Edwards Lifesciences Corp Valuation – March 2019 $EW

Company Profile (excerpt from Reuters): Edwards Lifesciences Corporation, incorporated on September 10, 1999, is a manufacturer of heart valve systems and repair products used to replace or repair a patient’s diseased or defective heart valve. The Company is globally engaged in patient-focused innovations for structural heart disease and critical care monitoring. Its segments include United States, Europe, Japan and Rest of World. Its products are categorized into three areas: Transcatheter Heart Valve Therapy, Surgical Heart Valve Therapy and Critical Care. It also develops hemodynamic monitoring systems that are used to measure a patient’s cardiovascular function in the hospital setting. The Company’s Transcatheter Heart Valve Therapy and Surgical Heart Valve Therapy products are manufactured in the United States, Singapore and Switzerland. Critical Care products are manufactured in its facilities located in Puerto Rico and the Dominican Republic. Its subsidiaries include Edwards Lifesciences Asset Management Corporation, Edwards Lifesciences CardiAQ LLC., Valtech Cardio Inc. and Red Hill Insurance Corporation.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EW – 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 $36,091,033,254 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.61 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 258.21% Pass
6. Moderate PEmg Ratio PEmg < 20 47.51 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.73 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.42 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 $3.66
MG Growth Estimate 8.64%
MG Value $94.29
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $53.01
MG Value based on 0% Growth $31.08
Market Implied Growth Rate 19.51%
Current Price $173.71
% of Intrinsic Value 184.24%

Edwards Lifesciences Corp 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 Overvalued after growing its EPSmg (normalized earnings) from $2.32 in 2015 to an estimated $3.66 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 19.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Edwards Lifesciences Corp revealed the company was trading above its Graham Number of $41.72. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 47.51, which was below the industry average of 53.13, 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 $0.49.

Edwards Lifesciences Corp receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.49
Graham Number $41.72
PEmg 47.51
Current Ratio 2.61
PB Ratio 11.73
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 $2,286,900,000
Total Current Liabilities $876,600,000
Long-Term Debt $593,800,000
Total Assets $5,323,700,000
Intangible Assets $1,455,400,000
Total Liabilities $2,183,300,000
Shares Outstanding (Diluted Average) 212,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.15
Dec2018 $3.38
Dec2017 $2.70
Dec2016 $2.61
Dec2015 $2.25
Dec2014 $3.74
Dec2013 $1.71
Dec2012 $1.23
Dec2011 $0.99
Dec2010 $0.92
Dec2009 $0.98
Dec2008 $0.55
Dec2007 $0.47
Dec2006 $0.53
Dec2005 $0.32
Dec2004 $0.01
Dec2003 $0.32
Dec2002 $0.23
Dec2001 -$0.05
Dec2000 -$1.16

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.66
Dec2018 $2.92
Dec2017 $2.66
Dec2016 $2.53
Dec2015 $2.32
Dec2014 $2.14
Dec2013 $1.28
Dec2012 $1.02
Dec2011 $0.87
Dec2010 $0.77
Dec2009 $0.66
Dec2008 $0.46
Dec2007 $0.38
Dec2006 $0.32
Dec2005 $0.20
Dec2004 $0.05

Recommended Reading:

Other ModernGraham posts about the company

Edwards Lifesciences Corp Valuation – May 2018 $EW
12 Best Stocks for Value Investors This Week – 2/4/17
Edwards Lifesciences Corp Valuation – January 2017 $EW
Edwards Lifesciences Corp Valuation – August 2016 $EW
15 Best Stocks For Value Investors This Week – 2/13/16

Other ModernGraham posts about related companies

Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX
Centene Corp Valuation – March 2019 $CNC
Abbott Laboratories Valuation – February 2019 $ABT
Becton Dickinson and Co Valuation – February 2019 $BDX
IQVIA Holdings Inc Valuation – February 2019 $IQV
Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN

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.

