//www.

Westrock Co Valuation – February 2019 $WRK

Company Profile (excerpt from Reuters): WestRock Company, incorporated on March 6, 2015, is a multinational provider of paper and packaging solutions for consumer and corrugated packaging markets. The Company also develops real estate in the Charleston, South Carolina region. The Company’s segments include Corrugated Packaging, Consumer Packaging, and Land and Development. The Corrugated Packaging segment consists of its containerboard mill and corrugated packaging operations, as well as its recycling operations. The Consumer Packaging segment consists of consumer mills, folding carton, beverage, merchandising displays, and partition operations. The Land and Development segment is engaged in the development and sale of real estate primarily in Charleston, South Carolina.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WRK – 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 $10,296,639,282 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.40 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 128.38% Pass
6. Moderate PEmg Ratio PEmg < 20 11.01 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.90 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.40 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.50 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.66
MG Growth Estimate 2.32%
MG Value $48.11
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $53.10
MG Value based on 0% Growth $31.13
Market Implied Growth Rate 1.26%
Current Price $40.32
% of Intrinsic Value 83.81%

Westrock 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 stability over the last ten years. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years. 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 $3.17 in 2015 to an estimated $3.66 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 1.26% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Westrock Co revealed the company was trading below its Graham Number of $59.42. The company pays a dividend of $1.72 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.01, which was below the industry average of 17.32, 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 $-53.28.

Westrock 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) -$53.28
Graham Number $59.42
PEmg 11.01
Current Ratio 1.40
PB Ratio 0.90
Current Dividend $1.72
Dividend Yield 4.27%
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 $5,226,000,000
Total Current Liabilities $3,729,900,000
Long-Term Debt $9,728,000,000
Total Assets $30,666,900,000
Intangible Assets $11,672,300,000
Total Liabilities $19,051,400,000
Shares Outstanding (Diluted Average) 259,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.49
Sep2018 $7.34
Sep2017 $2.77
Sep2016 -$1.56
Sep2015 $2.93
Sep2014 $3.29
Sep2013 $4.98
Sep2012 $1.72
Sep2011 $1.39
Sep2010 $2.85
Sep2009 $2.86
Sep2008 $1.07
Sep2007 $1.04
Sep2006 $0.39
Sep2005 $0.25
Sep2004 $0.25
Sep2003 $0.42
Sep2002 $0.39
Sep2001 $0.46
Sep2000 -$0.23
Sep1999 $0.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.66
Sep2018 $3.48
Sep2017 $1.86
Sep2016 $1.70
Sep2015 $3.17
Sep2014 $3.14
Sep2013 $2.97
Sep2012 $1.96
Sep2011 $2.00
Sep2010 $2.09
Sep2009 $1.51
Sep2008 $0.76
Sep2007 $0.56
Sep2006 $0.33
Sep2005 $0.31
Sep2004 $0.32
Sep2003 $0.34

Recommended Reading:

Other ModernGraham posts about the company

10 Most Overvalued Stocks of the S&P 500 – July 2018
WestRock Co Valuation – April 2018 $WRK
WestRock Co Valuation – December 2016 $WRK
10 Best Dividend Paying Stocks for the Defensive Investor – August 2016
14 Best Undervalued Stocks of the Week – 8/6/16

Other ModernGraham posts about related companies

Packaging Corp of America Valuation – January 2019 $PKG
Schweitzer-Mauduit International Inc Valuation – September 2018 $SWM
KapStone Paper and Packaging Corp Valuation – August 2018 $KS
Sonoco Products Co Valuation – August 2018 $SON
Silgan Holdings Inc Valuation – August 2018 $SLGN
Clearwater Paper Corp Valuation – July 2018 $CLW
Intertape Polymer Group Valuation – July 2018 $TSE-ITP
Bemis Co Inc Valuation – June 2018 $BMS
Owens-Illinois Inc Valuation – June 2018 $OI
International Paper Co Valuation – June 2018 $IP

Disclaimer:

The author held a long position in WRK but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  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.

WestRock Co Valuation – April 2018 $WRK

Company Profile (excerpt from Reuters): WestRock Company, incorporated on March 6, 2015, is a multinational provider of paper and packaging solutions for consumer and corrugated packaging markets. The Company also develops real estate in the Charleston, South Carolina region. The Company’s segments include Corrugated Packaging, Consumer Packaging, and Land and Development. The Corrugated Packaging segment consists of its containerboard mill and corrugated packaging operations, as well as its recycling operations. The Consumer Packaging segment consists of consumer mills, folding carton, beverage, merchandising displays, and partition operations. The Land and Development segment is engaged in the development and sale of real estate primarily in Charleston, South Carolina.

WRK Chart

WRK data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WRK – April 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 $16,932,793,429 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.28 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 -30.47% Fail
6. Moderate PEmg Ratio PEmg < 20 29.15 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.52 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 1.28 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.49 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 $2.28
MG Growth Estimate -4.14%
MG Value $0.52
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $33.01
MG Value based on 0% Growth $19.35
Market Implied Growth Rate 10.33%
Current Price $66.37
% of Intrinsic Value 12756.65%

WestRock 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 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 $3.14 in 2014 to an estimated $2.28 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.33% 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 WestRock Co revealed the company was trading above its Graham Number of $58.32. The company pays a dividend of $1.6 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 29.15, which was above the industry average of 24.07. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-35.95.

WestRock Co 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) -$35.95
Graham Number $58.32
PEmg 29.15
Current Ratio 1.28
PB Ratio 1.52
Current Dividend $1.60
Dividend Yield 2.41%
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 12/1/2017
Total Current Assets $4,465,200,000
Total Current Liabilities $3,487,300,000
Long-Term Debt $5,365,800,000
Total Assets $25,136,900,000
Intangible Assets $8,793,400,000
Total Liabilities $13,783,500,000
Shares Outstanding (Diluted Average) 259,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.72
Sep2017 $2.77
Sep2016 -$1.56
Sep2015 $2.93
Sep2014 $3.29
Sep2013 $4.98
Sep2012 $1.72
Sep2011 $1.39
Sep2010 $2.85
Sep2009 $2.86
Sep2008 $1.07
Sep2007 $1.04
Sep2006 $0.39
Sep2005 $0.25
Sep2004 $0.25
Sep2003 $0.42
Sep2002 $0.39
Sep2001 $0.46
Sep2000 -$0.23
Sep1999 $0.57
Sep1998 $0.60

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.28
Sep2017 $1.86
Sep2016 $1.70
Sep2015 $3.17
Sep2014 $3.14
Sep2013 $2.97
Sep2012 $1.96
Sep2011 $2.00
Sep2010 $2.09
Sep2009 $1.51
Sep2008 $0.76
Sep2007 $0.56
Sep2006 $0.33
Sep2005 $0.31
Sep2004 $0.32
Sep2003 $0.34
Sep2002 $0.32

Recommended Reading:

Other ModernGraham posts about the company

WestRock Co Valuation – December 2016 $WRK
10 Best Dividend Paying Stocks for the Defensive Investor – August 2016
14 Best Undervalued Stocks of the Week – 8/6/16
WestRock Co Valuation – August 2016 $WRK
10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2016

Other ModernGraham posts about related companies

Packaging Corp of America Valuation – Initial Coverage $PKG
AptarGroup Inc Valuation – Initial Coverage $ATR
Tredegar Corp Valuation – Initial Coverage $TG
International Paper Co Valuation – March 2017 $IP
Schweitzer-Mauduit International Inc Valuation – Initial Coverage $SWM
KapStone Paper and Packaging Corp Valuation – Initial Coverage $KS
Sonoco Products Co Valuation – Initial Coverage $SON
Silgan Holdings Inc Valuation – Initial Coverage $SLGN
Clearwater Paper Corp Valuation – Initial Coverage $CLW
Intertape Polymer Group Valuation – Initial Coverage $TSE:ITP

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.

WestRock Co Valuation – December 2016 $WRK

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 WestRock Co (WRK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Westrock Company is a provider of packaging solutions and manufactures containerboard and paperboard. The Company’s operating segments include Corrugated Packaging, Consumer Packaging, Specialty Chemicals, and Land and Development. The Company operates in North America, South America, Europe and Asia. It also operates a specialty chemicals business and develops real estate in Charleston, South Carolina. The Company’s corrugated packaging system manufactures containerboard, corrugated sheets, corrugated packaging and preprinted linerboard for sale to consumer and industrial products manufacturers and corrugated box manufacturers. It operates virgin and recycled fiber paperboard mills and consumer packaging converting operations, which convert items, such as folding and beverage cartons, displays, dispensing and interior partitions. The Company manufactures, markets and distributes specialty chemicals derived from sawdust and other byproducts of the papermaking process.

WRK Chart

WRK 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-wrk-december-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 $12,959,627,469 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.79 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 -41.40% Fail
6. Moderate PEmg Ratio PEmg < 20 28.53 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.37 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 1.79 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.18 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

wrk-value-chart-december-2016

EPSmg $1.81
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $26.19
MG Value based on 0% Growth $15.35
Market Implied Growth Rate 10.01%
Current Price $51.52
% of Intrinsic Value N/A

WestRock 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 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 net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.97 in 2013 to an estimated $1.81 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.01% 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 WestRock Co revealed the company was trading above its Graham Number of $47.43. The company pays a dividend of $1.5 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 28.53, which was below the industry average of 53.08, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-36.44.

WestRock Co scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

wrk-charts-december-2016

Net Current Asset Value (NCAV) -$36.44
Graham Number $47.43
PEmg 28.53
Current Ratio 1.79
PB Ratio 1.37
Current Dividend $1.50
Dividend Yield 2.91%
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 9/1/2016
Total Current Assets $3,912,600,000
Total Current Liabilities $2,183,000,000
Long-Term Debt $5,496,300,000
Total Assets $23,038,200,000
Intangible Assets $7,377,400,000
Total Liabilities $13,309,400,000
Shares Outstanding (Diluted Average) 257,900,000

Earnings Per Share History

Next Fiscal Year Estimate $2.58
Sep2016 -$1.54
Sep2015 $2.93
Sep2014 $3.29
Sep2013 $4.98
Sep2012 $1.72
Sep2011 $1.39
Sep2010 $2.85
Sep2009 $2.86
Sep2008 $1.07
Sep2007 $1.04
Sep2006 $0.39
Sep2005 $0.25
Sep2004 $0.25
Sep2003 $0.43
Sep2002 $0.39
Sep2001 $0.46
Sep2000 -$0.23
Sep1999 $0.57
Sep1998 $0.60
Sep1997 $0.24

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.81
Sep2016 $1.70
Sep2015 $3.17
Sep2014 $3.14
Sep2013 $2.97
Sep2012 $1.96
Sep2011 $2.00
Sep2010 $2.09
Sep2009 $1.51
Sep2008 $0.76
Sep2007 $0.56
Sep2006 $0.33
Sep2005 $0.32
Sep2004 $0.32
Sep2003 $0.34
Sep2002 $0.32
Sep2001 $0.30

Recommended Reading:

Other ModernGraham posts about the company

WestRock Co Valuation – August 2016 $WRK
10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2016
Stocks Trading Below Their Graham Number – June 2016
10 Most Undervalued Companies for the Defensive Investor – June 2016

Other ModernGraham posts about related companies

WestRock Co Valuation – August 2016 $WRK
Bemis Company Inc Valuation – July 2016 $BMS
Owens-Illinois Inc Valuation – June 2016 $OI
Bemis Co Inc Valuation – January 2016 Update $BMS
WestRock Co Valuation – January 2016 Update $WRK
International Paper Co Valuation – December 2015 Update $IP
Bemis Company Inc. Analysis – September 2015 Update $BMS
WestRock Co. Analysis – Initial Coverage $WRK
International Paper Company Analysis – September 2015 Update $IP
Ball Corporation Analysis – 2015 Update $BLL

Disclaimer:

The author held a long position in WestRock Co but 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.

WestRock Co Valuation – August 2016 $WRK

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today - July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how WestRock Co (WRK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Westrock Company is a provider of packaging solutions and manufactures containerboard and paperboard. The Company’s operating segments include Corrugated Packaging, Consumer Packaging, Specialty Chemicals, and Land and Development. The Company operates in North America, South America, Europe and Asia. It also operates a specialty chemicals business and develops real estate in Charleston, South Carolina. The Company’s corrugated packaging system manufactures containerboard, corrugated sheets, corrugated packaging and preprinted linerboard for sale to consumer and industrial products manufacturers and corrugated box manufacturers. It operates virgin and recycled fiber paperboard mills and consumer packaging converting operations, which convert items, such as folding and beverage cartons, displays, dispensing and interior partitions. The Company manufactures, markets and distributes specialty chemicals derived from sawdust and other byproducts of the papermaking process.

[level-free]
WRK Chart

WRK data by YCharts

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of WRK – 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 $11,297,233,407 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.74 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 73.49% Pass
6. Moderate PEmg Ratio PEmg < 20 14.46 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.03 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 1.74 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.10 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

WRK value chart August 2016

EPSmg $3.02
MG Growth Estimate 8.04%
MG Value $74.34
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $43.85
MG Value based on 0% Growth $25.71
Market Implied Growth Rate 2.98%
Current Price $43.72
% of Intrinsic Value 58.81%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.97 in 2012 to an estimated $3.02 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.98% 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 WestRock Co revealed the company was trading below its Graham Number of $48.57. The company pays a dividend of $1.45 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 14.46, which was below the industry average of 53.08, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-38.4.

WestRock Co fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

WRK charts August 2016

Net Current Asset Value (NCAV) -$38.40
Graham Number $48.57
PEmg 14.46
Current Ratio 1.74
PB Ratio 1.03
Current Dividend $1.45
Dividend Yield 3.31%
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 3/1/2016
Total Current Assets $4,449,200,000
Total Current Liabilities $2,557,100,000
Long-Term Debt $5,858,300,000
Total Assets $25,268,400,000
Intangible Assets $8,659,600,000
Total Liabilities $14,333,000,000
Shares Outstanding (Diluted Average) 257,400,000

Earnings Per Share History

Next Fiscal Year Estimate $2.42
Sep2015 $2.93
Sep2014 $3.29
Sep2013 $4.98
Sep2012 $1.73
Sep2011 $1.39
Sep2010 $2.85
Sep2009 $2.88
Sep2008 $1.07
Sep2007 $1.04
Sep2006 $0.39
Sep2005 $0.25
Sep2004 $0.25
Sep2003 $0.43
Sep2002 $0.39
Sep2001 $0.46
Sep2000 -$0.23
Sep1999 $0.57
Sep1998 $0.60
Sep1997 $0.24
Sep1996 $0.75

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.02
Sep2015 $3.17
Sep2014 $3.14
Sep2013 $2.97
Sep2012 $1.97
Sep2011 $2.01
Sep2010 $2.09
Sep2009 $1.52
Sep2008 $0.76
Sep2007 $0.56
Sep2006 $0.33
Sep2005 $0.32
Sep2004 $0.32
Sep2003 $0.34
Sep2002 $0.32
Sep2001 $0.30
Sep2000 $0.28

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2016
Stocks Trading Below Their Graham Number – June 2016
10 Most Undervalued Companies for the Defensive Investor – June 2016
10 Low PE Stocks for the Defensive Investor – May 2016

Other ModernGraham posts about related companies

Bemis Company Inc Valuation – July 2016 $BMS
Owens-Illinois Inc Valuation – June 2016 $OI
Bemis Co Inc Valuation – January 2016 Update $BMS
WestRock Co Valuation – January 2016 Update $WRK
WestRock Co Valuation – January 2016 Update $WRK
International Paper Co Valuation – December 2015 Update $IP
Bemis Company Inc. Analysis – September 2015 Update $BMS
WestRock Co. Analysis – Initial Coverage $WRK
International Paper Company Analysis – September 2015 Update $IP
Ball Corporation Analysis – 2015 Update $BLL

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.

WestRock Co Valuation – January 2016 Update $WRK

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 WestRock Co (WRK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): WestRock Company, formerly Rome-Milan Holdings, Inc., is a packaging company. The Company provides paper and packaging solutions in consumer and corrugated markets. The Company includes customers across the world from around 275 operating and business locations spanning North America, South America, Europe and Asia-Pacific. The Company’s products and services include consumer packaging, corrugated packaging, merchandising displays, containerboard, kraft paper, pulp, paperboard, recycling and waste solutions, and specialty paperboard. The Company’s consumer packaging includes the manufacturing of folding cartons and production of coated paperboard and serves markets, such as printing and converting, solid bleached sulfate and coated recycled board. Its corrugated packaging is engaged in the manufacturing of containerboard, containers, pre-print and microflute packaging, retail displays and automated packaging systems. Rock-Tenn Company is a subsidiary of WestRock Co.

[level-free]

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

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

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

Downloadable PDF version of this valuation:

ModernGraham Valuation of WRK

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 $8,253,958,468 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 89.52% Pass
6. Moderate PEmg Ratio PEmg < 20 9.79 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.73 Pass
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 1.92 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.78 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

WRK value chart January 2016

EPSmg $3.28
MG Growth Estimate 10.01%
MG Value $93.49
Opinion Undervalued
MG Value based on 3% Growth $47.54
MG Value based on 0% Growth $27.87
Market Implied Growth Rate 0.64%
Current Price $32.08
% of Intrinsic Value 34.31%

WestRock Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor’s only initial concern is the level of debt relative to the net current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.97 in 2012 to an estimated $3.28 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.64% annual earnings growth 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 WestRock Co (WRK)?  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

WRK charts January 2016

Net Current Asset Value (NCAV) -$36.00
Graham Number $56.96
PEmg 9.79
Current Ratio 1.92
PB Ratio 0.73
Dividend Yield 3.34%
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 Sep2015
Total Current Assets $4,160,400,000
Total Current Liabilities $2,163,200,000
Long-Term Debt $5,558,300,000
Total Assets $25,356,800,000
Intangible Assets $9,246,700,000
Total Liabilities $13,705,000,000
Shares Outstanding (Diluted Average) 265,100,000

Earnings Per Share History

Next Fiscal Year Estimate $3.18
Sep2015 $2.93
Sep2014 $3.29
Sep2013 $4.98
Sep2012 $1.73
Sep2011 $1.39
Sep2010 $2.85
Sep2009 $2.86
Sep2008 $1.07
Sep2007 $1.04
Sep2006 $0.39
Sep2005 $0.25
Sep2004 $0.25
Sep2003 $0.42
Sep2002 $0.39
Sep2001 $0.46
Sep2000 -$0.23
Sep1999 $0.57
Sep1998 $0.60
Sep1997 $0.24
Sep1996 $0.75

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.28
Sep2015 $3.17
Sep2014 $3.14
Sep2013 $2.97
Sep2012 $1.97
Sep2011 $2.00
Sep2010 $2.09
Sep2009 $1.51
Sep2008 $0.76
Sep2007 $0.56
Sep2006 $0.33
Sep2005 $0.31
Sep2004 $0.32
Sep2003 $0.34
Sep2002 $0.32
Sep2001 $0.30
Sep2000 $0.28

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – December 2015
5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – November 2015
10 Undervalued Companies for the Defensive Dividend Stock Investor – November 2015
15 Best Stocks For Value Investors This Week – 9/4/15
WestRock Co. Analysis – Initial Coverage $WRK

Other ModernGraham posts about related companies

International Paper Co Valuation – December 2015 Update $IP
Bemis Company Inc. Analysis – September 2015 Update $BMS
WestRock Co. Analysis – Initial Coverage $WRK
International Paper Company Analysis – September 2015 Update $IP
Ball Corporation Analysis – 2015 Update $BLL
Bemis Company Analysis – June 2015 Update $BMS
MeadWestvaco Corporation Analysis – June 2015 Quarterly Update $MWV
International Paper Stock Analysis – May 2015 Quarterly Update $IP
Sealed Air Corporation Annual Valuation – 2015 $SEE
Bemis Company Inc. Quarterly Valuation – March 2015 $BMS

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.

WestRock Co. Analysis – Initial Coverage $WRK

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 – August 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 WestRock Co. (WRK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): WestRock Company, formerly Rome-Milan Holdings, Inc., is a packaging company. The Company provides paper and packaging solutions in consumer and corrugated markets. The Company includes customers across the world from around 275 operating and business locations spanning North America, South America, Europe and Asia-Pacific. The Company’s products and services include consumer packaging, corrugated packaging, merchandising displays, containerboard, kraft paper, pulp, paperboard, recycling and waste solutions, and specialty paperboard. The Company’s consumer packaging includes the manufacturing of folding cartons and production of coated paperboard and serves markets, such as printing and converting, solid bleached sulfate and coated recycled board. Its corrugated packaging is engaged in the manufacturing of containerboard, containers, pre-print and microflute packaging, retail displays and automated packaging systems. Rock-Tenn Company is a subsidiary of WestRock Co.

[level-free]

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

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

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of WRK – September 2015

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 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 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 Pass
6. Moderate PEmg Ratio PEmg < 20 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Pass
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 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.24
MG Growth Estimate 9.22%
MG Value $87.14
Opinion Undervalued
MG Value based on 3% Growth $46.92
MG Value based on 0% Growth $27.50
Market Implied Growth Rate 4.89%
Current Price $59.15
% of Intrinsic Value 67.88%

WestRock Company qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is only concerned with the low current ratio while the Enterprising Investor’s only concern is the level of debt relative to the net current assets.  As a result, all value 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 $2.00 in 2011 to an estimated $3.24 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.89% annual earnings growth 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 WestRock Co. (WRK)?  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

WRK Charts September 2015

Net Current Asset Value (NCAV) -$27.85
Graham Number $47.34
PEmg 18.28
Current Ratio 1.75
PB Ratio 1.85
Dividend Yield 1.47%
Number of Consecutive Years of Dividend Growth 3

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

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

Most Recent Balance Sheet Figures

Total Current Assets $2,304,800,000
Total Current Liabilities $1,316,300,000
Long-Term Debt $2,514,500,000
Total Assets $10,835,700,000
Intangible Assets $2,541,400,000
Total Liabilities $6,279,600,000
Shares Outstanding (Diluted Average) 142,700,000

Earnings Per Share History

Next Fiscal Year Estimate $3.12
Sep14 $3.29
Sep13 $4.98
Sep12 $1.73
Sep11 $1.39
Sep10 $2.85
Sep09 $2.86
Sep08 $1.07
Sep07 $1.04
Sep06 $0.39
Sep05 $0.25
Sep04 $0.25
Sep03 $0.42
Sep02 $0.39
Sep01 $0.46
Sep00 -$0.23
Sep99 $0.57
Sep98 $0.60
Sep97 $0.24
Sep96 $0.75
Sep95 $0.61

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.24
Sep14 $3.14
Sep13 $2.97
Sep12 $1.97
Sep11 $2.00
Sep10 $2.09
Sep09 $1.51
Sep08 $0.76
Sep07 $0.56
Sep06 $0.33
Sep05 $0.31
Sep04 $0.32
Sep03 $0.34
Sep02 $0.32
Sep01 $0.30
Sep00 $0.28
Sep99 $0.54

Recommended Reading:

Other ModernGraham posts about the company

None

Other ModernGraham posts about related companies

International Paper Company Analysis – September 2015 Update $IP
Ball Corporation Analysis – 2015 Update $BLL
Bemis Company Analysis – June 2015 Update $BMS
MeadWestvaco Corporation Analysis – June 2015 Quarterly Update $MWV
International Paper Stock Analysis – May 2015 Quarterly Update $IP
Sealed Air Corporation Annual Valuation – 2015 $SEE
Bemis Company Inc. Quarterly Valuation – March 2015 $BMS
MeadWestvaco Corporation Quarterly Valuation – February 2015 $MWV
Owens-Illinois Inc. Annual Valuation – 2015 $OI
International Paper Company Quarterly Valuation – January 2015 $IP

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.

International Paper Co Valuation – March 2019 #IP

Company Profile (excerpt from Reuters): International Paper Company, incorporated on June 23, 1941, is a paper and packaging company with primary markets and manufacturing operations in North America, Europe, Latin America, Russia, Asia, Africa and the Middle East. The Company’s segments include Industrial Packaging, Global Cellulose Fibers, Printing Papers and Consumer Packaging. As of December 31, 2016, the Company operated 29 pulp, paper and packaging mills, 170 converting and packaging plants, 16 recycling plants and three bag facilities in the United States. As of December 31, 2016, the production facilities in Canada, Europe, Asia, Africa, India, Latin America included 17 pulp, paper and packaging mills, 68 converting and packaging plants, and two recycling plants. As of December 31, 2016, the Company operated a printing and packaging products distribution business principally through 12 branches in Asia. The Company sells packaging products, paper products and other products directly to end users and converters, as well as through agents, resellers and paper distributors.

IP Chart

IP data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IP – 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 $17,950,583,989 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.49 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 129.44% