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Genuine Parts Co Valuation – January 2019 $GPC

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GPC – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,785,072,914 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.33 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 57.16% Pass
6. Moderate PEmg Ratio PEmg < 20 19.61 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.78 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.33 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.30 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

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

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.22 in 2014 to an estimated $4.79 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.55% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Genuine Parts Company revealed the company was trading above its Graham Number of $53.66. The company pays a dividend of $2.7 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.61, which was below the industry average of 19.88, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.79.

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

Stage 3: Information for Further Research

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

Useful Links:

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

Most Recent Balance Sheet Figures

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

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

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
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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.

Genuine Parts Co Valuation – July 2016 $GPC

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 Genuine Parts Co (GPC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Genuine Parts Company is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company’s segments include Automotive, Industrial, Office Products Group, Electrical/Electronic Materials and Other. The automotive segment distributes replacement parts for all makes and models of automobiles, trucks and other vehicles. The industrial segment distributes a range 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 range of office products, computer supplies, office furniture, and business electronics. The electrical/electronic materials segment distributes a range of electrical/electronic materials, including insulating and conductive materials for use in electronic and electrical apparatus.

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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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of GPC – 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 $15,657,262,715 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.37 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 65.95% Pass
6. Moderate PEmg Ratio PEmg < 20 22.89 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.88 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 1.37 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.16 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

GPC value chart July 2016

EPSmg $4.59
MG Growth Estimate 4.87%
MG Value $83.61
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $66.50
MG Value based on 0% Growth $38.98
Market Implied Growth Rate 7.19%
Current Price $104.97
% of Intrinsic Value 125.54%

Genuine Parts Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the low current ratio. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.46 in 2012 to an estimated $4.59 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.19% 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 below the price.

Genuine Parts Company performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

GPC charts July 2016

Net Current Asset Value (NCAV) $3.67
Graham Number $47.79
PEmg 22.89
Current Ratio 1.37
PB Ratio 4.88
Current Dividend $2.50
Dividend Yield 2.38%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $5,770,268,000
Total Current Liabilities $4,211,926,000
Long-Term Debt $250,000,000
Total Assets $8,450,527,000
Intangible Assets $1,412,985,000
Total Liabilities $5,218,797,000
Shares Outstanding (Diluted Average) 150,342,000

Earnings Per Share History

Next Fiscal Year Estimate $4.70
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
Dec1997 $1.90
Dec1996 $1.82

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.59
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
Dec2001 $1.97
Dec2000 $2.07

Recommended Reading:

Other ModernGraham posts about the company

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
Dividend Growth Stocks for the Intelligent Investor – November 2015

Other ModernGraham posts about related companies

Johnson Controls Inc Valuation – July 2016 $JCI
Goodyear Tire & Rubber Co Valuation – July 2016 $GT
Harley-Davidson Inc Valuation – June 2016 $HOG
Autozone Inc Valuation – June 2016 $AZO
BorgWarner Inc Valuation – February 2016 Update $BWA
Genuine Parts Co Valuation – January 2016 Update $GPC
Ford Motor Company Valuation – January 2016 Update $F
Genuine Parts Co Valuation – January 2016 Update $GPC
Ford Motor Company Valuation – January 2016 Update $F
Harley-Davidson Inc Valuation – January 2016 Update $HOG

Disclaimer:

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

Genuine Parts Co Valuation – January 2016 Update $GPC

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 Genuine Parts Co (GPC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Genuine Parts Company is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company operates through four segments: Automotive Parts Group, which distributes automotive parts and accessory items; Industrial Parts Group, which distributes industrial replacement parts and related supplies; Office Products Group, which is engaged in the wholesale distribution of a line of office and other business related products, and Electrical/Electronic Materials Group, which distributes materials to more than 20,000 electrical and electronic manufacturers, as well as industrial assembly and specialty wire and cable markets in North America. In 2014, the Company’s business was conducted from approximately 2,600 locations throughout the United States, Canada, Mexico, Australia and New Zealand.

