Target Corporation Valuation – March 2019 #TGT

Company Profile (excerpt from Reuters): Target Corporation (Target), incorporated on February 11, 1902, is a general merchandise retailer selling products through its stores and digital channels. The Company’s general merchandise stores offer an edited food assortment, including perishables, dry grocery, dairy and frozen items. The Company’s digital channels include a range of general merchandise, including a range of items found in its stores, along with an assortment, such as additional sizes and colors sold only online. The Company’s owned brands include Archer Farms, Market Pantry, Sutton & Dodge, Art Class, Merona, Threshold, Ava & Viv, Pillowfort, up & up, Boots & Barkley, Room Essentials, Wine Cube, Cat & Jack, Simply Balanced, Wondershop, Embark, Smith & Hawken, Xhilaration, Gilligan & O’Malley, Sonia Kashuk, Knox Rose and Spritz.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TGT – March 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 $40,036,461,292 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.83 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 27.42% Fail
6. Moderate PEmg Ratio PEmg < 20 14.51 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.60 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 0.83 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -4.10 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.34
MG Growth Estimate 15.00%
MG Value $205.72
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $77.48
MG Value based on 0% Growth $45.42
Market Implied Growth Rate 3.01%
Current Price $77.54
% of Intrinsic Value 37.69%

Target Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high 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 $2.58 in 2016 to an estimated $5.34 for 2020. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.01% 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 Target Corporation revealed the company was trading above its Graham Number of $51.81. The company pays a dividend of $2.52 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.51, which was below the industry average of 27.69, 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 $-33.33.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$33.33
Graham Number $51.81
PEmg 14.51
Current Ratio 0.83
PB Ratio 3.60
Current Dividend $2.52
Dividend Yield 3.25%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $12,519,000,000
Total Current Liabilities $15,014,000,000
Long-Term Debt $10,223,000,000
Total Assets $41,290,000,000
Intangible Assets $699,000,000
Total Liabilities $29,993,000,000
Shares Outstanding (Diluted Average) 524,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.51
Jan2019 $5.51
Jan2018 $5.29
Jan2017 $4.69
Jan2016 $5.31
Jan2015 -$2.58
Jan2014 $3.07
Jan2013 $4.52
Jan2012 $4.28
Jan2011 $4.00
Jan2010 $3.30
Jan2009 $2.86
Jan2008 $3.33
Jan2007 $3.21
Jan2006 $2.71
Jan2005 $3.51
Jan2004 $1.76
Jan2003 $1.78
Jan2002 $1.21
Jan2001 $1.38
Jan2000 $1.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.34
Jan2019 $4.72
Jan2018 $3.94
Jan2017 $3.17
Jan2016 $2.58
Jan2015 $1.70
Jan2014 $3.84
Jan2013 $4.08
Jan2012 $3.76
Jan2011 $3.44
Jan2010 $3.14
Jan2009 $3.08
Jan2008 $3.09
Jan2007 $2.85
Jan2006 $2.51
Jan2005 $2.25
Jan2004 $1.57

Recommended Reading:

Other ModernGraham posts about the company

Target Corp Valuation – June 2018 $TGT
Target Corp Valuation – March 2017 $TGT
Target Corp Valuation – August 2016 $TGT
Target Corporation Stock Analysis – 2015 Update $TGT
17 Companies in the Spotlight This Week – June 21, 2014

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Disclaimer:

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

Huntington Ingalls Industries Inc Valuation – February 2019 $HII

Company Profile (excerpt from Reuters): Huntington Ingalls Industries, Inc., incorporated on August 4, 2010, is a military shipbuilding company and a provider of professional services to partners in government and industry. The Company’s business consists of the design, construction, repair and maintenance of nuclear-powered ships and non-nuclear ships for the United States Navy and coastal defense surface ships for the United States Coast Guard, as well as the refueling and overhaul and inactivation of nuclear-powered ships for the United States Navy. The Company operates through three segments: Ingalls Shipbuilding (Ingalls), Newport News Shipbuilding (Newport News) and Technical Solutions. The Company’s Ingalls segment includes its non-nuclear ship design, construction, repair and maintenance businesses. The Company’s Newport News includes all of its nuclear ship design, construction, overhaul, refueling, and repair and maintenance businesses. The Company’s Technical Solutions segment provides a range of professional services, including fleet support, integrated missions solutions, and nuclear and environmental and oil and gas services, to the governmental, energy, and oil and gas markets. The Company conducts majority of its business with the United States Government, principally the Department of Defense (DoD).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HII – February 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 $9,109,897,923 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.14 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 6282.54% Pass
6. Moderate PEmg Ratio PEmg < 20 17.17 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.16 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 1.14 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.62 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 $12.66
MG Growth Estimate 15.00%
MG Value $487.38
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $183.56
MG Value based on 0% Growth $107.60
Market Implied Growth Rate 4.34%
Current Price $217.42
% of Intrinsic Value 44.61%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.16 in 2014 to an estimated $12.66 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.34% 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 Huntington Ingalls Industries Inc revealed the company was trading above its Graham Number of $124.28. The company pays a dividend of $2.52 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 17.17, which was below the industry average of 53.93, 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 $-58.08.

Huntington Ingalls 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) -$58.08
Graham Number $124.28
PEmg 17.17
Current Ratio 1.14
PB Ratio 5.16
Current Dividend $2.52
Dividend Yield 1.16%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,859,000,000
Total Current Liabilities $1,631,000,000
Long-Term Debt $1,282,000,000
Total Assets $6,199,000,000
Intangible Assets $1,697,000,000
Total Liabilities $4,374,000,000
Shares Outstanding (Diluted Average) 43,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.61
Dec2017 $10.46
Dec2016 $12.14
Dec2015 $8.36
Dec2014 $6.86
Dec2013 $5.18
Dec2012 $2.91
Dec2011 -$2.05
Dec2010 $2.68

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.66
Dec2017 $9.66
Dec2016 $8.53
Dec2015 $5.90
Dec2014 $4.16
Dec2013 $2.45
Dec2012 $0.96
Dec2011 $0.03
Dec2010 $0.89

Recommended Reading:

Other ModernGraham posts about the company

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

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Disclaimer:

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

Goodyear Tire & Rubber Co Valuation – January 2019 $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.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GT – 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 $4,795,345,782 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 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 -869.49% Fail
6. Moderate PEmg Ratio PEmg < 20 6.77 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.98 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 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.28 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 $3.04
MG Growth Estimate -2.98%
MG Value $7.71
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $44.05
MG Value based on 0% Growth $25.82
Market Implied Growth Rate -0.86%
Current Price $20.58
% of Intrinsic Value 266.80%

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 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 $3.79 in 2014 to an estimated $3.04 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.86% 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 Goodyear Tire & Rubber Co revealed the company was trading below its Graham Number of $35.79. The company pays a dividend of $0.44 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 6.77, 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 $-24.53.

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) -$24.53
Graham Number $35.79
PEmg 6.77
Current Ratio 1.34
PB Ratio 0.98
Current Dividend $0.44
Dividend Yield 2.14%
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 9/1/2018
Total Current Assets $6,753,000,000
Total Current Liabilities $5,047,000,000
Long-Term Debt $5,604,000,000
Total Assets $17,591,000,000
Intangible Assets $709,000,000
Total Liabilities $12,591,000,000
Shares Outstanding (Diluted Average) 238,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.97
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 $3.04
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 – March 2018 $GT
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

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Disclaimer:

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

Huntington Bancshares Inc Valuation – January 2019 $HBAN

Company Profile (excerpt from Reuters): Huntington Bancshares Incorporated (Huntington), incorporated on April 14, 1966, is a bank holding company. Through its subsidiaries, including its bank subsidiary, The Huntington National Bank (the Bank), the Company provides commercial and consumer banking services, mortgage banking services, automobile financing, recreational vehicle and marine financing, equipment leasing, investment management, trust services, brokerage services, insurance programs, and other financial products and services. Its segments include Consumer and Business Banking, Commercial Banking, Commercial Real Estate and Vehicle Finance, Regional Banking and The Huntington Private Client Group, Home Lending and Treasury/Other.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HBAN – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,059,951,483 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -153.73% Fail
5. Moderate PEmg Ratio PEmg < 20 13.86 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.34 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.96
MG Growth Estimate 6.68%
MG Value $20.90
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $13.86
MG Value based on 0% Growth $8.13
Market Implied Growth Rate 2.68%
Current Price $13.25
% of Intrinsic Value 63.38%

