Kimberly-Clark Corp Valuation – January 2019 $KMB

Company Profile (excerpt from Reuters): Kimberly-Clark Corporation, incorporated on June 29, 1928, is engaged in the manufacturing and marketing of a range of products made from natural or synthetic fibers. The Company’s segments include Personal Care, Consumer Tissue, K-C Professional and Corporate & Other. The Company sells its products to supermarkets, mass merchandisers, drugstores, warehouse clubs, variety and department stores, and other retail outlets. It sells its products for away-from-home use through distributors and directly to manufacturing, lodging, office building, food service and public facilities. As of December 31, 2016, the Company and its equity companies had manufacturing facilities in 38 countries, and it sold products in more than 175 countries. The Company’s business outside North America includes Developing and Emerging Markets (D&E) and Developed Markets. D&E markets consist of Eastern Europe, the Middle East and Africa, Latin America and Asia-Pacific, excluding Australia and South Korea. Its Developed Markets consist of Western and Central Europe, Australia and South Korea.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KMB – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $40,257,491,250 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.75 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 29.94% Fail
6. Moderate PEmg Ratio PEmg < 20 23.13 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 362.04 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 0.75 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.38 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 $5.03
MG Growth Estimate 1.63%
MG Value $59.11
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $72.89
MG Value based on 0% Growth $42.73
Market Implied Growth Rate 7.31%
Current Price $116.25
% of Intrinsic Value 196.66%

Kimberly Clark 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, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.53 in 2014 to an estimated $5.03 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.31% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Kimberly Clark Corp revealed the company was trading above its Graham Number of $13.39. The company pays a dividend of $3.88 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.13, which was above the industry average of 20. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.84.

Kimberly Clark 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) -$26.84
Graham Number $13.39
PEmg 23.13
Current Ratio 0.75
PB Ratio 362.04
Current Dividend $3.88
Dividend Yield 3.34%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $5,108,000,000
Total Current Liabilities $6,805,000,000
Long-Term Debt $5,739,000,000
Total Assets $14,583,000,000
Intangible Assets $1,480,000,000
Total Liabilities $14,471,000,000
Shares Outstanding (Diluted Average) 348,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.45
Dec2017 $6.40
Dec2016 $5.99
Dec2015 $2.77
Dec2014 $4.04
Dec2013 $5.53
Dec2012 $4.42
Dec2011 $3.99
Dec2010 $4.45
Dec2009 $4.52
Dec2008 $4.04
Dec2007 $4.09
Dec2006 $3.25
Dec2005 $3.28
Dec2004 $3.61
Dec2003 $3.33
Dec2002 $3.22
Dec2001 $3.02
Dec2000 $3.31
Dec1999 $3.09
Dec1998 $1.99

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.03
Dec2017 $5.19
Dec2016 $4.58
Dec2015 $3.96
Dec2014 $4.53
Dec2013 $4.71
Dec2012 $4.30
Dec2011 $4.23
Dec2010 $4.26
Dec2009 $4.05
Dec2008 $3.77
Dec2007 $3.59
Dec2006 $3.34
Dec2005 $3.35
Dec2004 $3.36
Dec2003 $3.22
Dec2002 $3.09

Recommended Reading:

Other ModernGraham posts about the company

Kimberly-Clark Corp Valuation – March 2018 $KMB
Kimberly-Clark Corporation Valuation – June 2016 $KMB
34 Companies in the Spotlight This Week – 2/7/15
Kimberly Clark Corporation Annual Valuation – 2015 $KMB
15 Companies in the Spotlight This Week – 2/1/14

Other ModernGraham posts about related companies

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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.

Kimberly-Clark Corp Valuation – March 2018 $KMB

Company Profile (obtained from Marketwatch): Kimberly-Clark Corp. engages in the manufacture of paper-based products and provision of cleaning solutions. It operates through the following segments: Personal Care, Consumer Tissue, and K-C Professional. The Personal Care segment manufactures and markets disposable diapers, training and youth pants, swim pants, baby wipes, feminine and incontinence care products, and related products, which are primarily for household use. The Consumer Tissue segment produces and sells facial and bathroom tissue, paper towels, napkins and related products for household use. The K-C Professional segment manufacture and sell facial and bathroom tissue, paper towels, napkins, wipers and a range of safety products for the away-from-home marketplace. The company was founded by John A. Kimberly, Havilah Babcock, Charles B. Clark, and Frank C. Shattuck in 1872 and is headquartered in Irving, TX.