[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 GPC

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,566,109,997 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.49 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 56.47% Pass
6. Moderate PEmg Ratio PEmg < 20 19.52 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.15 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.49 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.27 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

GPC value chart January 2016

EPSmg $4.41
MG Growth Estimate 6.48%
MG Value $94.75
Opinion Fairly Valued
MG Value based on 3% Growth $63.99
MG Value based on 0% Growth $37.51
Market Implied Growth Rate 5.51%
Current Price $86.17
% of Intrinsic Value 90.95%

Genuine Parts Co qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio along with the high PB ratio.  The Enterprising Investor is only initially concerned by the low current ratio.  As a result, all Enterprising 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 fairly valued after growing its EPSmg (normalized earnings) from $3.08 in 2011 to an estimated $4.41 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 5.51% 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 within a margin of safety relative to 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 Genuine Parts Co (GPC)?  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

GPC charts January 2016

Net Current Asset Value (NCAV) $3.81
Graham Number $46.26
PEmg 19.52
Current Ratio 1.49
PB Ratio 4.15
Dividend Yield 2.81%
Number of Consecutive Years of Dividend Growth 20

 

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information Sep2015
Total Current Assets $5,623,482,000
Total Current Liabilities $3,764,068,000
Long-Term Debt $500,000,000
Total Assets $8,203,128,000
Intangible Assets $1,328,431,000
Total Liabilities $5,044,342,000
Shares Outstanding (Diluted Average) 152,143,000

Earnings Per Share History

Next Fiscal Year Estimate $4.54
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
Dec1997 $1.90
Dec1996 $1.81

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.41
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
Dec2001 $1.97
Dec2000 $2.07
Dec1999 $1.85

Recommended Reading:

Other ModernGraham posts about the company

Dividend Growth Stocks for the Intelligent Investor – November 2015
Genuine Parts Company Analysis – June 2015 Quarterly Update $GPC
23 Companies in the Spotlight This Week – 3/9/15
Genuine Parts Company Quarterly Valuation – March 2015 $GPC
32 Companies in the Spotlight This Week – 12/6/14

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Ford Motor Company Valuation – January 2016 Update $F
Harley-Davidson Inc Valuation – January 2016 Update $HOG
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BorgWarner Inc. Valuation – November 2015 Update $BWA
The Best Companies of the Auto Industry – October 2015
Harley-Davidson Inc. Analysis – October 2015 Update $HOG
Harman International Industries Analysis – September 2015 Update $HAR
Genuine Parts Company Analysis – September 2015 Update $GPC
Ford Motor Company Analysis – August 2015 Update $F
Advance Auto Parts Inc. Analysis – Initial Coverage $AAP

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 Company Analysis – September 2015 Update $GPC

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 Genuine Parts Company (GPC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Genuine Parts Company is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company operates through four segments: Automotive Parts Group, which distributes automotive parts and accessory items; Industrial Parts Group, which distributes industrial replacement parts and related supplies; Office Products Group, which is engaged in the wholesale distribution of a line of office and other business related products, and Electrical/Electronic Materials Group, which distributes materials to more than 20,000 electrical and electronic manufacturers, as well as industrial assembly and specialty wire and cable markets in North America. In 2014, the Company’s business was conducted from approximately 2,600 locations throughout the United States, Canada, Mexico, Australia and New Zealand.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of GPC – 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 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 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 $4.43
MG Growth Estimate 6.58%
MG Value $96.04
Opinion Fairly Valued
MG Value based on 3% Growth $64.28
MG Value based on 0% Growth $37.68
Market Implied Growth Rate 5.18%
Current Price $83.64
% of Intrinsic Value 87.09%

Genuine Parts Company qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio and the high PB ratio.  The Enterprising Investor is only initially concerned by the low current ratio.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.08 in 2011 to an estimated $4.43 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 5.18% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to 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 Genuine Parts Company (GPC)?  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

GPC Charts September 2015

Net Current Asset Value (NCAV) $3.88
Graham Number $46.85
PEmg 18.87
Current Ratio 1.49
PB Ratio 3.94
Dividend Yield 2.85%
Number of Consecutive Years of Dividend Growth 20

 

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Useful Links:

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

Most Recent Balance Sheet Figures

Total Current Assets $5,763,520,000
Total Current Liabilities $3,867,622,000
Long-Term Debt $500,000,000
Total Assets $8,413,633,000
Intangible Assets $1,382,766,000
Total Liabilities $5,169,818,000
Shares Outstanding (Diluted Average) 152,989,000

Earnings Per Share History

Next Fiscal Year Estimate $4.60
Dec14 $4.61
Dec13 $4.40
Dec12 $4.14
Dec11 $3.58
Dec10 $3.00
Dec09 $2.50
Dec08 $2.92
Dec07 $2.98
Dec06 $2.76
Dec05 $2.50
Dec04 $2.25
Dec03 $1.91
Dec02 -$0.16
Dec01 $1.71
Dec00 $2.20
Dec99 $2.11
Dec98 $1.98
Dec97 $1.90
Dec96 $1.82
Dec95 $1.68

