Jack Henry & Associates Inc Valuation – April 2019 #JKHY

Company Profile (excerpt from Reuters): Jack Henry & Associates, Inc., incorporated on October 4, 1985, is a provider of information processing solutions for community banks. The Company offers a range of products and services, including processing transactions, automating business processes, and managing information financial institutions and diverse corporate entities. The Company operates in two segments, which include bank systems and services (Bank) and credit union systems and services (Credit Union). The Company provides its products and services through approximately three business brands, which include Jack Henry Banking, Symitar and ProfitStars. The Core software system consists of the integrated applications required to process deposit, loan, and general ledger transactions, and to maintain centralized customer/member information. Jack Henry Banking markets over three core software systems to banks and Symitar markets over two core software systems to credit unions. The Company’s subsidiaries include Jack Henry Services, Inc., Jack Henry Software/Commlink, Inc., Symitar Systems, Inc., Check Collect, Inc. and Bayside Business Solutions, Inc.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JKHY – 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 $10,937,524,534 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.07 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 142.89% Pass
6. Moderate PEmg Ratio PEmg < 20 38.72 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.88 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.07 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.66
MG Growth Estimate 10.26%
MG Value $106.22
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $53.07
MG Value based on 0% Growth $31.11
Market Implied Growth Rate 15.11%
Current Price $141.73
% of Intrinsic Value 133.43%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.17 in 2015 to an estimated $3.66 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.11% 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 Jack Henry & Associates, Inc. revealed the company was trading above its Graham Number of $35.7. The company pays a dividend of $1.36 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 38.72, which was above the industry average of 32.68. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.81.

Jack Henry & Associates, 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) -$2.81
Graham Number $35.70
PEmg 38.72
Current Ratio 1.07
PB Ratio 7.88
Current Dividend $1.36
Dividend Yield 0.96%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $362,639,000
Total Current Liabilities $340,074,000
Long-Term Debt $0
Total Assets $1,971,777,000
Intangible Assets $1,113,794,000
Total Liabilities $579,822,000
Shares Outstanding (Diluted Average) 77,409,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.45
Jun2018 $4.85
Jun2017 $3.14
Jun2016 $3.12
Jun2015 $2.59
Jun2014 $2.19
Jun2013 $1.94
Jun2012 $1.74
Jun2011 $1.59
Jun2010 $1.38
Jun2009 $1.22
Jun2008 $1.16
Jun2007 $1.14
Jun2006 $0.96
Jun2005 $0.81
Jun2004 $0.68
Jun2003 $0.55
Jun2002 $0.62
Jun2001 $0.61
Jun2000 $0.40
Jun1999 $0.38

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.66
Jun2018 $3.57
Jun2017 $2.82
Jun2016 $2.54
Jun2015 $2.17
Jun2014 $1.90
Jun2013 $1.69
Jun2012 $1.52
Jun2011 $1.37
Jun2010 $1.23
Jun2009 $1.13
Jun2008 $1.04
Jun2007 $0.93
Jun2006 $0.79
Jun2005 $0.68
Jun2004 $0.61
Jun2003 $0.55

Recommended Reading:

Other ModernGraham posts about the company

Jack Henry & Associates Inc Valuation – August 2018 $JKHY
Jack Henry & Associates Inc Valuation – Initial Coverage $JKHY

Other ModernGraham posts about related companies

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IHS Markit Ltd Valuation – February 2019 $INFO
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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.

Jack Henry & Associates Inc Valuation – August 2018 $JKHY

Company Profile (excerpt from Reuters): Jack Henry & Associates, Inc., incorporated on October 4, 1985, is a provider of information processing solutions for community banks. The Company offers a range of products and services, including processing transactions, automating business processes, and managing information financial institutions and diverse corporate entities. The Company operates in two segments, which include bank systems and services (Bank) and credit union systems and services (Credit Union). The Company provides its products and services through approximately three business brands, which include Jack Henry Banking, Symitar and ProfitStars. The Core software system consists of the integrated applications required to process deposit, loan, and general ledger transactions, and to maintain centralized customer/member information. Jack Henry Banking markets over three core software systems to banks and Symitar markets over two core software systems to credit unions. The Company’s subsidiaries include Jack Henry Services, Inc., Jack Henry Software/Commlink, Inc., Symitar Systems, Inc., Check Collect, Inc. and Bayside Business Solutions, Inc.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JKHY – August 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 $10,609,021,562 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.25 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 161.34% Pass
6. Moderate PEmg Ratio PEmg < 20 39.43 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.79 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 1.25 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.44 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 $3.52
MG Growth Estimate 12.77%
MG Value $119.67
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $50.98
MG Value based on 0% Growth $29.89
Market Implied Growth Rate 15.46%
Current Price $138.63
% of Intrinsic Value 115.85%

Jack Henry & Associates, 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, 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 $1.9 in 2014 to an estimated $3.52 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.46% 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 Jack Henry & Associates, Inc. revealed the company was trading above its Graham Number of $37.51. The company pays a dividend of $1.18 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 39.43, which was above the industry average of 33.97. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.13.