Boston Scientific Corporation Valuation – March 2019 $BSX

Company Profile (excerpt from Reuters): Boston Scientific Corporation, incorporated on June 22, 1979, is a developer, manufacturer and marketer of medical devices that are used in a range of interventional medical specialties. The Company offers its products by seven businesses: interventional cardiology, cardiac rhythm management, endoscopy, peripheral interventions, urology and pelvic health, neuromodulation, and electrophysiology. It operates through three segments: Cardiovascular, Rhythm Management, and MedSurg. Its Cardiovascular segment consists of Interventional Cardiology and Peripheral Interventions businesses. Rhythm Management consists of Cardiac Rhythm Management and Electrophysiology businesses. MedSurg consists of Endoscopy, Urology and Pelvic Health, and Neuromodulation businesses. It sells ACURATE TA and ACURATE neo /TF valve systems in Europe and in other geographies outside of the United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BSX – 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 $56,533,391,248 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.76 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 -185.15% Fail
6. Moderate PEmg Ratio PEmg < 20 46.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.57 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 0.76 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.82 Fail
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 $0.87
MG Growth Estimate 15.00%
MG Value $33.42
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $12.59
MG Value based on 0% Growth $7.38
Market Implied Growth Rate 19.25%
Current Price $40.79
% of Intrinsic Value 122.06%

Boston Scientific Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings 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 level of debt relative to the current assets, and 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 $-0.47 in 2015 to an estimated $0.87 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 19.25% 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 Boston Scientific Corporation revealed the company was trading above its Graham Number of $14.78. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 46.99, which was below the industry average of 53.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.88.

Boston Scientific Corporation 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) -$5.88
Graham Number $14.78
PEmg 46.99
Current Ratio 0.76
PB Ratio 6.57
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 $4,003,000,000
Total Current Liabilities $5,260,000,000
Long-Term Debt $4,797,000,000
Total Assets $20,999,000,000
Intangible Assets $14,283,000,000
Total Liabilities $12,273,000,000
Shares Outstanding (Diluted Average) 1,406,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.54
Dec2018 $1.19
Dec2017 $0.08
Dec2016 $0.25
Dec2015 -$0.18
Dec2014 -$0.09
Dec2013 -$0.09
Dec2012 -$2.89
Dec2011 $0.29
Dec2010 -$0.70
Dec2009 -$0.68
Dec2008 -$1.36
Dec2007 -$0.33
Dec2006 -$2.81
Dec2005 $0.75
Dec2004 $1.24
Dec2003 $0.56
Dec2002 $0.45
Dec2001 -$0.07
Dec2000 $0.46
Dec1999 $0.45

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.87
Dec2018 $0.44
Dec2017 $0.04
Dec2016 -$0.19
Dec2015 -$0.47
Dec2014 -$0.64
Dec2013 -$0.88
Dec2012 -$1.21
Dec2011 -$0.43
Dec2010 -$0.92
Dec2009 -$0.98
Dec2008 -$0.92
Dec2007 -$0.51
Dec2006 -$0.38
Dec2005 $0.75
Dec2004 $0.67
Dec2003 $0.38

Recommended Reading:

Other ModernGraham posts about the company

Boston Scientific Corp Valuation – May 2018 $BSX
Most Overvalued Stocks of the S&P 500 – March 2017
Boston Scientific Corp Valuation – January 2017 $BSX
Boston Scientific Inc. Analysis – September 2015 Update $BSX
23 Companies to Research This Week – 9/13/14

Other ModernGraham posts about related companies

Centene Corp Valuation – March 2019 $CNC
Abbott Laboratories Valuation – February 2019 $ABT
Becton Dickinson and Co Valuation – February 2019 $BDX
IQVIA Holdings Inc Valuation – February 2019 $IQV
Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK

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.

Thermo Fisher Scientific Inc Valuation – February 2019 $TMO

Company Profile (excerpt from Reuters): Thermo Fisher Scientific Inc., incorporated on October 11, 1960, develops, manufactures and sells a range of products. The Company provides analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics. The Company operates through four segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services. The Company serves various markets, such as pharmaceutical and biotech; academic and government; industrial and applied; as well as healthcare and diagnostics. The Company serves its customers through its brands, such as Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific and Unity Lab Services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TMO – 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 $101,078,782,817 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.71 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 170.43% Pass
6. Moderate PEmg Ratio PEmg < 20 31.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.69 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 1.71 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.01 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 $8.07
MG Growth Estimate 13.48%
MG Value $286.31
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $117.04
MG Value based on 0% Growth $68.61
Market Implied Growth Rate 11.30%
Current Price $251.09
% of Intrinsic Value 87.70%

Thermo Fisher Scientific Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor 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 Fairly Valued after growing its EPSmg (normalized earnings) from $4.25 in 2015 to an estimated $8.07 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 11.3% 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 Thermo Fisher Scientific Inc. revealed the company was trading above its Graham Number of $136.3. The company pays a dividend of $0.68 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 31.11, which was below the industry average of 51.18, 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 $-44.33.