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.43
Dec14 $4.22
Dec13 $3.85
Dec12 $3.46
Dec11 $3.08
Dec10 $2.83
Dec09 $2.74
Dec08 $2.80
Dec07 $2.66
Dec06 $2.28
Dec05 $1.91
Dec04 $1.60
Dec03 $1.37
Dec02 $1.26
Dec01 $1.97
Dec00 $2.07
Dec99 $1.97

Recommended Reading:

Other ModernGraham posts about the company

Genuine Parts Company Analysis – June 2015 Quarterly Update $GPC
23 Companies in the Spotlight This Week – 3/9/15
Genuine Parts Company Quarterly Valuation – March 2015 $GPC
32 Companies in the Spotlight This Week – 12/6/14
Genuine Parts Company Quarterly Valuation – December 2014 $GPC

Other ModernGraham posts about related companies

Ford Motor Company Analysis – August 2015 Update $F
Advance Auto Parts Inc. Analysis – Initial Coverage $AAP
General Motors Company Analysis – 2015 Update $GM
BorgWarner Inc. Analysis – July 2015 Update $BWA
Paccar Inc. Analysis – July 2015 Update $PCAR
Harley Davidson Analysis – June 2015 Update $HOG
Delphi Automotive Analysis – 2015 Update $DLPH
Genuine Parts Company Analysis – June 2015 Quarterly Update $GPC
Harman International Industries Analysis – June 2015 Quarterly Update $HAR
Ford Motor Company Stock Analysis – May 2015 Quarterly Update $F

Disclaimer:

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

Genuine Parts Company Analysis – June 2015 Quarterly Update $GPC

GPCGenuine Parts Company (GPC) may intrigue many investors simply because it has dropped in price relative to the market over the last several months, making it somewhat attractive based on its price alone. That said, Benjamin Graham, the father of value investing, taught that 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 determine a potential investment’s merits. Here’s an updated look at how Genuine Parts Company fares in the ModernGraham valuation model.

This 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 in order 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.

GPC Chart

GPC data by YCharts

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

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – FAIL
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – 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 one-third over the last 10 years, using three-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) ratio – PEmg is less than 20 – FAIL
  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 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  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 that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $90.40
MG Value $98.21
MG Opinion Fairly Valued
Value Based on 3% Growth $64.77
Value Based on 0% Growth $37.97
Market Implied Growth Rate 5.87%
NCAV $3.76
PEmg 20.24
Current Ratio 1.50
PB Ratio 4.37

Balance Sheet – March 2015

Current Assets $5,635,000,000
Current Liabilities $3,759,000,000
Total Debt $500,000,000
Total Assets $8,238,000,000
Intangible Assets $1,346,000,000
Total Liabilities $5,058,000,000
Outstanding Shares 153,600,000

Earnings Per Share

2015 (estimate) $4.70
2014 $4.61
2013 $4.40
2012 $4.14
2011 $3.58
2010 $3.00
2009 $2.50
2008 $2.92
2007 $2.98
2006 $2.76
2005 $2.50

Earnings Per Share – ModernGraham

2015 (estimate) $4.47
2014 $4.22
2013 $3.85
2012 $3.46
2011 $3.08
2010 $2.83

Dividend History

GPC Dividend Chart

GPC Dividend data by YCharts

Competitive Comparison

Genuine Parts Company is much more attractive as an investment than some of its competitors. For example, a ModernGraham valuation of O’Reilly Automotive (ORLY) indicates the company is not suitable for either the Defensive Investor or the Enterprising. Similarly, despite being undervalued, Autozone (AZO) is also unsuitable for either ModernGraham investor type under its most recent ModernGraham valuation.

Conclusion

Genuine Parts Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned by the low current ratio and the high PEmg and PB ratios, while the Enterprising Investor is only concerned with the low current ratio. Therefore, all Enterprising Investors should feel very comfortable proceeding with the next stage of the analysis, which is a determination of an estimate of intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $3.08 in 2011 to an estimated $4.47 for 2015. This level of demonstrated growth is in line with the market’s implied estimate for earnings growth of 5.87% over the next 7-10 years.

The company’s recent earnings history shows an average annual growth in EPSmg of around 9%. The ModernGraham valuation model reduces such a rate to a more conservative figure, assuming some slowdown will occur, but still returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating Genuine Parts Company is fairly valued at the present time.

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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Genuine Parts Company Quarterly Valuation – March 2015 $GPC

GPCBenjamin 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 Genuine Parts Company (GPC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Genuine Parts Company is a service organization company. The Company is engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company operates in four segments, such as Automotive Parts Group, Industrial Parts Group, Office Products Group and Electrical/Electronic Materials Group. During the year ended December 31, 2013, the Company’s business was conducted throughout the United States, in Canada and in Mexico from approximately 2,600 locations. The Automotive Parts Group distributes automotive parts and accessory items. Industrial Parts Group distributes industrial replacement parts and related supplies. Office Products Group is engaged in the wholesale distribution of office and other business related products. Electrical/Electronic Materials group distributes materials to more than 20,000 electrical and electronic manufacturers.

