IQVIA Holdings Inc Valuation – February 2019 $IQV

Company Profile (excerpt from Reuters): IQVIA Holdings Inc., formerly Quintiles IMS Holdings, Inc., incorporated on October 3, 2016, provides integrated information and technology-enabled healthcare services. The Company operates through segments, including Commercial Solutions; Research & Development Solutions, and Integrated Engagement Services. It serves pharmaceutical, biotechnology, medical device and healthcare companies. The Company has its operations in the Americas, Europe and Africa, and the Asia-Pacific.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IQV – 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 $27,790,759,500 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.10 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 841.73% Pass
6. Moderate PEmg Ratio PEmg < 20 37.22 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.13 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 1.10 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 32.08 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.78
MG Growth Estimate 9.77%
MG Value $106.06
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $54.86
MG Value based on 0% Growth $32.16
Market Implied Growth Rate 14.36%
Current Price $140.82
% of Intrinsic Value 132.77%

Iqvia Holdings 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 PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.29 in 2015 to an estimated $3.78 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.36% 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 Iqvia Holdings Inc revealed the company was trading above its Graham Number of $68.27. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 37.22, which was below the industry average of 51.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-57.46.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$57.46
Graham Number $68.27
PEmg 37.22
Current Ratio 1.10
PB Ratio 4.13
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,874,000,000
Total Current Liabilities $3,534,000,000
Long-Term Debt $10,907,000,000
Total Assets $22,549,000,000
Intangible Assets $17,751,000,000
Total Liabilities $15,595,000,000
Shares Outstanding (Diluted Average) 204,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.11
Dec2018 $1.24
Dec2017 $5.74
Dec2016 $0.47
Dec2015 $3.08
Dec2014 $2.72
Dec2013 $1.77
Dec2012 $1.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.78
Dec2018 $2.63
Dec2017 $3.14
Dec2016 $1.85
Dec2015 $2.29
Dec2014 $1.66
Dec2013 $0.96
Dec2012 $0.46

Recommended Reading:

Other ModernGraham posts about the company

IQVIA Holdings Inc Valuation – Initial Coverage May 2018 $IQV

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Stryker Corp Valuation – February 2019 $SYK
Align Technology Inc Valuation – February 2019 $ALGN
Quest Diagnostics Inc Valuation – February 2019 $DGX
AmerisourceBergen Corp Valuation – February 2019 $ABC
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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.

IQVIA Holdings Inc Valuation – Initial Coverage May 2018 $IQV

Company Profile (excerpt from Reuters): IQVIA Holdings Inc., formerly Quintiles IMS Holdings, Inc., incorporated on October 3, 2016, provides integrated information and technology-enabled healthcare services. The Company operates through segments, including Commercial Solutions; Research & Development Solutions, and Integrated Engagement Services. It serves pharmaceutical, biotechnology, medical device and healthcare companies. The Company has its operations in the Americas, Europe and Africa, and the Asia-Pacific.

IQV Chart

IQV data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IQV – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,540,248,156 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.16 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 250.73% Pass
6. Moderate PEmg Ratio PEmg < 20 24.24 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.56 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 1.16 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 19.70 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.09
MG Growth Estimate 15.00%
MG Value $157.29
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $59.24
MG Value based on 0% Growth $34.73
Market Implied Growth Rate 7.87%
Current Price $99.02
% of Intrinsic Value 62.96%

Iqvia Holdings 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 PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.02 in 2014 to an estimated $4.09 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.87% 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 Iqvia Holdings Inc revealed the company was trading above its Graham Number of $68.3. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 24.24, which was below the industry average of 42.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-53.37.

