Diebold Nixdorf Inc Valuation – Initial Coverage $DBD

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 – March 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 Diebold Nixdorf Inc (DBD) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Diebold Nixdorf, Incorporated provides connected commerce services, software and technology. The Company’s geographic segments include North America (NA), Asia Pacific (AP), Europe, Middle East and Africa (EMEA), and Latin America (LA). These segments sell and service financial self-service (FSS), retail solutions and security systems. The Company is engaged in providing connected commerce solutions to financial institutions. These solutions are supported by a field service organization. The Company provides security solutions, which combine a services portfolio and products to help address its customers’ needs. The Company provides services for a portfolio of physical security offerings, in addition to serving as a national locksmith. The Company provides voting machines for official elections and the terminals for the governmental lottery and correspondent bank.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of DBD – July 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 $1,607,666,752 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.41 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 58.87% Pass
6. Moderate PEmg Ratio PEmg < 20 31.53 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.00 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 1.41 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.24 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 $0.67
MG Growth Estimate 15.00%
MG Value $25.95
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $9.77
MG Value based on 0% Growth $5.73
Market Implied Growth Rate 11.51%
Current Price $21.25
% of Intrinsic Value 81.89%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $-0.21 in 2013 to an estimated $0.67 for 2017.  This level of demonstrated earnings growth supports the market’s implied estimate of 11.51% 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 Diebold Nixdorf Inc revealed the company was trading above its Graham Number of $16.83.  The company pays a dividend of $0.96 per share, for a yield of 4.5%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 31.53, which was below the industry average of 41.95, 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 $-28.02.

Diebold Nixdorf 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) -$28.02
Graham Number $16.83
PEmg 31.53
Current Ratio 1.41
PB Ratio 3.00
Current Dividend $0.96
Dividend Yield 4.53%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2017
Total Current Assets $2,601,500,000
Total Current Liabilities $1,846,200,000
Long-Term Debt $1,689,700,000
Total Assets $5,244,600,000
Intangible Assets $1,765,200,000
Total Liabilities $4,711,500,000
Shares Outstanding (Diluted Average) 75,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.60
Dec2016 -$0.48
Dec2015 $1.12
Dec2014 $1.76
Dec2013 -$2.85
Dec2012 $1.15
Dec2011 $2.22
Dec2010 -$0.31
Dec2009 $0.39
Dec2008 $1.33
Dec2007 $0.59
Dec2006 $1.55
Dec2005 $1.43
Dec2004 $2.53
Dec2003 $2.37
Dec2002 $1.37
Dec2001 $0.93
Dec2000 $1.92
Dec1999 $1.85
Dec1998 $1.10
Dec1997 $1.76

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.67
Dec2016 $0.19
Dec2015 $0.57
Dec2014 $0.33
Dec2013 -$0.21
Dec2012 $1.05
Dec2011 $0.95
Dec2010 $0.45
Dec2009 $0.90
Dec2008 $1.27
Dec2007 $1.39
Dec2006 $1.81
Dec2005 $1.87
Dec2004 $2.00
Dec2003 $1.72
Dec2002 $1.41
Dec2001 $1.46

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.

Verisign Inc Valuation – May 2018 $VRSN

Company Profile (excerpt from Reuters): VeriSign, Inc., incorporated on April 12, 1995, is a provider of domain name registry services and Internet security, enabling Internet navigation for various domain names and providing protection for Websites and enterprises around the world. The Company operates through Registry Services and Security Services segment. Registry Services ensure the security, stability and resiliency of Internet infrastructure and services, including the .com and .net domains, and operation of the root-zone maintainer functions for the core of the Internet’s Domain Name System (DNS). Security Services provides infrastructure assurance services consisting of Distributed Denial of Services (DDoS) Protection Services and Managed DNS Services.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of VRSN – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,589,991,262 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.55 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 69.76% Pass
6. Moderate PEmg Ratio PEmg < 20 34.42 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -12.67 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.55 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.07 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.68
MG Growth Estimate 6.35%
MG Value $78.02
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $53.35
MG Value based on 0% Growth $31.27
Market Implied Growth Rate 12.96%
Current Price $126.66
% of Intrinsic Value 162.34%

Verisign, 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 net 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 Overvalued after growing its EPSmg (normalized earnings) from $2.58 in 2014 to an estimated $3.68 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.96% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Verisign, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 34.42, which was below the industry average of 42.24, 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 $-14.02.

