Twitter Inc Valuation – April 2019 #TWTR

Company Profile (excerpt from Reuters): Twitter, Inc. (Twitter), incorporated on April 19, 2007, offers products and services for users, advertisers, developers and data partners. The Company’s products and services include Twitter, Periscope, Promoted Tweets, Promoted Accounts and Promoted Trends.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TWTR – April 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 $26,509,140,015 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.69 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -183.13% Fail
6. Moderate PEmg Ratio PEmg < 20 76.76 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.94 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 4.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.31 Pass
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 $0.45
MG Growth Estimate 15.00%
MG Value $17.33
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $6.53
MG Value based on 0% Growth $3.83
Market Implied Growth Rate 34.13%
Current Price $34.54
% of Intrinsic Value 199.37%

Twitter Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the 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 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 $-1.4 in 2015 to an estimated $0.45 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 34.13% 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 Twitter Inc revealed the company was trading above its Graham Number of $11.08. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 76.76, which was above the industry average of 33.53. Finally, the company was trading above its Net Current Asset Value (NCAV) of $4.84.

Twitter Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $4.84
Graham Number $11.08
PEmg 76.76
Current Ratio 4.69
PB Ratio 3.94
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $7,111,036,000
Total Current Liabilities $1,516,311,000
Long-Term Debt $1,730,922,000
Total Assets $10,162,572,000
Intangible Assets $1,272,294,000
Total Liabilities $3,356,978,000
Shares Outstanding (Diluted Average) 776,211,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.61
Dec2018 $1.56
Dec2017 -$0.15
Dec2016 -$0.65
Dec2015 -$0.79
Dec2014 -$0.96
Dec2013 -$3.41
Dec2012 -$0.68
Dec2011 -$1.60
Dec2010 -$0.15

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.45
Dec2018 $0.18
Dec2017 -$0.74
Dec2016 -$1.12
Dec2015 -$1.40
Dec2014 -$1.59
Dec2013 -$1.66
Dec2012 -$0.68
Dec2011 -$0.57
Dec2010 -$0.05

Recommended Reading:

Other ModernGraham posts about the company

Twitter Inc Valuation – June 2018 $TWTR

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Twitter Inc Valuation – June 2018 $TWTR
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eBay Inc Valuation – May 2018 $EBAY
Facebook Inc Valuation – March 2018 $FB
Salesforce.com Inc Valuation – April 2017 $CRM
Paypal Holdings Inc Valuation – Initial Coverage $PYPL
Netflix Inc Valuation – February 2017 $NFLX

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.

Littelfuse Inc Valuation – September 2018 $LFUS

Company Profile (excerpt from Reuters): Littelfuse, Inc., incorporated on November 25, 1991, is a supplier of circuit protection products for the electronics, automotive and industrial markets. The Company operates through three segments: Electronics, Automotive and Industrial. In addition to the portfolio of circuit protection products and solutions, the Company offers electronic reed switches and sensors, automotive sensors for comfort and safety systems and a range of electromechanical and electronic switch and control devices for commercial and specialty vehicles, as well as protection relays and power distribution centers for the control and distribution of electricity.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LFUS – September 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 $5,704,732,255 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.59 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 120.38% Pass
6. Moderate PEmg Ratio PEmg < 20 40.15 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.86 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 3.59 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.99 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 $5.57
MG Growth Estimate 6.28%
MG Value $117.27
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $80.75
MG Value based on 0% Growth $47.33
Market Implied Growth Rate 15.82%
Current Price $223.56
% of Intrinsic Value 190.63%

Littelfuse, 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 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 $3.93 in 2014 to an estimated $5.57 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.82% 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 Littelfuse, Inc. revealed the company was trading above its Graham Number of $83.77. The company pays a dividend of $1.36 per share, for a yield of 0.6% Its PEmg (price over earnings per share – ModernGraham) was 40.15, which was below the industry average of 40.28, 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 $-6.29.

