Clarcor Inc Valuation – Initial Coverage $CLC

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Clarcor Inc (CLC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CLARCOR Inc. provides filtration products, filtration systems and services, and consumer and industrial packaging products. The Company’s segments include Engine/Mobile Filtration and Industrial/Environmental Filtration. Its Engine/Mobile Filtration segment manufactures and sells filtration products for on-road and off-road mobile and stationary applications, including trucks, agricultural machinery, transit buses, locomotives, and other industrial and specialty applications. The Engine/Mobile Filtration segment’s products include first-fit filtration systems and replacement products, such as oil, air, fuel, coolant, transmission and hydraulic filters. The Company’s Industrial/Environmental Filtration segment manufactures and sells filtration products used in industrial and commercial processes, and in buildings and infrastructures of various types. The Industrial/Environmental Filtration segment’s products include liquid process, natural gas and air filtration products and systems.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CLC – January 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $4,006,395,941 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.44 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 67.26% Pass
6. Moderate PEmg Ratio PEmg < 20 30.19 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.51 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.44 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.67 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.73
MG Growth Estimate 4.13%
MG Value $45.74
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $39.56
MG Value based on 0% Growth $23.19
Market Implied Growth Rate 10.84%
Current Price $82.35
% of Intrinsic Value 180.04%

CLARCOR Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.14 in 2012 to an estimated $2.73 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.84% 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 CLARCOR Inc. revealed the company was trading above its Graham Number of $39.49. The company pays a dividend of $0.88 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 30.19, which was above the industry average of 22.25. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.49.

CLARCOR 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) $0.49
Graham Number $39.49
PEmg 30.19
Current Ratio 3.44
PB Ratio 3.51
Current Dividend $0.88
Dividend Yield 1.07%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 8/1/2016
Total Current Assets $634,114,000
Total Current Liabilities $184,543,000
Long-Term Debt $302,789,000
Total Assets $1,759,791,000
Intangible Assets $818,182,000
Total Liabilities $610,173,000
Shares Outstanding (Diluted Average) 49,055,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.93
Nov2015 $2.67
Nov2014 $2.83
Nov2013 $2.34
Nov2012 $2.42
Nov2011 $2.42
Nov2010 $1.88
Nov2009 $1.40
Nov2008 $1.86
Nov2007 $1.78
Nov2006 $1.59
Nov2005 $1.46
Nov2004 $1.24
Nov2003 $1.08
Nov2002 $0.93
Nov2001 $0.84
Nov2000 $0.82
Nov1999 $0.73
Nov1998 $0.65
Nov1997 $0.55
Nov1996 $0.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.73
Nov2015 $2.60
Nov2014 $2.50
Nov2013 $2.25
Nov2012 $2.14
Nov2011 $1.95
Nov2010 $1.72
Nov2009 $1.63
Nov2008 $1.69
Nov2007 $1.55
Nov2006 $1.37
Nov2005 $1.21
Nov2004 $1.05
Nov2003 $0.93
Nov2002 $0.84
Nov2001 $0.77
Nov2000 $0.71

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.

Coherent Inc Valuation – August 2018 $COHR

Company Profile (excerpt from Reuters): Coherent, Inc., incorporated on January 11, 1989, is a photonics manufacturer. The Company is engaged in designing, manufacturing, servicing and marketing of lasers and related accessories for a range of scientific, commercial and industrial applications. The Company operates through two segments: Specialty Lasers and Systems (SLS) and Commercial Lasers and Components (CLC). The Specialty Lasers and Systems segment develops and manufactures configurable products serving the microelectronics, scientific research and government programs, and original equipment manufacturer (OEM) components and instrumentation markets. The Commercial Lasers and Components segment focuses on higher volume products that are offered in set configurations. The product architectures are designed for exchange at the point of use such that substantially all product service and repairs are based upon advanced replacement and depot (that is factory) repair. CLC’s primary markets include materials processing, OEM components, and instrumentation and microelectronics.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of COHR – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,994,005,261 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.10 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 515.49% Pass
6. Moderate PEmg Ratio PEmg < 20 25.72 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.53 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 3.10 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.53 Pass
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 $7.08
MG Growth Estimate 15.00%
MG Value $272.61
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $102.67
MG Value based on 0% Growth $60.19
Market Implied Growth Rate 8.61%
Current Price $182.10
% of Intrinsic Value 66.80%

Coherent, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.62 in 2014 to an estimated $7.08 for 2018. This level of demonstrated earnings growth outpaces 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 above the price.

At the time of valuation, further research into Coherent, Inc. revealed the company was trading above its Graham Number of $106.68. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 25.72, which was below the industry average of 53.7, 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 $8.02.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $8.02
Graham Number $106.68
PEmg 25.72
Current Ratio 3.10
PB Ratio 3.53
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 3/1/2018
Total Current Assets $1,247,407,000
Total Current Liabilities $401,968,000
Long-Term Debt $449,653,000
Total Assets $2,336,585,000
Intangible Assets $641,563,000
Total Liabilities $1,046,904,000
Shares Outstanding (Diluted Average) 25,010,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.71
Sep2017 $8.36
Sep2016 $3.58
Sep2015 $3.06
Sep2014 $2.36
Sep2013 $2.70
Sep2012 $2.62
Sep2011 $3.66
Sep2010 $1.47
Sep2009 -$1.45
Sep2008 $0.83
Sep2007 $0.50
Sep2006 $1.44
Sep2005 $1.23
Sep2004 $0.55
Sep2003 -$1.56
Sep2002 -$2.40
Sep2001 $3.50
Sep2000 $2.24
Sep1999 $0.66
Sep1998 $0.73

