Johnson & Johnson Valuation – April 2019 #JNJ

Company Profile (excerpt from Reuters): Johnson & Johnson, incorporated on November 10, 1887, is a holding company. The Company and its subsidiaries are engaged in the research and development, manufacture and sale of a range of products in the healthcare field. The Company operates through three segments: Consumer, Pharmaceutical and Medical Devices. The Company’s primary focus is on products related to human health and well-being. The Company’s subsidiaries operated 119 manufacturing facilities, as of January 1, 2017. The Company’s research facilities are located in the United States, Belgium, Brazil, Canada, China, France, Germany, India, Israel, Japan, the Netherlands, Singapore, Switzerland and the United Kingdom. The Company has over 230 operating companies, which conduct business around the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JNJ – 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 $361,737,592,452 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.47 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 20.12% Fail
6. Moderate PEmg Ratio PEmg < 20 24.36 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.20 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 1.47 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.87 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 $5.58
MG Growth Estimate 1.54%
MG Value $64.60
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $80.85
MG Value based on 0% Growth $47.40
Market Implied Growth Rate 7.93%
Current Price $135.83
% of Intrinsic Value 210.26%

 

Johnson & Johnson 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 $5.06 in 2015 to an estimated $5.58 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.93% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Johnson & Johnson revealed the company was trading above its Graham Number of $65.24. The company pays a dividend of $3.54 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.36, which was below the industry average of 45.96, 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 $-17.3.

Johnson & Johnson receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.30
Graham Number $65.24
PEmg 24.36
Current Ratio 1.47
PB Ratio 6.20
Current Dividend $3.54
Dividend Yield 2.61%
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 $46,033,000,000
Total Current Liabilities $31,230,000,000
Long-Term Debt $27,684,000,000
Total Assets $152,954,000,000
Intangible Assets $78,064,000,000
Total Liabilities $93,202,000,000
Shares Outstanding (Diluted Average) 2,726,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.49
Dec2018 $5.61
Dec2017 $0.47
Dec2016 $5.93
Dec2015 $5.48
Dec2014 $5.70
Dec2013 $4.81
Dec2012 $3.86
Dec2011 $3.49
Dec2010 $4.78
Dec2009 $4.40
Dec2008 $4.57
Dec2007 $3.63
Dec2006 $3.73
Dec2005 $3.35
Dec2004 $2.74
Dec2003 $2.29
Dec2002 $2.16
Dec2001 $1.84
Dec2000 $1.61
Dec1999 $1.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.58
Dec2018 $4.29
Dec2017 $3.91
Dec2016 $5.48
Dec2015 $5.06
Dec2014 $4.74
Dec2013 $4.26
Dec2012 $4.06
Dec2011 $4.17
Dec2010 $4.41
Dec2009 $4.13
Dec2008 $3.87
Dec2007 $3.39
Dec2006 $3.13
Dec2005 $2.72
Dec2004 $2.31
Dec2003 $2.01

Recommended Reading:

Other ModernGraham posts about the company

Johnson & Johnson Valuation – November 2018 $JNJ
Johnson & Johnson Valuation – February 2018 $JNJ
4 Best Stocks for Value Investors This Week – 1/28/17
Best Dividend Paying Stocks for Dividend Growth Investors – January 2017
Johnson & Johnson Valuation – January 2017 $JNJ

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Celgene Corp Valuation – March 2019 #CELG
Amgen Inc Valuation – March 2019 #AMGN
AbbVie Inc Valuation – March 2019 #ABBV
Allergan PLC Valuation – February 2019 $AGN
Incyte Corp Valuation – February 2019 $INCY
Regeneron Pharmaceuticals Inc Valuation – February 2019 $REGN
Alexion Pharmaceuticals Inc Valuation – February 2019 $ALXN

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.