Littelfuse, 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) -$6.29
Graham Number $83.77
PEmg 40.15
Current Ratio 3.59
PB Ratio 3.86
Current Dividend $1.36
Dividend Yield 0.61%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $958,201,000
Total Current Liabilities $267,163,000
Long-Term Debt $687,538,000
Total Assets $2,587,994,000
Intangible Assets $1,222,279,000
Total Liabilities $1,117,974,000
Shares Outstanding (Diluted Average) 25,401,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.49
Dec2017 $5.21
Dec2016 $4.60
Dec2015 $3.56
Dec2014 $4.32
Dec2013 $3.94
Dec2012 $3.40
Dec2011 $3.90
Dec2010 $3.52
Dec2009 $0.43
Dec2008 $0.37
Dec2007 $1.64
Dec2006 $1.06
Dec2005 $0.78
Dec2004 $1.59
Dec2003 $0.70
Dec2002 $0.44
Dec2001 $0.19
Dec2000 $1.69
Dec1999 $1.16
Dec1998 $0.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.57
Dec2017 $4.51
Dec2016 $4.10
Dec2015 $3.84
Dec2014 $3.93
Dec2013 $3.50
Dec2012 $2.96
Dec2011 $2.48
Dec2010 $1.65
Dec2009 $0.76
Dec2008 $0.98
Dec2007 $1.24
Dec2006 $1.00
Dec2005 $0.90
Dec2004 $0.94
Dec2003 $0.69
Dec2002 $0.75

Recommended Reading:

Other ModernGraham posts about the company

Littelfuse Inc Valuation – Initial Coverage $LFUS

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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.

ITT Inc Valuation – July 2018 $ITT

Company Profile (excerpt from Reuters): ITT Inc., incorporated on January 1, 2016, is a manufacturer of engineered critical components and customized technology solutions for the energy, transportation and industrial markets. The Company operates through four segments: Industrial Process (IP), Motion Technologies (MT), Interconnect Solutions (ICS) and Control Technologies (CT). The Company manufactures components that are integral to the operation of systems and manufacturing processes in these markets. The Company’s brands include Goulds Pumps, Bornemann, Engineered Valves, Cannon, VEAM, BIW Connector Systems, KONI, Wolverine, Enidine, Environmental Control Systems and ITT.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ITT – July 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 $4,896,148,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.58 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 -55.40% Fail
6. Moderate PEmg Ratio PEmg < 20 22.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.98 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 1.58 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.42
MG Growth Estimate -1.72%
MG Value $12.23
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $35.12
MG Value based on 0% Growth $20.59
Market Implied Growth Rate 7.23%
Current Price $55.62
% of Intrinsic Value 454.69%

ITT Inc is suitable for the Enterprising Investor but not 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 and PB ratios. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. 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 seeing its EPSmg (normalized earnings) decline from $2.74 in 2014 to an estimated $2.42 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.23% 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 ITT Inc revealed the company was trading above its Graham Number of $35.24. The company pays a dividend of $0.51 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 22.96, which was below the industry average of 30.22, 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 $-6.89.

ITT 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) -$6.89
Graham Number $35.24
PEmg 22.96
Current Ratio 1.58
PB Ratio 2.98
Current Dividend $0.51
Dividend Yield 0.92%
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 3/1/2018
Total Current Assets $1,598,000,000
Total Current Liabilities $1,009,100,000
Long-Term Debt $0
Total Assets $3,871,500,000
Intangible Assets $1,086,900,000
Total Liabilities $2,211,000,000
Shares Outstanding (Diluted Average) 89,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.05
Dec2017 $1.28
Dec2016 $2.07
Dec2015 $3.88
Dec2014 $1.99
Dec2013 $5.29
Dec2012 $1.33
Dec2011 -$1.40
Dec2010 $8.75
Dec2009 $7.00
Dec2008 $8.66
Dec2007 $8.06
Dec2006 $6.20
Dec2005 $3.82
Dec2004 $4.58
Dec2003 $4.30
Dec2002 $4.06
Dec2001 $3.05
Dec2000 $2.94
Dec1999 $2.53
Dec1998 $13.55

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.42
Dec2017 $2.37
Dec2016 $2.92
Dec2015 $2.97
Dec2014 $2.74
Dec2013 $3.47
Dec2012 $3.33
Dec2011 $4.96
Dec2010 $8.00
Dec2009 $7.34
Dec2008 $7.09
Dec2007 $6.00
Dec2006 $4.85
Dec2005 $4.10
Dec2004 $4.09
Dec2003 $3.69
Dec2002 $4.00

Recommended Reading:

Other ModernGraham posts about the company

ITT Inc Valuation – Initial Coverage $ITT

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Illinois Tool Works Inc Valuation – August 2017 $ITW
Honeywell International Inc Valuation – July 2017 $HON
Carlisle Companies Inc Valuation – Initial Coverage $CSL
ITT Inc Valuation – Initial Coverage $ITT
3M Co. Valuation – December 2016 $MMM

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.