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.08
Sep2017 $4.85
Sep2016 $3.02
Sep2015 $2.78
Sep2014 $2.62
Sep2013 $2.43
Sep2012 $2.01
Sep2011 $1.47
Sep2010 $0.43
Sep2009 $0.11
Sep2008 $0.90
Sep2007 $0.77
Sep2006 $0.55
Sep2005 $0.16
Sep2004 -$0.10
Sep2003 -$0.12
Sep2002 $0.72

Recommended Reading:

Other ModernGraham posts about the company

12 Best Stocks for Value Investors This Week – 2/4/17
Coherent Inc Valuation – Initial Coverage $COHR

Other ModernGraham posts about related companies

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iRobot Corp Valuation – July 2018 $IRBT
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Cognex Corp Valuation – July 2018 $CGNX
Sanmina Corp Valuation – July 2018 $SANM
II-VI Inc Valuation – July 2018 $IIVI

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.

Best Dividend Paying Stocks for Dividend Growth Investors – February 2017

Dividend Growth Stocks

Dividend growth investing is a very popular approach which can fit within the ModernGraham methods.  This article will look at companies reviewed by ModernGraham which have grown their dividends annually for at least the last 20 years.

For all 737 companies covered by ModernGraham, I track the number of years a company has grown its dividend, and provide that information in my individual company valuations.

Out of the 737 companies, only 66 have grown dividends annually for at least the last 20 years.  Here is an overview of those companies:

The Elite

The following companies have been rated as undervalued and suitable for either the Defensive Investor or the Enterprising Investor:

AFLAC Incorporated (AFL)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.72 in 2012 to an estimated $6.22 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.36% 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 AFLAC Incorporated revealed the company was trading below its Graham Number of $87.98. The company pays a dividend of $1.64 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.22, which was below the industry average of 18.78, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Cintas Corporation (CTAS)

Cintas Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.07 in 2013 to an estimated $4.36 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.06% 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.  (See the full valuation)

CTAS charts July 2016

T. Rowe Price Group Inc (TROW)

T. Rowe Price Group Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.75 in 2012 to an estimated $4.22 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.89% 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 T. Rowe Price Group Inc revealed the company was trading above its Graham Number of $41.69. The company pays a dividend of $2.12 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.27, which was below the industry average of 19.87, 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 $-0.07.  (See the full valuation)

TROW charts August 2016

United Technologies Corporation (UTX)

United Technologies Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.17 in 2012 to an estimated $7.65 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.29% 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.  (See the full valuation)

UTX Charts May 2016

The Good

The following companies have been rated as fairly valued and suitable for either the Defensive Investor or the Enterprising Investor:

A. O. Smith Corp (AOS)

A. O. Smith Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.9 in 2012 to an estimated $2.82 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 4.47% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.  (See the full valuation)

AOS charts June 2016

Franklin Resources, Inc. (BEN)

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.5 in 2012 to an estimated $3.2 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 2.18% 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 Franklin Resources, Inc. revealed the company was trading above its Graham Number of $35.55. The company pays a dividend of $0.69 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 11.51, which was below the industry average of 19.87, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $14.41.  (See the full valuation)

BEN charts August 2016

Cincinnati Financial Corporation (CINF)

Cincinnati Financial Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and 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 $2.12 in 2012 to an estimated $3.21 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 6.36% 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.  (See the full valuation)

CINF charts May 2016

Hormel Foods Corp (HRL)

Hormel Foods Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.81 in 2012 to an estimated $1.29 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 9.9% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Hormel Foods Corp revealed the company was trading above its Graham Number of $17.33. The company pays a dividend of $0.56 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 29.96, which was below the industry average of 30.19, 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 $0.03.  (See the full valuation)

HRL charts August 2016

Leggett & Platt, Inc. (LEG)

Leggett & Platt, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.21 in 2012 to an estimated $1.93 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 9.31% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Leggett & Platt, Inc. revealed the company was trading above its Graham Number of $21.85. The company pays a dividend of $1.3 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 27.11, which was below the industry average of 27.31, 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 $-4.2.  (See the full valuation)

LEG charts August 2016

People’s United Financial, Inc. (PBCT)

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.51 in 2012 to an estimated $0.83 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 7.13% 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.  (See the full valuation)

PBCT charts June 2016

Ross Stores, Inc. (ROST)

Ross Stores, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.36 in 2013 to an estimated $2.35 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 7.44% 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.  (See the full valuation)

ROST charts June 2016

VF Corp (VFC)

VF Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.83 in 2012 to an estimated $2.72 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 7.2% 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.  (See the full valuation)

VFC charts August 2016

The Full List

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Clicking on the company name will take you to the company’s latest valuation.  For the investor type, a “D” indicates the company is suitable for the Defensive Investor, an “E” indicates the company is suitable for the Enterprising Investor, and an “S” indicates the company is considered speculative at this time.

Ticker Name with Link Investor Type Latest Valuation Date MG Value Recent Price Price as a percent of Value PEmg Ratio Div. Yield
ADM Archer Daniels Midland Company E 1/3/2017 $21.55 $44.69 207.38% 17.39 2.64%
ADP Automatic Data Processing E 11/20/2016 $49.29 $99.68 202.23% 30.21 2.13%
AFL AFLAC Incorporated D 12/19/2016 $112.32 $71.10 63.30% 11.43 2.31%
ALB Albemarle Corporation S 8/25/2016 $0.00 $91.92 N/A 41.04 1.29%
AOS A. O. Smith Corp E 6/11/2016 $64.88 $49.59 76.43% 17.59 1.63%
APD Air Products & Chemicals, Inc. S 1/27/2017 $41.85 $141.50 338.11% 28.53 2.40%
BCR C R Bard Inc E 8/25/2016 $73.15 $242.41 331.39% 42.53 0.40%
BDX Becton Dickinson and Co S 1/8/2017 $18.86 $180.90 959.17% 36.69 1.46%
BEN Franklin Resources, Inc. D 8/21/2016 $54.08 $42.53 78.64% 13.29 1.62%
BF.B Brown-Forman Corporation S 2/2/2017 $45.80 $48.20 105.24% 25.64 1.41%
BMS Bemis Company, Inc. E 7/1/2016 $43.96 $48.62 110.60% 21.32 2.32%
CAH Cardinal Health Inc S 7/3/2016 $54.67 $80.71 147.63% 23.46 1.92%
CFR Cullen/Frost Bankers, Inc. E 12/8/2016 $62.02 $94.12 151.76% 22.04 2.27%
CHRW C.H. Robinson Worldwide, Inc. S 8/29/2016 $46.96 $79.06 168.36% 23.74 2.11%
CINF Cincinnati Financial Corporation E 5/21/2016 $76.98 $72.67 94.40% 22.64 2.56%
CL Colgate-Palmolive Company S 1/27/2016 $32.95 $71.98 218.45% 28.56 2.11%
CLC CLARCOR Inc. E 1/8/2017 $45.74 $82.93 181.31% 30.38 1.06%
CLX Clorox Co S 1/28/2017 $63.04 $133.71 212.10% 27.91 2.33%
CTAS Cintas Corporation E 7/21/2016 $167.73 $118.61 70.71% 27.20 0.89%
CVX Chevron Corporation S 8/18/2016 $0.00 $110.33 N/A 23.57 3.88%
DOV Dover Corp D 7/8/2016 $60.20 $79.94 132.79% 17.53 2.08%
ECL Ecolab Inc. S 6/26/2016 $117.40 $123.95 105.58% 33.41 1.10%
ED Consolidated Edison, Inc. S 8/21/2016 $39.19 $73.50 187.55% 19.09 3.59%
EMR Emerson Electric Co. S 2/12/2016 $38.39 $61.89 161.21% 19.46 3.05%
EPD Enterprise Products Partners L.P. S 8/27/2016 $21.05 $28.86 137.10% 22.55 5.37%
ESS Essex Property Trust Inc S 10/9/2015 $153.41 $228.10 148.69% 57.31 2.60%
EXPD Expeditors International of Washington E 6/25/2016 $39.14 $56.50 144.35% 27.03 1.27%
GPC Genuine Parts Company E 7/8/2016 $83.61 $100.67 120.40% 21.93 2.48%
GWW W W Grainger Inc E 1/12/2017 $219.90 $254.96 115.94% 22.85 1.87%
HP Helmerich & Payne, Inc. S 6/23/2016 $14.72 $68.26 463.72% 20.44 4.03%
HRL Hormel Foods Corp E 8/24/2016 $34.15 $37.26 109.11% 28.88 1.50%
IBM International Business Machines Corp. S 11/10/2015 $200.54 $180.67 90.09% 13.42 2.88%
ITW Illinois Tool Works Inc. D 7/6/2016 $100.87 $130.31 129.19% 23.52 1.64%
JKHY Jack Henry & Associates, Inc. S 1/30/2017 $78.75 $92.53 117.50% 33.05 1.18%
JNJ Johnson & Johnson E 1/16/2017 $105.81 $118.86 112.33% 21.57 2.61%
KMB Kimberly Clark Corp S 6/24/2016 $47.14 $131.93 279.87% 28.93 2.70%
KO The Coca-Cola Co S 7/28/2016 $10.76 $41.23 383.18% 23.16 3.25%
LEG Leggett & Platt, Inc. E 8/25/2016 $50.91 $48.62 95.50% 25.19 2.67%
LLTC Linear Technology Corporation E 7/12/2016 $19.97 $64.92 325.09% 33.12 1.88%
LOW Lowe’s Companies, Inc. S 1/8/2016 $83.53 $76.74 91.87% 29.98 1.39%
MCD McDonald’s Corporation S 11/20/2016 $49.98 $127.80 255.70% 25.01 2.79%
MDT Medtronic plc. Ordinary Shares D 7/12/2016 $34.43 $78.88 229.10% 23.90 1.93%
MKC McCormick & Company, Incorporated S 1/3/2017 $49.74 $97.59 196.20% 29.31 1.73%
MMM 3M Co E 12/13/2016 $135.24 $182.95 135.28% 24.23 2.38%
NEE NextEra Energy Inc S 12/21/2016 $79.43 $126.86 159.71% 23.41 2.66%
NNN National Retail Properties, Inc. S 12/4/2016 $20.46 $44.72 218.57% 36.36 3.94%
PBCT People’s United Financial, Inc. D 6/20/2016 $22.89 $19.19 83.84% 23.12 3.49%
PEP PepsiCo, Inc. S 7/13/2016 $43.65 $108.15 247.77% 26.12 2.64%
PG Procter & Gamble Co S 7/8/2016 $17.20 $91.09 529.59% 26.48 2.91%
PH Parker-Hannifin Corp D 7/15/2016 $81.86 $153.89 187.99% 23.90 1.64%
PPG PPG Industries, Inc. S 1/16/2017 $215.75 $102.37 47.45% 18.28 1.48%
PX Praxair, Inc. E 6/13/2016 $69.25 $117.42 169.56% 21.23 2.47%
ROST Ross Stores, Inc. E 6/21/2016 $71.19 $68.55 96.29% 29.17 0.69%
SHW Sherwin-Williams Co S 7/12/2016 $386.46 $311.35 80.56% 31.01 0.92%
SKT Tanger Factory Outlet Centers Inc. S 1/16/2017 $61.57 $33.69 54.72% 21.06 3.62%
SON Sonoco Products Co E 2/6/2017 $32.94 $52.86 160.47% 23.18 2.72%
SPGI S&P Global Inc S 2/8/2017 $135.28 $130.39 96.39% 31.27 1.08%
SWK Stanley Black & Decker, Inc. S 1/28/2016 $125.20 $126.65 101.16% 26.44 1.71%
SYY SYSCO Corporation S 1/25/2017 $13.77 $52.35 380.17% 29.25 2.37%
TGT Target Corporation S 8/22/2016 $3.67 $65.79 1792.64% 21.36 3.40%
TROW T. Rowe Price Group Inc D 8/25/2016 $103.50 $71.10 68.70% 16.85 2.98%
TSE:CNR Canadian National Railway Company S 1/30/2017 $118.66 $93.85 79.09% 20.86 1.60%
UTX United Technologies Corporation D 5/18/2016 $174.94 $112.15 64.11% 14.66 2.28%
VFC VF Corp E 8/1/2016 $62.96 $52.68 83.67% 19.37 2.71%
WBA Walgreens Boots Alliance Inc S 7/6/2016 $61.94 $85.86 138.62% 26.26 1.65%
WMT Wal-Mart Stores Inc S 5/20/2016 $39.55 $69.37 175.40% 15.31 2.83%