Iqvia Holdings 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) -$53.37
Graham Number $68.30
PEmg 24.24
Current Ratio 1.16
PB Ratio 2.56
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $3,724,000,000
Total Current Liabilities $3,199,000,000
Long-Term Debt $10,342,000,000
Total Assets $23,235,000,000
Intangible Assets $18,621,000,000
Total Liabilities $15,039,000,000
Shares Outstanding (Diluted Average) 212,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.32
Dec2017 $5.88
Dec2016 $0.76
Dec2015 $3.08
Dec2014 $2.72
Dec2013 $1.77
Dec2012 $1.39
Dec2011 $2.05
Dec2010 $1.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.09
Dec2017 $3.26
Dec2016 $1.95
Dec2015 $2.43
Dec2014 $2.02
Dec2013 $1.55
Dec2012 $1.28
Dec2011 $1.05
Dec2010 $0.45

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
Illumina Inc Valuation – April 2018 $ILMN
Waters Corp Valuation – April 2018 $WAT
Align Technology Inc Valuation – April 2018 $ALGN
HCA Healthcare Inc Valuation – April 2018 $HCA
Express Scripts Holding Co Valuation – April 2018 $ESRX
Stryker Corp Valuation – April 2018 $SYK
Cerner Corporation Valuation – April 2018 $CERN
Quest Diagnostics Inc Valuation – April 2018 $DGX
Laboratory Corporation of America Holdings Valuation – March 2018 $LH

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.

Danaher Corp Valuation – March 2019 #DHR

Company Profile (excerpt from Reuters): Danaher Corporation (Danaher), incorporated on October 3, 1986, designs, manufactures and markets professional, medical, industrial and commercial products and services. As of December 31, 2016, the Company’s research and development, manufacturing, sales, distribution, service and administrative facilities were located in over 60 countries. Danaher operates through four segments: Life Sciences; Diagnostics; Dental, and Environmental & Applied Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DHR – 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 $91,024,671,224 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.47 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 29.20% Fail
6. Moderate PEmg Ratio PEmg < 20 31.87 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.22 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 1.47 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.30 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 $4.01
MG Growth Estimate 0.16%
MG Value $35.34
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $58.09
MG Value based on 0% Growth $34.05
Market Implied Growth Rate 11.69%
Current Price $127.68
% of Intrinsic Value 361.24%

Danaher Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. 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 $3.96 in 2015 to an estimated $4.01 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.69% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Danaher Corporation revealed the company was trading above its Graham Number of $63.81. The company pays a dividend of $0.64 per share, for a yield of 0.5% Its PEmg (price over earnings per share – ModernGraham) was 31.87, which was below the industry average of 53.13, 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 $-17.6.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.60
Graham Number $63.81
PEmg 31.87
Current Ratio 1.47
PB Ratio 3.22
Current Dividend $0.64
Dividend Yield 0.50%
Number of Consecutive Years of Dividend Growth 1

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 12/1/2018
Total Current Assets $7,093,800,000
Total Current Liabilities $4,841,500,000
Long-Term Debt $9,688,500,000
Total Assets $47,832,500,000
Intangible Assets $37,579,100,000
Total Liabilities $19,605,800,000
Shares Outstanding (Diluted Average) 711,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.50
Dec2018 $3.74
Dec2017 $3.53
Dec2016 $3.65
Dec2015 $4.74
Dec2014 $3.63
Dec2013 $3.80
Dec2012 $3.36
Dec2011 $3.11
Dec2010 $2.64
Dec2009 $1.73
Dec2008 $1.98
Dec2007 $2.10
Dec2006 $1.74
Dec2005 $1.38
Dec2004 $1.15
Dec2003 $0.84
Dec2002 $0.47
Dec2001 $0.50
Dec2000 $0.56
Dec1999 $0.45

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.01
Dec2018 $3.79
Dec2017 $3.84
Dec2016 $3.94
Dec2015 $3.96
Dec2014 $3.49
Dec2013 $3.25
Dec2012 $2.84
Dec2011 $2.49
Dec2010 $2.13
Dec2009 $1.85
Dec2008 $1.83
Dec2007 $1.65
Dec2006 $1.32
Dec2005 $1.03
Dec2004 $0.81
Dec2003 $0.61

Recommended Reading:

Other ModernGraham posts about the company

Danaher Corp Valuation – May 2018 $DHR
Danaher Corporation Valuation – February 2017 $DHR
Danaher Corporation Valuation – November 2015 Update $DHR
Danaher Corporation Analysis – August 2015 Update $DHR
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Other ModernGraham posts about related companies

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Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX
Centene Corp Valuation – March 2019 $CNC
Abbott Laboratories Valuation – February 2019 $ABT
Becton Dickinson and Co Valuation – February 2019 $BDX
IQVIA Holdings Inc Valuation – February 2019 $IQV

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.

