//www.

O’Reilly Automotive Inc Valuation – February 2019 $ORLY

Company Profile (excerpt from Reuters): O’Reilly Automotive, Inc., incorporated on December 20, 2010, is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The Company sells its products to both do-it-yourself (DIY) and professional service provider customers. The Company’s product line includes new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control, chassis parts, driveline parts and engine parts; maintenance items, such as oil, antifreeze, fluids, filters, wiper blades, lighting, engine additives and appearance products, and accessories, such as floor mats, seat covers and truck accessories. It operated 4,829 stores in 47 states, as of December 31, 2016.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORLY – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $27,776,062,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.91 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 343.42% Pass
6. Moderate PEmg Ratio PEmg < 20 27.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 56.64 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 0.91 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.20 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $12.58
MG Growth Estimate 15.00%
MG Value $484.20
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $182.36
MG Value based on 0% Growth $106.90
Market Implied Growth Rate 9.54%
Current Price $346.75
% of Intrinsic Value 71.61%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.7 in 2014 to an estimated $12.58 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.54% 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 above the price.

At the time of valuation, further research into O’Reilly Automotive Inc revealed the company was trading above its Graham Number of $52.84. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 27.57, which was above the industry average of 21.23. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-47.12.

O’Reilly Automotive Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$47.12
Graham Number $52.84
PEmg 27.57
Current Ratio 0.91
PB Ratio 56.64
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,560,031,000
Total Current Liabilities $3,905,081,000
Long-Term Debt $3,174,327,000
Total Assets $7,894,714,000
Intangible Assets $832,750,000
Total Liabilities $7,396,335,000
Shares Outstanding (Diluted Average) 81,410,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $16.02
Dec2017 $12.67
Dec2016 $10.73
Dec2015 $9.17
Dec2014 $7.34
Dec2013 $6.03
Dec2012 $4.75
Dec2011 $3.71
Dec2010 $2.95
Dec2009 $2.23
Dec2008 $1.48
Dec2007 $1.67
Dec2006 $1.55
Dec2005 $1.45
Dec2004 $0.63
Dec2003 $0.92
Dec2002 $0.77
Dec2001 $0.63
Dec2000 $0.50
Dec1999 $0.46
Dec1998 $0.18

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.58
Dec2017 $10.30
Dec2016 $8.61
Dec2015 $7.10
Dec2014 $5.70
Dec2013 $4.56
Dec2012 $3.56
Dec2011 $2.78
Dec2010 $2.20
Dec2009 $1.78
Dec2008 $1.48
Dec2007 $1.40
Dec2006 $1.20
Dec2005 $0.98
Dec2004 $0.72
Dec2003 $0.73
Dec2002 $0.60

Recommended Reading:

Other ModernGraham posts about the company

O’Reilly Automotive Inc Valuation – April 2018 $ORLY
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
O’Reilly Automotive Inc. Annual Valuation – 2015 $ORLY
16 Companies in the Spotlight this Week – 4/19/14
O’Reilly Automotive Inc. (ORLY) Annual Valuation – 2014

Other ModernGraham posts about related companies

Goodyear Tire & Rubber Co Valuation – January 2019 $GT
Genuine Parts Co Valuation – January 2019 $GPC
Autozone Inc Valuation – January 2019 $AZO
Linamar Corp Valuation – October 2018 $TSE-LNR
AutoNation Inc Valuation – September 2018 $AN
Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL
Delphi Technologies PLC Valuation – August 2018 $DLPH

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.

HollyFrontier Corp Valuation – January 2019 $HFC

Company Profile (excerpt from Reuters): HollyFrontier Corporation, incorporated on January 25, 1947, is an independent petroleum refiner. The Company produces various light products, such as gasoline, diesel fuel, jet fuel, specialty lubricant products, and specialty and modified asphalt. The Company operates through two segments: Refining and Holly Energy Partners, L.P. (HEP). The Refining segment includes the operations of the Company’s El Dorado, Kansas (the El Dorado Refinery); refinery facilities located in Tulsa, Oklahoma (collectively, the Tulsa Refineries); a refinery in Artesia, New Mexico that is operated in conjunction with crude oil distillation and vacuum distillation and other facilities situated 65 miles away in Lovington, New Mexico (collectively, the Navajo Refinery); refinery located in Cheyenne, Wyoming (the Cheyenne Refinery); a refinery in Woods Cross, Utah (the Woods Cross Refinery), and HollyFrontier Asphalt Company (HFC Asphalt). The HEP segment involves all of the operations of HEP.

