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Denbury Resources Inc Valuation – August 2018 $DNR

Company Profile (excerpt from Reuters): Denbury Resources Inc., incorporated on April 20, 1999, is an oil and natural gas company. The Company’s operations are focused in two operating areas: the Gulf Coast and Rocky Mountain regions. The Company’s properties with proved and producing reserves in the Gulf Coast region are situated in Mississippi, Texas, Louisiana and Alabama, and in the Rocky Mountain region are situated in Montana, North Dakota and Wyoming. The Company had an estimated proved oil and natural gas reserves of 254.5 million barrels of oil equivalent (MMBOE), as of December 31, 2016.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DNR – 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 $2,040,729,871 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.43 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 -202.70% Fail
6. Moderate PEmg Ratio PEmg < 20 -2.45 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.36 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 0.43 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -8.98 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$1.87
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$27.09
MG Value based on 0% Growth -$15.88
Market Implied Growth Rate -5.48%
Current Price $4.58
% of Intrinsic Value N/A

Denbury Resources 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 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 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 $1.41 in 2014 to an estimated $-1.87 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 Denbury Resources Inc. revealed the company was trading above its Graham Number of $3.3. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -2.45, which was below the industry average of 59.52, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.49.

Denbury Resources 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) -$7.49
Graham Number $3.30
PEmg -2.45
Current Ratio 0.43
PB Ratio 2.36
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 6/1/2018
Total Current Assets $224,237,000
Total Current Liabilities $523,819,000
Long-Term Debt $2,689,647,000
Total Assets $4,534,235,000
Intangible Assets $0
Total Liabilities $3,648,590,000
Shares Outstanding (Diluted Average) 457,165,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.30
Dec2017 $0.41
Dec2016 -$2.61
Dec2015 -$12.57
Dec2014 $1.81
Dec2013 $1.11
Dec2012 $1.35
Dec2011 $1.43
Dec2010 $0.72
Dec2009 -$0.30
Dec2008 $1.54
Dec2007 $1.00
Dec2006 $0.82
Dec2005 $0.70
Dec2004 $0.36
Dec2003 $0.26
Dec2002 $0.22
Dec2001 $0.28
Dec2000 $0.77
Dec1999 $0.03
Dec1998 -$2.77

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.87
Dec2017 -$2.76
Dec2016 -$3.62
Dec2015 -$3.21
Dec2014 $1.41
Dec2013 $1.09
Dec2012 $1.04
Dec2011 $0.88
Dec2010 $0.66
Dec2009 $0.67
Dec2008 $1.06
Dec2007 $0.76
Dec2006 $0.58
Dec2005 $0.43
Dec2004 $0.32
Dec2003 $0.30
Dec2002 $0.12

Recommended Reading:

Other ModernGraham posts about the company

Denbury Resources Inc Valuation – February 2017 $DNR
Denbury Resources Inc. Valuation – November 2015 Update $DNR
10 Most Undervalued Companies for the Enterprising Investor – October 2015
5 Undervalued Companies for Value Investors with a High Beta – October 2015
10 Companies Benjamin Graham Would Invest In Today – October 2015

Other ModernGraham posts about related companies

California Resources Corp Valuation – August 2018 $CRC
Crew Energy Inc Valuation – August 2018 $TSE-CR
Superior Energy Services Inc Valuation – August 2018 $SPN
Crescent Point Energy Corp Valuation – August 2018 $TSE-CPG
Kelt Exploration Ltd Valuation – August 2018 $TSE-KEL
Canadian Natural Resources Ltd Valuation – August 2018 $TSE:CNQ
SM Energy Co Valuation – August 2018 $SM
Surge Energy Inc Valuation – July 2018 $TSE:SGY
CIRCOR International Inc Valuation – July 2018 $CIR
SEACOR Holdings Inc Valuation – July 2018 $CKH

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.