Harley-Davidson Inc Valuation – April 2019 #HOG

Company Profile (excerpt from Reuters): Harley-Davidson, Inc., incorporated on March 8, 1991, is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two segments: the Motorcycles & Related Products (Motorcycles) and the Financial Services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HOG – 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 $5,914,027,961 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.25 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 53.65% Pass
6. Moderate PEmg Ratio PEmg < 20 11.78 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.42 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.25 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.51 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 $3.16
MG Growth Estimate -1.28%
MG Value $18.74
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $45.79
MG Value based on 0% Growth $26.84
Market Implied Growth Rate 1.64%
Current Price $37.19
% of Intrinsic Value 198.44%

Harley-Davidson Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, 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 $3.45 in 2015 to an estimated $3.16 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.64% 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 Harley-Davidson Inc revealed the company was trading above its Graham Number of $26.38. The company pays a dividend of $1.48 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 11.78, which was below the industry average of 22.44, 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 $-27.04.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$27.04
Graham Number $26.38
PEmg 11.78
Current Ratio 1.25
PB Ratio 3.42
Current Dividend $1.48
Dividend Yield 3.98%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,484,442,000
Total Current Liabilities $3,597,600,000
Long-Term Debt $4,887,667,000
Total Assets $10,665,664,000
Intangible Assets $61,046,000
Total Liabilities $8,891,715,000
Shares Outstanding (Diluted Average) 162,973,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.84
Dec2018 $3.19
Dec2017 $3.02
Dec2016 $3.83
Dec2015 $3.69
Dec2014 $3.88
Dec2013 $3.28
Dec2012 $2.72
Dec2011 $2.55
Dec2010 $0.62
Dec2009 -$0.24
Dec2008 $2.79
Dec2007 $3.74
Dec2006 $3.93
Dec2005 $3.41
Dec2004 $3.00
Dec2003 $2.50
Dec2002 $1.90
Dec2001 $1.43
Dec2000 $1.13
Dec1999 $0.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.16
Dec2018 $3.39
Dec2017 $3.50
Dec2016 $3.66
Dec2015 $3.45
Dec2014 $3.09
Dec2013 $2.40
Dec2012 $1.86
Dec2011 $1.59
Dec2010 $1.46
Dec2009 $2.16
Dec2008 $3.37
Dec2007 $3.54
Dec2006 $3.28
Dec2005 $2.79
Dec2004 $2.31
Dec2003 $1.83

Recommended Reading:

Other ModernGraham posts about the company

Harley-Davidson Inc Valuation – June 2018 $HOG
Harley-Davidson Inc Valuation – August 2017 $HOG
12 Best Stocks For Value Investors This Week – 7/1/16
Harley-Davidson Inc Valuation – June 2016 $HOG
19 Best Stocks For Value Investors This Week – 1/9/16

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Ford Motor Co Valuation – February 2019 $F
General Motors Co Valuation – February 2019 $GM
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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.

Emerson Electric Co Valuation – April 2019 #EMR

Company Profile (excerpt from Reuters): Emerson Electric Co., incorporated on September 24, 1890, is a diversified global manufacturing company, which provides solutions to customers by bringing technology and engineering together in the industrial, commercial and consumer markets around the world. The Company operates through four segments based on the nature of the products and services rendered: Process Management, Industrial Automation, Climate Technologies and Commercial & Residential Solutions. The Company’s principal production operations are electronics assembly, metal stamping, forming, casting, machining, welding, plating, heat treating, painting and assembly. In addition, the Company uses specialized production operations, including automatic and semiautomatic testing, automated material handling and storage, ferrous and nonferrous machining, and special furnaces for heat treating and foundry applications.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EMR – 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 $42,765,260,725 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.88 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 7.18% Fail
6. Moderate PEmg Ratio PEmg < 20 21.78 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.28 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 0.88 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.99 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.19
MG Growth Estimate -0.32%
MG Value $25.12
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $46.32
MG Value based on 0% Growth $27.15
Market Implied Growth Rate 6.64%
Current Price $69.58
% of Intrinsic Value 277.00%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.26 in 2015 to an estimated $3.19 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.64% 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 Emerson Electric Co. revealed the company was trading above its Graham Number of $33.94. The company pays a dividend of $1.94 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.78, 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 $-8.75.

