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Fox Factory Holding Corp Valuation – Initial Coverage $FOXF

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

Company Profile (obtained from Google Finance): Fox Factory Holding Corp. is engaged in the manufacturing, sale and service of ride dynamics products. The Company’s products fall into two categories: bikes, and powered vehicles, including side-by-sides, on-road vehicles with off-road capabilities, off-road vehicles and trucks, all-terrain vehicles (ATVs), snowmobiles, specialty vehicles and applications, and motorcycles. The Company’s brands include FOX, FOX RACING SHOX and RACE FACE. The Company’s products include 34 Factory Series FLOAT FIT4, which provides external adjustability with its fourth-generation FOX Isolated Technology and closed-cartridge damper, and includes a self-adjusting negative chamber air spring; X2 technology, utilized in its Factory Series FLOAT and DH rear shocks; PODIUM Internal Bypass, and X2 technology utilized in its 2.5 PODIUM shocks for side-by-sides that feature high and low speed rebound adjustment, high and low speed compression adjustment, and a dual-rate spring for the rear shocks.

FOXF Chart

FOXF data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of FOXF – August 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,411,077,023 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.23 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 785.29% Pass
6. Moderate PEmg Ratio PEmg < 20 37.88 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.81 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.23 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.53 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.00
MG Growth Estimate 15.00%
MG Value $38.32
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $14.43
MG Value based on 0% Growth $8.46
Market Implied Growth Rate 14.69%
Current Price $37.70
% of Intrinsic Value 98.38%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.47 in 2013 to an estimated $1 for 2017.  This level of demonstrated earnings growth supports the market’s implied estimate of 14.69% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Fox Factory Holding Corp revealed the company was trading above its Graham Number of $12.61.  The company does not pay a dividend.  Its PEmg (price over earnings per share – ModernGraham) was 37.88, which was above the industry average of 18.18.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.38.

Fox Factory Holding 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) $1.38
Graham Number $12.61
PEmg 37.88
Current Ratio 2.23
PB Ratio 6.81
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $207,958,000
Total Current Liabilities $93,176,000
Long-Term Debt $60,774,000
Total Assets $368,729,000
Intangible Assets $114,359,000
Total Liabilities $154,435,000
Shares Outstanding (Diluted Average) 38,725,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.41
Dec2016 $0.94
Dec2015 $0.66
Dec2014 $0.73
Dec2013 $0.68
Dec2012 $0.44
Dec2011 $0.42
Dec2010 $0.34

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.00
Dec2016 $0.76
Dec2015 $0.64
Dec2014 $0.59
Dec2013 $0.47
Dec2012 $0.33
Dec2011 $0.23
Dec2010 $0.11

Recommended Reading:

Other ModernGraham posts about the company

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

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Delphi Automotive PLC Valuation – February 2017 $DLPH

Disclaimer:

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

Ford Motor Company Valuation – April 2018 $F

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

F Chart

F data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of F – April 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 $44,439,883,703 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.23 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -41.42% Fail
6. Moderate PEmg Ratio PEmg < 20 7.85 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.30 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 1.23 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.82 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 $1.44
MG Growth Estimate -3.84%
MG Value $1.19
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $20.92
MG Value based on 0% Growth $12.26
Market Implied Growth Rate -0.32%
Current Price $11.33
% of Intrinsic Value 952.38%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.94 in 2014 to an estimated $1.44 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.32% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Ford Motor Company revealed the company was trading below its Graham Number of $15.98. The company pays a dividend of $0.6 per share, for a yield of 5.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.85, which was below the industry average of 17.88, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.77.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$26.77
Graham Number $15.98
PEmg 7.85
Current Ratio 1.23
PB Ratio 1.30
Current Dividend $0.60
Dividend Yield 5.30%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $115,902,000,000
Total Current Liabilities $94,600,000,000
Long-Term Debt $102,666,000,000
Total Assets $257,808,000,000
Intangible Assets $0
Total Liabilities $222,918,000,000
Shares Outstanding (Diluted Average) 3,998,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.32
Dec2017 $1.90
Dec2016 $1.15
Dec2015 $1.84
Dec2014 $0.31
Dec2013 $2.94
Dec2012 $1.41
Dec2011 $4.94
Dec2010 $1.66
Dec2009 $0.86
Dec2008 -$6.50
Dec2007 -$1.40
Dec2006 -$6.73
Dec2005 $0.77
Dec2004 $1.52
Dec2003 $0.13
Dec2002 $0.47
Dec2001 -$3.02
Dec2000 $2.30
Dec1999 $5.86
Dec1998 $17.76

