Cboe Global Markets Inc Valuation – Initial Coverage $CBOE

Company Profile (excerpt from Reuters): Cboe Global Markets, Inc., formerly CBOE Holdings, Inc., incorporated on August 15, 2006, is a holding company. The Company provides trading and investment solutions to investors around the world. It offers trading across a diverse range of products in multiple asset classes and geographies, including options, futures, United States and European equities, exchange-traded products (ETPs), global foreign exchange (FX) and multi-asset volatility products based on the Cboe Volatility Index (VIX Index).

CBOE Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CBOE – March 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 $12,612,814,613 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 176.61% Pass
6. Moderate PEmg Ratio PEmg < 20 33.34 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.05 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 12.29 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 $3.36
MG Growth Estimate 11.57%
MG Value $106.24
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $48.67
MG Value based on 0% Growth $28.53
Market Implied Growth Rate 12.42%
Current Price $111.91
% of Intrinsic Value 105.34%

Cboe Global Markets 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, 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. 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 $1.89 in 2014 to an estimated $3.36 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 12.42% 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 Cboe Global Markets Inc revealed the company was trading above its Graham Number of $51.85. The company pays a dividend of $1.04 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 33.34, which was above the industry average of 25.5. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.28.

Cboe Global Markets 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) -$15.28
Graham Number $51.85
PEmg 33.34
Current Ratio 1.30
PB Ratio 4.05
Current Dividend $1.04
Dividend Yield 0.93%
Number of Consecutive Years of Dividend Growth 8

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $434,700,000
Total Current Liabilities $334,000,000
Long-Term Debt $1,237,900,000
Total Assets $5,265,700,000
Intangible Assets $4,650,600,000
Total Liabilities $2,155,100,000
Shares Outstanding (Diluted Average) 112,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.33
Dec2017 $3.69
Dec2016 $2.27
Dec2015 $2.46
Dec2014 $2.21
Dec2013 $1.99
Dec2012 $1.78
Dec2011 $1.52
Dec2010 $1.03
Dec2009 $1.17
Dec2008 $1.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.36
Dec2017 $2.75
Dec2016 $2.24
Dec2015 $2.15
Dec2014 $1.89
Dec2013 $1.66
Dec2012 $1.44
Dec2011 $1.18
Dec2010 $0.90
Dec2009 $0.72
Dec2008 $0.41

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

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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.

S&P Global Inc Valuation – May 2018 $SPGI

Company Profile (excerpt from Reuters): S&P Global Inc., formerly McGraw Hill Financial Inc., incorporated on December 29, 1925, is a provider of ratings, benchmarks, analytics and data to the capital and commodity markets around the world. The Company operates through three segments: Ratings, Market and Commodities Intelligence, and S&P Dow Jones Indices (Indices). The Company provides ratings related to new issuance of corporate and government debt instruments, and structured finance debt instruments; bank loan ratings; and corporate credit estimates, which are intended, based on an abbreviated analysis, to provide an indication of its opinion regarding creditworthiness of a company, which does not have a Ratings credit rating. The Company serves its customers through a range of products and services available through both third party and its distribution channels. The Company’s subsidiary, CRISIL Limited (CRISIL), is a global analytical company and a provider of ratings, data and research, analytics and solutions.

SPGI Chart

SPGI data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SPGI – May 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 $49,724,596,372 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.05 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 178.20% Pass
6. Moderate PEmg Ratio PEmg < 20 30.46 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7,183.53 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 1.05 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 21.28 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 $6.49
MG Growth Estimate 15.00%
MG Value $249.84
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $94.10
MG Value based on 0% Growth $55.16
Market Implied Growth Rate 10.98%
Current Price $197.66
% of Intrinsic Value 79.11%

S&P Global Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.05 in 2014 to an estimated $6.49 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 10.98% 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 S&P Global Inc revealed the company was trading above its Graham Number of $23.11. The company pays a dividend of $1.64 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 30.46, which was above the industry average of 22.78. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.46.