Huntington Bancshares Incorporated is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. 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 $0.66 in 2014 to an estimated $0.96 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.68% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Huntington Bancshares Incorporated revealed the company was trading below its Graham Number of $15.53. The company pays a dividend of $0.35 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.86, which was below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Huntington Bancshares Incorporated fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $15.53
PEmg 13.86
PB Ratio 1.34
Dividend Yield 2.64%
TTM Dividend $0.35
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $9,385,000,000
Total Assets $105,652,000,000
Intangible Assets $2,550,000,000
Total Liabilities $94,718,000,000
Shares Outstanding (Diluted Average) 1,103,740,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.18
Dec2017 $1.00
Dec2016 $0.70
Dec2015 $0.81
Dec2014 $0.72
Dec2013 $0.72
Dec2012 $0.69
Dec2011 $0.59
Dec2010 $0.19
Dec2009 -$6.14
Dec2008 -$0.44
Dec2007 $0.25
Dec2006 $1.92
Dec2005 $1.77
Dec2004 $1.71
Dec2003 $1.61
Dec2002 $1.33
Dec2001 $0.54
Dec2000 $1.29
Dec1999 $1.62
Dec1998 $1.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.96
Dec2017 $0.83
Dec2016 $0.74
Dec2015 $0.74
Dec2014 $0.66
Dec2013 $0.16
Dec2012 -$0.42
Dec2011 -$1.02
Dec2010 -$1.50
Dec2009 -$1.74
Dec2008 $0.65
Dec2007 $1.28
Dec2006 $1.76
Dec2005 $1.58
Dec2004 $1.42
Dec2003 $1.28
Dec2002 $1.14

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
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Huntington Bancshares Inc. Analysis – October 2015 Update $HBAN

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Disclaimer:

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

Expeditors International of Washington Inc Valuation – January 2019 $EXPD

Company Profile (excerpt from Reuters): Expeditors International of Washington, Inc., incorporated on May 29, 1979, is a logistics company. The Company is a third-party logistics provider, and purchases cargo space from carriers, including airlines and ocean shipping lines on a volume basis and resells that space to its customers. The Company provides a range of customer solutions, such as order management, time-definite transportation, warehousing and distribution, temperature-controlled transit, cargo insurance and customized logistics solutions. In addition, the Company’s Project Cargo unit handles special project shipments that move through a single method or combination of air, ocean, and/or ground transportation. The Company’s services include airfreight services, ocean freight and ocean services, and customs brokerage and other services. The Company operates along five geographic areas: the Americas; North Asia; South Asia; Europe, and the Middle East, Africa and India.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EXPD – 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 $11,805,156,263 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.99 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 85.52% Pass
6. Moderate PEmg Ratio PEmg < 20 25.05 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.19 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 1.99 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.73
MG Growth Estimate 8.45%
MG Value $69.36
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $39.59
MG Value based on 0% Growth $23.21
Market Implied Growth Rate 8.27%
Current Price $68.40
% of Intrinsic Value 98.61%

Expeditors International of Washington 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.75 in 2014 to an estimated $2.73 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 8.27% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Expeditors International of Washington revealed the company was trading above its Graham Number of $28.87. The company pays a dividend of $0.84 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 25.05, which was above the industry average of 17.22. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.73.

