Eastman Chemical Co Valuation – January 2019 $EMN

Company Profile (excerpt from Reuters): Eastman Chemical Company (Eastman), incorporated on July 29, 1993, is an advanced materials and specialty additives company that produces a range of advanced materials, specialty additives, chemicals, and fibers found in items people use every day. The Company operates through four segments: Additives & Functional Products (AFP), Advanced Materials (AM), Chemical Intermediates (CI), and Fibers. As of December 31, 2016, the Company had 49 manufacturing sites and equity interests in six manufacturing joint ventures in 14 countries that supplied products to customers throughout the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EMN – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,141,841,383 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 188.41% Pass
6. Moderate PEmg Ratio PEmg < 20 9.42 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.72 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.95 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 $7.69
MG Growth Estimate 7.98%
MG Value $188.07
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $111.52
MG Value based on 0% Growth $65.38
Market Implied Growth Rate 0.46%
Current Price $72.42
% of Intrinsic Value 38.51%

Eastman Chemical Company qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.02 in 2014 to an estimated $7.69 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.46% 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 Eastman Chemical Company revealed the company was trading below its Graham Number of $86.45. The company pays a dividend of $2.09 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.42, which was below the industry average of 20.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-47.19.

Eastman Chemical Company fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$47.19
Graham Number $86.45
PEmg 9.42
Current Ratio 1.69
PB Ratio 1.72
Current Dividend $2.09
Dividend Yield 2.89%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,647,000,000
Total Current Liabilities $2,153,000,000
Long-Term Debt $5,898,000,000
Total Assets $16,362,000,000
Intangible Assets $6,740,000,000
Total Liabilities $10,367,000,000
Shares Outstanding (Diluted Average) 142,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.79
Dec2017 $9.47
Dec2016 $5.75
Dec2015 $5.66
Dec2014 $4.97
Dec2013 $7.44
Dec2012 $2.93
Dec2011 $4.52
Dec2010 $2.88
Dec2009 $0.93
Dec2008 $2.28
Dec2007 $1.79
Dec2006 $2.46
Dec2005 $3.41
Dec2004 $1.09
Dec2003 -$1.75
Dec2002 $0.40
Dec2001 -$1.14
Dec2000 $1.97
Dec1999 $0.31
Dec1998 $1.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.69
Dec2017 $6.98
Dec2016 $5.61
Dec2015 $5.39
Dec2014 $5.02
Dec2013 $4.61
Dec2012 $3.03
Dec2011 $2.88
Dec2010 $2.06
Dec2009 $1.83
Dec2008 $2.25
Dec2007 $1.96
Dec2006 $1.74
Dec2005 $1.05
Dec2004 -$0.05
Dec2003 -$0.42
Dec2002 $0.37

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Defensive Investor – March 2018
5 Great Stocks This Week – 3/5/18
Eastman Chemical Co Valuation – March 2018 $EMN
10 Low PE Stock Picks for the Defensive Investor – February 2017
10 Undervalued Companies for the Defensive Investor – February 2017

Other ModernGraham posts about related companies

DowDuPont Inc Valuation – November 2018 $DWDP
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Innophos Holdings Inc Valuation – March 2018 $IPHS
Olin Corp Valuation – March 2018 $OLN
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FMC Corp Valuation – March 2018 $FMC
Compass Minerals International Inc Valuation – March 2018 $CMP
Ashland Global Holdings Inc Valuation – March 2018 $ASH

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.

Eastman Chemical Co Valuation – March 2018 $EMN

Company Profile (obtained from Marketwatch): Eastman Chemical Co. engages in the provision of specialty chemicals. It activities include production and distribution a range of advanced materials, chemicals and fibers. It operates through the following segments: Additives & Functional Products, Advanced Materials, Chemical Intermediates and Fibers. The Additives and Functional Products segment pertains to manufacturing chemicals for products in the coatings and tires industries in transportation, building and construction, durable goods and consumables markets. The Advanced Materials segment produces and markets its polymers, films, and plastics with differentiated performance properties for value-added end uses in transportation, consumables, building and construction, durable goods, and health and wellness markets. The Chemical Intermediates segment provides large scale and vertical integration from the cellulose and acetyl, olefins, and alkylamines streams to support operating segments with advantaged cost positions. . The Fiber segment manufactures and sells EstronTM acetate tow and EstrobondTM triacetin plasticizers for use primarily in the manufacture of cigarette filters; EstronTM natural (undyed) and ChromspunTM solution-dyed acetate yarns for use in apparel, home furnishings, and industrial fabrics; and cellulose acetate flake and acetyl raw materials for other acetate fiber producers, including the Company’s new joint venture acetate tow manufacturing facility in Hefei, China. The company was founded by George Eastman in 1918 and is headquartered in Kingsport, TN.

EMN Chart

EMN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EMN – 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 $14,528,670,282 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.83 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 189.97% Pass
6. Moderate PEmg Ratio PEmg < 20 13.14 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.93 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 1.83 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.29 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 $7.69
MG Growth Estimate 7.98%
MG Value $188.21
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $111.55
MG Value based on 0% Growth $65.39
Market Implied Growth Rate 2.32%
Current Price $101.08
% of Intrinsic Value 53.71%

Eastman Chemical Company qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.02 in 2014 to an estimated $7.69 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.32% 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 Eastman Chemical Company revealed the company was trading above its Graham Number of $84.49. The company pays a dividend of $2.09 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.14, which was below the industry average of 30.04, 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 $-53.31.

Eastman Chemical Company performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$53.31
Graham Number $84.49
PEmg 13.14
Current Ratio 1.83
PB Ratio 2.93
Current Dividend $2.09
Dividend Yield 2.07%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2017
Total Current Assets $3,245,000,000
Total Current Liabilities $1,771,000,000
Long-Term Debt $6,325,000,000
Total Assets $16,024,000,000
Intangible Assets $6,924,000,000
Total Liabilities $11,001,000,000
Shares Outstanding (Diluted Average) 145,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.30
Dec2017 $10.09
Dec2016 $5.75
Dec2015 $5.66
Dec2014 $4.97
Dec2013 $7.44
Dec2012 $2.93
Dec2011 $4.52
Dec2010 $2.88
Dec2009 $0.93
Dec2008 $2.28
Dec2007 $1.79
Dec2006 $2.46
Dec2005 $3.41
Dec2004 $1.09
Dec2003 -$1.75
Dec2002 $0.40
Dec2001 -$1.14
Dec2000 $1.97
Dec1999 $0.31
Dec1998 $1.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.69
Dec2017 $7.19
Dec2016 $5.61
Dec2015 $5.39
Dec2014 $5.02
Dec2013 $4.61
Dec2012 $3.03
Dec2011 $2.88
Dec2010 $2.06
Dec2009 $1.83
Dec2008 $2.25
Dec2007 $1.96
Dec2006 $1.74
Dec2005 $1.05
Dec2004 -$0.05
Dec2003 -$0.42
Dec2002 $0.37

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – May 2016
10 Most Undervalued Companies for the Defensive Investor – February 2016
18 Best Stocks For Value Investors This Week – 1/30/16
Eastman Chemical Co Valuation – January 2016 $EMN
10 Most Undervalued Companies for the Defensive Investor – November 2015

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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.

Eastman Chemical Company Valuation – July 2016 $EMN

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 Companies Benjamin Graham Would Invest In Today - June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Eastman Chemical Co (EMN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Eastman Chemical Company (Eastman) is a specialty chemicals company that produces a range of advanced materials, chemicals and fibers. The Company operates through five segments: Additives & Functional Products (AFP), Adhesives & Plasticizers (A&P), Advanced Materials (AM), Fibers, and Specialty Fluids & Intermediates (SFI). In the AFP segment, the Company manufactures chemicals for products in the coatings, tires, consumables, animal nutrition, crop protection and energy markets. The A&P segment focuses on producing intermediate chemicals. In the AM segment, the Company produces and markets its polymers, films and plastics. In the Fibers segment, the Company manufactures and sells Estron acetate tow and Estrobond triacetin plasticizers; Estron natural (undyed) and Chromspun solution-dyed acetate yarns and cellulose acetate flake and acetyl raw materials. The SFI segment offers products, such as acetyl chemical intermediates, olefin derivatives, specialty fluids and alkylamines.

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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. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of EMN – July 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,165,829,818 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 Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 245.29% Pass
6. Moderate PEmg Ratio PEmg < 20 11.53 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.40 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 1.55 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.46 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

EMN value chart July 2016

EPSmg $5.89
MG Growth Estimate 13.14%
MG Value $204.91
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $85.41
MG Value based on 0% Growth $50.07
Market Implied Growth Rate 1.51%
Current Price $67.90
% of Intrinsic Value 33.14%

Eastman Chemical Company qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.14 in 2012 to an estimated $5.89 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Eastman Chemical Company performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

EMN charts July 2016

Net Current Asset Value (NCAV) -$57.45
Graham Number $64.98
PEmg 11.53
Current Ratio 1.55
PB Ratio 2.40
Current Dividend $1.72
Dividend Yield 2.53%
Number of Consecutive Years of Dividend Growth 7

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $2,863,000,000
Total Current Liabilities $1,847,000,000
Long-Term Debt $6,565,000,000
Total Assets $15,616,000,000
Intangible Assets $7,164,000,000
Total Liabilities $11,412,000,000
Shares Outstanding (Diluted Average) 148,800,000

Earnings Per Share History

Next Fiscal Year Estimate $6.60
Dec2015 $5.66
Dec2014 $4.97
Dec2013 $7.44
Dec2012 $2.93
Dec2011 $4.86
Dec2010 $2.96
Dec2009 $0.93
Dec2008 $2.28
Dec2007 $1.79
Dec2006 $2.46
Dec2005 $3.41
Dec2004 $1.09
Dec2003 -$1.75
Dec2002 $0.40
Dec2001 -$1.17
Dec2000 $1.97
Dec1999 $0.31
Dec1998 $1.57
Dec1997 $1.82
Dec1996 $2.40

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.89
Dec2015 $5.41
Dec2014 $5.07
Dec2013 $4.69
Dec2012 $3.14
Dec2011 $3.02
Dec2010 $2.09
Dec2009 $1.83
Dec2008 $2.25
Dec2007 $1.96
Dec2006 $1.74
Dec2005 $1.05
Dec2004 -$0.05
Dec2003 -$0.43
Dec2002 $0.36
Dec2001 $0.53
Dec2000 $1.45

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – May 2016
10 Most Undervalued Companies for the Defensive Investor – February 2016
18 Best Stocks For Value Investors This Week – 1/30/16
Eastman Chemical Co Valuation – January 2016 $EMN
10 Most Undervalued Companies for the Defensive Investor – November 2015

Other ModernGraham posts about related companies

Olin Corporation Valuation – June 2016 $OLN
LyondellBasell Industries Valuation – June 2016 $LYB
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Albemarle Corp Valuation – February 2016 $ALB
Airgas Inc Stock Valuation – February 2016 $ARG
Air Products & Chemicals Inc Valuation – February 2016 $APD
FMC Corporation Valuation – January 2016 Update $FMC
Eastman Chemical Co Valuation – January 2016 $EMN
Dow Chemical Co Valuation – January 2016 Update $DOW
Ashland Inc Valuation – January 2016 Update $ASH

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.

Eastman Chemical Co Valuation – January 2016 $EMN

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 – November 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 Eastman Chemical Co (EMN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Eastman Chemical Company (Eastman) is a specialty chemicals company that produces a range of advanced materials, chemicals and fibers. The Company operates through five segments: Additives & Functional Products (AFP), Adhesives & Plasticizers (A&P), Advanced Materials (AM), Fibers, and Specialty Fluids & Intermediates (SFI). The Company manufactures chemicals for products in the coatings and tires industries in transportation, building and construction, durable goods, and consumables markets in the Additives & Functional Products segment. The Company’s A&P segment focuses on producing intermediate chemicals. The Company’s the AM segment produces and markets specialty copolyesters, cellulose esters, interlayers. In the Fibers segment, Eastman manufactures and sells Estron acetate tow and Estrobond triacetin plasticizers. The Company’s SFI segment offers products, such as acetyl chemical intermediates, olefin derivatives, specialty fluids, and alkylamines.

