www.

Aon PLC Valuation – November 2018 $AON

Company Profile (excerpt from Reuters): Aon plc, incorporated on December 8, 2011, is a professional services firm providing a range of risk, retirement and health solutions. The Company provides an advice and solutions to clients focused on risk, retirement, and health. The Company’s principal products and services include, Commercial Risk Solutions, Reinsurance Solutions, Retirement Solutions, Health Solutions, and Data and Analytic Services. Commercial Risk Solutions includes retail brokerage, cyber solutions, global risk consulting, and captives. Retirement Solutions includes core retirement, investment consulting, and talent, rewards and performance. Health Solutions includes heath and benefits brokerage and healthcare exchanges. Data and Analytic Services include Affinity, Aon InPoint, and ReView.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AON – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $39,190,000,000 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 102.43% Pass
5. Moderate PEmg Ratio PEmg < 20 31.35 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.30 Fail
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.23
MG Growth Estimate 6.59%
MG Value $113.40
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $75.84
MG Value based on 0% Growth $44.46
Market Implied Growth Rate 11.42%
Current Price $163.95
% of Intrinsic Value 144.57%

Aon PLC is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. 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 $3.63 in 2014 to an estimated $5.23 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.42% 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.

At the time of valuation, further research into Aon PLC revealed the company was trading above its Graham Number of $49.78. The company pays a dividend of $1.41 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 31.35, which was below the industry average of 32.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Aon PLC receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Graham Number $49.78
PEmg 31.35
PB Ratio 9.30
Dividend Yield 0.86%
TTM Dividend $1.41
Number of Consecutive Years of Dividend Growth 6

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
Long-Term Debt & Capital Lease Obligation $5,822,000,000
Total Assets $25,602,000,000
Intangible Assets $9,542,000,000
Total Liabilities $21,274,000,000
Shares Outstanding (Diluted Average) 245,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.95
Dec2017 $4.70
Dec2016 $5.16
Dec2015 $4.88
Dec2014 $4.66
Dec2013 $3.53
Dec2012 $2.99
Dec2011 $2.87
Dec2010 $2.37
Dec2009 $2.57
Dec2008 $4.80
Dec2007 $2.69
Dec2006 $2.13
Dec2005 $2.17
Dec2004 $1.63
Dec2003 $1.97
Dec2002 $1.61
Dec2001 $0.53
Dec2000 $1.79
Dec1999 $1.33
Dec1998 $2.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.23
Dec2017 $4.78
Dec2016 $4.62
Dec2015 $4.17
Dec2014 $3.63
Dec2013 $3.04
Dec2012 $2.90
Dec2011 $2.92
Dec2010 $2.94
Dec2009 $3.10
Dec2008 $3.14
Dec2007 $2.25
Dec2006 $1.98
Dec2005 $1.80
Dec2004 $1.58
Dec2003 $1.52
Dec2002 $1.35

Recommended Reading:

Other ModernGraham posts about the company

Aon PLC Valuation – February 2018 $AON
Aon PLC Valuation – January 2016 Update $AON
32 Companies in the Spotlight This Week – 12/6/14
Aon PLC Annual Valuation – 2014 $AON

Other ModernGraham posts about related companies

Travelers Companies Inc Valuation – November 2018 $TRV
Stewart Information Services Corp Valuation – August 2018 $STC
Kemper Corp Valuation – August 2018 $KMPR
CNO Financial Group Inc Valuation – August 2018 $CNO
Sun Life Financial Inc Valuation – August 2018 $TSE-SLF
American Financial Group Inc Valuation – August 2018 $AFG
Selective Insurance Group Inc Valuation – July 2018 $SIGI
Genworth Financial Inc Valuation – June 2018 $GNW
Prudential Financial Inc Valuation – June 2018 $PRU
Assurant Inc Valuation – June 2018 $AIZ

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.

Aon PLC Valuation – February 2018 $AON

Company Profile (obtained from Marketwatch): Aon Plc provides insurance brokerage, risk management and human capital consulting services. The company operates through two segments: Risk Solutions and HR Solutions. The Risk Solutions segment acts as an advisor and insurance and reinsurance broker, helping clients manage their risks via consultation, as well as negotiation and placement of insurance risk with insurance carriers through its global distribution network. The HR Solutions segment partners with organizations to solve their most complex benefits, talent and related financial challenges, and improve business performance by designing, implementing, communicating and administering a wide range of human capital, retirement, investment management, health care, compensation and talent management strategies. The company’s clients include corporations and businesses, insurance companies, professional organizations, independent agents and brokers, governments, and other entities. It also serves individuals through personal lines, affinity groups, and certain specialty operations. The company’s products and services are divided into two transactional product lines: retail brokerage and reinsurance brokerage. The retail brokerage product line encompasses retail brokerage services, affinity products, managing general underwriting, placement, and captive management services; and reinsurance brokerage product line offers sophisticated advisory services in program design and claim recoveries that enhance the risk/return characteristics of insurance policy portfolios, improve capital utilization, and evaluate and mitigate catastrophic loss exposures worldwide. Aon was founded in 1979 and is headquartered in London, the United Kingdom.