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

To view the MG Value and PEmg information,  you must be logged in as a premium member.  Clicking on the company name will take you to the company’s latest valuation.

For the investor type, a “D” indicates the company is suitable for the Defensive Investor, an “E” indicates the company is suitable for the Enterprising Investor, and an “S” indicates the company is considered speculative at this time.

Ticker Name with Link Investor Type Latest Valuation Date MG Value Recent Price Price as a percent of Value PEmg Ratio Div. Yield
ADM Archer Daniels Midland Company E 1/3/2017 $44.69 2.64%
ADP Automatic Data Processing E 11/20/2016 $99.68 2.13%
AFL AFLAC Incorporated D 12/19/2016 $71.10 2.31%
ALB Albemarle Corporation S 8/25/2016 $91.92 1.29%
AOS A. O. Smith Corp E 6/11/2016 $49.59 1.63%
APD Air Products & Chemicals, Inc. S 1/27/2017 $141.50 2.40%
BCR C R Bard Inc E 8/25/2016 $242.41 0.40%
BDX Becton Dickinson and Co S 1/8/2017 $180.90 1.46%
BEN Franklin Resources, Inc. D 8/21/2016 $42.53 1.62%
BF.B Brown-Forman Corporation S 2/2/2017 $48.20 1.41%
BMS Bemis Company, Inc. E 7/1/2016 $48.62 2.32%
CAH Cardinal Health Inc S 7/3/2016 $80.71 1.92%
CFR Cullen/Frost Bankers, Inc. E 12/8/2016 $94.12 2.27%
CHRW C.H. Robinson Worldwide, Inc. S 8/29/2016 $79.06 2.11%
CINF Cincinnati Financial Corporation E 5/21/2016 $72.67 2.56%
CL Colgate-Palmolive Company S 1/27/2016 $71.98 2.11%
CLC CLARCOR Inc. E 1/8/2017 $82.93 1.06%
CLX Clorox Co S 1/28/2017 $133.71 2.33%
CTAS Cintas Corporation E 7/21/2016 $118.61 0.89%
CVX Chevron Corporation S 8/18/2016 $110.33 3.88%
DOV Dover Corp D 7/8/2016 $79.94 2.08%
ECL Ecolab Inc. S 6/26/2016 $123.95 1.10%
ED Consolidated Edison, Inc. S 8/21/2016 $73.50 3.59%
EMR Emerson Electric Co. S 2/12/2016 $61.89 3.05%
EPD Enterprise Products Partners L.P. S 8/27/2016 $28.86 5.37%
ESS Essex Property Trust Inc S 10/9/2015 $228.10 2.60%
EXPD Expeditors International of Washington E 6/25/2016 $56.50 1.27%
GPC Genuine Parts Company E 7/8/2016 $100.67 2.48%
GWW W W Grainger Inc E 1/12/2017 $254.96 1.87%
HP Helmerich & Payne, Inc. S 6/23/2016 $68.26 4.03%
HRL Hormel Foods Corp E 8/24/2016 $37.26 1.50%
IBM International Business Machines Corp. S 11/10/2015 $180.67 2.88%
ITW Illinois Tool Works Inc. D 7/6/2016 $130.31 1.64%
JKHY Jack Henry & Associates, Inc. S 1/30/2017 $92.53 1.18%
JNJ Johnson & Johnson E 1/16/2017 $118.86 2.61%
KMB Kimberly Clark Corp S 6/24/2016 $131.93 2.70%
KO The Coca-Cola Co S 7/28/2016 $41.23 3.25%
LEG Leggett & Platt, Inc. E 8/25/2016 $48.62 2.67%
LLTC Linear Technology Corporation E 7/12/2016 $64.92 1.88%
LOW Lowe’s Companies, Inc. S 1/8/2016 $76.74 1.39%
MCD McDonald’s Corporation S 11/20/2016 $127.80 2.79%
MDT Medtronic plc. Ordinary Shares D 7/12/2016 $78.88 1.93%
MKC McCormick & Company, Incorporated S 1/3/2017 $97.59 1.73%
MMM 3M Co E 12/13/2016 $182.95 2.38%
NEE NextEra Energy Inc S 12/21/2016 $126.86 2.66%
NNN National Retail Properties, Inc. S 12/4/2016 $44.72 3.94%
PBCT People’s United Financial, Inc. D 6/20/2016 $19.19 3.49%
PEP PepsiCo, Inc. S 7/13/2016 $108.15 2.64%
PG Procter & Gamble Co S 7/8/2016 $91.09 2.91%
PH Parker-Hannifin Corp D 7/15/2016 $153.89 1.64%
PPG PPG Industries, Inc. S 1/16/2017 $102.37 1.48%
PX Praxair, Inc. E 6/13/2016 $117.42 2.47%
ROST Ross Stores, Inc. E 6/21/2016 $68.55 0.69%
SHW Sherwin-Williams Co S 7/12/2016 $311.35 0.92%
SKT Tanger Factory Outlet Centers Inc. S 1/16/2017 $33.69 3.62%
SON Sonoco Products Co E 2/6/2017 $52.86 2.72%
SPGI S&P Global Inc S 2/8/2017 $130.39 1.08%
SWK Stanley Black & Decker, Inc. S 1/28/2016 $126.65 1.71%
SYY SYSCO Corporation S 1/25/2017 $52.35 2.37%
TGT Target Corporation S 8/22/2016 $65.79 3.40%
TROW T. Rowe Price Group Inc D 8/25/2016 $71.10 2.98%
TSE:CNR Canadian National Railway Company S 1/30/2017 $93.85 1.60%
UTX United Technologies Corporation D 5/18/2016 $112.15 2.28%
VFC VF Corp E 8/1/2016 $52.68 2.71%
WBA Walgreens Boots Alliance Inc S 7/6/2016 $85.86 1.65%
WMT Wal-Mart Stores Inc S 5/20/2016 $69.37 2.83%

