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Caterpillar Inc Valuation – April 2019 #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 – April 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 $80,783,215,831 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.37 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 5.64% Fail
6. Moderate PEmg Ratio PEmg < 20 21.71 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.84 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 1.37 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.36 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.47
MG Growth Estimate 3.62%
MG Value $101.81
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $93.75
MG Value based on 0% Growth $54.96
Market Implied Growth Rate 6.60%
Current Price $140.36
% of Intrinsic Value 137.86%

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 over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $5.21 in 2015 to an estimated $6.47 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.6% 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 $72.74. The company pays a dividend of $3.28 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 21.71, which was below the industry average of 26.97, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-44.06.

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) -$44.06
Graham Number $72.74
PEmg 21.71
Current Ratio 1.37
PB Ratio 5.84
Current Dividend $3.28
Dividend Yield 2.34%
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 12/1/2018
Total Current Assets $38,603,000,000
Total Current Liabilities $28,218,000,000
Long-Term Debt $24,544,000,000
Total Assets $78,509,000,000
Intangible Assets $8,114,000,000
Total Liabilities $64,429,000,000
Shares Outstanding (Diluted Average) 586,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.64
Dec2018 $10.26
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

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.47
Dec2018 $4.55
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

Recommended Reading:

Other ModernGraham posts about the company

5 Overvalued Dow Components – April 2019
5 Overvalued Dow Components – January 2019
Caterpillar Inc Valuation – November 2018 $CAT
5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Charter Communications Inc Valuation – February 2019 $CHTR

Company Profile (excerpt from Reuters): Charter Communications, Inc., incorporated on July 9, 2003, is a holding company. The Company is a cable operator in the United States and a broadband communications services company. The Company operates in cable services segment. As of December 31, 2016, the Company was engaged in providing video, Internet and voice services to approximately 26.2 million residential and business customers. In addition, it sells video and online advertising inventory to local, regional and national advertising customers and fiber-delivered communications and managed information technology (IT) solutions to enterprise customers. The Company also owns and operates regional sports networks and local sports, news and lifestyle channels and sells security and home management services to the residential marketplace.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CHTR – February 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $78,923,408,111 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.23 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 -562.00% Fail
6. Moderate PEmg Ratio PEmg < 20 30.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.82 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.23 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.43 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $11.58
MG Growth Estimate 15.00%
MG Value $445.83
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $167.91
MG Value based on 0% Growth $98.43
Market Implied Growth Rate 10.88%
Current Price $350.44
% of Intrinsic Value 78.60%

Charter Communications 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 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 stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $-2.46 in 2015 to an estimated $11.58 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 10.88% 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 Charter Communications Inc revealed the company was trading above its Graham Number of $124.38. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 30.26, which was below the industry average of 92.4, 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 $-430.86.

Charter Communications 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) -$430.86
Graham Number $124.38
PEmg 30.26
Current Ratio 0.23
PB Ratio 1.82
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,730,000,000
Total Current Liabilities $12,095,000,000
Long-Term Debt $69,537,000,000
Total Assets $146,130,000,000
Intangible Assets $106,914,000,000
Total Liabilities $101,858,000,000
Shares Outstanding (Diluted Average) 230,069,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.27
Dec2018 $5.22
Dec2017 $34.09
Dec2016 $15.94
Dec2015 -$2.68
Dec2014 -$1.88
Dec2013 -$1.83
Dec2012 -$3.37
Dec2011 -$3.75
Dec2010 -$2.31
Dec2009 $0.00
Dec2008 -$7.26
Dec2007 -$4.61
Dec2006 -$4.57
Dec2005 -$3.46
Dec2004 -$16.00
Dec2003 -$0.91
Dec2002 -$9.46
Dec2001 -$4.79
Dec2000 -$4.20
Dec1999 -$2.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $11.58
Dec2018 $13.54
Dec2017 $14.71
Dec2016 $3.75
Dec2015 -$2.46
Dec2014 -$2.44
Dec2013 -$2.57
Dec2012 -$3.07
Dec2011 -$3.14
Dec2010 -$3.14
Dec2009 -$3.70
Dec2008 -$6.09
Dec2007 -$5.64
Dec2006 -$6.40
Dec2005 -$7.18
Dec2004 -$8.39
Dec2003 -$4.51

Recommended Reading:

Other ModernGraham posts about the company

Charter Communications Inc Valuation – May 2018 $CHTR
Charter Communications Inc Valuation – Initial Coverage $CHTR

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AT&T Inc Valuation – January 2019 $T
Juniper Networks Inc Valuation – January 2019 $JNPR
SBA Communications Corp Valuation – January 2019 $SBAC
Harris Corp Valuation – December 2018 $HRS
Verizon Communications Inc Valuation – November 2018 $VZ
Lumentum Holdings Inc Valuation – October 2018 $LITE
Windstream Holdings Inc Valuation – September 2018 $WIN
Sierra Wireless Inc Valuation – September 2018 $TSE:SW
Frontier Communications Corp Valuation – August 2018 $FTR

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.

SBA Communications Corp Valuation – January 2019 $SBAC

Company Profile (excerpt from Reuters): SBA Communications Corporation, incorporated on December 23, 1996, is an independent owner and operator of wireless communications tower structures, rooftops and other structures that support antennas used for wireless communications. The Company’s operating segments include site leasing and site development. The site leasing business includes segments, domestic site leasing and international site leasing. The Company’s primary business line is its site leasing business. In its site leasing business, the Company leases antenna space to wireless service providers on towers that it owns or operates, and manages rooftop and tower sites for property owners under various contractual arrangements. The Company owns approximately 25,460 towers. The Company also manages or leases approximately 5,500 actual or potential towers. The Company’s other business line is its site development business, through which it assists wireless service providers in developing and maintaining their own wireless service networks. The Company’s principal operations are in the United States and its territories. In addition, it owns and operates towers in Canada, Central America and South America.

Downloadable PDF version of this valuation:

ModernGraham Valuation of SBAC – 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 $18,326,242,846 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.23 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 -138.56% Fail
6. Moderate PEmg Ratio PEmg < 20 895.24 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -6.04 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 1.23 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 156.23 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.18
MG Growth Estimate 15.00%
MG Value $7.03
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $2.65
MG Value based on 0% Growth $1.55
Market Implied Growth Rate 443.37%
Current Price $163.53
% of Intrinsic Value 2325.29%

SBA Communications 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 stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.75 in 2014 to an estimated $0.18 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 443.37% 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 SBA Communications Corporation revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 895.24, which was above the industry average of 25.67. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-86.39.

SBA Communications Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$86.39
Graham Number $0.00
PEmg 895.24
Current Ratio 1.23
PB Ratio -6.04
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $327,663,000
Total Current Liabilities $265,512,000
Long-Term Debt $9,710,145,000
Total Assets $7,213,823,000
Intangible Assets $3,387,955,000
Total Liabilities $10,358,906,000
Shares Outstanding (Diluted Average) 116,114,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.08
Dec2017 $0.86
Dec2016 $0.61
Dec2015 -$1.37
Dec2014 -$0.19
Dec2013 -$0.44
Dec2012 -$1.51
Dec2011 -$1.14
Dec2010 -$1.68
Dec2009 -$1.20
Dec2008 -$0.61
Dec2007 -$0.74
Dec2006 -$1.36
Dec2005 -$1.28
Dec2004 -$2.52
Dec2003 -$3.36
Dec2002 -$5.29
Dec2001 -$2.99
Dec2000 -$0.70
Dec1999 -$1.77
Dec1998 -$2.64

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.18
Dec2017 $0.12
Dec2016 -$0.36
Dec2015 -$0.87
Dec2014 -$0.75
Dec2013 -$1.08
Dec2012 -$1.34
Dec2011 -$1.20
Dec2010 -$1.19
Dec2009 -$0.98
Dec2008 -$1.01
Dec2007 -$1.43
Dec2006 -$2.10
Dec2005 -$2.68
Dec2004 -$3.24
Dec2003 -$3.34
Dec2002 -$3.11

Recommended Reading:

Other ModernGraham posts about the company

SBA Communications Corp Valuation – Initial Coverage $SBAC

Other ModernGraham posts about related companies

Harris Corp Valuation – December 2018 $HRS
Verizon Communications Inc Valuation – November 2018 $VZ
Lumentum Holdings Inc Valuation – October 2018 $LITE
Windstream Holdings Inc Valuation – September 2018 $WIN
Sierra Wireless Inc Valuation – September 2018 $TSE:SW
Frontier Communications Corp Valuation – August 2018 $FTR
Consolidated Communications Holdings Inc Valuation – August 2018 $CNSL
Comtech Telecommunications Corp Valuation – August 2018 $CMTL
Shaw Communications Inc Valuation – July 2018 $TSE:SJR.B
ARRIS International PLC Valuation – July 2018 $ARRS

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.

Verizon Communications Inc Valuation – November 2018 $VZ

Company Profile (excerpt from Reuters): Verizon Communications Inc., incorporated on October 7, 1983, is a holding company. The Company, through its subsidiaries, provides communications, information and entertainment products and services to consumers, businesses and governmental agencies. Its segments include Wireless and Wireline. The Wireless segment offers communications products and services, including wireless voice and data services and equipment sales, to consumer, business and government customers across the United States. The Wireline segment offers voice, data and video communications products and services, such as broadband video and data, corporate networking solutions, data center and cloud services, security and managed network services, and local and long distance voice services. The Company has combined Yahoo! Inc operating assets with its existing AOL Inc. business to create a new subsidiary, Oath Inc, a diverse house of more than 50 media and technology brands. The Oath portfolio includes HuffPost, Yahoo Sports, AOL.com, MAKERS, Tumblr, BUILD Studios, Yahoo Finance and Yahoo Mail.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VZ – 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 $248,416,727,707 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.97 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 335.73% Pass
6. Moderate PEmg Ratio PEmg < 20 12.36 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.44 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.97 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -105.07 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 $4.87
MG Growth Estimate 15.00%
MG Value $187.32
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $70.55
MG Value based on 0% Growth $41.36
Market Implied Growth Rate 1.93%
Current Price $60.15
% of Intrinsic Value 32.11%

Verizon Communications 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, high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.11 in 2014 to an estimated $4.87 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.93% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Verizon Communications Inc. revealed the company was trading above its Graham Number of $32.89. The company pays a dividend of $2.34 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.36, which was below the industry average of 30.21, 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 $-42.59.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$42.59
Graham Number $32.89
PEmg 12.36
Current Ratio 0.97
PB Ratio 4.44
Current Dividend $2.34
Dividend Yield 3.88%
Number of Consecutive Years of Dividend Growth 11

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 $33,154,000,000
Total Current Liabilities $34,167,000,000
Long-Term Debt $106,440,000,000
Total Assets $265,562,000,000
Intangible Assets $132,937,000,000
Total Liabilities $209,475,000,000
Shares Outstanding (Diluted Average) 4,140,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.55
Dec2017 $7.36
Dec2016 $3.21
Dec2015 $4.37
Dec2014 $2.42
Dec2013 $4.00
Dec2012 $0.31
Dec2011 $0.85
Dec2010 $0.90
Dec2009 $1.72
Dec2008 -$0.77
Dec2007 $1.90
Dec2006 $2.12
Dec2005 $2.65
Dec2004 $2.79
Dec2003 $1.12
Dec2002 $1.49
Dec2001 $0.14
Dec2000 $4.31
Dec1999 $2.97
Dec1998 $1.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.87
Dec2017 $4.77
Dec2016 $3.27
Dec2015 $3.00
Dec2014 $2.11
Dec2013 $1.82
Dec2012 $0.69
Dec2011 $0.89
Dec2010 $1.00
Dec2009 $1.21
Dec2008 $1.21
Dec2007 $2.18
Dec2006 $2.22
Dec2005 $2.06
Dec2004 $1.83
Dec2003 $1.57
Dec2002 $1.92

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2018
10 Low PE Stock Picks for the Defensive Investor – June 2018
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2018
10 Undervalued Companies for the Defensive Investor – June 2018
5 Undervalued Companies for Value Investors with a Low Beta – May 2018

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Frontier Communications Corp Valuation – August 2018 $FTR
Consolidated Communications Holdings Inc Valuation – August 2018 $CNSL
Comtech Telecommunications Corp Valuation – August 2018 $CMTL
Shaw Communications Inc Valuation – July 2018 $TSE:SJR.B
ARRIS International PLC Valuation – July 2018 $ARRS
Iridium Communications Inc Valuation – July 2018 $IRDM
CenturyLink Inc Valuation – June 2018 $CTL

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.

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

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Strategic Education Inc Valuation – August 2018 $STRA

Company Profile (excerpt from Reuters): Strategic Education, Inc., formerly Strayer Education, Inc., incorporated on May 10, 1996, is an education services holding company. The Company provides post-secondary education and other academic programs, through its subsidiaries, Strayer University (the University), New York Code and Design Academy (NYCDA) and Capella Education Company (Capella). As of December 31, 2016, the University offered undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, nursing, public administration and criminal justice at 74 physical campuses located in the Mid-Atlantic and Southern regions of the United States, and online. The University also offers an executive Master of Business Administration (MBA) online through its Jack Welch Management Institute. Its subsidiary, NYCDA, provides non-degree courses in Web and application software development, primarily at its campus in New York City.

Downloadable PDF version of this valuation:

ModernGraham Valuation of STRA – 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 $1,564,597,123 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.09 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -68.41% Fail
6. Moderate PEmg Ratio PEmg < 20 46.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.04 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 3.09 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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 $2.99
MG Growth Estimate -4.25%
MG Value $8.90
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $43.40
MG Value based on 0% Growth $25.44
Market Implied Growth Rate 18.86%
Current Price $138.38
% of Intrinsic Value 1555.37%

Strategic Education Inc 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 poor dividend history, 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 $4.85 in 2014 to an estimated $2.99 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 18.86% 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 Strategic Education Inc revealed the company was trading above its Graham Number of $36.84. The company pays a dividend of $1 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 46.23, which was above the industry average of 33.97. Finally, the company was trading above its Net Current Asset Value (NCAV) of $8.9.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $8.90
Graham Number $36.84
PEmg 46.23
Current Ratio 3.09
PB Ratio 7.04
Current Dividend $1.00
Dividend Yield 0.72%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $214,172,000
Total Current Liabilities $69,204,000
Long-Term Debt $0
Total Assets $336,765,000
Intangible Assets $17,919,000
Total Liabilities $112,925,000
Shares Outstanding (Diluted Average) 11,380,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.22
Dec2017 $1.84
Dec2016 $3.21
Dec2015 $3.73
Dec2014 $4.35
Dec2013 $1.55
Dec2012 $5.76
Dec2011 $8.88
Dec2010 $9.70
Dec2009 $7.60
Dec2008 $5.67
Dec2007 $4.47
Dec2006 $3.61
Dec2005 $3.26
Dec2004 $2.74
Dec2003 $2.27
Dec2002 $1.78
Dec2001 $1.55
Dec2000 $1.41
Dec1999 $1.23
Dec1998 $1.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.99
Dec2017 $2.90
Dec2016 $3.53
Dec2015 $4.07
Dec2014 $4.85
Dec2013 $5.63
Dec2012 $7.62
Dec2011 $8.12
Dec2010 $7.23
Dec2009 $5.64
Dec2008 $4.42
Dec2007 $3.62
Dec2006 $3.04
Dec2005 $2.61
Dec2004 $2.18
Dec2003 $1.81
Dec2002 $1.53

Recommended Reading:

Other ModernGraham posts about the company

Strayer Education Inc Valuation – Initial Coverage $STRA

Other ModernGraham posts about related companies

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Frontier Communications Corp Valuation – August 2018 $FTR

Company Profile (excerpt from Reuters): Frontier Communications Corporation (Frontier), incorporated on November 12, 1935, is a provider of communications services in the United States. The Company offers a portfolio of communications services for residential and business customers. Its products and services include data and Internet services, video services, voice services, access services and customer premise equipment (CPE). The Company offers a range of broadband services. The principal residential service it provides is broadband Internet service. Its commercial services include Ethernet, Dedicated Internet, Multiprotocol Label Switching (MPLS), Time Division Multiplexing (TDM) data transport services and optical transport services. It also offers wireless broadband services (using unlicensed spectrum) in various markets utilizing networks that it owns or operates. In addition, the Company offers its Frontier Secure suite of products, including computer security, cloud backup and sharing, identity protection and equipment insurance.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FTR – 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 $601,000,782 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.47 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 -422.72% Fail
6. Moderate PEmg Ratio PEmg < 20 -0.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.18 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.47 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.96 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$9.97
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$144.62
MG Value based on 0% Growth -$84.78
Market Implied Growth Rate -4.53%
Current Price $5.68
% of Intrinsic Value N/A

Frontier Communications Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, 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 $2.01 in 2014 to an estimated $-9.97 for 2018. This level of negative earnings does not support a positive valuation.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 Frontier Communications Corp revealed the company was trading above its Graham Number of $0. The company pays a dividend of $3.38 per share, for a yield of 59.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -0.57, which was below the industry average of 37.58, 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 $-267.87.