S&P Global 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) -$20.46
Graham Number $23.11
PEmg 30.46
Current Ratio 1.05
PB Ratio 7,183.53
Current Dividend $1.64
Dividend Yield 0.83%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $3,284,000,000
Total Current Liabilities $3,135,000,000
Long-Term Debt $3,170,000,000
Total Assets $8,497,000,000
Intangible Assets $4,435,000,000
Total Liabilities $8,490,000,000
Shares Outstanding (Diluted Average) 254,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.48
Dec2017 $5.78
Dec2016 $7.94
Dec2015 $4.21
Dec2014 -$0.42
Dec2013 $4.91
Dec2012 $1.53
Dec2011 $3.00
Dec2010 $2.65
Dec2009 $2.33
Dec2008 $2.51
Dec2007 $2.94
Dec2006 $2.40
Dec2005 $2.21
Dec2004 $1.96
Dec2003 $1.79
Dec2002 $1.48
Dec2001 $0.96
Dec2000 $1.03
Dec1999 $1.07
Dec1998 $0.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.49
Dec2017 $5.16
Dec2016 $4.44
Dec2015 $2.68
Dec2014 $2.05
Dec2013 $3.15
Dec2012 $2.32
Dec2011 $2.70
Dec2010 $2.56
Dec2009 $2.50
Dec2008 $2.53
Dec2007 $2.44
Dec2006 $2.12
Dec2005 $1.88
Dec2004 $1.62
Dec2003 $1.39
Dec2002 $1.15

Recommended Reading:

Other ModernGraham posts about the company

S&P Global Inc Valuation – Initial Coverage $SPGI

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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.

Equifax Inc Valuation – May 2018 $EFX

Company Profile (excerpt from Reuters): Equifax Inc., incorporated on December 20, 1913, is a global provider of information solutions and human resources business process outsourcing services for businesses, governments and consumers. The Company operates in four segments: U.S. Information Solutions (USIS), International, Workforce Solutions and Global Consumer Solutions. Its products and services are based on databases of consumer and business information derived from various sources, including credit, financial assets, telecommunications and utility payments, employment, income, demographic and marketing data. It uses statistical techniques and software tools to analyze all available data, creating customized insights, decision-making solutions and processing services for its clients. It helps consumers understand, manage and protect their personal information and make more informed financial decisions. It also provides information, technology and services to support debt collections and recovery management.

EFX Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of EFX – May 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 $13,662,980,946 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.60 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 153.78% Pass
6. Moderate PEmg Ratio PEmg < 20 23.97 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.20 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 0.60 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.80 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 $4.73
MG Growth Estimate 12.49%
MG Value $158.54
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $68.64
MG Value based on 0% Growth $40.24
Market Implied Growth Rate 7.74%
Current Price $113.49
% of Intrinsic Value 71.58%

Equifax 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 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 Undervalued after growing its EPSmg (normalized earnings) from $2.58 in 2014 to an estimated $4.73 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.74% 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 Equifax Inc. revealed the company was trading above its Graham Number of $59.23. The company pays a dividend of $1.56 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 23.97, which was above the industry average of 22.78. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.77.

Equifax 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) -$24.77
Graham Number $59.23
PEmg 23.97
Current Ratio 0.60
PB Ratio 4.20
Current Dividend $1.56
Dividend Yield 1.37%
Number of Consecutive Years of Dividend Growth 8

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 $917,400,000
Total Current Liabilities $1,538,900,000
Long-Term Debt $1,739,600,000
Total Assets $7,196,100,000
Intangible Assets $5,535,500,000
Total Liabilities $3,921,400,000
Shares Outstanding (Diluted Average) 121,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.90
Dec2017 $4.83
Dec2016 $4.04
Dec2015 $3.55
Dec2014 $2.97
Dec2013 $2.84
Dec2012 $2.22
Dec2011 $1.88
Dec2010 $2.11
Dec2009 $1.83
Dec2008 $2.09
Dec2007 $2.02
Dec2006 $2.12
Dec2005 $1.86
Dec2004 $1.76
Dec2003 $1.20
Dec2002 $1.25
Dec2001 $0.85
Dec2000 $1.68
Dec1999 $1.55
Dec1998 $1.34

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.73
Dec2017 $3.98
Dec2016 $3.41
Dec2015 $2.96
Dec2014 $2.58
Dec2013 $2.32
Dec2012 $2.05
Dec2011 $1.97
Dec2010 $2.02
Dec2009 $1.98
Dec2008 $2.02
Dec2007 $1.93
Dec2006 $1.80
Dec2005 $1.55
Dec2004 $1.38
Dec2003 $1.23
Dec2002 $1.27

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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.