Denbury Resources Inc Valuation – February 2017 $DNR

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 Denbury Resources Inc (DNR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Denbury Resources Inc. is an independent oil and natural gas company. The Company’s operations are focused on two operating areas: the Gulf Coast and Rocky Mountain regions. Its properties with proved and producing reserves in the Gulf Coast region are situated in Mississippi, Texas, Louisiana and Alabama, and in the Rocky Mountain region are situated in Montana, North Dakota and Wyoming. It has estimated proved oil and natural gas reserves of over 288.6 million barrels of oil equivalent (MMBOE). Its primary Gulf Coast carbon dioxide (CO2) source is Jackson Dome, which is located near Jackson, Mississippi. Its mature group of properties includes the initial CO2 field, Little Creek, as well as various other fields, including Brookhaven, Cranfield, Eucutta, Lockhart Crossing, Mallalieu, Martinville, McComb and Soso fields. Its LaBarge Field is located in southwestern Wyoming. It holds interest in LaBarge Field, which consists of over 1.2 trillion cubic feet of proved CO2 reserves.

DNR Chart

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ModernGraham Valuation of DNR – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,251,575,725 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.40 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 -654.91% Fail
6. Moderate PEmg Ratio PEmg < 20 -0.97 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.48 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 0.40 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.97 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 -$3.31
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$47.98
MG Value based on 0% Growth -$28.12
Market Implied Growth Rate -4.74%
Current Price $3.22
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.04 in 2012 to an estimated $-3.31 for 2016. 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 Denbury Resources Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.06 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was -0.97, which was below the industry average of 69.19, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.8.

Denbury Resources Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.80
Graham Number $0.00
PEmg -0.97
Current Ratio 0.40
PB Ratio 1.48
Current Dividend $0.06
Dividend Yield 1.96%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $162,717,000
Total Current Liabilities $405,245,000
Long-Term Debt $2,903,051,000
Total Assets $4,816,801,000
Intangible Assets $0
Total Liabilities $3,969,457,000
Shares Outstanding (Diluted Average) 388,572,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.67
Dec2015 -$12.57
Dec2014 $1.81
Dec2013 $1.11
Dec2012 $1.35
Dec2011 $1.43
Dec2010 $0.72
Dec2009 -$0.30
Dec2008 $1.54
Dec2007 $1.00
Dec2006 $0.82
Dec2005 $0.70
Dec2004 $0.36
Dec2003 $0.26
Dec2002 $0.22
Dec2001 $0.28
Dec2000 $0.77
Dec1999 $0.03
Dec1998 -$2.77
Dec1997 $0.18
Dec1996 $0.16

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$3.31
Dec2015 -$3.21
Dec2014 $1.41
Dec2013 $1.09
Dec2012 $1.04
Dec2011 $0.88
Dec2010 $0.66
Dec2009 $0.67
Dec2008 $1.06
Dec2007 $0.76
Dec2006 $0.58
Dec2005 $0.43
Dec2004 $0.32
Dec2003 $0.30
Dec2002 $0.12
Dec2001 -$0.05
Dec2000 -$0.26

Recommended Reading:

Other ModernGraham posts about the company

Denbury Resources Inc. Valuation – November 2015 Update $DNR
10 Most Undervalued Companies for the Enterprising Investor – October 2015
5 Undervalued Companies for Value Investors with a High Beta – October 2015
10 Companies Benjamin Graham Would Invest In Today – October 2015
The Best Companies of the Oil & Gas Industry – August 2015

Other ModernGraham posts about related companies

California Resources Corp Valuation – Initial Coverage $CRC
Crew Energy Inc Valuation – Initial Coverage $TSE:CR
Exxon Mobil Corp Valuation – February 2017 $XOM
Superior Energy Services Inc Valuation – Initial Coverage $SPN
2017 Oil & Gas Industry Review
Spartan Energy Corp Valuation – Initial Coverage $TSE:SPE
Crescent Point Energy Corp Valuation – Initial Coverage $TSE:CPG
Tesoro Corporation Valuation – February 2017 $TSO
Kelt Exploration Ltd Valuation – Initial Coverage $TSE:KEL
Canadian National Resources Ltd Valuation – Initial Coverage $TSE:CNQ

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.

Denbury Resources Inc. Valuation – November 2015 Update $DNR

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 Most Undervalued Companies for the Defensive Investor – October 2015.  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 Denbury Resources Inc. (DNR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Denbury Resources Inc. is an independent oil and natural gas company. The Company’s operations are focused in two operating areas: the Gulf Coast and Rocky Mountain regions. The Company’s properties with proved and producing reserves in the Gulf Coast region are situated in Mississippi, Texas, Louisiana and Alabama, and in the Rocky Mountain region are situated in Montana, North Dakota and Wyoming. The Company’s primary Gulf Coast CO2 source is Jackson Dome. The Company’s mature group of properties includes the initial CO2 field, Little Creek, as well as several other fields, including Brookhaven, Cranfield, Eucutta, Lockhart Crossing, Mallalieu, Martinville, McComb and Soso fields. The Company also holds interest in the 183-mile NEJD CO2 pipeline that runs from Jackson Dome to near Donaldsonville, Louisiana.