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years - 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 - FAIL
  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 = 5/5

  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 - PASS
  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 $96.94
MG Value $97.60
MG Opinion Fairly Valued
Value Based on 3% Growth $61.12
Value Based on 0% Growth $35.83
Market Implied Growth Rate 7.25%
NCAV $4.21
PEmg 23.00
Current Ratio 1.56
PB Ratio 4.53

Balance Sheet – December 2014

Current Assets $5,593,000,000
Current Liabilities $3,584,000,000
Total Debt $500,000,000
Total Assets $8,246,000,000
Intangible Assets $1,387,000,000
Total Liabilities $4,945,000,000
Outstanding Shares 154,100,000

Earnings Per Share

2014 $4.61
2013 $4.40
2012 $4.14
2011 $3.58
2010 $3.00
2009 $2.50
2008 $2.92
2007 $2.98
2006 $2.76
2005 $2.50
2004 $2.25

Earnings Per Share – ModernGraham

2014 $4.22
2013 $3.85
2012 $3.46
2011 $3.08
2010 $2.83
2009 $2.74

Dividend History

Conclusion:

Genuine Parts Company is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, and the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  As a result, Enterprising 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 fairly valued after growing its EPSmg (normalized earnings) from $2.83 in 2010 to $4.22 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 7.25% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out previous ModernGraham valuations of Genuine Parts Company (GPC) 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 Genuine Parts Company (GPC)?  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 Genuine Parts Company (GPC) 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.

Genuine Parts Company Quarterly Valuation – December 2014 $GPC

GPCBenjamin 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 – 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 Genuine Parts Company (GPC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Genuine Parts Company is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company operates in four: Automotive Parts Group, Industrial Parts Group, Office Products Group and Electrical/Electronic Materials Group. The Automotive Parts Group distributes automotive parts and accessory items. In addition to over 427,000 available part numbers, the Company offers inventory, cataloging, marketing, training and other programs in the automotive aftermarket. The Industrial Parts Group is operated as Motion Industries, Inc. (Motion), a wholly owned subsidiary of the Company. During the year ended December 31, 2012, the Company’s business were conducted throughout the United States, in Canada and in Mexico from approximately 2,000 locations. On February 1, 2012, the Company acquired Light Fabrications Inc.

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years - 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 – FAIL
  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 = 5/5

  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 - PASS
  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 $101.76
MG Value $96.70
MG Opinion Fairly Valued
Value Based on 3% Growth $60.93
Value Based on 0% Growth $35.72
Market Implied Growth Rate 7.86%
NCAV $4.81
PEmg 24.22
Current Ratio 1.54
PB Ratio 4.48

Balance Sheet – September 2014

Current Assets $5,585,000,000
Current Liabilities $3,636,000,000
Total Debt $500,000,000
Total Assets $8,341,000,000
Intangible Assets $1,444,000,000
Total Liabilities $4,844,000,000
Outstanding Shares 154,100,000

Earnings Per Share

2014 (estimate) $4.57
2013 $4.40
2012 $4.14
2011 $3.58
2010 $3.00
2009 $2.50
2008 $2.92
2007 $2.98
2006 $2.76
2005 $2.50
2004 $2.25

Earnings Per Share – ModernGraham

2014 (estimate) $4.20
2013 $3.85
2012 $3.46
2011 $3.08
2010 $2.83
2009 $2.74

Dividend History

Conclusion:

Genuine Parts Company qualifies for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, and the poor PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, Enterprising 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.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.83 in 2010 to an estimated $4.20 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 7.86% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out previous ModernGraham valuations of Genuine Parts Company (GPC) 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 Genuine Parts Company (GPC)?  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 Genuine Parts Company (GPC) 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.