Twitter Inc Valuation – June 2018 $TWTR

Company Profile (excerpt from Reuters): Twitter, Inc. (Twitter), incorporated on April 19, 2007, offers products and services for users, advertisers, developers and data partners. The Company’s products and services include Twitter, Periscope, Promoted Tweets, Promoted Accounts and Promoted Trends.

TWTR Chart

TWTR data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TWTR – 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 $32,069,056,823 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 10.23 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -85.00% Fail
6. Moderate PEmg Ratio PEmg < 20 -286.05 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.42 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 10.23 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.34 Pass
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 -$0.15
MG Growth Estimate 13.55%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$2.21
MG Value based on 0% Growth -$1.30
Market Implied Growth Rate -147.27%
Current Price $43.67
% of Intrinsic Value N/A

Twitter Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the 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 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 $-1.58 in 2014 to an estimated $-0.15 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Twitter Inc revealed the company was trading above its Graham Number of $9.23. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -286.05, which was below the industry average of 163.46, 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 $4.02.

Twitter 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) $4.02
Graham Number $9.23
PEmg -286.05
Current Ratio 10.23
PB Ratio 6.42
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 $5,409,235,000
Total Current Liabilities $528,654,000
Long-Term Debt $1,650,064,000
Total Assets $7,539,441,000
Intangible Assets $1,235,726,000
Total Liabilities $2,329,005,000
Shares Outstanding (Diluted Average) 765,861,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.56
Dec2017 -$0.15
Dec2016 -$0.65
Dec2015 -$0.79
Dec2014 -$0.96
Dec2013 -$3.41
Dec2012 -$0.68
Dec2011 -$1.60

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.15
Dec2017 -$0.74
Dec2016 -$1.12
Dec2015 -$1.40
Dec2014 -$1.58
Dec2013 -$1.64
Dec2012 -$0.65
Dec2011 -$0.53

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

eBay Inc Valuation – May 2018 $EBAY
Facebook Inc Valuation – March 2018 $FB
Salesforce.com Inc Valuation – April 2017 $CRM
Paypal Holdings Inc Valuation – Initial Coverage $PYPL
Netflix Inc Valuation – February 2017 $NFLX
Shutterstock Inc Valuation – Initial Coverage $SSTK
Synchronoss Technologies Inc Valuation – Initial Coverage $SNCR
eBay Inc Valuation – December 2016 $EBAY
Facebook Inc Valuation – July 2016 $FB
Salesforce.com Valuation – January 2016 Update $CRM

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.

Urban Outfitters Inc Valuation – June 2018 $URBN

Company Profile (excerpt from Reuters): Urban Outfitters, Inc., incorporated on August 06, 1976, is a lifestyle specialty retail company. The Company operates through two segments: Retail and Wholesale. The Company’s Retail segment consists of its Urban Outfitters, Anthropologie, Free People, Terrain and Bhldn brands, whose merchandise is sold to its customers through retail stores, Websites, mobile applications, catalogs and customer contact centers. The Retail segment also includes Vetri Family, which operates restaurants under the names Amis, Alla Spina, Lo Spiedo, Pizzeria Vetri and Osteria. Its Wholesale segment consists of the Free People wholesale division that primarily designs, develops and markets young women’s contemporary casual apparel and shoes through individual and chain specialty stores and department stores.

URBN Chart

URBN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of URBN – 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 $5,042,320,182 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.64 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 22.60% Fail
6. Moderate PEmg Ratio PEmg < 20 27.28 Fail
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 2.64 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 Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.70
MG Growth Estimate 0.43%
MG Value $15.92
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $24.66
MG Value based on 0% Growth $14.46
Market Implied Growth Rate 9.39%
Current Price $46.40
% of Intrinsic Value 291.52%

Urban Outfitters, 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 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 $1.65 in 2015 to an estimated $1.7 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.39% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Urban Outfitters, Inc. revealed the company was trading above its Graham Number of $24.22. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 27.28, 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 $3.58.

