Carlisle Companies Inc Valuation – August 2018 $CSL

Company Profile (excerpt from Reuters): Carlisle Companies Incorporated, incorporated on February 28, 1986, is a manufacturing company. The Company designs, manufactures and markets a range of products that serve a range of markets, including commercial roofing, energy, agriculture, mining, construction, aerospace and defense electronics, medical technology, transportation, general industrial, protective coatings, wood, auto refinishing and sanitary maintenance. The Company operates through four segments: Carlisle Construction Materials (CCM or Construction Materials); Carlisle Interconnect Technologies (CIT or Interconnect Technologies); Carlisle Fluid Technologies (CFT or Fluid Technologies); and Carlisle Brake & Friction (CBF or Brake & Friction). The Company markets its products as a component supplier to original equipment manufacturers (OEMs) and distributors, among others.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSL – 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 $7,618,223,701 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.10 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 158.75% Pass
6. Moderate PEmg Ratio PEmg < 20 19.59 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.91 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 1.08 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 $6.51
MG Growth Estimate 12.80%
MG Value $221.97
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $94.40
MG Value based on 0% Growth $55.34
Market Implied Growth Rate 5.54%
Current Price $127.53
% of Intrinsic Value 57.45%

Carlisle Companies, 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 $3.51 in 2014 to an estimated $6.51 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.54% 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 above the price.

At the time of valuation, further research into Carlisle Companies, Inc. revealed the company was trading above its Graham Number of $95.82. The company pays a dividend of $1.44 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 19.59, which was above the industry average of 18.51. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.61.

Carlisle Companies, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.61
Graham Number $95.82
PEmg 19.59
Current Ratio 3.10
PB Ratio 2.91
Current Dividend $1.44
Dividend Yield 1.13%
Number of Consecutive Years of Dividend Growth 20

 

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $2,169,400,000
Total Current Liabilities $700,400,000
Long-Term Debt $1,586,900,000
Total Assets $5,428,200,000
Intangible Assets $2,467,200,000
Total Liabilities $2,755,900,000
Shares Outstanding (Diluted Average) 61,059,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.98
Dec2017 $5.71
Dec2016 $3.82
Dec2015 $4.82
Dec2014 $3.82
Dec2013 $3.22
Dec2012 $4.22
Dec2011 $2.86
Dec2010 $2.34
Dec2009 $2.34
Dec2008 $0.91
Dec2007 $3.44
Dec2006 $3.49
Dec2005 $1.71
Dec2004 $1.27
Dec2003 $1.44
Dec2002 $0.47
Dec2001 $0.41
Dec2000 $1.57
Dec1999 $1.57
Dec1998 $1.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.51
Dec2017 $4.61
Dec2016 $4.03
Dec2015 $4.02
Dec2014 $3.51
Dec2013 $3.24
Dec2012 $3.01
Dec2011 $2.40
Dec2010 $2.28
Dec2009 $2.29
Dec2008 $2.23
Dec2007 $2.68
Dec2006 $2.10
Dec2005 $1.29
Dec2004 $1.06
Dec2003 $1.00
Dec2002 $0.88

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – August 2017
Best Dividend Paying Stocks for Dividend Growth Investors – March 2017
11 Best Stocks for Value Investors This Week – 3/4/17
Carlisle Companies Inc Valuation – Initial Coverage $CSL

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Aptiv PLC Valuation – Initial Coverage May 2018 $APTV
BorgWarner Inc Valuation – April 2018 $BWA
CarMax Inc Valuation – April 2018 $KMX
Ford Motor Company Valuation – April 2018 $F

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.

Carlisle Companies Inc Valuation – Initial Coverage $CSL

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 Carlisle Companies Inc (CSL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Carlisle Companies Incorporated is a manufacturing company. The Company designs, manufactures and markets a range of products that serve a range of markets, including commercial roofing, energy, agriculture, mining, construction, aerospace and defense electronics, medical technology, transportation, general industrial, protective coatings, wood, auto refinishing, foodservice, and healthcare and sanitary maintenance. The Company operates through five segments: Carlisle Construction Materials (Construction Materials); Carlisle Interconnect Technologies (Interconnect Technologies); Carlisle Fluid Technologies (Fluid Technologies); Carlisle Brake & Friction (Brake & Friction), and Carlisle FoodService Products (FoodService Products). The Company markets its products as a component supplier to original equipment manufacturers and distributors, among others.

CSL Chart

CSL data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CSL – 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 $6,716,524,982 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.64 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 158.32% Pass
6. Moderate PEmg Ratio PEmg < 20 22.65 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.76 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 2.64 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.71 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 $4.64
MG Growth Estimate 6.49%
MG Value $99.67
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $67.28
MG Value based on 0% Growth $39.44
Market Implied Growth Rate 7.07%
Current Price $105.09
% of Intrinsic Value 105.44%

Carlisle Companies, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $3.24 in 2013 to an estimated $4.64 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 7.07% 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 Carlisle Companies, Inc. revealed the company was trading above its Graham Number of $70.65. The company pays a dividend of $1.3 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 22.65, which was below the industry average of 27.42, 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 $-2.21.