AON Chart

AON data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AON – February 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 $35,277,667,100 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.07 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 127.02% Pass
6. Moderate PEmg Ratio PEmg < 20 24.27 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.90 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 1.07 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.15 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 $5.87
MG Growth Estimate 9.23%
MG Value $158.30
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $85.12
MG Value based on 0% Growth $49.90
Market Implied Growth Rate 7.88%
Current Price $142.46
% of Intrinsic Value 89.99%

Aon plc Class A Ordinary Shares (UK) does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg 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 Fairly Valued after growing its EPSmg (normalized earnings) from $3.63 in 2014 to an estimated $5.87 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.88% 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 Aon plc Class A Ordinary Shares (UK) revealed the company was trading above its Graham Number of $56.99. The company pays a dividend of $1.41 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 24.27, which was above the industry average of 20.16. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-30.81.

Aon plc Class A Ordinary Shares (UK) 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) -$30.81
Graham Number $56.99
PEmg 24.27
Current Ratio 1.07
PB Ratio 7.90
Current Dividend $1.41
Dividend Yield 0.99%
Number of Consecutive Years of Dividend Growth 6

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 $13,677,000,000
Total Current Liabilities $12,755,000,000
Long-Term Debt $5,667,000,000
Total Assets $26,088,000,000
Intangible Assets $10,091,000,000
Total Liabilities $21,505,000,000
Shares Outstanding (Diluted Average) 254,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.87
Dec2017 $4.70
Dec2016 $5.16
Dec2015 $4.88
Dec2014 $4.66
Dec2013 $3.53
Dec2012 $2.99
Dec2011 $2.87
Dec2010 $2.37
Dec2009 $2.57
Dec2008 $4.80
Dec2007 $2.69
Dec2006 $2.13
Dec2005 $2.17
Dec2004 $1.63
Dec2003 $1.97
Dec2002 $1.61
Dec2001 $0.53
Dec2000 $1.79
Dec1999 $1.33
Dec1998 $2.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.87
Dec2017 $4.78
Dec2016 $4.62
Dec2015 $4.17
Dec2014 $3.63
Dec2013 $3.04
Dec2012 $2.90
Dec2011 $2.92
Dec2010 $2.94
Dec2009 $3.10
Dec2008 $3.14
Dec2007 $2.25
Dec2006 $1.98
Dec2005 $1.80
Dec2004 $1.58
Dec2003 $1.52
Dec2002 $1.35

Recommended Reading:

Other ModernGraham posts about the company

Aon PLC Valuation – January 2016 Update $AON
32 Companies in the Spotlight This Week – 12/6/14
Aon PLC Annual Valuation – 2014 $AON

Other ModernGraham posts about related companies

Travelers Companies Inc Valuation – February 2018 $TRV
Hanover Insurance Group Valuation – Initial Coverage $THG
Prudential Financial Inc Valuation – July 2017 $PRU
Assurant Inc Valuation – March 2017 $AIZ
American International Group Inc Valuation – March 2017 $AIG
Torchmark Corporation Valuation – March 2017 $TMK
Humana Inc Valuation – Initial Coverage $HUM
Chubb Ltd Valuation – March 2017 $CB
Stewart Information Services Corp Valuation – Initial Coverage $STC
Loews Corporation – February 2017 $L

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.

Aon PLC Valuation – January 2016 Update $AON

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 - November 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 Aon PLC (AON) fares in the ModernGraham valuation model.

[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 AON

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 $23,565,064,600 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.03 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 35.45% Pass
6. Moderate PEmg Ratio PEmg < 20 20.69 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.14 Fail
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 1.03 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 12.66 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

AON value chart January 2016

EPSmg $4.15
MG Growth Estimate 6.31%
MG Value $87.72
Opinion Fairly Valued
MG Value based on 3% Growth $60.20
MG Value based on 0% Growth $35.29
Market Implied Growth Rate 6.10%
Current Price $85.91
% of Intrinsic Value 97.93%

Aon PLC does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio and the high PEmg and PB ratios.  The Enterprising Investor is concerned by the level of debt relative to the current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.92 in 2011 to an estimated $4.15 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 6.1% 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 Aon PLC (AON)?  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