Agilent Technologies Inc Valuation – March 2019 #A

Company Profile (excerpt from Reuters): Agilent Technologies, Inc., incorporated on May 4, 1999, provides application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow. The Company serves the life sciences, diagnostics and applied chemical markets. The Company has three business segments: life sciences and applied markets business, diagnostics and genomics business, and Agilent CrossLab business. The life sciences and applied markets business segment brings together the Company’s analytical laboratory instrumentation and informatics. The Company’s diagnostics and genomics business segment includes the reagent partnership, pathology, companion diagnostics, genomics and the nucleic acid solutions businesses. The Company’s Agilent CrossLab business segment spans the entire lab with its consumables and services portfolio.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of A – 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 $24,759,898,745 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.39 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -24.07% Fail
6. Moderate PEmg Ratio PEmg < 20 39.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.99 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 3.39 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.69 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 $1.96
MG Growth Estimate 0.62%
MG Value $19.11
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $28.45
MG Value based on 0% Growth $16.68
Market Implied Growth Rate 15.62%
Current Price $77.98
% of Intrinsic Value 407.98%

Agilent Technologies Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the poor dividend history, and 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 $1.88 in 2015 to an estimated $1.96 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.62% 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 Agilent Technologies Inc revealed the company was trading above its Graham Number of $31.39. The company pays a dividend of $0.6 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 39.75, which was below the industry average of 53.13, 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 $-0.63.

Agilent Technologies 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) -$0.63
Graham Number $31.39
PEmg 39.75
Current Ratio 3.39
PB Ratio 4.99
Current Dividend $0.60
Dividend Yield 0.76%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $3,712,000,000
Total Current Liabilities $1,095,000,000
Long-Term Debt $1,798,000,000
Total Assets $8,952,000,000
Intangible Assets $3,699,000,000
Total Liabilities $3,916,000,000
Shares Outstanding (Diluted Average) 322,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.05
Oct2018 $0.97
Oct2017 $2.10
Oct2016 $1.40
Oct2015 $1.20
Oct2014 $1.62
Oct2013 $2.13
Oct2012 $3.27
Oct2011 $2.85
Oct2010 $1.94
Oct2009 -$0.09
Oct2008 $1.87
Oct2007 $1.57
Oct2006 $7.50
Oct2005 $0.65
Oct2004 $0.75
Oct2003 -$4.35
Oct2002 -$2.22
Oct2001 $0.38
Oct2000 $1.66
Oct1999 $1.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.96
Oct2018 $1.43
Oct2017 $1.67
Oct2016 $1.61
Oct2015 $1.88
Oct2014 $2.27
Oct2013 $2.40
Oct2012 $2.35
Oct2011 $1.80
Oct2010 $1.71
Oct2009 $1.83
Oct2008 $2.68
Oct2007 $2.46
Oct2006 $2.10
Oct2005 -$0.72
Oct2004 -$1.19
Oct2003 -$1.65

Recommended Reading:

Other ModernGraham posts about the company

Agilent Technologies Inc Valuation – May 2018 $A
Agilent Technologies Inc Valuation – February 2017 $A
Agilent Technologies Inc Valuation – August 2016 $A
Agilent Technologies Inc Valuation – February 2016
Agilent Technologies Inc. Valuation – October 2015 Update $A

Other ModernGraham posts about related companies

ResMed Inc Valuation – March 2019 #RMD
Cooper Companies Inc Valuation – March 2019 #COO
Edwards Lifesciences Corp Valuation – March 2019 $EW
Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX
Centene Corp Valuation – March 2019 $CNC
Abbott Laboratories Valuation – February 2019 $ABT
Becton Dickinson and Co Valuation – February 2019 $BDX
IQVIA Holdings Inc Valuation – February 2019 $IQV
Thermo Fisher Scientific Inc Valuation – February 2019 $TMO

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.