KMB Chart

KMB data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KMB – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $39,286,121,685 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.89 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 46.06% Pass
6. Moderate PEmg Ratio PEmg < 20 19.57 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 62.96 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 0.89 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.00 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 $5.72
MG Growth Estimate 3.93%
MG Value $93.69
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $82.99
MG Value based on 0% Growth $48.65
Market Implied Growth Rate 5.54%
Current Price $112.02
% of Intrinsic Value 119.57%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.53 in 2014 to an estimated $5.72 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.54% 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 Kimberly Clark Corp revealed the company was trading above its Graham Number of $16.24. The company pays a dividend of $3.88 per share, for a yield of 3.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.57, 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 $-26.34.

Kimberly Clark 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) -$26.34
Graham Number $16.24
PEmg 19.57
Current Ratio 0.89
PB Ratio 62.96
Current Dividend $3.88
Dividend Yield 3.46%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $5,211,000,000
Total Current Liabilities $5,858,000,000
Long-Term Debt $6,472,000,000
Total Assets $15,151,000,000
Intangible Assets $1,576,000,000
Total Liabilities $14,522,000,000
Shares Outstanding (Diluted Average) 353,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.54
Dec2017 $6.40
Dec2016 $5.99
Dec2015 $2.77
Dec2014 $4.04
Dec2013 $5.53
Dec2012 $4.42
Dec2011 $3.99
Dec2010 $4.45
Dec2009 $4.52
Dec2008 $4.04
Dec2007 $4.09
Dec2006 $3.25
Dec2005 $3.28
Dec2004 $3.61
Dec2003 $3.33
Dec2002 $3.22
Dec2001 $3.02
Dec2000 $3.31
Dec1999 $3.09
Dec1998 $1.99

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.72
Dec2017 $5.19
Dec2016 $4.58
Dec2015 $3.96
Dec2014 $4.53
Dec2013 $4.71
Dec2012 $4.30
Dec2011 $4.23
Dec2010 $4.26
Dec2009 $4.05
Dec2008 $3.77
Dec2007 $3.59
Dec2006 $3.34
Dec2005 $3.35
Dec2004 $3.36
Dec2003 $3.22
Dec2002 $3.09

Recommended Reading:

Other ModernGraham posts about the company

34 Companies in the Spotlight This Week – 2/7/15
Kimberly Clark Corporation Annual Valuation – 2015 $KMB
15 Companies in the Spotlight This Week – 2/1/14
Kimberly Clark Corp (KMB) Annual Valuation

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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.

Kimberly-Clark Corporation Valuation – June 2016 $KMB

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

Company Profile (obtained from Google Finance): Kimberly-Clark Corporation is engaged in the manufacturing and marketing of a range of products made from natural or synthetic fibers. The Company operates through three segments: Personal Care, Consumer Tissue and K-C Professional. The Company’s Personal Care segment offers various solutions and products, such as disposable diapers, training and youth pants, swimpants, baby wipes, feminine and incontinence care products, and other related products. The Company’s Consumer Tissue segment offers products, such as facial and bathroom tissue, paper towels, napkins and related products. The Company’s K-C Professional segment offers solutions and supporting products, such as wipers, tissue, towels, apparel, soaps and sanitizers. The Company sells its products under various brands, such as Huggies, Pull-Ups, Little Swimmers, GoodNites, DryNites, Kotex, U by Kotex, Intimus, Depend, Plenitud, Poise, Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Neve, WypAll, Kimtech and Jackson Safety.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of KMB – June 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 $48,076,064,888 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.96 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 0.87% Fail
6. Moderate PEmg Ratio PEmg < 20 29.09 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 442.41 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 0.96 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -28.77 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

KMB value Chart June 2016

EPSmg $4.56
MG Growth Estimate 0.92%
MG Value $47.14
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $66.15
MG Value based on 0% Growth $38.78
Market Implied Growth Rate 10.29%
Current Price $132.70
% of Intrinsic Value 281.51%

Kimberly Clark 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, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.3 in 2012 to an estimated $4.56 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.29% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

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

Stage 3: Information for Further Research

KMB Charts June 2016

Net Current Asset Value (NCAV) -$26.31
Graham Number $6.37
PEmg 29.09
Current Ratio 0.96
PB Ratio 442.41
Current Dividend $3.56
Dividend Yield 2.68%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $5,151,000,000
Total Current Liabilities $5,391,000,000
Long-Term Debt $6,904,000,000
Total Assets $14,820,000,000
Intangible Assets $1,498,000,000
Total Liabilities $14,711,000,000
Shares Outstanding (Diluted Average) 363,400,000