Verisign, 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) -$14.02
Graham Number $0.00
PEmg 34.42
Current Ratio 1.55
PB Ratio -12.67
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 $2,408,528,000
Total Current Liabilities $1,548,946,000
Long-Term Debt $1,783,159,000
Total Assets $2,905,323,000
Intangible Assets $52,527,000
Total Liabilities $4,140,057,000
Shares Outstanding (Diluted Average) 123,506,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.41
Dec2017 $3.68
Dec2016 $3.42
Dec2015 $2.82
Dec2014 $2.52
Dec2013 $3.49
Dec2012 $1.95
Dec2011 $0.86
Dec2010 $4.64
Dec2009 $1.28
Dec2008 -$1.90
Dec2007 -$0.63
Dec2006 $1.53
Dec2005 $1.63
Dec2004 $0.60
Dec2003 -$1.20
Dec2002 -$20.97
Dec2001 -$65.64
Dec2000 -$19.57
Dec1999 $0.03
Dec1998 -$0.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.68
Dec2017 $3.27
Dec2016 $2.99
Dec2015 $2.63
Dec2014 $2.58
Dec2013 $2.56
Dec2012 $1.85
Dec2011 $1.48
Dec2010 $1.53
Dec2009 $0.11
Dec2008 -$0.24
Dec2007 $0.52
Dec2006 -$0.49
Dec2005 -$6.71
Dec2004 -$14.37
Dec2003 -$21.73
Dec2002 -$28.42

Recommended Reading:

Other ModernGraham posts about the company

Verisign Inc Valuation – February 2017 $VRSN
Verisign Inc Valuation – August 2016 $VRSN
Verisign Inc. Analysis – 2015 Update $VRSN
20 Companies in the Research Spotlight This Week – June 7, 2014
Verisign Inc. Annual Valuation – 2014 $VRSN

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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.

Cboe Global Markets Inc Valuation – Initial Coverage $CBOE

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

CBOE Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CBOE – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,612,814,613 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 176.61% Pass
6. Moderate PEmg Ratio PEmg < 20 33.34 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.05 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 12.29 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.36
MG Growth Estimate 11.57%
MG Value $106.24
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $48.67
MG Value based on 0% Growth $28.53
Market Implied Growth Rate 12.42%
Current Price $111.91
% of Intrinsic Value 105.34%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.89 in 2014 to an estimated $3.36 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 12.42% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Cboe Global Markets Inc revealed the company was trading above its Graham Number of $51.85. The company pays a dividend of $1.04 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 33.34, which was above the industry average of 25.5. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.28.

Cboe Global Markets Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$15.28
Graham Number $51.85
PEmg 33.34
Current Ratio 1.30
PB Ratio 4.05
Current Dividend $1.04
Dividend Yield 0.93%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

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

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

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Disclaimer:

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

Seagate Technology PLC Valuation – March 2018 $STX

Company Profile (obtained from Marketwatch): Seagate Technology Plc engages in the development, production, and distribution of data storage products and electronic data storage solutions. The company’s products include hard disk drives, solid state hybrid drives, solid state drives, peripheral component interconnect express cards, serial advanced technology attachment controllers, storage subsystems and computing solutions. It offers its products under the Backup Plus and Expansion product lines, and Maxtor and LaCie brands. The company was founded by Finis Conner, Syed Iftikar, Doug Mahon, David Thomas Mitchell, and Alan F. Shugart in 1978 and is headquartered in Dublin, Ireland.

STX Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of STX – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,705,383,820 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.58 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 -405.53% Fail
6. Moderate PEmg Ratio PEmg < 20 18.81 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 15.12 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.40 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.93
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $42.50
MG Value based on 0% Growth $24.92
Market Implied Growth Rate 5.16%
Current Price $55.14
% of Intrinsic Value N/A

Seagate Technology PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PB ratio. 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 $4.44 in 2014 to an estimated $2.93 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.16% 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 Seagate Technology PLC revealed the company was trading above its Graham Number of $18.43. The company pays a dividend of $2.52 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 18.81, which was below the industry average of 41.95, 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 $-9.55.

