United Rentals Inc Valuation – April 2019 #URI

Company Profile (excerpt from Reuters): United Rentals, Inc., incorporated on July 20, 1998, is a holding company. The Company is an equipment rental company, which operates throughout the United States and Canada. It operates through two segments: general rentals, and trench, power and pump. The general rentals segment includes the rental of construction, aerial, industrial and homeowner equipment and related services and activities. The trench, power and pump segment includes the rental of specialty construction products and related services. As of October 17, 2018, the Company had an integrated network of 1075 rental locations in North America and 11 in Europe. The Company conducts its operations through its subsidiaries, NES Rentals Holdings II, Inc., United Rentals (North America), Inc. (URNA) and subsidiaries of URNA.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of URI – 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 $9,549,825,287 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.83 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 2565.90% Pass
6. Moderate PEmg Ratio PEmg < 20 8.87 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.90 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.83 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -30.55 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $13.67
MG Growth Estimate 15.00%
MG Value $526.14
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $198.16
MG Value based on 0% Growth $116.16
Market Implied Growth Rate 0.18%
Current Price $121.20
% of Intrinsic Value 23.04%

United Rentals, 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 stability over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.32 in 2015 to an estimated $13.67 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.18% 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 United Rentals, Inc. revealed the company was trading below its Graham Number of $128.67. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 8.87, which was below the industry average of 32.68, 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 $-159.15.

United Rentals, 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) -$159.15
Graham Number $128.67
PEmg 8.87
Current Ratio 0.83
PB Ratio 2.90
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,761,000,000
Total Current Liabilities $2,116,000,000
Long-Term Debt $10,844,000,000
Total Assets $18,133,000,000
Intangible Assets $6,142,000,000
Total Liabilities $14,730,000,000
Shares Outstanding (Diluted Average) 81,487,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.27
Dec2018 $13.12
Dec2017 $15.73
Dec2016 $6.45
Dec2015 $6.07
Dec2014 $5.15
Dec2013 $3.64
Dec2012 $0.79
Dec2011 $1.38
Dec2010 -$0.44
Dec2009 -$1.02
Dec2008 -$12.62
Dec2007 $3.25
Dec2006 $2.06
Dec2005 $1.80
Dec2004 -$0.88
Dec2003 -$3.29
Dec2002 -$4.88
Dec2001 $1.18
Dec2000 $1.89
Dec1999 $1.53

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $13.67
Dec2018 $11.01
Dec2017 $9.11
Dec2016 $5.34
Dec2015 $4.32
Dec2014 $3.00
Dec2013 $1.57
Dec2012 -$0.43
Dec2011 -$1.33
Dec2010 -$2.37
Dec2009 -$2.66
Dec2008 -$2.75
Dec2007 $1.66
Dec2006 $0.23
Dec2005 -$0.86
Dec2004 -$1.86
Dec2003 -$1.81

Recommended Reading:

Other ModernGraham posts about the company

United Rentals Inc Valuation – June 2018 $URI
United Rentals Inc Valuation – September 2017 $URI
United Rentals Inc Valuation – August 2016 $URI
United Rentals Inc. Analysis – Initial Coverage $URI

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Automatic Data Processing Inc Valuation – February 2019 $ADP
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Iron Mountain Inc Valuation – February 2019 $IRM
Cintas Corp Valuation – February 2019 $CTAS

Disclaimer:

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

Fortune Brands Home & Security Inc Valuation – March 2019 #FBHS

Company Profile (excerpt from Reuters): Fortune Brands Home & Security, Inc., incorporated on June 9, 1988, is a holding company. The Company is a home and security products company. The Company operates through four segments: Cabinets, Plumbing, Doors and Security. The Company sells its products through a range of sales channels, including kitchen and bath dealers, wholesalers oriented toward builders or professional remodelers, industrial and locksmith distributors, do-it-yourself remodeling-oriented home centers and other retail outlets. The Company’s subsidiaries include MasterBrand Cabinets, Inc., Moen Incorporated, Fortune Brands Global Plumbing Group LLC, Fortune Brands Doors, Inc. and Fortune Brands Storage & Security LLC.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FBHS – 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 $6,456,820,866 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.13 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 915.73% Pass
6. Moderate PEmg Ratio PEmg < 20 15.79 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.00 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 1.13 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.32 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.91
MG Growth Estimate 15.00%
MG Value $112.04
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $42.20
MG Value based on 0% Growth $24.74
Market Implied Growth Rate 3.64%
Current Price $45.94
% of Intrinsic Value 41.01%

Fortune Brands Home & Security 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 stability over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.24 in 2015 to an estimated $2.91 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.64% 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 above the price.