ResMed Inc Valuation – March 2019 #RMD

Company Profile (excerpt from Reuters): ResMed Inc., incorporated on March 31, 1994, is a holding company. The Company is engaged in the development, manufacturing, distribution and marketing of medical devices and cloud-based software applications that diagnose, treat and manage respiratory disorders, including sleep disordered breathing (SDB), chronic obstructive pulmonary disease (COPD), neuromuscular disease and other diseases. SDB includes obstructive sleep apnea (OSA) and other respiratory disorders that occur during sleep. The Company’s cloud-based software digital health applications, along with its devices, are designed to provide connected care to improve patient outcomes. The Company offers a treatment, nasal Continuous Positive Airway Pressure (CPAP), for OSA. CPAP systems deliver pressurized air, typically through a nasal mask, to prevent collapse of the upper airway during sleep. Its manufacturing operations are located in Australia, Singapore, Malaysia, France and the United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RMD – 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 $14,454,671,393 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.44 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 74.20% Pass
6. Moderate PEmg Ratio PEmg < 20 39.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.46 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 2.44 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.89 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 $2.57
MG Growth Estimate 2.51%
MG Value $34.82
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $37.32
MG Value based on 0% Growth $21.88
Market Implied Growth Rate 15.38%
Current Price $101.06
% of Intrinsic Value 290.28%

ResMed Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. 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 $2.2 in 2015 to an estimated $2.57 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.38% 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 ResMed Inc. revealed the company was trading above its Graham Number of $31.42. The company pays a dividend of $1.4 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 39.26, which was below the industry average of 53.13, 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 $-5.82.

ResMed 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) -$5.82
Graham Number $31.42
PEmg 39.26
Current Ratio 2.44
PB Ratio 7.46
Current Dividend $1.40
Dividend Yield 1.39%
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 12/1/2018
Total Current Assets $1,063,539,000
Total Current Liabilities $436,443,000
Long-Term Debt $1,185,500,000
Total Assets $3,859,816,000
Intangible Assets $2,243,971,000
Total Liabilities $1,903,772,000
Shares Outstanding (Diluted Average) 144,349,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.04
Jun2018 $2.19
Jun2017 $2.40
Jun2016 $2.49
Jun2015 $2.47
Jun2014 $2.39
Jun2013 $2.10
Jun2012 $1.71
Jun2011 $1.44
Jun2010 $1.23
Jun2009 $0.95
Jun2008 $0.70
Jun2007 $0.43
Jun2006 $0.58
Jun2005 $0.46
Jun2004 $0.41
Jun2003 $0.33
Jun2002 $0.28
Jun2001 $0.09
Jun2000 $0.17
Jun1999 $0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.57
Jun2018 $2.36
Jun2017 $2.42
Jun2016 $2.36
Jun2015 $2.20
Jun2014 $1.97
Jun2013 $1.67
Jun2012 $1.37
Jun2011 $1.12
Jun2010 $0.90
Jun2009 $0.70
Jun2008 $0.55
Jun2007 $0.46
Jun2006 $0.46
Jun2005 $0.37
Jun2004 $0.30
Jun2003 $0.23

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Cooper Companies Inc Valuation – March 2019 #COO
Edwards Lifesciences Corp Valuation – March 2019 $EW
Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX
Centene Corp Valuation – March 2019 $CNC
Abbott Laboratories Valuation – February 2019 $ABT
Becton Dickinson and Co Valuation – February 2019 $BDX
IQVIA Holdings Inc Valuation – February 2019 $IQV
Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN

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.

Cooper Companies Inc Valuation – March 2019 #COO

Company Profile (excerpt from Reuters): The Cooper Companies, Inc., incorporated on March 4, 1980, is a global medical device company. The Company operates through two business units: CooperVision, Inc. (CooperVision ) and CooperSurgical, Inc. (CooperSurgical). CooperVision offers soft contact lenses for the vision correction market. CooperSurgical primarily develops, manufactures, markets medical devices and procedures solutions, and provides services to improve health care delivery to families.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of COO – 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 $14,341,367,792 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.03 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 96.04% Pass
6. Moderate PEmg Ratio PEmg < 20 40.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.39 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 2.03 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.58 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.09
MG Growth Estimate 6.46%
MG Value $151.90
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $102.82
MG Value based on 0% Growth $60.28
Market Implied Growth Rate 16.24%
Current Price $290.67
% of Intrinsic Value 191.36%

Cooper Companies Inc 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 is only concerned with the level of debt relative to the net current assets. 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 $4.96 in 2015 to an estimated $7.09 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.24% 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 below the price.

At the time of valuation, further research into Cooper Companies Inc revealed the company was trading above its Graham Number of $131.68. The company pays a dividend of $0.06 per share, for a yield of 0% Its PEmg (price over earnings per share – ModernGraham) was 40.99, which was below the industry average of 53.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-34.28.

Cooper Companies 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) -$34.28
Graham Number $131.68
PEmg 40.99
Current Ratio 2.03
PB Ratio 4.39
Current Dividend $0.06
Dividend Yield 0.02%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2018
Total Current Assets $1,090,900,000
Total Current Liabilities $536,500,000
Long-Term Debt $1,985,700,000
Total Assets $6,112,800,000
Intangible Assets $3,913,400,000
Total Liabilities $2,805,000,000
Shares Outstanding (Diluted Average) 50,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.45
Oct2018 $2.81
Oct2017 $7.52
Oct2016 $5.59
Oct2015 $4.14
Oct2014 $5.51
Oct2013 $5.96
Oct2012 $5.05
Oct2011 $3.63
Oct2010 $2.43
Oct2009 $2.21
Oct2008 $1.43
Oct2007 -$0.25
Oct2006 $1.44
Oct2005 $2.04
Oct2004 $2.59
Oct2003 $2.09
Oct2002 $1.57
Oct2001 $1.22
Oct2000 $1.00
Oct1999 $0.88

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.09
Oct2018 $4.98
Oct2017 $5.96
Oct2016 $5.20
Oct2015 $4.96
Oct2014 $5.08
Oct2013 $4.53
Oct2012 $3.53
Oct2011 $2.47
Oct2010 $1.75
Oct2009 $1.40
Oct2008 $1.14
Oct2007 $1.19
Oct2006 $1.93
Oct2005 $2.08
Oct2004 $1.96
Oct2003 $1.55

Recommended Reading:

Other ModernGraham posts about the company

Cooper Companies Inc Valuation – May 2018 $COO
Cooper Companies Inc Valuation – Initial Coverage $COO

Other ModernGraham posts about related companies

Edwards Lifesciences Corp Valuation – March 2019 $EW
Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX
Centene Corp Valuation – March 2019 $CNC
Abbott Laboratories Valuation – February 2019 $ABT
Becton Dickinson and Co Valuation – February 2019 $BDX
IQVIA Holdings Inc Valuation – February 2019 $IQV
Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT

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.

Edwards Lifesciences Corp Valuation – March 2019 $EW

Company Profile (excerpt from Reuters): Edwards Lifesciences Corporation, incorporated on September 10, 1999, is a manufacturer of heart valve systems and repair products used to replace or repair a patient’s diseased or defective heart valve. The Company is globally engaged in patient-focused innovations for structural heart disease and critical care monitoring. Its segments include United States, Europe, Japan and Rest of World. Its products are categorized into three areas: Transcatheter Heart Valve Therapy, Surgical Heart Valve Therapy and Critical Care. It also develops hemodynamic monitoring systems that are used to measure a patient’s cardiovascular function in the hospital setting. The Company’s Transcatheter Heart Valve Therapy and Surgical Heart Valve Therapy products are manufactured in the United States, Singapore and Switzerland. Critical Care products are manufactured in its facilities located in Puerto Rico and the Dominican Republic. Its subsidiaries include Edwards Lifesciences Asset Management Corporation, Edwards Lifesciences CardiAQ LLC., Valtech Cardio Inc. and Red Hill Insurance Corporation.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EW – 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 $36,091,033,254 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.61 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 258.21% Pass
6. Moderate PEmg Ratio PEmg < 20 47.51 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.73 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 2.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.42 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.66
MG Growth Estimate 8.64%
MG Value $94.29
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $53.01
MG Value based on 0% Growth $31.08
Market Implied Growth Rate 19.51%
Current Price $173.71
% of Intrinsic Value 184.24%

Edwards Lifesciences Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.32 in 2015 to an estimated $3.66 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 19.51% 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 Edwards Lifesciences Corp revealed the company was trading above its Graham Number of $41.72. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 47.51, which was below the industry average of 53.13, 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 $0.49.

Edwards Lifesciences Corp receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.49
Graham Number $41.72
PEmg 47.51
Current Ratio 2.61
PB Ratio 11.73
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,286,900,000
Total Current Liabilities $876,600,000
Long-Term Debt $593,800,000
Total Assets $5,323,700,000
Intangible Assets $1,455,400,000
Total Liabilities $2,183,300,000
Shares Outstanding (Diluted Average) 212,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.15
Dec2018 $3.38
Dec2017 $2.70
Dec2016 $2.61
Dec2015 $2.25
Dec2014 $3.74
Dec2013 $1.71
Dec2012 $1.23
Dec2011 $0.99
Dec2010 $0.92
Dec2009 $0.98
Dec2008 $0.55
Dec2007 $0.47
Dec2006 $0.53
Dec2005 $0.32
Dec2004 $0.01
Dec2003 $0.32
Dec2002 $0.23
Dec2001 -$0.05
Dec2000 -$1.16

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.66
Dec2018 $2.92
Dec2017 $2.66
Dec2016 $2.53
Dec2015 $2.32
Dec2014 $2.14
Dec2013 $1.28
Dec2012 $1.02
Dec2011 $0.87
Dec2010 $0.77
Dec2009 $0.66
Dec2008 $0.46
Dec2007 $0.38
Dec2006 $0.32
Dec2005 $0.20
Dec2004 $0.05

Recommended Reading:

Other ModernGraham posts about the company

Edwards Lifesciences Corp Valuation – May 2018 $EW
12 Best Stocks for Value Investors This Week – 2/4/17
Edwards Lifesciences Corp Valuation – January 2017 $EW
Edwards Lifesciences Corp Valuation – August 2016 $EW
15 Best Stocks For Value Investors This Week – 2/13/16

Other ModernGraham posts about related companies

Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX
Centene Corp Valuation – March 2019 $CNC
Abbott Laboratories Valuation – February 2019 $ABT
Becton Dickinson and Co Valuation – February 2019 $BDX
IQVIA Holdings Inc Valuation – February 2019 $IQV
Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN

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.

Boston Scientific Corporation Valuation – March 2019 $BSX

Company Profile (excerpt from Reuters): Boston Scientific Corporation, incorporated on June 22, 1979, is a developer, manufacturer and marketer of medical devices that are used in a range of interventional medical specialties. The Company offers its products by seven businesses: interventional cardiology, cardiac rhythm management, endoscopy, peripheral interventions, urology and pelvic health, neuromodulation, and electrophysiology. It operates through three segments: Cardiovascular, Rhythm Management, and MedSurg. Its Cardiovascular segment consists of Interventional Cardiology and Peripheral Interventions businesses. Rhythm Management consists of Cardiac Rhythm Management and Electrophysiology businesses. MedSurg consists of Endoscopy, Urology and Pelvic Health, and Neuromodulation businesses. It sells ACURATE TA and ACURATE neo /TF valve systems in Europe and in other geographies outside of the United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BSX – 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 $56,533,391,248 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.76 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 -185.15% Fail
6. Moderate PEmg Ratio PEmg < 20 46.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.57 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 0.76 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.82 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.87
MG Growth Estimate 15.00%
MG Value $33.42
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $12.59
MG Value based on 0% Growth $7.38
Market Implied Growth Rate 19.25%
Current Price $40.79
% of Intrinsic Value 122.06%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.47 in 2015 to an estimated $0.87 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 19.25% 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 Boston Scientific Corporation revealed the company was trading above its Graham Number of $14.78. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 46.99, which was below the industry average of 53.13, 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 $-5.88.