Jack Henry & Associates, 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) -$4.13
Graham Number $37.51
PEmg 39.43
Current Ratio 1.25
PB Ratio 8.79
Current Dividend $1.18
Dividend Yield 0.85%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $362,030,000
Total Current Liabilities $289,238,000
Long-Term Debt $105,000,000
Total Assets $1,905,368,000
Intangible Assets $1,088,493,000
Total Liabilities $682,283,000
Shares Outstanding (Diluted Average) 77,546,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.69
Jun2017 $3.14
Jun2016 $3.12
Jun2015 $2.59
Jun2014 $2.19
Jun2013 $1.94
Jun2012 $1.74
Jun2011 $1.59
Jun2010 $1.38
Jun2009 $1.22
Jun2008 $1.16
Jun2007 $1.14
Jun2006 $0.96
Jun2005 $0.81
Jun2004 $0.68
Jun2003 $0.55
Jun2002 $0.62
Jun2001 $0.61
Jun2000 $0.40
Jun1999 $0.38
Jun1998 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.52
Jun2017 $2.82
Jun2016 $2.54
Jun2015 $2.17
Jun2014 $1.90
Jun2013 $1.69
Jun2012 $1.52
Jun2011 $1.37
Jun2010 $1.23
Jun2009 $1.13
Jun2008 $1.04
Jun2007 $0.93
Jun2006 $0.79
Jun2005 $0.68
Jun2004 $0.61
Jun2003 $0.55
Jun2002 $0.52

Recommended Reading:

Other ModernGraham posts about the company

Jack Henry & Associates Inc Valuation – Initial Coverage $JKHY

Other ModernGraham posts about related companies

CoreLogic Inc Valuation – July 2018 $CLGX
Pitney Bowes Inc Valuation – June 2018 $PBI
United Rentals Inc Valuation – June 2018 $URI
Global Payments Inc Valuation – June 2018 $GPN
Verisk Analytics Inc Valuation – June 2018 $VRSK
Robert Half International Inc Valuation – June 2018 $RHI
Alliance Data Systems Corp Valuation – May 2018 $ADS
Whirlpool Corporation Valuation – April 2018 $WHR
IHS Markit Ltd Valuation – Initial Coverage April 2018 $INFO
Automatic Data Processing Inc Valuation – April 2018 $ADP

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.

Jack in the Box Inc Valuation – July 2018 $JACK

Company Profile (excerpt from Reuters): Jack in the Box Inc., incorporated on May 27, 1999, is a restaurant company that operates and franchises Jack in the Box restaurants. The Company segment is Jack in the Box. It has more then 2,200 restaurants in 21 states and Guam.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JACK – 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 $2,362,168,115 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.87 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 134.96% Pass
6. Moderate PEmg Ratio PEmg < 20 22.87 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -5.61 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 0.87 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -40.21 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 $3.60
MG Growth Estimate 15.00%
MG Value $138.55
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $52.18
MG Value based on 0% Growth $30.59
Market Implied Growth Rate 7.19%
Current Price $82.31
% of Intrinsic Value 59.41%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.57 in 2014 to an estimated $3.6 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.19% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Jack in the Box Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.6 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 22.87, which was below the industry average of 30.09, 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 $-39.54.