Earnings Per Share History

Next Fiscal Year Estimate $5.95
Dec2015 $2.77
Dec2014 $4.04
Dec2013 $5.53
Dec2012 $4.42
Dec2011 $3.99
Dec2010 $4.45
Dec2009 $4.52
Dec2008 $4.04
Dec2007 $4.09
Dec2006 $3.25
Dec2005 $3.28
Dec2004 $3.61
Dec2003 $3.33
Dec2002 $3.22
Dec2001 $3.02
Dec2000 $3.31
Dec1999 $3.09
Dec1998 $2.11
Dec1997 $1.61
Dec1996 $2.49

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.56
Dec2015 $3.96
Dec2014 $4.53
Dec2013 $4.71
Dec2012 $4.30
Dec2011 $4.23
Dec2010 $4.26
Dec2009 $4.05
Dec2008 $3.77
Dec2007 $3.59
Dec2006 $3.34
Dec2005 $3.35
Dec2004 $3.36
Dec2003 $3.22
Dec2002 $3.09
Dec2001 $2.90
Dec2000 $2.73

Recommended Reading:

Other ModernGraham posts about the company

34 Companies in the Spotlight This Week – 2/7/15
Kimberly Clark Corporation Annual Valuation – 2015 $KMB
15 Companies in the Spotlight This Week – 2/1/14
Kimberly Clark Corp (KMB) Annual Valuation

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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.

Kimberly Clark Corporation Annual Valuation – 2015 $KMB

500px-Kimberly-Clark_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – January 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Kimberly Clark Corporation (KMB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kimberly-Clark Corporation is engaged in the manufacturing and marketing of a range of products made from natural or synthetic fibers. The Company operates in four segments Personal Care, Consumer Tissue, K-C Professional and HealthCare. The Company operates and markets its products globally in Asia, Latin America, Eastern Europe, the Middle East and Africa, with a particular emphasis in China, Russia and Latin America. The Company’s key brands include Kleenex, Scott, WypAll, Kimtech, Jackson Safety, Kimberly Clark, ON Q, Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Hakle and Page, among others.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years - PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $110.02
MG Value $47.33
MG Opinion Overvalued
Value Based on 3% Growth $65.74
Value Based on 0% Growth $38.54
Market Implied Growth Rate 7.88%
Net Current Asset Value (NCAV) -$24.77
PEmg 24.27
Current Ratio 0.89
PB Ratio 56.29

Balance Sheet – December 2014

Current Assets $5,559,000,000
Current Liabilities $6,226,000,000
Total Debt $5,630,000,000
Total Assets $15,526,000,000
Intangible Assets $1,737,000,000
Total Liabilities $14,797,000,000
Outstanding Shares 373,000,000

Earnings Per Share

2014 $4.04
2013 $5.53
2012 $4.42
2011 $3.99
2010 $4.45
2009 $4.52
2008 $4.04
2007 $4.09
2006 $3.25
2005 $3.28
2004 $3.55

Earnings Per Share – ModernGraham

2014 $4.53
2013 $4.71
2012 $4.30
2011 $4.23
2010 $4.26
2009 $4.05

Dividend History

Conclusion:

Kimberly Clark Corporation is not suitable for the Enterprising Investor or for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, insufficient earnings growth over the last ten years, as well as the high PEmg and PB ratios.  The Enterprising Investor is concerned by the level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $4.26 in 2010 to only $4.53 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 7.88% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of Kimberly Clark Corporation (KMB) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Kimberly Clark Corporation (KMB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Kimberly Clark Corporation (KMB) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Kimberly Clark Corp (KMB) Annual Valuation

500px-Kimberly-Clark_logo.svg

Kimberly Clark Corp operates a business that supplies products that will be in demand worldwide until the common cold is cured.  That seems like an extremely strong business, but Intelligent Investors must go beyond simply deciding that a brand is good, or a business model is good, and look closely at the fundamentals of the company to determine its risk level then calculate an intrinsic value.  By using a ModernGraham analysis, one can maintain a systematic analysis across companies and even industries to easily compare one potential investment’s risk level and opportunity for value against another potential investment.  What follows is a specific look at how Kimberly-Clark Corporation fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kimberly-Clark Corporation (Kimberly-Clark), incorporated on June 29, 1928, is engaged in the manufacturing and marketing of a range of products made from natural or synthetic fibers. The Company operates in Personal Care, Consumer Tissue, K-C Professional and HealthCare. The Company operates and markets its products globally in Asia, Latin America, Eastern Europe, the Middle East and Africa, with a particular emphasis in China, Russia and Latin America. In April 2013, it announced the acquisition of the anesthesia business of Life-Tech, Inc.

