Pinnacle West Capital Corp Valuation – March 2019 #PNW

Company Profile (excerpt from Reuters): Pinnacle West Capital Corporation, incorporated on February 20, 1985, is a holding company that operates through its subsidiaries. The Company operates through regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses and related activities, and includes electricity generation, transmission and distribution. The Company’s subsidiaries include Arizona Public Service Company (APS), which is a vertically-integrated electric utility that provides retail or wholesale electric service to the State of Arizona, with the exceptions of one-half of the Phoenix metropolitan area, the Tucson metropolitan area and Mohave County in northwestern Arizona.

PNW Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of PNW – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,824,428,063 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.56 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 39.65% Pass
6. Moderate PEmg Ratio PEmg < 20 21.58 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.03 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 0.56 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.41 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 $4.47
MG Growth Estimate 3.33%
MG Value $67.81
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $64.84
MG Value based on 0% Growth $38.01
Market Implied Growth Rate 6.54%
Current Price $96.52
% of Intrinsic Value 142.35%

Pinnacle West Capital 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, 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 Overvalued after growing its EPSmg (normalized earnings) from $3.66 in 2015 to an estimated $4.47 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.54% 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 Pinnacle West Capital Corporation revealed the company was trading above its Graham Number of $71.02. The company pays a dividend of $2.82 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.58, which was below the industry average of 23.71, 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 $-101.07.

Pinnacle West Capital Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$101.07
Graham Number $71.02
PEmg 21.58
Current Ratio 0.56
PB Ratio 2.03
Current Dividend $2.82
Dividend Yield 2.92%
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 12/1/2018
Total Current Assets $924,991,000
Total Current Liabilities $1,648,964,000
Long-Term Debt $4,638,232,000
Total Assets $17,664,202,000
Intangible Assets $262,902,000
Total Liabilities $12,315,497,000
Shares Outstanding (Diluted Average) 112,703,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.81
Dec2018 $4.54
Dec2017 $4.35
Dec2016 $3.95
Dec2015 $3.92
Dec2014 $3.58
Dec2013 $3.66
Dec2012 $3.45
Dec2011 $3.09
Dec2010 $3.27
Dec2009 $0.67
Dec2008 $2.40
Dec2007 $3.05
Dec2006 $3.27
Dec2005 $1.82
Dec2004 $2.66
Dec2003 $2.63
Dec2002 $1.76
Dec2001 $3.68
Dec2000 $3.56
Dec1999 $1.97

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.47
Dec2018 $4.22
Dec2017 $4.01
Dec2016 $3.80
Dec2015 $3.66
Dec2014 $3.49
Dec2013 $3.24
Dec2012 $2.88
Dec2011 $2.56
Dec2010 $2.37
Dec2009 $2.03
Dec2008 $2.69
Dec2007 $2.78
Dec2006 $2.58
Dec2005 $2.32
Dec2004 $2.67
Dec2003 $2.69

Recommended Reading:

Other ModernGraham posts about the company

Pinnacle West Capital Corp Valuation – June 2018 $PNW
Pinnacle West Corp Valuation – March 2017 $PNW
Pinnacle West Capital Corp Valuation – December 2015 Update $PNW
22 Companies in the Spotlight This Week – 11/29/14
Pinnacle West Capital Corporation Annual Valuation – 2014 $PNW

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NiSource Inc Valuation – March 2019 #NI
American Electric Power Company Inc Valuation – March 2019 #AEP
American Water Works Co Inc Valuation – March 2019 #AWK
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Duke Energy Corp Valuation – March 2019 #DUK
Sempra Energy Valuation – March 2019 #SRE
Ameren Corp Valuation – March 2019 #AEE
NextEra Energy Inc Valuation – February 2019 $NEE
Dominion Energy Inc Valuation – February 2019 $D

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.

Colgate-Palmolive Co Valuation – March 2019 #CL

Company Profile (excerpt from Reuters): Colgate-Palmolive Company (Colgate), incorporated on July 25, 1923, is a consumer products company. The Company operates in two product segments: Oral, Personal and Home Care, and Pet Nutrition. The Oral, Personal and Home Care product segment is operated through five geographic segments, which include North America, Latin America, Europe, Asia Pacific and Africa/Eurasia. It is engaged in oral care business with toothpaste and manual toothbrush brands around the world. The Company’s oral care products include Colgate Total, Colgate Sensitive Pro-Relief, Colgate Max Fresh, Colgate Maximum Cavity Protection plus Sugar Acid Neutralizer, Colgate Optic White and Colgate Luminous White toothpastes, Colgate 360 degree and Colgate Slim Soft manual toothbrushes and Colgate Optic White, Colgate Total and Colgate Plax mouthwashes. Colgate’s Oral Care business also includes pharmaceutical products for dentists and other oral health professionals.