AON charts January 2016

Net Current Asset Value (NCAV) -$26.09
Graham Number $48.36
PEmg 20.69
Current Ratio 1.03
PB Ratio 4.14
Dividend Yield 1.28%
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 Sep2015
Total Current Assets $13,920,000,000
Total Current Liabilities $13,541,000,000
Long-Term Debt $4,799,000,000
Total Assets $27,206,000,000
Intangible Assets $10,828,000,000
Total Liabilities $21,323,000,000
Shares Outstanding (Diluted Average) 283,800,000

Earnings Per Share History

Next Fiscal Year Estimate $4.84
Dec2014 $4.66
Dec2013 $3.53
Dec2012 $2.99
Dec2011 $2.87
Dec2010 $2.37
Dec2009 $2.57
Dec2008 $4.80
Dec2007 $2.69
Dec2006 $2.13
Dec2005 $2.17
Dec2004 $1.63
Dec2003 $1.88
Dec2002 $1.61
Dec2001 $0.53
Dec2000 $1.79
Dec1999 $1.33
Dec1998 $2.07
Dec1997 $1.12
Dec1996 $1.26

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.15
Dec2014 $3.63
Dec2013 $3.04
Dec2012 $2.90
Dec2011 $2.92
Dec2010 $2.94
Dec2009 $3.10
Dec2008 $3.14
Dec2007 $2.24
Dec2006 $1.97
Dec2005 $1.78
Dec2004 $1.56
Dec2003 $1.49
Dec2002 $1.35
Dec2001 $1.27
Dec2000 $1.60
Dec1999 $1.39

Recommended Reading:

Other ModernGraham posts about the company

32 Companies in the Spotlight This Week – 12/6/14

Other ModernGraham posts about related companies

Progressive Corp Valuation – November 2015 Update $PGR
Progressive Corp Valuation – November 2015 Update $PGR
Ace Limited Valuation – November 2015 Update $ACE
Travelers Companies Inc. Valuation – November 2015 Update $TRV
Lincoln National Corp Valuation – November 2015 Update $LNC
Unum Group Valuation – November 2015 Update $UNM
Principal Financial Group Valuation – November 2015 Update $PFG
Assurant Inc. Valuation – November 2015 Update $AIZ
American International Group Inc. Valuation – November 2015 Update $AIG
Cincinnati Financial Corp Valuation – November 2015 Update $CINF

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.

Aon PLC Annual Valuation – 2014 $AON

220px-Aon_Corporation_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 or by reviewing the 5 Most Undervalued Companies for the Enterprising Investor – November 2014.  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 Aon PLC (AON) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance):  Aon plc (Aon) is a global provider of risk management services, insurance and reinsurance brokerage, and human resource consulting and outsourcing, delivering distinctive client value via risk management and workforce productivity solutions. The Company operates in two segments: Risk Solutions and Human Resource (HR) Solutions. Effective June 3, 2014, Aon acquired Lorica Consulting Ltd. In July 2014, the Company announced that its Aon Affinity completed the acquisition of StoneRiver National Flood Services, Inc. and related entities. Effective August 6, 2014, Aon PLC, through its Aon Risk Solutions business, acquired Grana y Asociados Corredores de Seguros SA. In September 2014, the Company Aon Risk Solutions, announced it has sold Aon eSolutions, Inc., risk management information systems business unit.

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 $92.49
MG Value $74.30
MG Opinion Overvalued
Value Based on 3% Growth $57.23
Value Based on 0% Growth $33.55
Market Implied Growth Rate 7.47%
Net Current Asset Value (NCAV) -$23.16
PEmg 23.43
Current Ratio 1.06
PB Ratio 3.80

Balance Sheet – September 2014

Current Assets $14,755,000,000
Current Liabilities $13,856,000,000
Total Debt $5,031,000,000
Total Assets $28,827,000,000
Intangible Assets $11,638,000,000
Total Liabilities $21,612,000,000
Outstanding Shares 296,100,000

Earnings Per Share

2014 (estimate) $5.60
2013 $3.53
2012 $2.99
2011 $2.87
2010 $2.37
2009 $2.57
2008 $4.80
2007 $2.69
2006 $2.13
2005 $2.17
2004 $1.63

Earnings Per Share – ModernGraham

2014 (estimate) $3.95
2013 $3.04
2012 $2.90
2011 $2.92
2010 $2.94
2009 $3.10

Dividend History

Conclusion:

Aon does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned by the low current ratio, and the high PEmg and PB ratios.  The Enterprising Investor is concerned by the level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.94 in 2010 to only an estimated $3.95 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 7.47% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below 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 Aon PLC (AON)?  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 Aon PLC (AON) or 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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Humana Inc Valuation – March 2019 #HUM

Company Profile (excerpt from Reuters): Humana Inc. (Humana), incorporated on July 27, 1964, is a health and well-being company. The Company’s segments include Retail, Group and Specialty, Healthcare Services and Individual Commercial. The Retail segment consists of Medicare benefits, as well as individual commercial fully insured medical benefits, including dental, vision, and other supplemental health products. The Group and Specialty segment consists administrative services only (ASO) products. The Healthcare Services segment includes services offered to its health plan members, as well as to third parties, including pharmacy solutions, provider services, home-based services and clinical programs, as well as services and capabilities to manage population health. The Individual Commercial segment includes Individual Commercial products marketed under the HumanaOne brand.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HUM – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $36,974,919,627 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 106.34% Pass
5. Moderate PEmg Ratio PEmg < 20 20.25 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.69 Fail
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $13.46
MG Growth Estimate 10.62%
MG Value $400.17
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $195.17
MG Value based on 0% Growth $114.41
Market Implied Growth Rate 5.88%
Current Price $272.60
% of Intrinsic Value 68.12%

Humana 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 has no initial concerns. 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 Undervalued after growing its EPSmg (normalized earnings) from $7.88 in 2015 to an estimated $13.46 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.88% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Humana Inc revealed the company was trading above its Graham Number of $170.56. The company pays a dividend of $2 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 20.25, which was below the industry average of 26.11, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Humana Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Graham Number $170.56
PEmg 20.25
PB Ratio 3.69
Dividend Yield 0.73%
TTM Dividend $2.00
Number of Consecutive Years of Dividend Growth 2

Useful Links:

 

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $4,375,000,000
Total Assets $25,413,000,000
Intangible Assets $4,142,000,000
Total Liabilities $15,252,000,000
Shares Outstanding (Diluted Average) 137,527,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.25
Dec2018 $12.16
Dec2017 $16.81
Dec2016 $4.07
Dec2015 $8.44
Dec2014 $7.36
Dec2013 $7.73
Dec2012 $7.47
Dec2011 $8.46
Dec2010 $6.47
Dec2009 $6.15
Dec2008 $3.83
Dec2007 $4.91
Dec2006 $2.90
Dec2005 $1.87
Dec2004 $1.72
Dec2003 $1.38
Dec2002 $0.83
Dec2001 $0.70
Dec2000 $0.54
Dec1999 -$2.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $13.46
Dec2018 $10.97
Dec2017 $9.87
Dec2016 $6.61
Dec2015 $7.88
Dec2014 $7.57
Dec2013 $7.53
Dec2012 $7.12
Dec2011 $6.61
Dec2010 $5.41
Dec2009 $4.56
Dec2008 $3.53
Dec2007 $3.11
Dec2006 $2.05
Dec2005 $1.52
Dec2004 $1.24
Dec2003 $0.74

Recommended Reading:

Other ModernGraham posts about the company

Humana Inc Valuation – June 2018 $HUM
Humana Inc Valuation – Initial Coverage $HUM
Humana Inc Valuation – August 2016 $HUM
Humana Inc Stock Valuation – February 2016 $HUM
Humana Inc. Valuation – October 2015 Update $HUM

Other ModernGraham posts about related companies

American International Group Inc Valuation – March 2019 #AIG
Chubb Ltd Valuation – March 2019 #CB
Loews Corporation Valuation – March 2019 #L
Anthem Inc Valuation – February 2019 $ANTM
Arthur J Gallagher & Co Valuation – February 2019 $AJG
Brighthouse Financial Inc Valuation – February 2019 $BHF
Allstate Corp Valuation – February 2019 $ALL
Hartford Financial Services Group Inc Valuation – February 2019 $HIG
Unum Group Valuation – February 2019 $UNM
Everest Re Group Ltd Valuation – February 2019 $RE

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.

Hartford Financial Services Group Inc Valuation – February 2019 $HIG

Company Profile (excerpt from Reuters): The Hartford Financial Services Group, Inc., incorporated on December 9, 1985, is a holding company for insurance and financial services subsidiaries. The Company, through its subsidiaries, provides property and casualty insurance, group life and disability products, and mutual funds and exchange-traded products to individual and business customers in the United States. The Company’s segments include Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits, Mutual Funds, and Corporate. The Company administers life insurance and annuity products previously sold.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HIG – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,456,035,313 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -72.65% Fail
5. Moderate PEmg Ratio PEmg < 20 28.38 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.35 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.71
MG Growth Estimate -1.62%
MG Value $9.01
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $24.86
MG Value based on 0% Growth $14.57
Market Implied Growth Rate 9.94%
Current Price $48.66
% of Intrinsic Value 540.08%

Hartford Financial Services Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding 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 $1.92 in 2015 to an estimated $1.71 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.94% 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.

