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Kohl’s Corporation Valuation – March 2019 #KSS

Company Profile (excerpt from Reuters): Kohl’s Corporation (Kohl’s), incorporated on March 23, 1993, is an operator of department stores. As of January 28, 2017, the Company operated 1,154 Kohl’s department stores, a Website (www.Kohls.com), 12 FILA outlets, and three Off-Aisle clearance centers. The Company’s stores and Website sell moderately-priced private label and national brand apparel, footwear, accessories, beauty and home products. The Company’s Website includes merchandise that is available in its stores, as well as merchandise that is available only online. The Company’s merchandise mix includes both national brands and private brands that are available only at Kohl’s.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KSS – 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 $11,227,120,357 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.77 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 29.93% Fail
6. Moderate PEmg Ratio PEmg < 20 13.89 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.01 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.77 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.88 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 $4.89
MG Growth Estimate 3.65%
MG Value $77.27
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $70.95
MG Value based on 0% Growth $41.59
Market Implied Growth Rate 2.70%
Current Price $67.99
% of Intrinsic Value 87.99%

Kohl’s Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.94 in 2016 to an estimated $4.89 for 2020. This level of demonstrated earnings growth supports the market’s implied estimate of 2.7% 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 Kohl’s Corporation revealed the company was trading above its Graham Number of $66.09. The company pays a dividend of $2.44 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 13.89, 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 $-12.93.

Kohl’s Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.93
Graham Number $66.09
PEmg 13.89
Current Ratio 1.77
PB Ratio 2.01
Current Dividend $2.44
Dividend Yield 3.59%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $4,835,000,000
Total Current Liabilities $2,730,000,000
Long-Term Debt $1,861,000,000
Total Assets $12,469,000,000
Intangible Assets $0
Total Liabilities $6,942,000,000
Shares Outstanding (Diluted Average) 163,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.80
Jan2019 $4.84
Jan2018 $5.12
Jan2017 $3.11
Jan2016 $3.46
Jan2015 $4.24
Jan2014 $4.05
Jan2013 $4.17
Jan2012 $4.30
Jan2011 $3.66
Jan2010 $3.17
Jan2009 $2.89
Jan2008 $3.39
Jan2007 $3.31
Jan2006 $2.43
Jan2005 $2.04
Jan2004 $1.59
Jan2003 $1.85
Jan2002 $1.45
Jan2001 $1.10
Jan2000 $0.77

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.89
Jan2019 $4.34
Jan2018 $4.06
Jan2017 $3.63
Jan2016 $3.94
Jan2015 $4.14
Jan2014 $4.02
Jan2013 $3.88
Jan2012 $3.65
Jan2011 $3.32
Jan2010 $3.11
Jan2009 $2.99
Jan2008 $2.88
Jan2007 $2.49
Jan2006 $2.02
Jan2005 $1.74
Jan2004 $1.51

Recommended Reading:

Other ModernGraham posts about the company

Kohl’s Corporation Valuation – June 2018 $KSS
Kohl’s Corporation Valuation – March 2017 $KSS
Kohl’s Corporation Valuation – November 2015 Update $KSS
The Best Companies of the Retail Industry – August 2015
15 Best Stocks For Value Investors This Week – 8/22/15

Other ModernGraham posts about related companies

Dollar Tree Inc Valuation – March 2019 #DLTR
TJX Companies Inc Valuation – February 2019 $TJX
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.

Kohl’s Corporation Valuation – June 2018 $KSS

Company Profile (excerpt from Reuters): Kohl’s Corporation (Kohl’s), incorporated on March 23, 1993, is an operator of department stores. As of January 28, 2017, the Company operated 1,154 Kohl’s department stores, a Website (www.Kohls.com), 12 FILA outlets, and three Off-Aisle clearance centers. The Company’s stores and Website sell moderately-priced private label and national brand apparel, footwear, accessories, beauty and home products. The Company’s Website includes merchandise that is available in its stores, as well as merchandise that is available only online. The Company’s merchandise mix includes both national brands and private brands that are available only at Kohl’s.