Frontier Communications Corp 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) -$267.87
Graham Number $0.00
PEmg -0.57
Current Ratio 0.47
PB Ratio 0.18
Current Dividend $3.38
Dividend Yield 59.42%
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 6/1/2018
Total Current Assets $1,428,000,000
Total Current Liabilities $3,056,000,000
Long-Term Debt $16,209,000,000
Total Assets $24,730,000,000
Intangible Assets $8,784,000,000
Total Liabilities $22,329,000,000
Shares Outstanding (Diluted Average) 78,026,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$3.19
Dec2017 -$25.99
Dec2016 -$7.61
Dec2015 -$4.41
Dec2014 $1.95
Dec2013 $1.65
Dec2012 $1.95
Dec2011 $2.25
Dec2010 $3.45
Dec2009 $5.70
Dec2008 $8.55
Dec2007 $9.75
Dec2006 $15.90
Dec2005 $9.00
Dec2004 $3.45
Dec2003 $9.60
Dec2002 -$36.45
Dec2001 -$5.70
Dec2000 -$1.65
Dec1999 $8.25
Dec1998 $3.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$9.97
Dec2017 -$11.20
Dec2016 -$2.97
Dec2015 -$0.21
Dec2014 $2.01
Dec2013 $2.36
Dec2012 $3.27
Dec2011 $4.60
Dec2010 $6.74
Dec2009 $8.85
Dec2008 $10.06
Dec2007 $10.39
Dec2006 $7.24
Dec2005 $0.60
Dec2004 -$4.45
Dec2003 -$7.33
Dec2002 -$12.68

Recommended Reading:

Other ModernGraham posts about the company

Most Overvalued Stocks of the S&P 500 – March 2017
Frontier Communications Corp Valuation – February 2017 $FTR
Frontier Communications Corp Valuation – November 2015 Update $FTR
Frontier Communications Corp Annual Valuation – 2014 $FTR

Other ModernGraham posts about related companies

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Iridium Communications Inc Valuation – July 2018 $IRDM
CenturyLink Inc Valuation – June 2018 $CTL
American Tower Corp Valuation – June 2018 $AMT
Charter Communications Inc Valuation – May 2018 $CHTR
DISH Network Corp Valuation – Initial Coverage $DISH
AT&T Inc Valuation – April 2018 $T

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.

Consolidated Communications Holdings Inc Valuation – August 2018 $CNSL

Company Profile (excerpt from Reuters): Consolidated Communications Holdings, Inc., incorporated on March 22, 2002, is a holding company with operating subsidiaries that provide integrated communications services in consumer, commercial and carrier channels in California, Illinois, Iowa, Kansas, Minnesota, Missouri, North Dakota, Pennsylvania, South Dakota, Texas and Wisconsin. The Company operates as both an Incumbent Local Exchange Carrier (ILEC) and a Competitive Local Exchange Carrier (CLEC) dependent upon the territory served. The Company provides a range of services and products that include local and long-distance service, broadband Internet access, video services, Voice over Internet Protocol (VoIP), private line services, carrier grade access services, network capacity services over its regional fiber optic networks, cloud data services, data center and managed services, directory publishing, equipment sales and cloud data services. The Company markets services to its residential customers either individually or as a bundled package.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CNSL – 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 $778,590,711 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.84 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 -72.95% Fail
6. Moderate PEmg Ratio PEmg < 20 66.16 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.41 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.84 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -51.80 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 $0.16
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $2.38
MG Value based on 0% Growth $1.39
Market Implied Growth Rate 28.83%
Current Price $10.85
% of Intrinsic Value N/A

Consolidated Communications Holdings Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, 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 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 $0.54 in 2014 to an estimated $0.16 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 28.83% 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 Consolidated Communications Holdings Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.55 per share, for a yield of 14.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 66.16, which was above the industry average of 37.58. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-41.59.