Seagate Technology PLC 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) -$9.55
Graham Number $18.43
PEmg 18.81
Current Ratio 1.58
PB Ratio 15.12
Current Dividend $2.52
Dividend Yield 4.57%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $4,910,000,000
Total Current Liabilities $3,113,000,000
Long-Term Debt $4,316,000,000
Total Assets $8,750,000,000
Intangible Assets $1,460,000,000
Total Liabilities $7,689,000,000
Shares Outstanding (Diluted Average) 291,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.23
Jun2017 $2.58
Jun2016 $0.82
Jun2015 $5.26
Jun2014 $4.52
Jun2013 $4.81
Jun2012 $6.49
Jun2011 $1.09
Jun2010 $3.14
Jun2009 -$6.40
Jun2008 $2.36
Jun2007 $1.56
Jun2006 $1.60
Jun2005 $1.41
Jun2004 $1.06
Jun2003 $1.36
Jun2002 $0.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.93
Jun2017 $3.05
Jun2016 $3.65
Jun2015 $4.86
Jun2014 $4.44
Jun2013 $3.54
Jun2012 $2.39
Jun2011 $0.34
Jun2010 $0.13
Jun2009 -$0.88
Jun2008 $1.78
Jun2007 $1.46
Jun2006 $1.33
Jun2005 $1.07
Jun2004 $0.79
Jun2003 $0.55
Jun2002 $0.12

Recommended Reading:

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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.

HP Inc Valuation – February 2018 $HPQ

Company Profile (obtained from Marketwatch): HP Inc. provides personal computing and other access devices, imaging and printing products, and related technologies, solutions and services to individual consumers, small and medium-sized businesses and large enterprises, including customers in the government, health and education sectors. It operates through following business segments: Personal Systems, Printing, and Corporate Investments. The Personal Systems segment offers Commercial personal computers, Consumer PCs, Workstations, thin clients, Commercial tablets and mobility devices, retail point-of-sale systems, displays and other related accessories, support, and services for the commercial and consumer markets. The Printing segment provides consumer and commercial printer hardware, supplies, media, solutions and services, as well as scanning devices. The Corporate Investments segment includes HP Labs and certain business incubation projects. The company was founded by William R. Hewlett and David Packard in January 1939 and is headquartered in Palo Alto, CA.

HPQ Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of HPQ – February 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 $38,695,774,462 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.91 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 -54.29% Fail
6. Moderate PEmg Ratio PEmg < 20 13.34 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -14.32 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 -2.97 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.76
MG Growth Estimate 12.02%
MG Value $57.34
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $25.56
MG Value based on 0% Growth $14.98
Market Implied Growth Rate 2.42%
Current Price $23.52
% of Intrinsic Value 41.02%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.98 in 2014 to an estimated $1.76 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.42% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into HP Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.53 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 13.34, which was below the industry average of 41.95, 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 $-10.05.

HP 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) -$10.05
Graham Number $0.00
PEmg 13.34
Current Ratio 0.91
PB Ratio -14.32
Current Dividend $0.53
Dividend Yield 2.26%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2018
Total Current Assets $21,217,000,000
Total Current Liabilities $23,349,000,000
Long-Term Debt $6,340,000,000
Total Assets $35,245,000,000
Intangible Assets $5,935,000,000
Total Liabilities $37,987,000,000
Shares Outstanding (Diluted Average) 1,669,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.73
Oct2017 $1.48
Oct2016 $1.43
Oct2015 $2.48
Oct2014 $2.62
Oct2013 $2.62
Oct2012 -$6.41
Oct2011 $3.32
Oct2010 $3.69
Oct2009 $3.14
Oct2008 $3.25
Oct2007 $2.68
Oct2006 $2.18
Oct2005 $0.82
Oct2004 $1.15
Oct2003 $0.83
Oct2002 -$0.36
Oct2001 $0.21
Oct2000 $1.80
Oct1999 $1.67
Oct1998 $1.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.76
Oct2017 $1.89
Oct2016 $1.58
Oct2015 $1.42
Oct2014 $0.98
Oct2013 $0.53
Oct2012 $0.12
Oct2011 $3.33
Oct2010 $3.22
Oct2009 $2.79
Oct2008 $2.42
Oct2007 $1.85
Oct2006 $1.26
Oct2005 $0.71
Oct2004 $0.68
Oct2003 $0.57
Oct2002 $0.61