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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. Here is a free sample valuation pdf, and 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 DNR – November 2015

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 $1,489,380,215 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.46 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 -123.21% Fail
6. Moderate PEmg Ratio PEmg < 20 -16.58 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.33 Fail
Score
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 1.46 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 19.75 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

DNR value Chart November 2015

EPSmg -$0.25
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Value based on 3% Growth -$3.67
MG Value based on 0% Growth -$2.15
Market Implied Growth Rate -12.54%
Current Price $4.20
% of Intrinsic Value N/A

Denbury Resources Inc. does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The company now fails every Defensive Investor requirement, and only passes the Enterprising Investor’s requirement of dividend payments. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from a gain of $0.88 in 2011 to an estimated loss of $0.25 for 2015.  This level of demonstrated earnings growth does not support a positive valuation.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Denbury Resources Inc. (DNR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

DNR Charts November 2015

Net Current Asset Value (NCAV) -$15.82
Graham Number #NUM!
PEmg -16.58
Current Ratio 1.46
PB Ratio 0.33
Dividend Yield 6.00%
Number of Consecutive Years of Dividend Growth 2

 

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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

Total Current Assets $558,382,000
Total Current Liabilities $382,641,000
Long-Term Debt $3,471,141,000
Total Assets $10,495,300,000
Intangible Assets $1,261,512,000
Total Liabilities $6,095,269,000
Shares Outstanding (Diluted Average) 350,039,000

Earnings Per Share History

Next Fiscal Year Estimate -$3.70
Dec14 $1.81
Dec13 $1.11
Dec12 $1.35
Dec11 $1.43
Dec10 $0.72
Dec09 -$0.30
Dec08 $1.54
Dec07 $1.00
Dec06 $0.82
Dec05 $0.70
Dec04 $0.36
Dec03 $0.26
Dec02 $0.22
Dec01 $0.28
Dec00 $0.77
Dec99 $0.03
Dec98 -$2.77
Dec97 $0.18
Dec96 $0.16
Dec95 $0.03

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate -$0.25
Dec14 $1.41
Dec13 $1.09
Dec12 $1.04
Dec11 $0.88
Dec10 $0.66
Dec09 $0.67
Dec08 $1.06
Dec07 $0.76
Dec06 $0.58
Dec05 $0.43
Dec04 $0.32
Dec03 $0.30
Dec02 $0.12
Dec01 -$0.05
Dec00 -$0.26
Dec99 -$0.67

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Enterprising Investor – October 2015
5 Undervalued Companies for Value Investors with a High Beta – October 2015
10 Companies Benjamin Graham Would Invest In Today – October 2015
The Best Companies of the Oil & Gas Industry – August 2015
10 Low PE Stocks for the Enterprising Investor – August 2015

Other ModernGraham posts about related companies

Western Refining Inc. Valuation – October 2015 Update $WNR
Valero Energy Corporation Valuation – October 2015 Update $VLO
Schlumberger Limited Valuation – October 2015 Update $SLB
National Oilwell Varco Inc. Valuation – October 2015 Update $NOV
Tesoro Corporation Analysis – October 2015 Update $TSO
Cameron International Company Analysis – September 2015 Update $CAM
Halliburton Company Analysis – September 2015 Update $HAL
Kinder Morgan Inc. Analysis – September 2015 Update $KMI
Range Resources Corporation Analysis – August 2015 Update $RRC
Helmerich & Payne Inc. Analysis – August 2015 Update $HP

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.