Consolidated Communications Holdings Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$41.59
Graham Number $0.00
PEmg 66.16
Current Ratio 0.84
PB Ratio 1.41
Current Dividend $1.55
Dividend Yield 14.29%
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 3/1/2018
Total Current Assets $228,853,000
Total Current Liabilities $273,591,000
Long-Term Debt $2,317,398,000
Total Assets $3,708,864,000
Intangible Assets $1,325,472,000
Total Liabilities $3,164,761,000
Shares Outstanding (Diluted Average) 70,598,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.60
Dec2017 $1.07
Dec2016 $0.29
Dec2015 -$0.02
Dec2014 $0.35
Dec2013 $0.76
Dec2012 $0.15
Dec2011 $0.88
Dec2010 $1.09
Dec2009 $0.84
Dec2008 $0.42
Dec2007 $0.44
Dec2006 $0.47
Dec2005 -$0.83
Dec2004 -$1.79
Dec2003 -$0.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.16
Dec2017 $0.53
Dec2016 $0.27
Dec2015 $0.32
Dec2014 $0.54
Dec2013 $0.67
Dec2012 $0.64
Dec2011 $0.84
Dec2010 $0.76
Dec2009 $0.49
Dec2008 $0.12
Dec2007 -$0.15
Dec2006 -$0.47
Dec2005 -$0.82
Dec2004 -$0.68
Dec2003 -$0.11

Recommended Reading:

Other ModernGraham posts about the company

Consolidated Communications Holdings Inc Valuation – Initial Coverage $CNSL

Other ModernGraham posts about related companies

Comtech Telecommunications Corp Valuation – August 2018 $CMTL
Shaw Communications Inc Valuation – July 2018 $TSE:SJR.B
ARRIS International PLC Valuation – July 2018 $ARRS
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CenturyLink Inc Valuation – June 2018 $CTL
American Tower Corp Valuation – June 2018 $AMT
Charter Communications Inc Valuation – May 2018 $CHTR
DISH Network Corp Valuation – Initial Coverage $DISH
AT&T Inc Valuation – April 2018 $T
Comcast Corporation Valuation – March 2018 $CMCSA

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.

Comtech Telecommunications Corp Valuation – August 2018 $CMTL

Company Profile (excerpt from Reuters): Comtech Telecommunications Corp., incorporated on December 30, 1986, designs, develops, produces and markets products, systems and services for communications solutions. The Company operates through two segments: Commercial Solutions and Government Solutions. The Company offers communications solutions, including command and control technologies, safety and security technologies, and enterprise technologies. The Company serves system and network suppliers in the global satellite, defense, broadcast and aerospace industries, as well as the federal government of the United States, the state and local governments of the United States, and foreign governments.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CMTL – 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 $823,471,047 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.72 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 -76.45% Fail
6. Moderate PEmg Ratio PEmg < 20 44.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.62 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 1.72 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.48 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 $0.76
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $10.98
MG Value based on 0% Growth $6.44
Market Implied Growth Rate 17.93%
Current Price $33.60
% of Intrinsic Value N/A

Comtech Telecomm. Corp. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or 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 net 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 $1.42 in 2014 to an estimated $0.76 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.93% 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 Comtech Telecomm. Corp. revealed the company was trading above its Graham Number of $23.15. The company pays a dividend of $0.6 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 44.37, which was above the industry average of 37.58. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.09.

Comtech Telecomm. Corp. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.09
Graham Number $23.15
PEmg 44.37
Current Ratio 1.72
PB Ratio 1.62
Current Dividend $0.60
Dividend Yield 1.79%
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 4/1/2018
Total Current Assets $261,906,000
Total Current Liabilities $152,505,000
Long-Term Debt $161,856,000
Total Assets $834,072,000
Intangible Assets $536,698,000
Total Liabilities $336,288,000
Shares Outstanding (Diluted Average) 24,052,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.17
Jul2017 $0.67
Jul2016 -$0.46
Jul2015 $1.42
Jul2014 $1.37
Jul2013 $0.97
Jul2012 $1.42
Jul2011 $2.22
Jul2010 $1.91
Jul2009 $1.73
Jul2008 $2.76
Jul2007 $2.42
Jul2006 $1.72
Jul2005 $1.42
Jul2004 $0.92
Jul2003 $0.53
Jul2002 $0.07
Jul2001 $0.38
Jul2000 -$0.31
Jul1999 $0.51
Jul1998 $0.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.76
Jul2017 $0.63
Jul2016 $0.72
Jul2015 $1.37
Jul2014 $1.42
Jul2013 $1.52
Jul2012 $1.86
Jul2011 $2.12
Jul2010 $2.09
Jul2009 $2.12
Jul2008 $2.16
Jul2007 $1.71
Jul2006 $1.21
Jul2005 $0.86
Jul2004 $0.49
Jul2003 $0.26
Jul2002 $0.14