KSS Chart

KSS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KSS – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,502,360,460 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.76 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 18.69% Fail
6. Moderate PEmg Ratio PEmg < 20 15.57 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.13 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.76 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.07 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 $4.39
MG Growth Estimate 0.89%
MG Value $45.17
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $63.67
MG Value based on 0% Growth $37.33
Market Implied Growth Rate 3.53%
Current Price $68.37
% of Intrinsic Value 151.37%

Kohl’s Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the poor dividend history. 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 $4.14 in 2015 to an estimated $4.39 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.53% 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 Kohl’s Corporation revealed the company was trading above its Graham Number of $60.16. The company pays a dividend of $2.2 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 15.57, which was below the industry average of 37.1, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.43.

Kohl’s Corporation receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$15.43
Graham Number $60.16
PEmg 15.57
Current Ratio 1.76
PB Ratio 2.13
Current Dividend $2.20
Dividend Yield 3.22%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 4/1/2018
Total Current Assets $4,983,000,000
Total Current Liabilities $2,830,000,000
Long-Term Debt $2,301,000,000
Total Assets $12,916,000,000
Intangible Assets $0
Total Liabilities $7,560,000,000
Shares Outstanding (Diluted Average) 167,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.98
Jan2018 $5.12
Jan2017 $3.11
Jan2016 $3.46
Jan2015 $4.24
Jan2014 $4.05
Jan2013 $4.17
Jan2012 $4.30
Jan2011 $3.66
Jan2010 $3.17
Jan2009 $2.89
Jan2008 $3.39
Jan2007 $3.31
Jan2006 $2.43
Jan2005 $2.04
Jan2004 $1.59
Jan2003 $1.85
Jan2002 $1.45
Jan2001 $1.10
Jan2000 $0.77
Jan1999 $0.59

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.39
Jan2018 $4.06
Jan2017 $3.63
Jan2016 $3.94
Jan2015 $4.14
Jan2014 $4.02
Jan2013 $3.88
Jan2012 $3.65
Jan2011 $3.32
Jan2010 $3.11
Jan2009 $2.99
Jan2008 $2.88
Jan2007 $2.49
Jan2006 $2.02
Jan2005 $1.74
Jan2004 $1.51
Jan2003 $1.37

Recommended Reading:

Other ModernGraham posts about the company

Kohl’s Corporation Valuation – March 2017 $KSS
Kohl’s Corporation Valuation – November 2015 Update $KSS
The Best Companies of the Retail Industry – August 2015
15 Best Stocks For Value Investors This Week – 8/22/15
Kohl’s Corporation Analysis – August 2015 Update $KSS

Other ModernGraham posts about related companies

Dollar Tree Inc Valuation – May 2018 $DLTR
TJX Companies Inc Valuation – May 2018 $TJX
Tractor Supply Co Valuation – April 2018 $TSCO
Tapestry Inc Valuation – April 2018 $TPR
Dollar General Corp Valuation – April 2018 $DG
Tiffany & Co. Valuation – April 2018 $TIF
Best Buy Co Inc Valuation – April 2018 $BBY
Macy’s Inc Valuation – April 2018 $M
Walgreens Boots Alliance Inc Valuation – March 2018 $WBA
Bed Bath & Beyond Inc Valuation – March 2018 $BBBY

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.

Kohl’s Corporation Valuation – March 2017 $KSS

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

Company Profile (obtained from Google Finance): Kohl’s Corporation (Kohl’s) is an operator of department stores. The Company also operates an e-commerce Website (www.Kohls.com). The Company operates over 1,160 department stores in approximately 50 states. The Company sells private label, exclusive and national brand apparel, footwear, accessories, beauty and home products. Its Website includes merchandise, which is available in its stores, as well as merchandise, which is available only on-line. The Company’s private brands include Apt. 9, Croft & Barrow, Jumping Beans, SO and Sonoma Goods for Life. Its exclusive brands include Food Network, Jennifer Lopez, Marc Anthony, Rock & Republic and Simply Vera Vera Wang.