Denbury Resources Inc. Analysis – August 2015 Update $DNR

logo (4)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 5 Most Undervalued Companies for the Defensive Investor – July 2015.  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 Denbury Resources Inc. (DNR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Denbury Resources Inc. is an independent oil and natural gas company. The Company’s operations are focused in two operating areas: the Gulf Coast and Rocky Mountain regions. The Company’s properties with proved and producing reserves in the Gulf Coast region are situated in Mississippi, Texas, Louisiana and Alabama, and in the Rocky Mountain region are situated in Montana, North Dakota and Wyoming. The Company’s primary Gulf Coast CO2 source is Jackson Dome. The Company’s mature group of properties includes the initial CO2 field, Little Creek, as well as several other fields, including Brookhaven, Cranfield, Eucutta, Lockhart Crossing, Mallalieu, Martinville, McComb and Soso fields. The Company also holds interest in the 183-mile NEJD CO2 pipeline that runs from Jackson Dome to near Donaldsonville, Louisiana.

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To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - FAIL
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years - FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years - PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $3.52
MG Value $15.15
MG Opinion Undervalued
Value Based on 3% Growth $15.27
Value Based on 0% Growth $8.95
Market Implied Growth Rate -2.58%
Net Current Asset Value (NCAV) -$17.44
PEmg 3.34
Current Ratio 2.01
PB Ratio 0.22

Balance Sheet – June 2015

Current Assets $769,000,000
Current Liabilities $382,000,000
Total Debt $3,596,000,000
Total Assets $12,468,000,000
Intangible Assets $1,284,000,000
Total Liabilities $6,885,000,000
Outstanding Shares 350,700,000

Earnings Per Share

2015 (estimate) $0.22
2014 $1.81
2013 $1.11
2012 $1.35
2011 $1.43
2010 $0.72
2009 -$0.30
2008 $1.54
2007 $1.00
2006 $0.82
2005 $0.70

Earnings Per Share – ModernGraham

2015 (estimate) $1.05
2014 $1.41
2013 $1.09
2012 $1.04
2011 $0.88
2010 $0.66

Dividend History

Free Cash Flow

Conclusion:

Denbury Resources Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the company size, insufficient earnings growth or stability over the last ten years along with the short dividend history.  The Enterprising Investor is concerned with the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.88 in 2011 to an estimated $1.05 for 2015.  This level of demonstrated earnings growth surpasses the market’s implied estimate of 2.58% annual earnings decline 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.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Denbury Resources Inc. (DNR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Denbury Resources Inc. Annual Valuation – 2014 $DNR

logo (4)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 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows.  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 specific look at how Denbury Resources (DNR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Denbury Resources Inc. is an independent oil and natural gas company. As of December 31, 2011, the Company had 461.9 million barrel of oil equivalent of proved oil and natural gas reserves, of which 77% was oil. The Company’s oil and natural gas properties are concentrated in the Gulf Coast and Rocky Mountain regions in the United States. As of December 31, 2011, the Company’s properties with proved and producing reserves in the Gulf Coast region were situated in Mississippi, Texas, Louisiana and Alabama, and in the Rocky Mountain region were primarily situated in Montana, North Dakota, Utah and Wyoming. In April 2012, it sold certain non-operated assets in the Greater Aneth Field in the Paradox Basin of Utah to Resolute Energy Corporation and the Navajo Nation Oil and Gas Company. In March 2013, it announced the closing of acquisition of producing property interests in the Cedar Creek Anticline (CCA) of Montana and North Dakota.
DNR Chart

DNR data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years - FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $16.55
MG Value $33.66
MG Opinion Undervalued
Value Based on 3% Growth $16.31
Value Based on 0% Growth $9.56
Market Implied Growth Rate 3.11%
Net Current Asset Value (NCAV) -$18.42
PEmg 14.72
Current Ratio 0.57
PB Ratio 1.15

Balance Sheet – 6/30/2014

Current Assets $423,000,000
Current Liabilities $736,000,000
Total Debt $3,602,200,000
Total Assets $11,999,700,000
Intangible Assets $1,283,600,000
Total Liabilities $6,911,700,000
Outstanding Shares 352,330,000

Earnings Per Share

2014 (estimate) $0.96
2013 $1.11
2012 $1.35
2011 $1.43
2010 $0.72
2009 -$0.30
2008 $1.54
2007 $1.00
2006 $0.82
2005 $0.70
2004 $0.36

Earnings Per Share – ModernGraham

2014 (estimate) $1.12
2013 $1.09
2012 $1.04
2011 $0.88
2010 $0.66
2009 $0.67

Conclusion:

Denbury Resources does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has major concerns with the current ratio, the short dividend history, and the lack of sufficient earnings stability over the last ten years.  The Enterprising Investor is concerned with the high level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.66 in 2010 to an estimated $1.12 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 3.11% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Denbury Resources (DNR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Denbury Resources (DNR) or 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.  Logo taken from wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Williams Companies Inc Valuation – January 2019 $WMB

Company Profile (excerpt from Reuters): The Williams Companies, Inc., incorporated on February 3, 1987, is an energy infrastructure company. The Company is focused on connecting North America’s hydrocarbon resource plays to markets for natural gas, natural gas liquids (NGL), and olefins. As of December 31, 2016, the Company’s interstate gas pipelines, midstream and olefins production interests were held through its investment in Williams Partners L.P. (WPZ). The Company’s segments include Williams Partners, Williams NGL & Petchem Services and Other. The Williams Partners segment includes its consolidated master limited partnership, WPZ. The Williams NGL & Petchem Services segment includes its Texas Belle pipeline and certain other domestic olefins pipeline assets. Other segment includes its corporate operations and Canadian construction services company.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WMB – 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 $30,487,499,623 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 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 -436.84% Fail
6. Moderate PEmg Ratio PEmg < 20 29.71 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.52 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 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -27.55 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 $0.85
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $12.30
MG Value based on 0% Growth $7.21
Market Implied Growth Rate 10.60%
Current Price $25.19
% of Intrinsic Value N/A

Williams 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, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.37 in 2014 to an estimated $0.85 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.6% 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 Williams Companies Inc revealed the company was trading above its Graham Number of $11.58. The company pays a dividend of $1.2 per share, for a yield of 4.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 29.71, which was below the industry average of 41.28, 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 $-27.56.

Williams Companies 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) -$27.56
Graham Number $11.58
PEmg 29.71
Current Ratio 0.72
PB Ratio 1.52
Current Dividend $1.20
Dividend Yield 4.76%
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 $1,984,000,000
Total Current Liabilities $2,761,000,000
Long-Term Debt $21,409,000,000
Total Assets $47,153,000,000
Intangible Assets $8,324,000,000
Total Liabilities $30,194,000,000
Shares Outstanding (Diluted Average) 1,023,587,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.51
Dec2017 $2.62
Dec2016 -$0.57
Dec2015 -$0.76
Dec2014 $2.92
Dec2013 $0.62
Dec2012 $1.37
Dec2011 $0.63
Dec2010 -$1.88
Dec2009 $0.49
Dec2008 $2.40
Dec2007 $1.63
Dec2006 $0.51
Dec2005 $0.53
Dec2004 $0.31
Dec2003 -$1.01
Dec2002 -$1.64
Dec2001 -$0.95
Dec2000 $1.17
Dec1999 $0.35
Dec1998 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.85
Dec2017 $1.00
Dec2016 $0.37
Dec2015 $0.87
Dec2014 $1.37
Dec2013 $0.48
Dec2012 $0.47
Dec2011 $0.24
Dec2010 $0.24
Dec2009 $1.23
Dec2008 $1.43
Dec2007 $0.76
Dec2006 $0.13
Dec2005 -$0.22
Dec2004 -$0.54
Dec2003 -$0.78
Dec2002 -$0.50

Recommended Reading:

Other ModernGraham posts about the company

Williams Companies Inc Valuation – March 2018 $WMB
Williams Companies Inc Valuation – June 2016 $WMB
34 Companies in the Spotlight This Week – 2/7/15
Williams Companies Annual Valuation – 2015 $WMB
15 Companies in the Spotlight This Week – 2/1/14

Other ModernGraham posts about related companies

Exxon Mobil Corp Valuation – November 2018 $XOM
Chevron Corp Valuation – November 2018 $CVX
Cenovus Energy Inc Valuation – October 2018 $TSE-CVE
CNX Resources Corp Valuation – September 2018 $CNX
Carbo Ceramics Inc Valuation – August 2018 $CRR
Murphy Oil Corp Valuation – August 2018 $MUR
Suncor Energy Inc Valuation – August 2018 $TSE:SU
Tidewater Inc Valuation – August 2018 $TDW
Carrizo Oil & Gas Inc Valuation – August 2018 $CRZO
Denbury Resources Inc Valuation – August 2018 $DNR

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.