Thermo Fisher Scientific 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) -$44.33
Graham Number $136.30
PEmg 31.11
Current Ratio 1.71
PB Ratio 3.69
Current Dividend $0.68
Dividend Yield 0.27%
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 12/1/2018
Total Current Assets $10,640,000,000
Total Current Liabilities $6,223,000,000
Long-Term Debt $17,719,000,000
Total Assets $56,181,000,000
Intangible Assets $40,325,000,000
Total Liabilities $28,595,000,000
Shares Outstanding (Diluted Average) 405,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.05
Dec2018 $7.24
Dec2017 $5.59
Dec2016 $5.09
Dec2015 $4.92
Dec2014 $4.71
Dec2013 $3.48
Dec2012 $3.21
Dec2011 $3.46
Dec2010 $2.53
Dec2009 $2.01
Dec2008 $2.25
Dec2007 $1.72
Dec2006 $0.84
Dec2005 $1.36
Dec2004 $2.17
Dec2003 $1.20
Dec2002 $1.73
Dec2001 $0.00
Dec2000 -$0.22
Dec1999 -$1.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.07
Dec2018 $5.89
Dec2017 $5.06
Dec2016 $4.63
Dec2015 $4.25
Dec2014 $3.77
Dec2013 $3.18
Dec2012 $2.92
Dec2011 $2.64
Dec2010 $2.11
Dec2009 $1.82
Dec2008 $1.70
Dec2007 $1.44
Dec2006 $1.35
Dec2005 $1.50
Dec2004 $1.37
Dec2003 $0.76

Recommended Reading:

Other ModernGraham posts about the company

Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
8 Best Stocks for Value Investors of the Week – 12/10/16
Thermo Fisher Scientific Inc Valuation – December 2016 $TMO
Thermo Fisher Scientific Inc Valuation – November 2016 $TMO
Thermo Fisher Scientific Inc. Analysis – 2015 Update $TMO

Other ModernGraham posts about related companies

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Align Technology Inc Valuation – February 2019 $ALGN
Quest Diagnostics Inc Valuation – February 2019 $DGX
AmerisourceBergen Corp Valuation – February 2019 $ABC
Abiomed Inc Valuation – February 2019 $ABMD
Laboratory Corp of America Holdings Inc Valuation – January 2019 $LH

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.

MSCI Inc Valuation – January 2019 $MSCI

Company Profile (excerpt from Reuters): MSCI Inc. (MSCI), incorporated on July 2, 1998, offers products and services to support the needs of institutional investors throughout their investment processes. The Company’s segments include Index, Analytics and All Other segment. All Other segment comprises environmental, social and governance (ESG) and Real Estate segments. The Company’s products and services include the development and production of indexes and analytical models; the provision of ratings and analysis that identify environmental, social and governance risks and opportunities and the analysis of real estate in both privately and publicly owned portfolios.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MSCI – 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 $13,531,533,038 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.75 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 267.88% Pass
6. Moderate PEmg Ratio PEmg < 20 43.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 37.11 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 2.75 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.18 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 $3.56
MG Growth Estimate 14.05%
MG Value $130.10
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $51.55
MG Value based on 0% Growth $30.22
Market Implied Growth Rate 17.37%
Current Price $153.71
% of Intrinsic Value 118.15%

Msci Inc 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 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 $1.84 in 2014 to an estimated $3.56 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.37% 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 Msci Inc revealed the company was trading above its Graham Number of $22.6. The company pays a dividend of $1.32 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 43.23, which was above the industry average of 18. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.19.

Msci 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) -$17.19
Graham Number $22.60
PEmg 43.23
Current Ratio 2.75
PB Ratio 37.11
Current Dividend $1.32
Dividend Yield 0.86%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,857,346,000
Total Current Liabilities $675,050,000
Long-Term Debt $2,574,616,000
Total Assets $3,806,405,000
Intangible Assets $1,834,447,000
Total Liabilities $3,427,964,000
Shares Outstanding (Diluted Average) 91,372,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.10
Dec2017 $3.31
Dec2016 $2.70
Dec2015 $2.03
Dec2014 $2.43
Dec2013 $1.83
Dec2012 $1.48
Dec2011 $1.41
Nov2010 $0.81
Nov2009 $0.80
Nov2008 $0.67
Nov2007 $0.96
Nov2006 $0.85
Nov2005 $0.65
Nov2004 $0.37
Nov2003 $0.40

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.56
Dec2017 $2.68
Dec2016 $2.27
Dec2015 $1.98
Dec2014 $1.84
Dec2013 $1.45
Dec2012 $1.18
Dec2011 $1.00
Nov2010 $0.80
Nov2009 $0.79
Nov2008 $0.76
Nov2007 $0.75
Nov2006 $0.58
Nov2005 $0.40
Nov2004 $0.23
Nov2003 $0.13

Recommended Reading:

Other ModernGraham posts about the company

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

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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.