[/level-free]

Disclaimer: 

The author held a long position in Dover Corporation and People’s United Financial Inc but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. See my current holdings here.  This article is not investment advice and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions.  Please also read our full disclaimer.

Snap-on Inc Valuation – February 2017 $SNA

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Snap-on Inc (SNA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Snap-On Incorporated is a manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users. The Company’s segments include Commercial & Industrial Group, the Snap-on Tools Group, the Repair Systems & Information Group and Financial Services. Its Commercial & Industrial Group segment consists of business operations serving a range of industrial and commercial customers across the world. Its Snap-on Tools Group segment consists of business operations serving vehicle service and repair technicians. Its Repair Systems & Information Group segment consists of business operations serving other professional vehicle repair customers around the world. Financial Services segment consists of the business operations of Snap-on Credit LLC (SOC), which has the Company’s financial services business in the United States, and Snap-on’s other financial services subsidiaries in those international markets where Snap-on has franchise operations.

SNA Chart

SNA data by YCharts

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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[/level-free]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of SNA – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,062,990,138 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.90 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 181.84% Pass
6. Moderate PEmg Ratio PEmg < 20 19.90 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.90 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.90 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.79 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $8.65
MG Growth Estimate 11.57%
MG Value $273.84
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $125.48
MG Value based on 0% Growth $73.56
Market Implied Growth Rate 5.70%
Current Price $172.21
% of Intrinsic Value 62.89%

Snap-on Incorporated is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.89 in 2013 to an estimated $8.65 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.7% 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 Snap-on Incorporated revealed the company was trading above its Graham Number of $99.22. The company pays a dividend of $2.54 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 19.9, which was below the industry average of 22.25, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.74.

Snap-on Incorporated performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.74
Graham Number $99.22
PEmg 19.90
Current Ratio 1.90
PB Ratio 3.90
Current Dividend $2.54
Dividend Yield 1.47%
Number of Consecutive Years of Dividend Growth 8

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $1,884,000,000
Total Current Liabilities $989,500,000
Long-Term Debt $708,800,000
Total Assets $4,723,200,000
Intangible Assets $1,080,100,000
Total Liabilities $2,106,000,000
Shares Outstanding (Diluted Average) 59,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.70
Dec2016 $9.20
Dec2015 $8.10
Dec2014 $7.14
Dec2013 $5.93
Dec2012 $5.20
Dec2011 $4.71
Dec2010 $3.19
Dec2009 $2.32
Dec2008 $4.07
Dec2007 $3.09
Dec2006 $1.69
Dec2005 $1.59
Dec2004 $1.40
Dec2003 $1.35
Dec2002 $1.81
Dec2001 $0.33
Dec2000 $2.53
Dec1999 $2.16
Dec1998 -$0.08
Dec1997 $2.44

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.65
Dec2016 $7.79
Dec2015 $6.80
Dec2014 $5.84
Dec2013 $4.89
Dec2012 $4.21
Dec2011 $3.63
Dec2010 $3.02
Dec2009 $2.81
Dec2008 $2.82
Dec2007 $2.08
Dec2006 $1.57
Dec2005 $1.44
Dec2004 $1.40
Dec2003 $1.48
Dec2002 $1.48
Dec2001 $1.37

Recommended Reading:

Other ModernGraham posts about the company

15 Best Stocks For Value Investors This Week – 2/13/16
Snap-on Inc Valuation – February 2016 $SNA
12 Best Stocks For Value Investors This Week – 11/7/15
Snap-on Inc. Valuation – November 2015 Update $SNA
The Best Companies of the Machinery Industry – August 2015

Other ModernGraham posts about related companies

SPX Corporation Valuation – Initial Coverage $SPXC
KLX Inc Valuation – Initial Coverage $KLXI
AGCO Corporation Valuation – February 2017 $AGCO
PACCAR Inc Valuation – February 2017 $PCAR
Kaman Corporation Valuation – Initial Coverage $KAMN
John Bean Technologies Corp Valuation – Initial Coverage $JBT
W. W. Grainger Inc Valuation – January 2017 $GWW
Allegion PLC Valuation – January 2017 $ALLE
Xylem Inc Valuation – January 2017 $XYL
Clarcor Inc Valuation – Initial Coverage $CLC

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.

Kennametal Inc Valuation – Initial Coverage $KMT

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Kennametal Inc (KMT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kennametal Inc. is a supplier of tooling, engineered components and materials consumed in production processes. The Company operates through two segments: Industrial and Infrastructure. The Industrial segment generally serves customers that operate in industrial end markets, such as transportation, general engineering, aerospace and defense. The Infrastructure segment generally serves customers that operate in the earthworks and energy sectors supporting primary industries, such as oil and gas, power generation, underground, surface and hard-rock mining, highway construction and road maintenance. It provides wear-resistant products, application engineering and services backed by material science serving customers across various sectors. The Company’s product offerings include a selection of standard and customized technologies for metalworking, such as metal cutting tools, tooling systems and services, as well as materials, such as cemented tungsten carbide products and super alloys.

KMT Chart

KMT data by YCharts

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

Learn More About Premium Membership

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of KMT – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,152,627,524 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.49 Pass
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 -731.48% Fail
6. Moderate PEmg Ratio PEmg < 20 -38.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.49 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 2.49 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
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 -$1.02
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$14.84
MG Value based on 0% Growth -$8.70
Market Implied Growth Rate -23.25%
Current Price $38.89
% of Intrinsic Value N/A

Kennametal Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.36 in 2013 to an estimated $-1.02 for 2017. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Kennametal Inc. revealed the company was trading above its Graham Number of $13.53. The company pays a dividend of $0.8 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -38, which was below the industry average of 22.25, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.69.

Kennametal 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) -$4.69
Graham Number $13.53
PEmg -38.00
Current Ratio 2.49
PB Ratio 3.49
Current Dividend $0.80
Dividend Yield 2.06%
Number of Consecutive Years of Dividend Growth 2

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $971,745,000
Total Current Liabilities $390,151,000
Long-Term Debt $0
Total Assets $2,254,781,000
Intangible Assets $489,219,000
Total Liabilities $1,351,975,000
Shares Outstanding (Diluted Average) 81,026,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.72
Jun2016 -$2.83
Jun2015 -$4.71
Jun2014 $1.99
Jun2013 $2.52
Jun2012 $3.77
Jun2011 $2.76
Jun2010 $0.57
Jun2009 -$1.64
Jun2008 $2.15
Jun2007 $2.22
Jun2006 $3.24
Jun2005 $1.57
Jun2004 $1.01
Jun2003 $0.26
Jun2002 -$3.35
Jun2001 $0.87
Jun2000 $0.85
Jun1999 $0.66
Jun1998 $1.29
Jun1997 $1.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.02
Jun2016 -$1.21
Jun2015 $0.15
Jun2014 $2.50
Jun2013 $2.36
Jun2012 $2.03
Jun2011 $1.18
Jun2010 $0.69
Jun2009 $1.01
Jun2008 $2.23
Jun2007 $2.07
Jun2006 $1.51
Jun2005 $0.45
Jun2004 -$0.09
Jun2003 -$0.48
Jun2002 -$0.54
Jun2001 $0.91

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

SPX Corporation Valuation – Initial Coverage $SPXC
KLX Inc Valuation – Initial Coverage $KLXI
AGCO Corporation Valuation – February 2017 $AGCO
PACCAR Inc Valuation – February 2017 $PCAR
Kaman Corporation Valuation – Initial Coverage $KAMN
John Bean Technologies Corp Valuation – Initial Coverage $JBT
W. W. Grainger Inc Valuation – January 2017 $GWW
Allegion PLC Valuation – January 2017 $ALLE
Xylem Inc Valuation – January 2017 $XYL
Clarcor Inc Valuation – Initial Coverage $CLC

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.

SPX Corporation Valuation – Initial Coverage $SPXC

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how SPX Corporation (SPXC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): SPX Corporation is a diversified, global supplier of infrastructure equipment. The Company operates through three segments: heating, ventilation and air conditioning (HVAC); Detection and Measurement, and Power. The HVAC solutions offered by its businesses include package cooling towers, residential and commercial boilers, heating and ventilation products. Its detection and measurement product lines encompass underground pipe and cable locators, and inspection equipment. Within its power platform, it is a manufacturer of medium and large power transformers, as well as equipment for various types of power plant, including cooling equipment, heat exchangers and pollution control systems. Its heating and ventilation products are sold under the Berko, Qmark, Farenheat, and Leading Edge brands, while its Marley-Wylain subsidiary sells Weil-McLain and Williamson-Thermoflo brands. Its power products are sold under the brand names of SPX Cooling, Marley, Balcke Duerr, Yuba and Ecolaire.