Expeditors International of Washington performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.73
Graham Number $28.87
PEmg 25.05
Current Ratio 1.99
PB Ratio 6.19
Current Dividend $0.84
Dividend Yield 1.23%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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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 $2,746,473,000
Total Current Liabilities $1,377,468,000
Long-Term Debt $0
Total Assets $3,334,800,000
Intangible Assets $7,927,000
Total Liabilities $1,377,468,000
Shares Outstanding (Diluted Average) 177,173,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.28
Dec2017 $2.69
Dec2016 $2.36
Dec2015 $2.40
Dec2014 $1.92
Dec2013 $1.68
Dec2012 $1.57
Dec2011 $1.79
Dec2010 $1.59
Dec2009 $1.11
Dec2008 $1.37
Dec2007 $1.21
Dec2006 $1.06
Dec2005 $0.86
Dec2004 $0.59
Dec2003 $0.46
Dec2002 $0.44
Dec2001 $0.45
Dec2000 $0.38
Dec1999 $0.28
Dec1998 $0.22

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.73
Dec2017 $2.37
Dec2016 $2.14
Dec2015 $1.98
Dec2014 $1.75
Dec2013 $1.62
Dec2012 $1.56
Dec2011 $1.51
Dec2010 $1.33
Dec2009 $1.18
Dec2008 $1.15
Dec2007 $0.97
Dec2006 $0.79
Dec2005 $0.62
Dec2004 $0.49
Dec2003 $0.43
Dec2002 $0.39

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – April 2018
Expeditors International of Washington Inc Valuation – March 2018 $EXPD
Expeditors International of Washington Valuation – June 2016 $EXPD
Expeditors International of Washington Valuation – January 2016 Update $EXPD
Expeditors International of Washington Analysis – October 2015 Update $EXPD

Other ModernGraham posts about related companies

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Knight-Swift Transportation Holdings Inc Valuation – August 2018 $KNX
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Ryder System Inc Valuation – June 2018 $R
United Parcel Service Inc Valuation – May 2018 $UPS
JB Hunt Transport Services Inc Valuation – May 2018 $JBHT
C.H. Robinson Worldwide Inc Valuation – April 2018 $CHRW
FedEx Corp Valuation – April 2018 $FDX
Expeditors International of Washington Inc Valuation – March 2018 $EXPD
TFI International Inc Valuation – Initial Coverage $TSE:TFII

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.

Target Corp Valuation – June 2018 $TGT

Company Profile (excerpt from Reuters): Target Corporation (Target), incorporated on February 11, 1902, is a general merchandise retailer selling products through its stores and digital channels. The Company’s general merchandise stores offer an edited food assortment, including perishables, dry grocery, dairy and frozen items. The Company’s digital channels include a range of general merchandise, including a range of items found in its stores, along with an assortment, such as additional sizes and colors sold only online. The Company’s owned brands include Archer Farms, Market Pantry, Sutton & Dodge, Art Class, Merona, Threshold, Ava & Viv, Pillowfort, up & up, Boots & Barkley, Room Essentials, Wine Cube, Cat & Jack, Simply Balanced, Wondershop, Embark, Smith & Hawken, Xhilaration, Gilligan & O’Malley, Sonia Kashuk, Knox Rose and Spritz.

TGT Chart

TGT data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TGT – June 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 $41,572,798,391 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.90 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 30.66% Fail
6. Moderate PEmg Ratio PEmg < 20 16.97 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 0.90 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.51 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 $4.60
MG Growth Estimate 15.00%
MG Value $177.00
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $66.66
MG Value based on 0% Growth $39.08
Market Implied Growth Rate 4.24%
Current Price $78.02
% of Intrinsic Value 44.08%