CL Chart

CL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CL – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $57,098,959,614 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.14 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 7.02% Fail
6. Moderate PEmg Ratio PEmg < 20 26.06 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 291.66 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 1.14 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 14.06 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 $2.54
MG Growth Estimate 3.00%
MG Value $36.88
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $36.88
MG Value based on 0% Growth $21.62
Market Implied Growth Rate 8.78%
Current Price $66.27
% of Intrinsic Value 179.68%

Colgate-Palmolive 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 growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.12 in 2015 to an estimated $2.54 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.78% 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 Colgate-Palmolive Company revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.66 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 26.06, which was below the industry average of 62.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.42.

Colgate-Palmolive Company receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.42
Graham Number $0.00
PEmg 26.06
Current Ratio 1.14
PB Ratio 291.66
Current Dividend $1.66
Dividend Yield 2.50%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,793,000,000
Total Current Liabilities $3,341,000,000
Long-Term Debt $6,354,000,000
Total Assets $12,161,000,000
Intangible Assets $4,167,000,000
Total Liabilities $11,964,000,000
Shares Outstanding (Diluted Average) 867,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.67
Dec2018 $2.75
Dec2017 $2.28
Dec2016 $2.72
Dec2015 $1.52
Dec2014 $2.36
Dec2013 $2.38
Dec2012 $2.57
Dec2011 $2.47
Dec2010 $2.16
Dec2009 $2.19
Dec2008 $1.83
Dec2007 $1.60
Dec2006 $1.23
Dec2005 $1.22
Dec2004 $1.17
Dec2003 $1.23
Dec2002 $1.10
Dec2001 $0.95
Dec2000 $0.85
Dec1999 $0.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.54
Dec2018 $2.43
Dec2017 $2.26
Dec2016 $2.27
Dec2015 $2.12
Dec2014 $2.41
Dec2013 $2.41
Dec2012 $2.36
Dec2011 $2.19
Dec2010 $1.96
Dec2009 $1.78
Dec2008 $1.52
Dec2007 $1.34
Dec2006 $1.20
Dec2005 $1.17
Dec2004 $1.12
Dec2003 $1.05

Recommended Reading:

Other ModernGraham posts about the company

Colgate-Palmolive Co Valuation – June 2018 $CL
Colgate-Palmolive Co. Valuation – April 2017 $CL
Colgate-Palmolive Co Valuation – January 2016 Update $CL
32 Companies in the Spotlight This Week – 12/6/14
Colgate-Palmolive Annual Valuation – 2014 $CL

Other ModernGraham posts about related companies

Coty Inc Valuation – March 2019 #COTY
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International Flavors & Fragrances Inc Valuation – January 2019 $IFF
Estee Lauder Companies Inc Valuation – December 2018 $EL
Proctor & Gamble Co Valuation – November 2018 $PG
Johnson & Johnson Valuation – November 2018 $JNJ
Inter Parfums Inc Valuation – July 2018 $IPAR
Service Corp International Valuation – July 2018 $SCI
Avon Products Inc Valuation – June 2018 $AVP

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.

Royal Caribbean Cruises Ltd Valuation – March 2019 #RCL

Company Profile (excerpt from Reuters): Royal Caribbean Cruises Ltd., incorporated on July 23, 1985, is a cruise company. The Company owns and operates three global cruise brands: Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises (Global Brands). The Company also own joint venture interest in the German brand TUI Cruises, interest in the Spanish brand Pullmantur and interest in the Chinese brand SkySea Cruises (collectively, Partner Brands). Together, its Global Brands and its Partner Brands operate a combined total of 50 ships in the cruise vacation industry with an aggregate capacity of approximately 123,270 berths, as of December 31, 2016. As of July 31, 2018, the Company’s ships offer a selection of itineraries that call on approximately 540 destinations in 105 countries, covering all seven continents.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RCL – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,317,988,750 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.17 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 396.93% Pass
6. Moderate PEmg Ratio PEmg < 20 14.42 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.20 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 0.17 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.42 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.06
MG Growth Estimate 15.00%
MG Value $310.46
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $116.93
MG Value based on 0% Growth $68.54
Market Implied Growth Rate 2.96%
Current Price $116.25
% of Intrinsic Value 37.44%

Royal Caribbean Cruises Ltd 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 $2.54 in 2015 to an estimated $8.06 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.96% 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 Royal Caribbean Cruises Ltd revealed the company was trading above its Graham Number of $108.51. The company pays a dividend of $2.6 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.42, which was below the industry average of 31.69, 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 $-73.