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.44
Dec2017 $1.55
Dec2016 $1.42
Dec2015 $1.80
Dec2014 $1.94
Dec2013 $2.62
Dec2012 $1.80
Dec2011 $1.30
Dec2010 -$1.15
Dec2009 -$2.57
Dec2008 -$3.68
Dec2007 -$1.90
Dec2006 -$1.69
Dec2005 $0.55
Dec2004 $0.39
Dec2003 $0.26
Dec2002 $1.78

Recommended Reading:

Other ModernGraham posts about the company

Ford Motor Company Valuation – November 2016 $F
Ford Motor Company Valuation – August 2016 $F
Dividend Investors Should Research These 10 Stocks – July 2016
Benjamin Graham Would Love These 10 Companies Today
10 Low PE Stocks for the Enterprising Investor – July 2016

Other ModernGraham posts about related companies

O’Reilly Automotive Inc Valuation – April 2018 $ORLY
Goodyear Tire & Rubber Co Valuation – March 2018 $GT
Genuine Parts Co Valuation – March 2018 $GPC
AutoZone Inc Valuation – February 2018 $AZO
Thor Industries Inc Valuation – Initial Coverage $THO
Titan International Inc Valuation – Initial Coverage $TWI
Harley-Davidson Inc Valuation – August 2017 $HOG
Wabash National Corp Valuation – Initial Coverage $WNC
Advance Auto Parts Inc Valuation – August 2017 $AAP
Fox Factory Holding Corp Valuation – Initial Coverage $FOXF

Disclaimer:

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

General Motors Co Valuation – April 2018 $GM

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

GM Chart

GM data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GM – April 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 $54,928,567,932 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.89 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 -92.48% Fail
6. Moderate PEmg Ratio PEmg < 20 11.89 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.62 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 0.89 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.35 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.30
MG Growth Estimate 4.23%
MG Value $55.96
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $47.82
MG Value based on 0% Growth $28.03
Market Implied Growth Rate 1.70%
Current Price $39.22
% of Intrinsic Value 70.08%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.57 in 2014 to an estimated $3.3 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.7% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into General Motors Company revealed the company was trading below its Graham Number of $56.31. The company pays a dividend of $1.52 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.89, which was below the industry average of 17.88, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-75.15.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$75.15
Graham Number $56.31
PEmg 11.89
Current Ratio 0.89
PB Ratio 1.62
Current Dividend $1.52
Dividend Yield 3.88%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $68,744,000,000
Total Current Liabilities $76,890,000,000
Long-Term Debt $10,987,000,000
Total Assets $212,482,000,000
Intangible Assets $5,849,000,000
Total Liabilities $177,481,000,000
Shares Outstanding (Diluted Average) 1,447,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.72
Dec2017 -$2.65
Dec2016 $6.00
Dec2015 $5.91
Dec2014 $1.65
Dec2013 $2.38
Dec2012 $2.92
Dec2011 $4.58
Dec2010 $2.89
Dec2009 $113.18
Dec2008 -$53.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.30
Dec2017 $2.28
Dec2016 $4.42
Dec2015 $3.58
Dec2014 $2.57
Dec2013 $10.42
Dec2012 $14.30
Dec2011 $17.80
Dec2010 $20.45
Dec2009 $23.47
Dec2008 -$17.82

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

O’Reilly Automotive Inc Valuation – April 2018 $ORLY
Goodyear Tire & Rubber Co Valuation – March 2018 $GT
Genuine Parts Co Valuation – March 2018 $GPC
AutoZone Inc Valuation – February 2018 $AZO
Thor Industries Inc Valuation – Initial Coverage $THO
Titan International Inc Valuation – Initial Coverage $TWI
Harley-Davidson Inc Valuation – August 2017 $HOG
Wabash National Corp Valuation – Initial Coverage $WNC
Advance Auto Parts Inc Valuation – August 2017 $AAP
Fox Factory Holding Corp Valuation – Initial Coverage $FOXF