At the time of valuation, further research into Fortune Brands Home & Security Inc revealed the company was trading above its Graham Number of $34.08. The company pays a dividend of $0.8 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 15.79, which was below the industry average of 24.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.73.

Fortune Brands Home & Security 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) -$14.73
Graham Number $34.08
PEmg 15.79
Current Ratio 1.13
PB Ratio 3.00
Current Dividend $0.80
Dividend Yield 1.74%
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 $1,686,100,000
Total Current Liabilities $1,492,100,000
Long-Term Debt $1,809,000,000
Total Assets $5,964,600,000
Intangible Assets $3,327,100,000
Total Liabilities $3,784,600,000
Shares Outstanding (Diluted Average) 142,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.35
Dec2018 $2.66
Dec2017 $3.03
Dec2016 $2.62
Dec2015 $1.93
Dec2014 $0.95
Dec2013 $1.34
Dec2012 $0.71
Dec2011 -$0.23
Dec2010 $0.41

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.91
Dec2018 $2.54
Dec2017 $2.31
Dec2016 $1.80
Dec2015 $1.24
Dec2014 $0.81
Dec2013 $0.64
Dec2012 $0.26
Dec2011 $0.03
Dec2010 $0.14

Recommended Reading:

Other ModernGraham posts about the company

Fortune Brands Home & Security Inc Valuation – June 2018 $FBHS
6 Best Stocks for Value Investors This Week – 3/11/17
Fortune Brands Home & Security Inc Valuation – Initial Coverage $FBHS

Other ModernGraham posts about related companies

Fortune Brands Home & Security Inc Valuation – June 2018 $FBHS
Tyco International PLC Valuation – November 2015 Update $TYC
ADT Stock Analysis – 2015 Annual Update $ADT
Tyco International Limited Annual Valuation – 2014 $TYC
ADT Corporation 2014 Annual Valuation $ADT

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.

Simpson Manufacturing Co Inc Valuation – August 2018 $SSD

Company Profile (excerpt from Reuters): Simpson Manufacturing Co., Inc., incorporated on February 23, 1999, through its subsidiary, Simpson Strong-Tie Company Inc. (SST), designs, engineers and manufactures wood construction products, including connectors, truss plates, fastening systems, fasteners and pre-fabricated lateral systems used in light-frame construction. The Company’s segments are North America, Europe, Asia/Pacific, and Administrative & All Other. The North America segment includes operations primarily in the United States and Canada. The Europe segment includes operations primarily in France, the United Kingdom, Germany, Denmark, Switzerland, Portugal, Poland, the Netherlands and Belgium. The Asia/Pacific segment includes operations primarily in Australia, New Zealand, South Africa, China, Taiwan, and Vietnam.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SSD – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,375,258,071 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.81 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 257.22% Pass
6. Moderate PEmg Ratio PEmg < 20 34.31 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.76 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 3.81 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.12
MG Growth Estimate 14.95%
MG Value $81.39
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $30.73
MG Value based on 0% Growth $18.01
Market Implied Growth Rate 12.90%
Current Price $72.71
% of Intrinsic Value 89.33%

Simpson Manufacturing Co, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.06 in 2014 to an estimated $2.12 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 12.9% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Simpson Manufacturing Co, Inc. revealed the company was trading above its Graham Number of $35.02. The company pays a dividend of $0.81 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 34.31, which was above the industry average of 24.98. Finally, the company was trading above its Net Current Asset Value (NCAV) of $9.81.