Royal Caribbean Cruises Ltd receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$73.00
Graham Number $108.51
PEmg 14.42
Current Ratio 0.17
PB Ratio 2.20
Current Dividend $2.60
Dividend Yield 2.24%
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 12/1/2018
Total Current Assets $1,242,044,000
Total Current Liabilities $7,112,165,000
Long-Term Debt $8,355,370,000
Total Assets $27,698,270,000
Intangible Assets $1,378,353,000
Total Liabilities $16,592,809,000
Shares Outstanding (Diluted Average) 210,297,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.85
Dec2018 $8.56
Dec2017 $7.53
Dec2016 $5.93
Dec2015 $3.02
Dec2014 $3.43
Dec2013 $2.14
Dec2012 $0.08
Dec2011 $2.77
Dec2010 $2.37
Dec2009 $0.75
Dec2008 $2.68
Dec2007 $2.82
Dec2006 $2.94
Dec2005 $3.26
Dec2004 $2.26
Dec2003 $1.42
Dec2002 $1.79
Dec2001 $1.32
Dec2000 $2.31
Dec1999 $2.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.06
Dec2018 $6.68
Dec2017 $5.30
Dec2016 $3.76
Dec2015 $2.54
Dec2014 $2.26
Dec2013 $1.65
Dec2012 $1.52
Dec2011 $2.25
Dec2010 $2.10
Dec2009 $2.14
Dec2008 $2.82
Dec2007 $2.77
Dec2006 $2.61
Dec2005 $2.30
Dec2004 $1.82
Dec2003 $1.66

Recommended Reading:

Other ModernGraham posts about the company

Royal Caribbean Cruises Ltd Valuation – Initial Coverage June 2018 $RCL

Other ModernGraham posts about related companies

Hilton Worldwide Holdings Inc Valuation – February 2019 $HLT
Carnival Corp Valuation – February 2019 $CCL
Marriott International Inc Valuation – January 2019 $MAR
Norwegian Cruise Line Holdings Ltd Valuation – January 2019 $NCLH
Wyndham Worldwide Corp Valuation – May 2018 $WYN
Carnival Corp Valuation – April 2018 $CCL
Marriott International Inc Valuation – March 2018 $MAR
Norwegian Cruise Line Holdings Ltd Valuation – Initial Coverage $NCLH
Wyndham Worldwide Corp Valuation – January 2017 $WYN
ILG Inc Valuation – Initial Coverage $ILG

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.

Clorox Co Valuation – March 2019 $CLX

Company Profile (excerpt from Reuters): The Clorox Company, incorporated on September 5, 1986, is a manufacturer and marketer of consumer and professional products. The Company sells its products primarily through mass retail outlets, e-commerce channels, wholesale distributors and medical supply distributors. The Company operates through four segments: Cleaning, Household, Lifestyle and International. The Company markets some of the consumer brand names, including namesake bleach and cleaning products, Pine-Sol cleaners, Liquid-Plumr clog removers, Poett home care products, Fresh Step cat litter, Glad bags, wraps and containers, Kingsford charcoal, Hidden Valley dressings and sauces, Brita water-filtration products and Burt’s Bees natural personal care products. The Company also markets brands for professional services, including Clorox Healthcare and Clorox Commercial Solutions. The Company manufactures products in approximately 10 countries and markets them in over 100 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CLX – March 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,224,279,591 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.15 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 44.05% Pass
6. Moderate PEmg Ratio PEmg < 20 27.45 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 27.67 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 1.15 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 12.77 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.75
MG Growth Estimate 5.25%
MG Value $109.28
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $83.37
MG Value based on 0% Growth $48.87
Market Implied Growth Rate 9.47%
Current Price $157.80
% of Intrinsic Value 144.40%

Clorox Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.26 in 2015 to an estimated $5.75 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.47% 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 below the price.

At the time of valuation, further research into Clorox Co revealed the company was trading above its Graham Number of $28.13. The company pays a dividend of $3.48 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 27.45, which was above the industry average of 26.43. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-22.8.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$22.80
Graham Number $28.13
PEmg 27.45
Current Ratio 1.15
PB Ratio 27.67
Current Dividend $3.48
Dividend Yield 2.21%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,365,000,000
Total Current Liabilities $1,186,000,000
Long-Term Debt $2,285,000,000
Total Assets $5,073,000,000
Intangible Assets $2,505,000,000
Total Liabilities $4,331,000,000
Shares Outstanding (Diluted Average) 130,094,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.20
Jun2018 $6.26
Jun2017 $5.33
Jun2016 $4.92
Jun2015 $4.37
Jun2014 $4.23
Jun2013 $4.30
Jun2012 $4.09
Jun2011 $4.02
Jun2010 $4.24
Jun2009 $3.79
Jun2008 $3.24
Jun2007 $3.26
Jun2006 $2.90
Jun2005 $6.11
Jun2004 $2.56
Jun2003 $2.23
Jun2002 $1.37
Jun2001 $1.35
Jun2000 $1.64
Jun1999 $0.52