Carlisle Companies, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.21
Graham Number $70.65
PEmg 22.65
Current Ratio 2.64
PB Ratio 2.76
Current Dividend $1.30
Dividend Yield 1.24%
Number of Consecutive Years of Dividend Growth 20

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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 $1,355,200,000
Total Current Liabilities $513,500,000
Long-Term Debt $596,400,000
Total Assets $3,965,800,000
Intangible Assets $1,953,400,000
Total Liabilities $1,498,900,000
Shares Outstanding (Diluted Average) 64,883,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.80
Dec2016 $3.82
Dec2015 $4.82
Dec2014 $3.82
Dec2013 $3.22
Dec2012 $4.22
Dec2011 $2.86
Dec2010 $2.34
Dec2009 $2.34
Dec2008 $0.91
Dec2007 $3.44
Dec2006 $3.49
Dec2005 $1.71
Dec2004 $1.27
Dec2003 $1.44
Dec2002 $0.47
Dec2001 $0.41
Dec2000 $1.57
Dec1999 $1.57
Dec1998 $1.39
Dec1997 $1.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.64
Dec2016 $4.03
Dec2015 $4.02
Dec2014 $3.51
Dec2013 $3.24
Dec2012 $3.01
Dec2011 $2.40
Dec2010 $2.28
Dec2009 $2.29
Dec2008 $2.23
Dec2007 $2.68
Dec2006 $2.10
Dec2005 $1.29
Dec2004 $1.06
Dec2003 $1.00
Dec2002 $0.88
Dec2001 $1.13

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.

Ford Motor Co Valuation – February 2019 $F

Company Profile (excerpt from Reuters): Ford Motor Company, incorporated on July 9, 1919, is a global automotive and mobility company. The Company’s business includes designing, manufacturing, marketing, and servicing a line of Ford cars, trucks, and sport utility vehicles (SUVs), as well as Lincoln luxury vehicles. The Company operates in four segments: Automotive, Financial Services, Ford Smart Mobility LLC, and Central Treasury Operations. Ford Smart Mobility LLC and Central Treasury Operations are combined in All Other. The Company’s vehicle brands are Ford and Lincoln. The Company sells its dealerships for retail sale, it also sells vehicles to its dealerships for sale to fleet customers, including commercial fleet customers, daily rental car companies, and governments. The Company also sells parts and accessories, primarily to its dealerships (which in turn sell these products to retail customers) and to authorized parts distributors (which in turn primarily sell these products to retailers). The Company also offers extended service contracts.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of F – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $33,366,215,390 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.19 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 -52.93% Fail
6. Moderate PEmg Ratio PEmg < 20 7.01 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.95 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 1.19 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.59 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 $1.22
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $17.66
MG Value based on 0% Growth $10.35
Market Implied Growth Rate -0.74%
Current Price $8.54
% of Intrinsic Value N/A

Ford Motor Company does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $1.8 in 2015 to an estimated $1.22 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.74% annual earnings loss 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 Ford Motor Company revealed the company was trading below its Graham Number of $13.9. The company pays a dividend of $0.6 per share, for a yield of 7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.01, which was below the industry average of 21.23, 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 $-26.81.

Ford Motor Company receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$26.81
Graham Number $13.90
PEmg 7.01
Current Ratio 1.19
PB Ratio 0.95
Current Dividend $0.60
Dividend Yield 7.03%
Number of Consecutive Years of Dividend Growth 0

 

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $113,585,000,000
Total Current Liabilities $95,569,000,000
Long-Term Debt $100,720,000,000
Total Assets $256,540,000,000
Intangible Assets $0
Total Liabilities $220,574,000,000
Shares Outstanding (Diluted Average) 3,989,957,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.95
Dec2018 $0.92
Dec2017 $1.90
Dec2016 $1.15
Dec2015 $1.84
Dec2014 $0.31
Dec2013 $2.94
Dec2012 $1.41
Dec2011 $4.94
Dec2010 $1.66
Dec2009 $0.86
Dec2008 -$6.50
Dec2007 -$1.40
Dec2006 -$6.73
Dec2005 $0.77
Dec2004 $1.52
Dec2003 $0.13
Dec2002 $0.47
Dec2001 -$3.02
Dec2000 $2.30
Dec1999 $5.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.22
Dec2018 $1.31
Dec2017 $1.55
Dec2016 $1.42
Dec2015 $1.80
Dec2014 $1.94
Dec2013 $2.62
Dec2012 $1.80
Dec2011 $1.30
Dec2010 -$1.15
Dec2009 -$2.57
Dec2008 -$3.68
Dec2007 -$1.90
Dec2006 -$1.69
Dec2005 $0.55
Dec2004 $0.39
Dec2003 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Ford Motor Company Valuation – April 2018 $F
Ford Motor Company Valuation – November 2016 $F
Ford Motor Company Valuation – August 2016 $F
Dividend Investors Should Research These 10 Stocks – July 2016
Benjamin Graham Would Love These 10 Companies Today