[level-free]

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of EMN

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 $9,212,181,019 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.77 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 185.12% Pass
6. Moderate PEmg Ratio PEmg < 20 11.33 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.44 Pass
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 1.77 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.09 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

EMN value chart January 2016

EPSmg $5.57
MG Growth Estimate 13.96%
MG Value $202.72
Opinion Undervalued
MG Value based on 3% Growth $80.70
MG Value based on 0% Growth $47.31
Market Implied Growth Rate 1.41%
Current Price $63.04
% of Intrinsic Value 31.10%

Eastman Chemical Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor is only initially concerned by the level of debt relative to the net current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.88 in 2011 to an estimated $5.57 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.41% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

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 Eastman Chemical Co (DOW)?  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

EMN charts January 2016

Net Current Asset Value (NCAV) -$58.89
Graham Number $60.23
PEmg 11.33
Current Ratio 1.77
PB Ratio 2.44
Dividend Yield 2.54%
Number of Consecutive Years of Dividend Growth 6

 

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information Sep2015
Total Current Assets $3,182,000,000
Total Current Liabilities $1,800,000,000
Long-Term Debt $7,029,000,000
Total Assets $15,880,000,000
Intangible Assets $7,200,000,000
Total Liabilities $12,003,000,000
Shares Outstanding (Diluted Average) 149,800,000

Earnings Per Share History

Next Fiscal Year Estimate $6.18
Dec2014 $4.97
Dec2013 $7.44
Dec2012 $2.93
Dec2011 $4.52
Dec2010 $2.88
Dec2009 $0.93
Dec2008 $2.28
Dec2007 $1.79
Dec2006 $2.46
Dec2005 $3.41
Dec2004 $1.09
Dec2003 -$1.75
Dec2002 $0.40
Dec2001 -$1.14
Dec2000 $1.97
Dec1999 $0.31
Dec1998 $1.57
Dec1997 $1.82
Dec1996 $2.40

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.57
Dec2014 $5.02
Dec2013 $4.61
Dec2012 $3.03
Dec2011 $2.88
Dec2010 $2.06
Dec2009 $1.83
Dec2008 $2.25
Dec2007 $1.96
Dec2006 $1.74
Dec2005 $1.05
Dec2004 -$0.05
Dec2003 -$0.42
Dec2002 $0.37
Dec2001 $0.54
Dec2000 $1.45
Dec1999 $1.20

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – November 2015
10 Companies Benjamin Graham Would Invest In Today – September 2015
15 Best Stocks For Value Investors This Week – 9/4/15
Eastman Chemical Company Analysis – September 2015 Update $EMN
The Best Companies of the Chemicals Industry – August 2015

Other ModernGraham posts about related companies

Ashland Inc Valuation – January 2016 Update $ASH
LyondellBasell Industries Valuation – November 2015 Update $LYB
Albemarle Corporation Valuation – November 2015 Update $ALB
Dow Chemical Company Analysis – October 2015 Update $DOW
Sigma-Aldrich Corporation Analysis – September 2015 Update $SIAL
FMC Corporation Analysis – September 2015 Update $FMC
Eastman Chemical Company Analysis – September 2015 Update $EMN
Ashland Inc. Analysis – Initial Coverage $ASH
The Best Companies of the Chemicals Industry – August 2015
LyondellBasell Industries Analysis – August 2015 Update $LYB

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.

Eastman Chemical Company Analysis – September 2015 Update $EMN

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 – August 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 Eastman Chemical Company (EMN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Eastman Chemical Company (Eastman) is a specialty chemicals company that produces a range of advanced materials, chemicals and fibers. The Company operates through five segments: Additives & Functional Products (AFP), Adhesives & Plasticizers (A&P), Advanced Materials (AM), Fibers, and Specialty Fluids & Intermediates (SFI). The Company manufactures chemicals for products in the coatings and tires industries in transportation, building and construction, durable goods, and consumables markets in the Additives & Functional Products segment. The Company’s A&P segment focuses on producing intermediate chemicals. The Company’s the AM segment produces and markets specialty copolyesters, cellulose esters, interlayers. In the Fibers segment, Eastman manufactures and sells Estron acetate tow and Estrobond triacetin plasticizers. The Company’s SFI segment offers products, such as acetyl chemical intermediates, olefin derivatives, specialty fluids, and alkylamines.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of EMN – September 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 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 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 Pass
6. Moderate PEmg Ratio PEmg < 20 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Pass
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 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $5.62
MG Growth Estimate 14.26%
MG Value $208.10
Opinion Undervalued
MG Value based on 3% Growth $81.52
MG Value based on 0% Growth $47.79
Market Implied Growth Rate 2.00%
Current Price $70.24
% of Intrinsic Value 33.75%