Gilead Sciences Inc Valuation – January 2019 $GILD

Company Profile (excerpt from Reuters): Gilead Sciences, Inc., incorporated on June 22, 1987, is a research-based biopharmaceutical company that discovers, develops and commercializes medicines in areas of unmet medical need. The Company’s portfolio of products and pipeline of investigational drugs includes treatments for Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome (HIV/AIDS), liver diseases, cancer, inflammatory and respiratory diseases and cardiovascular conditions. Its products include AmBisome, Atripla, Cayston, Complera/Eviplera, Descovy, Emtriva, Epclusa, Genvoya, Harvoni, Hepsera, Letairis, Odefsey, Ranexa, Sovaldi, Stribild, Truvada, Tybost, Vemlidy, Viread, Vitekta and Zydelig. The Company’s areas of focus include HIV; liver diseases, such as chronic hepatitis C virus (HCV) infection and chronic hepatitis B virus (HBV) infection; hematology/oncology; cardiovascular, and inflammation/respiratory diseases. The Company had operations in more than 30 countries, as of December 31, 2016. The Company, through its subsidiary Kite Pharma, Inc. (Kite), is engaged in the development of cancer immunotherapies. Kite is focused on chimeric antigen receptor (CAR) and T cell receptor (TCR) engineered cell therapies designed to empower the immune system’s ability to recognize and kill tumors. Kite’s pipeline includes axicabtagene ciloleucel, KTE-C19, Human anti-CD19 (2nd Gen), Humanized anti-CD19 Control CAR (3rd Gen), KITE-585 (anti-BCMA), KITE-796 (anti-CLL-1 Control CAR), MAGE A3/A6, KITE-718 (MAGE A3/A6), MAGE A3, HPV-16 E6 & E7, KITE-439 (HPV-16 E7), KRAS, SSX-2 and Neoantigens.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GILD – 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 $87,772,115,026 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.45 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 293.60% Pass
6. Moderate PEmg Ratio PEmg < 20 9.88 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.85 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 3.45 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.99 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 $6.87
MG Growth Estimate 13.56%
MG Value $244.68
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $99.60
MG Value based on 0% Growth $58.38
Market Implied Growth Rate 0.69%
Current Price $67.84
% of Intrinsic Value 27.73%

Gilead Sciences, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor has no initial concerns. 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 2014 to an estimated $6.87 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.69% 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 Gilead Sciences, Inc. revealed the company was trading above its Graham Number of $44.37. The company pays a dividend of $2.08 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.88, which was below the industry average of 35.4, 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 $-4.88.

Gilead Sciences, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$4.88
Graham Number $44.37
PEmg 9.88
Current Ratio 3.45
PB Ratio 3.85
Current Dividend $2.08
Dividend Yield 3.07%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $34,918,000,000
Total Current Liabilities $10,116,000,000
Long-Term Debt $24,570,000,000
Total Assets $64,305,000,000
Intangible Assets $20,432,000,000
Total Liabilities $41,298,000,000
Shares Outstanding (Diluted Average) 1,307,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.60
Dec2017 $3.51
Dec2016 $9.94
Dec2015 $11.91
Dec2014 $7.35
Dec2013 $1.81
Dec2012 $1.64
Dec2011 $1.77
Dec2010 $1.66
Dec2009 $1.41
Dec2008 $1.03
Dec2007 $0.84
Dec2006 -$0.65
Dec2005 $0.43
Dec2004 $0.25
Dec2003 -$0.05
Dec2002 $0.04
Dec2001 $0.03
Dec2000 -$0.04
Dec1999 -$0.05
Dec1998 -$0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.87
Dec2017 $7.30
Dec2016 $8.31
Dec2015 $6.63
Dec2014 $3.61
Dec2013 $1.71
Dec2012 $1.61
Dec2011 $1.51
Dec2010 $1.20
Dec2009 $0.85
Dec2008 $0.51
Dec2007 $0.22
Dec2006 -$0.06
Dec2005 $0.21
Dec2004 $0.08
Dec2003 -$0.01
Dec2002 $0.01

Recommended Reading:

Other ModernGraham posts about the company

Most Undervalued Stocks of the S&P 500 – August 2018
10 Undervalued Stocks for the Enterprising Investor – August 2018
10 Undervalued Stocks for the Enterprising Investor – July 2018
10 Best Dividend Paying Stocks for the Enterprising Investor – May 2018
10 Stocks for Using A Benjamin Graham Value Investing Strategy – May 2018

Other ModernGraham posts about related companies

Pfizer Inc Valuation – November 2018 $PFE
Nektar Therapeutics Valuation – November 2018 $NKTR
Merck & Co Inc Valuation – November 2018 $MRK
Ligand Pharmaceuticals Inc Valuation – September 2018 $LGND
Supernus Pharmaceuticals Inc Valuation – August 2018 $SUPN
Lannett Co Inc Valuation – August 2018 $LCI
Spectrum Pharmaceuticals Inc Valuation – August 2018 $SPPI
Akorn Inc Valuation – July 2018 $AKRX
Mallinckrodt PLC Valuation – July 2018 $MNK
Bristol-Myers Squibb Company Valuation – June 2018 $BMY

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.

Scientific Games Corp Valuation – July 2018 $SGMS

Company Profile (excerpt from Reuters): Scientific Games Corporation, incorporated on July 2, 1984, is a developer of technology-based products and services and associated content for the gaming, lottery and interactive gaming industries. The Company’s segments include Gaming, Lottery and Interactive. The Company’s portfolio includes gaming machines and game content, casino management systems, table game products and services, instant and draw-based lottery games, server-based gaming and lottery systems, sports betting technology, lottery content and services, loyalty and rewards programs, interactive gaming and social casino solutions. The Company’s games are available on Facebook, Amazon.com, the Apple app store and Android app on Google play.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SGMS – July 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 $4,364,172,914 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.00 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 -139.08% Fail
6. Moderate PEmg Ratio PEmg < 20 -36.64 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.32 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 4.00 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.27 Fail
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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$1.30
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$18.86
MG Value based on 0% Growth -$11.06
Market Implied Growth Rate -22.57%
Current Price $47.65
% of Intrinsic Value N/A

Scientific Games 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 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 earnings stability or growth 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 seeing its EPSmg (normalized earnings) decline from $3.65 in 2014 to an estimated $-1.3 for 2018. This level of negative earnings does not support a positive valuation.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 Scientific Games Corp revealed the company was trading above its Graham Number of $36.89. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -36.64, which was below the industry average of 24.74, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.52.

Scientific Games 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) -$12.52
Graham Number $36.89
PEmg -36.64
Current Ratio 4.00
PB Ratio 1.32
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 6/1/2018
Total Current Assets $555,187,000
Total Current Liabilities $138,759,000
Long-Term Debt $530,909,000
Total Assets $1,655,924,000
Intangible Assets $59,672,000
Total Liabilities $838,088,000
Shares Outstanding (Diluted Average) 22,588,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.74
Dec2017 $3.31
Dec2016 -$12.76
Dec2015 -$3.94
Dec2014 $4.71
Dec2013 $1.82
Dec2012 $2.95
Dec2011 $1.91
Dec2010 $11.25
Dec2009 $6.57
Dec2008 $9.25
Dec2007 $9.04
Dec2006 $8.44
Dec2005 $6.95
Dec2004 $1.08
Dec2003 $0.63
Dec2002 $2.28
Dec2001 $3.43
Dec2000 $1.92
Dec1999 $1.69
Dec1998 $5.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.30
Dec2017 -$2.34
Dec2016 -$3.92
Dec2015 $0.83
Dec2014 $3.65
Dec2013 $3.71
Dec2012 $5.24
Dec2011 $6.79
Dec2010 $9.12
Dec2009 $8.05
Dec2008 $8.18
Dec2007 $6.84
Dec2006 $5.12
Dec2005 $3.26
Dec2004 $1.57
Dec2003 $1.87
Dec2002 $2.65

Recommended Reading:

Other ModernGraham posts about the company

Scientific Games Corp Valuation – Initial Coverage $SGMS

Other ModernGraham posts about related companies

Wynn Resorts Ltd Valuation – June 2018 $WYNN
MGM Resorts International Valuation – Initial Coverage $MGM
Wynn Resorts Ltd Valuation – March 2017 $WYNN
Intertain Group Corp Valuation – Initial Coverage $TSE:IT
Scientific Games Corp Valuation – Initial Coverage $SGMS
Wynn Resorts Limited Valuation – August 2016 $WYNN
Wynn Resorts Ltd Valuation – February 2016 $WYNN
Wynn Resorts Limited Analysis – September 2015 Update $WYNN
Wyndham Worldwide Corporation Analysis – August 2015 Update $WYN
Wynn Resorts Analysis – June 2015 Update $WYNN

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.