Jack in the Box 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) -$39.54
Graham Number $0.00
PEmg 22.87
Current Ratio 0.87
PB Ratio -5.61
Current Dividend $1.60
Dividend Yield 1.94%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $145,141,000
Total Current Liabilities $167,535,000
Long-Term Debt $900,402,000
Total Assets $875,038,000
Intangible Assets $48,124,000
Total Liabilities $1,305,948,000
Shares Outstanding (Diluted Average) 29,356,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.55
Sep2017 $4.38
Sep2016 $3.63
Sep2015 $2.85
Sep2014 $2.12
Sep2013 $1.14
Sep2012 $1.28
Sep2011 $1.61
Sep2010 $1.26
Sep2009 $2.05
Sep2008 $2.01
Sep2007 $1.87
Sep2006 $1.49
Sep2005 $1.21
Sep2004 $0.99
Sep2003 $0.95
Sep2002 $1.00
Sep2001 $1.03
Sep2000 $1.28
Sep1999 $0.98
Sep1998 $0.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.60
Sep2017 $3.36
Sep2016 $2.63
Sep2015 $2.02
Sep2014 $1.57
Sep2013 $1.35
Sep2012 $1.52
Sep2011 $1.68
Sep2010 $1.72
Sep2009 $1.87
Sep2008 $1.69
Sep2007 $1.46
Sep2006 $1.21
Sep2005 $1.06
Sep2004 $1.01
Sep2003 $1.02
Sep2002 $1.05

Recommended Reading:

Other ModernGraham posts about the company

Jack in the Box Inc Valuation – Initial Coverage $JACK

Other ModernGraham posts about related companies

Chipotle Mexican Grill Inc Valuation – June 2018 $CMG
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Starbucks Corporation Valuation – March 2018 $SBUX
McDonald’s Corporation Valuation – February 2018 $MCD
El Pollo LoCo Holdings Inc Valuation – Initial Coverage $LOCO
Chipotle Mexican Grill Inc Valuation – March 2017 $CMG
Sonic Corporation Valuation – Initial Coverage $SONC
Darden Restaurants Inc Valuation – February 2017 $DRI
Jack in the Box Inc Valuation – Initial Coverage $JACK

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.

Jack Henry & Associates Inc Valuation – Initial Coverage $JKHY

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 Jack Henry & Associates Inc (JKHY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Jack Henry & Associates, Inc. is a provider of information processing solutions for community banks. The Company offers a range of products and services, including processing transactions, automating business processes, and managing information financial institutions and diverse corporate entities. It operates in two segments: bank systems and services (Bank) and credit union systems and services (Credit Union). It provides its products and services through approximately three business brands, which include Jack Henry Banking, Symitar and ProfitStars. The Core software system consists of the integrated applications required to process deposit, loan, and general ledger transactions, and to maintain centralized customer/member information. Jack Henry Banking markets over three software systems to banks and Symitar markets over two software systems to credit unions. Its subsidiaries include Jack Henry Services, Inc., Symitar Systems, Inc. and Bayside Business Solutions, Inc.

JKHY Chart

JKHY data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of JKHY – 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 $7,066,811,699 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.90 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 134.04% Pass
6. Moderate PEmg Ratio PEmg < 20 32.17 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.31 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.90 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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 $2.80
MG Growth Estimate 9.81%
MG Value $78.75
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $40.62
MG Value based on 0% Growth $23.81
Market Implied Growth Rate 11.84%
Current Price $90.13
% of Intrinsic Value 114.46%

Jack Henry & Associates, 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, 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 $1.69 in 2013 to an estimated $2.8 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.84% 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 Jack Henry & Associates, Inc. revealed the company was trading above its Graham Number of $29.43. The company pays a dividend of $1.09 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 32.17, which was below the industry average of 38.13, 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 $-5.29.

Jack Henry & Associates, 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) -$5.29
Graham Number $29.43
PEmg 32.17
Current Ratio 0.90
PB Ratio 7.31
Current Dividend $1.09
Dividend Yield 1.21%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $342,900,000
Total Current Liabilities $379,371,000
Long-Term Debt $0
Total Assets $1,732,252,000
Intangible Assets $918,446,000
Total Liabilities $759,663,000
Shares Outstanding (Diluted Average) 78,844,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.09
Jun2016 $3.12
Jun2015 $2.59
Jun2014 $2.19
Jun2013 $1.94
Jun2012 $1.74
Jun2011 $1.59
Jun2010 $1.38
Jun2009 $1.22
Jun2008 $1.16
Jun2007 $1.14
Jun2006 $0.96
Jun2005 $0.81
Jun2004 $0.68
Jun2003 $0.55
Jun2002 $0.62
Jun2001 $0.61
Jun2000 $0.40
Jun1999 $0.38
Jun1998 $0.28
Jun1997 $0.22

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.80
Jun2016 $2.54
Jun2015 $2.17
Jun2014 $1.90
Jun2013 $1.69
Jun2012 $1.52
Jun2011 $1.37
Jun2010 $1.23
Jun2009 $1.13
Jun2008 $1.04
Jun2007 $0.93
Jun2006 $0.79
Jun2005 $0.68
Jun2004 $0.61
Jun2003 $0.55
Jun2002 $0.52
Jun2001 $0.44

Recommended Reading:

Other ModernGraham posts about the company

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

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Acxiom Corporation Valuation – November 2016 $ACXM
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Equinix Inc Valuation – August 2016 $EQIX
Qualcomm Inc Valuation – August 2016 $QCOM
Verisign Inc Valuation – August 2016 $VRSN

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.

