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PPG Industries Inc Valuation – February 2019 $PPG

Company Profile (excerpt from Reuters): PPG Industries, Inc., incorporated on August 24, 1883, manufactures and distributes a range of coatings and specialty materials. The Company has two segments: Performance Coatings and Industrial Coatings. The Company’s geographical segments include the United States, Canada, Western Europe, Latin America, Central and Eastern Europe, the Middle East, Africa and Asia Pacific. The Company’s brands include PPG, GLIDDEN, COMEX, OLYMPIC, DULUX (in Canada), SIKKENS, PPG PITTSBURGH PAINTS, MULCO, FLOOD, LIQUID NAILS, SICO, CIL, RENNER, TAUBMANS, WHITE KNIGHT, BRISTOL, HOMAX, SIGMA, HISTOR, SEIGNEURIE, GUITTET, PEINTURES GAUTHIER, RIPOLIN, JOHNSTONE’S, LEYLAND, PRIMALEX, DEKORAL, TRILAK, PROMINENT PAINTS, GORI and BONDEX.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PPG – 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 $26,373,508,919 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.36 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 102.28% Pass
6. Moderate PEmg Ratio PEmg < 20 20.29 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.66 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.36 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.75 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 $5.51
MG Growth Estimate -2.43%
MG Value $20.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $79.90
MG Value based on 0% Growth $46.84
Market Implied Growth Rate 5.90%
Current Price $111.80
% of Intrinsic Value 558.89%

PPG Industries, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, 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 $6.58 in 2015 to an estimated $5.51 for 2019. This level of demonstrated earnings growth does not support 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 below the price.

At the time of valuation, further research into PPG Industries, Inc. revealed the company was trading above its Graham Number of $51.51. The company pays a dividend of $1.86 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 20.29, which was below the industry average of 22.8, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-22.2.

PPG Industries, 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) -$22.20
Graham Number $51.51
PEmg 20.29
Current Ratio 1.36
PB Ratio 5.66
Current Dividend $1.86
Dividend Yield 1.66%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $5,961,000,000
Total Current Liabilities $4,373,000,000
Long-Term Debt $4,365,000,000
Total Assets $16,015,000,000
Intangible Assets $6,042,000,000
Total Liabilities $11,283,000,000
Shares Outstanding (Diluted Average) 239,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.11
Dec2018 $5.47
Dec2017 $6.18
Dec2016 $3.27
Dec2015 $5.14
Dec2014 $7.52
Dec2013 $11.13
Dec2012 $3.03
Dec2011 $3.44
Dec2010 $2.32
Dec2009 $1.02
Dec2008 $1.63
Dec2007 $2.52
Dec2006 $2.14
Dec2005 $1.75
Dec2004 $1.98
Dec2003 $1.45
Dec2002 -$0.21
Dec2001 $1.15
Dec2000 $1.79
Dec1999 $1.62

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.51
Dec2018 $5.31
Dec2017 $5.70
Dec2016 $5.65
Dec2015 $6.58
Dec2014 $6.69
Dec2013 $5.58
Dec2012 $2.63
Dec2011 $2.35
Dec2010 $1.85
Dec2009 $1.68
Dec2008 $2.00
Dec2007 $2.12
Dec2006 $1.75
Dec2005 $1.45
Dec2004 $1.27
Dec2003 $1.00

Recommended Reading:

Other ModernGraham posts about the company

PPG Industries Inc Valuation – May 2018 $PPG
PPG Industries Inc Valuation – January 2017 $PPG
5 Companies for Enterprising Investors Near 52 Week Lows – January 2017
Best Dividend Paying Stocks for Dividend Growth Investors – December 2016
5 Companies for Enterprising Investors Near 52 Week Lows – December 2016

Other ModernGraham posts about related companies

Celanese Corporation Valuation – February 2019 $CE
Ecolab Inc Valuation – January 2019 $ECL
FMC Corp Valuation – January 2019 $FMC
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Albemarle Corp Valuation – January 2019 $ALB
LyondellBasell Industries NV Valuation – January 2019 $LYB
Eastman Chemical Co Valuation – January 2019 $EMN
DowDuPont Inc Valuation – November 2018 $DWDP
Chemtrade Logistics Income Fund Valuation – July 2018 $TSE:CHE.UN
PPG Industries Inc Valuation – May 2018 $PPG

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.

PPG Industries Inc Valuation – May 2018 $PPG

Company Profile (excerpt from Reuters): PPG Industries, Inc., incorporated on August 24, 1883, manufactures and distributes a range of coatings and specialty materials. The Company has two segments: Performance Coatings and Industrial Coatings. The Company’s geographical segments include the United States, Canada, Western Europe, Latin America, Central and Eastern Europe, the Middle East, Africa and Asia Pacific. The Company’s brands include PPG, GLIDDEN, COMEX, OLYMPIC, DULUX (in Canada), SIKKENS, PPG PITTSBURGH PAINTS, MULCO, FLOOD, LIQUID NAILS, SICO, CIL, RENNER, TAUBMANS, WHITE KNIGHT, BRISTOL, HOMAX, SIGMA, HISTOR, SEIGNEURIE, GUITTET, PEINTURES GAUTHIER, RIPOLIN, JOHNSTONE’S, LEYLAND, PRIMALEX, DEKORAL, TRILAK, PROMINENT PAINTS, GORI and BONDEX.

PPG Chart

PPG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PPG – May 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 $26,168,920,350 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.77 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 129.12% Pass
6. Moderate PEmg Ratio PEmg < 20 19.33 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -6.91 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 1.77 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.69 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 $5.50
MG Growth Estimate -2.66%
MG Value $17.47
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $79.82
MG Value based on 0% Growth $46.79
Market Implied Growth Rate 5.41%
Current Price $106.40
% of Intrinsic Value 609.07%

PPG Industries, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. 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 $6.69 in 2014 to an estimated $5.5 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.41% 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 PPG Industries, Inc. revealed the company was trading above its Graham Number of $54.88. The company pays a dividend of $1.7 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 19.33, which was below the industry average of 29.58, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.4.

PPG Industries, 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) -$15.40
Graham Number $54.88
PEmg 19.33
Current Ratio 1.77
PB Ratio -6.91
Current Dividend $1.70
Dividend Yield 1.60%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $7,108,000,000
Total Current Liabilities $4,024,000,000
Long-Term Debt $5,199,000,000
Total Assets $7,108,000,000
Intangible Assets $5,987,000,000
Total Liabilities $10,980,000,000
Shares Outstanding (Diluted Average) 251,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.05
Dec2017 $6.17
Dec2016 $3.28
Dec2015 $5.14
Dec2014 $7.52
Dec2013 $11.13
Dec2012 $3.03
Dec2011 $3.44
Dec2010 $2.32
Dec2009 $1.02
Dec2008 $1.63
Dec2007 $2.52
Dec2006 $2.14
Dec2005 $1.75
Dec2004 $1.98
Dec2003 $1.45
Dec2002 -$0.21
Dec2001 $1.15
Dec2000 $1.79
Dec1999 $1.62
Dec1998 $2.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.50
Dec2017 $5.70
Dec2016 $5.65
Dec2015 $6.58
Dec2014 $6.69
Dec2013 $5.58
Dec2012 $2.63
Dec2011 $2.35
Dec2010 $1.85
Dec2009 $1.68
Dec2008 $2.00
Dec2007 $2.12
Dec2006 $1.75
Dec2005 $1.45
Dec2004 $1.27
Dec2003 $1.00
Dec2002 $0.96

Recommended Reading:

Other ModernGraham posts about the company

PPG Industries Inc Valuation – January 2017 $PPG
5 Companies for Enterprising Investors Near 52 Week Lows – January 2017
Best Dividend Paying Stocks for Dividend Growth Investors – December 2016
5 Companies for Enterprising Investors Near 52 Week Lows – December 2016
Best Dividend Paying Stocks for Dividend Growth Investors – August 2016

Other ModernGraham posts about related companies

Innospec Inc Valuation – April 2018 $IOSP
Innophos Holdings Inc Valuation – March 2018 $IPHS
Olin Corp Valuation – March 2018 $OLN
A Schulman Inc Valuation – March 2018 $SHLM
FMC Corp Valuation – March 2018 $FMC
Compass Minerals International Inc Valuation – March 2018 $CMP
Ashland Global Holdings Inc Valuation – March 2018 $ASH
Air Products & Chemicals Inc Valuation – March 2018 $APD
Koppers Holdings Inc Valuation – March 2018 $KOP
Kraton Corp Valuation – March 2018 $KRA

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.

PPG Industries Inc Valuation – January 2017 $PPG

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

Company Profile (obtained from Google Finance): PPG Industries, Inc. (PPG) manufactures and distributes a range of coatings, specialty materials and glass products. PPG operates through three business segments: Performance Coatings, Industrial Coatings and Glass. The Performance Coatings segment consists of the refinish, aerospace, protective and marine, architectural-Americas and Asia Pacific, and architectural-EMEA coatings businesses. The Industrial Coatings segment consists of the automotive original equipment manufacturer (OEM), industrial coatings, packaging coatings, and specialty coatings and materials businesses. Industrial, automotive OEM, packaging coatings, and specialty coatings and materials products are formulated specifically for the customers’ needs and application methods. The Glass segment consists of the flat glass and fiberglass businesses. The Company’s brands include SIKKENS, PPG PITTSBURGH PAINTS, MULCO, FLOOD, LIQUID NAILS, SICO, CIL, RENNER, TAUBMANS, WHITE KNIGHT and BRISTOL.

PPG Chart

PPG 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 PPG – January 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $25,283,646,907 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.44 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 206.30% Pass
6. Moderate PEmg Ratio PEmg < 20 17.19 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.10 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 1.44 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.92 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $5.60
MG Growth Estimate 15.00%
MG Value $215.75
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $81.26
MG Value based on 0% Growth $47.63
Market Implied Growth Rate 4.34%
Current Price $96.32
% of Intrinsic Value 44.64%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.63 in 2012 to an estimated $5.6 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.34% 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 PPG Industries, Inc. revealed the company was trading above its Graham Number of $36.63. The company pays a dividend of $1.52 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 17.19, which was below the industry average of 28.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-18.93.

PPG Industries, 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) -$18.93
Graham Number $36.63
PEmg 17.19
Current Ratio 1.44
PB Ratio 5.10
Current Dividend $1.52
Dividend Yield 1.58%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $6,417,000,000
Total Current Liabilities $4,460,000,000
Long-Term Debt $3,752,000,000
Total Assets $16,490,000,000
Intangible Assets $5,774,000,000
Total Liabilities $11,459,000,000
Shares Outstanding (Diluted Average) 266,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.13
Dec2015 $5.14
Dec2014 $7.52
Dec2013 $11.13
Dec2012 $3.03
Dec2011 $3.44
Dec2010 $2.32
Dec2009 $1.02
Dec2008 $1.63
Dec2007 $2.52
Dec2006 $2.14
Dec2005 $1.75
Dec2004 $1.98
Dec2003 $1.45
Dec2002 -$0.21
Dec2001 $1.15
Dec2000 $1.79
Dec1999 $1.62
Dec1998 $2.24
Dec1997 $1.97
Dec1996 $1.97

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.60
Dec2015 $6.58
Dec2014 $6.69
Dec2013 $5.58
Dec2012 $2.63
Dec2011 $2.35
Dec2010 $1.85
Dec2009 $1.68
Dec2008 $2.00
Dec2007 $2.12
Dec2006 $1.75
Dec2005 $1.45
Dec2004 $1.27
Dec2003 $1.00
Dec2002 $0.96
Dec2001 $1.61
Dec2000 $1.87

Recommended Reading:

Other ModernGraham posts about the company

PPG Industries Inc Valuation – August 2016 $PPG
18 Companies in the Spotlight This Week – 3/15/15
PPG Industries Inc. Annual Valuation – 2015 $PPG
32 Companies in the Spotlight This Week – 12/6/14
PPG Industries Inc. Quarterly Valuation – December 2014 $PPG

Other ModernGraham posts about related companies

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Jacobs Engineering Group Inc Valuation – August 2016 $JEC
PPG Industries Inc Valuation – August 2016 $PPG
D.R. Horton Inc Valuation – August 2016 $DHI
Martin Marietta Materials Inc Valuation – August 2016 $MLM
Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI

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.

PPG Industries Inc Valuation – August 2016 $PPG

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 PPG Industries Inc (PPG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): PPG Industries, Inc. (PPG) manufactures and distributes a range of coatings, specialty materials and glass products. PPG operates through three business segments: Performance Coatings, Industrial Coatings and Glass. The Performance Coatings segment consists of the refinish, aerospace, protective and marine, architectural-Americas and Asia Pacific, and architectural-EMEA coatings businesses. The Industrial Coatings segment consists of the automotive original equipment manufacturer (OEM), industrial coatings, packaging coatings, and specialty coatings and materials businesses. Industrial, automotive OEM, packaging coatings, and specialty coatings and materials products are formulated specifically for the customers’ needs and application methods. The Glass segment consists of the flat glass and fiberglass businesses. The Company’s brands include SIKKENS, PPG PITTSBURGH PAINTS, MULCO, FLOOD, LIQUID NAILS, SICO, CIL, RENNER, TAUBMANS, WHITE KNIGHT and BRISTOL.

PPG Chart

PPG 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. 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 PPG – August 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 $27,616,674,621 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.62 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 251.50% Pass
6. Moderate PEmg Ratio PEmg < 20 16.37 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.26 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 1.62 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.62 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

PPG value chart August 2016

EPSmg $6.38
MG Growth Estimate 15.00%
MG Value $245.66
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $92.52
MG Value based on 0% Growth $54.24
Market Implied Growth Rate 3.94%
Current Price $104.46
% of Intrinsic Value 42.52%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.63 in 2012 to an estimated $6.38 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.94% 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 PPG Industries, Inc. revealed the company was trading above its Graham Number of $49.66. The company pays a dividend of $1.48 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 16.37, which was below the industry average of 28.02, 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 $-17.82.

PPG Industries, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

PPG charts August 2016

Net Current Asset Value (NCAV) -$17.82
Graham Number $49.66
PEmg 16.37
Current Ratio 1.62
PB Ratio 5.26
Current Dividend $1.48
Dividend Yield 1.42%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $7,107,000,000
Total Current Liabilities $4,375,000,000
Long-Term Debt $4,426,000,000
Total Assets $17,248,000,000
Intangible Assets $5,675,000,000
Total Liabilities $11,902,000,000
Shares Outstanding (Diluted Average) 269,100,000

Earnings Per Share History

Next Fiscal Year Estimate $5.46
Dec2015 $5.14
Dec2014 $7.52
Dec2013 $11.13
Dec2012 $3.03
Dec2011 $3.44
Dec2010 $2.32
Dec2009 $1.02
Dec2008 $1.63
Dec2007 $2.52
Dec2006 $2.14
Dec2005 $1.75
Dec2004 $1.98
Dec2003 $1.45
Dec2002 -$0.21
Dec2001 $1.15
Dec2000 $1.79
Dec1999 $1.62
Dec1998 $2.24
Dec1997 $1.97
Dec1996 $1.97

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $6.38
Dec2015 $6.58
Dec2014 $6.69
Dec2013 $5.58
Dec2012 $2.63
Dec2011 $2.35
Dec2010 $1.85
Dec2009 $1.68
Dec2008 $2.00
Dec2007 $2.12
Dec2006 $1.75
Dec2005 $1.45
Dec2004 $1.27
Dec2003 $1.00
Dec2002 $0.96
Dec2001 $1.61
Dec2000 $1.87

Recommended Reading:

Other ModernGraham posts about the company

18 Companies in the Spotlight This Week – 3/15/15
PPG Industries Inc. Annual Valuation – 2015 $PPG
32 Companies in the Spotlight This Week – 12/6/14
PPG Industries Inc. Quarterly Valuation – December 2014 $PPG

Other ModernGraham posts about related companies

D.R. Horton Inc Valuation – August 2016 $DHI
Martin Marietta Materials Inc Valuation – August 2016 $MLM
Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI
Corning Inc Valuation – May 2016 $GLW
Flowserve Corporation Valuation – May 2016 $FLS
Lennar Corporation Valuation – May 2016 $LEN

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.

PPG Industries Inc. Annual Valuation – 2015 $PPG

ppg_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 – February 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 PPG Industries Inc. (PPG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): PPG Industries, Inc. (PPG) manufactures and distributes a range of coatings, optical and specialty materials and glass products. It is a supplier of protective and decorative coatings. PPG operates in five business segments, which includes Performance Coatings, Industrial Coatings, Architectural Coatings-EMEA (Europe, Middle East and Africa), Optical and Specialty Materials, and Glass. The Performance Coatings, Industrial Coatings and Architectural Coatings- EMEA segments supply protective and decorative finishes for customers in a range of end use markets, including industrial equipment, appliances and packaging; factory-finished aluminum extrusions and steel and aluminum coils; marine and aircraft equipment; automotive original equipment; and other industrial and consumer products. The Optical and Specialty Materials segment consist of the optical products and silicas businesses. The Glass business segment consists of the flat glass and fiber glass businesses.

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - 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 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - FAIL

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

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

Valuation Summary

Key Data:

Recent Price $227.67
MG Value $515.34
MG Opinion Undervalued
Value Based on 3% Growth $194.09
Value Based on 0% Growth $113.78
Market Implied Growth Rate 4.25%
Net Current Asset Value (NCAV) -$39.98
PEmg 17.01
Current Ratio 1.40
PB Ratio 6.10

Balance Sheet – December 2014

Current Assets $6,850,000,000
Current Liabilities $4,876,000,000
Total Debt $3,544,000,000
Total Assets $17,583,000,000
Intangible Assets $6,212,000,000
Total Liabilities $12,403,000,000
Outstanding Shares 138,900,000

Earnings Per Share

2014 $15.03
2013 $22.27
2012 $6.06
2011 $6.87
2010 $4.63
2009 $2.03
2008 $3.25
2007 $5.03
2006 $4.27
2005 $3.49
2004 $3.95

Earnings Per Share – ModernGraham

2014 $13.39
2013 $11.17
2012 $5.27
2011 $4.70
2010 $3.69
2009 $3.35

Dividend History

Conclusion:

PPG Industries Inc. is not suitable for the Enterprising Investor or for the Defensive Investor.  The Defensive Investor is concerned by the the low current ratio, and the high PB ratio.  The Enterprising Investor is concerned by the level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.69 in 2010 to $13.39 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of a 4.25% annual earnings over the next 7-10 years, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above 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 PPG Industries Inc. (PPG)?  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 PPG Industries Inc. (PPG) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

PPG Industries Inc. Quarterly Valuation – December 2014 $PPG

ppg_logoPPG Industries performs quite well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the low current ratio and the high PB ratio, while the Enterprising Investor has no initial concerns. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $3.69 in 2010 to an estimated $11.54 for 2014. This is a very strong level of demonstrated growth which is well above the market’s implied estimate 5.24% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 42.56% per year, which is clearly unsustainable over a long period of time. As a result, the ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. The ModernGraham estimate is capped at 15% annual growth, which is still significantly higher than the market estimate. A significant slowdown would have to occur to justify a price as low as the market is demonstrating. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.

Read the full valuation on Seeking Alpha!

PPG Chart

PPG data by YCharts

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

DowDuPont Inc Valuation – April 2019 #DWDP

Company Profile (excerpt from Reuters): Robert Half International Inc. is engaged in providing specialized staffing and risk consulting services. The Company provides staffing and risk consulting services through the divisions: Accountemps, Robert Half Finance & Accounting, OfficeTeam, Robert Half Technology, Robert Half Management Resources, Robert Half Legal, The Creative Group and Protiviti. The Company operates through three segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. The temporary and consultant segment provides specialized staffing in the accounting and finance, administrative and office, information technology, legal, advertising, marketing and Web design fields. The permanent placement segment provides full-time personnel in the accounting, finance, administrative and office, and information technology fields. The risk consulting segment provides business and technology risk consulting and internal audit services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DWDP – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $85,135,304,027 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.01 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -8.50% Fail
6. Moderate PEmg Ratio PEmg < 20 18.84 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.90 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 2.01 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.51 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 $2.01
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $29.16
MG Value based on 0% Growth $17.10
Market Implied Growth Rate 5.17%
Current Price $37.90
% of Intrinsic Value N/A

DowDuPont Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the insufficient earnings growth over the last ten years. 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 feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.78 in 2015 to an estimated $2.01 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.17% 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 DowDuPont Inc revealed the company was trading above its Graham Number of $37.88. The company pays a dividend of $1.52 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.84, which was below the industry average of 23.27, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-18.43.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$18.43
Graham Number $37.88
PEmg 18.84
Current Ratio 2.01
PB Ratio 0.90
Current Dividend $1.52
Dividend Yield 4.01%
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 $49,603,000,000
Total Current Liabilities $24,715,000,000
Long-Term Debt $37,662,000,000
Total Assets $188,030,000,000
Intangible Assets $89,997,000,000
Total Liabilities $91,851,000,000
Shares Outstanding (Diluted Average) 2,292,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.53
Dec2018 $1.65
Dec2017 $0.91
Dec2016 $3.52
Dec2015 $6.15
Dec2014 $2.87
Dec2013 $3.68
Dec2012 $0.70
Dec2011 $2.05
Dec2010 $1.72
Dec2009 $0.32
Dec2008 $0.62
Dec2007 $2.99
Dec2006 $3.82
Dec2005 $4.62
Dec2004 $2.93
Dec2003 $1.87
Dec2002 -$0.37
Dec2001 -$0.43
Dec2000 $2.22
Dec1999 $0.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.01
Dec2018 $2.51
Dec2017 $3.10
Dec2016 $3.92
Dec2015 $3.78
Dec2014 $2.47
Dec2013 $2.07
Dec2012 $1.21
Dec2011 $1.49
Dec2010 $1.44
Dec2009 $1.69
Dec2008 $2.58
Dec2007 $3.45
Dec2006 $3.32
Dec2005 $2.62
Dec2004 $1.49
Dec2003 $0.78

Recommended Reading:

Other ModernGraham posts about the company

DowDuPont Inc Valuation – November 2018 $DWDP
DowDuPont Inc Valuation – February 2018 $DWDP

Other ModernGraham posts about related companies

Linde PLC Valuation – April 2019 #LIN
PPG Industries Inc Valuation – February 2019 $PPG
Celanese Corporation Valuation – February 2019 $CE
Ecolab Inc Valuation – January 2019 $ECL
FMC Corp Valuation – January 2019 $FMC
Air Products & Chemicals Inc Valuation – January 2019 $APD
Albemarle Corp Valuation – January 2019 $ALB
LyondellBasell Industries NV Valuation – January 2019 $LYB
Eastman Chemical Co Valuation – January 2019 $EMN
DowDuPont Inc Valuation – November 2018 $DWDP

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.

Linde PLC Valuation – April 2019 #LIN

Company Profile (excerpt from Reuters): Linde plc, incorporated on April 18, 2017, is an industrial gases and engineering company that operates through its subsidiaries. The Company provides atmospheric gases (oxygen, nitrogen, argon and rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases and acetylene). It designs, engineers and builds equipment that produces industrial gases primarily for internal use. It also offers gaseous medication and related medical products and devices for patients and medical staff. The Company serves the customers in various industries, including healthcare, petroleum refining, manufacturing, food, beverage carbonation, fiber-optics, steel making, aerospace, chemicals and water treatment.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LIN – April 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $100,601,281,539 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.86 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 26.09% Fail
6. Moderate PEmg Ratio PEmg < 20 32.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.99 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 0.86 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.92 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.70
MG Growth Estimate 0.33%
MG Value $52.23
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $82.69
MG Value based on 0% Growth $48.47
Market Implied Growth Rate 11.94%
Current Price $184.62
% of Intrinsic Value 353.45%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $5.58 in 2014 to an estimated $5.7 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.94% 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 Linde PLC revealed the company was trading above its Graham Number of $58.47. The company pays a dividend of $3.15 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 32.37, which was above the industry average of 23.27. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-34.09.

Linde PLC 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) -$34.09
Graham Number $58.47
PEmg 32.37
Current Ratio 0.86
PB Ratio 7.99
Current Dividend $3.15
Dividend Yield 1.71%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,305,000,000
Total Current Liabilities $3,860,000,000
Long-Term Debt $6,615,000,000
Total Assets $19,979,000,000
Intangible Assets $3,714,000,000
Total Liabilities $13,244,000,000
Shares Outstanding (Diluted Average) 291,513,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.24
Dec2017 $4.32
Dec2016 $5.21
Dec2015 $5.35
Dec2014 $5.73
Dec2013 $5.87
Dec2012 $5.61
Dec2011 $5.45
Dec2010 $3.84
Dec2009 $4.01
Dec2008 $3.80
Dec2007 $3.62
Dec2006 $3.00
Dec2005 $2.20
Dec2004 $2.10
Dec2003 $1.77
Dec2002 $1.24
Dec2001 $1.31
Dec2000 $1.13
Dec1999 $1.33
Dec1998 $1.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.70
Dec2017 $5.05
Dec2016 $5.47
Dec2015 $5.60
Dec2014 $5.58
Dec2013 $5.32
Dec2012 $4.88
Dec2011 $4.39
Dec2010 $3.79
Dec2009 $3.62
Dec2008 $3.27
Dec2007 $2.84
Dec2006 $2.33
Dec2005 $1.90
Dec2004 $1.67
Dec2003 $1.42
Dec2002 $1.25

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

PPG Industries Inc Valuation – February 2019 $PPG
Celanese Corporation Valuation – February 2019 $CE
Ecolab Inc Valuation – January 2019 $ECL
FMC Corp Valuation – January 2019 $FMC
Air Products & Chemicals Inc Valuation – January 2019 $APD
Albemarle Corp Valuation – January 2019 $ALB
LyondellBasell Industries NV Valuation – January 2019 $LYB
Eastman Chemical Co Valuation – January 2019 $EMN
DowDuPont Inc Valuation – November 2018 $DWDP
Chemtrade Logistics Income Fund Valuation – July 2018 $TSE:CHE.UN

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.

Celanese Corporation Valuation – February 2019 $CE

Company Profile (excerpt from Reuters): Celanese Corporation (Celanese), incorporated on November 3, 2004, is a technology and specialty materials company. The Company’s segments include Advanced Engineered Materials, Consumer Specialties, Industrial Specialties, Acetyl Intermediates and Other Activities. The Company’s business involves processing chemical raw materials, such as methanol, carbon monoxide, ethylene and natural products, including wood pulp, into chemicals, thermoplastic polymers and other chemical-based products. Its product portfolio serves a range of end-use applications, including paints and coatings, textiles, automotive applications, consumer and medical applications, performance industrial applications, filtration applications, paper and packaging, chemical additives, construction, consumer and industrial adhesives, and food and beverage applications. The Company operates in North America, Europe and Asia. As of December 31, 2016, the Company had 30 global production facilities, and an additional eight affiliate production facilities.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CE – 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 $13,125,672,172 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.62 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 234.46% Pass
6. Moderate PEmg Ratio PEmg < 20 12.58 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.84 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 1.62 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.71 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.80
MG Growth Estimate 15.00%
MG Value $300.35
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $113.12
MG Value based on 0% Growth $66.31
Market Implied Growth Rate 2.04%
Current Price $98.13
% of Intrinsic Value 32.67%

Celanese Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.61 in 2015 to an estimated $7.8 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.04% 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 Celanese Corporation revealed the company was trading above its Graham Number of $69.96. The company pays a dividend of $2.08 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.58, which was below the industry average of 22.8, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-23.16.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$23.16
Graham Number $69.96
PEmg 12.58
Current Ratio 1.62
PB Ratio 3.84
Current Dividend $2.08
Dividend Yield 2.12%
Number of Consecutive Years of Dividend Growth 9

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 $2,874,000,000
Total Current Liabilities $1,779,000,000
Long-Term Debt $2,970,000,000
Total Assets $9,313,000,000
Intangible Assets $1,367,000,000
Total Liabilities $5,934,000,000
Shares Outstanding (Diluted Average) 132,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.75
Dec2018 $8.91
Dec2017 $6.09
Dec2016 $6.18
Dec2015 $2.00
Dec2014 $4.00
Dec2013 $6.91
Dec2012 $2.33
Dec2011 $2.69
Dec2010 $2.38
Dec2009 $3.17
Dec2008 $1.73
Dec2007 $2.49
Dec2006 $2.36
Dec2005 $1.67
Dec2004 -$2.01
Dec2003 $2.57
Dec2002 $2.44
Dec2001 -$7.25

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.80
Dec2018 $6.36
Dec2017 $5.07
Dec2016 $4.47
Dec2015 $3.61
Dec2014 $4.16
Dec2013 $3.99
Dec2012 $2.51
Dec2011 $2.56
Dec2010 $2.47
Dec2009 $2.44
Dec2008 $1.80
Dec2007 $1.70
Dec2006 $1.34
Dec2005 $0.38
Dec2004 -$0.46
Dec2003 $0.06

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

Ecolab Inc Valuation – January 2019 $ECL
FMC Corp Valuation – January 2019 $FMC
Air Products & Chemicals Inc Valuation – January 2019 $APD
Albemarle Corp Valuation – January 2019 $ALB
LyondellBasell Industries NV Valuation – January 2019 $LYB
Eastman Chemical Co Valuation – January 2019 $EMN
DowDuPont Inc Valuation – November 2018 $DWDP
Chemtrade Logistics Income Fund Valuation – July 2018 $TSE:CHE.UN
PPG Industries Inc Valuation – May 2018 $PPG
Innospec Inc Valuation – April 2018 $IOSP

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.

Ecolab Inc Valuation – January 2019 $ECL

Company Profile (excerpt from Reuters): Ecolab Inc., incorporated on February 18, 1924, provides water, hygiene and energy technologies and services. The Company’s cleaning and sanitizing programs and products, pest elimination services and equipment maintenance and repair services support customers in the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care and commercial facilities management sectors in over 170 countries. The Company’s segments include Global Industrial, Global Institutional, Global Energy, Other and Corporate. Its products and technologies are also used in water treatment, pollution control, energy conservation, oil production and refining, steelmaking, papermaking, mining, and other industrial processes.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ECL – 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 $43,316,505,468 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 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 143.03% Pass
6. Moderate PEmg Ratio PEmg < 20 32.73 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.50 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 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.14 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.57
MG Growth Estimate 7.67%
MG Value $109.08
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $66.32
MG Value based on 0% Growth $38.88
Market Implied Growth Rate 12.11%
Current Price $149.70
% of Intrinsic Value 137.24%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.03 in 2014 to an estimated $4.57 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.11% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Ecolab Inc. revealed the company was trading above its Graham Number of $54.54. The company pays a dividend of $1.52 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 32.73, which was above the industry average of 20.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.39.

Ecolab 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) -$24.39
Graham Number $54.54
PEmg 32.73
Current Ratio 1.34
PB Ratio 5.50
Current Dividend $1.52
Dividend Yield 1.02%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $4,822,300,000
Total Current Liabilities $3,589,800,000
Long-Term Debt $6,334,800,000
Total Assets $19,962,600,000
Intangible Assets $10,898,800,000
Total Liabilities $11,979,600,000
Shares Outstanding (Diluted Average) 293,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.02
Dec2017 $5.13
Dec2016 $4.14
Dec2015 $3.32
Dec2014 $3.93
Dec2013 $3.16
Dec2012 $2.35
Dec2011 $1.91
Dec2010 $2.23
Dec2009 $1.74
Dec2008 $1.80
Dec2007 $1.70
Dec2006 $1.43
Dec2005 $1.23
Dec2004 $1.09
Dec2003 $1.06
Dec2002 $0.75
Dec2001 $0.72
Dec2000 $0.78
Dec1999 $0.65
Dec1998 $0.72

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.57
Dec2017 $4.21
Dec2016 $3.63
Dec2015 $3.23
Dec2014 $3.03
Dec2013 $2.48
Dec2012 $2.09
Dec2011 $1.93
Dec2010 $1.89
Dec2009 $1.67
Dec2008 $1.58
Dec2007 $1.41
Dec2006 $1.21
Dec2005 $1.06
Dec2004 $0.94
Dec2003 $0.84
Dec2002 $0.73

Recommended Reading:

Other ModernGraham posts about the company

Ecolab Inc Valuation – March 2018 $ECL
Ecolab Inc Valuation – June 2016 $ECL
40 Companies in the Spotlight This Week – 2/21/15
ECOLAB Inc. Annual Valuation – 2015 $ECL
14 Companies in the Spotlight This Week – 2/22/14

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Disclaimer:

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

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