KSS Chart

KSS 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 KSS – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,205,242,652 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.76 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 2.47% Fail
6. Moderate PEmg Ratio PEmg < 20 12.03 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.42 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.76 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.23 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg $3.49
MG Growth Estimate -1.99%
MG Value $15.73
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $50.56
MG Value based on 0% Growth $29.64
Market Implied Growth Rate 1.77%
Current Price $41.95
% of Intrinsic Value 266.70%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.02 in 2014 to an estimated $3.49 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.77% 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 Kohl’s Corporation revealed the company was trading below its Graham Number of $47.5. The company pays a dividend of $2 per share, for a yield of 4.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.03, which was below the industry average of 50.09, 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 $-18.

Kohl’s Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$18.00
Graham Number $47.50
PEmg 12.03
Current Ratio 1.76
PB Ratio 1.42
Current Dividend $2.00
Dividend Yield 4.77%
Number of Consecutive Years of Dividend Growth 7

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2017
Total Current Assets $5,247,000,000
Total Current Liabilities $2,974,000,000
Long-Term Debt $2,795,000,000
Total Assets $13,574,000,000
Intangible Assets $0
Total Liabilities $8,397,000,000
Shares Outstanding (Diluted Average) 175,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.39
Jan2017 $3.11
Jan2016 $3.46
Jan2015 $4.24
Jan2014 $4.05
Jan2013 $4.17
Jan2012 $4.30
Jan2011 $3.66
Jan2010 $3.17
Jan2009 $2.89
Jan2008 $3.39
Jan2007 $3.31
Jan2006 $2.43
Jan2005 $2.04
Jan2004 $1.59
Jan2003 $1.85
Jan2002 $1.45
Jan2001 $1.10
Jan2000 $0.77
Jan1999 $0.59
Jan1998 $0.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.49
Jan2017 $3.63
Jan2016 $3.94
Jan2015 $4.14
Jan2014 $4.02
Jan2013 $3.88
Jan2012 $3.65
Jan2011 $3.32
Jan2010 $3.11
Jan2009 $2.99
Jan2008 $2.88
Jan2007 $2.49
Jan2006 $2.02
Jan2005 $1.74
Jan2004 $1.51
Jan2003 $1.37
Jan2002 $1.02

Recommended Reading:

Other ModernGraham posts about the company

Kohl’s Corporation Valuation – November 2015 Update $KSS
The Best Companies of the Retail Industry – August 2015
15 Best Stocks For Value Investors This Week – 8/22/15
Kohl’s Corporation Analysis – August 2015 Update $KSS
30 Companies in the Spotlight This Week – 5/23/15

Other ModernGraham posts about related companies

Kirkland’s Inc Valuation – Initial Coverage $KIRK
Dollar Tree Inc Valuation – February 2017 $DLTR
Staples Inc Valuation – February 2017 $SPLS
Stein Mart Inc Valuation – Initial Coverage $SMRT
J C Penney Company Inc Valuation – Initial Coverage $JCP
TJX Companies Inc Valuation – December 2016 $TJX
Shoe Carnival Inc Valuation – Initial Coverage $SCVL
Aaron’s Inc Valuation – November 2016 $AAN
Tractor Supply Company Valuation – August 2016 $TSCO
Fossil Group Inc Valuation – August 2016 $FOSL

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.

Kohl’s Corporation Valuation – November 2015 Update $KSS

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 Most Undervalued Companies for the Defensive Investor – November 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 stock analysis showing a specific look at how Kohl’s Corporation (KSS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kohl’s Corporation (Kohl’s) is a specialty department store. As of January 31, 2015, the Company operated 1,162 department stores in 49 states and an e-Commerce Website (www.Kohls.com). The Company sells private label, and national brand apparel, footwear, accessories, beauty and home products. The Company’s stores carry a merchandise assortment with differences attributable to regional preferences. The Company’s Website includes merchandise which is available in the stores, as well as merchandise which is available only on-line. Its private brands include Apt. 9, Croft & Barrow, Jumping Beans, SO and Sonoma Life + Style. The Company’s exclusive brands consist of Food Network, Jennifer Lopez, Marc Anthony, Rock & Republic and Simply Vera Vera Wang. It also offers products under the Fitbit, IZOD, Juicy Couture, Gaiam, Nespresso and PUMA brands, as well as Jumping Beans collections featuring Disney characters. It also operates a nationwide loyalty program called Yes2You rewards.