Target Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PB ratio. 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 $1.7 in 2015 to an estimated $4.6 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.24% 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 Target Corporation revealed the company was trading above its Graham Number of $49.41. The company pays a dividend of $2.44 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.97, which was below the industry average of 37.1, 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 $-31.23.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$31.23
Graham Number $49.41
PEmg 16.97
Current Ratio 0.90
PB Ratio 3.78
Current Dividend $2.44
Dividend Yield 3.13%
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 4/1/2018
Total Current Assets $10,876,000,000
Total Current Liabilities $12,044,000,000
Long-Term Debt $11,107,000,000
Total Assets $38,929,000,000
Intangible Assets $0
Total Liabilities $27,771,000,000
Shares Outstanding (Diluted Average) 541,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.10
Jan2018 $5.33
Jan2017 $4.70
Jan2016 $5.31
Jan2015 -$2.58
Jan2014 $3.07
Jan2013 $4.52
Jan2012 $4.28
Jan2011 $4.00
Jan2010 $3.30
Jan2009 $2.86
Jan2008 $3.33
Jan2007 $3.21
Jan2006 $2.71
Jan2005 $3.51
Jan2004 $1.76
Jan2003 $1.78
Jan2002 $1.21
Jan2001 $1.38
Jan2000 $1.23
Jan1999 $0.99

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.60
Jan2018 $3.95
Jan2017 $3.18
Jan2016 $2.58
Jan2015 $1.70
Jan2014 $3.84
Jan2013 $4.08
Jan2012 $3.76
Jan2011 $3.44
Jan2010 $3.14
Jan2009 $3.08
Jan2008 $3.09
Jan2007 $2.85
Jan2006 $2.51
Jan2005 $2.25
Jan2004 $1.57
Jan2003 $1.42

Recommended Reading:

Other ModernGraham posts about the company

Target Corp Valuation – March 2017 $TGT
Target Corp Valuation – August 2016 $TGT
Target Corporation Stock Analysis – 2015 Update $TGT
17 Companies in the Spotlight This Week – June 21, 2014
Target Corp Annual Valuation – 2014 $TGT

Other ModernGraham posts about related companies

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Tractor Supply Co Valuation – April 2018 $TSCO
Tapestry Inc Valuation – April 2018 $TPR
Dollar General Corp Valuation – April 2018 $DG
Tiffany & Co. Valuation – April 2018 $TIF
Best Buy Co Inc Valuation – April 2018 $BBY
Macy’s Inc Valuation – April 2018 $M

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

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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.

Huntington Bancshares Inc Valuation – March 2018 $HBAN

Company Profile (excerpt from Reuters): Huntington Bancshares Incorporated (Huntington), incorporated on April 14, 1966, is a bank holding company. Through its subsidiaries, including its bank subsidiary, The Huntington National Bank (the Bank), the Company provides commercial and consumer banking services, mortgage banking services, automobile financing, recreational vehicle and marine financing, equipment leasing, investment management, trust services, brokerage services, insurance programs, and other financial products and services. Its segments include Consumer and Business Banking, Commercial Banking, Commercial Real Estate and Vehicle Finance, Regional Banking and The Huntington Private Client Group, Home Lending and Treasury/Other.

HBAN Chart

HBAN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HBAN – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,227,469,674 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -152.43% Fail
5. Moderate PEmg Ratio PEmg < 20 17.23 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.81 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.93
MG Growth Estimate 6.15%
MG Value $19.41
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $13.52
MG Value based on 0% Growth $7.93
Market Implied Growth Rate 4.37%
Current Price $16.07
% of Intrinsic Value 82.80%

Huntington Bancshares Incorporated is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.66 in 2014 to an estimated $0.93 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 4.37% 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.

At the time of valuation, further research into Huntington Bancshares Incorporated revealed the company was trading above its Graham Number of $15.07. The company pays a dividend of $0.35 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 17.23, which was below the industry average of 24.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Huntington Bancshares Incorporated performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Graham Number $15.07
PEmg 17.23
PB Ratio 1.81
Dividend Yield 2.18%
TTM Dividend $0.35
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $12,931,000,000
Total Assets $104,185,000,000
Intangible Assets $2,577,000,000
Total Liabilities $93,371,000,000
Shares Outstanding (Diluted Average) 1,221,110,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.11
Dec2017 $1.00
Dec2016 $0.70
Dec2015 $0.81
Dec2014 $0.72
Dec2013 $0.72
Dec2012 $0.69
Dec2011 $0.59
Dec2010 $0.19
Dec2009 -$6.14
Dec2008 -$0.44
Dec2007 $0.25
Dec2006 $1.92
Dec2005 $1.77
Dec2004 $1.71
Dec2003 $1.61
Dec2002 $1.33
Dec2001 $0.54
Dec2000 $1.29
Dec1999 $1.62
Dec1998 $1.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.93
Dec2017 $0.83
Dec2016 $0.74
Dec2015 $0.74
Dec2014 $0.66
Dec2013 $0.16
Dec2012 -$0.42
Dec2011 -$1.02
Dec2010 -$1.50
Dec2009 -$1.74
Dec2008 $0.65
Dec2007 $1.28
Dec2006 $1.76
Dec2005 $1.58
Dec2004 $1.42
Dec2003 $1.28
Dec2002 $1.14