Downloadable PDF version of this valuation:

ModernGraham Valuation of HFC – 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 $9,387,931,192 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.50 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 33.29% Fail
6. Moderate PEmg Ratio PEmg < 20 13.96 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.46 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 2.50 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.04 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.88
MG Growth Estimate -0.59%
MG Value $28.38
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $56.27
MG Value based on 0% Growth $32.99
Market Implied Growth Rate 2.73%
Current Price $54.18
% of Intrinsic Value 190.94%

HollyFrontier Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has concerns regarding the lack of earnings stability or 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 $4.04 in 2014 to an estimated $3.88 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.73% 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 HollyFrontier Corp revealed the company was trading below its Graham Number of $69.4. The company pays a dividend of $1.32 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.96, which was below the industry average of 41.28, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-6.07.

HollyFrontier 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) -$6.07
Graham Number $69.40
PEmg 13.96
Current Ratio 2.50
PB Ratio 1.46
Current Dividend $1.32
Dividend Yield 2.44%
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 9/1/2018
Total Current Assets $3,857,725,000
Total Current Liabilities $1,540,635,000
Long-Term Debt $2,409,148,000
Total Assets $11,495,126,000
Intangible Assets $2,691,357,000
Total Liabilities $4,931,614,000
Shares Outstanding (Diluted Average) 176,927,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.07
Dec2017 $4.52
Dec2016 -$1.48
Dec2015 $3.90
Dec2014 $1.42
Dec2013 $3.64
Dec2012 $8.38
Dec2011 $6.42
Dec2010 $0.97
Dec2009 $0.20
Dec2008 $1.19
Dec2007 $2.99
Dec2006 $2.29
Dec2005 $1.33
Dec2004 $0.65
Dec2003 $0.36
Jul2002 $0.25
Jul2001 $0.60
Jul2000 $0.09
Jul1999 $0.15
Jul1998 $0.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.88
Dec2017 $2.32
Dec2016 $1.87
Dec2015 $3.95
Dec2014 $4.04
Dec2013 $4.87
Dec2012 $4.80
Dec2011 $2.80
Dec2010 $1.16
Dec2009 $1.37
Dec2008 $1.87
Dec2007 $1.98
Dec2006 $1.31
Dec2005 $0.76
Dec2004 $0.45
Dec2003 $0.33
Jul2002 $0.29

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

EQT Corp Valuation – January 2019 $EQT
Helmerich & Payne Inc Valuation – January 2019 $HP
Williams Companies Inc Valuation – January 2019 $WMB
Exxon Mobil Corp Valuation – November 2018 $XOM
Chevron Corp Valuation – November 2018 $CVX
Cenovus Energy Inc Valuation – October 2018 $TSE-CVE
CNX Resources Corp Valuation – September 2018 $CNX
Carbo Ceramics Inc Valuation – August 2018 $CRR
Murphy Oil Corp Valuation – August 2018 $MUR
Suncor Energy Inc Valuation – August 2018 $TSE:SU

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.

Eli Lilly and Co Valuation – January 2019 $LLY

Company Profile (excerpt from Reuters): Eli Lilly and Company, incorporated on January 17, 1901, is engaged in drug manufacturing business. The Company discovers, develops, manufactures and markets products in two segments: human pharmaceutical products and animal health products. The Company’s human pharmaceutical business segment sells medicines, which are discovered or developed by its scientists. Its animal health business segment operates through the Company’s Elanco division, which develops, manufactures and markets products for both food animals and companion animals. As of December 31, 2016, the Company manufactured and distributed its products through facilities in the United States, Puerto Rico and 14 other countries.

Downloadable PDF version of this valuation:

ModernGraham Valuation of LLY – 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 $124,957,622,150 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.91 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -53.78% Fail
6. Moderate PEmg Ratio PEmg < 20 58.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.56 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.91 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.18 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.03
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $29.46
MG Value based on 0% Growth $17.27
Market Implied Growth Rate 24.78%
Current Price $117.99
% of Intrinsic Value N/A

Eli Lilly And 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 stability or 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 net current assets, and the lack of earnings stability or 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 $3.45 in 2014 to an estimated $2.03 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 24.78% 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 Eli Lilly And Co revealed the company was trading above its Graham Number of $28.18. The company pays a dividend of $2.08 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 58.07, which was above the industry average of 35.4. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.54.

Eli Lilly And Co scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.54
Graham Number $28.18
PEmg 58.07
Current Ratio 1.91
PB Ratio 8.56
Current Dividend $2.08
Dividend Yield 1.76%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $20,685,900,000
Total Current Liabilities $10,826,700,000
Long-Term Debt $11,674,700,000
Total Assets $44,625,100,000
Intangible Assets $3,619,400,000
Total Liabilities $30,474,200,000
Shares Outstanding (Diluted Average) 1,026,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.35
Dec2017 -$0.19
Dec2016 $2.58
Dec2015 $2.26
Dec2014 $2.23
Dec2013 $4.32
Dec2012 $3.66
Dec2011 $3.90
Dec2010 $4.58
Dec2009 $3.94
Dec2008 -$1.89
Dec2007 $2.71
Dec2006 $2.45
Dec2005 $1.81
Dec2004 $1.66
Dec2003 $2.37
Dec2002 $2.50
Dec2001 $2.55
Dec2000 $2.79
Dec1999 $2.46
Dec1998 $1.87

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.03
Dec2017 $1.66
Dec2016 $2.73
Dec2015 $2.96
Dec2014 $3.45
Dec2013 $4.07
Dec2012 $3.58
Dec2011 $3.24
Dec2010 $2.72
Dec2009 $1.80
Dec2008 $0.93
Dec2007 $2.30
Dec2006 $2.11
Dec2005 $2.02
Dec2004 $2.21
Dec2003 $2.50
Dec2002 $2.52

Recommended Reading:

Other ModernGraham posts about the company

Eli Lilly and Co. Valuation – March 2018 $LLY
Eli Lilly and Company Valuation – July 2016 $LLY
47 Companies in the Spotlight This Week – 5/16/15
Eli Lilly & Co. Annual Valuation – 2015 $LLY
58 Companies in the Spotlight This Week – 1/31/15

Other ModernGraham posts about related companies

Zoetis Inc Valuation – January 2019 $ZTS
Gilead Sciences Inc Valuation – January 2019 $GILD
Pfizer Inc Valuation – November 2018 $PFE
Nektar Therapeutics Valuation – November 2018 $NKTR
Merck & Co Inc Valuation – November 2018 $MRK
Ligand Pharmaceuticals Inc Valuation – September 2018 $LGND
Supernus Pharmaceuticals Inc Valuation – August 2018 $SUPN
Lannett Co Inc Valuation – August 2018 $LCI
Spectrum Pharmaceuticals Inc Valuation – August 2018 $SPPI
Akorn Inc Valuation – July 2018 $AKRX

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.

Kelly Services Inc Valuation – August 2018 $KELYA

Company Profile (excerpt from Reuters): Kelly Services, Inc., incorporated on August 27, 1952, is a workforce solutions provider, which is engaged in offering a range of specialty services. The Company provides workforce solutions in three regions: the Americas; Europe, the Middle East and Africa (EMEA), and Asia Pacific (APAC). The Company’s segments are Americas Commercial, Americas Professional and Technical (Americas PT), EMEA Commercial, EMEA Professional and Technical (EMEA PT), and Outsourcing and Consulting Group (OCG). The Company places professional and technical employees at various levels in engineering, information technology (IT), law, healthcare and finance.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KELYA – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $937,235,822 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.50 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -1283.33% Fail
6. Moderate PEmg Ratio PEmg < 20 11.83 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.80 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 1.50 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.06
MG Growth Estimate 11.87%
MG Value $66.46
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $29.89
MG Value based on 0% Growth $17.52
Market Implied Growth Rate 1.66%
Current Price $24.38
% of Intrinsic Value 36.68%

Kelly Services, Inc. Class A is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the low current ratio. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.15 in 2014 to an estimated $2.06 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.66% 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 above the price.

At the time of valuation, further research into Kelly Services, Inc. Class A revealed the company was trading below its Graham Number of $38.61. The company pays a dividend of $0.3 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 11.83, which was below the industry average of 33.97, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.92.

Kelly Services, Inc. Class A performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $3.92
Graham Number $38.61
PEmg 11.83
Current Ratio 1.50
PB Ratio 0.80
Current Dividend $0.30
Dividend Yield 1.23%
Number of Consecutive Years of Dividend Growth 2

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,397,700,000
Total Current Liabilities $934,200,000
Long-Term Debt $0
Total Assets $2,436,600,000
Intangible Assets $107,300,000
Total Liabilities $1,245,300,000
Shares Outstanding (Diluted Average) 38,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.21
Dec2017 $1.81
Dec2016 $3.08
Dec2015 $1.39
Dec2014 $0.61
Dec2013 $1.54
Dec2012 $1.32
Dec2011 $1.69
Dec2010 $0.71
Dec2009 -$3.00
Dec2008 -$2.37
Dec2007 $1.67
Dec2006 $1.75
Dec2005 $1.09
Dec2004 $0.60
Dec2003 $0.14
Dec2002 $0.51
Dec2001 $0.47
Dec2000 $2.43
Dec1999 $2.36
Dec1998 $2.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.06
Dec2017 $1.89
Dec2016 $1.81
Dec2015 $1.22
Dec2014 $1.15
Dec2013 $1.10
Dec2012 $0.47
Dec2011 -$0.05
Dec2010 -$0.70
Dec2009 -$0.99
Dec2008 $0.19
Dec2007 $1.33
Dec2006 $1.05
Dec2005 $0.65
Dec2004 $0.56
Dec2003 $0.76
Dec2002 $1.24

Recommended Reading:

Other ModernGraham posts about the company

Best Stocks Below Their Graham Number – August 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017
Best Stocks Below Their Graham Number – February 2017
14 Best Stocks for Value Investors This Week – 2/11/17
Kelly Services Inc Valuation – Initial Coverage $KELYA

Other ModernGraham posts about related companies

Jack Henry & Associates Inc Valuation – August 2018 $JKHY
Dun & Bradstreet Corp Valuation – July 2018 $DNB
CoreLogic Inc Valuation – July 2018 $CLGX
Pitney Bowes Inc Valuation – June 2018 $PBI
United Rentals Inc Valuation – June 2018 $URI
Global Payments Inc Valuation – June 2018 $GPN
Verisk Analytics Inc Valuation – June 2018 $VRSK
Robert Half International Inc Valuation – June 2018 $RHI
Alliance Data Systems Corp Valuation – May 2018 $ADS
Whirlpool Corporation Valuation – April 2018 $WHR

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.

O’Reilly Automotive Inc Valuation – April 2018 $ORLY

Company Profile (excerpt from Reuters): O’Reilly Automotive, Inc., incorporated on December 20, 2010, is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The Company sells its products to both do-it-yourself (DIY) and professional service provider customers. The Company’s product line includes new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control, chassis parts, driveline parts and engine parts; maintenance items, such as oil, antifreeze, fluids, filters, wiper blades, lighting, engine additives and appearance products, and accessories, such as floor mats, seat covers and truck accessories. It operated 4,829 stores in 47 states, as of December 31, 2016.

ORLY Chart

ORLY data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORLY – April 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,754,315,960 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.93 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 314.17% Pass
6. Moderate PEmg Ratio PEmg < 20 20.30 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 31.09 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 0.93 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.93 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $11.71
MG Growth Estimate 15.00%
MG Value $450.84
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $169.80
MG Value based on 0% Growth $99.54
Market Implied Growth Rate 5.90%
Current Price $237.77
% of Intrinsic Value 52.74%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.7 in 2014 to an estimated $11.71 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.9% 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 O’Reilly Automotive Inc revealed the company was trading above its Graham Number of $48.37. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 20.3, which was above the industry average of 17.88. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-41.23.

O’Reilly Automotive Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$41.23
Graham Number $48.37
PEmg 20.30
Current Ratio 0.93
PB Ratio 31.09
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $3,397,672,000
Total Current Liabilities $3,647,366,000
Long-Term Debt $2,978,390,000
Total Assets $7,571,885,000
Intangible Assets $798,450,000
Total Liabilities $6,918,839,000
Shares Outstanding (Diluted Average) 85,401,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.42
Dec2017 $12.67
Dec2016 $10.73
Dec2015 $9.17
Dec2014 $7.34
Dec2013 $6.03
Dec2012 $4.75
Dec2011 $3.71
Dec2010 $2.95
Dec2009 $2.23
Dec2008 $1.48
Dec2007 $1.67
Dec2006 $1.55
Dec2005 $1.45
Dec2004 $1.25
Dec2003 $0.92
Dec2002 $0.77
Dec2001 $0.63
Dec2000 $0.50
Dec1999 $0.46
Dec1998 $0.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $11.71
Dec2017 $10.30
Dec2016 $8.61
Dec2015 $7.10
Dec2014 $5.70
Dec2013 $4.56
Dec2012 $3.56
Dec2011 $2.78
Dec2010 $2.20
Dec2009 $1.78
Dec2008 $1.53
Dec2007 $1.49
Dec2006 $1.33
Dec2005 $1.14
Dec2004 $0.93
Dec2003 $0.73
Dec2002 $0.61

Recommended Reading:

Other ModernGraham posts about the company

O’Reilly Automotive Inc Valuation – July 2016 $ORLY
O’Reilly Automotive Inc. Annual Valuation – 2015 $ORLY
16 Companies in the Spotlight this Week – 4/19/14
O’Reilly Automotive Inc. (ORLY) Annual Valuation – 2014

Other ModernGraham posts about related companies

Goodyear Tire & Rubber Co Valuation – March 2018 $GT
Genuine Parts Co Valuation – March 2018 $GPC
AutoZone Inc Valuation – February 2018 $AZO
Thor Industries Inc Valuation – Initial Coverage $THO
Titan International Inc Valuation – Initial Coverage $TWI
Harley-Davidson Inc Valuation – August 2017 $HOG
Wabash National Corp Valuation – Initial Coverage $WNC
Advance Auto Parts Inc Valuation – August 2017 $AAP
Fox Factory Holding Corp Valuation – Initial Coverage $FOXF
Monro Muffler Brake Inc Valuation – Initial Coverage $MNRO

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.