Disclaimer:

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

O’Reilly Automotive Inc Valuation – April 2018 $ORLY

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

ORLY Chart

ORLY data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORLY – April 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 $20,754,315,960 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.93 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 314.17% Pass
6. Moderate PEmg Ratio PEmg < 20 20.30 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 31.09 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 0.93 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.93 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $11.71
MG Growth Estimate 15.00%
MG Value $450.84
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $169.80
MG Value based on 0% Growth $99.54
Market Implied Growth Rate 5.90%
Current Price $237.77
% of Intrinsic Value 52.74%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.7 in 2014 to an estimated $11.71 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.9% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into O’Reilly Automotive Inc revealed the company was trading above its Graham Number of $48.37. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 20.3, which was above the industry average of 17.88. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-41.23.

O’Reilly Automotive Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$41.23
Graham Number $48.37
PEmg 20.30
Current Ratio 0.93
PB Ratio 31.09
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 12/1/2017
Total Current Assets $3,397,672,000
Total Current Liabilities $3,647,366,000
Long-Term Debt $2,978,390,000
Total Assets $7,571,885,000
Intangible Assets $798,450,000
Total Liabilities $6,918,839,000
Shares Outstanding (Diluted Average) 85,401,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.42
Dec2017 $12.67
Dec2016 $10.73
Dec2015 $9.17
Dec2014 $7.34
Dec2013 $6.03
Dec2012 $4.75
Dec2011 $3.71
Dec2010 $2.95
Dec2009 $2.23
Dec2008 $1.48
Dec2007 $1.67
Dec2006 $1.55
Dec2005 $1.45
Dec2004 $1.25
Dec2003 $0.92
Dec2002 $0.77
Dec2001 $0.63
Dec2000 $0.50
Dec1999 $0.46
Dec1998 $0.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $11.71
Dec2017 $10.30
Dec2016 $8.61
Dec2015 $7.10
Dec2014 $5.70
Dec2013 $4.56
Dec2012 $3.56
Dec2011 $2.78
Dec2010 $2.20
Dec2009 $1.78
Dec2008 $1.53
Dec2007 $1.49
Dec2006 $1.33
Dec2005 $1.14
Dec2004 $0.93
Dec2003 $0.73
Dec2002 $0.61

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Goodyear Tire & Rubber Co Valuation – March 2018 $GT
Genuine Parts Co Valuation – March 2018 $GPC
AutoZone Inc Valuation – February 2018 $AZO
Thor Industries Inc Valuation – Initial Coverage $THO
Titan International Inc Valuation – Initial Coverage $TWI
Harley-Davidson Inc Valuation – August 2017 $HOG
Wabash National Corp Valuation – Initial Coverage $WNC
Advance Auto Parts Inc Valuation – August 2017 $AAP
Fox Factory Holding Corp Valuation – Initial Coverage $FOXF
Monro Muffler Brake Inc Valuation – Initial Coverage $MNRO

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.

Goodyear Tire & Rubber Co Valuation – March 2018 $GT

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

GT Chart

GT data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GT – 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 $6,579,502,468 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.21 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 -909.32% Fail
6. Moderate PEmg Ratio PEmg < 20 8.56 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.47 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 1.21 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.19
MG Growth Estimate -2.36%
MG Value $12.07
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $46.32
MG Value based on 0% Growth $27.15
Market Implied Growth Rate 0.03%
Current Price $27.36
% of Intrinsic Value 226.65%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.79 in 2014 to an estimated $3.19 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.03% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Goodyear Tire & Rubber Co revealed the company was trading below its Graham Number of $38.53. The company pays a dividend of $0.44 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 8.56, which was below the industry average of 17.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-25.84.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$25.84
Graham Number $38.53
PEmg 8.56
Current Ratio 1.21
PB Ratio 1.47
Current Dividend $0.44
Dividend Yield 1.61%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $6,079,000,000
Total Current Liabilities $5,025,000,000
Long-Term Debt $0
Total Assets $17,064,000,000
Intangible Assets $734,000,000
Total Liabilities $12,461,000,000
Shares Outstanding (Diluted Average) 247,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.44
Dec2017 $1.37
Dec2016 $4.74
Dec2015 $1.12
Dec2014 $8.78
Dec2013 $2.28
Dec2012 $0.74
Dec2011 $1.26
Dec2010 -$0.89
Dec2009 -$1.55
Dec2008 -$0.32
Dec2007 $2.65
Dec2006 -$1.86
Dec2005 $1.16
Dec2004 $0.63
Dec2003 -$4.61
Dec2002 -$7.47
Dec2001 -$1.59
Dec2000 $0.31
Dec1999 $1.53
Dec1998 $4.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.19
Dec2017 $3.27
Dec2016 $3.99
Dec2015 $3.35
Dec2014 $3.79
Dec2013 $0.99
Dec2012 $0.18
Dec2011 $0.01
Dec2010 -$0.54
Dec2009 -$0.24
Dec2008 $0.42
Dec2007 $0.40
Dec2006 -$1.30
Dec2005 -$1.47
Dec2004 -$2.70
Dec2003 -$3.70
Dec2002 -$2.38