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Linamar Corp Valuation – October 2018 $TSE-LNR
AutoNation Inc Valuation – September 2018 $AN
Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL

Disclaimer:

The author held a long position in F 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; 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.

General Motors Co Valuation – February 2019 $GM

Company Profile (excerpt from Reuters): General Motors Company, incorporated on August 11, 2009, designs, builds and sells cars, trucks, crossovers and automobile parts. The Company’s segments include GM North America (GMNA), GM Europe (GME), GM International Operations (GMIO), GM South America (GMSA) and General Motors Financial Company, Inc. (GM Financial). The Company provides automotive financing services through General Motors Financial Company, Inc. The Company develops, manufactures and/or markets vehicles in North America under the brands, including Buick, Cadillac, Chevrolet and GMC. The Company also develops, manufactures and/or markets vehicles outside North America under the brands, including Buick, Cadillac, Chevrolet, GMC, Holden, Opel and Vauxhall.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GM – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $55,096,534,325 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.92 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 -14.05% Fail
6. Moderate PEmg Ratio PEmg < 20 9.41 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.31 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.92 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.52 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.16
MG Growth Estimate 2.41%
MG Value $55.33
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $60.25
MG Value based on 0% Growth $35.32
Market Implied Growth Rate 0.45%
Current Price $39.09
% of Intrinsic Value 70.65%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.58 in 2015 to an estimated $4.16 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.45% 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 General Motors Company revealed the company was trading below its Graham Number of $61.47. The company pays a dividend of $1.52 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.41, which was below the industry average of 21.23, 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 $-76.36.

General Motors Company performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$76.36
Graham Number $61.47
PEmg 9.41
Current Ratio 0.92
PB Ratio 1.31
Current Dividend $1.52
Dividend Yield 3.89%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $75,293,000,000
Total Current Liabilities $82,237,000,000
Long-Term Debt $73,060,000,000
Total Assets $227,339,000,000
Intangible Assets $5,579,000,000
Total Liabilities $184,562,000,000
Shares Outstanding (Diluted Average) 1,431,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.05
Dec2018 $5.53
Dec2017 -$2.65
Dec2016 $6.00
Dec2015 $5.91
Dec2014 $1.65
Dec2013 $2.38
Dec2012 $2.92
Dec2011 $4.58
Dec2010 $2.89
Dec2009 $113.18
Dec2008 -$53.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.16
Dec2018 $3.23
Dec2017 $2.28
Dec2016 $4.42
Dec2015 $3.58
Dec2014 $2.57
Dec2013 $10.42
Dec2012 $14.30
Dec2011 $17.80
Dec2010 $20.45
Dec2009 $23.47
Dec2008 -$17.82

Recommended Reading:

Other ModernGraham posts about the company

General Motors Co Valuation – April 2018 $GM
General Motors Company Valuation – November 2016 $GM
General Motors Company Analysis – 2015 Update $GM
17 Companies in the Spotlight This Week – 8/2/14
General Motors Co. Annual Valuation – 2014 $GM

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Genuine Parts Co Valuation – January 2019 $GPC
Autozone Inc Valuation – January 2019 $AZO
Linamar Corp Valuation – October 2018 $TSE-LNR
AutoNation Inc Valuation – September 2018 $AN
Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL

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.

O’Reilly Automotive Inc Valuation – February 2019 $ORLY

Company Profile (excerpt from Reuters): O’Reilly Automotive, Inc., incorporated on December 20, 2010, is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The Company sells its products to both do-it-yourself (DIY) and professional service provider customers. The Company’s product line includes new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control, chassis parts, driveline parts and engine parts; maintenance items, such as oil, antifreeze, fluids, filters, wiper blades, lighting, engine additives and appearance products, and accessories, such as floor mats, seat covers and truck accessories. It operated 4,829 stores in 47 states, as of December 31, 2016.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORLY – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $27,776,062,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.91 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 343.42% Pass
6. Moderate PEmg Ratio PEmg < 20 27.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 56.64 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.91 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.20 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $12.58
MG Growth Estimate 15.00%
MG Value $484.20
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $182.36
MG Value based on 0% Growth $106.90
Market Implied Growth Rate 9.54%
Current Price $346.75
% of Intrinsic Value 71.61%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.7 in 2014 to an estimated $12.58 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.54% 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 above the price.