Eli Lilly and Co. Valuation – March 2018 $LLY

Company Profile (excerpt from Reuters): Eli Lilly and Company, incorporated on January 17, 1901, is engaged in drug manufacturing business. The Company discovers, develops, manufactures and markets products in two segments: human pharmaceutical products and animal health products. The Company’s human pharmaceutical business segment sells medicines, which are discovered or developed by its scientists. Its animal health business segment operates through the Company’s Elanco division, which develops, manufactures and markets products for both food animals and companion animals. As of December 31, 2016, the Company manufactured and distributed its products through facilities in the United States, Puerto Rico and 14 other countries.

LLY Chart

LLY data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LLY – 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 $81,906,882,355 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.32 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -43.40% Fail
6. Moderate PEmg Ratio PEmg < 20 30.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.73 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 1.32 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.13 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fai

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.46
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $35.70
MG Value based on 0% Growth $20.93
Market Implied Growth Rate 10.93%
Current Price $74.76
% of Intrinsic Value N/A

Eli Lilly And 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 stability or 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, and the lack of earnings stability or 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 $3.45 in 2014 to an estimated $2.46 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.93% 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 Eli Lilly And Co revealed the company was trading above its Graham Number of $33.17. The company pays a dividend of $2.08 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 30.37, which was above the industry average of 30.2. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-13.59.

Eli Lilly And Co scores quite poorly in the ModernGraham grading system, with an overall grade of D.

 

 

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$13.59
Graham Number $33.17
PEmg 30.37
Current Ratio 1.32
PB Ratio 6.73
Current Dividend $2.08
Dividend Yield 2.78%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $19,202,100,000
Total Current Liabilities $14,535,900,000
Long-Term Debt $9,940,500,000
Total Assets $44,981,000,000
Intangible Assets $8,399,300,000
Total Liabilities $33,388,800,000
Shares Outstanding (Diluted Average) 1,043,692,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.64
Dec2017 -$0.19
Dec2016 $2.58
Dec2015 $2.26
Dec2014 $2.23
Dec2013 $4.32
Dec2012 $3.66
Dec2011 $3.90
Dec2010 $4.58
Dec2009 $3.94
Dec2008 -$1.89
Dec2007 $2.71
Dec2006 $2.45
Dec2005 $1.81
Dec2004 $1.66
Dec2003 $2.37
Dec2002 $2.50
Dec2001 $2.55
Dec2000 $2.79
Dec1999 $2.46
Dec1998 $1.87

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.46
Dec2017 $1.66
Dec2016 $2.73
Dec2015 $2.96
Dec2014 $3.45
Dec2013 $4.07
Dec2012 $3.58
Dec2011 $3.24
Dec2010 $2.72
Dec2009 $1.80
Dec2008 $0.93
Dec2007 $2.30
Dec2006 $2.11
Dec2005 $2.02
Dec2004 $2.21
Dec2003 $2.50
Dec2002 $2.52

Recommended Reading:

Other ModernGraham posts about the company

47 Companies in the Spotlight This Week – 5/16/15
Eli Lilly & Co. Annual Valuation – 2015 $LLY
58 Companies in the Spotlight This Week – 1/31/15
Eli Lilly & Company Quarterly Valuation – January 2015 $LLY
18 Companies in the Spotlight This Week – 10/25/14

Other ModernGraham posts about related companies

Zoetis Inc Valuation – March 2018 $ZTS
Gilead Sciences Inc Valuation – March 2018 $GILD
Pfizer Inc Valuation – February 2018 $PFE
Merck & Co Inc Valuation – February 2018 $MRK
Johnson & Johnson Valuation – February 2018 $JNJ
Bristol-Myers Squibb Co Valuation – September 2017 $BMY
Momenta Pharmaceuticals Inc Valuation – Initial Coverage $MNTA
Depomed Inc Valuation – Initial Coverage $DEPO
Endo International PLC Valuation – July 2017 $ENDP
Biogen Inc Valuation – July 2017 $BIIB

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.

