio 3.34
Current Dividend $2.74
Dividend Yield 1.81%
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 9/1/2018
Total Current Assets $5,298,082,000
Total Current Liabilities $3,308,521,000
Long-Term Debt $4,313,221,000
Total Assets $15,425,042,000
Intangible Assets $7,441,245,000
Total Liabilities $9,317,936,000
Shares Outstanding (Diluted Average) 134,664,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.41
Jun2018 $7.83
Jun2017 $7.25
Jun2016 $5.89
Jun2015 $6.97
Jun2014 $6.87
Jun2013 $6.26
Jun2012 $7.45
Jun2011 $6.37
Jun2010 $3.40
Jun2009 $3.13
Jun2008 $5.53
Jun2007 $4.68
Jun2006 $3.71
Jun2005 $3.35
Jun2004 $1.94
Jun2003 $1.12
Jun2002 $0.75
Jun2001 $1.97
Jun2000 $2.21
Jun1999 $1.89

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.26
Jun2018 $7.11
Jun2017 $6.71
Jun2016 $6.53
Jun2015 $6.83
Jun2014 $6.53
Jun2013 $6.01
Jun2012 $5.65
Jun2011 $4.71
Jun2010 $3.95
Jun2009 $4.17
Jun2008 $4.41
Jun2007 $3.55
Jun2006 $2.72
Jun2005 $2.09
Jun2004 $1.50
Jun2003 $1.39

Recommended Reading:

Other ModernGraham posts about the company

Parker-Hannifin Corp Valuation – March 2018 $PH
Parker-Hannifin Corp Valuation – July 2016 $PH
Parker Hannifin Corp Valuation – January 2016 Update $PH
Dividend Growth Stocks for the Intelligent Investor – November 2015
Dividend Growth Stocks for the Intelligent Investor – October 2015

Other ModernGraham posts about related companies

Caterpillar Inc Valuation – November 2018 $CAT
Lindsay Corp Valuation – October 2018 $LNN
Lennox International Inc Valuation – October 2018 $LII
Standex International Corp Valuation – September 2018 $SXI
Lincoln Electric Holdings Inc Valuation – August 2018 $LECO
Regal Beloit Corp Valuation – August 2018 $RBC
Kennametal Inc Valuation – August 2018 $KMT
SPX Corp Valuation – August 2018 $SPXC
AGCO Corp Valuation – August 2018 $AGCO
John Bean Technologies Corp Valuation – August 2018 $JBT

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.

Dover Corp Valuation – January 2019 $DOV

Company Profile (excerpt from Reuters): Dover Corporation, incorporated on April 22, 1947, is a diversified global manufacturer, delivering equipment and components, specialty systems, consumable supplies, software and digital solutions and support services. The Company operates through four segments: Energy, Engineered Systems, Fluids and Refrigeration & Food Equipment. The Company’s customers include businesses supplying the waste and recycling, agricultural, defense, energy, automotive and commercial refrigeration industries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DOV – January 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 $10,506,709,846 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 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 20.29% Fail
6. Moderate PEmg Ratio PEmg < 20 16.29 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.91 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 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.24 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.41
MG Growth Estimate -1.32%
MG Value $25.84
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $63.91
MG Value based on 0% Growth $37.46
Market Implied Growth Rate 3.90%
Current Price $71.80
% of Intrinsic Value 277.84%

Dover 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 growth 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 growth 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 seeing its EPSmg (normalized earnings) decline from $4.83 in 2014 to an estimated $4.41 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.9% 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 Dover Corp revealed the company was trading above its Graham Number of $50.79. The company pays a dividend of $1.82 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.29, which was below the industry average of 23.62, 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 $-21.78.

Dover 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) -$21.78
Graham Number $50.79
PEmg 16.29
Current Ratio 1.30
PB Ratio 3.91
Current Dividend $1.82
Dividend Yield 2.53%
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 9/1/2018
Total Current Assets $2,459,049,000
Total Current Liabilities $1,890,305,000
Long-Term Debt $2,981,923,000
Total Assets $8,461,770,000
Intangible Assets $4,915,448,000
Total Liabilities $5,713,836,000
Shares Outstanding (Diluted Average) 149,457,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.05
Dec2017 $5.15
Dec2016 $3.25
Dec2015 $5.46
Dec2014 $4.59
Dec2013 $5.78
Dec2012 $4.41
Dec2011 $4.74
Dec2010 $3.70
Dec2009 $1.91
Dec2008 $3.12
Dec2007 $3.26
Dec2006 $2.74
Dec2005 $2.50
Dec2004 $2.02
Dec2003 $1.44
Dec2002 -$0.60
Dec2001 $1.22
Dec2000 $2.54
Dec1999 $4.41
Dec1998 $1.69