CME Group Inc Valuation – May 2018 $CME

Company Profile (excerpt from Reuters): CME Group Inc., incorporated on August 2, 2001, through its exchanges, provides products across all asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The Company’s segment primarily consists of the Chicago Mercantile Exchange Inc. (CME), Board of Trade of the City of Chicago, Inc. (CBOT), New York Mercantile Exchange, Inc. (NYMEX) and Commodity Exchange, Inc. (COMEX) exchanges. The Company provides electronic trading around the globe on its CME Globex platform. The Company also offers clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives through its clearinghouses CME Clearing and CME Clearing Europe. It also provides hosting, connectivity and customer support for electronic trading through its co-location services.

CME Chart

CME data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CME – May 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 $54,597,620,681 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.04 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 112.03% Pass
6. Moderate PEmg Ratio PEmg < 20 23.14 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.40 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 1.04 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.39 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 $6.93
MG Growth Estimate 15.00%
MG Value $266.75
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $100.47
MG Value based on 0% Growth $58.89
Market Implied Growth Rate 7.32%
Current Price $160.33
% of Intrinsic Value 60.10%

CME 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 low current ratio, high PEmg 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 $3.35 in 2014 to an estimated $6.93 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.32% 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 CME Group Inc revealed the company was trading above its Graham Number of $97.31. The company pays a dividend of $2.64 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 23.14, which was above the industry average of 22.78. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.88.

CME Group 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) -$17.88
Graham Number $97.31
PEmg 23.14
Current Ratio 1.04
PB Ratio 2.40
Current Dividend $2.64
Dividend Yield 1.65%
Number of Consecutive Years of Dividend Growth 7

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 $41,054,800,000
Total Current Liabilities $39,445,300,000
Long-Term Debt $2,233,500,000
Total Assets $69,919,300,000
Intangible Assets $27,066,900,000
Total Liabilities $47,146,500,000
Shares Outstanding (Diluted Average) 340,747,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.37
Dec2017 $11.94
Dec2016 $4.53
Dec2015 $3.69
Dec2014 $3.35
Dec2013 $2.92
Dec2012 $2.70
Dec2011 $5.43
Dec2010 $2.86
Dec2009 $2.48
Dec2008 $2.43
Dec2007 $2.99
Dec2006 $2.32
Dec2005 $1.76
Dec2004 $1.28
Dec2003 $0.72
Dec2002 $0.63
Dec2001 $0.51
Dec2000 -$0.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.93
Dec2017 $6.57
Dec2016 $3.73
Dec2015 $3.43
Dec2014 $3.35
Dec2013 $3.33
Dec2012 $3.41
Dec2011 $3.59
Dec2010 $2.65
Dec2009 $2.50
Dec2008 $2.39
Dec2007 $2.18
Dec2006 $1.64
Dec2005 $1.19
Dec2004 $0.81
Dec2003 $0.50
Dec2002 $0.34

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CME Group Inc Valuation – February 2017 $CME
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Leucadia National Corp Valuation – March 2018 $LUK
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Cboe Global Markets Inc Valuation – Initial Coverage $CBOE
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Marsh & McLennan Companies Inc Valuation – March 2018 $MMC

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.

Affiliated Managers Group Inc Valuation – May 2018 $AMG

Company Profile (excerpt from Reuters): Affiliated Managers Group, Inc., incorporated on December 29, 1993, is an asset management company with equity investments in boutique investment management firms (Affiliates). The Company is focused on investing around the globe in investment management firms that manage active return-oriented strategies, including traditional, alternative and wealth management firms. The Company operates through three business segments, which represent its principal distribution channels: Institutional, Mutual Fund and High Net Worth. The equity method investments in the Institutional distribution channel are made in relationships with public and private client entities, including foundations, endowments, sovereign wealth funds and retirement plans for corporations and municipalities. The equity method investments in the Mutual Fund distribution channel are made in advisory or sub-advisory relationships with active return-oriented mutual funds, Undertakings for Collective Investment in Transferable Securities (UCITS) and other retail products. The equity method investments in the High Net Worth distribution channel are made in relationships with high net worth and ultra-high net worth individuals, families, trusts, foundations, endowments and retirement plans.