Boston Scientific Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.88
Graham Number $14.78
PEmg 46.99
Current Ratio 0.76
PB Ratio 6.57
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,003,000,000
Total Current Liabilities $5,260,000,000
Long-Term Debt $4,797,000,000
Total Assets $20,999,000,000
Intangible Assets $14,283,000,000
Total Liabilities $12,273,000,000
Shares Outstanding (Diluted Average) 1,406,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.54
Dec2018 $1.19
Dec2017 $0.08
Dec2016 $0.25
Dec2015 -$0.18
Dec2014 -$0.09
Dec2013 -$0.09
Dec2012 -$2.89
Dec2011 $0.29
Dec2010 -$0.70
Dec2009 -$0.68
Dec2008 -$1.36
Dec2007 -$0.33
Dec2006 -$2.81
Dec2005 $0.75
Dec2004 $1.24
Dec2003 $0.56
Dec2002 $0.45
Dec2001 -$0.07
Dec2000 $0.46
Dec1999 $0.45

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.87
Dec2018 $0.44
Dec2017 $0.04
Dec2016 -$0.19
Dec2015 -$0.47
Dec2014 -$0.64
Dec2013 -$0.88
Dec2012 -$1.21
Dec2011 -$0.43
Dec2010 -$0.92
Dec2009 -$0.98
Dec2008 -$0.92
Dec2007 -$0.51
Dec2006 -$0.38
Dec2005 $0.75
Dec2004 $0.67
Dec2003 $0.38

Recommended Reading:

Other ModernGraham posts about the company

Boston Scientific Corp Valuation – May 2018 $BSX
Most Overvalued Stocks of the S&P 500 – March 2017
Boston Scientific Corp Valuation – January 2017 $BSX
Boston Scientific Inc. Analysis – September 2015 Update $BSX
23 Companies to Research This Week – 9/13/14

Other ModernGraham posts about related companies

Centene Corp Valuation – March 2019 $CNC
Abbott Laboratories Valuation – February 2019 $ABT
Becton Dickinson and Co Valuation – February 2019 $BDX
IQVIA Holdings Inc Valuation – February 2019 $IQV
Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK

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.

Baxter International Inc Valuation – March 2019 $BAX

Company Profile (excerpt from Reuters): Baxter International Inc., incorporated on October 19, 1931, through its subsidiaries, provides a portfolio of essential renal and hospital products, including acute and chronic dialysis; sterile intravenous (IV) solutions; infusion systems and devices; parenteral nutrition therapies; premixed and oncolytic injectables; biosurgery products and anesthetics; drug reconstitution systems, and pharmacy automation, software and services. The Company operates through two segments: Hospital Products and Renal. The Company’s products are used by hospitals, kidney dialysis centers, nursing homes, rehabilitation centers, doctors’ offices and by patients at home under physician supervision. As of December 31, 2016, the Company manufactured products in over 20 countries and sold them in over 100 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BAX – 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 $38,937,512,485 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.09 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 -29.57% Fail
6. Moderate PEmg Ratio PEmg < 20 22.33 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.25 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 2.09 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.13 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.40
MG Growth Estimate 0.23%
MG Value $30.48
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $49.33
MG Value based on 0% Growth $28.92
Market Implied Growth Rate 6.92%
Current Price $75.97
% of Intrinsic Value 249.24%

Baxter International Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. 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 $3.35 in 2015 to an estimated $3.4 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.92% 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 Baxter International Inc revealed the company was trading above its Graham Number of $31.96. The company pays a dividend of $0.73 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 22.33, which was below the industry average of 53.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.53.

Baxter International 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) -$3.53
Graham Number $31.96
PEmg 22.33
Current Ratio 2.09
PB Ratio 5.25
Current Dividend $0.73
Dividend Yield 0.96%
Number of Consecutive Years of Dividend Growth 2

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 12/1/2018
Total Current Assets $5,919,000,000
Total Current Liabilities $2,836,000,000
Long-Term Debt $3,473,000,000
Total Assets $15,641,000,000
Intangible Assets $4,356,000,000
Total Liabilities $7,825,000,000
Shares Outstanding (Diluted Average) 540,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.10
Dec2018 $2.97
Dec2017 $1.29
Dec2016 $9.01
Dec2015 $1.76
Dec2014 $4.56
Dec2013 $3.66
Dec2012 $4.18
Dec2011 $3.88
Dec2010 $2.39
Dec2009 $3.59
Dec2008 $3.16
Dec2007 $2.61
Dec2006 $2.13
Dec2005 $1.52
Dec2004 $0.63
Dec2003 $1.50
Dec2002 $1.66
Dec2001 $1.09
Dec2000 $1.25
Dec1999 $1.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.40
Dec2018 $3.67
Dec2017 $4.04
Dec2016 $5.15
Dec2015 $3.35
Dec2014 $4.01
Dec2013 $3.67
Dec2012 $3.60
Dec2011 $3.24
Dec2010 $2.88
Dec2009 $2.95
Dec2008 $2.42
Dec2007 $1.93
Dec2006 $1.55
Dec2005 $1.27
Dec2004 $1.17
Dec2003 $1.42