Exxon Mobil Corp Valuation – November 2018 $XOM

Company Profile (excerpt from Reuters): Exxon Mobil Corporation, incorporated on August 5, 1882, is engaged in energy business. The Company is engaged in the exploration, production, transportation and sale of crude oil and natural gas, and the manufacture, transportation and sale of petroleum products. The Company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and a range of specialty products. The Company’s segments include Upstream, Downstream, Chemical, and Corporate and Financing. The Upstream segment operates to explore for and produce crude oil and natural gas. The Downstream operates to manufacture and sell petroleum products. The Chemical segment operates to manufacture and sell petrochemicals. The Company has exploration and development activities in projects located in the United States, Canada/South America, Europe, Africa, Asia and Australia/Oceania.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of XOM – 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 $334,301,427,796 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.83 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 -40.71% Fail
6. Moderate PEmg Ratio PEmg < 20 19.07 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.71 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 0.83 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.82 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 $4.14
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $60.04
MG Value based on 0% Growth $35.20
Market Implied Growth Rate 5.28%
Current Price $78.96
% of Intrinsic Value N/A

Exxon Mobil Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years. 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 $7.98 in 2014 to an estimated $4.14 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.28% 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 Exxon Mobil Corporation revealed the company was trading above its Graham Number of $67.18. The company pays a dividend of $3.06 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 19.07, which was below the industry average of 50.98, 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 $-24.31.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.31
Graham Number $67.18
PEmg 19.07
Current Ratio 0.83
PB Ratio 1.71
Current Dividend $3.06
Dividend Yield 3.88%
Number of Consecutive Years of Dividend Growth 15

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 $53,975,000,000
Total Current Liabilities $65,288,000,000
Long-Term Debt $20,624,000,000
Total Assets $354,628,000,000
Intangible Assets $0
Total Liabilities $157,797,000,000
Shares Outstanding (Diluted Average) 4,271,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.53
Dec2017 $4.63
Dec2016 $1.88
Dec2015 $3.85
Dec2014 $7.60
Dec2013 $7.37
Dec2012 $9.70
Dec2011 $8.42
Dec2010 $6.22
Dec2009 $3.98
Dec2008 $8.66
Dec2007 $7.26
Dec2006 $6.62
Dec2005 $5.71
Dec2004 $3.89
Dec2003 $3.23
Dec2002 $1.68
Dec2001 $2.21
Dec2000 $2.52
Dec1999 $1.13
Dec1998 $1.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.14
Dec2017 $4.32
Dec2016 $4.80
Dec2015 $6.64
Dec2014 $7.98
Dec2013 $7.82
Dec2012 $7.83
Dec2011 $6.90
Dec2010 $6.28
Dec2009 $6.35
Dec2008 $7.17
Dec2007 $6.06
Dec2006 $5.05
Dec2005 $3.96
Dec2004 $2.96
Dec2003 $2.38
Dec2002 $1.88

Recommended Reading:

Other ModernGraham posts about the company

5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018
Exxon Mobil Corp Valuation – February 2018 $XOM
Most Overvalued Stocks of the S&P 500 – March 2017
5 Overvalued Dow Components – February 2017

Other ModernGraham posts about related companies

Chevron Corp Valuation – November 2018 $CVX
Cenovus Energy Inc Valuation – October 2018 $TSE-CVE
CNX Resources Corp Valuation – September 2018 $CNX
Carbo Ceramics Inc Valuation – August 2018 $CRR
Murphy Oil Corp Valuation – August 2018 $MUR
Suncor Energy Inc Valuation – August 2018 $TSE:SU
Tidewater Inc Valuation – August 2018 $TDW
Carrizo Oil & Gas Inc Valuation – August 2018 $CRZO
Denbury Resources Inc Valuation – August 2018 $DNR
California Resources Corp Valuation – August 2018 $CRC

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.