Defensive and Enterprising Investor Tests:

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

MG Value $63.63
MG Opinion Overvalued
Value Based on 3% Growth $68.60
Value Based on 0% Growth $40.22
Market Implied Growth Rate 7.23%
Net Current Asset Value (NCAV) -$20.42
PEmg 22.96
Current Ratio 1.19
PB Ratio 8.90

Balance Sheet – 9/30/2013

Current Assets $6,894,000,000
Current Liabilities $5,780,000,000
Total Debt $5,388,000,000
Total Assets $19,364,000,000
Intangible Assets $3,480,000,000
Total Liabilities $14,697,000,000
Outstanding Shares 382,100,000

Earnings Per Share

2013 $5.58
2012 $4.42
2011 $3.99
2010 $4.45
2009 $4.52
2008 $4.06
2007 $4.09
2006 $3.25
2005 $3.31
2004 $3.55
2003 $3.33

Earnings Per Share – ModernGraham 

2013 $4.73
2012 $4.30
2011 $4.23
2010 $4.26
2009 $4.06
2008 $3.77

Conclusion:

Kimberly Clark Corp has exhibited solid growth over the historical period, but it does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is not interested because the company’s current ratio is too low and the stock is trading at high PEmg and PB ratios.  The Enterprising Investor is turned away because the company’s debt levels are too high relative to its current assets.  The company as a whole, while a very good company that is likely to be around for a long time in the future, presents slightly more risk than value investors following Benjamin Graham’s methods are willing to accept.  As a result, those investors should investigate other potential investments such as through a review of companies that pass the ModernGraham requirements.  From strictly a valuation perspective, the company appears to be overvalued at the current time.  The company’s EPSmg (normalized earnings) have grown from $3.77 in 2008 to $4.73 in 2013, which is solid growth throughout the period, but the ModernGraham valuation model does not support the market price.

What do you think?  What value would you put on Kimberly Clark Corp (KMB)?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Kimberly Clark Corp (KMB) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

Leggett & Platt Inc Valuation – March 2019 #LEG

Company Profile (excerpt from Reuters): Leggett & Platt, Incorporated, incorporated on February 23, 1901, is a diversified manufacturer that conceives, designs and produces a range of engineered components and products found in homes, offices and automobiles. The Company operates in four segments: Residential Furnishings, Commercial Products, Industrial Materials and Specialized Products. The Company’s brands include ComfortCore, Mira-Coil, VertiCoil, Quantum, Nanocoil, Softech, Lura-Flex, Superlastic and Active Support Technology, which includes mattress innersprings; Semi-Flex, which includes box spring components and foundations; Spuhl, which includes mattress innerspring manufacturing machines; Wall Hugger, which includes recliner chair mechanisms; Super Sagless, which includes motion and sofa sleeper mechanisms; No-Sag, which includes wire forms used in seating; LPSense, which includes capacitive sensing; Hanes, which includes fabric materials; Schukra, Pullmaflex and Flex-O-Lator, which includes automotive seating products, and Gribetz and Porter, which includes quilting and sewing machines.

LEG Chart

LEG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LEG – 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 $5,419,827,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.87 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 77.12% Pass
6. Moderate PEmg Ratio PEmg < 20 17.36 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.81 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 1.87 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.65 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 $2.38
MG Growth Estimate 8.74%
MG Value $61.86
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $34.54
MG Value based on 0% Growth $20.25
Market Implied Growth Rate 4.43%
Current Price $41.35
% of Intrinsic Value 66.84%

Leggett & Platt, 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 PB ratio. 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 Undervalued after growing its EPSmg (normalized earnings) from $1.51 in 2015 to an estimated $2.38 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.43% 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 Leggett & Platt, Inc. revealed the company was trading above its Graham Number of $22.33. The company pays a dividend of $1.5 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 17.36, which was below the industry average of 26.43, 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 $-5.2.