Simpson Manufacturing Co, 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) $9.81
Graham Number $35.02
PEmg 34.31
Current Ratio 3.81
PB Ratio 3.76
Current Dividend $0.81
Dividend Yield 1.11%
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 6/1/2018
Total Current Assets $640,166,000
Total Current Liabilities $167,992,000
Long-Term Debt $0
Total Assets $1,085,887,000
Intangible Assets $163,159,000
Total Liabilities $182,085,000
Shares Outstanding (Diluted Average) 46,677,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.88
Dec2017 $1.94
Dec2016 $1.86
Dec2015 $1.38
Dec2014 $1.29
Dec2013 $1.05
Dec2012 $0.87
Dec2011 $1.04
Dec2010 $0.58
Dec2009 $0.25
Dec2008 $1.10
Dec2007 $1.40
Dec2006 $2.10
Dec2005 $2.02
Dec2004 $1.67
Dec2003 $1.21
Dec2002 $1.05
Dec2001 $0.82
Dec2000 $0.80
Dec1999 $0.79
Dec1998 $0.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.12
Dec2017 $1.66
Dec2016 $1.44
Dec2015 $1.20
Dec2014 $1.06
Dec2013 $0.88
Dec2012 $0.79
Dec2011 $0.79
Dec2010 $0.81
Dec2009 $1.07
Dec2008 $1.54
Dec2007 $1.73
Dec2006 $1.80
Dec2005 $1.55
Dec2004 $1.25
Dec2003 $1.01
Dec2002 $0.88

Recommended Reading:

Other ModernGraham posts about the company

5 Best Stocks for Value Investors This Week – 2/18/17
Simpson Manufacturing Co Valuation – February 2017 $SSD

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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.

United Rentals Inc Valuation – June 2018 $URI

Company Profile (excerpt from Reuters): United Rentals, Inc., incorporated on July 20, 1998, is a holding company. The Company is an equipment rental company, which operates throughout the United States and Canada. It operates through two segments: general rentals, and trench, power and pump. The general rentals segment includes the rental of construction, aerial, industrial and homeowner equipment and related services and activities. The trench, power and pump segment includes the rental of specialty construction products and related services. As of April 3, 2017, the Company had an integrated network of 968 rental locations in 49 states and every Canadian province. The Company conducts its operations through its subsidiaries, NES Rentals Holdings II, Inc., United Rentals (North America), Inc. (URNA) and subsidiaries of URNA.

URI Chart

URI data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of URI – June 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 $12,265,222,524 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.97 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 -44475.00% Fail
6. Moderate PEmg Ratio PEmg < 20 13.33 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.11 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 0.97 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -164.94 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $11.08
MG Growth Estimate 15.00%
MG Value $426.48
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $160.62
MG Value based on 0% Growth $94.16
Market Implied Growth Rate 2.41%
Current Price $147.62
% of Intrinsic Value 34.61%

United Rentals, 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 stability or growth over the last ten years, and the poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3 in 2014 to an estimated $11.08 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.41% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into United Rentals, Inc. revealed the company was trading above its Graham Number of $104.98. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 13.33, which was below the industry average of 34.82, 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 $-117.79.

United Rentals, 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) -$117.79
Graham Number $104.98
PEmg 13.33
Current Ratio 0.97
PB Ratio 4.11
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 $1,590,000,000
Total Current Liabilities $1,641,000,000
Long-Term Debt $8,412,000,000
Total Assets $14,688,000,000
Intangible Assets $4,940,000,000
Total Liabilities $11,630,000,000
Shares Outstanding (Diluted Average) 85,238,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.32
Dec2017 $15.73
Dec2016 $6.45
Dec2015 $6.07
Dec2014 $5.15
Dec2013 $3.64
Dec2012 $0.79
Dec2011 $1.38
Dec2010 -$0.44
Dec2009 -$1.02
Dec2008 -$12.62
Dec2007 $3.25
Dec2006 $2.06
Dec2005 $1.80
Dec2004 -$0.88
Dec2003 -$3.29
Dec2002 -$4.88
Dec2001 $1.18
Dec2000 $1.89
Dec1999 $1.53
Dec1998 $0.18

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $11.08
Dec2017 $9.11
Dec2016 $5.34
Dec2015 $4.32
Dec2014 $3.00
Dec2013 $1.57
Dec2012 -$0.43
Dec2011 -$1.33
Dec2010 -$2.37
Dec2009 -$2.66
Dec2008 -$2.75
Dec2007 $1.66
Dec2006 $0.23
Dec2005 -$0.86
Dec2004 -$1.86
Dec2003 -$1.81
Dec2002 -$0.72

Recommended Reading:

Other ModernGraham posts about the company

United Rentals Inc Valuation – September 2017 $URI
United Rentals Inc Valuation – August 2016 $URI
United Rentals Inc. Analysis – Initial Coverage $URI

Other ModernGraham posts about related companies

Global Payments Inc Valuation – June 2018 $GPN
Verisk Analytics Inc Valuation – June 2018 $VRSK
Robert Half International Inc Valuation – June 2018 $RHI
Alliance Data Systems Corp Valuation – May 2018 $ADS
Whirlpool Corporation Valuation – April 2018 $WHR
IHS Markit Ltd Valuation – Initial Coverage April 2018 $INFO
Automatic Data Processing Inc Valuation – April 2018 $ADP
Accenture PLC Valuation – April 2018 $ACN
Fiserv Inc Valuation – April 2018 $FISV
Iron Mountain Inc Valuation – April 2018 $IRM

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.

Fortune Brands Home & Security Inc Valuation – June 2018 $FBHS

Company Profile (excerpt from Reuters): Fortune Brands Home & Security, Inc., incorporated on June 9, 1988, is a holding company. The Company is a home and security products company. The Company operates through four segments: Cabinets, Plumbing, Doors and Security. The Company sells its products through a range of sales channels, including kitchen and bath dealers, wholesalers oriented toward builders or professional remodelers, industrial and locksmith distributors, do-it-yourself remodeling-oriented home centers and other retail outlets. The Company’s subsidiaries include MasterBrand Cabinets, Inc., Moen Incorporated, Fortune Brands Global Plumbing Group LLC, Fortune Brands Doors, Inc. and Fortune Brands Storage & Security LLC.

FBHS Chart

FBHS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FBHS – June 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 $8,451,843,675 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.44 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 5038.89% Pass
6. Moderate PEmg Ratio PEmg < 20 20.30 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.74 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.44 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.05 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 $2.85
MG Growth Estimate 15.00%
MG Value $109.83
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $41.36
MG Value based on 0% Growth $24.25
Market Implied Growth Rate 5.90%
Current Price $57.92
% of Intrinsic Value 52.74%

Fortune Brands Home & Security 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 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 $0.81 in 2014 to an estimated $2.85 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.9% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Fortune Brands Home & Security Inc revealed the company was trading above its Graham Number of $37.23. The company pays a dividend of $0.72 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 20.3, which was below the industry average of 26.05, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.19.

Fortune Brands Home & Security 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) -$10.19
Graham Number $37.23
PEmg 20.30
Current Ratio 1.44
PB Ratio 3.74
Current Dividend $0.72
Dividend Yield 1.24%
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 3/1/2018
Total Current Assets $1,644,500,000
Total Current Liabilities $1,140,800,000
Long-Term Debt $1,538,000,000
Total Assets $5,552,000,000
Intangible Assets $3,069,900,000
Total Liabilities $3,193,700,000
Shares Outstanding (Diluted Average) 152,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.60
Dec2017 $3.03
Dec2016 $2.62
Dec2015 $1.93
Dec2014 $0.95
Dec2013 $1.34
Dec2012 $0.71
Dec2011 -$0.23
Dec2010 $0.41

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.85
Dec2017 $2.31
Dec2016 $1.80
Dec2015 $1.24
Dec2014 $0.81
Dec2013 $0.64
Dec2012 $0.26
Dec2011 $0.03
Dec2010 $0.14

Recommended Reading:

Other ModernGraham posts about the company

6 Best Stocks for Value Investors This Week – 3/11/17
Fortune Brands Home & Security Inc Valuation – Initial Coverage $FBHS

Other ModernGraham posts about related companies

Tyco International PLC Valuation – November 2015 Update $TYC
ADT Stock Analysis – 2015 Annual Update $ADT
Tyco International Limited Annual Valuation – 2014 $TYC
ADT Corporation 2014 Annual Valuation $ADT

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.

United Rentals Inc Valuation – September 2017 $URI

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

Company Profile (obtained from Google Finance): United Rentals, Inc. is a holding company. The Company is an equipment rental company, which operates throughout the United States and Canada. It operates through two segments: general rentals, and trench, power and pump. The general rentals segment includes the rental of construction, aerial, industrial and homeowner equipment and related services and activities. The trench, power and pump segment includes the rental of specialty construction products and related services. Its general rentals segment includes the rental of general construction and industrial equipment, such as backhoes, skid-steer loaders, forklifts and material handling equipment; aerial work platforms, such as boom lifts and scissor lifts, and general tools and light equipment, such as pressure washers, water pumps and power tools. As of January 1, 2017, it operated 887 rental locations. The Company conducts its operations through its subsidiary, United Rentals (North America), Inc. (URNA) and subsidiaries of URNA.