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and 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 KSS – November 2015

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 $8,625,977,178 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.57 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 5.94% Fail
6. Moderate PEmg Ratio PEmg < 20 13.02 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.59 Pass
Score
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 1.57 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.04 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

KSS value Chart November 2015

EPSmg $3.41
MG Growth Estimate -1.02%
MG Value $22.02
Opinion Overvalued
MG Value based on 3% Growth $49.40
MG Value based on 0% Growth $28.96
Market Implied Growth Rate 2.26%
Current Price $44.35
% of Intrinsic Value 201.39%

Kohl’s Corp does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned by the low current ratio, short dividend history, and the insufficient earnings growth over the last ten years.  The Enterprising Investor has concerns with the level of debt in relation to the net current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $3.65 in 2012 to an estimated $3.41 for 2016.  This level of demonstrated earnings growth does not support the market’s implied estimate of 2.26% 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.

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 Kohl’s Corporation (KSS)?  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.

Stage 3: Information for Further Research

KSS Charts November 2015

Net Current Asset Value (NCAV) -$16.43
Graham Number $34.28
PEmg 13.02
Current Ratio 1.57
PB Ratio 1.59
Dividend Yield 3.79%
Number of Consecutive Years of Dividend Growth 5

 

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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 Oct15
Total Current Assets $6,203,000,000
Total Current Liabilities $3,939,000,000
Long-Term Debt $4,609,000,000
Total Assets $14,898,000,000
Intangible Assets $0
Total Liabilities $9,424,000,000
Shares Outstanding (Diluted Average) 196,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.87
Jan15 $4.24
Jan14 $4.05
Jan13 $4.17
Jan12 $4.30
Jan11 $3.66
Jan10 $3.17
Jan09 $2.89
Jan08 $3.39
Jan07 $3.31
Jan06 $2.43
Jan05 $2.04
Jan04 $1.59
Jan03 $1.85
Jan02 $1.45
Jan01 $1.10
Jan00 $0.77
Jan99 $0.59
Jan98 $0.23
Jan97 $0.34
Jan96 $0.25

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.41
Jan15 $4.14
Jan14 $4.02
Jan13 $3.88
Jan12 $3.65
Jan11 $3.32
Jan10 $3.11
Jan09 $2.99
Jan08 $2.88
Jan07 $2.49
Jan06 $2.02
Jan05 $1.74
Jan04 $1.51
Jan03 $1.37
Jan02 $1.02
Jan01 $0.74
Jan00 $0.52

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Retail Industry – August 2015
15 Best Stocks For Value Investors This Week – 8/22/15
Kohl’s Corporation Analysis – August 2015 Update $KSS
30 Companies in the Spotlight This Week – 5/23/15
Kohl’s Corporation Quarterly Valuation – May 2015 $KSS

Other ModernGraham posts about related companies

Aaron’s Inc. Valuation – October 2015 Update $AAN
Nordstrom Inc. Valuation – October 2015 Update $JWN
Tractor Supply Company Valuation – October 2015 Update $TSCO
Coach Inc. Valuation – October 2015 Update $COH
Dollar Tree Stores Inc. Valuation – October 2015 Update $DLTR
TJX Companies Inc. Valuation – October 2015 Update $TJX
Tiffany and Company Valuation – October 2015 Update $TIF
Urban Outfitters Inc. Analysis – October 2015 Update $URBN
Staples Inc. Analysis – September 2015 Update $SPLS
Fossil Group Inc. Analysis – September 2015 Update $FOSL

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.

Kohl’s Corporation Analysis – August 2015 Update $KSS

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 Most Undervalued Companies for the Defensive Investor – August 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 stock analysis showing a specific look at how Kohl’s Corporation (KSS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kohl’s Corporation (Kohl’s) is a specialty department store. As of January 31, 2015, the Company operated 1,162 department stores in 49 states and an e-Commerce Website (www.Kohls.com). The Company sells private label, and national brand apparel, footwear, accessories, beauty and home products. The Company’s stores carry a merchandise assortment with differences attributable to regional preferences. The Company’s Website includes merchandise which is available in the stores, as well as merchandise which is available only on-line. Its private brands include Apt. 9, Croft & Barrow, Jumping Beans, SO and Sonoma Life + Style. The Company’s exclusive brands consist of Food Network, Jennifer Lopez, Marc Anthony, Rock & Republic and Simply Vera Vera Wang. It also offers products under the Fitbit, IZOD, Juicy Couture, Gaiam, Nespresso and PUMA brands, as well as Jumping Beans collections featuring Disney characters. It also operates a nationwide loyalty program called Yes2You rewards.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of KSS – August 2015