At the time of valuation, further research into O’Reilly Automotive Inc revealed the company was trading above its Graham Number of $52.84. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 27.57, which was above the industry average of 21.23. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-47.12.

O’Reilly Automotive 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) -$47.12
Graham Number $52.84
PEmg 27.57
Current Ratio 0.91
PB Ratio 56.64
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,560,031,000
Total Current Liabilities $3,905,081,000
Long-Term Debt $3,174,327,000
Total Assets $7,894,714,000
Intangible Assets $832,750,000
Total Liabilities $7,396,335,000
Shares Outstanding (Diluted Average) 81,410,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $16.02
Dec2017 $12.67
Dec2016 $10.73
Dec2015 $9.17
Dec2014 $7.34
Dec2013 $6.03
Dec2012 $4.75
Dec2011 $3.71
Dec2010 $2.95
Dec2009 $2.23
Dec2008 $1.48
Dec2007 $1.67
Dec2006 $1.55
Dec2005 $1.45
Dec2004 $0.63
Dec2003 $0.92
Dec2002 $0.77
Dec2001 $0.63
Dec2000 $0.50
Dec1999 $0.46
Dec1998 $0.18

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.58
Dec2017 $10.30
Dec2016 $8.61
Dec2015 $7.10
Dec2014 $5.70
Dec2013 $4.56
Dec2012 $3.56
Dec2011 $2.78
Dec2010 $2.20
Dec2009 $1.78
Dec2008 $1.48
Dec2007 $1.40
Dec2006 $1.20
Dec2005 $0.98
Dec2004 $0.72
Dec2003 $0.73
Dec2002 $0.60

Recommended Reading:

Other ModernGraham posts about the company

O’Reilly Automotive Inc Valuation – April 2018 $ORLY
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
O’Reilly Automotive Inc. Annual Valuation – 2015 $ORLY
16 Companies in the Spotlight this Week – 4/19/14
O’Reilly Automotive Inc. (ORLY) Annual Valuation – 2014

Other ModernGraham posts about related companies

Goodyear Tire & Rubber Co Valuation – January 2019 $GT
Genuine Parts Co Valuation – January 2019 $GPC
Autozone Inc Valuation – January 2019 $AZO
Linamar Corp Valuation – October 2018 $TSE-LNR
AutoNation Inc Valuation – September 2018 $AN
Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL
Delphi Technologies PLC Valuation – August 2018 $DLPH

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 2019

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.  Out of over 800 companies covered by ModernGraham, only 70 have grown dividends annually for at least the last 20 years.

Defensive Investors are defined as investors who need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to select companies that present a moderate (though still low) amount of risk.

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 $3.03 in 2014 to an estimated $4.11 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.21% 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 $53.04. The company pays a dividend of $0.87 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 10.93, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

AFLAC Incorporated fares extremely well in the ModernGraham grading system, scoring an A+.  (See the full valuation)

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 Undervalued after growing its EPSmg (normalized earnings) from $1.05 in 2014 to an estimated $1.95 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.55% 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 A. O. Smith Corp revealed the company was trading above its Graham Number of $23.34. The company pays a dividend of $0.56 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 23.59, which was below the industry average of 23.62, 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 $1.92.

A. O. Smith Corp performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Cincinnati Financial Corporation (CINF)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.69 in 2014 to an estimated $4.82 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.78% 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 Cincinnati Financial Corporation revealed the company was trading above its Graham Number of $76.19. The company pays a dividend of $2 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.06, which was below the industry average of 32.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Cincinnati Financial Corporation fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

Carlisle Companies, Inc. (CSL)

Carlisle Companies, 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 $3.51 in 2014 to an estimated $6.51 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.54% 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 above the price.

At the time of valuation, further research into Carlisle Companies, Inc. revealed the company was trading above its Graham Number of $95.82. The company pays a dividend of $1.44 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 19.59, which was above the industry average of 18.51. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.61.

Carlisle Companies, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

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, high PB ratio. 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 $1.14 in 2014 to an estimated $2.35 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.06% 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 Leggett & Platt, Inc. revealed the company was trading above its Graham Number of $23.11. The company pays a dividend of $1.42 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.62, which was above the industry average of 17.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.

Leggett & Platt, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Lowe’s Companies, Inc. (LOW)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.1 in 2015 to an estimated $4.11 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.7% 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 Lowe’s Companies, Inc. revealed the company was trading above its Graham Number of $29. The company pays a dividend of $1.58 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 23.9, which was below the industry average of 25.61, 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 $-19.93.