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.75
Jun2018 $5.36
Jun2017 $4.81
Jun2016 $4.50
Jun2015 $4.26
Jun2014 $4.19
Jun2013 $4.15
Jun2012 $4.00
Jun2011 $3.88
Jun2010 $3.70
Jun2009 $3.57
Jun2008 $3.51
Jun2007 $3.57
Jun2006 $3.50
Jun2005 $3.44
Jun2004 $2.01
Jun2003 $1.63

Recommended Reading:

Other ModernGraham posts about the company

Clorox Co Valuation – May 2018 $CLX
Clorox Company Valuation – January 2017 $CLX
Clorox Company Analysis – September 2015 Update $CLX
23 Companies to Research This Week – 9/13/14
Clorox Company Annual Stock Valuation – 2014 $CLX

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Clorox Co Valuation – May 2018 $CLX
Newell Brands Inc Valuation – March 2018 $NWL
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Leggett & Platt Inc Valuation – March 2017 $LEG

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.

Carnival Corp Valuation – February 2019 $CCL

Company Profile (excerpt from Reuters): Carnival Corporation, incorporated on November 21, 1974, is a leisure travel company. The Company is a cruise company of global cruise guests, and a provider of vacations to all cruise destinations throughout the world. The Company operates in four segments: North America, EAA, Cruise Support and, Tour and Other. As of November 30, 2016, the Company operated over 100 cruise ships within a portfolio of global, regional and national cruise brands that sell cruise products, services and vacation experiences in all the vacation geographic areas. The Company’s North America segment includes Carnival Cruise Line, Holland America Line, Princess Cruises (Princess) and Seabourn. The Company’s EAA segment includes AIDA Cruises (AIDA), Costa Cruises (Costa), Cunard, P&O Cruises (Australia), P&O Cruises (the United Kingdom) and ship operations of Fathom. The Company’s Cruise Support segment represents certain of its port and related facilities and other services that are provided for the benefit of its cruise brands and Fathom’s selling, general and administrative expenses. The Company’s Tour and Other segment represents the hotel and transportation operations of Holland America Princess Alaska Tours and three ships that the Company bareboat charter to unaffiliated entities.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CCL – 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 $39,817,043,115 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.24 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 93.60% Pass
6. Moderate PEmg Ratio PEmg < 20 14.07 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.65 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 0.24 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.13 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 $4.11
MG Growth Estimate 15.00%
MG Value $158.06
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $59.53
MG Value based on 0% Growth $34.90
Market Implied Growth Rate 2.79%
Current Price $57.78
% of Intrinsic Value 36.56%

Carnival 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, 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 $1.83 in 2015 to an estimated $4.11 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.79% 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 Carnival Corp revealed the company was trading below its Graham Number of $59.51. The company pays a dividend of $1.95 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.07, which was below the industry average of 31.44, 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 $-22.48.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$22.48
Graham Number $59.51
PEmg 14.07
Current Ratio 0.24
PB Ratio 1.65
Current Dividend $1.95
Dividend Yield 3.37%
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 11/1/2018
Total Current Assets $2,225,000,000
Total Current Liabilities $9,204,000,000
Long-Term Debt $7,897,000,000
Total Assets $42,401,000,000
Intangible Assets $4,101,000,000
Total Liabilities $17,958,000,000
Shares Outstanding (Diluted Average) 700,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.67
Nov2018 $4.44
Nov2017 $3.59
Nov2016 $3.72
Nov2015 $2.26
Nov2014 $1.56
Nov2013 $1.36
Nov2012 $1.67
Nov2011 $2.42
Nov2010 $2.47
Nov2009 $2.24
Nov2008 $2.90
Nov2007 $2.95
Nov2006 $2.77
Nov2005 $2.70
Nov2004 $2.24
Nov2003 $1.62
Nov2002 $1.68
Nov2001 $1.57
Nov2000 $1.60
Nov1999 $1.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.11
Nov2018 $3.59
Nov2017 $2.94
Nov2016 $2.45
Nov2015 $1.83
Nov2014 $1.70
Nov2013 $1.86
Nov2012 $2.19
Nov2011 $2.50
Nov2010 $2.58
Nov2009 $2.66
Nov2008 $2.82
Nov2007 $2.67
Nov2006 $2.42
Nov2005 $2.15
Nov2004 $1.83
Nov2003 $1.63

Recommended Reading:

Other ModernGraham posts about the company

Carnival Corp Valuation – April 2018 $CCL
Carnival Corp Valuation – July 2016 $CCL
5 Speculative and Overvalued Companies to Avoid – May 2015
Carnival Corporation Annual Valuation – 2015 $CCL
14 Companies in the Spotlight This Week – 4/12/14

Other ModernGraham posts about related companies

Wyndham Worldwide Corp Valuation – May 2018 $WYN
Carnival Corp Valuation – April 2018 $CCL
Marriott International Inc Valuation – March 2018 $MAR
Norwegian Cruise Line Holdings Ltd Valuation – Initial Coverage $NCLH
Wyndham Worldwide Corp Valuation – January 2017 $WYN
ILG Inc Valuation – Initial Coverage $ILG
Starwood Hotels & Resorts Worldwide Inc Valuation – August 2016 $HOT
Carnival Corp Valuation – July 2016 $CCL
Marriott International Inc Valuation – July 2016 $MAR
Starwood Hotels & Resorts Worldwide Inc. Analysis – July 2015 Update $HOT

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.

Oracle Corporation Valuation – January 2019 $ORCL

Company Profile (excerpt from Reuters): Oracle Corporation (Oracle), incorporated on October 9, 2005, provides products and services that address all aspects of corporate information technology (IT) environments, including application, platform and infrastructure. The Company’s businesses include cloud and on-premise software, hardware and services. Its cloud and on-premise software business consists of three segments, including cloud software and on-premise software, which includes Software as a Service (SaaS) and Platform as a Service (PaaS) offerings, cloud infrastructure as a service (IaaS) and software license updates and product support. Its hardware business consists of two segments, including hardware products and hardware support. Its services business includes activities, such as consulting services, enhanced support services and education services, among others.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORCL – 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 $178,674,331,867 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.80 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 22.73% Fail
6. Moderate PEmg Ratio PEmg < 20 24.31 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.12 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.80 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.41 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.05
MG Growth Estimate -1.01%
MG Value $13.29
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $29.71
MG Value based on 0% Growth $17.41
Market Implied Growth Rate 7.91%
Current Price $49.81
% of Intrinsic Value 374.79%

Oracle Corporation 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 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 net current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.2 in 2015 to an estimated $2.05 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.91% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Oracle Corporation revealed the company was trading above its Graham Number of $26.99. The company pays a dividend of $0.76 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 24.31, which was below the industry average of 50.37, 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 $-7.94.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.94
Graham Number $26.99
PEmg 24.31
Current Ratio 2.80
PB Ratio 6.12
Current Dividend $0.76
Dividend Yield 1.53%
Number of Consecutive Years of Dividend Growth 10

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 11/1/2018
Total Current Assets $56,938,000,000
Total Current Liabilities $20,315,000,000
Long-Term Debt $51,561,000,000
Total Assets $118,318,000,000
Intangible Assets $49,881,000,000
Total Liabilities $87,263,000,000
Shares Outstanding (Diluted Average) 3,817,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.83
May2018 $0.90
May2017 $2.21
May2016 $2.07
May2015 $2.21
May2014 $2.38
May2013 $2.26
May2012 $1.96
May2011 $1.67
May2010 $1.21
May2009 $1.09
May2008 $1.06
May2007 $0.81
May2006 $0.64
May2005 $0.55
May2004 $0.50
May2003 $0.43
May2002 $0.39
May2001 $0.44
May2000 $1.05
May1999 $0.22

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.05
May2018 $1.76
May2017 $2.20
May2016 $2.19
May2015 $2.20
May2014 $2.09
May2013 $1.84
May2012 $1.56
May2011 $1.29
May2010 $1.06
May2009 $0.93
May2008 $0.80
May2007 $0.65
May2006 $0.54
May2005 $0.48
May2004 $0.49
May2003 $0.49

Recommended Reading:

Other ModernGraham posts about the company

Oracle Corporation Valuation – March 2018 $ORCL
9 Best Stocks For Value Investors This Week – 7/23/16
Oracle Corporation Valuation – July 2016 $ORCL
19 Best Stocks For Value Investors This Week – 1/9/16
Oracle Corporation Valuation – January 2016 Update $ORCL

Other ModernGraham posts about related companies

Red Hat Inc Valuation – January 2019 $RHT
Alphabet Inc Valuation – January 2019 $GOOG $GOOGL
Ansys Inc Valuation – January 2019 $ANSS
Citrix Systems Inc Valuation – January 2019 $CTXS
Microsoft Corporation Valuation – November 2018 $MSFT
Cisco Systems Inc Valuation – November 2018 $CSCO
Kinaxis Inc Valuation – August 2018 $TSE:KXS
CSG Systems International Inc Valuation – August 2018 $CSGS
SPS Commerce Inc Valuation – August 2018 $SPSC
Synchronoss Technologies Inc Valuation – August 2018 $SNCR

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.