At the time of valuation, further research into Hartford Financial Services Group Inc revealed the company was trading below its Graham Number of $60.98. The company pays a dividend of $1.1 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 28.38, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Hartford Financial Services Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Graham Number $60.98
PEmg 28.38
PB Ratio 1.35
Dividend Yield 2.26%
TTM Dividend $1.10
Number of Consecutive Years of Dividend Growth 6

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $4,265,000,000
Total Assets $62,307,000,000
Intangible Assets $1,947,000,000
Total Liabilities $49,206,000,000
Shares Outstanding (Diluted Average) 364,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.65
Dec2018 $4.95
Dec2017 -$8.61
Dec2016 $2.27
Dec2015 $3.96
Dec2014 $1.73
Dec2013 $0.36
Dec2012 -$0.18
Dec2011 $1.40
Dec2010 $2.40
Dec2009 -$2.93
Dec2008 -$8.99
Dec2007 $9.24
Dec2006 $8.69
Dec2005 $7.44
Dec2004 $7.12
Dec2003 -$0.33
Dec2002 $3.97
Dec2001 $2.10
Dec2000 $4.34
Dec1999 $3.79

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.71
Dec2018 $0.45
Dec2017 -$1.22
Dec2016 $2.19
Dec2015 $1.92
Dec2014 $0.98
Dec2013 $0.48
Dec2012 -$0.20
Dec2011 -$0.06
Dec2010 $0.03
Dec2009 $0.13
Dec2008 $2.67
Dec2007 $7.81
Dec2006 $6.53
Dec2005 $4.98
Dec2004 $3.65
Dec2003 $2.20

Recommended Reading:

Other ModernGraham posts about the company

Hartford Financial Services Analysis – 2015 Annual Update $HIG
15 Companies in the Spotlight This Week – 5/31/14
Hartford Financial Services 2014 Annual Valuation $HIG

Other ModernGraham posts about related companies

Unum Group Valuation – February 2019 $UNM
Everest Re Group Ltd Valuation – February 2019 $RE
Cigna Corp Valuation – January 2019 $CI
MetLife Inc Valuation – January 2019 $MET
Aflac Inc Valuation – January 2019 $AFL
Principal Financial Group Inc Valuation – January 2019 $PFG
Progressive Corp Valuation – January 2019 $PGR
Lincoln National Corp Valuation – January 2019 $LNC
Cincinnati Financial Corp Valuation – January 2019 $CINF
Aon PLC Valuation – November 2018 $AON

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.

Unum Group Valuation – February 2019 $UNM

Company Profile (excerpt from Reuters): Unum Group, incorporated on March 22, 1995, is a provider of financial protection benefits in the United States and the United Kingdom. The Company’s products include disability, life, accident, critical illness, dental and vision, and other related services. Its segments include Unum US, Unum UK, Colonial Life, Closed Block and Corporate. Its Unum US segment includes group long-term and short-term disability insurance, group life and accidental death and dismemberment products, and supplemental and voluntary lines of business. Its Unum UK segment includes insurance for group long-term disability, group life, and supplemental lines of business, which include dental, individual disability and critical illness products. Its Colonial Life segment includes insurance for accident, sickness, and disability products, life products, and cancer and critical illness products issued primarily by Colonial Life & Accident Insurance Company and marketed to employees, on both a group and an individual basis, at the workplace through an independent contractor agency sales force and brokers. Its Closed Block segment consists of other insurance products. Its principal operating subsidiaries in the United States are Unum Life Insurance Company of America (Unum America), Provident Life and Accident Insurance Company (Provident), The Paul Revere Life Insurance Company (Paul Revere Life), and Colonial Life & Accident Insurance Company, and in the United Kingdom, Unum Limited.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of UNM – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,623,067,828 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 76.32% Pass
5. Moderate PEmg Ratio PEmg < 20 8.85 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.90 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.02
MG Growth Estimate 7.24%
MG Value $92.24
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $58.22
MG Value based on 0% Growth $34.13
Market Implied Growth Rate 0.17%
Current Price $35.53
% of Intrinsic Value 38.52%

Unum Group qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.71 in 2015 to an estimated $4.02 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Unum Group revealed the company was trading below its Graham Number of $68.83. The company pays a dividend of $0.98 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.85, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Unum Group fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $68.83
PEmg 8.85
PB Ratio 0.90
Dividend Yield 2.76%
TTM Dividend $0.98
Number of Consecutive Years of Dividend Growth 10