Genuine Parts Company – Quarterly Stock Valuation – $GPC

logoBenjamin 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 Enterprising 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 Genuine Parts Company (GPC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Genuine Parts Company is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company operates in four: Automotive Parts Group, Industrial Parts Group, Office Products Group and Electrical/Electronic Materials Group. The Automotive Parts Group distributes automotive parts and accessory items. In addition to over 427,000 available part numbers, the Company offers inventory, cataloging, marketing, training and other programs in the automotive aftermarket. The Industrial Parts Group is operated as Motion Industries, Inc. (Motion), a wholly owned subsidiary of the Company. During the year ended December 31, 2012, the Company’s business were conducted throughout the United States, in Canada and in Mexico from approximately 2,000 locations. On February 1, 2012, the Company acquired Light Fabrications Inc.
GPC Chart

GPC data by YCharts

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years - 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 - FAIL
  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 = 5/5

  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 – PASS
  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 $87.80
MG Value $96.25
MG Opinion Fairly Valued
Value Based on 3% Growth $60.83
Value Based on 0% Growth $35.66
Market Implied Growth Rate 6.21%
NCAV $5.14
PEmg 20.93
Current Ratio 1.57
PB Ratio 3.82

Balance Sheet – 6/30/2014

Current Assets $5,512,400,000
Current Liabilities $3,506,900,000
Total Debt $500,000,000
Total Assets $8,251,500,000
Intangible Assets $1,432,900,000
Total Liabilities $4,724,400,000
Outstanding Shares 153,310,000

Earnings Per Share

2014 (estimate) $4.55
2013 $4.40
2012 $4.14
2011 $3.58
2010 $3.00
2009 $2.50
2008 $2.92
2007 $2.98
2006 $2.76
2005 $2.50
2004 $2.25

Earnings Per Share – ModernGraham

2014 (estimate) $4.20
2013 $3.85
2012 $3.46
2011 $3.08
2010 $2.83
2009 $2.74

Dividend History

GPC Dividend Chart

GPC Dividend data by YCharts

Conclusion:

Genuine Parts Company does not qualify for the Defensive Investor but does satisfy for the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio and the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  As a result, Enterprising 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.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.83 in 2010 to an estimated $4.20 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 6.21% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out the previous ModernGraham valuations of Genuine Parts Company (GPC) 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 Genuine Parts Company (GPC)?  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 Genuine Parts Company (GPC) 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.

Genuine Parts Company May 2014 Quarterly Valuation $GPC

logoBenjamin 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 Lowest PEmg Companies for Enterprising Investors.  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 Genuine Parts Company (GPC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Genuine Parts Company is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company operates in four: Automotive Parts Group, Industrial Parts Group, Office Products Group and Electrical/Electronic Materials Group. The Automotive Parts Group distributes automotive parts and accessory items. In addition to over 427,000 available part numbers, the Company offers inventory, cataloging, marketing, training and other programs in the automotive aftermarket. The Industrial Parts Group is operated as Motion Industries, Inc. (Motion), a wholly owned subsidiary of the Company. During the year ended December 31, 2012, the Company’s business were conducted throughout the United States, in Canada and in Mexico from approximately 2,000 locations. On February 1, 2012, the Company acquired Light Fabrications Inc.

GPC Chart

GPC data by YCharts

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – 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 - FAIL
  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 = 5/5

  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 – PASS
  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 $85.81
MG Value $96.03
MG Opinion Fairly Valued
Value Based on 3% Growth $60.78
Value Based on 0% Growth $35.63
Market Implied Growth Rate 5.98%
NCAV $4.99
PEmg 20.47
Current Ratio 1.56
PB Ratio 3.87

Balance Sheet – 3/31/2014

Current Assets $5,346,400,000
Current Liabilities $3,422,700,000
Total Debt $500,000,000
Total Assets $7,982,400,000
Intangible Assets $1,409,800,000
Total Liabilities $4,580,600,000
Outstanding Shares 153,600,000

Earnings Per Share

2014 (estimate) $4.54
2013 $4.40
2012 $4.14
2011 $3.58
2010 $3.00
2009 $2.50
2008 $2.92
2007 $2.98
2006 $2.76
2005 $2.50
2004 $2.25

Earnings Per Share – ModernGraham

2014 (estimate) $4.19
2013 $3.85
2012 $3.46
2011 $3.08
2010 $2.83
2009 $2.74

Dividend HistoryGPC Dividend Chart

GPC Dividend data by YCharts

Conclusion:

Genuine Parts Company is suitable for Enterprising Investors, but Defensive Investors are not quite as keen, and have concerns with the low current ratio along with the high PEmg and PB ratios.  The company passes all of the requirements of the Enterprising Investor, though.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors through a review of ModernGraham’s valuation of O’Reilly Automotive (ORLY).  From a valuation standpoint, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.83 in 2010 to an estimated $4.19 for 2014.  This demonstrated level of growth supports the market’s implied estimate of 5.98% earnings growth, and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to 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 Genuine Parts Company (GPC)?  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.

Be sure to review the previous ModernGraham Valuations of Genuine Parts Company (GPC)!

Disclaimer:  The author did not hold a position in Genuine Parts Company (GPC) or 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; this article is not affiliated with the company in any manner.

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