AMG Chart

AMG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMG – May 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 $8,869,286,844 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 403.01% Pass
6. Moderate PEmg Ratio PEmg < 20 13.44 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.51 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 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.35 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 $12.03
MG Growth Estimate 15.00%
MG Value $463.21
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $174.45
MG Value based on 0% Growth $102.27
Market Implied Growth Rate 2.47%
Current Price $161.72
% of Intrinsic Value 34.91%

Affiliated Managers 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 low current ratio, poor dividend history. 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 $5.57 in 2014 to an estimated $12.03 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.47% 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 Affiliated Managers Group, Inc. revealed the company was trading above its Graham Number of $158.62. The company pays a dividend of $0.8 per share, for a yield of 0.5% Its PEmg (price over earnings per share – ModernGraham) was 13.44, which was below the industry average of 22.78, 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 $-70.89.

Affiliated Managers Group, 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) -$70.89
Graham Number $158.62
PEmg 13.44
Current Ratio 1.30
PB Ratio 2.51
Current Dividend $0.80
Dividend Yield 0.49%
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 3/1/2018
Total Current Assets $866,400,000
Total Current Liabilities $667,300,000
Long-Term Debt $1,861,500,000
Total Assets $8,584,200,000
Intangible Assets $4,110,400,000
Total Liabilities $4,907,200,000
Shares Outstanding (Diluted Average) 57,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $16.12
Dec2017 $12.03
Dec2016 $8.57
Dec2015 $9.17
Dec2014 $7.70
Dec2013 $6.55
Dec2012 $3.28
Dec2011 $3.11
Dec2010 $2.81
Dec2009 $1.38
Dec2008 -$0.03
Dec2007 $4.55
Dec2006 $3.74
Dec2005 $2.81
Dec2004 $2.02
Dec2003 $1.57
Dec2002 $1.65
Dec2001 $1.47
Dec2000 $1.66
Dec1999 $2.12
Dec1998 $0.89

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.03
Dec2017 $9.59
Dec2016 $7.93
Dec2015 $7.06
Dec2014 $5.57
Dec2013 $4.15
Dec2012 $2.67
Dec2011 $2.36
Dec2010 $2.15
Dec2009 $2.05
Dec2008 $2.46
Dec2007 $3.45
Dec2006 $2.72
Dec2005 $2.11
Dec2004 $1.73
Dec2003 $1.62
Dec2002 $1.62

Recommended Reading:

Other ModernGraham posts about the company

Affiliated Managers Group Inc Valuation – January 2017 $AMG
Affiliated Managers Group Analysis – Initial Coverage $AMG

Other ModernGraham posts about related companies

The Western Union Co Valuation – April 2018 $WU
Northern Trust Corp Valuation – April 2018 $NTRS
Nasdaq Inc Valuation – April 2018 $NDAQ
Leucadia National Corp Valuation – March 2018 $LUK
E*Trade Financial Corp Valuation – March 2018 $ETFC
Cboe Global Markets Inc Valuation – Initial Coverage $CBOE
Raymond James Financial Inc Valuation – March 2018 $RJF
Marsh & McLennan Companies Inc Valuation – March 2018 $MMC
Fidelity National Information Services Inc Valuation – March 2018 $FIS
Intercontinental Exchange Inc Valuation – March 2018 $ICE

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.

The Western Union Co Valuation – April 2018 $WU

Company Profile (excerpt from Reuters): The Western Union Company (Western Union), incorporated on February 17, 2006, is a provider of money movement and payment services. The Company operates through three segments: Consumer-to-Consumer, Consumer-to-Business and Business Solutions. Western Union’s Consumer-to-Consumer segment is engaged in individual money transfers from one consumer to another. The Company’s Consumer-to-Business segment provides options to make one-time or recurring payments from consumers to businesses and other organizations, including utilities, auto finance companies, mortgage servicers, financial service providers and government agencies. Western Union’s Business Solutions segment facilitates payment and foreign exchange solutions, primarily cross-border, cross-currency transactions, for small and medium size enterprises and other organizations and individuals.

WU Chart

WU data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WU – April 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,018,657,069 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.79 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 -74.60% Fail
6. Moderate PEmg Ratio PEmg < 20 27.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -18.10 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 0.79 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.32 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 $0.71
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $10.25
MG Value based on 0% Growth $6.01
Market Implied Growth Rate 9.43%
Current Price $19.34
% of Intrinsic Value N/A

The Western Union Company 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 $1.59 in 2014 to an estimated $0.71 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.43% 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 The Western Union Company revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.7 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 27.37, which was above the industry average of 22.34. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.21.