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $2,971,300,000
Total Assets $61,875,600,000
Intangible Assets $350,300,000
Total Liabilities $53,253,800,000
Shares Outstanding (Diluted Average) 217,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.24
Dec2018 $2.38
Dec2017 $4.37
Dec2016 $3.95
Dec2015 $3.50
Dec2014 $1.57
Dec2013 $3.19
Dec2012 $3.17
Dec2011 $0.94
Dec2010 $2.69
Dec2009 $2.57
Dec2008 $1.62
Dec2007 $1.91
Dec2006 $1.23
Dec2005 $1.64
Dec2004 -$0.86
Dec2003 -$1.31
Dec2002 $1.66
Dec2001 $2.21
Dec2000 $2.22
Dec1999 -$0.77

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.02
Dec2018 $3.32
Dec2017 $3.63
Dec2016 $3.20
Dec2015 $2.71
Dec2014 $2.31
Dec2013 $2.63
Dec2012 $2.30
Dec2011 $1.89
Dec2010 $2.24
Dec2009 $1.94
Dec2008 $1.46
Dec2007 $1.09
Dec2006 $0.61
Dec2005 $0.43
Dec2004 $0.14
Dec2003 $0.69

Recommended Reading:

Other ModernGraham posts about the company

5 Low P/E Companies In The S&P 500 – August 2018
Best Stocks Below Their Graham Number – August 2018
10 Low PE Stock Picks for the Defensive Investor – August 2018
Best Stocks Below Their Graham Number – June 2018
10 Low PE Stock Picks for the Defensive Investor – June 2018

Other ModernGraham posts about related companies

Everest Re Group Ltd Valuation – February 2019 $RE
Cigna Corp Valuation – January 2019 $CI
MetLife Inc Valuation – January 2019 $MET
Aflac Inc Valuation – January 2019 $AFL
Principal Financial Group Inc Valuation – January 2019 $PFG
Progressive Corp Valuation – January 2019 $PGR
Lincoln National Corp Valuation – January 2019 $LNC
Cincinnati Financial Corp Valuation – January 2019 $CINF
Aon PLC Valuation – November 2018 $AON
Travelers Companies Inc Valuation – November 2018 $TRV

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.

Everest Re Group Ltd Valuation – February 2019 $RE

Company Profile (excerpt from Reuters): Everest Re Group, Ltd., incorporated on August 26, 1999, through its subsidiaries, is engaged in the underwriting of reinsurance and insurance in the United States, Bermuda and international markets. The Company operates in segments: U.S. Reinsurance, International, Bermuda and Insurance. The Company underwrites reinsurance both through brokers and directly with ceding companies. The Company underwrites insurance principally through general agent relationships, brokers and surplus lines brokers. The Company offers treaty and facultative reinsurance, and admitted and non-admitted insurance. Its products include the range of property and casualty reinsurance, and insurance coverage’s, including marine, aviation, surety, errors and omissions liability (E&O), directors’ and officers’ liability (D&O), medical malpractice, other specialty lines, accident and health (A&H) and workers’ compensation. The Company’s subsidiaries include Everest Reinsurance (Bermuda), Ltd. (Bermuda Re), Everest International Reinsurance, Ltd., Everest Reinsurance Company (Ireland) Limited (Ireland Re), Everest Reinsurance Company (Everest Re), Everest Insurance Company of Canada, Everest National Insurance Company, Everest Indemnity Insurance Company, Everest Security Insurance Company and Everest International Assurance, Ltd.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RE – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,035,643,647 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 62.33% Pass
5. Moderate PEmg Ratio PEmg < 20 17.24 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.08 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $12.90
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $186.99
MG Value based on 0% Growth $109.62
Market Implied Growth Rate 4.37%
Current Price $222.29
% of Intrinsic Value N/A

Everest Re Group Ltd does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has concerns regarding 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 $19.09 in 2014 to an estimated $12.9 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.37% 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.