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Genuine Parts Co Valuation – March 2018 $GPC
AutoZone Inc Valuation – February 2018 $AZO
Thor Industries Inc Valuation – Initial Coverage $THO
Titan International Inc Valuation – Initial Coverage $TWI
Harley-Davidson Inc Valuation – August 2017 $HOG
Wabash National Corp Valuation – Initial Coverage $WNC
Advance Auto Parts Inc Valuation – August 2017 $AAP
Fox Factory Holding Corp Valuation – Initial Coverage $FOXF
Monro Muffler Brake Inc Valuation – Initial Coverage $MNRO
Group 1 Automotive Inc Valuation – Initial Coverage $GPI

Disclaimer:

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

Genuine Parts Co Valuation – March 2018 $GPC

Company Profile (obtained from Marketwatch): Genuine Parts Co. engages in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. It also distributes industrial replacement parts in the U.S., Canada and Mexico through its Motion Industries subsidiary. It operates through the following segments: Automotive, Industrial, Office Products, and Electrical/Electronic Materials. The Automotive segment distributes replacement parts, other than body parts for substantially all makes and models of automobiles, trucks, and other vehicles. The Industrial segment distributes a wide variety of industrial bearings, mechanical and fluid power transmission equipment, including hydraulic and pneumatic products, material handling components, and related parts and supplies. The Office products segment distributes a wide variety of office products, computer supplies, office furniture, and business electronics. The Electrical/Electronic Materials segment distributes a wide variety of electrical/electronic materials, including insulating and conductive materials for use in electronic and electrical apparatus. The company was founded by Carlyle Fraser on May 7, 1928 and is headquartered in Atlanta, GA.

GPC Chart

GPC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GPC – 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 $13,321,302,699 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 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 54.63% Pass
6. Moderate PEmg Ratio PEmg < 20 19.27 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.92 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.39 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.71
MG Growth Estimate 1.77%
MG Value $56.80
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $68.35
MG Value based on 0% Growth $40.07
Market Implied Growth Rate 5.39%
Current Price $90.86
% of Intrinsic Value 159.97%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.22 in 2014 to an estimated $4.71 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.39% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Genuine Parts Company revealed the company was trading above its Graham Number of $52.53. The company pays a dividend of $2.7 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.27, which was above the industry average of 18.18. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.46.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.46
Graham Number $52.53
PEmg 19.27
Current Ratio 1.34
PB Ratio 3.92
Current Dividend $2.70
Dividend Yield 2.97%
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 12/1/2017
Total Current Assets $7,312,893,000
Total Current Liabilities $5,474,025,000
Long-Term Debt $2,550,020,000
Total Assets $12,412,381,000
Intangible Assets $3,554,380,000
Total Liabilities $9,000,229,000
Shares Outstanding (Diluted Average) 147,185,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.27
Dec2017 $4.18
Dec2016 $4.59
Dec2015 $4.63
Dec2014 $4.61
Dec2013 $4.40
Dec2012 $4.14
Dec2011 $3.58
Dec2010 $3.00
Dec2009 $2.50
Dec2008 $2.92
Dec2007 $2.98
Dec2006 $2.76
Dec2005 $2.50
Dec2004 $2.25
Dec2003 $1.91
Dec2002 -$0.16
Dec2001 $1.71
Dec2000 $2.20
Dec1999 $2.11
Dec1998 $1.98

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.71
Dec2017 $4.45
Dec2016 $4.55
Dec2015 $4.44
Dec2014 $4.22
Dec2013 $3.85
Dec2012 $3.46
Dec2011 $3.08
Dec2010 $2.83
Dec2009 $2.74
Dec2008 $2.80
Dec2007 $2.66
Dec2006 $2.28
Dec2005 $1.91
Dec2004 $1.60
Dec2003 $1.37
Dec2002 $1.26

Recommended Reading:

Other ModernGraham posts about the company

Genuine Parts Co Valuation – July 2016 $GPC
Dividend Growth Stocks for Intelligent Investors – June 2016
Dividend Growth Stocks for Intelligent Investors – February 2016
26 Best Stocks For Value Investors This Week – 2/6/16
Genuine Parts Co Valuation – January 2016 Update $GPC

Other ModernGraham posts about related companies

AutoZone Inc Valuation – February 2018 $AZO
Thor Industries Inc Valuation – Initial Coverage $THO
Titan International Inc Valuation – Initial Coverage $TWI
Harley-Davidson Inc Valuation – August 2017 $HOG
Wabash National Corp Valuation – Initial Coverage $WNC
Advance Auto Parts Inc Valuation – August 2017 $AAP
Fox Factory Holding Corp Valuation – Initial Coverage $FOXF
Monro Muffler Brake Inc Valuation – Initial Coverage $MNRO
Group 1 Automotive Inc Valuation – Initial Coverage $GPI
Dana Inc Valuation – Initial Coverage $DAN

Disclaimer:

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

AutoZone Inc Valuation – February 2018 $AZO

Company Profile (obtained from Marketwatch): AutoZone, Inc. engages in the provision of retail and a distribution of automotive replacement parts and accessories. It operates through Auto Parts Locations, and Other segments. The Auto Parts Locations segment is provides automotive parts and accessories through the company’s stores in the United States, Puerto Rico, Mexico, and Brazil. The Other segment includes ALLDATA, which produces, sells, and maintains diagnostic and repair information software used in the automotive repair industry. The company was founded by Joseph R. Hyde, III on July 4, 1979 and is headquartered in Memphis, TN.

Downloadable PDF version of this valuation:

ModernGraham Valuation of AZO – February 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,182,097,324 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.98 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 169.66% Pass
6. Moderate PEmg Ratio PEmg < 20 16.60 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -13.93 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 0.98 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -41.71 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $40.04
MG Growth Estimate 7.90%
MG Value $973.47
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $580.64
MG Value based on 0% Growth $340.37
Market Implied Growth Rate 4.05%
Current Price $664.72
% of Intrinsic Value 68.28%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $26.22 in 2014 to an estimated $40.04 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.05% 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 AutoZone, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 16.6, which was below the industry average of 18.18, 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 $-211.89.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$211.89
Graham Number $0.00
PEmg 16.60
Current Ratio 0.98
PB Ratio -13.93
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 1/1/2018
Total Current Assets $4,826,307,000
Total Current Liabilities $4,947,228,000
Long-Term Debt $5,043,541,000
Total Assets $9,403,719,000
Intangible Assets $0
Total Liabilities $10,734,266,000
Shares Outstanding (Diluted Average) 27,882,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $39.73
Aug2017 $44.07
Aug2016 $40.70
Aug2015 $36.03
Aug2014 $31.57
Aug2013 $27.79
Aug2012 $23.48
Aug2011 $19.47
Aug2010 $14.97
Aug2009 $11.73
Aug2008 $10.04
Aug2007 $8.53
Aug2006 $7.50
Aug2005 $7.18
Aug2004 $6.56
Aug2003 $5.34
Aug2002 $4.00
Aug2001 $1.54
Aug2000 $2.00
Aug1999 $1.63
Aug1998 $1.48

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $40.04
Aug2017 $38.81
Aug2016 $34.76
Aug2015 $30.42
Aug2014 $26.22
Aug2013 $22.20
Aug2012 $18.25
Aug2011 $14.74
Aug2010 $11.76
Aug2009 $9.77
Aug2008 $8.52
Aug2007 $7.51
Aug2006 $6.71
Aug2005 $5.85
Aug2004 $4.75
Aug2003 $3.53
Aug2002 $2.46

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Thor Industries Inc Valuation – Initial Coverage $THO
Titan International Inc Valuation – Initial Coverage $TWI
Harley-Davidson Inc Valuation – August 2017 $HOG
Wabash National Corp Valuation – Initial Coverage $WNC
Advance Auto Parts Inc Valuation – August 2017 $AAP
Fox Factory Holding Corp Valuation – Initial Coverage $FOXF
Monro Muffler Brake Inc Valuation – Initial Coverage $MNRO
Group 1 Automotive Inc Valuation – Initial Coverage $GPI
Dana Inc Valuation – Initial Coverage $DAN
Linamar Corp Valuation – Initial Coverage $TSE:LNR

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.

Thor Industries Inc Valuation – Initial Coverage $THO

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

Company Profile (obtained from Google Finance): Thor Industries, Inc. manufactures a range of recreational vehicles (RVs) in the United States and sells those vehicles primarily in the United States and Canada. The Company’s segments include towable recreational vehicles, which consists of the operations of Airstream, Inc. (Airstream) (towable); Heartland Recreational Vehicles, LLC (Heartland) (including Bison Coach, LLC (Bison), Cruiser RV, LLC (CRV) and DRV, LLC (DRV)); Jayco, Corp. (Jayco) (including Jayco towable, Starcraft and Highland Ridge), Keystone RV Company (Keystone) (including CrossRoads and Dutchmen) and K.Z., Inc. (KZ) (including Livin’ Lite RV, Inc. (Livin’ Lite)); motorized recreational vehicles, which consists of the operations of Airstream (motorized), Jayco (including Jayco motorized and Entegra Coach) and Thor Motor Coach, Inc. (Thor Motor Coach), and Other, which includes the operations of its subsidiary, Postle Operating, LLC (Postle).

THO Chart

THO data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of THO – September 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,714,511,987 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.63 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 284.65% Pass
6. Moderate PEmg Ratio PEmg < 20 21.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.93 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.63 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.60 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $4.99
MG Growth Estimate 15.00%
MG Value $192.29
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $72.42
MG Value based on 0% Growth $42.45
Market Implied Growth Rate 6.73%
Current Price $109.70
% of Intrinsic Value 57.05%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.24 in 2013 to an estimated $4.99 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.73% 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 Thor Industries, Inc. revealed the company was trading above its Graham Number of $61.27.  The company pays a dividend of $1.2 per share, for a yield of 1.1%  Its PEmg (price over earnings per share – ModernGraham) was 21.96, which was above the industry average of 18.18.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $2.71.

Thor Industries, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $2.71
Graham Number $61.27
PEmg 21.96
Current Ratio 1.63
PB Ratio 3.93
Current Dividend $1.20
Dividend Yield 1.09%
Number of Consecutive Years of Dividend Growth 6

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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 4/1/2017
Total Current Assets $1,271,365,000
Total Current Liabilities $778,447,000
Long-Term Debt $295,000,000
Total Assets $2,600,076,000
Intangible Assets $836,374,000
Total Liabilities $1,128,118,000
Shares Outstanding (Diluted Average) 52,773,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.92
Jul2016 $4.88
Jul2015 $3.74
Jul2014 $3.35
Jul2013 $2.88
Jul2012 $2.26
Jul2011 $1.92
Jul2010 $2.07
Jul2009 $0.31
Jul2008 $1.66
Jul2007 $2.41
Jul2006 $2.87
Jul2005 $2.09
Jul2004 $1.81
Jul2003 $1.37
Jul2002 $0.94
Jul2001 $0.56
Jul2000 $0.74
Jul1999 $0.63
Jul1998 $0.40
Jul1997 $0.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.99
Jul2016 $3.83
Jul2015 $3.15
Jul2014 $2.73
Jul2013 $2.24
Jul2012 $1.83
Jul2011 $1.64
Jul2010 $1.62
Jul2009 $1.55
Jul2008 $2.17
Jul2007 $2.32
Jul2006 $2.12
Jul2005 $1.62
Jul2004 $1.28
Jul2003 $0.96
Jul2002 $0.72
Jul2001 $0.58

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Harley-Davidson Inc Valuation – August 2017 $HOG
Wabash National Corp Valuation – Initial Coverage $WNC
Advance Auto Parts Inc Valuation – August 2017 $AAP
Fox Factory Holding Corp Valuation – Initial Coverage $FOXF
Monro Muffler Brake Inc Valuation – Initial Coverage $MNRO
Group 1 Automotive Inc Valuation – Initial Coverage $GPI
Dana Inc Valuation – Initial Coverage $DAN
Linamar Corp Valuation – Initial Coverage $TSE:LNR
AutoNation Inc Valuation – March 2017 $AN
Superior Industries International Inc Valuation – Initial Coverage $SUP

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.