Leggett & Platt, Inc. fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.20
Graham Number $22.33
PEmg 17.36
Current Ratio 1.87
PB Ratio 4.81
Current Dividend $1.50
Dividend Yield 3.63%
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 $1,524,600,000
Total Current Liabilities $815,700,000
Long-Term Debt $1,167,800,000
Total Assets $3,382,000,000
Intangible Assets $1,012,500,000
Total Liabilities $2,224,400,000
Shares Outstanding (Diluted Average) 134,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.50
Dec2018 $2.26
Dec2017 $2.13
Dec2016 $2.76
Dec2015 $2.28
Dec2014 $0.68
Dec2013 $1.34
Dec2012 $1.70
Dec2011 $1.04
Dec2010 $1.15
Dec2009 $0.70
Dec2008 $0.62
Dec2007 -$0.06
Dec2006 $1.61
Dec2005 $1.30
Dec2004 $1.45
Dec2003 $1.05
Dec2002 $1.17
Dec2001 $0.94
Dec2000 $1.32
Dec1999 $1.45

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.38
Dec2018 $2.22
Dec2017 $2.08
Dec2016 $1.96
Dec2015 $1.51
Dec2014 $1.14
Dec2013 $1.31
Dec2012 $1.21
Dec2011 $0.87
Dec2010 $0.79
Dec2009 $0.69
Dec2008 $0.78
Dec2007 $0.93
Dec2006 $1.39
Dec2005 $1.25
Dec2004 $1.21
Dec2003 $1.12

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – February 2019
10 Best Dividend Paying Stocks for the Enterprising Investor – September 2018
Best Dividend Paying Stocks for Dividend Growth Investors – August 2018
Best Dividend Paying Stocks for Dividend Growth Investors – June 2018
Leggett & Platt Inc Valuation – June 2018 $LEG

Other ModernGraham posts about related companies

Clorox Co Valuation – March 2019 $CLX
Kimberly-Clark Corp Valuation – January 2019 $KMB
Newell Brands Inc Valuation – January 2019 $NWL
Sleep Number Corp Valuation – July 2018 $SNBR
National Presto Industries Inc Valuation – June 2018 $NPK
Leggett & Platt Inc Valuation – June 2018 $LEG
Clorox Co Valuation – May 2018 $CLX
Newell Brands Inc Valuation – March 2018 $NWL
La-Z-Boy Inc Valuation – Initial Coverage $LZB
Tupperware Brands Corp Valuation – Initial Coverage $TUP

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.

Clorox Co Valuation – March 2019 $CLX

Company Profile (excerpt from Reuters): The Clorox Company, incorporated on September 5, 1986, is a manufacturer and marketer of consumer and professional products. The Company sells its products primarily through mass retail outlets, e-commerce channels, wholesale distributors and medical supply distributors. The Company operates through four segments: Cleaning, Household, Lifestyle and International. The Company markets some of the consumer brand names, including namesake bleach and cleaning products, Pine-Sol cleaners, Liquid-Plumr clog removers, Poett home care products, Fresh Step cat litter, Glad bags, wraps and containers, Kingsford charcoal, Hidden Valley dressings and sauces, Brita water-filtration products and Burt’s Bees natural personal care products. The Company also markets brands for professional services, including Clorox Healthcare and Clorox Commercial Solutions. The Company manufactures products in approximately 10 countries and markets them in over 100 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CLX – 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 $20,224,279,591 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.15 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 44.05% Pass
6. Moderate PEmg Ratio PEmg < 20 27.45 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 27.67 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 1.15 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 12.77 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 $5.75
MG Growth Estimate 5.25%
MG Value $109.28
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $83.37
MG Value based on 0% Growth $48.87
Market Implied Growth Rate 9.47%
Current Price $157.80
% of Intrinsic Value 144.40%

Clorox Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, 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 $4.26 in 2015 to an estimated $5.75 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.47% 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 below the price.

At the time of valuation, further research into Clorox Co revealed the company was trading above its Graham Number of $28.13. The company pays a dividend of $3.48 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 27.45, which was above the industry average of 26.43. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-22.8.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$22.80
Graham Number $28.13
PEmg 27.45
Current Ratio 1.15
PB Ratio 27.67
Current Dividend $3.48
Dividend Yield 2.21%
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 12/1/2018
Total Current Assets $1,365,000,000
Total Current Liabilities $1,186,000,000
Long-Term Debt $2,285,000,000
Total Assets $5,073,000,000
Intangible Assets $2,505,000,000
Total Liabilities $4,331,000,000
Shares Outstanding (Diluted Average) 130,094,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.20
Jun2018 $6.26
Jun2017 $5.33
Jun2016 $4.92
Jun2015 $4.37
Jun2014 $4.23
Jun2013 $4.30
Jun2012 $4.09
Jun2011 $4.02
Jun2010 $4.24
Jun2009 $3.79
Jun2008 $3.24
Jun2007 $3.26
Jun2006 $2.90
Jun2005 $6.11
Jun2004 $2.56
Jun2003 $2.23
Jun2002 $1.37
Jun2001 $1.35
Jun2000 $1.64
Jun1999 $0.52