Jack in the Box Inc Valuation – Initial Coverage $JACK

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 Jack in the Box Inc (JACK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Jack in the Box Inc. operates and franchises Jack in the Box quick-service restaurants (QSRs) and Qdoba Mexican Eats (Qdoba) fast-casual restaurants. The Company operates in two segments: Jack in the Box and Qdoba restaurant operations. Qdoba is a fast-casual Mexican food brand in the United States, offering food items including burritos, tacos, salads, and quesadillas. Jack in the Box is a hamburger chain, which offers a selection of products, including classic burgers such as, Jumbo Jack burgers, and new product lines, such as Buttery Jack burgers, and its Brunchfast menu. As of October 2, 2016, the Company operated 2,954 Jack in the Box QSRs and Qdoba fast-casual restaurants. As of October 2, 2016, Jack in the Box system included 2,255restaurants, of which 417 were company-operated and 1,838 were franchise operated. As of October 2, 2016, the Qdoba system included 699 restaurants, of which 367 were company operated and 332 were franchise operated.

JACK Chart

JACK data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. 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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of JACK – 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 $3,455,946,564 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.56 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 106.02% Pass
6. Moderate PEmg Ratio PEmg < 20 31.84 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -16.97 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 0.56 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.55 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 $3.39
MG Growth Estimate 15.00%
MG Value $130.52
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $49.16
MG Value based on 0% Growth $28.82
Market Implied Growth Rate 11.67%
Current Price $107.93
% of Intrinsic Value 82.70%

Jack in the Box Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.35 in 2013 to an estimated $3.39 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 11.67% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Jack in the Box Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.2 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 31.84, which was above the industry average of 31.3. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-41.31.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$41.31
Graham Number $0.00
PEmg 31.84
Current Ratio 0.56
PB Ratio -16.97
Current Dividend $1.20
Dividend Yield 1.11%
Number of Consecutive Years of Dividend Growth 4

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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 9/1/2016
Total Current Assets $155,405,000
Total Current Liabilities $279,560,000
Long-Term Debt $937,512,000
Total Assets $1,348,791,000
Intangible Assets $180,088,000
Total Liabilities $1,565,997,000
Shares Outstanding (Diluted Average) 34,146,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.48
Sep2016 $3.63
Sep2015 $2.85
Sep2014 $2.12
Sep2013 $1.14
Sep2012 $1.28
Sep2011 $1.61
Sep2010 $1.26
Sep2009 $2.05
Sep2008 $2.01
Sep2007 $1.87
Sep2006 $1.49
Sep2005 $1.21
Sep2004 $0.99
Sep2003 $0.95
Sep2002 $1.00
Sep2001 $1.03
Sep2000 $1.28
Sep1999 $0.98
Sep1998 $0.83
Sep1997 $0.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.39
Sep2016 $2.63
Sep2015 $2.02
Sep2014 $1.57
Sep2013 $1.35
Sep2012 $1.52
Sep2011 $1.68
Sep2010 $1.72
Sep2009 $1.87
Sep2008 $1.69
Sep2007 $1.46
Sep2006 $1.21
Sep2005 $1.06
Sep2004 $1.01
Sep2003 $1.02
Sep2002 $1.05
Sep2001 $1.02

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

Chuy’s Holdings Inc Valuation – Initial Coverage $CHUY
Yum Brands Inc Valuation – December 2016 $YUM
McDonald’s Corp Valuation – November 2016 $MCD
Chipotle Mexican Grill Inc Valuation – August 2016 $CMG
Yum! Brands Inc Valuation – August 2016 $YUM
Starbucks Corp Valuation – June 2016 $SBUX
McDonald’s Corporation Valuation – May 2016 $MCD
Chipotle Mexican Grill Inc Stock Valuation – February 2016 $CMG
McDonald’s Corporation – November 2015 Update $MCD
Chipotle Mexican Group Inc Valuation – November 2015 Update $CMG

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.