Lowe’s Companies, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.  (See the full valuation)

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 Undervalued after growing its EPSmg (normalized earnings) from $0.71 in 2014 to an estimated $1.04 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.89% 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 People’s United Financial, Inc. revealed the company was trading below its Graham Number of $21.65. The company pays a dividend of $0.69 per share, for a yield of 4.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.28, which was below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

People’s United Financial, Inc. fares extremely well in the ModernGraham grading system, scoring an A+.  (See the full valuation)

SEI Investments Company (SEIC)

SEI Investments Company 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 $1.52 in 2014 to an estimated $2.47 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.97% 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 SEI Investments Company revealed the company was trading above its Graham Number of $25.4. The company pays a dividend of $0.58 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 24.43, which was above the industry average of 21.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.12.

SEI Investments Company performs fairly well in the ModernGraham grading system, scoring a B-.  (See the full valuation)

Tanger Factory Outlet Centers Inc. (SKT)

Tanger Factory Outlet Centers 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 is only concerned with the level of debt relative to the net 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 $0.76 in 2014 to an estimated $1.25 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.18% 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 above the price.

At the time of valuation, further research into Tanger Factory Outlet Centers Inc. revealed the company was trading above its Graham Number of $11.47. The company pays a dividend of $1.35 per share, for a yield of 5.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.86, which was below the industry average of 49.54, 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 $-17.97.

Tanger Factory Outlet Centers Inc. fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

Stanley Black & Decker, Inc. (SWK)

Stanley Black & Decker, Inc. 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 $4.09 in 2014 to an estimated $7.32 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.97% 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 Stanley Black & Decker, Inc. revealed the company was trading above its Graham Number of $95.94. The company pays a dividend of $2.42 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 18.45, which was below the industry average of 28.31, 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 $-40.05.

Stanley Black & Decker, Inc. fares extremely well in the ModernGraham grading system, scoring an A-.  (See the full valuation)

T. Rowe Price Group Inc (TROW)

T. Rowe Price Group 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 Fairly Valued after growing its EPSmg (normalized earnings) from $3.79 in 2014 to an estimated $5.76 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.15% 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 T. Rowe Price Group Inc revealed the company was trading above its Graham Number of $60.69. The company pays a dividend of $2.28 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 20.79, which was below the industry average of 22.96, 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 $3.21.

T. Rowe Price Group Inc performs fairly well in the ModernGraham grading system, scoring a B.  (See the full valuation)

The Good

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

Air Products & Chemicals, Inc. (APD)

Air Products & Chemicals, 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 is only concerned with the level of debt relative to the net 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 Fairly Valued after growing its EPSmg (normalized earnings) from $5.23 in 2015 to an estimated $8 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 5.63% 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 Air Products & Chemicals, Inc. revealed the company was trading above its Graham Number of $94.7. The company pays a dividend of $4.25 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.76, which was below the industry average of 20.47, 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 $-13.21.

Air Products & Chemicals, Inc. fares extremely well in the ModernGraham grading system, scoring an A-.  (See the full valuation)

Cullen/Frost Bankers, Inc. (CFR)

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.92 in 2014 to an estimated $5.42 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.25% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Cullen/Frost Bankers, Inc. revealed the company was trading above its Graham Number of $84.91. The company pays a dividend of $2.25 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 21.01, which was above the industry average of 20.05.

Cullen/Frost Bankers, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.  (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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.94 in 2015 to an estimated $6.44 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 10.34% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Cintas Corporation revealed the company was trading above its Graham Number of $68.91. The company pays a dividend of $1.62 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 29.17, which was below the industry average of 29.23, 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 $-19.68.

Cintas Corporation performs fairly well in the ModernGraham grading system, scoring a B.  (See the full valuation)

Expeditors International of Washington (EXPD)

Expeditors International of Washington 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 $1.75 in 2014 to an estimated $2.73 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 8.27% 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 Expeditors International of Washington revealed the company was trading above its Graham Number of $28.87. The company pays a dividend of $0.84 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 25.05, which was above the industry average of 17.22. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.73.

Expeditors International of Washington performs fairly well in the ModernGraham grading system, scoring a B-.  (See the full valuation)

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 $0.98 in 2014 to an estimated $1.6 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.21% 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 $19.56. The company pays a dividend of $0.68 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 22.92, which was below the industry average of 24.35, 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 $-1.27.

Hormel Foods Corp performs fairly well in the ModernGraham grading system, scoring a B.  (See the full valuation)

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 $1.87 in 2015 to an estimated $3.36 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 8.18% 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 Ross Stores, Inc. revealed the company was trading above its Graham Number of $27.22. The company pays a dividend of $0.64 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 24.85, which was below the industry average of 25.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.55.

Ross Stores, Inc. performs fairly well in the ModernGraham grading system, scoring a B.  (See the full valuation)

Disclaimer: 

The author held a long position in 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.