Recommended Reading:

Other ModernGraham posts about the company

Baxter International Inc Valuation – May 2018 $BAX
10 Low PE Stock Picks for the Defensive Investor – August 2017
10 Low PE Stock Picks for the Defensive Investor – February 2017
10 Undervalued Companies for the Defensive Investor – February 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017

Other ModernGraham posts about related companies

Centene Corp Valuation – March 2019 $CNC
Abbott Laboratories Valuation – February 2019 $ABT
Becton Dickinson and Co Valuation – February 2019 $BDX
IQVIA Holdings Inc Valuation – February 2019 $IQV
Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK

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.

Centene Corp Valuation – March 2019 $CNC

Company Profile (excerpt from Reuters): Centene Corporation, incorporated on September 26, 2001, is a healthcare company. The Company provides a portfolio of services to government sponsored healthcare programs, focusing on under-insured and uninsured individuals. The Company operates through two segments: Managed Care and Specialty Services. It provides member-focused services through locally based staff by assisting in accessing care, coordinating referrals to related health and social services and addressing member concerns and questions. It also provides education and outreach programs to inform and assist members in accessing appropriate healthcare services. The Managed Care segment consists of the Company’s health plans, including all of the functions needed to operate them. The Specialty Services segment consists of the Company’s specialty companies, offering auxiliary healthcare services and products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CNC – 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 $25,290,159,805 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.00 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 769.31% Pass
6. Moderate PEmg Ratio PEmg < 20 21.95 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.34 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 1.00 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 246.22 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.79
MG Growth Estimate 15.00%
MG Value $107.34
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $40.43
MG Value based on 0% Growth $23.70
Market Implied Growth Rate 6.72%
Current Price $61.17
% of Intrinsic Value 56.99%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.96 in 2015 to an estimated $2.79 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.72% 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 Centene Corp revealed the company was trading above its Graham Number of $49.9. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 21.94, which was below the industry average of 53.13, 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 $-18.78.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$18.78
Graham Number $49.90
PEmg 21.94
Current Ratio 1.00
PB Ratio 2.33
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $11,998,000,000
Total Current Liabilities $11,971,000,000
Long-Term Debt $6,648,000,000
Total Assets $30,901,000,000
Intangible Assets $9,254,000,000
Total Liabilities $19,888,000,000
Shares Outstanding (Diluted Average) 420,226,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.18
Dec2018 $2.26
Dec2017 $2.34
Dec2016 $1.71
Dec2015 $1.44
Dec2014 $1.13
Dec2013 $0.74
Dec2012 $0.01
Dec2011 $0.53
Dec2010 $0.47
Dec2009 $0.47
Dec2008 $0.47
Dec2007 $0.41
Dec2006 -$0.25
Dec2005 $0.31
Dec2004 $0.26
Dec2003 $0.22
Dec2002 $0.18
Dec2001 $0.13
Dec2000 $0.09
Dec1999 -$0.92

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.79
Dec2018 $1.99
Dec2017 $1.72
Dec2016 $1.28
Dec2015 $0.96
Dec2014 $0.68
Dec2013 $0.45
Dec2012 $0.33
Dec2011 $0.49
Dec2010 $0.41
Dec2009 $0.35
Dec2008 $0.27
Dec2007 $0.18
Dec2006 $0.09
Dec2005 $0.25
Dec2004 $0.20
Dec2003 $0.10

Recommended Reading:

Other ModernGraham posts about the company

Centene Corp Valuation – May 2018 $CNC
Centene Corp Valuation – Initial Coverage $CNC

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Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK
Align Technology Inc Valuation – February 2019 $ALGN

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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