Emerson Electric Co. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.75
Graham Number $33.94
PEmg 21.78
Current Ratio 0.88
PB Ratio 5.28
Current Dividend $1.94
Dividend Yield 2.79%
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 $6,658,000,000
Total Current Liabilities $7,540,000,000
Long-Term Debt $2,641,000,000
Total Assets $20,429,000,000
Intangible Assets $9,182,000,000
Total Liabilities $12,153,000,000
Shares Outstanding (Diluted Average) 627,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.60
Sep2018 $3.46
Sep2017 $2.35
Sep2016 $2.52
Sep2015 $3.99
Sep2014 $3.03
Sep2013 $2.76
Sep2012 $2.67
Sep2011 $3.27
Sep2010 $2.84
Sep2009 $2.27
Sep2008 $3.06
Sep2007 $2.66
Sep2006 $2.24
Sep2005 $1.70
Sep2004 $1.49
Sep2003 $1.30
Sep2002 $0.15
Sep2001 $1.20
Sep2000 $1.65
Sep1999 $1.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.19
Sep2018 $3.02
Sep2017 $2.84
Sep2016 $3.06
Sep2015 $3.26
Sep2014 $2.91
Sep2013 $2.82
Sep2012 $2.84
Sep2011 $2.89
Sep2010 $2.67
Sep2009 $2.52
Sep2008 $2.50
Sep2007 $2.11
Sep2006 $1.68
Sep2005 $1.32
Sep2004 $1.14
Sep2003 $1.03

Recommended Reading:

Other ModernGraham posts about the company

Emerson Electric Co Valuation – June 2018 $EMR
Emerson Electric Co Valuation – August 2017 $EMR
Emerson Electric Co Valuation – February 2016 $EMR
5 Speculative and Overvalued Companies to Avoid – January 2015
15 Companies in the Spotlight This Week – 12/27/14

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Micron Technology Inc Valuation – March 2019 #MU
Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC
Texas Instruments Inc Valuation – March 2019 #TXN

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.

Tyson Foods Inc Valuation – March 2019 #TSN

Company Profile (excerpt from Reuters): Tyson Foods, Inc., incorporated on January 31, 1986, is a food company, which is engaged in offering chicken, beef and pork, as well as prepared foods. The Company offers food products under Tyson, Jimmy Dean, Hillshire Farm, Sara Lee, Ball Park, Wright, Aidells and State Fair brands. The Company operates through four segments: Chicken, Beef, Pork and Prepared Foods. It operates a vertically integrated chicken production process, which consists of breeding stock, contract growers, feed production, processing, further-processing, marketing and transportation of chicken and related allied products, including animal and pet food ingredients. Through its subsidiary, Cobb-Vantress, Inc. (Cobb), the Company is engaged in supplying poultry breeding stock across the world. It produces a range of fresh, frozen and refrigerated food products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSN – 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 $20,499,693,600 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.85 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 225.35% Pass
6. Moderate PEmg Ratio PEmg < 20 12.02 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.92 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 0.85 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.15 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 $5.78
MG Growth Estimate 15.00%
MG Value $222.38
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $83.75
MG Value based on 0% Growth $49.10
Market Implied Growth Rate 1.76%
Current Price $69.43
% of Intrinsic Value 31.22%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.38 in 2015 to an estimated $5.78 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.76% 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 Tyson Foods, Inc. revealed the company was trading above its Graham Number of $65.79. The company pays a dividend of $1.13 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 12.02, which was below the industry average of 26.89, 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 $-34.9.