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Huntington Bancshares Valuation – January 2016 Update $HBAN
The Best Companies of the Banking Industry – October 2015
13 Best Stocks For Value Investors This Week – 10/3/15
Huntington Bancshares Inc. Analysis – October 2015 Update $HBAN

Other ModernGraham posts about related companies

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People’s United Financial Inc Valuation – March 2018 $PBCT
JPMorgan Chase & Co Valuation – February 2018 $JPM
Opus Bank Valuation – Initial Coverage $OPB
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Disclaimer:

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

Expeditors International of Washington Inc Valuation – March 2018 $EXPD

Company Profile (obtained from Marketwatch): Expeditors International of Washington, Inc. engages in the provision of global logistics services. It offers airfreight services, ocean freight and ocean services, and customs brokerage and other services. The firm also provides customer solutions such as order management, time-definite transportation, warehousing and distribution, temperature-controlled transit, cargo insurance, and customized logistics solutions. It operates through the following geographical segments: Americas; North Asia; South Asia; Europe; and Middle East, Africa, and India. The company was founded by Peter Rose, Wang Li Kou, Kevin Walsh, Hank Wong, George Ho, Robert Chiarito, and Glenn Alger in May 1979 and is headquartered in Seattle, WA.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EXPD – 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 $11,387,197,415 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.32 Pass
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 73.50% Pass
6. Moderate PEmg Ratio PEmg < 20 25.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.82 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 2.32 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.55
MG Growth Estimate 6.90%
MG Value $56.90
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $36.98
MG Value based on 0% Growth $21.68
Market Implied Growth Rate 8.31%
Current Price $64.08
% of Intrinsic Value 112.61%

Expeditors International of Washington is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.75 in 2014 to an estimated $2.55 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.31% 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 Expeditors International of Washington revealed the company was trading above its Graham Number of $26.39. The company pays a dividend of $0.84 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 25.12, which was below the industry average of 36.6, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.83.

Expeditors International of Washington performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.83
Graham Number $26.39
PEmg 25.12
Current Ratio 2.32
PB Ratio 5.82
Current Dividend $0.84
Dividend Yield 1.31%
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 $2,541,452,000
Total Current Liabilities $1,093,119,000
Long-Term Debt $0
Total Assets $3,117,008,000
Intangible Assets $7,927,000
Total Liabilities $1,125,150,000
Shares Outstanding (Diluted Average) 180,811,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.74
Dec2017 $2.69
Dec2016 $2.36
Dec2015 $2.40
Dec2014 $1.92
Dec2013 $1.68
Dec2012 $1.57
Dec2011 $1.79
Dec2010 $1.59
Dec2009 $1.11
Dec2008 $1.37
Dec2007 $1.21
Dec2006 $1.06
Dec2005 $0.86
Dec2004 $0.59
Dec2003 $0.46
Dec2002 $0.44
Dec2001 $0.45
Dec2000 $0.38
Dec1999 $0.28
Dec1998 $0.22

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.55
Dec2017 $2.37
Dec2016 $2.14
Dec2015 $1.98
Dec2014 $1.75
Dec2013 $1.62
Dec2012 $1.56
Dec2011 $1.51
Dec2010 $1.33
Dec2009 $1.18
Dec2008 $1.15
Dec2007 $0.97
Dec2006 $0.79
Dec2005 $0.62
Dec2004 $0.49
Dec2003 $0.43
Dec2002 $0.39