Recommended Reading:

Other ModernGraham posts about the company

Hewlett-Packard Company (HPQ) Annual Valuation
58 Companies in the Spotlight This Week – 1/31/15
Hewlett-Packard Corporation Annual Valuation – 2015 $HPQ
14 Companies in the Spotlight This Week – 1/18/14

Other ModernGraham posts about related companies

Intel Corp Valuation – February 2018 $INTC
Apple Inc Valuation – February 2018 $AAPL
Lam Research Corp Valuation – September 2017 $LRCX
Vicor Corp Valuation – Initial Coverage $VICR
Emerson Electric Co Valuation – August 2017 $EMR
General Cable Corporation Valuation – Initial Coverage $BGC
3D Systems Corp Valuation – Initial Coverage $DDD
Teradyne Inc Valuation – Initial Coverage $TER
Diebold Nixdorf Inc Valuation – Initial Coverage $DBD
Tech Data Corp Valuation – Initial Coverage $TECD

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.

Intel Corp Valuation – February 2018 $INTC

Company Profile (obtained from Marketwatch): Intel Corp. engages in the design, manufacture, and sale of computer products and technologies. It delivers computer, networking, and communications platforms. It operates its business through the following segments: Client Computing Group, Data Center Group, Internet of Things Group, Non-Volatile Memory Solutions Group, Intel Security Group, Programmable Solutions, and All Other. The Client Computing Group segment consists of platforms designed for notebooks, 2 in 1 systems, desktops, tablets, phones, wireless and wired connectivity products, and mobile communication components. The Data Center Group segment includes workload-optimized platforms and related products designed for enterprise, cloud, and communication infrastructure market. The Internet of Things Group segment comprises of platforms such as retail, transportation, industrial, video, buildings and smart cities, along with a broad range of other market segments. The Non-Volatile Memory Solutions Group segment constitutes of NAND flash memory products primarily used in solid-state drives. The Intel Security Group segment composes of security software products designed to deliver innovative solutions that secure computers, mobile devices, and networks. The Programmable Solutions Group segment contains programmable semiconductors and related products for a broad range of markets, including communications, data center, industrial, military, and automotive. The All Other segment consist of results from other non-reportable segment and corporate-related charges. The company was founded by Robert Norton Noyce and Gordon Earle Moore on July 18, 1968 and is headquartered in Santa Clara, CA.

INTC Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of INTC – February 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 $232,192,483,121 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.69 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 42.55% Pass
6. Moderate PEmg Ratio PEmg < 20 19.05 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.31 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 1.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.07 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.51
MG Growth Estimate 2.46%
MG Value $33.64
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $36.34
MG Value based on 0% Growth $21.30
Market Implied Growth Rate 5.27%
Current Price $47.73
% of Intrinsic Value 141.88%

Intel 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 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 Overvalued after growing its EPSmg (normalized earnings) from $2.15 in 2014 to an estimated $2.51 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.27% 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 below the price.

At the time of valuation, further research into Intel Corporation revealed the company was trading above its Graham Number of $32.89. The company pays a dividend of $1.08 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 19.05, which was below the industry average of 41.95, 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 $-5.16.

Intel 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) -$5.16
Graham Number $32.89
PEmg 19.05
Current Ratio 1.69
PB Ratio 3.31
Current Dividend $1.08
Dividend Yield 2.26%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $29,500,000,000
Total Current Liabilities $17,421,000,000
Long-Term Debt $25,037,000,000
Total Assets $123,249,000,000
Intangible Assets $37,134,000,000
Total Liabilities $54,230,000,000
Shares Outstanding (Diluted Average) 4,793,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.26
Dec2017 $1.99
Dec2016 $2.12
Dec2015 $2.33
Dec2014 $2.31
Dec2013 $1.89
Dec2012 $2.13
Dec2011 $2.39
Dec2010 $2.01
Dec2009 $0.77
Dec2008 $0.92
Dec2007 $1.18
Dec2006 $0.86
Dec2005 $1.40
Dec2004 $1.16
Dec2003 $0.85
Dec2002 $0.46
Dec2001 $0.19
Dec2000 $1.51
Dec1999 $1.05
Dec1998 $0.87