Goodyear Tire & Rubber Co Valuation – January 2019 $GT

Company Profile (excerpt from Reuters): The Goodyear Tire & Rubber Company (Goodyear), incorporated on August 29, 1898, is a manufacturer of tires. The Company operates through three segments: Americas; Europe, Middle East and Africa (EMEA), and Asia Pacific. The Company also manufactures and markets rubber-related chemicals for various applications. The Company also operates commercial truck service and tire retreading centers. The Company manufactures and markets a range of rubber tires for automobiles, trucks, buses, aircraft, motorcycles, earthmoving and mining equipment, farm implements, industrial equipment and various other applications. Its tires are offered for sale to vehicle manufacturers for mounting as original equipment (OE) and for replacement around the world. The Company manufactures and sells tires under the Goodyear, Dunlop, Kelly, Debica, Sava and Fulda brands, and various other Goodyear owned house brands, and the private-label brands of certain customers. In certain geographic areas it also retreads truck, aviation and off-the-road (OTR) tires; manufactures and sells tread rubber and other tire retreading materials; sells chemical products, and provides automotive and commercial repair services and miscellaneous other products and services. As of December 31, 2016, the Company had operated approximately 1,100 tire and auto service center outlets where it offered its products for retail sale and provided automotive repair and other services. As of December 31, 2016, the Company had manufactured its products in 48 manufacturing facilities in 21 countries, including the United States, and it had marketing operations across the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GT – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $4,795,345,782 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 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 -869.49% Fail
6. Moderate PEmg Ratio PEmg < 20 6.77 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.98 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 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.28 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 $3.04
MG Growth Estimate -2.98%
MG Value $7.71
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $44.05
MG Value based on 0% Growth $25.82
Market Implied Growth Rate -0.86%
Current Price $20.58
% of Intrinsic Value 266.80%

Goodyear Tire & Rubber Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, 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 growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.79 in 2014 to an estimated $3.04 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.86% annual earnings loss 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 Goodyear Tire & Rubber Co revealed the company was trading below its Graham Number of $35.79. The company pays a dividend of $0.44 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 6.77, which was below the industry average of 19.88, 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 $-24.53.

Goodyear Tire & Rubber Co receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.53
Graham Number $35.79
PEmg 6.77
Current Ratio 1.34
PB Ratio 0.98
Current Dividend $0.44
Dividend Yield 2.14%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $6,753,000,000
Total Current Liabilities $5,047,000,000
Long-Term Debt $5,604,000,000
Total Assets $17,591,000,000
Intangible Assets $709,000,000
Total Liabilities $12,591,000,000
Shares Outstanding (Diluted Average) 238,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.97
Dec2017 $1.37
Dec2016 $4.74
Dec2015 $1.12
Dec2014 $8.78
Dec2013 $2.28
Dec2012 $0.74
Dec2011 $1.26
Dec2010 -$0.89
Dec2009 -$1.55
Dec2008 -$0.32
Dec2007 $2.65
Dec2006 -$1.86
Dec2005 $1.16
Dec2004 $0.63
Dec2003 -$4.61
Dec2002 -$7.47
Dec2001 -$1.59
Dec2000 $0.31
Dec1999 $1.53
Dec1998 $4.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.04
Dec2017 $3.27
Dec2016 $3.99
Dec2015 $3.35
Dec2014 $3.79
Dec2013 $0.99
Dec2012 $0.18
Dec2011 $0.01
Dec2010 -$0.54
Dec2009 -$0.24
Dec2008 $0.42
Dec2007 $0.40
Dec2006 -$1.30
Dec2005 -$1.47
Dec2004 -$2.70
Dec2003 -$3.70
Dec2002 -$2.38

Recommended Reading:

Other ModernGraham posts about the company

Goodyear Tire & Rubber Co Valuation – March 2018 $GT
Goodyear Tire & Rubber Co Valuation – July 2016 $GT
34 Companies in the Spotlight This Week – 2/7/15
Goodyear Tire & Rubber Company Annual Valuation – 2015 $GT
15 Companies in the Spotlight This Week – 2/1/14

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Genuine Parts Co Valuation – January 2019 $GPC
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Linamar Corp Valuation – October 2018 $TSE-LNR
AutoNation Inc Valuation – September 2018 $AN
Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL
Delphi Technologies PLC Valuation – August 2018 $DLPH
Cooper-Standard Holdings Inc Valuation – August 2018 $CPS

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.