The Western Union Company 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) -$10.21
Graham Number $0.00
PEmg 27.37
Current Ratio 0.79
PB Ratio -18.10
Current Dividend $0.70
Dividend Yield 3.62%
Number of Consecutive Years of Dividend Growth 3

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 $5,027,100,000
Total Current Liabilities $6,332,400,000
Long-Term Debt $3,033,600,000
Total Assets $9,231,400,000
Intangible Assets $3,314,200,000
Total Liabilities $9,722,800,000
Shares Outstanding (Diluted Average) 459,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.80
Dec2017 -$1.19
Dec2016 $0.51
Dec2015 $1.62
Dec2014 $1.59
Dec2013 $1.43
Dec2012 $1.69
Dec2011 $1.84
Dec2010 $1.36
Dec2009 $1.21
Dec2008 $1.24
Dec2007 $1.11
Dec2006 $1.19
Dec2005 $1.21
Dec2004 $0.00
Dec2003 $0.00
Dec2002 $0.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.71
Dec2017 $0.37
Dec2016 $1.22
Dec2015 $1.60
Dec2014 $1.59
Dec2013 $1.56
Dec2012 $1.57
Dec2011 $1.46
Dec2010 $1.25
Dec2009 $1.20
Dec2008 $1.11
Dec2007 $0.93
Dec2006 $0.76
Dec2005 $0.49
Dec2004 $0.13
Dec2003 $0.17
Dec2002 $0.22

Recommended Reading:

Other ModernGraham posts about the company

The Western Union Company Valuation – December 2016 $WU
Western Union Company Analysis – 2015 Update $WU
19 Companies in the Spotlight This Week – 8/9/14
The Western Union Company Annual Valuation – 2014 $WU

Other ModernGraham posts about related companies

Northern Trust Corp Valuation – April 2018 $NTRS
Nasdaq Inc Valuation – April 2018 $NDAQ
Leucadia National Corp Valuation – March 2018 $LUK
E*Trade Financial Corp Valuation – March 2018 $ETFC
Cboe Global Markets Inc Valuation – Initial Coverage $CBOE
Raymond James Financial Inc Valuation – March 2018 $RJF
Marsh & McLennan Companies Inc Valuation – March 2018 $MMC
Fidelity National Information Services Inc Valuation – March 2018 $FIS
Intercontinental Exchange Inc Valuation – March 2018 $ICE
H&R Block Inc Valuation – March 2018 $HRB

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.

Northern Trust Corp Valuation – April 2018 $NTRS

Company Profile (excerpt from Reuters): Northern Trust Corporation, incorporated on August 23, 1971, is a financial holding company. The Company provides asset servicing, fund administration, asset management, fiduciary and banking solutions for corporations, institutions, families and individuals around the world. The Company’s segments include Corporate & Institutional Services (C&IS), Wealth Management, and Treasury and Other. The Company conducts its business through various subsidiaries, including The Northern Trust Company (Bank). The Asset Management business, through the Company’s subsidiaries, supports the C&IS and Wealth Management segments by providing a range of asset management and related services, and other products to customers around the world.

NTRS Chart

NTRS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NTRS – April 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,554,663,257 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 81.88% Pass
5. Moderate PEmg Ratio PEmg < 20 21.48 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.33 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 $4.86
MG Growth Estimate 9.60%
MG Value $134.74
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $70.51
MG Value based on 0% Growth $41.33
Market Implied Growth Rate 6.49%
Current Price $104.46
% of Intrinsic Value 77.53%

Northern Trust Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg ratio. 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 $2.96 in 2014 to an estimated $4.86 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.49% 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 Northern Trust Corporation revealed the company was trading above its Graham Number of $73.19. The company pays a dividend of $1.6 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 21.48, which was below the industry average of 22.34, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Northern Trust Corporation receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Graham Number $73.19
PEmg 21.48
PB Ratio 2.33
Dividend Yield 1.53%
TTM Dividend $1.60
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
Long-Term Debt & Capital Lease Obligation $9,275,400,000
Total Assets $138,590,500,000
Intangible Assets $605,600,000
Total Liabilities $128,374,300,000
Shares Outstanding (Diluted Average) 228,050,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.80
Dec2017 $4.92
Dec2016 $4.32
Dec2015 $3.99
Dec2014 $3.32
Dec2013 $2.99
Dec2012 $2.81
Dec2011 $2.37
Dec2010 $2.74
Dec2009 $3.16
Dec2008 $3.47
Dec2007 $3.24
Dec2006 $3.00
Dec2005 $2.64
Dec2004 $2.27
Dec2003 $1.80
Dec2002 $1.97
Dec2001 $2.11
Dec2000 $2.08
Dec1999 $1.74
Dec1998 $1.52