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.51
Dec2017 $2.13
Dec2016 $2.18
Dec2015 $2.21
Dec2014 $2.15
Dec2013 $2.00
Dec2012 $1.91
Dec2011 $1.69
Dec2010 $1.27
Dec2009 $0.95
Dec2008 $1.06
Dec2007 $1.11
Dec2006 $1.04
Dec2005 $1.02
Dec2004 $0.83
Dec2003 $0.72
Dec2002 $0.70

Recommended Reading:

Other ModernGraham posts about the company

11 Best Stocks For Value Investors This Week – 11/21/15
Intel Corp Valuation – November 2015 Update $INTC
The Best Stocks of the IT Hardware Industry – September 2015
15 Best Stocks For Value Investors This Week – 8/22/15
Intel Corporation Analysis – August 2015 Update $INTC

Other ModernGraham posts about related companies

Apple Inc Valuation – February 2018 $AAPL
Lam Research Corp Valuation – September 2017 $LRCX
Vicor Corp Valuation – Initial Coverage $VICR
Emerson Electric Co Valuation – August 2017 $EMR
General Cable Corporation Valuation – Initial Coverage $BGC
3D Systems Corp Valuation – Initial Coverage $DDD
Teradyne Inc Valuation – Initial Coverage $TER
Diebold Nixdorf Inc Valuation – Initial Coverage $DBD
Tech Data Corp Valuation – Initial Coverage $TECD
Teledyne Technologies Inc Valuation – Initial Coverage $TDY

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.

Apple Inc Valuation – February 2018 $AAPL

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 Undervalued Stocks for the Enterprising Investor – August 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 Apple Inc (AAPL) fares in the ModernGraham valuation model.

Company Profile (obtained from Marketwatch): Apple, Inc. engages in the design, manufacture, and marketing of mobile communication, media devices, personal computers, and portable digital music players. It operates through the following geographical segments: Americas, Europe, Greater China, Japan, and Rest of Asia Pacific. The Americas segment includes both North and South America. The Europe segment consists of European countries, as well as India, the Middle East, and Africa. The Greater China segment comprises of China, Hong Kong, and Taiwan. The Rest of Asia Pacific segment includes Australia and Asian countries not included in the reportable operating segments of the company. The company was founded by Steven Paul Jobs, Ronald Gerald Wayne, and Stephen G. Wozniak on April 1, 1976 and is headquartered in Cupertino, CA.

AAPL Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AAPL – February 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 $873,716,604,806 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.24 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 283.01% Pass
6. Moderate PEmg Ratio PEmg < 20 18.31 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.33 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 1.24 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.71 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 $9.40
MG Growth Estimate 10.20%
MG Value $271.73
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $136.36
MG Value based on 0% Growth $79.93
Market Implied Growth Rate 4.91%
Current Price $172.19
% of Intrinsic Value 63.37%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.6 in 2014 to an estimated $9.4 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.91% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Apple Inc. revealed the company was trading above its Graham Number of $80.01. The company pays a dividend of $2.4 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 18.31, which was below the industry average of 41.95, 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 $-23.81.

Apple 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) -$23.81
Graham Number $80.01
PEmg 18.34
Current Ratio 1.24
PB Ratio 6.34
Current Dividend $2.40
Dividend Yield 1.39%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $143,810,000,000
Total Current Liabilities $115,788,000,000
Long-Term Debt $103,922,000,000
Total Assets $406,794,000,000
Intangible Assets $8,038,000,000
Total Liabilities $266,595,000,000
Shares Outstanding (Diluted Average) 5,157,787,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.88
Sep2017 $9.21
Sep2016 $8.31
Sep2015 $9.22
Sep2014 $6.45
Sep2013 $5.68
Sep2012 $6.31
Sep2011 $3.95
Sep2010 $2.16
Sep2009 $1.30
Sep2008 $0.97
Sep2007 $0.56
Sep2006 $0.32
Sep2005 $0.22
Sep2004 $0.05
Sep2003 $0.01
Sep2002 $0.01
Sep2001 -$0.01
Sep2000 $0.16
Sep1999 $0.13
Sep1998 $0.08