Kelly Services Inc Valuation – Initial Coverage $KELYA

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 Kelly Services Inc (KELYA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kelly Services, Inc. is a workforce solutions provider. The Company provides workforce solutions in over three regions: the Americas; Europe, the Middle East and Africa (EMEA), and Asia Pacific (APAC). It operates in seven segments: Americas Commercial, Americas Professional and Technical (Americas PT), EMEA Commercial, EMEA Professional and Technical (EMEA PT), APAC Commercial, APAC Professional and Technical (APAC PT), and Outsourcing and Consulting Group (OCG). Its Americas Commercial segment’s specialties include Office, Contact Center, Education, Electronic Assembly and Light Industrial. Its EMEA Commercial segment provides a range of staffing services, including Office, Contact Center and its temporary-to-hire service. Its EMEA PT segment provides services for Engineering, Finance and Accounting, Healthcare, Information Technology (IT) and Science. Its OCG segment delivers talent management solutions across multiple regions, skill sets and a spectrum of talent categories.

KELYA Chart

KELYA data by YCharts

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of KELYA – February 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 $835,011,175 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.58 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -229.61% Fail
6. Moderate PEmg Ratio PEmg < 20 11.99 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.82 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 1.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.80
MG Growth Estimate 9.64%
MG Value $50.08
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $26.15
MG Value based on 0% Growth $15.33
Market Implied Growth Rate 1.74%
Current Price $21.62
% of Intrinsic Value 43.17%

Kelly Services, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or 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 Undervalued after growing its EPSmg (normalized earnings) from $1.1 in 2013 to an estimated $1.8 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.74% 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 Kelly Services, Inc. revealed the company was trading below its Graham Number of $30.13. The company pays a dividend of $0.28 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 11.99, which was below the industry average of 21.9, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.19.

Kelly Services, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $5.19
Graham Number $30.13
PEmg 11.99
Current Ratio 1.58
PB Ratio 0.82
Current Dividend $0.28
Dividend Yield 1.27%
Number of Consecutive Years of Dividend Growth 2

[/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 12/1/2016
Total Current Assets $1,215,800,000
Total Current Liabilities $770,500,000
Long-Term Debt $0
Total Assets $2,029,300,000
Intangible Assets $88,300,000
Total Liabilities $1,015,500,000
Shares Outstanding (Diluted Average) 38,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.52
Dec2016 $3.13
Dec2015 $1.39
Dec2014 $0.61
Dec2013 $1.54
Dec2012 $1.32
Dec2011 $1.69
Dec2010 $0.71
Dec2009 -$3.00
Dec2008 -$2.37
Dec2007 $1.67
Dec2006 $1.75
Dec2005 $1.09
Dec2004 $0.60
Dec2003 $0.14
Dec2002 $0.51
Dec2001 $0.47
Dec2000 $2.43
Dec1999 $2.36
Dec1998 $2.23
Dec1997 $2.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.80
Dec2016 $1.83
Dec2015 $1.22
Dec2014 $1.15
Dec2013 $1.10
Dec2012 $0.47
Dec2011 -$0.05
Dec2010 -$0.70
Dec2009 -$0.99
Dec2008 $0.19
Dec2007 $1.33
Dec2006 $1.05
Dec2005 $0.65
Dec2004 $0.56
Dec2003 $0.76
Dec2002 $1.24
Dec2001 $1.72

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

John Wiley & Sons Inc Valuation – Initial Coverage $JW.A
Dun & Bradstreet Corp Valuation – January 2017 $DNB
Apollo Education Group Inc Valuation – January 2017 $APOL
Accenture PLC Valuation – December 2016 $ACN
Automatic Data Processing Valuation – November 2016 $ADP
United Rentals Inc Valuation – August 2016 $URI
Robert Half International Inc Valuation – August 2016 $RHI
Accenture PLC Valuation – August 2016 $ACN
Fiserv Inc Valuation – August 2016 $FISV
Cintas Corporation Valuation – July 2016 $CTAS

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.

O’Reilly Automotive Inc Valuation – July 2016 $ORLY

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

Company Profile (obtained from Google Finance): O’Reilly Automotive, Inc. is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The Company offers its products to both do-it-yourself (DIY) and professional service provider customers. Its stores’ product line includes new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control and engine parts; maintenance items, such as filters, lighting, engine additives and appearance products, and accessories, such as floor mats, seat covers and truck accessories. It offers various services and programs to its customers, such as used oil, oil filter and battery recycling; battery diagnostic testing; loaner tool program; custom hydraulic hoses; professional paint shop mixing and related materials, and machine shops. Its brands include BestTest, BrakeBest, Precision, Import Direct, Master Pro, Micro-Gard and Murray.

[level-free]
ORLY Chart

ORLY data by YCharts

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.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORLY – July 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 $26,683,131,284 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.12 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 401.12% Pass
6. Moderate PEmg Ratio PEmg < 20 32.17 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 13.92 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 1.12 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.89 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

ORLY value chart July 2016

EPSmg $8.52
MG Growth Estimate 15.00%
MG Value $327.92
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $123.50
MG Value based on 0% Growth $72.40
Market Implied Growth Rate 11.83%
Current Price $273.97
% of Intrinsic Value 83.55%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.56 in 2012 to an estimated $8.52 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 11.83% 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.