Recommended Reading:

Other ModernGraham posts about the company

Comtech Telecommunications Corp Valuation – Initial Coverage $CMTL

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Shaw Communications Inc Valuation – July 2018 $TSE:SJR.B

Company Profile (excerpt from Reuters): Shaw Communications Inc. (Shaw), incorporated on December 9, 1966, is a diversified connectivity provider. The Company operates through four divisions: Consumer, Wireless, Business Network Services and Business Infrastructure Services. Under the Consumer division, the Company offers Cable telecommunications and Satellite video services to residential customers. Its Business Network Services division offers data networking, Cable telecommunications, Satellite video and fleet tracking services to businesses and public sector entities. Its Business Infrastructure Services division offers data center colocation, cloud technology and managed information technology (IT) solutions to businesses. The Company offers wireless services for voice and data communications through its Wireless division.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-SJR.B – July 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 $10,297,950,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.65 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 55.71% Pass
6. Moderate PEmg Ratio PEmg < 20 15.53 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.32 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.65 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -8.65 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 $1.73
MG Growth Estimate 1.34%
MG Value $19.32
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $25.08
MG Value based on 0% Growth $14.70
Market Implied Growth Rate 3.52%
Current Price $26.86
% of Intrinsic Value 139.05%

Shaw Communications Inc (USA) Class B qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.59 in 2014 to an estimated $1.73 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.52% 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 Shaw Communications Inc (USA) Class B revealed the company was trading above its Graham Number of $18.51. The company pays a dividend of $1.19 per share, for a yield of 4.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 15.53, which was below the industry average of 38.56, 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 $-14.65.

Shaw Communications Inc (USA) Class B performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$14.65
Graham Number $18.51
PEmg 15.53
Current Ratio 0.65
PB Ratio 2.32
Current Dividend $1.19
Dividend Yield 4.41%
Number of Consecutive Years of Dividend Growth 14

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 $918,000,000
Total Current Liabilities $1,416,000,000
Long-Term Debt $4,310,000,000
Total Assets $14,133,000,000
Intangible Assets $7,730,000,000
Total Liabilities $8,304,000,000
Shares Outstanding (Diluted Average) 504,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.23
Aug2017 $1.71
Aug2016 $2.51
Aug2015 $1.79
Aug2014 $1.84
Aug2013 $1.63
Aug2012 $1.61
Aug2011 $1.02
Aug2010 $1.23
Aug2009 $1.25
Aug2008 $1.55
Aug2007 $0.89
Aug2006 $1.05
Aug2005 $0.34
Aug2004 -$0.08
Aug2003 -$0.19
Aug2002 $0.46
Aug2001 -$0.31
Aug2000 -$0.18
Aug1999 -$0.04
Aug1998 -$0.01

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.73
Aug2017 $1.95
Aug2016 $2.01
Aug2015 $1.70
Aug2014 $1.59
Aug2013 $1.42
Aug2012 $1.32
Aug2011 $1.18
Aug2010 $1.24
Aug2009 $1.17
Aug2008 $1.00
Aug2007 $0.62
Aug2006 $0.43
Aug2005 $0.09
Aug2004 -$0.04
Aug2003 -$0.03
Aug2002 $0.03

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2017
15 Best Stocks for Value Investors This Week – 1/14/17
Shaw Communications Inc Valuation – Initial Coverage $TSE-SJR.B

Other ModernGraham posts about related companies

Iridium Communications Inc Valuation – July 2018 $IRDM
CenturyLink Inc Valuation – June 2018 $CTL
American Tower Corp Valuation – June 2018 $AMT
Charter Communications Inc Valuation – May 2018 $CHTR
DISH Network Corp Valuation – Initial Coverage $DISH
AT&T Inc Valuation – April 2018 $T
Comcast Corporation Valuation – March 2018 $CMCSA
Spok Holdings Inc Valuation – March 2018 $SPOK
SBA Communications Corp Valuation – Initial Coverage $SBAC
Harris Corporation Valuation – February 2018 $HRS

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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