Tyson Foods, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$34.90
Graham Number $65.79
PEmg 12.02
Current Ratio 0.85
PB Ratio 1.92
Current Dividend $1.13
Dividend Yield 1.62%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,301,000,000
Total Current Liabilities $7,430,000,000
Long-Term Debt $8,075,000,000
Total Assets $32,335,000,000
Intangible Assets $18,255,000,000
Total Liabilities $19,076,000,000
Shares Outstanding (Diluted Average) 366,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.50
Sep2018 $8.19
Sep2017 $4.79
Sep2016 $4.53
Sep2015 $2.95
Sep2014 $2.37
Sep2013 $2.12
Sep2012 $1.58
Sep2011 $1.97
Sep2010 $2.13
Sep2009 -$1.49
Sep2008 $0.24
Sep2007 $0.75
Sep2006 -$0.58
Sep2005 $1.04
Sep2004 $1.13
Sep2003 $0.96
Sep2002 $1.08
Sep2001 $0.40
Sep2000 $0.67
Sep1999 $1.00

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.78
Sep2018 $5.46
Sep2017 $3.85
Sep2016 $3.16
Sep2015 $2.38
Sep2014 $2.08
Sep2013 $1.71
Sep2012 $1.30
Sep2011 $1.01
Sep2010 $0.42
Sep2009 -$0.29
Sep2008 $0.38
Sep2007 $0.52
Sep2006 $0.51
Sep2005 $1.01
Sep2004 $0.95
Sep2003 $0.84

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for Value Investors with a Low Beta – January 2019
10 Undervalued Stocks for the Enterprising Investor – January 2019
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10 Undervalued Stocks for the Enterprising Investor – August 2018
5 Companies for Enterprising Investors Near 52 Week Lows – July 2018

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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.

Willis Towers Watson PLC Valuation – March 2019 #WLTW

Company Profile (excerpt from Reuters): Willis Towers Watson Public Limited Company (Willis Towers Watson), incorporated on September 24, 2009, is a holding company. The Company operates as a global advisory, broking and solutions company. It is engaged in offering risk management, insurance broking, consulting, technology and solutions, and private exchanges. The Company operates through eight segments: Willis International; Willis North America; Willis Capital, Wholesale & Reinsurance (CWR); Willis GB; Towers Watson Benefits; Towers Watson Exchange Solutions; Towers Watson Risk and Financial Services, and Towers Watson Talent and Rewards.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WLTW – 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 $22,553,439,896 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.07 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 513.26% Pass
6. Moderate PEmg Ratio PEmg < 20 26.81 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.31 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 1.07 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.92 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 $6.52
MG Growth Estimate 12.25%
MG Value $215.04
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $94.50
MG Value based on 0% Growth $55.40
Market Implied Growth Rate 9.15%
Current Price $174.70
% of Intrinsic Value 81.24%

Willis Towers Watson 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 stability over the last ten years, and the high PEmg 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 Fairly Valued after growing its EPSmg (normalized earnings) from $3.59 in 2015 to an estimated $6.52 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 9.15% 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 Willis Towers Watson PLC revealed the company was trading above its Graham Number of $134.56. The company pays a dividend of $2.4 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 26.81, which was above the industry average of 21.22. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-45.41.

Willis Towers Watson 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) -$45.41
Graham Number $134.56
PEmg 26.81
Current Ratio 1.07
PB Ratio 2.31
Current Dividend $2.40
Dividend Yield 1.37%
Number of Consecutive Years of Dividend Growth 2

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $16,420,000,000
Total Current Liabilities $15,301,000,000
Long-Term Debt $4,389,000,000
Total Assets $32,385,000,000
Intangible Assets $13,783,000,000
Total Liabilities $22,414,000,000
Shares Outstanding (Diluted Average) 132,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.53
Dec2018 $5.27
Dec2017 $4.18
Dec2016 $3.04
Dec2015 $5.41
Dec2014 $5.32
Dec2013 $5.37
Dec2012 -$6.83
Dec2011 $3.05
Dec2010 $7.05
Dec2009 $6.86
Dec2008 $5.43
Dec2007 $7.36
Dec2006 $7.52
Dec2005 $4.56
Dec2004 $6.41
Dec2003 $5.75
Dec2002 $3.39
Dec2001 $0.03
Dec2000 $0.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.52
Dec2018 $4.56
Dec2017 $4.35
Dec2016 $3.78
Dec2015 $3.59
Dec2014 $2.71
Dec2013 $1.97
Dec2012 $1.22
Dec2011 $5.48
Dec2010 $6.75
Dec2009 $6.51
Dec2008 $6.31
Dec2007 $6.61
Dec2006 $6.00
Dec2005 $4.83
Dec2004 $4.36
Dec2003 $2.85