At the time of valuation, further research into Everest Re Group Ltd revealed the company was trading above its Graham Number of $79.48. The company pays a dividend of $5.05 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 17.24, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Everest Re Group Ltd scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Graham Number $79.48
PEmg 17.24
PB Ratio 1.08
Dividend Yield 2.27%
TTM Dividend $5.05
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 9/1/2018
Long-Term Debt & Capital Lease Obligation $236,634,000
Total Assets $24,410,857,000
Intangible Assets $0
Total Liabilities $16,081,844,000
Shares Outstanding (Diluted Average) 40,542,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.37
Dec2017 $11.36
Dec2016 $23.68
Dec2015 $22.10
Dec2014 $25.91
Dec2013 $25.44
Dec2012 $15.79
Dec2011 -$1.49
Dec2010 $10.70
Dec2009 $13.22
Dec2008 -$0.30
Dec2007 $13.19
Dec2006 $12.87
Dec2005 -$3.79
Dec2004 $8.71
Dec2003 $7.74
Dec2002 $4.52
Dec2001 $2.10
Dec2000 $4.02
Dec1999 $3.25
Dec1998 $3.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.90
Dec2017 $19.67
Dec2016 $23.41
Dec2015 $21.37
Dec2014 $19.09
Dec2013 $14.70
Dec2012 $8.75
Dec2011 $5.84
Dec2010 $9.65
Dec2009 $8.43
Dec2008 $6.07
Dec2007 $8.75
Dec2006 $6.35
Dec2005 $3.35
Dec2004 $6.42
Dec2003 $4.96
Dec2002 $3.52

Recommended Reading:

Other ModernGraham posts about the company

Everest Re Group Ltd Valuation – Initial Coverage $RE

Other ModernGraham posts about related companies

Cigna Corp Valuation – January 2019 $CI
MetLife Inc Valuation – January 2019 $MET
Aflac Inc Valuation – January 2019 $AFL
Principal Financial Group Inc Valuation – January 2019 $PFG
Progressive Corp Valuation – January 2019 $PGR
Lincoln National Corp Valuation – January 2019 $LNC
Cincinnati Financial Corp Valuation – January 2019 $CINF
Aon PLC Valuation – November 2018 $AON
Travelers Companies Inc Valuation – November 2018 $TRV
Stewart Information Services Corp Valuation – August 2018 $STC

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.

Cigna Corp Valuation – January 2019 $CI

Company Profile (excerpt from Reuters): Cigna Corporation (Cigna), incorporated on November 3, 1981, together with its subsidiaries, is a health services company. The Company offers medical, dental, disability, life and accident insurance and related products and services. The Company’s segments include Global Health Care, Global Supplemental Benefits, Group Disability and Life, and Other Operations and Corporate. The Company’s products are offered through employers and other groups, such as Governmental and non-Governmental organizations, unions and associations. Cigna also offers commercial health and dental insurance, Medicare and Medicaid products and health, life and accident insurance coverages to individuals in the United States and international markets. The Company’s other business operations include corporate-owned life insurance business (COLI), run-off reinsurance and settlement annuity businesses.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CI – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $73,825,240,499 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 98.78% Pass
5. Moderate PEmg Ratio PEmg < 20 20.83 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.07 Fail
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $9.31
MG Growth Estimate 8.13%
MG Value $230.49
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $134.96
MG Value based on 0% Growth $79.11
Market Implied Growth Rate 6.17%
Current Price $193.88
% of Intrinsic Value 84.12%

Cigna Holding Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. 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 $6.04 in 2014 to an estimated $9.31 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.17% 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.

At the time of valuation, further research into Cigna Holding Co revealed the company was trading above its Graham Number of $122.31. The company pays a dividend of $0.04 per share, for a yield of 0% Its PEmg (price over earnings per share – ModernGraham) was 20.83, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Cigna Holding Co receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Graham Number $122.31
PEmg 20.83
PB Ratio 3.07
Dividend Yield 0.02%
TTM Dividend $0.04
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 9/1/2018
Long-Term Debt & Capital Lease Obligation $25,041,000,000
Total Assets $82,956,000,000
Intangible Assets $6,129,000,000
Total Liabilities $67,401,000,000
Shares Outstanding (Diluted Average) 246,112,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.81
Dec2017 $8.77
Dec2016 $7.19
Dec2015 $8.04
Dec2014 $7.83
Dec2013 $5.18
Dec2012 $5.61
Dec2011 $4.59
Dec2010 $4.65
Dec2009 $4.73
Dec2008 $1.05
Dec2007 $3.87
Dec2006 $3.43
Dec2005 $4.17
Dec2004 $3.48
Dec2003 $1.50
Dec2002 -$1.06
Dec2001 $2.08
Dec2000 $1.95
Dec1999 $3.00
Dec1998 $2.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.31
Dec2017 $7.84
Dec2016 $7.17
Dec2015 $6.86
Dec2014 $6.04
Dec2013 $5.08
Dec2012 $4.72
Dec2011 $4.11
Dec2010 $3.77
Dec2009 $3.37
Dec2008 $2.86
Dec2007 $3.60
Dec2006 $3.08
Dec2005 $2.62
Dec2004 $1.75
Dec2003 $1.09
Dec2002 $1.12