SPXC Chart

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ModernGraham Valuation of SPXC – February 2017

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,042,192,414 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.18 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -25.82% Fail
6. Moderate PEmg Ratio PEmg < 20 10.56 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.84 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 1.18 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.51 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg $2.34
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $33.96
MG Value based on 0% Growth $19.91
Market Implied Growth Rate 1.03%
Current Price $24.73
% of Intrinsic Value N/A

SPX Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history. 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, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.3 in 2012 to an estimated $2.34 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.03% 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 SPX Corporation revealed the company was trading above its Graham Number of $9.55. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 10.56, which was below the industry average of 22.25, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-25.6.

SPX 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) -$25.60
Graham Number $9.55
PEmg 10.56
Current Ratio 1.18
PB Ratio 3.84
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $628,800,000
Total Current Liabilities $534,500,000
Long-Term Debt $331,200,000
Total Assets $1,989,500,000
Intangible Assets $488,800,000
Total Liabilities $1,716,100,000
Shares Outstanding (Diluted Average) 42,475,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.62
Dec2015 -$2.03
Dec2014 $9.14
Dec2013 $4.56
Dec2012 $3.61
Dec2011 $3.36
Dec2010 $4.08
Dec2009 $0.64
Dec2008 $4.56
Dec2007 $5.22
Dec2006 $2.83
Dec2005 $15.10
Dec2004 -$0.23
Dec2003 $2.84
Dec2002 $1.53
Dec2001 $2.13
Dec2000 $2.99
Dec1999 $1.63
Dec1998 -$0.97
Dec1997 $3.08
Dec1996 -$3.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.34
Dec2015 $3.38
Dec2014 $5.70
Dec2013 $3.74
Dec2012 $3.30
Dec2011 $3.29
Dec2010 $3.33
Dec2009 $3.86
Dec2008 $5.48
Dec2007 $5.67
Dec2006 $5.40
Dec2005 $5.89
Dec2004 $1.47
Dec2003 $2.29
Dec2002 $1.83
Dec2001 $1.91
Dec2000 $1.44

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

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.

KLX Inc Valuation – Initial Coverage $KLXI

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how KLX Inc (KLXI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): KLX Inc. (KLX) is the distributor and service provider of aerospace fasteners and consumables. The Company offers ranges of aerospace hardware and consumables and inventory management services across the world. The Company operates through two segments: Aerospace Solutions Group (ASG) and Energy Services Group (ESG). The Company’s ASG segment service offerings include inventory management and replenishment, creative and differential supply chain solutions, such as third-party logistics programs, special packaging and bar-coding, parts kitting, quality assurance testing and a range of purchasing assistance programs, plus the electronic data interchange capability. The Company’s ESG segment products and services include onshore completion services, wireline services, fishing services and tools, down-hole completion and production services, pressure control, accommodations and related surface rental equipment, and remanufacturing shops.

KLXI Chart

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ModernGraham Valuation of KLXI – February 2017

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,676,977,126 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 7.44 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -16066.67% Fail
6. Moderate PEmg Ratio PEmg < 20 -53.71 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.18 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 7.44 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.69 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg -$0.94
MG Growth Estimate -4.25%
MG Value $9.53
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$13.69
MG Value based on 0% Growth -$8.02
Market Implied Growth Rate -31.10%
Current Price $50.70
% of Intrinsic Value 532.07%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0 in 2012 to an estimated $-0.94 for 2017. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into KLX Inc revealed the company was trading above its Graham Number of $29.7. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -53.71, which was below the industry average of 22.25, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $9.53.

KLX 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) $9.53
Graham Number $29.70
PEmg -53.71
Current Ratio 7.44
PB Ratio 1.18
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2016
Total Current Assets $1,988,500,000
Total Current Liabilities $267,300,000
Long-Term Debt $1,181,300,000
Total Assets $3,728,600,000
Intangible Assets $1,313,600,000
Total Liabilities $1,491,100,000
Shares Outstanding (Diluted Average) 52,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.92
Jan2016 -$7.39
Dec2014 $1.68
Dec2013 $2.88

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.94
Jan2016 -$1.44
Dec2014 $1.33
Dec2013 $0.96

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

AGCO Corporation Valuation – February 2017 $AGCO

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how AGCO Corporation (AGCO) fares in the ModernGraham valuation model.

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

AGCO Chart

AGCO data by YCharts

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of AGCO – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,108,926,073 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.59 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 16.88% Fail
6. Moderate PEmg Ratio PEmg < 20 18.40 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.78 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.59 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.48 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

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

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.27 in 2012 to an estimated $3.46 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.95% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into AGCO Corporation revealed the company was trading above its Graham Number of $38.89. The company pays a dividend of $0.51 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 18.4, which was below the industry average of 22.25, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.

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

Stage 3: Information for Further Research

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

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

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

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

PACCAR Inc Valuation – February 2017 $PCAR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how PACCAR Inc (PCAR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): PACCAR Inc (PACCAR) is a global technology company engaged in the design, manufacture and customer support of trucks. The Company operates in three segments: the Truck segment, which includes the design, manufacture and distribution of light-, medium- and heavy-duty commercial trucks; the Parts segment, which includes the distribution of aftermarket parts for trucks and related commercial vehicles, and the Financial Services segment, which includes the finance and leasing products, and services provided to customers and dealers. PACCAR’s other businesses include a division of the Company, which manufactures industrial winches in over two the United States plants and markets them under the Braden, Carco and Gearmatic nameplates. PACCAR’s trucks are marketed under the Kenworth, Peterbilt and DAF nameplates. PACCAR’s finance and leasing activities are principally related to PACCAR products and associated equipment. PACCAR Financial Services (PFS) operates in over 20 countries.