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 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 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 Fail
6. Moderate PEmg Ratio PEmg < 20 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Pass
Score
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 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 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 4.17
MG Growth Estimate 2.10%
MG Value $52.93
Opinion Fairly Valued
MG Value based on 3% Growth $60.42
MG Value based on 0% Growth $35.42
Market Implied Growth Rate 2.45%
Current Price $55.84
% of Intrinsic Value 105.50%

Kohl’s Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, the short dividend history, and the insufficient earnings growth over the last ten years.  The Enterprising Investor is only initially concerned with the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.65 in 2012 to an estimated $4.17 for 2016.  This level of demonstrated earnings growth supports the market’s implied estimate of 2.45% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

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 Kohl’s Corporation (KSS)?  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.

Stage 3: Information for Further Research

KSS charts August 2015

Net Current Asset Value (NCAV) -$13.45
PEmg 13.40
Current Ratio 1.95
PB Ratio 1.87
Dividend Yield 2.90%
Number of Consecutive Years of Dividend Growth 5

 

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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

Total Current Assets $5,829,000,000
Total Current Liabilities $2,985,000,000
Long-Term Debt $4,633,000,000
Total Assets $14,563,000,000
Intangible Assets $0
Total Liabilities $8,546,000,000
Shares Outstanding (Diluted Average) 202,000,000

Earnings Per Share History

Next Fiscal Year Estimate $4.15
Jan15 $4.24
Jan14 $4.05
Jan13 $4.17
Jan12 $4.30
Jan11 $3.66
Jan10 $3.17
Jan09 $2.89
Jan08 $3.39
Jan07 $3.31
Jan06 $2.43
Jan05 $2.04
Jan04 $1.59
Jan03 $1.85
Jan02 $1.45
Jan01 $1.10
Jan00 $0.77
Jan99 $0.59
Jan98 $0.23
Jan97 $0.34
Jan96 $0.25

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.17
Jan15 $4.14
Jan14 $4.02
Jan13 $3.88
Jan12 $3.65
Jan11 $3.32
Jan10 $3.11
Jan09 $2.99
Jan08 $2.88
Jan07 $2.49
Jan06 $2.02
Jan05 $1.74
Jan04 $1.51
Jan03 $1.37
Jan02 $1.02
Jan01 $0.74
Jan00 $0.52

Recommended Reading:

Other ModernGraham posts about the company

30 Companies in the Spotlight This Week – 5/23/15
Kohl’s Corporation Quarterly Valuation – May 2015 $KSS
34 Companies in the Spotlight This Week – 2/7/15
Kohl’s Corporation Quarterly Valuation – February 2015 $KSS
28 Companies in the Spotlight This Week – 11/1/14

Other ModernGraham posts about related companies

Aaron’s Inc. Analysis – Initial Coverage $AAN
Nordstrom Inc. Analysis – July 2015 Update $JWN
Tractor Supply Company Analysis – Initial Coverage $TSCO
Coach Inc. Analysis – July 2015 Update $COH
TJX Companies Analysis – July 2015 Update $TJX
Dollar Tree Inc. Analysis – July 2015 Update $DLTR
Tiffany & Company Analysis – July 2015 Update $TIF
Urban Outfitters Analysis – July 2015 Update $URBN
Fossil Group Inc. Analysis – June 2015 Update $FOSL
Target Corporation Stock Analysis – 2015 Update $TGT

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.  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.