Urban Outfitters, 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) $3.58
Graham Number $24.22
PEmg 27.28
Current Ratio 2.64
PB Ratio 3.78
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 4/1/2018
Total Current Assets $1,097,138,000
Total Current Liabilities $415,091,000
Long-Term Debt $0
Total Assets $2,051,215,000
Intangible Assets $0
Total Liabilities $704,800,000
Shares Outstanding (Diluted Average) 109,744,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.17
Jan2018 $0.96
Jan2017 $1.86
Jan2016 $1.78
Jan2015 $1.68
Jan2014 $1.89
Jan2013 $1.62
Jan2012 $1.19
Jan2011 $1.60
Jan2010 $1.28
Jan2009 $1.17
Jan2008 $0.94
Jan2007 $0.69
Jan2006 $0.77
Jan2005 $0.54
Jan2004 $0.30
Jan2003 $0.18
Jan2002 $0.11
Jan2001 $0.08
Jan2000 $0.13
Jan1999 $0.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.70
Jan2018 $1.52
Jan2017 $1.79
Jan2016 $1.71
Jan2015 $1.65
Jan2014 $1.60
Jan2013 $1.43
Jan2012 $1.30
Jan2011 $1.28
Jan2010 $1.07
Jan2009 $0.92
Jan2008 $0.74
Jan2007 $0.60
Jan2006 $0.49
Jan2005 $0.32
Jan2004 $0.19
Jan2003 $0.13

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Defensive Investor – August 2017
9 Best Stocks For Value Investors This Week – 7/23/16
Urban Outfitters Inc Valuation – July 2016 $URBN
19 Best Stocks For Value Investors This Week – 1/9/16
Urban Outfitters Inc Valuation – January 2016 Update $URBN

Other ModernGraham posts about related companies

Ulta Beauty Inc Valuation – June 2018 $ULTA
Kohl’s Corporation Valuation – June 2018 $KSS
Dollar Tree Inc Valuation – May 2018 $DLTR
TJX Companies Inc Valuation – May 2018 $TJX
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.

American Eagle Outfitters Inc Valuation – May 2018 $AEO

Company Profile (excerpt from Reuters): American Eagle Outfitters, Inc. (AEO Inc.), incorporated on January 26, 1972, is a multi-brand specialty retailer. The Company offers a range of apparel and accessories for men and women under the American Eagle Outfitters Brand (AEO Brand), and intimates, apparel and personal care products for women under the Aerie brand. AEO Inc. operates stores in the United States, Canada, Mexico, Hong Kong, China and the United Kingdom. As of January 28, 2017, the Company operated over 1,000 retail stores and online at ae.com and aerie.com in the United States and internationally. Its company-owned retail stores are located in shopping malls, lifestyle centers and street locations in the United States, Canada, Mexico, China, Hong Kong and the United Kingdom.

AEO Chart

AEO data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AEO – 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 $3,848,209,366 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.00 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 59.65% Pass
6. Moderate PEmg Ratio PEmg < 20 19.44 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.25 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 2.00 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 $1.16
MG Growth Estimate 12.34%
MG Value $38.47
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $16.81
MG Value based on 0% Growth $9.85
Market Implied Growth Rate 5.47%
Current Price $22.54
% of Intrinsic Value 58.59%

American Eagle Outfitters is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. 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 $0.64 in 2015 to an estimated $1.16 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.47% 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 American Eagle Outfitters revealed the company was trading above its Graham Number of $14.5. The company pays a dividend of $0.5 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 19.44, which was below the industry average of 49.11, 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 $2.22.

American Eagle Outfitters performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $2.22
Graham Number $14.50
PEmg 19.44
Current Ratio 2.00
PB Ratio 3.25
Current Dividend $0.50
Dividend Yield 2.22%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2018
Total Current Assets $968,530,000
Total Current Liabilities $485,221,000
Long-Term Debt $0
Total Assets $1,816,313,000
Intangible Assets $61,736,000
Total Liabilities $569,522,000
Shares Outstanding (Diluted Average) 179,844,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.35
Jan2018 $1.13
Jan2017 $1.16
Jan2016 $1.11
Jan2015 $0.42
Jan2014 $0.43
Jan2013 $1.16
Jan2012 $0.77
Jan2011 $0.70
Jan2010 $0.81
Jan2009 $0.86
Jan2008 $1.82
Jan2007 $1.70
Jan2006 $1.26
Jan2005 $0.95
Jan2004 $0.38
Jan2003 $0.40
Jan2002 $0.48
Jan2001 $0.43
Jan2000 $0.41
Jan1999 $0.25