O’Reilly Automotive Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

ORLY charts July 2016

Net Current Asset Value (NCAV) -$18.05
Graham Number $68.67
PEmg 32.17
Current Ratio 1.12
PB Ratio 13.92
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $3,701,463,000
Total Current Liabilities $3,315,677,000
Long-Term Debt $1,885,877,000
Total Assets $7,419,773,000
Intangible Assets $757,130,000
Total Liabilities $5,479,932,000
Shares Outstanding (Diluted Average) 98,537,000

Earnings Per Share History

Next Fiscal Year Estimate $10.45
Dec2015 $9.17
Dec2014 $7.34
Dec2013 $6.03
Dec2012 $4.75
Dec2011 $3.71
Dec2010 $2.95
Dec2009 $2.23
Dec2008 $1.48
Dec2007 $1.67
Dec2006 $1.55
Dec2005 $1.45
Dec2004 $1.26
Dec2003 $0.92
Dec2002 $0.77
Dec2001 $0.63
Dec2000 $0.50
Dec1999 $0.46
Dec1998 $0.36
Dec1997 $0.27
Dec1996 $0.23

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $8.52
Dec2015 $7.10
Dec2014 $5.70
Dec2013 $4.56
Dec2012 $3.56
Dec2011 $2.78
Dec2010 $2.20
Dec2009 $1.78
Dec2008 $1.53
Dec2007 $1.49
Dec2006 $1.33
Dec2005 $1.15
Dec2004 $0.93
Dec2003 $0.73
Dec2002 $0.61
Dec2001 $0.50
Dec2000 $0.41

Recommended Reading:

Other ModernGraham posts about the company

O’Reilly Automotive Inc. Annual Valuation – 2015 $ORLY
16 Companies in the Spotlight this Week – 4/19/14
O’Reilly Automotive Inc. (ORLY) Annual Valuation – 2014

Other ModernGraham posts about related companies

Genuine Parts Co Valuation – July 2016 $GPC
Johnson Controls Inc Valuation – July 2016 $JCI
Goodyear Tire & Rubber Co Valuation – July 2016 $GT
Harley-Davidson Inc Valuation – June 2016 $HOG
Autozone Inc Valuation – June 2016 $AZO
BorgWarner Inc Valuation – February 2016 Update $BWA
Genuine Parts Co Valuation – January 2016 Update $GPC
Ford Motor Company Valuation – January 2016 Update $F
Genuine Parts Co Valuation – January 2016 Update $GPC
Ford Motor Company Valuation – January 2016 Update $F

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.

Eli Lilly and Company Valuation – July 2016 $LLY

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 Eli Lilly and Co (LLY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Eli Lilly and Company is engaged in drug manufacturing business. The Company discovers, develops, manufactures and markets products in two segments: human pharmaceutical products and animal health products. The Company’s human pharmaceutical business segment sells medicines, which are discovered or developed by its scientists. Its animal health business segment operates through the Company’s Elanco division, which develops, manufactures and markets products for both food animals and companion animals. The Company’s human pharmaceutical products include endocrinology products, such as Humalog and Humalog Mix 75/25; neuroscience products, such as Cymbalta and Zyprexa; oncology products, such as Alimta and Cyramza, and cardiovascular products, such as Cialis and ReoPro. The Company’s animal health products segment includes products for food animals, such as Rumensin and Posilac; products for companion animals, such as Onsior and Osurnia, and Novartis Animal Health (Novartis AH) products.

[level-free]

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

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of LLY – July 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 $88,026,355,688 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.60 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 68.28% Pass
6. Moderate PEmg Ratio PEmg < 20 26.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.62 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 1.60 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.71 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

LLY value chart July 2016

EPSmg $3.04
MG Growth Estimate -2.24%
MG Value $12.24
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $44.11
MG Value based on 0% Growth $25.86
Market Implied Growth Rate 8.79%
Current Price $79.32
% of Intrinsic Value 647.84%

Eli Lilly and 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 stability 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 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 $3.58 in 2012 to an estimated $3.04 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.79% 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.

