IPG Photonics Corp Valuation – March 2019 #IPGP

Company Profile (excerpt from Reuters): IPG Photonics Corporation, incorporated on December 2, 1998, is a developer and manufacturer of a line of fiber lasers, fiber amplifiers, diode lasers, laser systems and optical accessories that are used for various applications. The Company offers a line of lasers and amplifiers, which are used in materials processing, communications and medical applications. The Company sells its products globally to original equipment manufacturers (OEMs), system integrators and end users. The Company’s manufacturing facilities are located in the United States, Germany and Russia. The Company offers laser-based systems for certain markets and applications. The Company also makes packaged diodes, direct diode lasers, laser systems and communications components and systems. Its products are designed to be used as general-purpose energy or light sources.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IPGP – 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 $8,167,270,375 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 7.35 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 192.91% Pass
6. Moderate PEmg Ratio PEmg < 20 26.55 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.77 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 7.35 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.03 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.81
MG Growth Estimate 8.87%
MG Value $152.43
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $84.23
MG Value based on 0% Growth $49.37
Market Implied Growth Rate 9.02%
Current Price $154.21
% of Intrinsic Value 101.17%

IPG Photonics Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.65 in 2015 to an estimated $5.81 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 9.02% 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 IPG Photonics Corporation revealed the company was trading above its Graham Number of $67.5. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 26.55, which was below the industry average of 35.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $26.65.

IPG Photonics 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) $26.65
Graham Number $67.50
PEmg 26.55
Current Ratio 7.35
PB Ratio 3.77
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,805,424,000
Total Current Liabilities $245,774,000
Long-Term Debt $41,707,000
Total Assets $2,574,450,000
Intangible Assets $187,861,000
Total Liabilities $368,215,000
Shares Outstanding (Diluted Average) 53,919,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.86
Dec2018 $7.38
Dec2017 $6.36
Dec2016 $4.85
Dec2015 $4.53
Dec2014 $3.79
Dec2013 $2.97
Dec2012 $2.81
Dec2011 $2.41
Dec2010 $1.13
Dec2009 $0.12
Dec2008 $0.79
Dec2007 $0.65
Dec2006 $0.26
Dec2005 $0.16
Dec2004 $0.01
Dec2003 -$0.93
Dec2002 -$2.13
Dec2001 -$2.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.81
Dec2018 $5.98
Dec2017 $5.02
Dec2016 $4.17
Dec2015 $3.65
Dec2014 $3.01
Dec2013 $2.38
Dec2012 $1.87
Dec2011 $1.28
Dec2010 $0.67
Dec2009 $0.43
Dec2008 $0.51
Dec2007 $0.26
Dec2006 -$0.13
Dec2005 -$0.56
Dec2004 -$0.96
Dec2003 -$1.31

Recommended Reading:

Other ModernGraham posts about the company

IPG Photonics Corp Valuation – June 2018 $IPGP
5 Undervalued Stocks for Value Investors with a High Beta – January 2017
IPG Photonics Corp Valuation – Initial Coverage $IPGP

Other ModernGraham posts about related companies

Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC
Texas Instruments Inc Valuation – March 2019 #TXN
Qualcomm Inc Valuation – March 2019 #QCOM
Ametek Inc Valuation – March 2019 #AME
Advanced Micro Devices Inc Valuation – February 2019 $AMD
Qorvo Inc Valuation – February 2019 $QRVO
FLIR Systems Inc Valuation – February 2019 $FLIR
NetApp Inc Valuation – February 2019 $NTAP

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.

Amphenol Corp Valuation – March 2019 #APH

Company Profile (excerpt from Reuters): Amphenol Corporation (Amphenol), incorporated on December 19, 1986, is a designer, manufacturer and marketer of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor- based products, and coaxial and specialty cable. The Company operates through two segments, which include Interconnect Products and Assemblies, and Cable Products and Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of APH – 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 $28,058,928,491 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.86 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 112.11% Pass
6. Moderate PEmg Ratio PEmg < 20 29.03 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.18 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.86 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.32 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.25
MG Growth Estimate 8.07%
MG Value $80.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $47.09
MG Value based on 0% Growth $27.60
Market Implied Growth Rate 10.26%
Current Price $94.26
% of Intrinsic Value 117.83%

Amphenol Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.11 in 2015 to an estimated $3.25 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.26% 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 Amphenol Corporation revealed the company was trading above its Graham Number of $34.36. The company pays a dividend of $0.88 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 29.03, which was below the industry average of 35.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.55.

Amphenol 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) -$4.55
Graham Number $34.36
PEmg 29.03
Current Ratio 1.86
PB Ratio 7.18
Current Dividend $0.88
Dividend Yield 0.93%
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 12/1/2018
Total Current Assets $4,571,600,000
Total Current Liabilities $2,451,300,000
Long-Term Debt $2,806,400,000
Total Assets $10,044,900,000
Intangible Assets $4,501,100,000
Total Liabilities $5,980,700,000
Shares Outstanding (Diluted Average) 309,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.90
Dec2018 $3.85
Dec2017 $2.06
Dec2016 $2.61
Dec2015 $2.41
Dec2014 $2.21
Dec2013 $1.96
Dec2012 $1.69
Dec2011 $1.53
Dec2010 $1.41
Dec2009 $0.92
Dec2008 $1.17
Dec2007 $0.97
Dec2006 $0.70
Dec2005 $0.57
Dec2004 $0.46
Dec2003 $0.30
Dec2002 $0.23
Dec2001 $0.24
Dec2000 $0.32
Dec1999 $0.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.25
Dec2018 $2.82
Dec2017 $2.29
Dec2016 $2.33
Dec2015 $2.11
Dec2014 $1.89
Dec2013 $1.66
Dec2012 $1.45
Dec2011 $1.29
Dec2010 $1.12
Dec2009 $0.94
Dec2008 $0.89
Dec2007 $0.70
Dec2006 $0.53
Dec2005 $0.42
Dec2004 $0.33
Dec2003 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Amphenol Corp Valuation – May 2018 $APH
5 Best Stocks for Value Investors This Week – 2/25/17
Amphenol Corp Valuation – February 2017 $APH
21 Best Undervalued Stocks of the Week – 8/27/16
Amphenol Corporation Valuation – August 2016 $APH

Other ModernGraham posts about related companies

Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC
Texas Instruments Inc Valuation – March 2019 #TXN
Qualcomm Inc Valuation – March 2019 #QCOM
Ametek Inc Valuation – March 2019 #AME
Advanced Micro Devices Inc Valuation – February 2019 $AMD
Qorvo Inc Valuation – February 2019 $QRVO
FLIR Systems Inc Valuation – February 2019 $FLIR
NetApp Inc Valuation – February 2019 $NTAP
Applied Materials Inc Valuation – February 2019 $AMAT

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.

Ralph Lauren Corp Valuation – March 2019 #RL

Company Profile (excerpt from Reuters): Ralph Lauren Corporation, incorporated on March 20, 1997, is engaged in the design, marketing and distribution of lifestyle products, including apparel, accessories, home furnishings and other licensed product categories. The Company operates in three segments: Wholesale, Retail and Licensing. Wholesale business consists of sales made to department stores and specialty stores around the world. Retail business consists of sales made directly to consumers through retail channel, which includes Company’s’ retail stores, concession-based shop-within-shops and e-commerce operations around the world. Licensing business consists of royalty-based arrangements, under which the Company licenses to unrelated third parties for specified periods the right to operate retail stores and/or to use its various trademarks in connection with the manufacture and sale of designated products, such as certain apparel, eyewear, fragrances and home furnishings.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RL – 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 $9,698,017,412 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.90 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 -63.32% Fail
6. Moderate PEmg Ratio PEmg < 20 37.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.99 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.90 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.28 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 $3.32
MG Growth Estimate -4.25%
MG Value $11.80
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $48.19
MG Value based on 0% Growth $28.25
Market Implied Growth Rate 14.31%
Current Price $123.35
% of Intrinsic Value 1045.19%

Ralph Lauren 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, and the high PEmg and PB ratios. 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 $7.81 in 2015 to an estimated $3.32 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.31% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Ralph Lauren Corp revealed the company was trading above its Graham Number of $73.79. The company pays a dividend of $2 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 37.12, which was below the industry average of 47.57, 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 $11.8.

Ralph Lauren Corp 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) $11.80
Graham Number $73.79
PEmg 37.12
Current Ratio 2.90
PB Ratio 2.99
Current Dividend $2.00
Dividend Yield 1.62%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,696,400,000
Total Current Liabilities $1,273,700,000
Long-Term Debt $686,800,000
Total Assets $6,092,000,000
Intangible Assets $1,094,300,000
Total Liabilities $2,738,100,000
Shares Outstanding (Diluted Average) 81,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.69
Mar2018 $1.97
Mar2017 -$1.20
Mar2016 $4.62
Mar2015 $7.88
Mar2014 $8.43
Mar2013 $8.00
Mar2012 $7.13
Mar2011 $5.75
Mar2010 $4.73
Mar2009 $4.01
Mar2008 $3.99
Mar2007 $3.73
Mar2006 $2.87
Mar2005 $1.83
Mar2004 $1.69
Mar2003 $1.76
Mar2002 $1.75
Mar2001 $0.58
Mar2000 $1.45
Mar1999 $0.91

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.32
Mar2018 $2.87
Mar2017 $4.07
Mar2016 $6.87
Mar2015 $7.81
Mar2014 $7.45
Mar2013 $6.62
Mar2012 $5.66
Mar2011 $4.76
Mar2010 $4.13
Mar2009 $3.65
Mar2008 $3.26
Mar2007 $2.72
Mar2006 $2.13
Mar2005 $1.68
Mar2004 $1.56
Mar2003 $1.42

Recommended Reading:

Other ModernGraham posts about the company

10 Most Overvalued Stocks of the S&P 500 – July 2018
Ralph Lauren Corp Valuation – May 2018 $RL
Ralph Lauren Corp Valuation – April 2017 $RL
Ralph Lauren Corp Valuation – August 2016 $RL
Ralph Lauren Corp Stock Valuation – February 2016 $RL

Other ModernGraham posts about related companies

Gap Inc Valuation – March 2019 #GPS
PVH Corp Valuation – February 2019 $PVH
VF Corp Valuation – February 2019 $VFC
Foot Locker Inc Valuation – January 2019 $FL
Under Armour Inc Valuation – January 2019 $UA
Hanesbrands Inc Valuation – January 2019 $HBI
L Brands Inc Valuation – January 2019 $LB
Nike Inc Valuation – November 2018 $NKE
Deckers Outdoor Corp Valuation – May 2018 $DECK
Ralph Lauren Corp Valuation – May 2018 $RL

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.

Phillips 66 Valuation – March 2019 #PSX

Company Profile (excerpt from Reuters): Phillips 66, incorporated on November 10, 2011, is an energy manufacturing and logistics company with midstream, chemicals, refining, and marketing and specialties businesses. The Company operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment gathers, processes, transports and markets natural gas, and transports, stores, fractionates and markets natural gas liquids (NGLs) in the United States. The Chemicals segment consists of its equity investment in Chevron Phillips Chemical Company LLC (CPChem), which manufactures and markets petrochemicals and plastics. The Refining segment buys, sells and refines crude oil and other feedstocks at refineries, primarily in the United States and Europe. The M&S segment purchases for resale and markets refined petroleum products, such as gasolines, distillates and aviation fuels, primarily in the United States and Europe, as well as includes the manufacturing and marketing of specialty products, and power generation operations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PSX – 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 $44,040,480,834 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.48 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 343.98% Pass
6. Moderate PEmg Ratio PEmg < 20 11.54 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.66 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 1.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.60 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 $8.39
MG Growth Estimate 3.34%
MG Value $127.43
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $121.72
MG Value based on 0% Growth $71.35
Market Implied Growth Rate 1.52%
Current Price $96.89
% of Intrinsic Value 76.04%

Phillips 66 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 poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $6.87 in 2015 to an estimated $8.39 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 1.52% 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 Phillips 66 revealed the company was trading above its Graham Number of $93.06. The company pays a dividend of $3.1 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 11.54, which was below the industry average of 58.42, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-30.01.

Phillips 66 receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$30.01
Graham Number $93.06
PEmg 11.54
Current Ratio 1.48
PB Ratio 1.66
Current Dividend $3.10
Dividend Yield 3.20%
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 12/1/2018
Total Current Assets $13,209,000,000
Total Current Liabilities $8,935,000,000
Long-Term Debt $11,093,000,000
Total Assets $54,302,000,000
Intangible Assets $4,139,000,000
Total Liabilities $27,149,000,000
Shares Outstanding (Diluted Average) 464,528,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.12
Dec2018 $11.80
Dec2017 $9.85
Dec2016 $2.92
Dec2015 $7.73
Dec2014 $8.33
Dec2013 $6.02
Dec2012 $6.48

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.39
Dec2018 $8.73
Dec2017 $7.12
Dec2016 $5.94
Dec2015 $6.87
Dec2014 $5.68
Dec2013 $3.73
Dec2012 $2.16

Recommended Reading:

Other ModernGraham posts about the company

Phillips 66 Valuation – April 2018 $PSX
Phillips 66 Valuation – August 2016 $PSX
10 Best Dividend Paying Stocks for the Enterprising Investor – August 2016
5 Undervalued Stocks Near Lows for Enterprising Value Investors – Aug 2016
10 Companies Benjamin Graham Would Invest In Today – June 2016

Other ModernGraham posts about related companies

Kinder Morgan Inc Valuation – February 2019 $KMI
National Oilwell Varco Inc Valuation – February 2019 $NOV
Diamondback Energy Inc Valuation – February 2019 $FANG
TechnipFMC PLC Valuation – February 2019 $FTI
Marathon Petroleum Corp Valuation – February 2019 $MPC
Baker Hughes, a GE Co Valuation – February 2019 $BHGE
EOG Resources Inc Valuation – February 2019 $EOG
ConocoPhillips Valuation – February 2019 $COP
Devon Energy Corp Valuation – January 2019 $DVN
Noble Energy Inc Valuation – January 2019 $NBL

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.

Regeneron Pharmaceuticals Inc Valuation – February 2019 $REGN

Company Profile (excerpt from Reuters): Regeneron Pharmaceuticals, Inc., incorporated on January 11, 1988, is a biopharmaceutical company that discovers, invents, develops, manufactures and commercializes medicines for the treatment of serious medical conditions. The Company commercializes medicines for eye diseases, high low-density lipoprotein (LDL) cholesterol, and an inflammatory condition and have product candidates in development in other areas, including rheumatoid arthritis, asthma, atopic dermatitis, pain, cancer, and infectious diseases. The Company’s marketed products include EYLEA (aflibercept) Injection, Praluent (alirocumab) Injection, ARCALYST (rilonacept) Injection for Subcutaneous Use, Kevzara (sarilumab) Solution for Subcutaneous Injection and ZALTRAP (ziv-aflibercept) Injection for intravenous infusion. As of December 31, 2016, the Company had 16 product candidates in clinical development, which consisted of a Trap-based clinical program and 15 fully human monoclonal antibody product candidates. Its antibodies are generated using its VelocImmune technology.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of REGN – 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 $45,297,630,364 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.47 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 1470.07% Pass
6. Moderate PEmg Ratio PEmg < 20 29.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.52 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.47 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $14.51
MG Growth Estimate 15.00%
MG Value $558.51
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $210.35
MG Value based on 0% Growth $123.31
Market Implied Growth Rate 10.29%
Current Price $421.90
% of Intrinsic Value 75.54%

Regeneron Pharmaceuticals Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $4.12 in 2015 to an estimated $14.51 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 10.29% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on 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 Regeneron Pharmaceuticals Inc revealed the company was trading above its Graham Number of $170.59. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 29.08, which was below the industry average of 39.51, 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 $30.26.

Regeneron Pharmaceuticals Inc receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $30.26
Graham Number $170.59
PEmg 29.08
Current Ratio 4.47
PB Ratio 5.52
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,447,600,000
Total Current Liabilities $1,442,800,000
Long-Term Debt $0
Total Assets $11,734,500,000
Intangible Assets $0
Total Liabilities $2,977,200,000
Shares Outstanding (Diluted Average) 114,671,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $16.10
Dec2018 $21.29
Dec2017 $10.34
Dec2016 $7.70
Dec2015 $5.52
Dec2014 $2.98
Dec2013 $3.72
Dec2012 $6.75
Dec2011 -$2.45
Dec2010 -$1.26
Dec2009 -$0.85
Dec2008 -$1.00
Dec2007 -$1.59
Dec2006 -$1.77
Dec2005 -$1.71
Dec2004 $0.74
Dec2003 -$2.13
Dec2002 -$2.83
Dec2001 -$1.81
Dec2000 -$0.66
Dec1999 -$0.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $14.51
Dec2018 $12.33
Dec2017 $7.25
Dec2016 $5.58
Dec2015 $4.12
Dec2014 $2.92
Dec2013 $2.33
Dec2012 $1.16
Dec2011 -$1.56
Dec2010 -$1.18
Dec2009 -$1.22
Dec2008 -$1.29
Dec2007 -$1.39
Dec2006 -$1.37
Dec2005 -$1.30
Dec2004 -$1.17
Dec2003 -$1.96

Recommended Reading:

Other ModernGraham posts about the company

Regeneron Pharmaceuticals Inc Valuation – April 2018 $REGN
Regeneron Pharmaceuticals Inc Valuation – November 2016 $REGN
Regeneron Pharmaceuticals Inc Valuation – August 2016 $REGN
Regeneron Pharmaceuticals Inc. Annual Valuation – 2015 $REGN
16 Companies in the Spotlight this Week – 4/19/14

Other ModernGraham posts about related companies

Alexion Pharmaceuticals Inc Valuation – February 2019 $ALXN
Vertex Pharmaceuticals Inc Valuation – February 2019 $VRTX
Perrigo Company Valuation – February 2019 $PRGO
Eli Lilly and Co Valuation – January 2019 $LLY
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

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.

Alexion Pharmaceuticals Inc Valuation – February 2019 $ALXN

Company Profile (excerpt from Reuters): Alexion Pharmaceuticals, Inc., incorporated on January 28, 1992, is a biopharmaceutical company. The Company is focused on the development and commercialization of therapeutic products. The Company’s products include Soliris (eculizumab), Strensiq (asfotase alfa) and Kanuma (sebelipase alfa). The Company’s clinical development programs include Soliris (eculizumab), cPMP (ALXN1101), SBC-103, ALXN1210 (IV) and ALXN1210 (Subcutaneous).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ALXN – 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 $28,604,032,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.88 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 314.76% Pass
6. Moderate PEmg Ratio PEmg < 20 34.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.15 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.88 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.13 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 $3.74
MG Growth Estimate 15.00%
MG Value $143.99
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $54.23
MG Value based on 0% Growth $31.79
Market Implied Growth Rate 12.86%
Current Price $128.02
% of Intrinsic Value 88.91%

Alexion Pharmaceuticals, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net 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 $1.58 in 2015 to an estimated $3.74 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 12.86% 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 Alexion Pharmaceuticals, Inc. revealed the company was trading above its Graham Number of $90.72. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 34.23, which was below the industry average of 39.51, 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 $-6.13.

Alexion Pharmaceuticals, 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) -$6.13
Graham Number $90.72
PEmg 34.23
Current Ratio 2.88
PB Ratio 3.15
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,385,000,000
Total Current Liabilities $1,174,000,000
Long-Term Debt $2,501,700,000
Total Assets $13,931,900,000
Intangible Assets $8,678,700,000
Total Liabilities $4,766,600,000
Shares Outstanding (Diluted Average) 225,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.92
Dec2018 $0.35
Dec2017 $1.97
Dec2016 $1.76
Dec2015 $0.67
Dec2014 $3.26
Dec2013 $1.27
Dec2012 $1.28
Dec2011 $0.91
Dec2010 $0.52
Dec2009 $1.63
Dec2008 $0.20
Dec2007 -$0.64
Dec2006 -$1.04
Jul2005 -$0.98
Jul2004 -$0.86
Jul2003 -$1.16
Jul2002 -$0.78
Jul2001 -$0.82
Jul2000 -$0.36
Jul1999 -$0.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.74
Dec2018 $1.30
Dec2017 $1.78
Dec2016 $1.67
Dec2015 $1.58
Dec2014 $1.84
Dec2013 $1.12
Dec2012 $1.00
Dec2011 $0.75
Dec2010 $0.49
Dec2009 $0.26
Dec2008 -$0.50
Dec2007 -$0.88
Dec2006 -$0.98
Jul2005 -$0.94
Jul2004 -$0.88
Jul2003 -$0.82

Recommended Reading:

Other ModernGraham posts about the company

Alexion Pharmaceuticals Inc Valuation – April 2018 $ALXN
Alexion Pharmaceuticals Inc Valuation – December 2016 $ALXN
Alexion Pharmaceuticals Inc. Analysis – August 2015 Update $ALXN
47 Companies in the Spotlight This Week – 5/16/15
Alexion Pharmaceuticals Quarterly Valuation – May 2015 $ALXN

Other ModernGraham posts about related companies

Vertex Pharmaceuticals Inc Valuation – February 2019 $VRTX
Perrigo Company Valuation – February 2019 $PRGO
Eli Lilly and Co Valuation – January 2019 $LLY
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

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.

Vertex Pharmaceuticals Inc Valuation – February 2019 $VRTX

Company Profile (excerpt from Reuters): Vertex Pharmaceuticals Incorporated, incorporated on January 4, 1989, is engaged in discovering, developing, manufacturing and commercializing medicines for serious diseases. The Company is focused on developing and commercializing therapies for the treatment of cystic fibrosis (CF) and advancing its research and development programs in other indications. The Company’s marketed medicines are ORKAMBI and KALYDECO. ORKAMBI (lumacaftor in combination with ivacaftor) is approved as a treatment for patients having two copies (homozygous) of the Delta-F508 (F508del) mutation in their cystic fibrosis transmembrane conductance regulator (CFTR) gene. KALYDECO (ivacaftor) is approved for the treatment of CF patients having the G551D mutation or other specified mutations in their CFTR gene.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VRTX – 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 $47,416,062,908 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.17 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -405.57% Fail
6. Moderate PEmg Ratio PEmg < 20 56.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.89 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 5.17 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.31
MG Growth Estimate 15.00%
MG Value $127.56
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $48.04
MG Value based on 0% Growth $28.16
Market Implied Growth Rate 23.79%
Current Price $185.82
% of Intrinsic Value 145.67%

Vertex Pharmaceuticals Incorporated does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-2.06 in 2015 to an estimated $3.31 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 23.79% 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 Vertex Pharmaceuticals Incorporated revealed the company was trading above its Graham Number of $36.92. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 56.08, which was above the industry average of 39.51. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.28.

Vertex Pharmaceuticals Incorporated 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) $7.28
Graham Number $36.92
PEmg 56.08
Current Ratio 5.17
PB Ratio 10.89
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,702,290,000
Total Current Liabilities $715,482,000
Long-Term Debt $0
Total Assets $6,245,898,000
Intangible Assets $50,384,000
Total Liabilities $1,810,695,000
Shares Outstanding (Diluted Average) 259,812,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.49
Dec2018 $8.09
Dec2017 $1.04
Dec2016 -$0.46
Dec2015 -$2.31
Dec2014 -$3.14
Dec2013 -$1.98
Dec2012 -$0.50
Dec2011 $0.14
Dec2010 -$3.77
Dec2009 -$3.71
Dec2008 -$3.27
Dec2007 -$3.03
Dec2006 -$1.83
Dec2005 -$2.28
Dec2004 -$2.12
Dec2003 -$2.56
Dec2002 -$1.43
Dec2001 -$0.89
Dec2000 -$0.51
Dec1999 -$0.80

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.31
Dec2018 $2.36
Dec2017 -$0.79
Dec2016 -$1.69
Dec2015 -$2.06
Dec2014 -$1.91
Dec2013 -$1.52
Dec2012 -$1.60
Dec2011 -$2.34
Dec2010 -$3.43
Dec2009 -$3.11
Dec2008 -$2.71
Dec2007 -$2.41
Dec2006 -$2.08
Dec2005 -$2.09
Dec2004 -$1.83
Dec2003 -$1.53

Recommended Reading:

Other ModernGraham posts about the company

Vertex Pharmaceuticals Inc Valuation – April 2018 $VRTX
Vertex Pharmaceuticals Inc Valuation – August 2016 $VRTX
Vertex Pharmaceuticals Analysis – July 2015 Update $VRTX
Vertex Pharmaceuticals Annual Valuation – 2014 $VRTX

Other ModernGraham posts about related companies

Perrigo Company Valuation – February 2019 $PRGO
Eli Lilly and Co Valuation – January 2019 $LLY
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

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.

ConocoPhillips Valuation – February 2019 $COP

Company Profile (excerpt from Reuters): ConocoPhillips, incorporated on November 16, 2001, is an independent exploration and production (E&P) company. The Company explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG) and natural gas liquids. The Company operates through six segments: Alaska, Lower 48, Canada, Europe and North Africa, Asia Pacific and Middle East, and Other International. As of December 31, 2016, its operations were in the United States, Norway, the United Kingdom, Canada, Australia, Timor-Leste, Indonesia, China, Malaysia, Qatar and Libya. Its portfolio includes North American unconventional assets and oil sands assets in Canada; conventional assets in North America, Europe, Asia and Australia; LNG developments, and an inventory of conventional and unconventional exploration prospects. The Company’s subsidiaries include ConocoPhillips Company, ConocoPhillips Canada Funding Company I and Burlington Resources, Inc.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of COP – 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 $78,819,282,328 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.99 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 -98.62% Fail
6. Moderate PEmg Ratio PEmg < 20 167.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 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 1.99 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.04 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 $0.41
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $6.01
MG Value based on 0% Growth $3.52
Market Implied Growth Rate 79.31%
Current Price $69.30
% of Intrinsic Value N/A

ConocoPhillips 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 $6.85 in 2014 to an estimated $0.41 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 79.31% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into ConocoPhillips revealed the company was trading above its Graham Number of $47.64. The company pays a dividend of $1.06 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 167.12, which was above the industry average of 43.92. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.26.

ConocoPhillips 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) -$20.26
Graham Number $47.64
PEmg 167.12
Current Ratio 1.99
PB Ratio 2.53
Current Dividend $1.06
Dividend Yield 1.53%
Number of Consecutive Years of Dividend Growth 1

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 $14,723,000,000
Total Current Liabilities $7,401,000,000
Long-Term Debt $14,902,000,000
Total Assets $70,556,000,000
Intangible Assets $0
Total Liabilities $38,477,000,000
Shares Outstanding (Diluted Average) 1,172,694,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.88
Dec2017 -$0.70
Dec2016 -$2.91
Dec2015 -$3.58
Dec2014 $5.51
Dec2013 $7.38
Dec2012 $6.72
Dec2011 $8.97
Dec2010 $7.62
Dec2009 $2.94
Dec2008 -$10.73
Dec2007 $7.22
Dec2006 $9.66
Dec2005 $9.55
Dec2004 $5.80
Dec2003 $3.46
Dec2002 -$0.31
Dec2001 $2.82
Dec2000 $3.63
Dec1999 $1.20
Dec1998 $0.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.41
Dec2017 -$0.50
Dec2016 $0.61
Dec2015 $3.25
Dec2014 $6.85
Dec2013 $7.26
Dec2012 $5.83
Dec2011 $4.66
Dec2010 $2.78
Dec2009 $1.49
Dec2008 $1.94
Dec2007 $7.90
Dec2006 $7.37
Dec2005 $5.57
Dec2004 $3.41
Dec2003 $2.20
Dec2002 $1.56

Recommended Reading:

Other ModernGraham posts about the company

ConocoPhillips Valuation – April 2018 $COP
ConocoPhillips Valuation – July 2016 $COP
58 Companies in the Spotlight This Week – 1/31/15
Conoco Phillips Annual Valuation – 2015 $COP
14 Companies in the Spotlight This Week – 1/18/14

Other ModernGraham posts about related companies

Devon Energy Corp Valuation – January 2019 $DVN
Noble Energy Inc Valuation – January 2019 $NBL
ONEOK Inc Valuation – January 2019 $OKE
Marathon Oil Corp Valuation – January 2019 $MRO
HollyFrontier Corp Valuation – January 2019 $HFC
Hess Corp Valuation – January 2019 $HES
Cimarex Energy Co Valuation – January 2019 $XEC
EQT Corp Valuation – January 2019 $EQT
Helmerich & Payne Inc Valuation – January 2019 $HP
Williams Companies Inc Valuation – January 2019 $WMB

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.

PulteGroup Inc Valuation – January 2019 $PHM

Company Profile (excerpt from Reuters): PulteGroup, Inc., incorporated on September 17, 1987, is a homebuilder in the United States. The Company’s segments include Homebuilding and Financial Services. Its Homebuilding operations are engaged in the acquisition and development of land primarily for residential purposes within the United States and the construction of housing on such land. Its Financial Services operations consist principally of mortgage banking and title operations. The Company’s subsidiaries are engaged in the homebuilding business. The Company offers a product line to meet the needs of homebuyers in its focused markets. Through its brands, which include Centex, Pulte Homes, Del Webb, DiVosta Homes, and John Wieland Homes and Neighborhoods, the Company offers a range of home designs, including single-family detached, townhouses, condominiums and duplexes.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PHM – 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 $7,392,261,434 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.77 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -187.42% Fail
6. Moderate PEmg Ratio PEmg < 20 12.60 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.58 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 4.77 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.50 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 $2.09
MG Growth Estimate 0.26%
MG Value $18.86
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $30.30
MG Value based on 0% Growth $17.76
Market Implied Growth Rate 2.05%
Current Price $26.32
% of Intrinsic Value 139.57%

PulteGroup, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history. 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 $2.05 in 2014 to an estimated $2.09 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.05% 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 PulteGroup, Inc. revealed the company was trading below its Graham Number of $32.65. The company pays a dividend of $0.36 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 12.6, which was below the industry average of 18.63, 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 $10.27.

PulteGroup, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $10.27
Graham Number $32.65
PEmg 12.60
Current Ratio 4.77
PB Ratio 1.58
Current Dividend $0.36
Dividend Yield 1.37%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $8,248,466,000
Total Current Liabilities $1,727,675,000
Long-Term Debt $3,256,151,000
Total Assets $10,055,080,000
Intangible Assets $130,642,000
Total Liabilities $5,326,202,000
Shares Outstanding (Diluted Average) 284,672,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.27
Dec2017 $1.44
Dec2016 $1.75
Dec2015 $1.36
Dec2014 $1.26
Dec2013 $6.72
Dec2012 $0.54
Dec2011 -$0.55
Dec2010 -$2.90
Dec2009 -$3.94
Dec2008 -$5.81
Dec2007 -$8.94
Dec2006 $2.66
Dec2005 $5.68
Dec2004 $3.79
Dec2003 $2.48
Dec2002 $1.84
Dec2001 $1.50
Dec2000 $1.12
Dec1999 $1.02
Dec1998 $0.58

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.09
Dec2017 $1.83
Dec2016 $2.13
Dec2015 $2.17
Dec2014 $2.05
Dec2013 $1.62
Dec2012 -$1.46
Dec2011 -$3.12
Dec2010 -$4.19
Dec2009 -$3.92
Dec2008 -$2.78
Dec2007 -$0.46
Dec2006 $3.61
Dec2005 $3.75
Dec2004 $2.57
Dec2003 $1.83
Dec2002 $1.41

Recommended Reading:

Other ModernGraham posts about the company

PulteGroup Inc Valuation – March 2018 $PHM
10 Undervalued Stocks for the Enterprising Investor – July 2017
10 Low PE Stock Picks for the Enterprising Investor – April 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017
10 Low PE Stock Picks for the Enterprising Investor – March 2017

Other ModernGraham posts about related companies

Sherwin-Williams Co Valuation – January 2019 $SHW
Johnson Controls International PC Valuation – January 2019 $JCI
Cummins Inc Valuation – January 2019 $CMI
Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH
Stantec Inc Valuation – August 2018 $TSE-STN
Simpson Manufacturing Co Inc Valuation – August 2018 $SSD
KBR Inc Valuation – August 2018 $KBR

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.

Philip Morris International Inc Valuation – January 2019 $PM

Company Profile (excerpt from Reuters): Philip Morris International Inc., incorporated on January 4, 2007, is a holding company. The Company is engaged in the manufacture and sale of cigarettes, other tobacco products and other nicotine-containing products in markets outside of the United States. Its portfolio consists of both international and local brands. The Company’s segments include European Union (EU); Eastern Europe, Middle East & Africa (EEMA); Asia, and Latin America & Canada. The Company’s portfolio of international and local brands is led by Marlboro. Its mid-price brands are L&M, Lark, Merit, Muratti and Philip Morris. Its other international brands include Bond Street, Chesterfield, Next and Red & White. The Company also owns various local cigarette brands, such as Dji Sam Soe, Sampoerna and U Mild in Indonesia; Champion, Fortune and Jackpot in the Philippines; Apollo-Soyuz and Optima in Russia; Morven Gold in Pakistan; Boston in Colombia; Belmont, Canadian Classics and Number 7 in Canada; f6 in Germany; Delicados in Mexico; Assos in Greece, and Petra in the Czech Republic and Slovakia. In addition to the manufacture and sale of cigarettes and other tobacco products, the Company is engaged in the development and commercialization of Reduced-Risk Products (RRPs). It has a range of RRPs in various stages of development, scientific assessment and commercialization.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PM – 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 $108,832,228,560 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.19 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 11.16% Fail
6. Moderate PEmg Ratio PEmg < 20 15.57 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -10.96 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.19 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.59 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 $4.50
MG Growth Estimate -1.31%
MG Value $26.46
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $65.26
MG Value based on 0% Growth $38.26
Market Implied Growth Rate 3.53%
Current Price $70.06
% of Intrinsic Value 264.74%

Philip Morris International Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $4.93 in 2014 to an estimated $4.5 for 2018. 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 Philip Morris International Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $4.22 per share, for a yield of 6%, 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 19.84, 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 $-19.8.

Philip Morris International 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) -$19.80
Graham Number $0.00
PEmg 15.57
Current Ratio 1.19
PB Ratio -10.96
Current Dividend $4.22
Dividend Yield 6.02%
Number of Consecutive Years of Dividend Growth 10

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 $18,538,000,000
Total Current Liabilities $15,599,000,000
Long-Term Debt $28,179,000,000
Total Assets $39,380,000,000
Intangible Assets $9,588,000,000
Total Liabilities $49,322,000,000
Shares Outstanding (Diluted Average) 1,555,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.99
Dec2017 $3.88
Dec2016 $4.48
Dec2015 $4.42
Dec2014 $4.76
Dec2013 $5.26
Dec2012 $5.17
Dec2011 $4.85
Dec2010 $3.92
Dec2009 $3.24
Dec2008 $3.31
Dec2007 $2.86
Dec2006 $2.91
Dec2005 $2.69
Dec2003 $1.95

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.50
Dec2017 $4.36
Dec2016 $4.67
Dec2015 $4.81
Dec2014 $4.93
Dec2013 $4.84
Dec2012 $4.45
Dec2011 $3.94
Dec2010 $3.41
Dec2009 $3.10
Dec2008 $2.94
Dec2007 $2.53
Dec2006 $2.08
Dec2005 $1.42
Dec2003 $0.65

Recommended Reading:

Other ModernGraham posts about the company

Philip Morris International Inc Valuation – March 2018 $PM
21 Companies in the Spotlight This Week – 5/9/15
Philip Morris International Annual Valuation – 2015 $PM
16 Companies in the Spotlight This Week – 4/26/14
Philip Morris International (PM) Annual Valuation – 2014

Other ModernGraham posts about related companies

Molson Coors Brewing Co Valuation – January 2019 $TAP
Boston Beer Company Inc Valuation – July 2018 $SAM
Constellation Brands Inc Valuation – May 2018 $STZ
Brown-Forman Corp Valuation – May 2018 $BF.B
Philip Morris International Inc Valuation – March 2018 $PM
Altria Group Inc Valuation – March 2018 $MO
Molson Coors Brewing Co Valuation – March 2018 $TAP
Molson Coors Brewing Co Valuation – Initial Coverage $TAP
Constellation Brands Inc Valuation – February 2017 $STZ
Brown-Forman Corporation – February 2017 $BF.B

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.

Back To Top