McDonald’s Corp Valuation – April 2019 #MCD

Company Profile (excerpt from Reuters): McDonald’s Corporation (McDonald’s), incorporated on December 21, 1964, operates and franchises McDonald’s restaurants. The Company’s restaurants serve a locally relevant menu of food and drinks sold at various price points in over 100 countries. The Company’s segments include U.S., International Lead Markets, High Growth Markets and Foundational Markets and Corporate. McDonald’s franchised restaurants are owned and operated under various structures, including conventional franchise, developmental license or affiliate. The Company is primarily a franchisor. Under a conventional franchise arrangement, the Company owns the land and building or secures a long-term lease for the restaurant location and the franchisee pays for equipment, signs, seating and decor.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MCD – 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 $145,486,766,371 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.36 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 43.92% Pass
6. Moderate PEmg Ratio PEmg < 20 27.19 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -23.60 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.36 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 28.78 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 $6.99
MG Growth Estimate 5.72%
MG Value $139.32
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $101.36
MG Value based on 0% Growth $59.42
Market Implied Growth Rate 9.35%
Current Price $190.08
% of Intrinsic Value 136.43%

Mcdonald’s 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, 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 $5.06 in 2015 to an estimated $6.99 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.35% 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 Mcdonald’s Corp revealed the company was trading above its Graham Number of $0. The company pays a dividend of $4.19 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 27.19, which was below the industry average of 34.9, 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 $-45.07.

Mcdonald’s 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) -$45.07
Graham Number $0.00
PEmg 27.19
Current Ratio 1.36
PB Ratio -23.60
Current Dividend $4.19
Dividend Yield 2.20%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,053,200,000
Total Current Liabilities $2,973,500,000
Long-Term Debt $31,075,300,000
Total Assets $32,811,200,000
Intangible Assets $2,331,500,000
Total Liabilities $39,069,600,000
Shares Outstanding (Diluted Average) 776,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.98
Dec2018 $7.54
Dec2017 $6.37
Dec2016 $5.44
Dec2015 $4.80
Dec2014 $4.82
Dec2013 $5.55
Dec2012 $5.36
Dec2011 $5.27
Dec2010 $4.58
Dec2009 $4.11
Dec2008 $3.76
Dec2007 $1.98
Dec2006 $2.83
Dec2005 $2.04
Dec2004 $1.79
Dec2003 $1.15
Dec2002 $0.70
Dec2001 $1.25
Dec2000 $1.46
Dec1999 $1.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.99
Dec2018 $6.26
Dec2017 $5.55
Dec2016 $5.15
Dec2015 $5.06
Dec2014 $5.17
Dec2013 $5.22
Dec2012 $4.91
Dec2011 $4.43
Dec2010 $3.83
Dec2009 $3.28
Dec2008 $2.74
Dec2007 $2.14
Dec2006 $2.05
Dec2005 $1.56
Dec2004 $1.31
Dec2003 $1.11

Recommended Reading:

Other ModernGraham posts about the company

McDonald’s Corp Valuation – November 2018 $MCD
McDonald’s Corporation Valuation – February 2018 $MCD
5 Overvalued Dow Components – December 2016
McDonald’s Corp Valuation – November 2016 $MCD
5 Overvalued Dow Components – July 2016

Other ModernGraham posts about related companies

Chipotle Mexican Grill Inc Valuation – March 2019 #CMG
Darden Restaurants Inc Valuation – March 2019 #DRI
Yum Brands Inc Valuation – February 2019 $YUM
Starbucks Corporation Valuation – January 2019 $SBUX
McDonald’s Corp Valuation – November 2018 $MCD
Sonic Corp Valuation – August 2018 $SONC
Jack in the Box Inc Valuation – July 2018 $JACK
Chuy’s Holdings Inc Valuation – July 2018 $CHUY
Chipotle Mexican Grill Inc Valuation – June 2018 $CMG
Darden Restaurants Inc Valuation – May 2018 $DRI

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.