Kohl’s Corporation Quarterly Valuation – May 2015 $KSS

220px-Kohl's.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 – May 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 Kohl’s Corporation (KSS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kohl’s Corporation (Kohl’s) operates family-oriented department stores and a website (www.Kohls.com) that sells apparel, footwear, accessories, soft home products and housewares. The Company’s website includes merchandise which is available in its stores, as well as merchandise which is available only on-line. The Company’s brands include Apt. 9, Croft & Barrow, Jumping Beans, SO and Sonoma Life + Style. The Company operated approximately 1,158 stores in 49 states.

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 - FAIL
  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 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

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

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  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 $66.10
MG Value $56.73
MG Opinion Overvalued
Value Based on 3% Growth $61.58
Value Based on 0% Growth $36.10
Market Implied Growth Rate 3.53%
Net Current Asset Value (NCAV) -$13.45
PEmg 15.57
Current Ratio 1.95
PB Ratio 2.22

Balance Sheet – April 2015

Current Assets $5,829,000,000
Current Liabilities $2,985,000,000
Total Debt $4,633,000,000
Total Assets $14,563,000,000
Intangible Assets $0
Total Liabilities $8,546,000,000
Outstanding Shares 202,000,000

Earnings Per Share

2016 (estimate) $4.39
2015 $4.24
2014 $4.05
2013 $4.17
2012 $4.30
2011 $3.66
2010 $3.17
2009 $2.89
2008 $3.39
2007 $3.31
2006 $2.43

Earnings Per Share – ModernGraham

2016 (estimate) $4.25
2015 $4.14
2014 $4.02
2013 $3.88
2012 $3.65
2011 $3.32

Dividend History

Conclusion:

Kohl’s Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, short dividend history, and insufficient earnings growth over the last ten years, while the Enterprising Investor is only concerned by the high level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.65 in 2012 to only an estimated $4.25 for 2016.  This level of demonstrated growth does not support the market’s implied estimate of 3.53% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling below the price.

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 Kohl’s Corporation (KSS)?  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 any 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.

Kohl’s Corporation Quarterly Valuation – February 2015 $KSS

220px-Kohl's.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 Kohl’s Corporation (KSS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kohl’s Corporation (Kohl’s) operate family-oriented department stores that sell apparel, footwear and accessories for women, men and children; soft home products, such as sheets and pillows, and housewares. Kohl’s apparel and home fashions appeal to classic, modern classic and contemporary customers. As of January 28, 2012, the Company operated 1,127 stores in 49 states. In addition, Kohl’s offers on-line shopping on its Website at www.Kohls.com. Originally designed as an added service for customers who prefer to shop using the Internet, the Website include a selection of items and categories beyond what is available in stores, with a primary focus on sizes, product line extensions, and Web-exclusive product lines. Only at Kohl’s is a brand of the Company. In March 2012, the Company opened eight new stores. In March 2013, it announced the openings of nine new stores, bringing the Company’s store count to 1,155 stores.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  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 - FAIL
  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 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

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

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  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 $67.74
MG Value $62.08
MG Opinion Fairly Valued
Value Based on 3% Growth $58.94
Value Based on 0% Growth $34.55
Market Implied Growth Rate 4.08%
Net Current Asset Value (NCAV) -$15.59
PEmg 16.67
Current Ratio 1.66
PB Ratio 2.37

Balance Sheet – October 2014

Current Assets $6,078,000,000
Current Liabilities $3,655,000,000
Total Debt $4,679,000,000
Total Assets $15,047,000,000
Intangible Assets $0
Total Liabilities $9,242,000,000
Outstanding Shares 203,000,000

Earnings Per Share

2015 (estimate) $4.00
2014 $4.05
2013 $4.17
2012 $4.30
2011 $3.66
2010 $3.17
2009 $2.89
2008 $3.39
2007 $3.31
2006 $2.43
2005 $2.04

Earnings Per Share – ModernGraham

2015 (estimate) $4.06
2014 $4.02
2013 $3.88
2012 $3.65
2011 $3.32
2010 $3.11

Dividend History

Conclusion:

Kohl’s Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio along with the short dividend history.  The Enterprising Investor is only concerned by the level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.32 in 2011 to an estimated $4.06 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 4.08% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out previous ModernGraham valuations of Kohl’s Corporation (KSS) 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 Kohl’s Corporation (KSS)?  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 Kohl’s Corporation (KSS) 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.