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.86
Dec2017 $4.23
Dec2016 $3.75
Dec2015 $3.35
Dec2014 $2.96
Dec2013 $2.80
Dec2012 $2.77
Dec2011 $2.83
Dec2010 $3.08
Dec2009 $3.20
Dec2008 $3.12
Dec2007 $2.83
Dec2006 $2.53
Dec2005 $2.25
Dec2004 $2.05
Dec2003 $1.94
Dec2002 $1.97

Recommended Reading:

Other ModernGraham posts about the company

7 Best Stocks For Value Investors This Week – 7/30/16
Northern Trust Corp Valuation – July 2016 $NTRS
18 Best Stocks For Value Investors This Week – 1/30/16
Northern Trust Corp Valuation – January 2016 Update $NTRS
Northern Trust Corporation Analysis – September 2015 Update $NTRS

Other ModernGraham posts about related companies

Nasdaq Inc Valuation – April 2018 $NDAQ
Leucadia National Corp Valuation – March 2018 $LUK
E*Trade Financial Corp Valuation – March 2018 $ETFC
Cboe Global Markets Inc Valuation – Initial Coverage $CBOE
Raymond James Financial Inc Valuation – March 2018 $RJF
Marsh & McLennan Companies Inc Valuation – March 2018 $MMC
Fidelity National Information Services Inc Valuation – March 2018 $FIS
Intercontinental Exchange Inc Valuation – March 2018 $ICE
H&R Block Inc Valuation – March 2018 $HRB
Morgan Stanley Valuation – March 2018 $MS

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.

Nasdaq Inc Valuation – April 2018 $NDAQ

Company Profile (excerpt from Reuters): Nasdaq, Inc. (Nasdaq), incorporated on November 13, 1979, is a holding company. The Company is a provider of trading, clearing, exchange technology, regulatory, securities listing, information and public company services. The Company manages, operates and provides its products and services through four segments: Market Services, Corporate Services, Information Services and Market Technology. Its global offerings include trading and clearing across various asset classes, trade management services, data products, financial indexes, capital formation solutions, corporate solutions, and market technology products and services. Its technology powers markets across the globe, supporting equity derivative trading, clearing and settlement, cash equity trading, fixed income trading and various other functions.

NDAQ Chart

NDAQ data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NDAQ – April 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,245,932,961 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.05 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 81.17% Pass
6. Moderate PEmg Ratio PEmg < 20 25.72 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.46 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 1.05 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 13.96 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 $3.33
MG Growth Estimate 7.48%
MG Value $78.03
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $48.22
MG Value based on 0% Growth $28.27
Market Implied Growth Rate 8.61%
Current Price $85.53
% of Intrinsic Value 109.62%

Nasdaq 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, poor dividend history, and the high PEmg 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.22 in 2014 to an estimated $3.33 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 8.61% 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 Nasdaq Inc revealed the company was trading above its Graham Number of $60.1. The company pays a dividend of $1.46 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 25.72, which was above the industry average of 22.34. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-25.76.

Nasdaq 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) -$25.76
Graham Number $60.10
PEmg 25.72
Current Ratio 1.05
PB Ratio 2.46
Current Dividend $1.46
Dividend Yield 1.71%
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 $5,529,000,000
Total Current Liabilities $5,262,000,000
Long-Term Debt $3,727,000,000
Total Assets $15,786,000,000
Intangible Assets $9,054,000,000
Total Liabilities $9,899,000,000
Shares Outstanding (Diluted Average) 169,642,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.65
Dec2017 $4.33
Dec2016 $0.64
Dec2015 $2.50
Dec2014 $2.39
Dec2013 $2.25
Dec2012 $2.04
Dec2011 $2.15
Dec2010 $1.91
Dec2009 $1.25
Dec2008 $1.55
Dec2007 $3.46
Dec2006 $0.95
Dec2005 $0.57
Dec2004 -$0.02
Dec2003 -$1.45
Dec2002 $0.40
Dec2001 $0.35
Dec2000 $0.21
Dec1999 $0.86
Dec1998 $0.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.33
Dec2017 $2.58
Dec2016 $1.79
Dec2015 $2.34
Dec2014 $2.22
Dec2013 $2.06
Dec2012 $1.91
Dec2011 $1.91
Dec2010 $1.80
Dec2009 $1.69
Dec2008 $1.70
Dec2007 $1.42
Dec2006 $0.30
Dec2005 -$0.03
Dec2004 -$0.25
Dec2003 -$0.22
Dec2002 $0.41