Chipotle Mexican Grill Inc Valuation – March 2019 #CMG

Company Profile (excerpt from Reuters): Chipotle Mexican Grill, Inc. (Chipotle), incorporated on January 30, 1998, together with its subsidiaries, operates Chipotle Mexican Grill restaurants. The Company’s Chipotle Mexican Grill restaurants serve a menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads. As of December 31, 2016, the Company managed its operations and restaurants based on 11 regions. As of December 31, 2016, the Company operated 2,198 Chipotle restaurants throughout the United States, as well as 29 international Chipotle restaurants, and it also had 23 restaurants in operation in other non-Chipotle concepts. As of December 31, 2016, 29 of its restaurants were located outside of the United States, with 17 in Canada, six in the United Kingdom, five in France and one in Frankfurt, Germany. The Company sells gift cards, which do not have an expiration date.

CMG Chart

CMG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CMG – 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 $18,600,677,500 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.81 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 11.30% Fail
6. Moderate PEmg Ratio PEmg < 20 87.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 13.05 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 1.81 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.71
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $111.83
MG Value based on 0% Growth $65.56
Market Implied Growth Rate 39.38%
Current Price $672.98
% of Intrinsic Value N/A

Chipotle Mexican Grill, 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 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 growth 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 seeing its EPSmg (normalized earnings) decline from $12.51 in 2015 to an estimated $7.71 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 39.38% 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 Chipotle Mexican Grill, Inc. revealed the company was trading above its Graham Number of $113.79. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 87.26, which was above the industry average of 33.53. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.34.

Chipotle Mexican Grill, 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) -$0.34
Graham Number $113.79
PEmg 87.26
Current Ratio 1.81
PB Ratio 13.05
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 $814,794,000
Total Current Liabilities $449,990,000
Long-Term Debt $0
Total Assets $2,265,518,000
Intangible Assets $21,939,000
Total Liabilities $824,179,000
Shares Outstanding (Diluted Average) 27,947,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.06
Dec2018 $6.31
Dec2017 $6.17
Dec2016 $0.77
Dec2015 $15.10
Dec2014 $14.13
Dec2013 $10.47
Dec2012 $8.75
Dec2011 $6.76
Dec2010 $5.64
Dec2009 $3.95
Dec2008 $2.36
Dec2007 $2.13
Dec2006 $1.28
Dec2005 $1.43
Dec2004 $0.24
Dec2003 -$0.34
Dec2002 -$0.87
Dec2001 -$1.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.71
Dec2018 $6.86
Dec2017 $7.86
Dec2016 $9.09
Dec2015 $12.51
Dec2014 $10.53
Dec2013 $8.19
Dec2012 $6.53
Dec2011 $5.00
Dec2010 $3.77
Dec2009 $2.64
Dec2008 $1.82
Dec2007 $1.35
Dec2006 $0.75
Dec2005 $0.26
Dec2004 -$0.38
Dec2003 -$0.64

Recommended Reading:

Other ModernGraham posts about the company

Chipotle Mexican Grill Inc Valuation – June 2018 $CMG
Chipotle Mexican Grill Inc Valuation – March 2017 $CMG
Chipotle Mexican Grill Inc Valuation – August 2016 $CMG
Chipotle Mexican Grill Inc Stock Valuation – February 2016 $CMG
Chipotle Mexican Group Inc Valuation – November 2015 Update $CMG

Other ModernGraham posts about related companies

Darden Restaurants Inc Valuation – March 2019 #DRI
Yum Brands Inc Valuation – February 2019 $YUM
Starbucks Corporation Valuation – January 2019 $SBUX
McDonald’s Corp Valuation – November 2018 $MCD
Sonic Corp Valuation – August 2018 $SONC
Jack in the Box Inc Valuation – July 2018 $JACK
Chuy’s Holdings Inc Valuation – July 2018 $CHUY
Chipotle Mexican Grill Inc Valuation – June 2018 $CMG
Darden Restaurants Inc Valuation – May 2018 $DRI
Yum Brands Inc Valuation – April 2018 $YUM

Disclaimer:

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

Target Corporation Valuation – March 2019 #TGT

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TGT – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $40,036,461,292 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.83 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 27.42% Fail
6. Moderate PEmg Ratio PEmg < 20 14.51 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.60 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.83 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -4.10 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

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

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.58 in 2016 to an estimated $5.34 for 2020. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.01% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Target Corporation revealed the company was trading above its Graham Number of $51.81. The company pays a dividend of $2.52 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.51, which was below the industry average of 27.69, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-33.33.