Recommended Reading:

Other ModernGraham posts about the company

Willis Towers Watson PLC Valuation – Initial Coverage June 2018 $WLTW

Other ModernGraham posts about related companies

Synchrony Financial Valuation – March 2019 #SYF
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Franklin Resources Inc Valuation – March 2019 #BEN
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CME Group Inc Valuation – March 2019 #CME
Northern Trust Corp Valuation – March 2019 #NTRS
Affiliated Managers Group Inc Valuation – February 2019 $AMG
Bank of New York Mellon Corp Valuation – February 2019 $BK
Western Union Co Valuation – February 2019 $WU

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.

McKesson Corp Valuation – March 2019 #MCK

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MCK – 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 $23,379,630,473 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.02 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 109.07% Pass
6. Moderate PEmg Ratio PEmg < 20 13.60 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 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 1.02 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.51 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.96
MG Growth Estimate 8.57%
MG Value $229.80
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $129.91
MG Value based on 0% Growth $76.15
Market Implied Growth Rate 2.55%
Current Price $121.88
% of Intrinsic Value 53.04%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.7 in 2015 to an estimated $8.96 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.55% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into McKesson Corporation revealed the company was trading above its Graham Number of $92.59. The company pays a dividend of $1.3 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 13.6, 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 $-68.22.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$68.22
Graham Number $92.59
PEmg 13.60
Current Ratio 1.02
PB Ratio 2.53
Current Dividend $1.30
Dividend Yield 1.07%
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 12/1/2018
Total Current Assets $38,319,000,000
Total Current Liabilities $37,424,000,000
Long-Term Debt $7,616,000,000
Total Assets $61,011,000,000
Intangible Assets $14,439,000,000
Total Liabilities $51,622,000,000
Shares Outstanding (Diluted Average) 195,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.85
Mar2018 $0.32
Mar2017 $22.73
Mar2016 $9.70
Mar2015 $6.27
Mar2014 $5.41
Mar2013 $5.59
Mar2012 $5.59
Mar2011 $4.57
Mar2010 $4.62
Mar2009 $2.95
Mar2008 $3.32
Mar2007 $2.99
Mar2006 $2.38
Mar2005 -$0.53
Mar2004 $2.19
Mar2003 $1.88
Mar2002 $1.43
Mar2001 -$0.17
Mar2000 $2.55
Mar1999 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.96
Mar2018 $9.30
Mar2017 $12.51
Mar2016 $7.11
Mar2015 $5.70
Mar2014 $5.33
Mar2013 $5.08
Mar2012 $4.62
Mar2011 $3.99
Mar2010 $3.55
Mar2009 $2.75
Mar2008 $2.46
Mar2007 $1.94
Mar2006 $1.44
Mar2005 $0.96
Mar2004 $1.66
Mar2003 $1.33

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – August 2018
McKesson Corp Valuation – June 2018 $MCK
McKesson Corp Valuation – August 2017 $MCK
McKesson Corp Valuation – July 2016 $MCK
47 Companies in the Spotlight This Week – 5/16/15

Other ModernGraham posts about related companies

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Agilent Technologies Inc Valuation – March 2019 #A
ResMed Inc Valuation – March 2019 #RMD
Cooper Companies Inc Valuation – March 2019 #COO
Edwards Lifesciences Corp Valuation – March 2019 $EW
Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX

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.