Titan International Inc Valuation – Initial Coverage $TWI

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

Company Profile (obtained from Google Finance): Titan International, Inc. is a wheel, tire, and undercarriage industrial manufacturer and supplier. The Company’s segments are agricultural, earthmoving/construction, and consumer. The Company produces a range of products to meet the specifications of original equipment manufacturers (OEMs) and aftermarket customers in the agricultural, earthmoving/construction, and consumer markets. Its agricultural products include rims, wheels, tires, and undercarriage systems and components manufactured for use on various agricultural equipment. Its earthmoving/construction products include rims, wheels, tires, and undercarriage systems and components for various types of off-the-road (OTR) earthmoving, mining, military, construction, and forestry equipment. The Company’s consumer products include, but are not limited to, bias truck tires in Latin America and light truck tires in Russia, as well as products for all-terrain vehicles (ATVs), turf, and golf cart applications.

TWI Chart

TWI data by YCharts

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ModernGraham Valuation of TWI – September 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $513,649,677 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.23 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 462.00% Pass
6. Moderate PEmg Ratio PEmg < 20 -9.24 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.44 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.23 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.96 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg -$0.93
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$13.51
MG Value based on 0% Growth -$7.92
Market Implied Growth Rate -8.87%
Current Price $8.61
% of Intrinsic Value N/A

Titan International 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, insufficient earnings stability over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years.  As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.93 in 2013 to an estimated $-0.93 for 2017.  This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Titan International Inc revealed the company was trading above its Graham Number of $0.  The company pays a dividend of $0.02 per share, for a yield of 0.2%  Its PEmg (price over earnings per share – ModernGraham) was -9.24, which was below the industry average of 18.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.05.

Titan International 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) -$3.05
Graham Number $0.00
PEmg -9.24
Current Ratio 2.23
PB Ratio 1.44
Current Dividend $0.02
Dividend Yield 0.23%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $775,064,000
Total Current Liabilities $347,664,000
Long-Term Debt $408,789,000
Total Assets $1,311,951,000
Intangible Assets $16,243,000
Total Liabilities $956,739,000
Shares Outstanding (Diluted Average) 59,557,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.26
Dec2016 -$0.81
Dec2015 -$1.74
Dec2014 -$2.43
Dec2013 $0.64
Dec2012 $2.05
Dec2011 $1.18
Dec2010 -$0.17
Dec2009 -$0.71
Dec2008 $0.38
Dec2007 -$0.23
Dec2006 $0.21
Dec2005 $0.48
Dec2004 $0.49
Dec2003 -$1.40
Dec2002 -$1.38
Dec2001 -$1.34
Dec2000 $0.18
Dec1999 -$0.44
Dec1998 $0.30
Dec1997 $0.88

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.93
Dec2016 -$1.00
Dec2015 -$0.75
Dec2014 -$0.08
Dec2013 $0.93
Dec2012 $0.89
Dec2011 $0.24
Dec2010 -$0.19
Dec2009 -$0.12
Dec2008 $0.20
Dec2007 $0.05
Dec2006 $0.02
Dec2005 -$0.26
Dec2004 -$0.65
Dec2003 -$1.11
Dec2002 -$0.82
Dec2001 -$0.39

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Harley-Davidson Inc Valuation – August 2017 $HOG
Wabash National Corp Valuation – Initial Coverage $WNC
Advance Auto Parts Inc Valuation – August 2017 $AAP
Fox Factory Holding Corp Valuation – Initial Coverage $FOXF
Monro Muffler Brake Inc Valuation – Initial Coverage $MNRO
Group 1 Automotive Inc Valuation – Initial Coverage $GPI
Dana Inc Valuation – Initial Coverage $DAN
Linamar Corp Valuation – Initial Coverage $TSE:LNR
AutoNation Inc Valuation – March 2017 $AN
Superior Industries International Inc Valuation – Initial Coverage $SUP

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.