Eastman Chemical Company qualifies for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is only initially concerned with the low current ratio, while the Enterprising Investor is only concerned with the level of debt relative to the net current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.88 in 2011 to an estimated $5.62 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value well 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 Eastman Chemical Company (EMN)?  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

EMN Charts September 2015

 

Net Current Asset Value (NCAV) -$59.78
Graham Number $59.92
PEmg 12.49
Current Ratio 1.74
PB Ratio 2.80
Dividend Yield 2.21%
Number of Consecutive Years of Dividend Growth 6

 

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Most Recent Balance Sheet Figures

Total Current Assets $3,167,000,000
Total Current Liabilities $1,821,000,000
Long-Term Debt $7,072,000,000
Total Assets $15,886,000,000
Intangible Assets $7,251,000,000
Total Liabilities $12,122,000,000
Shares Outstanding (Diluted Average) 149,800,000

Earnings Per Share History

Next Fiscal Year Estimate $6.35
Dec14 $4.97
Dec13 $7.44
Dec12 $2.93
Dec11 $4.52
Dec10 $2.88
Dec09 $0.93
Dec08 $2.28
Dec07 $1.79
Dec06 $2.46
Dec05 $3.41
Dec04 $1.09
Dec03 -$1.75
Dec02 $0.40
Dec01 -$1.14
Dec00 $1.97
Dec99 $0.31
Dec98 $1.57
Dec97 $1.82
Dec96 $2.40
Dec95 $3.39

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.62
Dec14 $5.02
Dec13 $4.61
Dec12 $3.03
Dec11 $2.88
Dec10 $2.06
Dec09 $1.83
Dec08 $2.25
Dec07 $1.96
Dec06 $1.74
Dec05 $1.05
Dec04 -$0.05
Dec03 -$0.42
Dec02 $0.37
Dec01 $0.54
Dec00 $1.45
Dec99 $1.43

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Chemicals Industry – August 2015
10 Most Undervalued Companies for the Defensive Investor – August 2015
5 Most Undervalued Companies for the Defensive Investor – July 2015
5 Most Undervalued Companies for the Defensive Investor – June 2015
The 8 Best Stocks For Value Investors This Week – 6/6/15

Other ModernGraham posts about related companies

Ashland Inc. Analysis – Initial Coverage $ASH
The Best Companies of the Chemicals Industry – August 2015
LyondellBasell Industries Analysis – August 2015 Update $LYB
Albemarle Corporation Analysis – Initial Coverage $ALB
E I Du Pont de Nemours & Company Analysis – August 2015 Update $DD
Dow Chemical Analysis – July 2015 Update $DOW
Sigma-Aldrich Corporation Analysis – June 2015 Update $SIAL
Eastman Chemical Company Analysis – June 2015 Quarterly Update $EMN
FMC Corporation Analysis – June 2015 Quarterly Update $FMC
LyondellBassell Industries Quarterly Valuation – May 2015 $LYB

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 read our full disclaimer.

Eastman Chemical Company Analysis – June 2015 Quarterly Update $EMN

200px-Eastman_Chemical_Company_logo.svgEastman Chemical (EMN) has shown very strong earnings growth over the last several years, which when combined with the company’s healthy dividend yield will immediately intrigue many investors. For example, Winning Strategies recently wrote that the company’s expansion is strong, and has potential to significantly increase the dividend. Similarly, David Klein believes the recent acquisitions will allow the company to increase its revenue and earnings growth. These are great qualitative concerns that must be taken into consideration when making investment decisions.