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.75
Jun2018 $5.36
Jun2017 $4.81
Jun2016 $4.50
Jun2015 $4.26
Jun2014 $4.19
Jun2013 $4.15
Jun2012 $4.00
Jun2011 $3.88
Jun2010 $3.70
Jun2009 $3.57
Jun2008 $3.51
Jun2007 $3.57
Jun2006 $3.50
Jun2005 $3.44
Jun2004 $2.01
Jun2003 $1.63

Recommended Reading:

Other ModernGraham posts about the company

Clorox Co Valuation – May 2018 $CLX
Clorox Company Valuation – January 2017 $CLX
Clorox Company Analysis – September 2015 Update $CLX
23 Companies to Research This Week – 9/13/14
Clorox Company Annual Stock Valuation – 2014 $CLX

Other ModernGraham posts about related companies

Kimberly-Clark Corp Valuation – January 2019 $KMB
Newell Brands Inc Valuation – January 2019 $NWL
Sleep Number Corp Valuation – July 2018 $SNBR
National Presto Industries Inc Valuation – June 2018 $NPK
Leggett & Platt Inc Valuation – June 2018 $LEG
Clorox Co Valuation – May 2018 $CLX
Newell Brands Inc Valuation – March 2018 $NWL
La-Z-Boy Inc Valuation – Initial Coverage $LZB
Tupperware Brands Corp Valuation – Initial Coverage $TUP
Leggett & Platt Inc Valuation – March 2017 $LEG

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.

International Flavors & Fragrances Inc Valuation – January 2019 $IFF

Company Profile (excerpt from Reuters): International Flavors & Fragrances Inc., incorporated on December 6, 1909, creates, manufactures and supplies flavors and fragrances (including cosmetic active ingredients) used to impart or improve flavor or fragrance in a range of consumer products. The Company operates in two segments: Flavors and Fragrances. The Flavors segment offers flavor compounds that are sold to the food and beverage industries for use in consumer products, such as prepared foods, beverages, dairy, food and sweet products. The Fragrances segment offers fragrance compounds and fragrance ingredients. Its cosmetic active ingredients consist of active and functional ingredients, botanicals and delivery systems to support its customers’ cosmetic and personal care product lines. The Company’s products are sold to manufacturers of perfumes and cosmetics, hair and other personal care products, soaps and detergents, cleaning products, dairy, meat and other processed foods, beverages, snacks and savory foods, sweet and baked goods, and pharmaceutical and oral care products. As of December 31, 2016, the Company had 42 manufacturing facilities and over 70 creative centers and application laboratories located in over 35 countries that support over 35,000 products. Its manufacturing facilities are located in the United States, the Netherlands, Spain, Great Britain, Turkey, Brazil, Mexico, Australia, China, India and Singapore.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IFF – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,388,233,724 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 9.16 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 56.57% Pass
6. Moderate PEmg Ratio PEmg < 20 28.17 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.73 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 9.16 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.70 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 $4.79
MG Growth Estimate 2.52%
MG Value $64.90
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $69.46
MG Value based on 0% Growth $40.72
Market Implied Growth Rate 9.83%
Current Price $134.95
% of Intrinsic Value 207.92%

International Flavors & Fragrances Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor 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 $4.1 in 2014 to an estimated $4.79 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.83% 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 International Flavors & Fragrances Inc revealed the company was trading above its Graham Number of $50.39. The company pays a dividend of $2.66 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 28.17, which was below the industry average of 45.62, 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 $16.77.