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

Stage 3: Information for Further Research

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

Useful Links:

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

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

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Tractor Supply Co Valuation – February 2019 $TSCO
Tapestry Inc Valuation – February 2019 $TPR
Dollar General Corp Valuation – February 2019 $DG
Tiffany & Co Valuation – February 2019 $TIF
Best Buy Co Inc Valuation – February 2019 $BBY
Macy’s Inc Valuation – January 2019 $M
Ross Stores Inc Valuation – January 2019 $ROST
Walgreens Boots Alliance Inc Valuation – December 2018 $WBA

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.

Brown-Forman Corp Valuation – March 2019 #BF.B

Company Profile (excerpt from Reuters): Brown-Forman Corporation, incorporated on October 19, 1933, is a spirit and wine company. The Company manufactures, bottles, imports, exports, markets and sells a range of alcoholic beverages. The Company has a portfolio of approximately 40 spirit, wine and ready-to-drink cocktail (RTD) brands. The Company’s principal brands include Jack Daniel’s Tennessee Whiskey, Jack Daniel’s RTDs, Jack Daniel’s Tennessee Honey, Gentleman Jack Rare Tennessee Whiskey, Jack Daniel’s Tennessee Fire, Jack Daniel’s Single Barrel Collection, Jack Daniel’s Sinatra Select, Jack Daniel’s Winter Jack, Jack Daniel’s No. 27 Gold Tennessee Whiskey, Finlandia Vodkas, Finlandia RTDs, Korbel California Champagnes, Korbel California Brandy, Woodford Reserve Kentucky Bourbons, el Jimador Tequilas, el Jimador New Mix RTDs, Herradura Tequilas, Canadian Mist Canadian Whisky, Sonoma-Cutrer California Wines, Early Times Kentucky Whisky and Bourbon, Chambord Liqueur, Old Forester Kentucky Bourbon, Antiguo Tequila, Pepe Lopez Tequila, Santa Dose Cachaca and Collingwood Canadian Whisky.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BF.B – 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 $24,015,987,587 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.08 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 60.76% Pass
6. Moderate PEmg Ratio PEmg < 20 31.88 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 16.19 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.08 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.24 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 $1.58
MG Growth Estimate 5.27%
MG Value $30.07
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $22.90
MG Value based on 0% Growth $13.42
Market Implied Growth Rate 11.69%
Current Price $50.35
% of Intrinsic Value 167.46%

Brown-Forman Corporation Class B 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 $1.17 in 2015 to an estimated $1.58 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 Brown-Forman Corporation Class B revealed the company was trading above its Graham Number of $10.05. The company pays a dividend of $0.61 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 31.88, which was above the industry average of 22.75. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.91.

Brown-Forman Corporation Class B receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.91
Graham Number $10.05
PEmg 31.88
Current Ratio 3.08
PB Ratio 16.19
Current Dividend $0.61
Dividend Yield 1.21%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $2,755,000,000
Total Current Liabilities $895,000,000
Long-Term Debt $2,301,000,000
Total Assets $5,163,000,000
Intangible Assets $1,405,000,000
Total Liabilities $3,670,000,000
Shares Outstanding (Diluted Average) 480,099,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.64
Apr2018 $1.48
Apr2017 $1.37
Apr2016 $2.09
Apr2015 $1.28
Apr2014 $1.22
Apr2013 $1.10
Apr2012 $0.95
Apr2011 $1.04
Apr2010 $0.81
Apr2009 $0.77
Apr2008 $0.76
Apr2007 $0.67
Apr2006 $0.55
Apr2005 $0.54
Apr2004 $0.43
Apr2003 $0.35
Apr2002 $0.35
Apr2001 $0.36
Apr2000 $0.34
Apr1999 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.58
Apr2018 $1.53
Apr2017 $1.51
Apr2016 $1.49
Apr2015 $1.17
Apr2014 $1.08
Apr2013 $0.99
Apr2012 $0.91
Apr2011 $0.86
Apr2010 $0.75
Apr2009 $0.70
Apr2008 $0.64
Apr2007 $0.56
Apr2006 $0.48
Apr2005 $0.43
Apr2004 $0.38
Apr2003 $0.35

Recommended Reading:

Other ModernGraham posts about the company

Brown-Forman Corp Valuation – May 2018 $BF.B
Brown-Forman Corporation – February 2017 $BF.B
5 Speculative and Overvalued Companies to Avoid – November 2015
Brown-Forman Corporation Analysis – September 2015 Update $BF/B
Brown-Forman Corporation Analysis – June 2015 Update $BF.B

Other ModernGraham posts about related companies

Constellation Brands Inc Valuation – March 2019 #STZ
Philip Morris International Inc Valuation – January 2019 $PM
Altria Group Inc Valuation – January 2019 $MO
Molson Coors Brewing Co Valuation – January 2019 $TAP
Boston Beer Company Inc Valuation – July 2018 $SAM
Constellation Brands Inc Valuation – May 2018 $STZ
Brown-Forman Corp Valuation – May 2018 $BF.B
Philip Morris International Inc Valuation – March 2018 $PM
Altria Group Inc Valuation – March 2018 $MO
Molson Coors Brewing Co Valuation – March 2018 $TAP

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.