However, Benjamin Graham, the father of value investing, taught that investors must take emotion out of the equation, as the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here’s a look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

EMN Chart

EMN data by YCharts

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

  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 – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) 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 $77.71
MG Value $225.43
MG Opinion Undervalued
Value Based on 3% Growth $84.90
Value Based on 0% Growth $49.77
Market Implied Growth Rate 2.39%
Net Current Asset Value (NCAV) -$61.62
PEmg 13.27
Current Ratio 1.79
PB Ratio 3.38

Balance Sheet – March 2015

Current Assets $3,166,000,000
Current Liabilities $1,764,000,000
Total Debt $7,293,000,000
Total Assets $15,834,000,000
Intangible Assets $7,240,000,000
Total Liabilities $12,391,000,000
Outstanding Shares 149,700,000

Earnings Per Share

2015 (estimate) $7.05
2014 $4.97
2013 $7.44
2012 $2.93
2011 $4.52
2010 $2.88
2009 $0.93
2008 $2.28
2007 $1.79
2006 $2.46
2005 $3.41

Earnings Per Share – ModernGraham

2015 (estimate) $5.86
2014 $5.02
2013 $4.61
2012 $3.03
2011 $2.88
2010 $2.07

Dividend History

EMN Dividend Chart

EMN Dividend data by YCharts

Competitive Comparison

Eastman Chemical is very attractive when compared to some of its competitors. For example, a ModernGraham valuation of Dow Chemical (DOW) indicates that company is suitable for Enterprising Investors but not the Defensive Investor, and is not trading at quite as large a discount to intrinsic value. Another competitor, Du Pont (DD), is only considered to be fairly valued and suitable for Enterprising Investors in its most recent ModernGraham valuation.

Conclusion

Eastman Chemical performs well in the ModernGraham model and is suitable for both Defensive Investors and Enterprising Investors. The Defensive Investor is concerned with the low current ratio, while the Enterprising Investor is similarly concerned with the level of debt relative to the net current assets. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $2.88 in 2011 to an estimated $5.86 for 2015. This is a strong level of growth and is well above the market’s implied estimate of only 2.39% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged nearly 21% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.

Enterprising Investors should take this information regarding the company’s valuation and proceed with further research into whether the company would be suitable for individual portfolios, as it has passed a ModernGraham review.

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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Eastman Chemical Company Quarterly Valuation – March 2015 $EMN

200px-Eastman_Chemical_Company_logo.svgBenjamin 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 – February 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 specific look at how Eastman Chemical Company (EMN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Eastman Chemical Company (Eastman) is a specialty chemicals company that produces a range of advanced materials, chemicals and fibers. The Company’s segments include Additives & Functional Products, which consists of the rubber additives product lines and the specialty polymers and solvents product lines; Adhesives & Plasticizers, which consists of the adhesives product lines and the plasticizer product lines; Advanced Materials, which consists of plastics Performance Films and Advanced Interlayers product lines; Fibers, which consists of the acetate tow, acetate yarn and acetyl chemical product lines, and Specialty Fluids & Intermediates, which consists of the specialty fluids product lines and oxo and acetyl intermediates product lines. The Advanced Materials segment owns SunTek brand, and has a manufacturing facility and master distribution center in Martinsville, Virginia and nine sales distribution centers to serve the global market.

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

  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 - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  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 = 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 $75.41
MG Value $193.32
MG Opinion Undervalued
Value Based on 3% Growth $72.81
Value Based on 0% Growth $42.68
Market Implied Growth Rate 3.26%
Net Current Asset Value (NCAV) -$62.64
PEmg 15.02
Current Ratio 1.57
PB Ratio 3.22

Balance Sheet – December 2014

Current Assets $3,173,000,000
Current Liabilities $2,022,000,000
Total Debt $7,248,000,000
Total Assets $16,072,000,000
Intangible Assets $7,391,000,000
Total Liabilities $12,562,000,000
Outstanding Shares 149,900,000

Earnings Per Share

2014 $4.97
2013 $7.44
2012 $2.93
2011 $4.52
2010 $2.88
2009 $0.93
2008 $2.28
2007 $1.79
2006 $2.46
2005 $3.41
2004 $1.09

Earnings Per Share – ModernGraham

2014 $5.02
2013 $4.61
2012 $3.03
2011 $2.88
2010 $2.07
2009 $1.83

Dividend History

Conclusion:

Eastman Chemical Company is suitable for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only concern is the low current ratio, while the Enterprising Investor is only concerned with the level of debt relative to the net current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.07 in 2010 to $5.02 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 3.26% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out previous ModernGraham valuations of Eastman Chemical Company (EMN) for greater perspective!