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.16
Jan2018 $0.99
Jan2017 $0.90
Jan2016 $0.77
Jan2015 $0.64
Jan2014 $0.75
Jan2013 $0.90
Jan2012 $0.84
Jan2011 $0.98
Jan2010 $1.17
Jan2009 $1.34
Jan2008 $1.46
Jan2007 $1.17
Jan2006 $0.83
Jan2005 $0.59
Jan2004 $0.41
Jan2003 $0.42

Recommended Reading:

Other ModernGraham posts about the company

American Eagle Outfitters Valuation – January 2017 $AEO
American Eagle Outfitters Valuation – August 2016 $AEO
American Eagle Outfitters Valuation – February 2016 $AEO
American Eagle Outfitters Valuation – November 2015 Update $AEO
American Eagle Outfitters Analysis – Initial Coverage $AEO

Other ModernGraham posts about related companies

Gap Inc Valuation – May 2018 $GPS
PVH Corp Valuation – May 2018 $PVH
VF Corp Valuation – April 2018 $VFC
Michael Kors Holdings Ltd Valuation – March 2018 $KORS
Foot Locker Inc Valuation – March 2018 $FL
Under Armour Inc Valuation – March 2018 $UA
Hanesbrands Inc Valuation – March 2018 $HBI
L Brands Inc Valuation – March 2018 $LB
Nike Inc Valuation – February 2018 $NKE
Nike Inc Valuation – July 2017 $NKE

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.

Littelfuse Inc Valuation – Initial Coverage $LFUS

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 – February 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 Littelfuse Inc (LFUS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Littelfuse, Inc. is a supplier of circuit protection products for the electronics, automotive and electrical industries. The Company operates through three segments: Electronics, Automotive and Industrial. Its Electronics segment provides circuit protection components to manufacturers of a range of electronic products, including mobile phones, computers, liquid-crystal-display televisions, telecommunications equipment, medical devices, lighting products and white goods. Its Automotive segment provides circuit protection products to the automotive original equipment manufacturers and parts distributors of passenger automobiles, trucks, buses and off-road equipment. Its Industrial segment provides circuit protection products for industrial and commercial customers, which include power fuses and other circuit protection devices that are used in commercial and industrial buildings and large equipment, such as heating, ventilation and air conditioning systems, elevators and machine tools.

LFUS Chart

LFUS data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LFUS – March 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 $3,552,164,004 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.26 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 242.82% Pass
6. Moderate PEmg Ratio PEmg < 20 31.60 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.40 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 3.26 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.06 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $4.99
MG Growth Estimate 6.42%
MG Value $106.52
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $72.41
MG Value based on 0% Growth $42.45
Market Implied Growth Rate 11.55%
Current Price $157.83
% of Intrinsic Value 148.17%

Littelfuse, 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 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 $3.5 in 2013 to an estimated $4.99 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.55% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Littelfuse, Inc. revealed the company was trading above its Graham Number of $73.38. The company pays a dividend of $1.24 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 31.6, which was above the industry average of 28.12. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.83.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.83
Graham Number $73.38
PEmg 31.60
Current Ratio 3.26
PB Ratio 4.40
Current Dividend $1.24
Dividend Yield 0.79%
Number of Consecutive Years of Dividend Growth 8

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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 12/1/2016
Total Current Assets $612,081,000
Total Current Liabilities $187,541,000
Long-Term Debt $447,892,000
Total Assets $1,491,194,000
Intangible Assets $616,570,000
Total Liabilities $676,406,000
Shares Outstanding (Diluted Average) 22,727,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.65
Dec2016 $4.60
Dec2015 $3.56
Dec2014 $4.32
Dec2013 $3.94
Dec2012 $3.40
Dec2011 $3.90
Dec2010 $3.52
Dec2009 $0.43
Dec2008 $0.37
Dec2007 $1.64
Dec2006 $1.06
Dec2005 $0.78
Dec2004 $1.59
Dec2003 $0.70
Dec2002 $0.44
Dec2001 $0.19
Dec2000 $1.69
Dec1999 $1.16
Dec1998 $0.86
Dec1997 $1.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.99
Dec2016 $4.10
Dec2015 $3.84
Dec2014 $3.93
Dec2013 $3.50
Dec2012 $2.96
Dec2011 $2.48
Dec2010 $1.65
Dec2009 $0.76
Dec2008 $0.98
Dec2007 $1.24
Dec2006 $1.00
Dec2005 $0.90
Dec2004 $0.94
Dec2003 $0.69
Dec2002 $0.75
Dec2001 $0.93