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ModernGraham Valuation of URI – September 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,242,878,341 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.85 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 -257.53% Fail
6. Moderate PEmg Ratio PEmg < 20 17.10 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.31 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 0.85 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -29.01 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $7.08
MG Growth Estimate 15.00%
MG Value $272.71
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $102.71
MG Value based on 0% Growth $60.21
Market Implied Growth Rate 4.30%
Current Price $121.16
% of Intrinsic Value 44.43%

United Rentals, 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 stability or growth over the last ten years, and the poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends.  As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.57 in 2013 to an estimated $7.08 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.3% 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 above the price.

At the time of valuation, further research into United Rentals, Inc. revealed the company was trading above its Graham Number of $65.22.  The company does not pay a dividend.  Its PEmg (price over earnings per share – ModernGraham) was 17.1, which was below the industry average of 29.87, 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 $-115.36.

United Rentals, 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) -$115.36
Graham Number $65.22
PEmg 17.10
Current Ratio 0.85
PB Ratio 5.31
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $1,483,000,000
Total Current Liabilities $1,744,000,000
Long-Term Debt $7,571,000,000
Total Assets $13,284,000,000
Intangible Assets $4,266,000,000
Total Liabilities $11,336,000,000
Shares Outstanding (Diluted Average) 85,408,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.66
Dec2016 $6.45
Dec2015 $6.07
Dec2014 $5.15
Dec2013 $3.64
Dec2012 $0.79
Dec2011 $1.38
Dec2010 -$0.44
Dec2009 -$1.02
Dec2008 -$12.62
Dec2007 $3.25
Dec2006 $2.06
Dec2005 $1.80
Dec2004 -$0.88
Dec2003 -$3.29
Dec2002 -$4.88
Dec2001 $1.18
Dec2000 $1.89
Dec1999 $1.53
Dec1998 $0.18

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.08
Dec2016 $5.34
Dec2015 $4.32
Dec2014 $3.00
Dec2013 $1.57
Dec2012 -$0.43
Dec2011 -$1.33
Dec2010 -$2.37
Dec2009 -$2.66
Dec2008 -$2.75
Dec2007 $1.66
Dec2006 $0.23
Dec2005 -$0.86
Dec2004 -$1.86
Dec2003 -$1.81
Dec2002 -$0.72
Dec2001 $1.23

Recommended Reading:

Other ModernGraham posts about the company

United Rentals Inc Valuation – August 2016 $URI
United Rentals Inc. Analysis – Initial Coverage $URI

Other ModernGraham posts about related companies

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Multi-Color Corporation Valuation – Initial Coverage $LABL
Kinaxis Inc Valuation – Initial Coverage $TSE:KXS
Korn-Ferry International Valuation – Initial Coverage $KFY
Capella Education Company Valuation – Initial Coverage $CPLA
Kelly Services Inc Valuation – Initial Coverage $KELYA

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.

Fortune Brands Home & Security Inc Valuation – Initial Coverage $FBHS

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

Company Profile (obtained from Google Finance): Fortune Brands Home & Security, Inc. is a holding company. The Company is a home and security products company with a portfolio of branded products used for residential home repair, remodeling, new construction and security applications. The Company operates through four segments: Cabinets, Plumbing, Doors and Security. The Cabinets segment offers stock cabinetry, as well as vanities. The Plumbing segment offers faucets, accessories and kitchen sinks in North America and China. The Company operates Global Plumbing Group (GPG) platform in its plumbing segment, which provides infrastructure to support a multi-brand, channel and geography plumbing business. It offers Moen and Riobel brands under the GPG platform. The Doors segment provides fiberglass and steel entry door systems under the Therma-Tru brand and urethane millwork product lines under the Fypon brand. The Security segment provides a range of security and safety products under Master Lock and SentrySafe brands.