Chevron Corp Valuation – November 2018 $CVX

Company Profile (excerpt from Reuters): Chevron Corporation (Chevron), incorporated on January 27, 1926, manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to the United States and international subsidiaries that engage in integrated energy and chemicals operations. The Company operates through two business segments: Upstream and Downstream. Upstream operations consist primarily of exploring for, developing and producing crude oil and natural gas; liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transporting crude oil by international oil export pipelines; processing, transporting, storage and marketing of natural gas, and a gas-to-liquids plant. Downstream operations consist primarily of refining of crude oil into petroleum products; marketing of crude oil and refined products; transporting of crude oil and refined products by pipeline, marine vessel, motor equipment and rail car, and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CVX – 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 $228,998,726,088 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.22 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 -53.76% Fail
6. Moderate PEmg Ratio PEmg < 20 23.64 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.48 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 1.22 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.66 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 $5.06
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $73.30
MG Value based on 0% Growth $42.97
Market Implied Growth Rate 7.57%
Current Price $119.51
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $11.43 in 2014 to an estimated $5.06 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.57% 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 Chevron Corporation revealed the company was trading below its Graham Number of $121.52. The company pays a dividend of $4.32 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.64, which was below the industry average of 60.49, 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 $-34.6.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$34.60
Graham Number $121.52
PEmg 23.64
Current Ratio 1.22
PB Ratio 1.48
Current Dividend $4.32
Dividend Yield 3.61%
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 $35,583,000,000
Total Current Liabilities $29,183,000,000
Long-Term Debt $29,854,000,000
Total Assets $256,606,000,000
Intangible Assets $4,518,000,000
Total Liabilities $101,933,000,000
Shares Outstanding (Diluted Average) 1,917,474,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.44
Dec2017 $4.85
Dec2016 -$0.27
Dec2015 $2.45
Dec2014 $10.14
Dec2013 $11.09
Dec2012 $13.32
Dec2011 $13.44
Dec2010 $9.48
Dec2009 $5.24
Dec2008 $11.67
Dec2007 $8.77
Dec2006 $7.80
Dec2005 $6.54
Dec2004 $6.28
Dec2003 $3.48
Dec2002 $0.53
Dec2001 $1.55
Dec2000 $3.99
Dec1999 $1.57
Dec1998 $1.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.06
Dec2017 $4.13
Dec2016 $4.96
Dec2015 $8.41
Dec2014 $11.43
Dec2013 $11.55
Dec2012 $11.40
Dec2011 $10.20
Dec2010 $8.58
Dec2009 $8.09
Dec2008 $9.08
Dec2007 $7.38
Dec2006 $6.10
Dec2005 $4.72
Dec2004 $3.60
Dec2003 $2.25
Dec2002 $1.66

Recommended Reading:

Other ModernGraham posts about the company

5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018
Chevron Corp Valuation – February 2018 $CVX
Chevron Corporation Valuation – March 2017 $CVX
5 Overvalued Dow Components – February 2017

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Cenovus Energy Inc Valuation – October 2018 $TSE-CVE
CNX Resources Corp Valuation – September 2018 $CNX
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Murphy Oil Corp Valuation – August 2018 $MUR
Suncor Energy Inc Valuation – August 2018 $TSE:SU
Tidewater Inc Valuation – August 2018 $TDW
Carrizo Oil & Gas Inc Valuation – August 2018 $CRZO
Denbury Resources Inc Valuation – August 2018 $DNR
California Resources Corp Valuation – August 2018 $CRC
Crew Energy Inc Valuation – August 2018 $TSE-CR

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.

Cenovus Energy Inc Valuation – October 2018 $TSE-CVE

Company Profile (excerpt from Reuters): Cenovus Energy Inc is a Canada-based integrated oil and natural gas company. The Company’s operations, include oil sands projects in northern Alberta and oil production in Alberta and British Columbia. The Company is owner of two projects that are producing oil, Christina Lake and Foster Creek. The oil sands projects use a drilling method called steam-assisted gravity drainage or SAGD for short. The SAGD process uses natural gas to heat water into steam, which helps The Company to extract the oil out of the oil sands. The company also holds interest in two United States refineries, Wood River located in Roxana Illinois and Borger located in Borger Texas.

CVE Chart

CVE data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-CVE – October 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 $16,400,000,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.17 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 -57.49% Fail
6. Moderate PEmg Ratio PEmg < 20 19.02 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.84 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.17 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 15.37 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 $0.68
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $9.89
MG Value based on 0% Growth $5.80
Market Implied Growth Rate 5.26%
Current Price $12.97
% of Intrinsic Value N/A

Cenovus Energy 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 poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. 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 $1.18 in 2014 to an estimated $0.68 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.26% 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 Cenovus Energy Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.2 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 19.02, which was below the industry average of 60.49, 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 $-13.61.