Consolidated Edison Inc Valuation – March 2019 #ED

Company Profile (excerpt from Reuters): Consolidated Edison, Inc. (Con Edison), incorporated on September 3, 1997, is a holding company. The Company operates through its subsidiaries, which include Consolidated Edison Company of New York, Inc. (CECONY), Orange and Rockland Utilities, Inc. (O&R), Con Edison Clean Energy Businesses, Inc. (the Clean Energy Businesses) and Con Edison Transmission, Inc. (Con Edison Transmission). CECONY’s principal business operations are its regulated electric, gas and steam delivery businesses. O&R’s principal business operations are its regulated electric and gas delivery businesses. The Clean Energy Businesses develop, own and operate renewable and energy infrastructure projects and provide energy-related products and services to wholesale and retail customers. Con Edison Transmission, through its subsidiaries, invests in electric and gas transmission projects.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ED – 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 $27,410,352,908 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.62 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 22.57% Fail
6. Moderate PEmg Ratio PEmg < 20 19.77 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.60 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 0.62 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.47 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 $4.32
MG Growth Estimate 1.99%
MG Value $53.88
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $62.63
MG Value based on 0% Growth $36.71
Market Implied Growth Rate 5.64%
Current Price $85.40
% of Intrinsic Value 158.49%

Consolidated Edison, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years. 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 $3.81 in 2015 to an estimated $4.32 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.64% 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 Consolidated Edison, Inc. revealed the company was trading above its Graham Number of $69.52. The company pays a dividend of $2.86 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.77, which was below the industry average of 23.71, 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 $-105.15.

Consolidated Edison, 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) -$105.15
Graham Number $69.52
PEmg 19.77
Current Ratio 0.62
PB Ratio 1.60
Current Dividend $2.86
Dividend Yield 3.35%
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 $3,864,000,000
Total Current Liabilities $6,207,000,000
Long-Term Debt $17,495,000,000
Total Assets $53,920,000,000
Intangible Assets $2,094,000,000
Total Liabilities $37,081,000,000
Shares Outstanding (Diluted Average) 315,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.00
Dec2018 $4.42
Dec2017 $4.94
Dec2016 $4.12
Dec2015 $4.05
Dec2014 $3.71
Dec2013 $3.61
Dec2012 $3.86
Dec2011 $3.57
Dec2010 $3.47
Dec2009 $3.14
Dec2008 $4.37
Dec2007 $3.47
Dec2006 $2.95
Dec2005 $2.94
Dec2004 $2.27
Dec2003 $2.38
Dec2002 $3.02
Dec2001 $3.21
Dec2000 $2.74
Dec1999 $3.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.32
Dec2018 $4.40
Dec2017 $4.29
Dec2016 $3.93
Dec2015 $3.81
Dec2014 $3.68
Dec2013 $3.62
Dec2012 $3.64
Dec2011 $3.56
Dec2010 $3.53
Dec2009 $3.50
Dec2008 $3.52
Dec2007 $2.99
Dec2006 $2.74
Dec2005 $2.68
Dec2004 $2.61
Dec2003 $2.81

Recommended Reading:

Other ModernGraham posts about the company

Consolidated Edison Inc Valuation – June 2018 $ED
Consolidated Edison Inc Valuation – February 2017 $ED
Consolidated Edison Inc Valuation – August 2016 $ED
Consolidated Edison Analysis – 2015 Update $ED
21 Companies in the Spotlight This Week – June 14, 2014

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NRG Energy Inc Valuation – January 2019 $NRG
DTE Energy Co Valuation – January 2019 $DTE
AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX

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.

Becton Dickinson and Co Valuation – February 2019 $BDX

Company Profile (excerpt from Reuters): Becton, Dickinson and Company (BD), incorporated in November 1906, is a global medical technology company engaged in the development, manufacture and sale of a range of medical supplies, devices, laboratory equipment and diagnostic products. The Company operates through two segments: BD Medical and BD Life Sciences. It provides customer solutions that are focused on managing medication management and patient safety; supporting infection prevention practices; equipping surgical and interventional procedures; managing drug delivery; aiding anesthesiology care; managing the diagnosis of infectious diseases and cancers; advancing cellular research and applications, and supporting the management of diabetes. The Company caters to markets, such as healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. The Company’s subsidiaries include Accuri Cytometers, Inc., BD Norge AS, CareFusion Canada 307 ULC, Vital Signs Hong Kong Limited and Dantor S.A.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BDX – 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 $66,862,230,050 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.97 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 3.35% Fail
6. Moderate PEmg Ratio PEmg < 20 41.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.18 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.97 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -87.34 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 $5.92
MG Growth Estimate 2.31%
MG Value $77.69
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $85.87
MG Value based on 0% Growth $50.34
Market Implied Growth Rate 16.73%
Current Price $248.50
% of Intrinsic Value 319.88%