Recommended Reading:

Other ModernGraham posts about the company

Cigna Corp Valuation – March 2018 $CI
5 Undervalued Companies for Value Investors with a Low Beta – December 2016
5 Undervalued Companies for Value Investors with a Low Beta – September 2016
5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – August 2016
5 Undervalued Companies with a Low Beta – August 2016

Other ModernGraham posts about related companies

MetLife Inc Valuation – January 2019 $MET
Aflac Inc Valuation – January 2019 $AFL
Principal Financial Group Inc Valuation – January 2019 $PFG
Progressive Corp Valuation – January 2019 $PGR
Lincoln National Corp Valuation – January 2019 $LNC
Cincinnati Financial Corp Valuation – January 2019 $CINF
Aon PLC Valuation – November 2018 $AON
Travelers Companies Inc Valuation – November 2018 $TRV
Stewart Information Services Corp Valuation – August 2018 $STC
Kemper Corp Valuation – August 2018 $KMPR

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.

MetLife Inc Valuation – January 2019 $MET

Company Profile (excerpt from Reuters): MetLife, Inc. (MetLife), incorporated on August 10, 1999, is a provider of life insurance, annuities, employee benefits and asset management. The Company’s segments include U.S.; Asia; Latin America; Europe, the Middle East and Africa (EMEA); MetLife Holdings, and Corporate & Other. In the United States, the Company provides a range of insurance and financial services products, including life, dental, disability, property and casualty, guaranteed interest, stable value and annuities to both individuals and groups. Outside the United States, the Company provides life, medical, dental, credit and other accident and health insurance, as well as annuities, endowment and retirement and savings products to both individuals and groups.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MET – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $41,989,964,657 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 45.90% Pass
5. Moderate PEmg Ratio PEmg < 20 12.39 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.82 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.43
MG Growth Estimate -1.32%
MG Value $20.10
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $49.78
MG Value based on 0% Growth $29.18
Market Implied Growth Rate 1.95%
Current Price $42.55
% of Intrinsic Value 211.68%

Metlife Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has concerns regarding 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 $3.77 in 2014 to an estimated $3.43 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.95% 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.

At the time of valuation, further research into Metlife Inc revealed the company was trading below its Graham Number of $71.76. The company pays a dividend of $1.6 per share, for a yield of 3.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.39, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $71.76
PEmg 12.39
PB Ratio 0.82
Dividend Yield 3.76%
TTM Dividend $1.60
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 9/1/2018
Long-Term Debt & Capital Lease Obligation $16,554,000,000
Total Assets $698,451,000,000
Intangible Assets $9,440,000,000
Total Liabilities $646,642,000,000
Shares Outstanding (Diluted Average) 1,000,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.07
Dec2017 $3.62
Dec2016 $0.67
Dec2015 $4.62
Dec2014 $5.42
Dec2013 $2.91
Dec2012 $1.12
Dec2011 $5.76
Dec2010 $2.86
Dec2009 -$2.89
Dec2008 $4.14
Dec2007 $5.48
Dec2006 $7.99
Dec2005 $6.16
Dec2004 $3.65
Dec2003 $2.94
Dec2002 $2.20
Dec2001 $0.62
Dec2000 $1.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.43
Dec2017 $3.23
Dec2016 $3.00
Dec2015 $4.10
Dec2014 $3.77
Dec2013 $2.61
Dec2012 $2.37
Dec2011 $3.02
Dec2010 $2.27
Dec2009 $2.71
Dec2008 $5.50
Dec2007 $5.87
Dec2006 $5.57
Dec2005 $3.95
Dec2004 $2.62
Dec2003 $1.89
Dec2002 $1.20

Recommended Reading:

Other ModernGraham posts about the company

MetLife Inc Valuation – March 2018 $MET
Best Stocks Below Their Graham Number – February 2017
10 Best Dividend Paying Stocks for the Enterprising Investor – February 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017
Best Stocks Below Their Graham Number – January 2017

Other ModernGraham posts about related companies

Aflac Inc Valuation – January 2019 $AFL
Principal Financial Group Inc Valuation – January 2019 $PFG
Progressive Corp Valuation – January 2019 $PGR
Lincoln National Corp Valuation – January 2019 $LNC
Cincinnati Financial Corp Valuation – January 2019 $CINF
Aon PLC Valuation – November 2018 $AON
Travelers Companies Inc Valuation – November 2018 $TRV
Stewart Information Services Corp Valuation – August 2018 $STC
Kemper Corp Valuation – August 2018 $KMPR
CNO Financial Group Inc Valuation – August 2018 $CNO

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.

Back To Top