Norwegian Cruise Line Holdings Ltd Valuation – January 2019 $NCLH

Company Profile (excerpt from Reuters): Norwegian Cruise Line Holdings Ltd. (NCLH), incorporated on February 21, 2011, is a global cruise company. The Company operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. The Company had 25 ships with approximately 50,400 Berths, as of May 1, 2017. The Company’s brands offer itineraries to various destinations around the world, including Europe, Asia, Australia, New Zealand, South America, Africa, Canada, Bermuda, Caribbean, Alaska and Hawaii. The Company’s brands offer various features, amenities, and activities, including various accommodations, multiple dining venues, bars and lounges, spa, casino and retail shopping areas and various entertainment choices. All the brands offer a selection of shore excursions at each port of call, as well as hotel packages for stays before or after a voyage.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NCLH – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,517,052,862 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.24 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 867.56% Pass
6. Moderate PEmg Ratio PEmg < 20 14.73 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.72 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 0.24 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.53 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.24
MG Growth Estimate 15.00%
MG Value $124.92
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $47.05
MG Value based on 0% Growth $27.58
Market Implied Growth Rate 3.12%
Current Price $47.81
% of Intrinsic Value 38.27%

Norwegian Cruise Line Holdings Ltd 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, 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 Undervalued after growing its EPSmg (normalized earnings) from $0.95 in 2014 to an estimated $3.24 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.12% 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 Norwegian Cruise Line Holdings Ltd revealed the company was trading below its Graham Number of $49.62. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 14.73, which was below the industry average of 29.4, 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 $-37.67.

Norwegian Cruise Line Holdings Ltd receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$37.67
Graham Number $49.62
PEmg 14.73
Current Ratio 0.24
PB Ratio 1.72
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 $727,408,000
Total Current Liabilities $3,052,179,000
Long-Term Debt $5,875,252,000
Total Assets $15,316,122,000
Intangible Assets $2,241,747,000
Total Liabilities $9,118,032,000
Shares Outstanding (Diluted Average) 222,753,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.35
Dec2017 $3.31
Dec2016 $2.78
Dec2015 $1.86
Dec2014 $1.62
Dec2013 $0.49
Dec2012 $0.94
Dec2011 $0.62
Dec2010 $0.13
Dec2009 $0.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.24
Dec2017 $2.47
Dec2016 $1.87
Dec2015 $1.32
Dec2014 $0.95
Dec2013 $0.58
Dec2012 $0.55
Dec2011 $0.31
Dec2010 $0.13
Dec2009 $0.11

Recommended Reading:

Other ModernGraham posts about the company

Norwegian Cruise Line Holdings Ltd Valuation – Initial Coverage $NCLH

Other ModernGraham posts about related companies

Wyndham Worldwide Corp Valuation – May 2018 $WYN
Carnival Corp Valuation – April 2018 $CCL
Marriott International Inc Valuation – March 2018 $MAR
Norwegian Cruise Line Holdings Ltd Valuation – Initial Coverage $NCLH
Wyndham Worldwide Corp Valuation – January 2017 $WYN
ILG Inc Valuation – Initial Coverage $ILG
Starwood Hotels & Resorts Worldwide Inc Valuation – August 2016 $HOT
Carnival Corp Valuation – July 2016 $CCL
Marriott International Inc Valuation – July 2016 $MAR
Starwood Hotels & Resorts Worldwide Inc. Analysis – July 2015 Update $HOT

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.

Marsh & McLennan Companies Inc Valuation – January 2019 $MMC

Company Profile (excerpt from Reuters): Marsh & McLennan Companies, Inc., incorporated on March 17, 1969, is a professional services firm offering clients advice and solutions in risk, strategy and people. The Company is the parent company of various risk advisors and specialty consultants, including Marsh, the insurance broker, intermediary and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of human resource (HR) and investment related financial advice and services, and Oliver Wyman Group, the management, economic and brand consultancy. The Company conducts business through two segments: Risk and Insurance Services, which includes risk management activities (risk advice, risk transfer and risk control and mitigation solutions), as well as insurance and reinsurance broking and services, and Consulting includes health, retirement, talent and investments consulting services and products, and specialized management, economic and brand consulting services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MMC – 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 $42,064,656,156 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.26 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 169.15% Pass
6. Moderate PEmg Ratio PEmg < 20 25.27 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.65 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 1.26 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.45 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 $3.31
MG Growth Estimate 6.56%
MG Value $71.48
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $47.93
MG Value based on 0% Growth $28.10
Market Implied Growth Rate 8.38%
Current Price $83.51
% of Intrinsic Value 116.83%

Marsh & McLennan Companies, 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 Overvalued after growing its EPSmg (normalized earnings) from $2.3 in 2014 to an estimated $3.31 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.38% 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 Marsh & McLennan Companies, Inc. revealed the company was trading above its Graham Number of $35.49. The company pays a dividend of $1.43 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 25.27, which was above the industry average of 18. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.95.