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

CTS Corporation Valuation – Initial Coverage $CTS
IT Hardware Industry Review – March 2017
Garmin Ltd Valuation – March 2017 $GRMN
Hewlett Packard Enterprise Co Valuation – Initial Valuation $HPE
Fortive Corp Valuation – Initial Coverage $FTV
Analog Devices Inc Valuation – February 2017 $ADI
Micron Technology Inc Valuation – February 2017 $MU
Amphenol Corp Valuation – February 2017 $APH
Kopin Corporation Valuation – Initial Coverage $KOPN
Xilinx Inc Valuation – February 2017 $XLNX

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.

ITT Inc Valuation – Initial Coverage $ITT

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 – January 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 ITT Inc (ITT) fares in the ModernGraham valuation model.

ITT Chart

ITT data by YCharts

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of ITT – January 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 $3,721,158,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.61 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 -66.15% Fail
6. Moderate PEmg Ratio PEmg < 20 14.26 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.59 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 1.61 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 Fail

Stage 2: Determination of Intrinsic Value

EPSmg $2.95
MG Growth Estimate -1.73%
MG Value $14.85
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $42.73
MG Value based on 0% Growth $25.05
Market Implied Growth Rate 2.88%
Current Price $42.03
% of Intrinsic Value 282.94%

ITT Inc. is suitable for the Enterprising Investor but not 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. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. 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 seeing its EPSmg (normalized earnings) decline from $3.33 in 2012 to an estimated $2.95 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.88% 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 ITT Inc. revealed the company was trading above its Graham Number of $28.31. The company pays a dividend of $0.49 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 14.26, which was below the industry average of 27.42, 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 $-8.31.

ITT 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) -$8.31
Graham Number $28.31
PEmg 14.26
Current Ratio 1.61
PB Ratio 2.59
Current Dividend $0.49
Dividend Yield 1.17%
Number of Consecutive Years of Dividend Growth 4

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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 9/1/2016
Total Current Assets $1,515,800,000
Total Current Liabilities $938,900,000
Long-Term Debt $0
Total Assets $3,717,600,000
Intangible Assets $951,200,000
Total Liabilities $2,261,600,000
Shares Outstanding (Diluted Average) 89,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.16
Dec2015 $3.88
Dec2014 $1.99
Dec2013 $5.29
Dec2012 $1.33
Dec2011 -$1.40
Dec2010 $8.75
Dec2009 $7.00
Dec2008 $8.66
Dec2007 $8.06
Dec2006 $6.20
Dec2005 $3.82
Dec2004 $4.58
Dec2003 $4.30
Dec2002 $4.06
Dec2001 $3.05
Dec2000 $2.94
Dec1999 $2.53
Dec1998 $13.55
Dec1997 $0.89
Dec1996 $1.85

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.95
Dec2015 $2.97
Dec2014 $2.74
Dec2013 $3.47
Dec2012 $3.33
Dec2011 $4.96
Dec2010 $8.00
Dec2009 $7.34
Dec2008 $7.09
Dec2007 $6.00
Dec2006 $4.85
Dec2005 $4.10
Dec2004 $4.09
Dec2003 $3.69
Dec2002 $4.00
Dec2001 $4.17
Dec2000 $4.61

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

E I du Pont de Nemours & Co Valuation – August 2016 $DD
3M Company Valuation – August 2016 $MMM
General Electric Co Valuation – July 2016 $GE
Illinois Tool Works Inc Valuation – July 2016 $ITW
Raven Industries Inc Valuation – July 2016 $RAVN
E.I. du Pont de Nemours Valuation – February 2016 $DD
Honeywell International Inc Valuation – February 2016 $HON
3M Company Valuation – February 2016 Update $MMM
Raven Industries Inc Valuation – January 2016 Update $RAVN
Illinois Tool Works Inc Valuation – January 2016 Update $ITW

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.