Recommended Reading:

Other ModernGraham posts about the company

24 Companies in the Spotlight This Week – 3/28/15
Nasdaq OMX Group Inc. Annual Valuation – 2015 $NDAQ
17 Companies in the Spotlight This Week – 3/29/14
Nasdaq OMX Group (NDAQ) Annual Valuation – 2014

Other ModernGraham posts about related companies

Leucadia National Corp Valuation – March 2018 $LUK
E*Trade Financial Corp Valuation – March 2018 $ETFC
Cboe Global Markets Inc Valuation – Initial Coverage $CBOE
Raymond James Financial Inc Valuation – March 2018 $RJF
Marsh & McLennan Companies Inc Valuation – March 2018 $MMC
Fidelity National Information Services Inc Valuation – March 2018 $FIS
Intercontinental Exchange Inc Valuation – March 2018 $ICE
H&R Block Inc Valuation – March 2018 $HRB
Morgan Stanley Valuation – March 2018 $MS
BlackRock Inc Valuation – March 2018 $BLK

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.

Leucadia National Corp Valuation – March 2018 $LUK

Company Profile (excerpt from Reuters): Leucadia National Corporation (Leucadia), incorporated on May 24, 1968, is a diversified holding company focused on return on investment and long-term value. The Company’s segments, based on requirements, are Jefferies, National Beef, and Corporate and other. The Company’s financial services businesses include Jefferies Group LLC (investment banking and capital markets), Leucadia Asset Management (asset management), Berkadia Commercial Mortgage, LLC (commercial mortgage banking and servicing), FXCM Group, LLC (a publicly traded company providing online foreign exchange trading), HomeFed Corporation (HomeFed) (a publicly traded real estate company) and Foursight Capital and Chrome Capital (vehicle finance). The Company also owns and has investments in an array of other businesses, including National Beef (beef processing), HRG Group, Inc. (HRG), Vitesse Energy, LLC and Juneau Energy, LLC (oil and gas exploration and development), Garcadia (automobile dealerships), Linkem (fixed wireless broadband services in Italy), Conwed Plastics and Idaho Timber (manufacturing) and Golden Queen Mining Company, LLC (a gold and silver mining project).

LUK Chart

LUK data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LUK – March 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 $8,098,087,309 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.38 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -75.20% Fail
6. Moderate PEmg Ratio PEmg < 20 25.18 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.82 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 1.38 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.72 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 $0.90
MG Growth Estimate -4.25%
MG Value $6.60
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $13.09
MG Value based on 0% Growth $7.67
Market Implied Growth Rate 8.34%
Current Price $22.73
% of Intrinsic Value 344.32%

Leucadia National Corp. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the low current ratio, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.69 in 2014 to an estimated $0.9 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.34% 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 Leucadia National Corp. revealed the company was trading below its Graham Number of $33.32. The company pays a dividend of $0.33 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 25.18, which was below the industry average of 25.5, 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 $6.6.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $6.60
Graham Number $33.32
PEmg 25.18
Current Ratio 1.38
PB Ratio 0.82
Current Dividend $0.33
Dividend Yield 1.43%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $39,483,108,000
Total Current Liabilities $28,592,753,000
Long-Term Debt $7,885,783,000
Total Assets $47,169,108,000
Intangible Assets $2,463,180,000
Total Liabilities $37,063,151,000
Shares Outstanding (Diluted Average) 366,580,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.74
Dec2017 $0.45
Dec2016 $0.34
Dec2015 $0.74
Dec2014 $0.54
Dec2013 $1.06
Dec2012 $3.44
Dec2011 $0.10
Dec2010 $7.85
Dec2009 $2.25
Dec2008 -$11.00
Dec2007 $2.10
Dec2006 $0.85
Dec2005 $7.14
Dec2004 $0.67
Dec2003 $0.52
Dec2002 $0.96
Dec2001 -$0.05
Dec2000 $0.70
Dec1999 $1.21
Dec1998 $0.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.90
Dec2017 $0.53
Dec2016 $0.79
Dec2015 $1.07
Dec2014 $1.69
Dec2013 $2.49
Dec2012 $2.31
Dec2011 $1.25
Dec2010 $1.35
Dec2009 -$1.17
Dec2008 -$1.94
Dec2007 $2.48
Dec2006 $2.45
Dec2005 $2.79
Dec2004 $0.59
Dec2003 $0.59
Dec2002 $0.63

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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.