Harley-Davidson Inc Valuation – August 2017 $HOG

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

Company Profile (obtained from Google Finance): Harley-Davidson, Inc. is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two segments: the Motorcycles & Related Products (Motorcycles) and the Financial Services. The Motorcycles segment consists of HDMC, which designs, manufactures and sells at wholesale on-road Harley-Davidson motorcycles, as well as motorcycle parts, accessories, general merchandise and related services. The Company manufactures and sells at wholesale cruiser and touring motorcycles. The Financial Services segment consists of HDFS, which provides wholesale and retail financing and insurance-related programs to the Harley-Davidson dealers and their retail customers. HDFS is engaged in the business of financing and servicing wholesale inventory receivables and retail consumer loans for the purchase of Harley-Davidson motorcycles.

HOG Chart

HOG data by YCharts

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

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

Learn More About Premium Membership

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

ModernGraham Valuation of HOG – August 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,183,423,170 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.27 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 249.84% Pass
6. Moderate PEmg Ratio PEmg < 20 13.02 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.11 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.27 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.26 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.69
MG Growth Estimate 8.08%
MG Value $90.87
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $53.44
MG Value based on 0% Growth $31.33
Market Implied Growth Rate 2.26%
Current Price $47.97
% of Intrinsic Value 52.79%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.4 in 2013 to an estimated $3.69 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.26% 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 above the price.

At the time of valuation, further research into Harley-Davidson Inc revealed the company was trading above its Graham Number of $29.61.  The company pays a dividend of $1.4 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 13.02, which was below the industry average of 18.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-23.94.

Harley-Davidson Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$23.94
Graham Number $29.61
PEmg 13.02
Current Ratio 1.27
PB Ratio 4.11
Current Dividend $1.40
Dividend Yield 2.92%
Number of Consecutive Years of Dividend Growth 6

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $4,244,602,000
Total Current Liabilities $3,354,761,000
Long-Term Debt $4,678,350,000
Total Assets $10,487,771,000
Intangible Assets $54,630,000
Total Liabilities $8,441,604,000
Shares Outstanding (Diluted Average) 175,324,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.57
Dec2016 $3.83
Dec2015 $3.69
Dec2014 $3.88
Dec2013 $3.28
Dec2012 $2.72
Dec2011 $2.55
Dec2010 $0.62
Dec2009 -$0.24
Dec2008 $2.79
Dec2007 $3.74
Dec2006 $3.93
Dec2005 $3.41
Dec2004 $3.00
Dec2003 $2.50
Dec2002 $1.90
Dec2001 $1.43
Dec2000 $1.13
Dec1999 $0.86
Dec1998 $0.69
Dec1997 $0.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.69
Dec2016 $3.66
Dec2015 $3.45
Dec2014 $3.09
Dec2013 $2.40
Dec2012 $1.86
Dec2011 $1.59
Dec2010 $1.46
Dec2009 $2.16
Dec2008 $3.37
Dec2007 $3.54
Dec2006 $3.28
Dec2005 $2.79
Dec2004 $2.31
Dec2003 $1.83
Dec2002 $1.40
Dec2001 $1.08

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Harley-Davidson Inc Valuation – January 2016 Update $HOG
The Best Companies of the Auto Industry – October 2015
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – October 2015
13 Best Stocks For Value Investors This Week – 10/3/15

Other ModernGraham posts about related companies

Fox Factory Holding Corp Valuation – Initial Coverage $FOXF
Monro Muffler Brake Inc Valuation – Initial Coverage $MNRO
Group 1 Automotive Inc Valuation – Initial Coverage $GPI
Dana Inc Valuation – Initial Coverage $DAN
Linamar Corp Valuation – Initial Coverage $TSE:LNR
AutoNation Inc Valuation – March 2017 $AN
Superior Industries International Inc Valuation – Initial Coverage $SUP
Canadian Tire Corp Limited Valuation – Initial Coverage $TSE:CTC.A
LKQ Corporation Valuation – Initial Coverage $LKQ
Lithia Motors Inc Valuation – Initial Coverage $LAD

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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