FBHS Chart

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ModernGraham Valuation of FBHS – March 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,094,978,393 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.71 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 1734.15% Pass
6. Moderate PEmg Ratio PEmg < 20 25.63 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.92 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.71 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.38 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 $2.29
MG Growth Estimate 15.00%
MG Value $88.19
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $33.21
MG Value based on 0% Growth $19.47
Market Implied Growth Rate 8.57%
Current Price $58.72
% of Intrinsic Value 66.58%

Fortune Brands Home & Security Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, 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 Undervalued after growing its EPSmg (normalized earnings) from $0.64 in 2013 to an estimated $2.29 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.57% 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 Fortune Brands Home & Security Inc revealed the company was trading above its Graham Number of $31.98. The company pays a dividend of $0.64 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 25.63, which was below the industry average of 28.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-8.38.

Fortune Brands Home & Security Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.38
Graham Number $31.98
PEmg 25.63
Current Ratio 1.71
PB Ratio 3.92
Current Dividend $0.64
Dividend Yield 1.09%
Number of Consecutive Years of Dividend Growth 5

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $1,445,200,000
Total Current Liabilities $842,800,000
Long-Term Debt $1,431,100,000
Total Assets $5,128,500,000
Intangible Assets $2,940,800,000
Total Liabilities $2,767,000,000
Shares Outstanding (Diluted Average) 157,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.97
Dec2016 $2.62
Dec2015 $1.93
Dec2014 $0.95
Dec2013 $1.34
Dec2012 $0.71
Dec2011 -$0.23
Dec2010 $0.41

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.29
Dec2016 $1.80
Dec2015 $1.24
Dec2014 $0.81
Dec2013 $0.64
Dec2012 $0.26
Dec2011 $0.03
Dec2010 $0.14

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

Simpson Manufacturing Co Valuation – February 2017 $SSD

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

Company Profile (obtained from Google Finance): Simpson Manufacturing Co., Inc. through its subsidiary, Simpson Strong-Tie Company Inc. (SST), designs, engineers and manufactures wood construction products, including connectors, truss plates, fastening systems and lateral systems used in light-frame construction. It also offers concrete construction products used for concrete, masonry, steel and for concrete repair, protection and strengthening, including adhesives, chemicals, mechanical anchors, carbide drill bits, powder actuated tools and fiber reinforced materials. It operates in three segments: North America, Europe and Asia/Pacific. The North America segment includes operations in the United States and Canada. The Europe segment includes operations in France, the United Kingdom, Germany, Denmark, Switzerland, Portugal and Poland. The Asia/Pacific segment includes operations in China, Hong Kong, Thailand, Australia, New Zealand, South Africa and the Middle East. Its segments sell both wood and concrete construction products.

SSD Chart

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ModernGraham Valuation of SSD – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,055,537,481 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.38 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 167.36% Pass
6. Moderate PEmg Ratio PEmg < 20 26.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.39 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 5.38 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.65
MG Growth Estimate 13.07%
MG Value $57.28
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $23.98
MG Value based on 0% Growth $14.06
Market Implied Growth Rate 8.87%
Current Price $43.39
% of Intrinsic Value 75.75%

Simpson Manufacturing Co, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PEmg ratio. 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.88 in 2013 to an estimated $1.65 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 8.87% 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 Simpson Manufacturing Co, Inc. revealed the company was trading above its Graham Number of $28.05. The company pays a dividend of $0.7 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 26.23, which was below the industry average of 28.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $9.87.

Simpson Manufacturing Co, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $9.87
Graham Number $28.05
PEmg 26.23
Current Ratio 5.38
PB Ratio 2.39
Current Dividend $0.70
Dividend Yield 1.61%
Number of Consecutive Years of Dividend Growth 4

[/not-level-free]

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $585,247,000
Total Current Liabilities $108,796,000
Long-Term Debt $0
Total Assets $979,974,000
Intangible Assets $124,479,000
Total Liabilities $114,132,000
Shares Outstanding (Diluted Average) 47,754,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.92
Dec2016 $1.86
Dec2015 $1.38
Dec2014 $1.29
Dec2013 $1.05
Dec2012 $0.87
Dec2011 $1.04
Dec2010 $0.58
Dec2009 $0.25
Dec2008 $1.10
Dec2007 $1.40
Dec2006 $2.10
Dec2005 $2.02
Dec2004 $1.67
Dec2003 $1.21
Dec2002 $1.05
Dec2001 $0.82
Dec2000 $0.80
Dec1999 $0.79
Dec1998 $0.65
Dec1997 $0.54