Genuine Parts Co Valuation – January 2019 $GPC

Company Profile (excerpt from Reuters): Genuine Parts Company, incorporated on May 7, 1928, is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company’s segments include Automotive, Industrial, Office Products Group and Electrical/Electronic Materials. As of December 31, 2016, the Company conducted its business from approximately 2,670 locations throughout the United States, Canada, Mexico, Australia and New Zealand.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GPC – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,785,072,914 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.33 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 57.16% Pass
6. Moderate PEmg Ratio PEmg < 20 19.61 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.78 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 1.33 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.30 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.79
MG Growth Estimate 2.05%
MG Value $60.34
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $69.46
MG Value based on 0% Growth $40.72
Market Implied Growth Rate 5.55%
Current Price $93.93
% of Intrinsic Value 155.68%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.22 in 2014 to an estimated $4.79 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.55% 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 Genuine Parts Company revealed the company was trading above its Graham Number of $53.66. The company pays a dividend of $2.7 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.61, which was below the industry average of 19.88, 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 $-9.79.

Genuine Parts Company receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.79
Graham Number $53.66
PEmg 19.61
Current Ratio 1.33
PB Ratio 3.78
Current Dividend $2.70
Dividend Yield 2.87%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $7,550,495,000
Total Current Liabilities $5,661,189,000
Long-Term Debt $2,463,452,000
Total Assets $12,657,119,000
Intangible Assets $3,518,470,000
Total Liabilities $8,994,040,000
Shares Outstanding (Diluted Average) 147,453,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.50
Dec2017 $4.18
Dec2016 $4.59
Dec2015 $4.63
Dec2014 $4.61
Dec2013 $4.40
Dec2012 $4.14
Dec2011 $3.58
Dec2010 $3.00
Dec2009 $2.50
Dec2008 $2.92
Dec2007 $2.98
Dec2006 $2.76
Dec2005 $2.50
Dec2004 $2.25
Dec2003 $1.91
Dec2002 -$0.16
Dec2001 $1.71
Dec2000 $2.20
Dec1999 $2.11
Dec1998 $1.98

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.79
Dec2017 $4.45
Dec2016 $4.55
Dec2015 $4.44
Dec2014 $4.22
Dec2013 $3.85
Dec2012 $3.46
Dec2011 $3.08
Dec2010 $2.83
Dec2009 $2.74
Dec2008 $2.80
Dec2007 $2.66
Dec2006 $2.28
Dec2005 $1.91
Dec2004 $1.60
Dec2003 $1.37
Dec2002 $1.26

Recommended Reading:

Other ModernGraham posts about the company

Genuine Parts Co Valuation – March 2018 $GPC
Best Dividend Paying Stocks for Dividend Growth Investors – August 2017
Genuine Parts Co Valuation – July 2016 $GPC
Dividend Growth Stocks for Intelligent Investors – June 2016
Dividend Growth Stocks for Intelligent Investors – February 2016

Other ModernGraham posts about related companies

Autozone Inc Valuation – January 2019 $AZO
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AutoNation Inc Valuation – September 2018 $AN
Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL
Delphi Technologies PLC Valuation – August 2018 $DLPH
Cooper-Standard Holdings Inc Valuation – August 2018 $CPS
Copart Inc Valuation – August 2018 $CPRT

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.

Autozone Inc Valuation – January 2019 $AZO

Company Profile (excerpt from Reuters): AutoZone, Inc., incorporated on November 25, 1991, is a retailer and distributor of automotive replacement parts and accessories in the United States. The Company operates through the Auto Parts Locations segment. The Auto Parts Locations segment is a retailer and distributor of automotive parts and accessories. As of February 10, 2018, the Company operated through 6,088 locations in the United States, Puerto Rico, Mexico and Brazil. The Company’s stores carry product lines for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products. The Company’s domestic stores also have a commercial sales program, which provides commercial credit and delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. The Company’s other operating segments include ALLDATA, which produces, sells and maintains diagnostic and repair information software used in the automotive repair industry; E-commerce, which includes direct sales to customers through www.autozone.com.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AZO – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $21,130,360,376 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 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 210.15% Pass
6. Moderate PEmg Ratio PEmg < 20 94.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.15 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -40.50 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.83
MG Growth Estimate 15.00%
MG Value $339.80
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $127.98
MG Value based on 0% Growth $75.02
Market Implied Growth Rate 43.24%
Current Price $838.34
% of Intrinsic Value 246.71%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.13 in 2014 to an estimated $8.83 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 43.24% 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 AutoZone, Inc. revealed the company was trading above its Graham Number of $151.94. The company pays a dividend of $5.68 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 94.99, which was above the industry average of 20.05. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-56.29.