Becton Dickinson and Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings 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 $5.13 in 2015 to an estimated $5.92 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.73% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Becton Dickinson and Co revealed the company was trading above its Graham Number of $145.91. The company pays a dividend of $3 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 41.96, 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 $-89.65.

Becton Dickinson and Co receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$89.65
Graham Number $145.91
PEmg 41.96
Current Ratio 0.97
PB Ratio 3.18
Current Dividend $3.00
Dividend Yield 1.21%
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 $6,941,000,000
Total Current Liabilities $7,145,000,000
Long-Term Debt $17,817,000,000
Total Assets $52,932,000,000
Intangible Assets $39,565,000,000
Total Liabilities $31,528,000,000
Shares Outstanding (Diluted Average) 274,256,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.06
Sep2018 $0.60
Sep2017 $4.60
Sep2016 $4.49
Sep2015 $3.35
Sep2014 $5.99
Sep2013 $6.49
Sep2012 $5.59
Sep2011 $5.62
Sep2010 $5.49
Sep2009 $4.99
Sep2008 $4.46
Sep2007 $3.49
Sep2006 $2.93
Sep2005 $2.77
Sep2004 $1.77
Sep2003 $2.07
Sep2002 $1.79
Sep2001 $1.49
Sep2000 $1.49
Sep1999 $1.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.92
Sep2018 $3.17
Sep2017 $4.63
Sep2016 $4.83
Sep2015 $5.13
Sep2014 $5.96
Sep2013 $5.84
Sep2012 $5.42
Sep2011 $5.16
Sep2010 $4.71
Sep2009 $4.13
Sep2008 $3.49
Sep2007 $2.87
Sep2006 $2.46
Sep2005 $2.15
Sep2004 $1.80
Sep2003 $1.73

Recommended Reading:

Other ModernGraham posts about the company

Becton Dickinson and Co Valuation – May 2018 $BDX
5 of the Worst Stocks to Invest In – January 2017
Becton Dickinson and Co Valuation – January 2017 $BDX
Becton Dickinson & Company Analysis – August 2015 Update $BDX
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Align Technology Inc Valuation – February 2019 $ALGN
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AmerisourceBergen Corp Valuation – February 2019 $ABC
Abiomed Inc Valuation – February 2019 $ABMD

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.

C.H. Robinson Worldwide Inc Valuation – February 2019 $CHRW

Company Profile (excerpt from Reuters): C.H. Robinson Worldwide, Inc. (C.H. Robinson), incorporated on August 11, 1997, is a third-party logistics company. The Company provides freight transportation services and logistics solutions to companies of a range of industries. The Company’s segments include North American Surface Transportation (NAST), Global Forwarding, Robinson Fresh, and All Other and Corporate. It operates through a network of offices in North America, Europe, Asia, Australia, New Zealand and South America. The Company also develops global transportation and distribution networks to provide transportation and supply chain services throughout the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CHRW – 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 $12,424,861,523 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.92 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 50.12% Pass
6. Moderate PEmg Ratio PEmg < 20 21.34 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.88 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 1.92 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.02 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.23
MG Growth Estimate 4.99%
MG Value $78.27
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $61.40
MG Value based on 0% Growth $35.99
Market Implied Growth Rate 6.42%
Current Price $90.36
% of Intrinsic Value 115.45%

C.H. Robinson Worldwide 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 PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.18 in 2015 to an estimated $4.23 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.42% 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 C.H. Robinson Worldwide Inc revealed the company was trading above its Graham Number of $34.8. The company pays a dividend of $1.88 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 21.34, which was above the industry average of 18.52. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.57.