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 Eastman Chemical Company (EMN)?  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 Eastman Chemical Company (EMN) 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.

Eastman Chemical Company Quarterly Valuation – November 2014 $EMN

200px-Eastman_Chemical_Company_logo.svgBenjamin 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 – November 2014.  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 Eastman Chemical Company (EMN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Eastman Chemical Company is a global specialty chemicals company that produces a range of advanced materials, chemicals and fibers that are found in products people use every day. It has over 40 manufacturing sites in 16 countries and equity interests in joint ventures that supply chemicals, plastics, and fibers products to customers throughout the world. Eastman has a portfolio of specialty businesses that hold positions and provide products that enhance performance in a variety of end markets such as transportation, building and construction, and consumables. In June 2014, it acquired BP’s global aviation turbine oil business and the newly acquired business is part of Eastman’s Specialty Fluids & Intermediates business segment. Effective August 6, 2014, Eastman Chemical Co acquired Knowlton Technologies LLC.

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  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 = 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 $82.47
MG Value $217.45
MG Opinion Undervalued
Value Based on 3% Growth $81.90
Value Based on 0% Growth $48.01
Market Implied Growth Rate 3.05%
Net Current Asset Value (NCAV) -$35.56
PEmg 14.60
Current Ratio 2.07
PB Ratio 3.18

Balance Sheet – September 2014

Current Assets $2,890,000,000
Current Liabilities $1,398,000,000
Total Debt $4,563,000,000
Total Assets $12,135,000,000
Intangible Assets $4,524,000,000
Total Liabilities $8,234,000,000
Outstanding Shares 150,300,000

Earnings Per Share

2014 (estimate) $6.85
2013 $7.44
2012 $2.93
2011 $4.52
2010 $2.88
2009 $0.93
2008 $2.28
2007 $1.79
2006 $2.46
2005 $3.41
2004 $1.09

Earnings Per Share – ModernGraham

2014 (estimate) $5.65
2013 $4.61
2012 $3.03
2011 $2.88
2010 $2.07
2009 $1.83

Dividend History

Conclusion:

Eastman Chemical qualifies for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has no initial concerns while the Enterprising Investor is only slightly concerned by the level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.07 in 2010 to an estimated $5.65 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 3.05% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out previous ModernGraham valuations of Eastman Chemical Company (EMN) for greater perspective!

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 Eastman Chemical Company (EMN)?  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 Eastman Chemical Company (EMN) 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.

Eastman Chemical Company Quarterly Valuation – August 2014 $EMN

200px-Eastman_Chemical_Company_logo.svgBenjamin 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 Eastman Chemical Company (EMN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Eastman Chemical Company is a global specialty chemicals company that produces a range of advanced materials, chemicals and fibers that are found in products people use every day. It has over 40 manufacturing sites in 16 countries and equity interests in joint ventures that supply chemicals, plastics, and fibers products to customers throughout the world. Eastman has a portfolio of specialty businesses that hold positions and provide products that enhance performance in a variety of end markets such as transportation, building and construction, and consumables. It management believes that the Company’s end-market diversity is a source of strength, as these markets are benefiting from longer-term global trends such as energy efficiency, a rising middle class in emerging economies, and increased health and wellness. In June 2014, it acquired BP’s global aviation turbine oil business and the newly acquired business is part of Eastman’s Specialty Fluids & Intermediates business segment.
EMN Chart

EMN data by YCharts

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  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 = 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 $79.86
MG Value $216.70
MG Opinion Undervalued
Value Based on 3% Growth $81.62
Value Based on 0% Growth $47.84
Market Implied Growth Rate 2.84%
Net Current Asset Value (NCAV) -$36.02
PEmg 14.19
Current Ratio 2.34
PB Ratio 3.07