Kohls Corporation Quarterly Valuation – October 2014 $KSS

220px-Kohl's.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 Highest Dividend Yields Among Undervalued Companies for the Defensive Investor - October 2014.  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 Kohl’s Corporation (KSS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kohl’s Corporation (Kohl’s) operate family-oriented department stores that sell apparel, footwear and accessories for women, men and children; soft home products, such as sheets and pillows, and housewares. Kohl’s apparel and home fashions appeal to classic, modern classic and contemporary customers. As of January 28, 2012, the Company operated 1,127 stores in 49 states. In addition, Kohl’s offers on-line shopping on its Website at www.Kohls.com. Originally designed as an added service for customers who prefer to shop using the Internet, the Website include a selection of items and categories beyond what is available in stores, with a primary focus on sizes, product line extensions, and Web-exclusive product lines. Only at Kohl’s is a brand of the Company. In March 2012, the Company opened eight new stores. In March 2013, it announced the openings of nine new stores, bringing the Company’s store count to 1,155 stores.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  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 - FAIL
  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 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

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

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  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 $54.26
MG Value $64.35
MG Opinion Fairly Valued
Value Based on 3% Growth $59.57
Value Based on 0% Growth $34.92
Market Implied Growth Rate 2.35%
Net Current Asset Value (NCAV) -$15.68
PEmg 13.21
Current Ratio 1.89
PB Ratio 1.91

Balance Sheet – July 2014

Current Assets $5,077,000,000
Current Liabilities $2,684,000,000
Total Debt $4,688,000,000
Total Assets $14,101,000,000
Intangible Assets $0
Total Liabilities $8,292,000,000
Outstanding Shares 205,000,000

Earnings Per Share

2015 (estimate) $4.13
2014 $4.05
2013 $4.17
2012 $4.30
2011 $3.66
2010 $3.17
2009 $2.89
2008 $3.39
2007 $3.31
2006 $2.43
2005 $2.04

Earnings Per Share – ModernGraham

2015 (estimate) $4.11
2014 $4.02
2013 $3.88
2012 $3.65
2011 $3.32
2010 $3.11

Dividend History

Conclusion:

Kohl’s Corporation is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the company’s low current ratio, as well as the short dividend history.  The Enterprising Investor’s only issue is with the level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.32 in 2011 to an estimated $4.11 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 2.35% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out previous ModernGraham valuations of Kohl’s Corporation (KSS) for a better 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 Kohl’s Corporation (KSS)?  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 Kohl’s Corporation (KSS) 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.

Kohls Corporation Quarterly Valuation – July 2014 $KSS

220px-Kohl's.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 Undervalued Companies for the Defensive Investor with High Dividend Yields.  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 Kohls Corporation (KSS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kohl’s Corporation (Kohl’s) operate family-oriented department stores that sell apparel, footwear and accessories for women, men and children; soft home products, such as sheets and pillows, and housewares. Kohl’s apparel and home fashions appeal to classic, modern classic and contemporary customers. As of January 28, 2012, the Company operated 1,127 stores in 49 states. In addition, Kohl’s offers on-line shopping on its Website at www.Kohls.com. Originally designed as an added service for customers who prefer to shop using the Internet, the Website include a selection of items and categories beyond what is available in stores, with a primary focus on sizes, product line extensions, and Web-exclusive product lines. Only at Kohl’s is a brand of the Company. In March 2012, the Company opened eight new stores. In March 2013, it announced the openings of nine new stores, bringing the Company’s store count to 1,155 stores.
KSS Chart

KSS data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  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 - FAIL
  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 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

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

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  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 $51.36
MG Value $64.00
MG Opinion Fairly Valued
Value Based on 3% Growth $59.60
Value Based on 0% Growth $34.94
Market Implied Growth Rate 2.00%
Net Current Asset Value (NCAV) -$15.20
PEmg 12.50
Current Ratio 1.95
PB Ratio 1.82

Balance Sheet – 5/3/2014

Current Assets $5,115,000,000
Current Liabilities $2,621,000,000
Total Debt $4,711,000,000
Total Assets $14,133,000,000
Intangible Assets $0
Total Liabilities $8,276,000,000
Outstanding Shares 208,000,000