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.40
Sep2017 $8.37
Sep2016 $7.70
Sep2015 $7.03
Sep2014 $5.60
Sep2013 $4.74
Sep2012 $3.83
Sep2011 $2.32
Sep2010 $1.36
Sep2009 $0.86
Sep2008 $0.57
Sep2007 $0.32
Sep2006 $0.18
Sep2005 $0.09
Sep2004 $0.03
Sep2003 $0.04
Sep2002 $0.06

Recommended Reading:

Other ModernGraham posts about the company

Apple Inc Valuation – January 2017 $AAPL
Apple Inc Valuation – August 2016 $AAPL
Apple Inc Valuation – February 2016 $AAPL
My Personal Holdings: Apple Inc. – September 2015 Update $AAPL
27 Companies in the Spotlight This Week – 12/20/14

Other ModernGraham posts about related companies

Lam Research Corp Valuation – September 2017 $LRCX
Vicor Corp Valuation – Initial Coverage $VICR
Emerson Electric Co Valuation – August 2017 $EMR
General Cable Corporation Valuation – Initial Coverage $BGC
3D Systems Corp Valuation – Initial Coverage $DDD
Teradyne Inc Valuation – Initial Coverage $TER
Diebold Nixdorf Inc Valuation – Initial Coverage $DBD
Tech Data Corp Valuation – Initial Coverage $TECD
Teledyne Technologies Inc Valuation – Initial Coverage $TDY
Skyworks Solutions Inc Valuation – April 2017 $SWKS

Disclaimer:

The author held a long position in AAPL 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.

Lam Research Corp Valuation – September 2017 $LRCX

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 Undervalued Stocks for the Enterprising Investor – August 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 Lam Research Corp (LRCX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Lam Research Corporation is a supplier of wafer fabrication equipment and services to the semiconductor industry. The Company designs, manufactures, markets, refurbishes and services semiconductor processing systems that are used in the fabrication of integrated circuits (ICs). It operates through manufacturing and servicing of wafer processing semiconductor manufacturing equipment segment. Its products are designed to enable its customers build a range of devices that are used in a range of electronic products, including cell phones, tablets, computers, storage devices, and networking equipment. Its customer base includes semiconductor memory, foundry, and integrated device manufacturers (IDMs) that make products, such as dynamic random-access memory (DRAM), negative-AND (NAND) memory and logic devices. It offers a portfolio of products that are used in several areas of the semiconductor manufacturing process flow, including thin film deposition, plasma etch and single-wafer clean.

LRCX Chart

LRCX 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 LRCX – September 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 $27,540,115,960 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 365.68% Pass
6. Moderate PEmg Ratio PEmg < 20 18.99 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.61 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 0.00 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 $8.88
MG Growth Estimate 15.00%
MG Value $341.73
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $128.70
MG Value based on 0% Growth $75.45
Market Implied Growth Rate 5.25%
Current Price $168.59
% of Intrinsic Value 49.33%

Lam Research Corporation 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 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 $2.61 in 2014 to an estimated $8.88 for 2018.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.25% 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 Lam Research Corporation revealed the company was trading above its Graham Number of $114.82.  The company pays a dividend of $1.65 per share, for a yield of 1%  Its PEmg (price over earnings per share – ModernGraham) was 18.99, which was below the industry average of 41.95, 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 $20.58.

Lam Research Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $20.58
Graham Number $114.82
PEmg 18.99
Current Ratio 3.10
PB Ratio 4.61
Current Dividend $1.65
Dividend Yield 0.98%
Number of Consecutive Years of Dividend Growth 4