Darden Restaurants Inc Valuation – March 2019 #DRI

Company Profile (excerpt from Reuters): Darden Restaurants, Inc., incorporated on March 30, 1995, is a full-service restaurant company. The Company owned and operated 1,536 restaurants through its subsidiaries in the United States and Canada, as of May 29, 2016. The Company’s segments include Olive Garden, LongHorn Steakhouse, Fine Dining (which includes The Capital Grille, and Eddie V’s Prime Seafood and Wildfish Seafood Grille (Eddie V’s)) and Other Business (which includes Yard House, Seasons 52, Bahama Breeze, consumer-packaged goods and franchise revenues). As of May 29, 2016, the Company also had 50 restaurants operated by independent third parties pursuant to area development and franchise agreements.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DRI – 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 $13,739,140,896 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.41 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 44.08% Pass
6. Moderate PEmg Ratio PEmg < 20 23.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.22 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 0.41 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.12 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 $4.64
MG Growth Estimate 3.67%
MG Value $73.44
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $67.22
MG Value based on 0% Growth $39.41
Market Implied Growth Rate 7.75%
Current Price $111.24
% of Intrinsic Value 151.48%

Darden Restaurants, 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, 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 $3.72 in 2015 to an estimated $4.64 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.75% 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 Darden Restaurants, Inc. revealed the company was trading above its Graham Number of $47.27. The company pays a dividend of $2.52 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.99, which was below the industry average of 33.53, 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 $-21.76.

Darden Restaurants, 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) -$21.76
Graham Number $47.27
PEmg 23.99
Current Ratio 0.41
PB Ratio 6.22
Current Dividend $2.52
Dividend Yield 2.27%
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 11/1/2018
Total Current Assets $561,200,000
Total Current Liabilities $1,385,300,000
Long-Term Debt $927,100,000
Total Assets $5,549,200,000
Intangible Assets $2,134,500,000
Total Liabilities $3,298,900,000
Shares Outstanding (Diluted Average) 125,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.59
May2018 $4.73
May2017 $3.80
May2016 $2.90
May2015 $5.47
May2014 $2.15
May2013 $3.13
May2012 $3.57
May2011 $3.39
May2010 $2.84
May2009 $2.65
May2008 $2.60
May2007 $1.35
May2006 $2.16
May2005 $1.78
May2004 $1.34
May2003 $1.27
May2002 $1.30
May2001 $1.06
May2000 $0.89
May1999 $0.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.64
May2018 $4.04
May2017 $3.63
May2016 $3.51
May2015 $3.72
May2014 $2.91
May2013 $3.23
May2012 $3.19
May2011 $2.85
May2010 $2.50
May2009 $2.25
May2008 $1.99
May2007 $1.65
May2006 $1.72
May2005 $1.45
May2004 $1.25
May2003 $1.15

Recommended Reading:

Other ModernGraham posts about the company

Darden Restaurants Inc Valuation – May 2018 $DRI
Darden Restaurants Inc Valuation – February 2017 $DRI
Darden Restaurants Inc. Analysis – September 2015 Update $DRI
5 Speculative and Overvalued Companies to Avoid – October 2014
17 Companies in the Spotlight This Week – 9/27/2014

Other ModernGraham posts about related companies

Yum Brands Inc Valuation – February 2019 $YUM
Starbucks Corporation Valuation – January 2019 $SBUX
McDonald’s Corp Valuation – November 2018 $MCD
Sonic Corp Valuation – August 2018 $SONC
Jack in the Box Inc Valuation – July 2018 $JACK
Chuy’s Holdings Inc Valuation – July 2018 $CHUY
Chipotle Mexican Grill Inc Valuation – June 2018 $CMG
Darden Restaurants Inc Valuation – May 2018 $DRI
Yum Brands Inc Valuation – April 2018 $YUM
Starbucks Corporation Valuation – March 2018 $SBUX

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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