Service Corp International Valuation – July 2018 $SCI

Company Profile (excerpt from Reuters): Service Corporation International, incorporated on July 6, 1962, is a provider of deathcare products and services, with a network of funeral service locations and cemeteries. The Company’s segments include Funeral, Cemetery and Corporate. It conducts both funeral and cemetery operations in the United States and Canada. As December 31, 2016, it operated 1,502 funeral service locations and 470 cemeteries, including 281 funeral service/cemetery combination locations, which are geographically diversified across 45 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. It offers various brands, such as Dignity Memorial, Dignity Planning, National Cremation Society, Advantage Funeral and Cremation Services, Funeraria del Angel, Making Everlasting Memories, Neptune Society and Trident Society. Its funeral service and cemetery operations consist of funeral service locations, cemeteries, funeral service/cemetery combination locations, crematoria, and related businesses. It sells cemetery property, and funeral and cemetery merchandise and services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SCI – July 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 $6,890,062,632 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.59 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 246.88% Pass
6. Moderate PEmg Ratio PEmg < 20 21.52 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.72 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 0.59 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -13.77 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.75
MG Growth Estimate 15.00%
MG Value $67.25
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $25.33
MG Value based on 0% Growth $14.85
Market Implied Growth Rate 6.51%
Current Price $37.58
% of Intrinsic Value 55.88%

Service Corporation International 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 Undervalued after growing its EPSmg (normalized earnings) from $0.71 in 2014 to an estimated $1.75 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Service Corporation International revealed the company was trading above its Graham Number of $17.54. The company pays a dividend of $0.56 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 21.52, which was below the industry average of 72.01, 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 $-55.63.

Service Corporation International receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$55.63
Graham Number $17.54
PEmg 21.52
Current Ratio 0.59
PB Ratio 4.72
Current Dividend $0.56
Dividend Yield 1.49%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $351,005,000
Total Current Liabilities $591,805,000
Long-Term Debt $3,316,695,000
Total Assets $12,429,008,000
Intangible Assets $1,819,134,000
Total Liabilities $10,917,159,000
Shares Outstanding (Diluted Average) 189,923,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.81
Dec2017 $2.84
Dec2016 $0.90
Dec2015 $1.14
Dec2014 $0.81
Dec2013 $0.68
Dec2012 $0.70
Dec2011 $0.61
Dec2010 $0.50
Dec2009 $0.49
Dec2008 $0.37
Dec2007 $0.85
Dec2006 $0.19
Dec2005 -$0.42
Dec2004 $0.34
Dec2003 $0.28
Dec2002 -$0.80
Dec2001 -$2.18
Dec2000 -$4.75
Dec1999 -$0.12
Dec1998 $1.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.75
Dec2017 $1.57
Dec2016 $0.90
Dec2015 $0.87
Dec2014 $0.71
Dec2013 $0.63
Dec2012 $0.59
Dec2011 $0.54
Dec2010 $0.50
Dec2009 $0.43
Dec2008 $0.35
Dec2007 $0.31
Dec2006 $0.00
Dec2005 -$0.25
Dec2004 -$0.58
Dec2003 -$1.20
Dec2002 -$1.73

Recommended Reading:

Other ModernGraham posts about the company

Service Corporation Intl Valuation – Initial Coverage $SCI

Other ModernGraham posts about related companies

Avon Products Inc Valuation – June 2018 $AVP
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Kimberly-Clark Corp Valuation – March 2018 $KMB
International Flavors & Fragrances Inc Valuation – March 2018 $IFF
Signet Jewelers Ltd Valuation – March 2018 $SIG
Estee Lauder Companies Inc Valuation – February 2018 $EL
Proctor & Gamble Co Valuation – February 2018 $PG
Colgate-Palmolive Co. Valuation – April 2017 $CL

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.