E*Trade Financial Corp Valuation – March 2018 $ETFC

Company Profile (excerpt from Reuters): E*Trade Financial Corporation, incorporated on September 4, 2003, is a financial services company. The Company provides online brokerage and related products and services primarily to individual retail investors under the brand E*TRADE Financial. The Company also provides investor-focused banking products, primarily sweep deposits, to retail investors. It provides its services to customers through its digital platforms and network of industry-licensed customer service representatives and Financial Consultants, over the phone and by e-mail. It operates federally chartered savings banks with the primary purpose of maximizing the value of deposits generated through its brokerage business. The Company’s hybrid service delivery model is delivered through various digital platforms: E*TRADE and OptionsHouse products. It offers trading applications for smartphones, tablets and watches, which manages accounts and offers stock and portfolio alerts. Its active trading platform is a software-based trading application that offers trading tools, idea generation and analysis, and advanced portfolio and market tracking. Its digital platforms are complemented by its offline channels, which include its network of customer service representatives and financial consultants and its round the clock customer service available via phone, e-mail and online.

ETFC Chart

ETFC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ETFC – March 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 $14,757,585,074 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
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 -163.55% Fail
5. Moderate PEmg Ratio PEmg < 20 25.14 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.16 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 Fail
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.20
MG Growth Estimate 15.00%
MG Value $84.85
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $31.96
MG Value based on 0% Growth $18.73
Market Implied Growth Rate 8.32%
Current Price $55.41
% of Intrinsic Value 65.30%

E*TRADE Financial Corp 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 poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding 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 Undervalued after growing its EPSmg (normalized earnings) from $0.4 in 2014 to an estimated $2.2 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.32% 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 E*TRADE Financial Corp revealed the company was trading above its Graham Number of $40.65. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 25.14, which was below the industry average of 25.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

E*TRADE Financial Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Graham Number $40.65
PEmg 25.14
PB Ratio 2.16
Dividend Yield 0.00%
TTM Dividend $0.00
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $1,901,000,000
Total Assets $63,365,000,000
Intangible Assets $2,654,000,000
Total Liabilities $56,434,000,000
Shares Outstanding (Diluted Average) 270,299,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.14
Dec2017 $2.15
Dec2016 $1.98
Dec2015 $0.91
Dec2014 $1.00
Dec2013 $0.29
Dec2012 -$0.39
Dec2011 $0.54
Dec2010 -$0.13
Dec2009 -$11.85
Dec2008 -$10.00
Dec2007 -$34.00
Dec2006 $14.40
Dec2005 $11.20
Dec2004 $9.90
Dec2003 $5.50
Dec2002 -$5.20
Dec2001 -$7.30
Sep2000 $0.60
Sep1999 -$2.10
Sep1998 -$0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.20
Dec2017 $1.58
Dec2016 $1.12
Dec2015 $0.61
Dec2014 $0.40
Dec2013 -$0.71
Dec2012 -$2.26
Dec2011 -$5.82
Dec2010 -$8.78
Dec2009 -$10.75
Dec2008 -$7.37
Dec2007 -$3.57
Dec2006 $10.15
Dec2005 $6.29
Dec2004 $2.79
Dec2003 -$1.07
Dec2002 -$3.85

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Other ModernGraham posts about the company

E*Trade Financial Corp Valuation – July 2016 $ETFC
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ModernGraham Valuation: E*Trade Financial Corporation (ETFC)

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Intercontinental Exchange Inc Valuation – March 2018 $ICE
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Morgan Stanley Valuation – March 2018 $MS
BlackRock Inc Valuation – March 2018 $BLK
Ameriprise Financial Inc Valuation – March 2018 $AMP
Navient Corp Valuation – March 2018 $NAVI

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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