C.H. Robinson Worldwide Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.57
Graham Number $34.80
PEmg 21.34
Current Ratio 1.92
PB Ratio 7.88
Current Dividend $1.88
Dividend Yield 2.08%
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 $2,753,074,000
Total Current Liabilities $1,433,323,000
Long-Term Debt $1,341,352,000
Total Assets $4,427,412,000
Intangible Assets $1,446,037,000
Total Liabilities $2,832,325,000
Shares Outstanding (Diluted Average) 139,182,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.64
Dec2018 $4.73
Dec2017 $3.57
Dec2016 $3.59
Dec2015 $3.51
Dec2014 $3.05
Dec2013 $2.65
Dec2012 $3.67
Dec2011 $2.62
Dec2010 $2.33
Dec2009 $2.13
Dec2008 $2.08
Dec2007 $1.86
Dec2006 $1.53
Dec2005 $1.16
Dec2004 $0.79
Dec2003 $0.62
Dec2002 $0.52
Dec2001 $0.47
Dec2000 $0.41
Dec1999 $0.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.23
Dec2018 $3.92
Dec2017 $3.43
Dec2016 $3.34
Dec2015 $3.18
Dec2014 $2.96
Dec2013 $2.84
Dec2012 $2.81
Dec2011 $2.32
Dec2010 $2.11
Dec2009 $1.92
Dec2008 $1.70
Dec2007 $1.41
Dec2006 $1.09
Dec2005 $0.82
Dec2004 $0.62
Dec2003 $0.51

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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.

Johnson Controls International PC Valuation – January 2019 $JCI

Company Profile (excerpt from Reuters): Johnson Controls International plc, formerly Tyco International plc, incorporated on May 9, 2014, is a global diversified technology and multi industrial company. The Company’s segments include Buildings and Power Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JCI – 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 $30,244,450,646 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.05 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 0.53% Fail
6. Moderate PEmg Ratio PEmg < 20 21.66 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.36 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 1.05 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 16.85 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.51
MG Growth Estimate -3.52%
MG Value $2.20
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $21.91
MG Value based on 0% Growth $12.85
Market Implied Growth Rate 6.58%
Current Price $32.73
% of Intrinsic Value 1490.37%

Johnson Controls International 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 stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.98 in 2015 to an estimated $1.51 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.58% 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 Johnson Controls International PLC revealed the company was trading above its Graham Number of $29.58. The company pays a dividend of $1.04 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.66, which was above the industry average of 18.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.6.

Johnson Controls International 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) -$15.60
Graham Number $29.58
PEmg 21.66
Current Ratio 1.05
PB Ratio 1.36
Current Dividend $1.04
Dividend Yield 3.18%
Number of Consecutive Years of Dividend Growth 1

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $11,823,000,000
Total Current Liabilities $11,250,000,000
Long-Term Debt $9,654,000,000
Total Assets $48,797,000,000
Intangible Assets $25,821,000,000
Total Liabilities $26,339,000,000
Shares Outstanding (Diluted Average) 930,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.70
Sep2018 $2.32
Sep2017 $1.71
Sep2016 -$1.30
Sep2015 $2.36
Sep2014 $1.80
Sep2013 $1.71
Sep2012 $1.72
Sep2011 $2.06
Sep2010 $1.92
Sep2009 -$0.57
Sep2008 $1.63
Sep2007 $2.09
Sep2006 $1.74
Sep2005 $1.56
Sep2004 $1.41
Sep2003 $1.20
Sep2002 $1.06
Sep2001 $0.85
Sep2000 $0.85
Sep1999 $0.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.51
Sep2018 $1.40
Sep2017 $1.05
Sep2016 $0.90
Sep2015 $1.98
Sep2014 $1.80
Sep2013 $1.66
Sep2012 $1.54
Sep2011 $1.44
Sep2010 $1.21
Sep2009 $1.00
Sep2008 $1.75
Sep2007 $1.74
Sep2006 $1.51
Sep2005 $1.33
Sep2004 $1.17
Sep2003 $1.02

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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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