American Eagle Outfitters Valuation – January 2017 $AEO

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 – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how American Eagle Outfitters (AEO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): American Eagle Outfitters, Inc. (AEO Inc.) is a specialty retailer, operating over 1,000 retail stores and online at ae.com and aerie.com in the United States and internationally. The Company operates in the segment of American Eagle Outfitters Brand (AEO Brand) retail stores, Aerie by American Eagle Outfitters retail stores and AEO Direct. It offers an assortment of apparel and accessories for men and women under the American Eagle Outfitters brand, and intimates, apparel and personal care products for women under the Aerie brand. AEO Inc. operates stores in the United States, Canada, Mexico, Hong Kong, China and the United Kingdom. It also has license agreements with third parties to operate American Eagle Outfitters and Aerie stores throughout Asia, Europe, Latin America and the Middle East. It operates over 950 American Eagle Outfitters stores and approximately 100 Aerie stand-alone stores. The Company has store base in approximately 140 locations in over 20 countries.

AEO Chart

AEO data by YCharts

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of AEO – January 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 $2,900,824,913 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.66 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 -20.63% Fail
6. Moderate PEmg Ratio PEmg < 20 16.86 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.47 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 1.66 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 $0.93
MG Growth Estimate 0.51%
MG Value $8.84
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $13.46
MG Value based on 0% Growth $7.89
Market Implied Growth Rate 4.18%
Current Price $15.65
% of Intrinsic Value 177.05%

American Eagle Outfitters is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings 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 Overvalued after growing its EPSmg (normalized earnings) from $0.9 in 2013 to an estimated $0.93 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.18% 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 American Eagle Outfitters revealed the company was trading above its Graham Number of $13.41. The company pays a dividend of $0.5 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 16.86, which was below the industry average of 22.16, 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 $1.55.

American Eagle Outfitters receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.55
Graham Number $13.41
PEmg 16.86
Current Ratio 1.66
PB Ratio 2.47
Current Dividend $0.50
Dividend Yield 3.19%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2016
Total Current Assets $936,849,000
Total Current Liabilities $562,879,000
Long-Term Debt $0
Total Assets $1,822,540,000
Intangible Assets $67,308,000
Total Liabilities $650,580,000
Shares Outstanding (Diluted Average) 184,615,000

Earnings Per Share History

Next Fiscal Year Estimate $1.24
Jan2016 $1.11
Jan2015 $0.42
Jan2014 $0.43
Jan2013 $1.16
Jan2012 $0.77
Jan2011 $0.70
Jan2010 $0.81
Jan2009 $0.86
Jan2008 $1.82
Jan2007 $1.70
Jan2006 $1.26
Jan2005 $0.95
Jan2004 $0.38
Jan2003 $0.40
Jan2002 $0.48
Jan2001 $0.43
Jan2000 $0.41
Jan1999 $0.25
Jan1998 $0.10
Jan1997 $0.07

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.93
Jan2016 $0.77
Jan2015 $0.64
Jan2014 $0.75
Jan2013 $0.90
Jan2012 $0.84
Jan2011 $0.98
Jan2010 $1.17
Jan2009 $1.34
Jan2008 $1.46
Jan2007 $1.17
Jan2006 $0.83
Jan2005 $0.59
Jan2004 $0.41
Jan2003 $0.42
Jan2002 $0.40
Jan2001 $0.32

Recommended Reading:

Other ModernGraham posts about the company

American Eagle Outfitters Valuation – August 2016 $AEO
American Eagle Outfitters Valuation – February 2016 $AEO
American Eagle Outfitters Valuation – November 2015 Update $AEO
American Eagle Outfitters Analysis – Initial Coverage $AEO

Other ModernGraham posts about related companies

Chico’s FAS Inc Valuation – Initial Coverage $CHS
Hanesbrands Inc Valuation – December 2016 $HBI
Nike Inc Valuation – November 2016 $NKE
Wolverine World Wide Inc Valuation – September 2016 $WWW
Ralph Lauren Corp Valuation – August 2016 $RL
Gap Inc Valuation – August 2016 $GPS
PVH Corp Valuation – August 2016 $PVH
American Eagle Outfitters Valuation – August 2016 $AEO
Hanesbrands Inc Valuation – August 2016 $HBI
VF Corp Valuation – August 2016 $VFC

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.

American Eagle Outfitters Valuation – August 2016 $AEO

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today - July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how American Eagle Outfitters (AEO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): American Eagle Outfitters, Inc. (AEO Inc.) is a specialty retailer, operating over 1,000 retail stores and online at ae.com and aerie.com in the United States and internationally. The Company operates in the segment of American Eagle Outfitters Brand (AEO Brand) retail stores, Aerie by American Eagle Outfitters retail stores and AEO Direct. It offers an assortment of apparel and accessories for men and women under the American Eagle Outfitters brand, and intimates, apparel and personal care products for women under the Aerie brand. AEO Inc. operates stores in the United States, Canada, Mexico, Hong Kong, China and the United Kingdom. It also has license agreements with third parties to operate American Eagle Outfitters and Aerie stores throughout Asia, Europe, Latin America and the Middle East. It operates over 950 American Eagle Outfitters stores and approximately 100 Aerie stand-alone stores. The Company has store base in approximately 140 locations in over 20 countries.

AEO Chart

AEO data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AEO – August 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,357,660,984 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.74 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 -22.06% Fail
6. Moderate PEmg Ratio PEmg < 20 20.19 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.12 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 1.74 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

AEO value chart August 2016

EPSmg $0.91
MG Growth Estimate 0.23%
MG Value $8.17
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $13.21
MG Value based on 0% Growth $7.75
Market Implied Growth Rate 5.85%
Current Price $18.40
% of Intrinsic Value 225.13%

American Eagle Outfitters is suitable for the Enterprising Investor but not 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 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 $0.9 in 2013 to an estimated $0.91 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.85% 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 American Eagle Outfitters revealed the company was trading above its Graham Number of $12.63. The company pays a dividend of $0.5 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.19, which was below the industry average of 26.26, 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 $1.15.

American Eagle Outfitters receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

AEO charts August 2016

Net Current Asset Value (NCAV) $1.15
Graham Number $12.63
PEmg 20.19
Current Ratio 1.74
PB Ratio 3.12
Current Dividend $0.50
Dividend Yield 2.72%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 4/1/2016
Total Current Assets $729,327,000
Total Current Liabilities $418,486,000
Long-Term Debt $0
Total Assets $1,596,296,000
Intangible Assets $68,952,000
Total Liabilities $518,988,000
Shares Outstanding (Diluted Average) 182,927,000

Earnings Per Share History

Next Fiscal Year Estimate $1.19
Jan2016 $1.11
Jan2015 $0.42
Jan2014 $0.43
Jan2013 $1.16
Jan2012 $0.77
Jan2011 $0.70
Jan2010 $0.81
Jan2009 $0.86
Jan2008 $1.82
Jan2007 $1.70
Jan2006 $1.89
Jan2005 $1.42
Jan2004 $0.28
Jan2003 $1.22
Jan2002 $1.43
Jan2001 $1.30
Jan2000 $1.86
Jan1999 $1.13
Jan1998 $0.10
Jan1997 $0.39

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.91
Jan2016 $0.77
Jan2015 $0.64
Jan2014 $0.75
Jan2013 $0.90
Jan2012 $0.84
Jan2011 $0.98
Jan2010 $1.22
Jan2009 $1.46
Jan2008 $1.65
Jan2007 $1.47
Jan2006 $1.32
Jan2005 $1.07
Jan2004 $1.00
Jan2003 $1.37
Jan2002 $1.35
Jan2001 $1.19

Recommended Reading:

Other ModernGraham posts about the company

American Eagle Outfitters Valuation – February 2016 $AEO
American Eagle Outfitters Valuation – November 2015 Update $AEO
American Eagle Outfitters Valuation – November 2015 Update $AEO
American Eagle Outfitters Analysis – Initial Coverage $AEO

Other ModernGraham posts about related companies

Hanesbrands Inc Valuation – August 2016 $HBI
VF Corp Valuation – August 2016 $VFC
L Brands Inc Valuation – July 2016 $LB
Michael Kors Holdings Ltd Valuation – July 2016 $KORS
Under Armour Inc Valuation – June 2016 $UA
Nike Inc. Valuation – May 2016 $NKE
Wolverine World Wide Inc Valuation – May 2016 $WWW
Ralph Lauren Corp Stock Valuation – February 2016 $RL
Gap Inc Valuation – February 2016 $GPS
American Eagle Outfitters Valuation – February 2016 $AEO

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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