Eli Lilly and Co scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

LLY charts July 2016

Net Current Asset Value (NCAV) -$7.49
Graham Number $32.78
PEmg 26.07
Current Ratio 1.60
PB Ratio 5.62
Current Dividend $2.01
Dividend Yield 2.53%
Number of Consecutive Years of Dividend Growth 2

[/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 3/1/2016
Total Current Assets $11,714,600,000
Total Current Liabilities $7,340,900,000
Long-Term Debt $7,477,600,000
Total Assets $34,691,800,000
Intangible Assets $8,934,900,000
Total Liabilities $19,681,900,000
Shares Outstanding (Diluted Average) 1,063,100,000

Earnings Per Share History

Next Fiscal Year Estimate $3.52
Dec2015 $2.26
Dec2014 $2.23
Dec2013 $4.32
Dec2012 $3.66
Dec2011 $3.90
Dec2010 $4.58
Dec2009 $3.94
Dec2008 -$1.89
Dec2007 $2.71
Dec2006 $2.45
Dec2005 $1.81
Dec2004 $1.66
Dec2003 $2.37
Dec2002 $2.50
Dec2001 $2.55
Dec2000 $2.79
Dec1999 $2.46
Dec1998 $1.87
Dec1997 -$0.35

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.04
Dec2015 $2.96
Dec2014 $3.45
Dec2013 $4.07
Dec2012 $3.58
Dec2011 $3.24
Dec2010 $2.72
Dec2009 $1.80
Dec2008 $0.93
Dec2007 $2.30
Dec2006 $2.11
Dec2005 $2.02
Dec2004 $2.21
Dec2003 $2.50
Dec2002 $2.52
Dec2001 $2.31
Dec2000 $1.91

Recommended Reading:

Other ModernGraham posts about the company

47 Companies in the Spotlight This Week – 5/16/15
Eli Lilly & Co. Annual Valuation – 2015 $LLY
58 Companies in the Spotlight This Week – 1/31/15
Eli Lilly & Company Quarterly Valuation – January 2015 $LLY
18 Companies in the Spotlight This Week – 10/25/14

Other ModernGraham posts about related companies

Zoetis Inc Valuation – June 2016 $ZTS
Merck & Co Inc Valuation – March 2016 $MRK
Bristol-Myers Squibb Company Valuation – February 2016 $BMY
Amgen Inc Valuation – February 2016 $AMGN
Merck & Co Inc Valuation – March 2016 $MRK
Bristol-Myers Squibb Company Valuation – February 2016 $BMY
Amgen Inc Valuation – February 2016 $AMGN
Pfizer Inc Valuation – February 2016 $PFE
Biogen Inc Valuation – February 2016 Update $BIIB
Perrigo Co PLC Valuation – January 2016 Update $PRGO

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.

Eli Lilly & Co. Annual Valuation – 2015 $LLY

LLY_red_logoBenjamin 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 – April 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 Eli Lilly & Co. (LLY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Eli Lilly and Company discovers, develops, manufactures, and sells products in two business segments human pharmaceutical products and animal health products. The Company manufactures and distributes its products through facilities in the United States, Puerto Rico and 11 other countries. Its animal health business, operating through its Elanco division, develops, manufactures, and markets products for both food animals and companion animals. The Company’s products are Humulin, Jentadueto, Axiron, Cymbalta, Strattera, Amyvid, Gemzar, Erbitux, Effient, ReoPro, Posilac, Posilac and Surmax. Its products in Late-Stage are Dulaglutide, Empagliflozin, Ramucirumab, Evacetrapib, Necitumumab, Tanezumab, Edivoxetine, Liprotamase and Ramucirumab.

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 - FAIL
  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 = 2/5

  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 - FAIL

Valuation Summary

Key Data:

Recent Price $73.71
MG Value $27.47
MG Opinion Overvalued
Value Based on 3% Growth $46.93
Value Based on 0% Growth $27.51
Market Implied Growth Rate 7.14%
Net Current Asset Value (NCAV) -$8.43
PEmg 22.77
Current Ratio 1.41
PB Ratio 5.27

Balance Sheet – March 2015

Current Assets $11,743,000,000
Current Liabilities $8,343,000,000
Total Debt $7,415,000,000
Total Assets $35,654,000,000
Intangible Assets $8,895,000,000
Total Liabilities $20,734,000,000
Outstanding Shares 1,067,000,000

Earnings Per Share

2015 (estimate) $3.09
2014 $2.23
2013 $4.32
2012 $3.66
2011 $3.90
2010 $4.58
2009 $3.94
2008 -$1.89
2007 $2.71
2006 $2.45
2005 $1.81

Earnings Per Share – ModernGraham

2015 (estimate) $3.24
2014 $3.45
2013 $4.07
2012 $3.58
2011 $3.24
2010 $2.72

Dividend History

Conclusion:

Eli Lilly & Co. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the current assets and the lack of earnings growth over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) not grow at all from $3.24 in 2011 to the estimated $3.24 for 2015.  This level of growth does not support the market’s implied estimate of 7.14% annual growth over the next 7-10 years, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well 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 Eli Lilly & Co. (LLY)?  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.

Back To Top