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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 6/1/2017
Total Current Assets $9,142,498,000
Total Current Liabilities $2,950,115,000
Long-Term Debt $0
Total Assets $12,122,765,000
Intangible Assets $1,796,668,000
Total Liabilities $5,305,314,000
Shares Outstanding (Diluted Average) 186,425,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.90
Jun2017 $9.24
Jun2016 $5.22
Jun2015 $3.70
Jun2014 $3.62
Jun2013 $0.66
Jun2012 $1.35
Jun2011 $5.79
Jun2010 $2.71
Jun2009 -$2.41
Jun2008 $3.47
Jun2007 $4.85
Jun2006 $2.33
Jun2005 $2.09
Jun2004 $0.54
Jun2003 -$0.06
Jun2002 -$0.71
Jun2001 $0.39
Jun2000 $1.53
Jun1999 -$0.98
Jun1998 -$1.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.88
Jun2017 $5.74
Jun2016 $3.63
Jun2015 $2.90
Jun2014 $2.61
Jun2013 $1.94
Jun2012 $2.45
Jun2011 $2.96
Jun2010 $1.76
Jun2009 $1.54
Jun2008 $3.23
Jun2007 $2.72
Jun2006 $1.39
Jun2005 $0.76
Jun2004 $0.18
Jun2003 $0.01
Jun2002 -$0.04

Recommended Reading:

Other ModernGraham posts about the company

Lam Research Corp Valuation – June 2016 $LRCX
19 Best Stocks For Value Investors This Week – 1/9/16
Lam Research Corp Valuation – January 2016 Update $LRCX
13 Best Stocks For Value Investors This Week – 10/3/15
Lam Research Corporation Analysis – October 2015 Update $LRCX

Other ModernGraham posts about related companies

Vicor Corp Valuation – Initial Coverage $VICR
Emerson Electric Co Valuation – August 2017 $EMR
General Cable Corporation Valuation – Initial Coverage $BGC
3D Systems Corp Valuation – Initial Coverage $DDD
Teradyne Inc Valuation – Initial Coverage $TER
Diebold Nixdorf Inc Valuation – Initial Coverage $DBD
Tech Data Corp Valuation – Initial Coverage $TECD
Teledyne Technologies Inc Valuation – Initial Coverage $TDY
Skyworks Solutions Inc Valuation – April 2017 $SWKS
Daktronics Inc Valuation – Initial Coverage $DAKT

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.

Exponent Inc Valuation – Initial Coverage $EXPO

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 Undervalued Stocks for the Enterprising Investor – August 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 Exponent Inc (EXPO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Exponent, Inc. (Exponent), along with its subsidiaries, is a science and engineering consulting company. Exponent provides engineering and scientific consulting services to clients around the world. Its service offerings are provided on a project-by-project basis. It operates in two segments: Engineering and Other Scientific, and Environmental and Health. Its Engineering and Other Scientific segment includes biomechanics, biomedical engineering, buildings and structures, civil engineering, construction consulting, materials and corrosion engineering, mechanical engineering, polymer science and materials chemistry, statistical and data sciences, thermal sciences and vehicle analysis services. Its Environmental and Health segment includes chemical regulation and food safety; ecological and biological sciences; environmental and earth sciences, and health sciences. Exponent serves clients in automotive, government, health, insurance, manufacturing and technology, among others.

EXPO Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of EXPO – September 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 $1,756,529,956 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.09 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 124.32% Pass
6. Moderate PEmg Ratio PEmg < 20 39.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.35 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 4.09 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.74
MG Growth Estimate 6.77%
MG Value $38.39
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $25.25
MG Value based on 0% Growth $14.80
Market Implied Growth Rate 15.30%
Current Price $68.10
% of Intrinsic Value 177.40%

Exponent, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the  small size, poor dividend history, and 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 $1.2 in 2013 to an estimated $1.74 for 2017.  This level of demonstrated earnings growth does not support the market’s implied estimate of 15.3% 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 Exponent, Inc. revealed the company was trading above its Graham Number of $21.92.  The company pays a dividend of $0.72 per share, for a yield of 1.1%  Its PEmg (price over earnings per share – ModernGraham) was 39.11, which was above the industry average of 29.87.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.88.