Balance Sheet – 6/30/2014

Current Assets $2,986,000,000
Current Liabilities $1,274,000,000
Total Debt $4,773,000,000
Total Assets $12,238,000,000
Intangible Assets $4,582,000,000
Total Liabilities $8,356,000,000
Outstanding Shares 149,080,000

Earnings Per Share

2014 (estimate) $6.77
2013 $7.44
2012 $2.92
2011 $4.59
2010 $2.88
2009 $0.93
2008 $2.16
2007 $1.92
2006 $2.46
2005 $3.41
2004 $1.09

Earnings Per Share – ModernGraham

2014 (estimate) $5.63
2013 $4.62
2012 $3.04
2011 $2.90
2010 $2.06
2009 $1.83

Dividend  History
EMN Dividend Chart

EMN Dividend data by YCharts

Conclusion:

Eastman Chemical Company qualifies for either the Defensive Investor or the Enterprising Investor.  In fact, the only requirement of either investor type which the company does not pass is the Enterprising Investor’s requirement of low debt to net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities through a review of ModernGraham’s valuation of The Dow Chemical Company (DOW).  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.06 in 2010 to an estimated $5.63 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of 2.84% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the price.

Be sure to check out the previous ModernGraham valuations of Eastman Chemical Company (EMN) for more perspective!

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 Eastman Chemical Company (EMN)?  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 Eastman Chemical Company (EMN) 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.

Eastman Chemical Co. (EMN) Quarterly Valuation – May 2014

200px-Eastman_Chemical_Company_logo.svgBenjamin 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 5 Undervalued Companies for the Defensive Investor.  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 Eastman Chemical Co. (EMN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Eastman Chemical Company (Eastman) is a global specialty chemicals company that produces a range of advanced materials, chemicals and fibers that are found in products people use every day. Eastman has over 40 manufacturing sites in 16 countries and equity interests in joint ventures that supply chemicals, plastics, and fibers products to customers throughout the world. Eastman has a portfolio of specialty businesses that hold positions and provide products that enhance performance in a variety of end markets such as transportation, building and construction, and consumables. Eastman management believes that the Company’s end-market diversity is a source of strength, as these markets are benefiting from longer-term global trends such as energy efficiency, a rising middle class in emerging economies, and increased health and wellness. On July 2, 2012, the Company completed its acquisition of Solutia Inc. (Solutia).

EMN Chart

EMN data by YCharts

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  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 – FAIL

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 $85.82
MG Value $217.09
MG Opinion Undervalued
Value Based on 3% Growth $81.76
Value Based on 0% Growth $47.93
Market Implied Growth Rate 3.36%
Net Current Asset Value (NCAV) -$35.08
PEmg 15.22
Current Ratio 2.34
PB Ratio 3.46

Balance Sheet – 3/31/2014

Current Assets $2,949,000,000
Current Liabilities $1,259,000,000
Total Debt $4,635,000,000
Total Assets $11,947,000,000
Intangible Assets $4,374,000,000
Total Liabilities $8,218,000,000
Outstanding Shares 150,190,000

Earnings Per Share

2014 (estimate) $6.80
2013 $7.44
2012 $2.92
2011 $4.59
2010 $2.88
2009 $0.93
2008 $2.16
2007 $1.92
2006 $2.46
2005 $3.41
2004 $1.09

Earnings Per Share – ModernGraham

2014 (estimate) $5.64
2013 $4.62
2012 $3.04
2011 $2.90
2010 $2.06
2009 $1.83

Dividend History

EMN Dividend Chart

EMN Dividend data by YCharts

Conclusion:

Eastman Chemical Co. is suitable for both Defensive Investors and Enterprising Investors.  The Defensive Investor’s only concern is with the high PB ratio, while the Enterprising Investor’s concern lies with the high level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research into the company and comparing it to other opportunities such as E I Du Pont de Nemours and Co. (DD) and Dow Chemical Corp. (DOW).  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.06 in 2010 to an estimated $5.64 for 2014.  This strong level of demonstrated growth surpasses the market’s implied estimate of 3.36% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market 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 Eastman Chemical Co. (EMN)?  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.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Eastman Chemical Co. (EMN) or in any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

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