Recommended Reading:

Other ModernGraham posts about the company

Expeditors International of Washington Valuation – January 2016 Update $EXPD
Expeditors International of Washington Analysis – October 2015 Update $EXPD
Expeditors International of Washington Analysis – June 2015 Update $EXPD
18 Companies in the Spotlight This Week – 3/21/15
Expeditors International of Washington Quarterly Valuation – March 2015 $EXPD

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Disclaimer:

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

Lexington Realty Trust Valuation – Initial Coverage $LXP

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

Company Profile (obtained from Google Finance): Lexington Realty Trust is a real estate investment trust (REIT). The Company owns a portfolio of equity and debt investments in single-tenant commercial properties. As of December 31, 2016, the Company had equity ownership interests in approximately 195 consolidated real estate properties, located in 40 states and containing an aggregate of approximately 43.3 million square feet of space, approximately 96.0% of which was leased. The Company conducts its operations either directly or indirectly through property owner subsidiaries and lender subsidiaries, which are single purpose entities; an operating partnership, Lepercq Corporate Income Fund L.P. (LCIF), in which the Company is the sole unit holder of the general partner and the sole unit holder of the limited partner that holds a majority of the limited partner interests; Lexington Realty Advisors, Inc. (LRA), a subsidiary of the Company, and investments in joint ventures.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LXP – July 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,461,596,997 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.73 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 -140.48% Fail
6. Moderate PEmg Ratio PEmg < 20 28.30 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.73 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 1.73 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 14.39 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $0.36
MG Growth Estimate 15.00%
MG Value $13.78
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $5.19
MG Value based on 0% Growth $3.04
Market Implied Growth Rate 9.90%
Current Price $10.13
% of Intrinsic Value 73.50%

Lexington Realty Trust does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the  low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net 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 $-0.12 in 2013 to an estimated $0.36 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.9% 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 Lexington Realty Trust revealed the company was trading above its Graham Number of $6.74.  The company pays a dividend of $0.69 per share, for a yield of 6.8%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 28.3, which was below the industry average of 51.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.27.

Lexington Realty Trust receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.27
Graham Number $6.74
PEmg 28.30
Current Ratio 1.73
PB Ratio 1.73
Current Dividend $0.69
Dividend Yield 6.81%
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 3/1/2017
Total Current Assets $283,282,000
Total Current Liabilities $163,361,000
Long-Term Debt $1,726,229,000
Total Assets $3,446,705,000
Intangible Assets $574,570,000
Total Liabilities $2,035,565,000
Shares Outstanding (Diluted Average) 241,088,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.37
Dec2016 $0.37
Dec2015 $0.45
Dec2014 $0.38
Dec2013 -$0.07
Dec2012 $0.93
Dec2011 -$0.68
Dec2010 -$0.44
Dec2009 -$2.22
Dec2008 -$0.28
Dec2007 $0.77
Dec2006 -$0.17
Dec2005 $0.33
Dec2004 $0.80
Dec2003 $0.88
Dec2002 $1.09
Dec2001 $0.77
Dec2000 $1.10
Dec1999 $1.08
Dec1998 $0.78
Dec1997 $0.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.36
Dec2016 $0.37
Dec2015 $0.32
Dec2014 $0.17
Dec2013 -$0.12
Dec2012 -$0.27
Dec2011 -$0.77
Dec2010 -$0.70
Dec2009 -$0.66
Dec2008 $0.18
Dec2007 $0.44
Dec2006 $0.38
Dec2005 $0.70
Dec2004 $0.90
Dec2003 $0.96
Dec2002 $0.98
Dec2001 $0.89

Recommended Reading:

Other ModernGraham posts about the company

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

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LTC Properties Inc Valuation – Initial Coverage $LTC
REIT Industry Review – April 2017
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Kimco Realty Corp Valuation – March 2017 $KIM
LaSalle Hotel Properties Valuation – Initial Coverage $LHO
Cousins Properties Inc Valuation – Initial Coverage $CUZ

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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