Exponent, 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) $5.88
Graham Number $21.92
PEmg 39.11
Current Ratio 4.09
PB Ratio 6.35
Current Dividend $0.72
Dividend Yield 1.06%
Number of Consecutive Years of Dividend Growth 4

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Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $278,723,000
Total Current Liabilities $68,116,000
Long-Term Debt $0
Total Assets $409,675,000
Intangible Assets $8,607,000
Total Liabilities $120,276,000
Shares Outstanding (Diluted Average) 26,968,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.00
Dec2016 $1.75
Dec2015 $1.60
Dec2014 $1.47
Dec2013 $1.38
Dec2012 $1.30
Dec2011 $1.11
Dec2010 $0.92
Dec2009 $0.74
Dec2008 $0.74
Dec2007 $0.63
Dec2006 $0.42
Dec2005 $0.41
Dec2004 $0.35
Dec2003 $0.32
Dec2002 $0.26
Dec2001 $0.21
Dec2000 $0.28
Dec1999 $0.19
Dec1998 $0.13
Dec1997 $0.15

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.74
Dec2016 $1.57
Dec2015 $1.45
Dec2014 $1.33
Dec2013 $1.20
Dec2012 $1.06
Dec2011 $0.90
Dec2010 $0.76
Dec2009 $0.65
Dec2008 $0.57
Dec2007 $0.47
Dec2006 $0.38
Dec2005 $0.34
Dec2004 $0.30
Dec2003 $0.27
Dec2002 $0.23
Dec2001 $0.21

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.

Vicor Corp Valuation – Initial Coverage $VICR

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 Undervalued Stocks for the Enterprising Investor – August 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 Vicor Corp (VICR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Vicor Corporation designs, develops, manufactures and markets modular power components and power systems for converting, regulating and controlling electric current. The Company’s segments include Brick Business Unit (BBU), VI Chip and Picor. The BBU segment designs, develops, manufactures and markets modular direct current-direct current converters and configurable products, and also includes the entities comprising Vicor Custom Power, and the BBU operations of Vicor Japan Company, Ltd. (VJCL). The VI Chip segment includes VI Chip Corporation, which designs, develops, manufactures and markets advanced power component products. The VI Chip segment also includes the VI Chip business conducted through VJCL. The Picor segment includes Picor Corporation (Picor), which designs, develops, manufactures and markets integrated circuits and related products for use in a range of power management and power system applications.

VICR Chart

VICR 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.

Learn More About Premium Membership

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of VICR – August 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 $696,745,152 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.90 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 -108.97% Fail
6. Moderate PEmg Ratio PEmg < 20 -150.42 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.27 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 3.90 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 Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg -$0.12
MG Growth Estimate -4.25%
MG Value $2.25
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$1.71
MG Value based on 0% Growth -$1.00
Market Implied Growth Rate -79.46%
Current Price $17.75
% of Intrinsic Value 789.00%

Vicor Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the  small size, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the 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 $-0.07 in 2013 to an estimated $-0.12 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 Vicor Corp revealed the company was trading above its Graham Number of $0.  The company does not pay a dividend.  Its PEmg (price over earnings per share – ModernGraham) was -150.42, which was below the industry average of 41.95, 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 $2.25.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $2.25
Graham Number $0.00
PEmg -150.42
Current Ratio 3.90
PB Ratio 5.27
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 6/1/2017
Total Current Assets $119,898,000
Total Current Liabilities $30,766,000
Long-Term Debt $0
Total Assets $163,615,000
Intangible Assets $0
Total Liabilities $31,773,000
Shares Outstanding (Diluted Average) 39,172,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.04
Dec2016 -$0.16
Dec2015 $0.13
Dec2014 -$0.36
Dec2013 -$0.60
Dec2012 -$0.10
Dec2011 $0.21
Dec2010 $0.80
Dec2009 $0.07
Dec2008 -$0.09
Dec2007 $0.13
Dec2006 -$0.69
Dec2005 $0.08
Dec2004 -$0.09
Dec2003 -$0.47
Dec2002 -$0.38
Dec2001 -$0.01
Dec2000 $0.78
Dec1999 $0.45
Dec1998 $0.37
Dec1997 $0.60

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.12
Dec2016 -$0.18
Dec2015 -$0.17
Dec2014 -$0.22
Dec2013 -$0.07
Dec2012 $0.19
Dec2011 $0.29
Dec2010 $0.24
Dec2009 -$0.06
Dec2008 -$0.13
Dec2007 -$0.17
Dec2006 -$0.31
Dec2005 -$0.14
Dec2004 -$0.18
Dec2003 -$0.13
Dec2002 $0.11
Dec2001 $0.38

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.

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