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.41
Dec2017 $4.67
Dec2016 $4.52
Dec2015 $5.10
Dec2014 $4.83
Dec2013 $4.67
Dec2012 $3.94
Dec2011 $3.58
Dec2010 $2.98
Dec2009 $2.65
Dec2008 $2.93
Dec2007 $2.68
Dec2006 $2.14
Dec2005 $1.66
Dec2004 $1.27
Dec2003 $1.20
Dec2002 $1.33

Recommended Reading:

Other ModernGraham posts about the company

Dover Corp Valuation – March 2018 $DOV
Dover Corporation Valuation – July 2016 $DOV
Dividend Growth Stocks for Intelligent Investors – June 2016
Dividend Growth Stocks for Intelligent Investors – February 2016
13 Best Stocks For Value Investors This Week – 12/12/15

Other ModernGraham posts about related companies

Caterpillar Inc Valuation – November 2018 $CAT
Lindsay Corp Valuation – October 2018 $LNN
Lennox International Inc Valuation – October 2018 $LII
Standex International Corp Valuation – September 2018 $SXI
Lincoln Electric Holdings Inc Valuation – August 2018 $LECO
Regal Beloit Corp Valuation – August 2018 $RBC
Kennametal Inc Valuation – August 2018 $KMT
SPX Corp Valuation – August 2018 $SPXC
AGCO Corp Valuation – August 2018 $AGCO
John Bean Technologies Corp Valuation – August 2018 $JBT

Disclaimer:

The author held a long position in DOV but did not hold a position in any other 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.

Caterpillar Inc Valuation – November 2018 $CAT

Company Profile (excerpt from Reuters): Caterpillar Inc. (Caterpillar), incorporated on March 12, 1986, is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The Company operates through segments, including Construction Industries, Resource Industries, Energy & Transportation, Financial Products segment and All Other operating segments. The Company’s products are sold primarily under the brands Caterpillar, CAT, design versions of CAT and Caterpillar, EMD, FG Wilson, MaK, MWM, Perkins, Progress Rail, SEM and Solar Turbines. As of December 31, 2016, the Company’s machines were distributed principally through an organization of dealers (dealer network), 49 located in the United States and 123 located outside the United States, serving 190 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CAT – November 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 $74,890,444,093 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.48 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 -5.01% Fail
6. Moderate PEmg Ratio PEmg < 20 26.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.79 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 1.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.05 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.86
MG Growth Estimate -2.42%
MG Value $17.78
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $70.44
MG Value based on 0% Growth $41.29
Market Implied Growth Rate 8.81%
Current Price $126.91
% of Intrinsic Value 713.89%

Caterpillar 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 or 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, and the lack of earnings stability or growth 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 seeing its EPSmg (normalized earnings) decline from $5.79 in 2014 to an estimated $4.86 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.81% 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 Caterpillar Inc. revealed the company was trading above its Graham Number of $75.93. The company pays a dividend of $3.1 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 26.12, which was below the industry average of 31.29, 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 $-39.81.

Caterpillar 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) -$39.81
Graham Number $75.93
PEmg 26.12
Current Ratio 1.48
PB Ratio 4.79
Current Dividend $3.10
Dividend Yield 2.44%
Number of Consecutive Years of Dividend Growth 4

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 9/1/2018
Total Current Assets $38,454,000,000
Total Current Liabilities $26,033,000,000
Long-Term Debt $25,441,000,000
Total Assets $78,209,000,000
Intangible Assets $8,209,000,000
Total Liabilities $62,319,000,000
Shares Outstanding (Diluted Average) 599,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.18
Dec2017 $1.26
Dec2016 -$0.11
Dec2015 $4.18
Dec2014 $3.90
Dec2013 $5.75
Dec2012 $8.48
Dec2011 $7.40
Dec2010 $4.15
Dec2009 $1.43
Dec2008 $5.66
Dec2007 $5.37
Dec2006 $5.17
Dec2005 $4.04
Dec2004 $2.88
Dec2003 $1.56
Dec2002 $1.15
Dec2001 $1.16
Dec2000 $1.51
Dec1999 $1.32
Dec1998 $2.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.86
Dec2017 $2.13
Dec2016 $3.19
Dec2015 $5.21
Dec2014 $5.79
Dec2013 $6.31
Dec2012 $6.20
Dec2011 $4.97
Dec2010 $3.96
Dec2009 $4.02
Dec2008 $5.08
Dec2007 $4.46
Dec2006 $3.66
Dec2005 $2.66
Dec2004 $1.86
Dec2003 $1.35
Dec2002 $1.31

Recommended Reading:

Other ModernGraham posts about the company

5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018
Caterpillar Inc Valuation – February 2018 $CAT
5 Overvalued Dow Components – February 2017
Caterpillar Inc Valuation – August 2016 $CAT

Other ModernGraham posts about related companies

Lindsay Corp Valuation – October 2018 $LNN
Lennox International Inc Valuation – October 2018 $LII
Standex International Corp Valuation – September 2018 $SXI
Lincoln Electric Holdings Inc Valuation – August 2018 $LECO
Regal Beloit Corp Valuation – August 2018 $RBC
Kennametal Inc Valuation – August 2018 $KMT
SPX Corp Valuation – August 2018 $SPXC
AGCO Corp Valuation – August 2018 $AGCO
John Bean Technologies Corp Valuation – August 2018 $JBT
Stanley Black & Decker Inc Valuation – June 2018 $SWK

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.

Lindsay Corp Valuation – October 2018 $LNN

Company Profile (excerpt from Reuters): Lindsay Corporation, incorporated on January 7, 1974, along with its subsidiaries, provides a range of water management and road infrastructure products and services. The Company operates through two segments: Irrigation Segment and Infrastructure Segment. The Irrigation Segment includes the manufacture and marketing of center pivot, lateral move, and hose reel irrigation systems, which are used primarily in the agricultural industry. The Infrastructure Segment includes the manufacture and marketing of moveable barriers, specialty barriers, crash cushions and end terminals, road marking and road safety equipment, large diameter steel tubing, and railroad signals and structures.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LNN – October 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 $1,106,605,126 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.55 Pass
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 1.34% Fail
6. Moderate PEmg Ratio PEmg < 20 46.87 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.00 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 3.55 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.46 Pass
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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.19
MG Growth Estimate -4.25%
MG Value $9.98
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $31.82
MG Value based on 0% Growth $18.65
Market Implied Growth Rate 19.19%
Current Price $102.87
% of Intrinsic Value 1030.26%

Lindsay Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. 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 seeing its EPSmg (normalized earnings) decline from $3.99 in 2014 to an estimated $2.19 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 19.19% 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 Lindsay Corporation revealed the company was trading above its Graham Number of $34.12. The company pays a dividend of $1.17 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 46.87, which was above the industry average of 31.29. Finally, the company was trading above its Net Current Asset Value (NCAV) of $9.98.

Lindsay 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) $9.98
Graham Number $34.12
PEmg 46.87
Current Ratio 3.55
PB Ratio 4.00
Current Dividend $1.17
Dividend Yield 1.14%
Number of Consecutive Years of Dividend Growth 15

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 5/1/2018
Total Current Assets $350,406,000
Total Current Liabilities $98,671,000
Long-Term Debt $116,622,000
Total Assets $520,228,000
Intangible Assets $93,379,000
Total Liabilities $242,719,000
Shares Outstanding (Diluted Average) 10,785,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.05
Aug2017 $2.17
Aug2016 $1.85
Aug2015 $2.22
Aug2014 $4.00
Aug2013 $5.47
Aug2012 $3.38
Aug2011 $2.90
Aug2010 $1.98
Aug2009 $1.11
Aug2008 $3.20
Aug2007 $1.31
Aug2006 $1.00
Aug2005 $0.41
Aug2004 $0.78
Aug2003 $1.08
Aug2002 $0.76
Aug2001 $0.67
Aug2000 $1.06
Aug1999 $0.96
Aug1998 $1.61

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.19
Aug2017 $2.56
Aug2016 $2.96
Aug2015 $3.54
Aug2014 $3.99
Aug2013 $3.64
Aug2012 $2.66
Aug2011 $2.23
Aug2010 $1.84
Aug2009 $1.65
Aug2008 $1.72
Aug2007 $0.96
Aug2006 $0.79
Aug2005 $0.71
Aug2004 $0.86
Aug2003 $0.90
Aug2002 $0.88

Recommended Reading:

Other ModernGraham posts about the company

Lindsay Corp Valuation – Initial Coverage $LNN

Other ModernGraham posts about related companies

Standex International Corp Valuation – September 2018 $SXI
Lincoln Electric Holdings Inc Valuation – August 2018 $LECO
Regal Beloit Corp Valuation – August 2018 $RBC
Kennametal Inc Valuation – August 2018 $KMT
SPX Corp Valuation – August 2018 $SPXC
AGCO Corp Valuation – August 2018 $AGCO
John Bean Technologies Corp Valuation – August 2018 $JBT
Stanley Black & Decker Inc Valuation – June 2018 $SWK
Pentair PLC Valuation – June 2018 $PNR
Snap-on Inc Valuation – May 2018 $SNA

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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