Science Applications International Corp Valuation – July 2018 $SAIC

Company Profile (excerpt from Reuters): Science Applications International Corporation (SAIC), incorporated on February 1, 2013, is a provider of technical, engineering and enterprise information technology (IT) services. The Company provides its services primarily to the United States Government, including the Department of Defense (DoD), the intelligence community and federal civilian agencies. The Company provides engineering, systems integration and information technology offerings for government projects, and offers a range of services with a targeted emphasis on higher-end, differentiated technology services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SAIC – July 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 $3,447,240,116 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 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 37700.00% Pass
6. Moderate PEmg Ratio PEmg < 20 22.54 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 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.13 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 $3.62
MG Growth Estimate 15.00%
MG Value $139.34
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $52.48
MG Value based on 0% Growth $30.76
Market Implied Growth Rate 7.02%
Current Price $81.57
% of Intrinsic Value 58.54%

Science Applications International Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. 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 $1.58 in 2015 to an estimated $3.62 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.02% 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 above the price.

At the time of valuation, further research into Science Applications International Corp revealed the company was trading above its Graham Number of $26.35. The company pays a dividend of $1.24 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 22.54, which was below the industry average of 45.08, 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 $-18.57.

Science Applications International Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$18.57
Graham Number $26.35
PEmg 22.54
Current Ratio 1.34
PB Ratio 10.89
Current Dividend $1.24
Dividend Yield 1.52%
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 4/1/2018
Total Current Assets $930,000,000
Total Current Liabilities $695,000,000
Long-Term Debt $971,000,000
Total Assets $2,061,000,000
Intangible Assets $1,037,000,000
Total Liabilities $1,736,000,000
Shares Outstanding (Diluted Average) 43,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.20
Jan2018 $4.02
Jan2017 $3.12
Jan2016 $2.47
Jan2015 $2.91
Jan2014 $2.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.62
Jan2018 $3.21
Jan2017 $2.58
Jan2016 $2.05
Jan2015 $1.58
Jan2014 $0.76

Recommended Reading:

Other ModernGraham posts about the company

Science Applications International Corp Valuation – Initial Coverage $SAIC

Other ModernGraham posts about related companies

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Equinix Inc Valuation – July 2017 $EQIX
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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.

Edwards Lifesciences Corp Valuation – May 2018 $EW

Company Profile (excerpt from Reuters): Edwards Lifesciences Corporation, incorporated on September 10, 1999, is a manufacturer of heart valve systems and repair products used to replace or repair a patient’s diseased or defective heart valve. The Company is globally engaged in patient-focused innovations for structural heart disease and critical care monitoring. Its segments include United States, Europe, Japan and Rest of World. Its products are categorized into three areas: Transcatheter Heart Valve Therapy, Surgical Heart Valve Therapy and Critical Care. It also develops hemodynamic monitoring systems that are used to measure a patient’s cardiovascular function in the hospital setting. The Company’s Transcatheter Heart Valve Therapy and Surgical Heart Valve Therapy products are manufactured in the United States, Singapore and Switzerland. Critical Care products are manufactured in its facilities located in Puerto Rico and the Dominican Republic. Its subsidiaries include Edwards Lifesciences Asset Management Corporation, Edwards Lifesciences CardiAQ LLC., Valtech Cardio Inc. and Red Hill Insurance Corporation.

EW Chart

EW data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EW – 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 $28,770,028,646 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.07 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 240.63% Pass
6. Moderate PEmg Ratio PEmg < 20 41.09 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.96 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 2.07 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.33 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 $3.29
MG Growth Estimate 8.05%
MG Value $80.98
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $47.72
MG Value based on 0% Growth $27.98
Market Implied Growth Rate 16.29%
Current Price $135.23
% of Intrinsic Value 166.99%

Edwards Lifesciences Corp 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 Overvalued after growing its EPSmg (normalized earnings) from $2.14 in 2014 to an estimated $3.29 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.29% 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 below the price.

At the time of valuation, further research into Edwards Lifesciences Corp revealed the company was trading above its Graham Number of $37.78. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 41.09, which was below the industry average of 42.49, 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 $0.64.

Edwards Lifesciences Corp receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.64
Graham Number $37.78
PEmg 41.09
Current Ratio 2.07
PB Ratio 8.96
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 3/1/2018
Total Current Assets $2,716,900,000
Total Current Liabilities $1,314,500,000
Long-Term Debt $456,000,000
Total Assets $5,825,100,000
Intangible Assets $1,625,300,000
Total Liabilities $2,579,400,000
Shares Outstanding (Diluted Average) 215,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.50
Dec2017 $2.70
Dec2016 $2.61
Dec2015 $2.25
Dec2014 $3.74
Dec2013 $1.71
Dec2012 $1.23
Dec2011 $0.99
Dec2010 $0.92
Dec2009 $0.98
Dec2008 $0.55
Dec2007 $0.47
Dec2006 $0.53
Dec2005 $0.32
Dec2004 $0.01
Dec2003 $0.32
Dec2002 $0.23
Dec2001 -$0.05
Dec2000 -$1.16

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.29
Dec2017 $2.66
Dec2016 $2.53
Dec2015 $2.32
Dec2014 $2.14
Dec2013 $1.28
Dec2012 $1.02
Dec2011 $0.87
Dec2010 $0.77
Dec2009 $0.66
Dec2008 $0.46
Dec2007 $0.38
Dec2006 $0.32
Dec2005 $0.20
Dec2004 $0.05
Dec2003 $0.00
Dec2002 -$0.17

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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.

Boston Scientific Corp Valuation – May 2018 $BSX

Company Profile (excerpt from Reuters): Boston Scientific Corporation, incorporated on June 22, 1979, is a developer, manufacturer and marketer of medical devices that are used in a range of interventional medical specialties. The Company offers its products by seven businesses: interventional cardiology, cardiac rhythm management, endoscopy, peripheral interventions, urology and pelvic health, neuromodulation, and electrophysiology. It operates through three segments: Cardiovascular, Rhythm Management, and MedSurg. Its Cardiovascular segment consists of Interventional Cardiology and Peripheral Interventions businesses. Rhythm Management consists of Cardiac Rhythm Management and Electrophysiology businesses. MedSurg consists of Endoscopy, Urology and Pelvic Health, and Neuromodulation businesses. It sells ACURATE TA and ACURATE neo /TF valve systems in Europe and in other geographies outside of the United States.

BSX Chart

BSX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BSX – 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 $41,311,529,905 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.82 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 -255.96% Fail
6. Moderate PEmg Ratio PEmg < 20 59.90 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.93 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 0.82 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.29 Fail
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 $0.50
MG Growth Estimate 15.00%
MG Value $19.17
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $7.22
MG Value based on 0% Growth $4.23
Market Implied Growth Rate 25.70%
Current Price $29.83
% of Intrinsic Value 155.58%

Boston Scientific Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings 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 level of debt relative to the current assets, and 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 $-0.64 in 2014 to an estimated $0.5 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 25.7% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Boston Scientific Corporation revealed the company was trading above its Graham Number of $12.54. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 59.9, which was above the industry average of 42.49. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.79.

Boston Scientific Corporation 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) -$5.79
Graham Number $12.54
PEmg 59.90
Current Ratio 0.82
PB Ratio 5.93
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $4,080,000,000
Total Current Liabilities $4,988,000,000
Long-Term Debt $4,802,000,000
Total Assets $19,202,000,000
Intangible Assets $12,698,000,000
Total Liabilities $12,172,000,000
Shares Outstanding (Diluted Average) 1,396,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.37
Dec2017 $0.08
Dec2016 $0.25
Dec2015 -$0.18
Dec2014 -$0.09
Dec2013 -$0.09
Dec2012 -$2.89
Dec2011 $0.29
Dec2010 -$0.70
Dec2009 -$0.68
Dec2008 -$1.36
Dec2007 -$0.33
Dec2006 -$2.81
Dec2005 $0.75
Dec2004 $1.24
Dec2003 $0.56
Dec2002 $0.45
Dec2001 -$0.07
Dec2000 $0.46
Dec1999 $0.45
Dec1998 -$0.34

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.50
Dec2017 $0.04
Dec2016 -$0.19
Dec2015 -$0.47
Dec2014 -$0.64
Dec2013 -$0.88
Dec2012 -$1.21
Dec2011 -$0.43
Dec2010 -$0.92
Dec2009 -$0.98
Dec2008 -$0.92
Dec2007 -$0.51
Dec2006 -$0.38
Dec2005 $0.75
Dec2004 $0.67
Dec2003 $0.38
Dec2002 $0.26

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Boston Scientific Corporation Annual Stock Valuation – 2014 $BSX

Other ModernGraham posts about related companies

Centene Corp Valuation – May 2018 $CNC
Abbott Laboratories Valuation – May 2018 $ABT
Becton Dickinson and Co Valuation – May 2018 $BDX
IQVIA Holdings Inc Valuation – Initial Coverage May 2018 $IQV
Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
Illumina Inc Valuation – April 2018 $ILMN
Waters Corp Valuation – April 2018 $WAT
Align Technology Inc Valuation – April 2018 $ALGN
HCA Healthcare Inc Valuation – April 2018 $HCA
Express Scripts Holding Co Valuation – April 2018 $ESRX

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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