International Flavors & Fragrances 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) $16.77
Graham Number $50.39
PEmg 28.17
Current Ratio 9.16
PB Ratio 2.73
Current Dividend $2.66
Dividend Yield 1.97%
Number of Consecutive Years of Dividend Growth 15

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $6,946,827,000
Total Current Liabilities $758,456,000
Long-Term Debt $4,331,242,000
Total Assets $9,615,542,000
Intangible Assets $1,538,439,000
Total Liabilities $5,577,593,000
Shares Outstanding (Diluted Average) 81,647,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.29
Dec2017 $3.72
Dec2016 $5.05
Dec2015 $5.16
Dec2014 $5.06
Dec2013 $4.29
Dec2012 $3.09
Dec2011 $3.26
Dec2010 $3.26
Dec2009 $2.46
Dec2008 $2.86
Dec2007 $2.82
Dec2006 $2.48
Dec2005 $2.04
Dec2004 $2.05
Dec2003 $1.83
Dec2002 $1.84
Dec2001 $1.20
Dec2000 $1.22
Dec1999 $1.53
Dec1998 $1.90

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.79
Dec2017 $4.58
Dec2016 $4.85
Dec2015 $4.56
Dec2014 $4.10
Dec2013 $3.50
Dec2012 $3.07
Dec2011 $3.02
Dec2010 $2.86
Dec2009 $2.61
Dec2008 $2.61
Dec2007 $2.40
Dec2006 $2.15
Dec2005 $1.92
Dec2004 $1.78
Dec2003 $1.61
Dec2002 $1.51

Recommended Reading:

Other ModernGraham posts about the company

International Flavors & Fragrances Inc Valuation – March 2018 $IFF
9 Best Stocks For Value Investors This Week – 6/24/16
International Flavors & Fragrances Inc Valuation – June 2016 $IFF
13 Best Stocks For Value Investors This Week – 12/12/15
International Flavors & Fragrances Valuation – December 2015 Update $IFF

Other ModernGraham posts about related companies

Estee Lauder Companies Inc Valuation – December 2018 $EL
Proctor & Gamble Co Valuation – November 2018 $PG
Johnson & Johnson Valuation – November 2018 $JNJ
Inter Parfums Inc Valuation – July 2018 $IPAR
Service Corp International Valuation – July 2018 $SCI
Avon Products Inc Valuation – June 2018 $AVP
Colgate-Palmolive Co Valuation – June 2018 $CL
Coty Inc Valuation – May 2018 $COTY
Church & Dwight Co Inc Valuation – April 2018 $CHD
Kimberly-Clark Corp Valuation – March 2018 $KMB

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.

Estee Lauder Companies Inc Valuation – December 2018 $EL

Company Profile (excerpt from Reuters): The Estee Lauder Companies Inc., incorporated on December 9, 1976, manufactures and markets skin care, makeup, fragrance and hair care products. The Company offers products, including skin care, makeup, fragrance, hair care and other. The Company operates in beauty products segment. The Company’s products are sold in over 150 countries and territories under brand names, including Estee Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, Tommy Hilfiger, MAC, Kiton, La Mer, Bobbi Brown, Donna Karan New York, DKNY, Aveda, Jo Malone London, Bumble and bumble, Michael Kors, Darphin, Tom Ford, Smashbox, Ermenegildo Zegna, AERIN, Tory Burch, RODIN olio lusso, Le Labo, Editions de Parfums Frederic Malle, GLAMGLOW, By Kilian, BECCA and Too Faced.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EL – December 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 $55,944,653,011 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.75 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 115.52% Pass
6. Moderate PEmg Ratio PEmg < 20 40.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 12.18 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 1.75 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.25 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 5.16%
MG Value $67.65
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $52.14
MG Value based on 0% Growth $30.57
Market Implied Growth Rate 15.78%
Current Price $144.09
% of Intrinsic Value 212.98%

Estee Lauder Companies 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 level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.68 in 2015 to an estimated $3.6 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.78% 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 Estee Lauder Companies Inc revealed the company was trading above its Graham Number of $36.63. The company pays a dividend of $1.48 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 40.07, which was below the industry average of 55.8, 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 $-4.98.

Estee Lauder Companies Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$4.98
Graham Number $36.63
PEmg 40.07
Current Ratio 1.75
PB Ratio 12.18
Current Dividend $1.48
Dividend Yield 1.03%
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 9/1/2018
Total Current Assets $6,249,000,000
Total Current Liabilities $3,563,000,000
Long-Term Debt $3,361,000,000
Total Assets $12,543,000,000
Intangible Assets $3,193,000,000
Total Liabilities $8,113,000,000
Shares Outstanding (Diluted Average) 374,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.67
Jun2018 $2.95
Jun2017 $3.35
Jun2016 $2.96
Jun2015 $2.82
Jun2014 $3.06
Jun2013 $2.58
Jun2012 $2.16
Jun2011 $1.74
Jun2010 $1.19
Jun2009 $0.55
Jun2008 $1.20
Jun2007 $1.08
Jun2006 $0.56
Jun2005 $0.89
Jun2004 $0.74
Jun2003 $0.63
Jun2002 $0.35
Jun2001 $0.58
Jun2000 $0.60
Jun1999 $0.52