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.65
Dec2016 $1.44
Dec2015 $1.20
Dec2014 $1.06
Dec2013 $0.88
Dec2012 $0.79
Dec2011 $0.79
Dec2010 $0.81
Dec2009 $1.07
Dec2008 $1.54
Dec2007 $1.73
Dec2006 $1.80
Dec2005 $1.55
Dec2004 $1.25
Dec2003 $1.01
Dec2002 $0.88
Dec2001 $0.77

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

United Rentals Inc Valuation – August 2016 $URI

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how United Rentals Inc (URI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): United Rentals, Inc. is a holding company engaged in the business of equipment rental. The Company conducts its operations through its subsidiary, United Rentals (North America), Inc. (URNA) and subsidiaries of URNA. It operates through two segments: general rentals, and trench, power and pump. The general rentals includes the rental of general construction and industrial equipment, such as backhoes, skid-steer loaders, forklifts, earthmoving equipment and material handling equipment; aerial work platforms, such as boom lifts and scissor lifts, general tools and light equipment, such as pressure washers, water pumps and power tools. The trench, power and pump segment includes the rental of specialty construction products and related services. The trench, power and pump segment consists of the Trench Safety region; the Power and heating, ventilating and air conditioning (HVAC) region, and the Pump Solutions region. The Company operates approximately 900 rental locations.

URI Chart

URI data by YCharts

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of URI – August 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $6,898,298,914 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.84 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 -267.47% Fail
6. Moderate PEmg Ratio PEmg < 20 15.48 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.78 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 0.84 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -29.77 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

URI value chart August 2016

EPSmg $5.25
MG Growth Estimate 15.00%
MG Value $202.00
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $76.08
MG Value based on 0% Growth $44.60
Market Implied Growth Rate 3.49%
Current Price $81.21
% of Intrinsic Value 40.20%

United Rentals, 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 stability or growth over the last ten years, the poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.43 in 2012 to an estimated $5.25 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.49% 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 United Rentals, Inc. revealed the company was trading above its Graham Number of $49.07. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 15.48, which was below the industry average of 21.38, 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 $-105.73.

United Rentals, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

URI charts August 2016

Net Current Asset Value (NCAV) -$105.73
Graham Number $49.07
PEmg 15.48
Current Ratio 0.84
PB Ratio 4.78
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $1,264,000,000
Total Current Liabilities $1,508,000,000
Long-Term Debt $7,265,000,000
Total Assets $12,120,000,000
Intangible Assets $4,084,000,000
Total Liabilities $10,618,000,000
Shares Outstanding (Diluted Average) 88,473,000

Earnings Per Share History

Next Fiscal Year Estimate $6.18
Dec2015 $6.07
Dec2014 $5.15
Dec2013 $3.64
Dec2012 $0.79
Dec2011 $1.38
Dec2010 -$0.44
Dec2009 -$1.02
Dec2008 -$12.62
Dec2007 $3.25
Dec2006 $2.06
Dec2005 $1.80
Dec2004 -$0.79
Dec2003 -$3.29
Dec2002 -$4.88
Dec2001 $1.18
Dec2000 $1.89
Dec1999 $1.53
Dec1998 $0.18

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.25
Dec2015 $4.32
Dec2014 $3.00
Dec2013 $1.57
Dec2012 -$0.43
Dec2011 -$1.33
Dec2010 -$2.37
Dec2009 -$2.66
Dec2008 -$2.74
Dec2007 $1.67
Dec2006 $0.24
Dec2005 -$0.84
Dec2004 -$1.83
Dec2003 -$1.81
Dec2002 -$0.72
Dec2001 $1.23
Dec2000 $1.07

Recommended Reading:

Other ModernGraham posts about the company

United Rentals Inc. Analysis – Initial Coverage $URI

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Robert Half International Inc Valuation – August 2016 $RHI
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Pitney Bowes Inc Valuation – July 2016 $PBI
Xerox Corp Valuation – June 2016 $XRX
Avery Dennison Corp Valuation – June 2016 $AVY
Ecolab Inc Valuation – June 2016 $ECL
Paychex Inc Valuation – June 2016 $PAYX
Automatic Data Processing Valuation – May 2016 $ADP

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.

Keurig Green Mountain Inc Valuation – January 2016 Update $GMCR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Keurig Green Mountain Inc (GMCR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Keurig Green Mountain, Inc. is a personal beverage system company. The Company is engaged in producing specialty coffee, coffeemakers, teas and other beverages in the United States and Canada. It operates through two segments: Domestic and Canada. Its Domestic segment includes all operations and immaterial operations related to international expansion in the United States, and the Canada segment includes all Canadian operations. Its products include pods, brewers and accessories, and other products and royalties. Its Domestic segment sells brewers, accessories, and sources, produces and sells coffee, hot cocoa, teas and other beverages in its pods (portion packs), and coffee in other packaging. Its Canada segment sells brewers, accessories, and sources, produces and sells coffee and teas and other beverages in pods. It sells coffee in traditional packaging under various brands to retailers, including supermarkets, restaurants and other markets through its Website.

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of GMCR

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 $13,317,180,014 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.52 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 1234.65% Pass
6. Moderate PEmg Ratio PEmg < 20 27.53 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.11 Fail
Score
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 2.52 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.49 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

GMCR value chart January 2016

EPSmg $3.24
MG Growth Estimate 15.00%
MG Value $124.82
Opinion Undervalued
MG Value based on 3% Growth $47.01
MG Value based on 0% Growth $27.56
Market Implied Growth Rate 9.51%
Current Price $89.25
% of Intrinsic Value 71.50%

Keurig Green Mountain Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short dividend history along with the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.30 in 2012 to an estimated $3.24 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.51% annual earnings loss over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Keurig Green Mountain Inc (GMCR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

GMCR charts January 2016

Net Current Asset Value (NCAV) $1.45
Graham Number $35.96
PEmg 27.53
Current Ratio 2.52
PB Ratio 5.11
Dividend Yield 1.29%
Number of Consecutive Years of Dividend Growth 3

 

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Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information Sep2015
Total Current Assets $1,517,203,000
Total Current Liabilities $602,124,000
Long-Term Debt $447,953,000
Total Assets $4,001,577,000
Intangible Assets $1,171,293,000
Total Liabilities $1,292,219,000
Shares Outstanding (Diluted Average) 155,275,000

Earnings Per Share History

Next Fiscal Year Estimate $3.25
Sep2015 $3.14
Sep2014 $3.74
Sep2013 $3.16
Sep2012 $2.28
Sep2011 $1.31
Sep2010 $0.58
Sep2009 $0.45
Sep2008 $0.19
Sep2007 $0.12
Sep2006 $0.08
Sep2005 $0.09
Sep2004 $0.08
Sep2003 $0.06
Sep2002 $0.06
Sep2001 $0.06
Sep2000 $0.04
Sep1999 $0.03
Sep1998 -$0.01
Sep1997 $0.01
Sep1996 $0.01

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.24
Sep2015 $3.07
Sep2014 $2.76
Sep2013 $2.03
Sep2012 $1.30
Sep2011 $0.71
Sep2010 $0.37
Sep2009 $0.24
Sep2008 $0.13
Sep2007 $0.09
Sep2006 $0.08
Sep2005 $0.07
Sep2004 $0.07
Sep2003 $0.06
Sep2002 $0.05
Sep2001 $0.04
Sep2000 $0.02

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Food Processing Industry – October 2015
5 Undervalued Companies with a Low Beta – August 2015
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – July 2015
The 20 Best Stocks For Value Investors This Week – 7/25/15
5 Undervalued Companies with a Low Beta – July 2015

Other ModernGraham posts about related companies

Monster Beverage Corp Valuation – January 2016 Update $MNST
Mead Johnson Nutrition Co Valuation – November 2015 Update $MJN
Archer Daniels Midland Valuation – November 2015 Update $ADM
The Best Companies of the Food Processing Industry – October 2015
J.M. Smucker Company Valuation – October 2015 Update $SJM
Keurig Green Mountain Inc. Valuation – October 2015 Update $GMCR
Monster Beverage Corporation Analysis – October 2015 Update $MNST
B&G Foods Inc. Analysis – September 2015 Update $BGS
Hormel Foods Corporation Analysis – September 2015 Update $HRL

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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