AutoZone, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$56.29
Graham Number $151.94
PEmg 94.99
Current Ratio 0.72
PB Ratio 11.15
Current Dividend $5.68
Dividend Yield 0.68%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $478,342,000
Total Current Liabilities $664,357,000
Long-Term Debt $7,533,228,000
Total Assets $18,662,119,000
Intangible Assets $0
Total Liabilities $8,264,721,000
Shares Outstanding (Diluted Average) 138,323,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.64
Dec2017 $6.35
Dec2016 $7.52
Dec2015 $5.51
Dec2014 $5.21
Dec2013 $2.78
Dec2012 $4.32
Dec2011 $4.87
Dec2010 $2.07
Dec2009 $1.93
Dec2008 $5.17
Dec2007 $4.38
Dec2006 $3.42
Dec2005 $4.05
Dec2004 $2.92
Dec2003 $3.73
Dec2002 $2.23
Dec2001 $3.02
Dec2000 $2.53
Dec1999 $2.03
Dec1998 $1.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.83
Dec2017 $6.10
Dec2016 $5.68
Dec2015 $4.68
Dec2014 $4.13
Dec2013 $3.46
Dec2012 $3.75
Dec2011 $3.54
Dec2010 $3.05
Dec2009 $3.62
Dec2008 $4.31
Dec2007 $3.82
Dec2006 $3.45
Dec2005 $3.37
Dec2004 $2.99
Dec2003 $2.91
Dec2002 $2.45

Recommended Reading:

Other ModernGraham posts about the company

AutoZone Inc Valuation – February 2018 $AZO
Autozone Inc Valuation – June 2016 $AZO
AutoZone Inc. Annual Valuation – 2015 $AZO

Other ModernGraham posts about related companies

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Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL
Delphi Technologies PLC Valuation – August 2018 $DLPH
Cooper-Standard Holdings Inc Valuation – August 2018 $CPS
Copart Inc Valuation – August 2018 $CPRT
Standard Motor Products Inc Valuation – August 2018 $SMP

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.

General Electric Co Valuation – November 2018 $GE

Company Profile (excerpt from Reuters): General Electric Company (GE), incorporated on April 15, 1892, is a global digital industrial company. The Company’s products and services range from aircraft engines, power generation, and oil and gas production equipment to medical imaging, financing and industrial products. The Company’s segments include Power, Renewable Energy, Oil & Gas, Aviation, Healthcare, Transportation, Energy Connections & Lighting, and Capital. As of December 31, 2016, the Company served customers in approximately 180 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GE – November 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $69,758,886,723 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.66 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -129.70% Fail
6. Moderate PEmg Ratio PEmg < 20 -21.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.46 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 1.66 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.16 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.38
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$5.51
MG Value based on 0% Growth -$3.23
Market Implied Growth Rate -14.80%
Current Price $8.02
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.33 in 2014 to an estimated $-0.38 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into General Electric Company revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.84 per share, for a yield of 10.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -21.11, which was below the industry average of 24.68, 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 $-16.92.

General Electric Company scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$16.92
Graham Number $0.00
PEmg -21.11
Current Ratio 1.66
PB Ratio 1.46
Current Dividend $0.84
Dividend Yield 10.47%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $116,783,000,000
Total Current Liabilities $70,517,000,000
Long-Term Debt $99,759,000,000
Total Assets $311,691,000,000
Intangible Assets $79,214,000,000
Total Liabilities $263,854,000,000
Shares Outstanding (Diluted Average) 8,694,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.15
Dec2017 -$0.72
Dec2016 $0.89
Dec2015 -$0.62
Dec2014 $1.50
Dec2013 $1.27
Dec2012 $1.29
Dec2011 $1.23
Dec2010 $1.06
Dec2009 $1.01
Dec2008 $1.72
Dec2007 $2.17
Dec2006 $2.00
Dec2005 $1.57
Dec2004 $1.64
Dec2003 $1.51
Dec2002 $1.41
Dec2001 $1.37
Dec2000 $1.27
Dec1999 $1.07
Dec1998 $0.93

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.38
Dec2017 $0.16
Dec2016 $0.69
Dec2015 $0.70
Dec2014 $1.33
Dec2013 $1.22
Dec2012 $1.22
Dec2011 $1.27
Dec2010 $1.39
Dec2009 $1.60
Dec2008 $1.87
Dec2007 $1.89
Dec2006 $1.71
Dec2005 $1.54
Dec2004 $1.50
Dec2003 $1.39
Dec2002 $1.29

Recommended Reading:

Other ModernGraham posts about the company

5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018
General Electric Co Valuation – February 2018 $GE
5 Overvalued Dow Components – February 2017
5 Overvalued Dow Components – December 2016

Other ModernGraham posts about related companies

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Illinois Tool Works Inc Valuation – June 2018 $ITW
Honeywell International Inc Valuation – June 2018 $HON
General Electric Co Valuation – February 2018 $GE
3M Company Valuation – February 2018 $MMM
Raven Industries Inc Valuation – September 2017 $RAVN
Illinois Tool Works Inc Valuation – August 2017 $ITW
Honeywell International Inc Valuation – July 2017 $HON
Carlisle Companies Inc Valuation – Initial Coverage $CSL

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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