Marsh & McLennan Companies, Inc. 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) -$14.95
Graham Number $35.49
PEmg 25.27
Current Ratio 1.26
PB Ratio 5.65
Current Dividend $1.43
Dividend Yield 1.71%
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 9/1/2018
Total Current Assets $5,966,000,000
Total Current Liabilities $4,727,000,000
Long-Term Debt $5,512,000,000
Total Assets $21,129,000,000
Intangible Assets $10,764,000,000
Total Liabilities $13,591,000,000
Shares Outstanding (Diluted Average) 510,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.87
Dec2017 $2.87
Dec2016 $3.38
Dec2015 $2.98
Dec2014 $2.65
Dec2013 $2.43
Dec2012 $2.13
Dec2011 $1.79
Dec2010 $1.55
Dec2009 $0.42
Dec2008 -$0.14
Dec2007 $4.53
Dec2006 $1.76
Dec2005 $0.74
Dec2004 $0.33
Dec2003 $2.81
Dec2002 $2.45
Dec2001 $1.70
Dec2000 $2.05
Dec1999 $1.31
Dec1998 $1.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.31
Dec2017 $2.97
Dec2016 $2.92
Dec2015 $2.59
Dec2014 $2.30
Dec2013 $1.97
Dec2012 $1.54
Dec2011 $1.38
Dec2010 $1.32
Dec2009 $1.29
Dec2008 $1.63
Dec2007 $2.36
Dec2006 $1.39
Dec2005 $1.34
Dec2004 $1.71
Dec2003 $2.29
Dec2002 $1.95

Recommended Reading:

Other ModernGraham posts about the company

Marsh & McLennan Companies Inc Valuation – March 2018 $MMC
5 Best Stocks For Value Investors This Week – 7/16/16
Marsh & McLennan Companies Inc Valuation – July 2016 $MMC
26 Best Stocks For Value Investors This Week – 2/6/16
Marsh & McLennan Company Valuation – January 2016 Update $MMC

Other ModernGraham posts about related companies

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State Street Corp Valuation – January 2019 $STT
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BlackRock Inc Valuation – January 2019 $BLK
Ameriprise Financial Inc Valuation – January 2019 $AMP
Invesco Ltd Valuation – January 2019 $IVZ
Capital One Financial Corp Valuation – January 2019 $COF
Total System Services Inc Valuation – December 2018 $TSS

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.

Ecolab Inc Valuation – January 2019 $ECL

Company Profile (excerpt from Reuters): Ecolab Inc., incorporated on February 18, 1924, provides water, hygiene and energy technologies and services. The Company’s cleaning and sanitizing programs and products, pest elimination services and equipment maintenance and repair services support customers in the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care and commercial facilities management sectors in over 170 countries. The Company’s segments include Global Industrial, Global Institutional, Global Energy, Other and Corporate. Its products and technologies are also used in water treatment, pollution control, energy conservation, oil production and refining, steelmaking, papermaking, mining, and other industrial processes.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ECL – 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 $43,316,505,468 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 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 143.03% Pass
6. Moderate PEmg Ratio PEmg < 20 32.73 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.50 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 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.14 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 $4.57
MG Growth Estimate 7.67%
MG Value $109.08
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $66.32
MG Value based on 0% Growth $38.88
Market Implied Growth Rate 12.11%
Current Price $149.70
% of Intrinsic Value 137.24%

Ecolab 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 Overvalued after growing its EPSmg (normalized earnings) from $3.03 in 2014 to an estimated $4.57 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.11% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Ecolab Inc. revealed the company was trading above its Graham Number of $54.54. The company pays a dividend of $1.52 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 32.73, which was above the industry average of 20.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.39.

Ecolab 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) -$24.39
Graham Number $54.54
PEmg 32.73
Current Ratio 1.34
PB Ratio 5.50
Current Dividend $1.52
Dividend Yield 1.02%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $4,822,300,000
Total Current Liabilities $3,589,800,000
Long-Term Debt $6,334,800,000
Total Assets $19,962,600,000
Intangible Assets $10,898,800,000
Total Liabilities $11,979,600,000
Shares Outstanding (Diluted Average) 293,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.02
Dec2017 $5.13
Dec2016 $4.14
Dec2015 $3.32
Dec2014 $3.93
Dec2013 $3.16
Dec2012 $2.35
Dec2011 $1.91
Dec2010 $2.23
Dec2009 $1.74
Dec2008 $1.80
Dec2007 $1.70
Dec2006 $1.43
Dec2005 $1.23
Dec2004 $1.09
Dec2003 $1.06
Dec2002 $0.75
Dec2001 $0.72
Dec2000 $0.78
Dec1999 $0.65
Dec1998 $0.72