Cenovus Energy 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) -$13.61
Graham Number $0.00
PEmg 19.02
Current Ratio 1.17
PB Ratio 0.84
Current Dividend $0.20
Dividend Yield 1.54%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $4,566,000,000
Total Current Liabilities $3,916,000,000
Long-Term Debt $9,992,000,000
Total Assets $40,299,000,000
Intangible Assets $2,272,000,000
Total Liabilities $21,296,000,000
Shares Outstanding (Diluted Average) 1,229,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.50
Dec2017 $3.05
Dec2016 -$0.65
Dec2015 $0.75
Dec2014 $0.98
Dec2013 $0.87
Dec2012 $1.31
Dec2011 $1.95
Dec2010 $1.43
Dec2009 $1.09
Dec2008 $3.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.68
Dec2017 $1.18
Dec2016 $0.38
Dec2015 $0.99
Dec2014 $1.18
Dec2013 $1.29
Dec2012 $1.64
Dec2011 $1.76
Dec2010 $1.53
Dec2009 $1.39
Dec2008 $1.28

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Cenovus Energy Inc Valuation – Initial Coverage $TSE:CVE

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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.

CNX Resources Corp Valuation – September 2018 $CNX

Company Profile (excerpt from Reuters): CNX Resources Corp., formerly CONSOL Energy Inc., incorporated on October 31, 1991, is an integrated energy company. The Company’s divisions include Exploration and Production (E&P), Pennsylvania (PA) Mining Operations and Other. The E&P division operates through three segments: Marcellus Shale, Coalbed Methane (CBM) and Other Gas, which produce pipeline quality natural gas for sale primarily to gas wholesalers. Its E&P division focuses on Appalachian area natural gas and liquids activities, including production, gathering, processing and acquisition of natural gas properties in the Appalachian Basin. The Company’s E&P operations are located throughout Appalachia. Its Other Gas properties include Shallow Oil and Gas, Chattanooga and Huron. The Other Gas segment is primarily related to shallow oil and gas production and the Chattanooga Shale in Tennessee. The principal activities of the PA Mining Operations division are mining, preparation and marketing of thermal coal, sold primarily to power generators. The PA Mining Operations division focuses on the extraction and preparation of coal in the Appalachian Basin. The Other division includes business activities, such as coal terminal operations and water operations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CNX – September 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,178,842,385 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.67 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 -93.16% Fail
6. Moderate PEmg Ratio PEmg < 20 39.47 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.65 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.67 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -14.96 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.38
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $5.48
MG Value based on 0% Growth $3.21
Market Implied Growth Rate 15.49%
Current Price $14.92
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.81 in 2014 to an estimated $0.38 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.49% 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 CNX Resources Corp revealed the company was trading below its Graham Number of $31.62. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 39.47, which was below the industry average of 58.86, 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 $-13.02.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$13.02
Graham Number $31.62
PEmg 39.47
Current Ratio 0.67
PB Ratio 0.65
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 6/1/2018
Total Current Assets $319,146,000
Total Current Liabilities $474,991,000
Long-Term Debt $2,330,780,000
Total Assets $8,207,758,000
Intangible Assets $902,835,000
Total Liabilities $3,168,835,000
Shares Outstanding (Diluted Average) 218,930,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.55
Dec2017 $1.65
Dec2016 -$3.70
Dec2015 -$1.64
Dec2014 $0.70
Dec2013 $2.87
Dec2012 $1.70
Dec2011 $2.76
Dec2010 $1.60
Dec2009 $2.95
Dec2008 $2.40
Dec2007 $1.45
Dec2006 $2.20
Dec2005 $3.13
Dec2004 $1.09
Dec2003 -$0.05
Dec2002 $0.08
Jun2001 $1.17
Jun2000 $0.68
Jun1999 $0.31
Dec1998 $0.87

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.38
Dec2017 -$0.48
Dec2016 -$1.03
Dec2015 $0.62
Dec2014 $1.81
Dec2013 $2.37
Dec2012 $2.18
Dec2011 $2.35
Dec2010 $2.14
Dec2009 $2.42
Dec2008 $2.12
Dec2007 $1.84
Dec2006 $1.78
Dec2005 $1.41
Dec2004 $0.57
Dec2003 $0.35
Dec2002 $0.57

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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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