PCAR Chart

PCAR data by YCharts

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of PCAR – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,327,983,664 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.11 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 114.06% Pass
6. Moderate PEmg Ratio PEmg < 20 21.91 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.56 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 1.11 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.13
MG Growth Estimate 2.42%
MG Value $41.72
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $45.33
MG Value based on 0% Growth $26.57
Market Implied Growth Rate 6.70%
Current Price $68.49
% of Intrinsic Value 164.18%

PACCAR Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the low current ratio. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.69 in 2013 to an estimated $3.13 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.7% 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 PACCAR Inc revealed the company was trading above its Graham Number of $37.88. The company pays a dividend of $0.96 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 21.91, which was below the industry average of 22.25, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.57.

PACCAR 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) -$26.57
Graham Number $37.88
PEmg 21.91
Current Ratio 1.11
PB Ratio 3.56
Current Dividend $0.96
Dividend Yield 1.40%
Number of Consecutive Years of Dividend Growth 7

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $4,512,600,000
Total Current Liabilities $4,056,200,000
Long-Term Debt $0
Total Assets $20,638,900,000
Intangible Assets $0
Total Liabilities $13,861,300,000
Shares Outstanding (Diluted Average) 351,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.30
Dec2016 $1.48
Dec2015 $4.51
Dec2014 $3.82
Dec2013 $3.30
Dec2012 $3.12
Dec2011 $2.86
Dec2010 $1.25
Dec2009 $0.31
Dec2008 $2.78
Dec2007 $3.29
Dec2006 $3.97
Dec2005 $2.91
Dec2004 $2.29
Dec2003 $1.33
Dec2002 $0.95
Dec2001 $0.44
Dec2000 $1.13
Dec1999 $1.46
Dec1998 $1.05
Dec1997 $0.87

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.13
Dec2016 $3.11
Dec2015 $3.79
Dec2014 $3.24
Dec2013 $2.69
Dec2012 $2.28
Dec2011 $1.94
Dec2010 $1.76
Dec2009 $2.23
Dec2008 $3.14
Dec2007 $3.13
Dec2006 $2.80
Dec2005 $2.00
Dec2004 $1.44
Dec2003 $1.03
Dec2002 $0.93
Dec2001 $0.94

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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.

Kaman Corporation Valuation – Initial Coverage $KAMN

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Kaman Corporation (KAMN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kaman Corporation conducts business in the aerospace and distribution markets. The Company operates through two segments: Distribution and Aerospace. Its Distribution segment is a power transmission, motion control, electrical and automation, and fluid power industrial distributor. It provides products, including bearings, mechanical and electrical power transmission, fluid power, motion control, automation, material handling components, electrical control and power distribution, and maintenance, repair and overhaul (MRO) supplies to a spectrum of industrial markets. Its Aerospace segment produces and markets aircraft bearings and components; super precision, miniature ball bearings; safe and arming solutions; subcontract helicopter work; restoration, modification and support of its SH-2G Super Seasprite maritime helicopters; manufacture and support of its K-MAX manned and unmanned medium-to-heavy lift helicopters, and engineering design, analysis and certification services.

KAMN Chart

KAMN data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of KAMN – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,368,395,650 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.94 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 31.84% Fail
6. Moderate PEmg Ratio PEmg < 20 23.55 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.45 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 1.94 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.89 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.15
MG Growth Estimate 3.54%
MG Value $33.47
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $31.17
MG Value based on 0% Growth $18.27
Market Implied Growth Rate 7.54%
Current Price $50.68
% of Intrinsic Value 151.42%

Kaman Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings growth over the last ten years, and 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 Overvalued after growing its EPSmg (normalized earnings) from $1.74 in 2012 to an estimated $2.15 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.54% 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 Kaman Corporation revealed the company was trading above its Graham Number of $32.59. The company pays a dividend of $0.72 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 23.58, which was above the industry average of 22.25. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.74.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.74
Graham Number $32.59
PEmg 23.58
Current Ratio 1.94
PB Ratio 2.46
Current Dividend $0.72
Dividend Yield 1.42%
Number of Consecutive Years of Dividend Growth 2

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $701,479,000
Total Current Liabilities $361,366,000
Long-Term Debt $301,566,000
Total Assets $1,442,077,000
Intangible Assets $481,171,000
Total Liabilities $862,715,000
Shares Outstanding (Diluted Average) 28,080,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.21
Dec2015 $2.17
Dec2014 $2.08
Dec2013 $2.10
Dec2012 $2.07
Dec2011 $1.93
Dec2010 $1.36
Dec2009 $1.27
Dec2008 $1.40
Dec2007 $2.23
Dec2006 $1.30
Dec2005 $0.57
Dec2004 -$0.52
Dec2003 $0.86
Dec2002 -$1.50
Dec2001 $0.52
Dec2000 $1.57
Dec1999 $1.05
Dec1998 $1.23
Dec1997 $2.86
Dec1996 $1.00

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.15
Dec2015 $2.10
Dec2014 $2.02
Dec2013 $1.90
Dec2012 $1.74
Dec2011 $1.60
Dec2010 $1.46
Dec2009 $1.45
Dec2008 $1.36
Dec2007 $1.19
Dec2006 $0.50
Dec2005 $0.06
Dec2004 -$0.07
Dec2003 $0.27
Dec2002 $0.17
Dec2001 $1.16
Dec2000 $1.50

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Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

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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