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.57
Dec2017 $4.21
Dec2016 $3.63
Dec2015 $3.23
Dec2014 $3.03
Dec2013 $2.48
Dec2012 $2.09
Dec2011 $1.93
Dec2010 $1.89
Dec2009 $1.67
Dec2008 $1.58
Dec2007 $1.41
Dec2006 $1.21
Dec2005 $1.06
Dec2004 $0.94
Dec2003 $0.84
Dec2002 $0.73

Recommended Reading:

Other ModernGraham posts about the company

Ecolab Inc Valuation – March 2018 $ECL
Ecolab Inc Valuation – June 2016 $ECL
40 Companies in the Spotlight This Week – 2/21/15
ECOLAB Inc. Annual Valuation – 2015 $ECL
14 Companies in the Spotlight This Week – 2/22/14

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Disclaimer:

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

Kimberly-Clark Corp Valuation – January 2019 $KMB

Company Profile (excerpt from Reuters): Kimberly-Clark Corporation, incorporated on June 29, 1928, is engaged in the manufacturing and marketing of a range of products made from natural or synthetic fibers. The Company’s segments include Personal Care, Consumer Tissue, K-C Professional and Corporate & Other. The Company sells its products to supermarkets, mass merchandisers, drugstores, warehouse clubs, variety and department stores, and other retail outlets. It sells its products for away-from-home use through distributors and directly to manufacturing, lodging, office building, food service and public facilities. As of December 31, 2016, the Company and its equity companies had manufacturing facilities in 38 countries, and it sold products in more than 175 countries. The Company’s business outside North America includes Developing and Emerging Markets (D&E) and Developed Markets. D&E markets consist of Eastern Europe, the Middle East and Africa, Latin America and Asia-Pacific, excluding Australia and South Korea. Its Developed Markets consist of Western and Central Europe, Australia and South Korea.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KMB – 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 $40,257,491,250 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.75 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 29.94% Fail
6. Moderate PEmg Ratio PEmg < 20 23.13 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 362.04 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 0.75 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.38 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.03
MG Growth Estimate 1.63%
MG Value $59.11
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $72.89
MG Value based on 0% Growth $42.73
Market Implied Growth Rate 7.31%
Current Price $116.25
% of Intrinsic Value 196.66%

Kimberly Clark Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.53 in 2014 to an estimated $5.03 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.31% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Kimberly Clark Corp revealed the company was trading above its Graham Number of $13.39. The company pays a dividend of $3.88 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.13, which was above the industry average of 20. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.84.

Kimberly Clark 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) -$26.84
Graham Number $13.39
PEmg 23.13
Current Ratio 0.75
PB Ratio 362.04
Current Dividend $3.88
Dividend Yield 3.34%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $5,108,000,000
Total Current Liabilities $6,805,000,000
Long-Term Debt $5,739,000,000
Total Assets $14,583,000,000
Intangible Assets $1,480,000,000
Total Liabilities $14,471,000,000
Shares Outstanding (Diluted Average) 348,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.45
Dec2017 $6.40
Dec2016 $5.99
Dec2015 $2.77
Dec2014 $4.04
Dec2013 $5.53
Dec2012 $4.42
Dec2011 $3.99
Dec2010 $4.45
Dec2009 $4.52
Dec2008 $4.04
Dec2007 $4.09
Dec2006 $3.25
Dec2005 $3.28
Dec2004 $3.61
Dec2003 $3.33
Dec2002 $3.22
Dec2001 $3.02
Dec2000 $3.31
Dec1999 $3.09
Dec1998 $1.99

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.03
Dec2017 $5.19
Dec2016 $4.58
Dec2015 $3.96
Dec2014 $4.53
Dec2013 $4.71
Dec2012 $4.30
Dec2011 $4.23
Dec2010 $4.26
Dec2009 $4.05
Dec2008 $3.77
Dec2007 $3.59
Dec2006 $3.34
Dec2005 $3.35
Dec2004 $3.36
Dec2003 $3.22
Dec2002 $3.09

Recommended Reading:

Other ModernGraham posts about the company

Kimberly-Clark Corp Valuation – March 2018 $KMB
Kimberly-Clark Corporation Valuation – June 2016 $KMB
34 Companies in the Spotlight This Week – 2/7/15
Kimberly Clark Corporation Annual Valuation – 2015 $KMB
15 Companies in the Spotlight This Week – 2/1/14

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Disclaimer:

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

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