Earnings Per Share

2015 (estimate) $4.15
2014 $4.04
2013 $4.16
2012 $4.31
2011 $3.64
2010 $3.24
2009 $2.88
2008 $3.39
2007 $3.31
2006 $2.43
2005 $2.12

Earnings Per Share – ModernGraham

2015 (estimate) $4.11
2014 $4.02
2013 $3.89
2012 $3.67
2011 $3.33
2010 $3.13

Dividend History
KSS Dividend Chart

KSS Dividend data by YCharts

Conclusion:

Kohls Cororation is suitable for Enterprising Investors but not for Defensive Investors.  The Defensive Investor is concerned with the low current ratio and the short dividend history while the Enterprising Investor’s only concern is the high level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities including a review of ModernGraham’s valuation of Macy’s Inc. (M) and ModernGraham’s valuation of Nordstrom (JWN).  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.33 in 2011 to an estimated $4.11 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 2.00% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

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 Kohls Corporation (KSS)?  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 Kohls Corporation (KSS) 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.

McKesson Corp Valuation – June 2018 $MCK

Company Profile (excerpt from Reuters): McKesson Corporation, incorporated on July 7, 1994, is a healthcare supply chain management solutions, retail pharmacy, community oncology and specialty care, and healthcare information technology company. The Company provides medicines, medical products and healthcare services by partnering with pharmaceutical manufacturers, providers, pharmacies, governments and other organizations in healthcare. It operates through two segments: McKesson Distribution Solutions and McKesson Technology Solutions.

MCK Chart

MCK data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MCK – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $29,995,548,994 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.01 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 145.53% Pass
6. Moderate PEmg Ratio PEmg < 20 13.52 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.98 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.01 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 14.97 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 $10.76
MG Growth Estimate 13.30%
MG Value $377.58
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $155.96
MG Value based on 0% Growth $91.43
Market Implied Growth Rate 2.51%
Current Price $145.37
% of Intrinsic Value 38.50%

McKesson Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current 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 feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.7 in 2015 to an estimated $10.76 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into McKesson Corporation revealed the company was trading above its Graham Number of $120.24. The company pays a dividend of $1.3 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 13.52, which was below the industry average of 37.1, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-64.02.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$64.02
Graham Number $120.24
PEmg 13.52
Current Ratio 1.01
PB Ratio 2.98
Current Dividend $1.30
Dividend Yield 0.89%
Number of Consecutive Years of Dividend Growth 5

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $37,136,000,000
Total Current Liabilities $36,685,000,000
Long-Term Debt $6,751,000,000
Total Assets $60,381,000,000
Intangible Assets $15,026,000,000
Total Liabilities $50,324,000,000
Shares Outstanding (Diluted Average) 206,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.24
Mar2018 $0.32
Mar2017 $22.73
Mar2016 $9.70
Mar2015 $6.27
Mar2014 $5.41
Mar2013 $5.59
Mar2012 $5.59
Mar2011 $4.57
Mar2010 $4.62
Mar2009 $2.95
Mar2008 $3.32
Mar2007 $2.99
Mar2006 $2.38
Mar2005 -$0.53
Mar2004 $2.19
Mar2003 $1.88
Mar2002 $1.43
Mar2001 -$0.17
Mar2000 $2.55
Mar1999 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.76
Mar2018 $9.30
Mar2017 $12.51
Mar2016 $7.11
Mar2015 $5.70
Mar2014 $5.33
Mar2013 $5.08
Mar2012 $4.62
Mar2011 $3.99
Mar2010 $3.55
Mar2009 $2.75
Mar2008 $2.46
Mar2007 $1.94
Mar2006 $1.44
Mar2005 $0.96
Mar2004 $1.66
Mar2003 $1.33

Recommended Reading:

Other ModernGraham posts about the company

McKesson Corp Valuation – August 2017 $MCK
McKesson Corp Valuation – July 2016 $MCK
47 Companies in the Spotlight This Week – 5/16/15
McKesson Corporation Annual Valuation – 2015 $MCK
18 Companies in the Spotlight This Week – 5/17/14

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Disclaimer:

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

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