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.60
Jun2018 $3.05
Jun2017 $3.05
Jun2016 $2.84
Jun2015 $2.68
Jun2014 $2.45
Jun2013 $1.98
Jun2012 $1.58
Jun2011 $1.24
Jun2010 $0.96
Jun2009 $0.85
Jun2008 $0.97
Jun2007 $0.83
Jun2006 $0.68
Jun2005 $0.71
Jun2004 $0.60
Jun2003 $0.53

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Proctor & Gamble Co Valuation – November 2018 $PG
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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.

Proctor & Gamble Co Valuation – November 2018 $PG

Company Profile (excerpt from Reuters): The Procter & Gamble Company, incorporated on May 5, 1905, is focused on providing branded consumer packaged goods to consumers around the world. The Company operates through five segments: Beauty; Grooming; Health Care; Fabric & Home Care, and Baby, Feminine & Family Care. The Company sells its products in approximately 180 countries and territories primarily through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, distributors, baby stores, specialty beauty stores, e-commerce, high-frequency stores and pharmacies.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PG – November 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 $229,682,910,985 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.80 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 16.92% Fail
6. Moderate PEmg Ratio PEmg < 20 21.83 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.59 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 0.80 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.54 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 $4.22
MG Growth Estimate 3.61%
MG Value $66.43
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $61.26
MG Value based on 0% Growth $35.91
Market Implied Growth Rate 6.66%
Current Price $92.21
% of Intrinsic Value 138.80%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.4 in 2015 to an estimated $4.22 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.66% 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 Procter & Gamble Co revealed the company was trading above its Graham Number of $45.2. The company pays a dividend of $2.79 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.83, which was below the industry average of 55.8, 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 $-16.3.

Procter & Gamble Co receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$16.30
Graham Number $45.20
PEmg 21.83
Current Ratio 0.80
PB Ratio 4.59
Current Dividend $2.79
Dividend Yield 3.02%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $23,346,000,000
Total Current Liabilities $29,220,000,000
Long-Term Debt $20,779,000,000
Total Assets $118,440,000,000
Intangible Assets $69,144,000,000
Total Liabilities $65,936,000,000
Shares Outstanding (Diluted Average) 2,612,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.42
Jun2018 $3.67
Jun2017 $5.59
Jun2016 $3.69
Jun2015 $2.44
Jun2014 $4.01
Jun2013 $3.86
Jun2012 $3.66
Jun2011 $3.93
Jun2010 $4.11
Jun2009 $4.26
Jun2008 $3.64
Jun2007 $3.04
Jun2006 $2.64
Jun2005 $2.53
Jun2004 $2.20
Jun2003 $1.70
Jun2002 $1.55
Jun2001 $1.04
Jun2000 $1.17
Jun1999 $1.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.22
Jun2018 $4.04
Jun2017 $4.13
Jun2016 $3.44
Jun2015 $3.40
Jun2014 $3.90
Jun2013 $3.88
Jun2012 $3.90
Jun2011 $3.95
Jun2010 $3.82
Jun2009 $3.52
Jun2008 $3.04
Jun2007 $2.63
Jun2006 $2.32
Jun2005 $2.05
Jun2004 $1.71
Jun2003 $1.43

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Other ModernGraham posts about the company

Proctor & Gamble Co Valuation – February 2018 $PG
5 Overvalued Dow Components – February 2017
5 Overvalued Dow Components – December 2016
5 Overvalued Dow Components – July 2016
Proctor & Gamble Co Valuation – July 2016 $PG

Other ModernGraham posts about related companies

Inter Parfums Inc Valuation – July 2018 $IPAR
Service Corp International Valuation – July 2018 $SCI
Avon Products Inc Valuation – June 2018 $AVP
Colgate-Palmolive Co Valuation – June 2018 $CL
Coty Inc Valuation – May 2018 $COTY
Church & Dwight Co Inc Valuation – April 2018 $CHD
Kimberly-Clark Corp Valuation – March 2018 $KMB
International Flavors & Fragrances Inc Valuation – March 2018 $IFF
Signet Jewelers Ltd Valuation – March 2018 $SIG
Estee Lauder Companies Inc Valuation – February 2018 $EL

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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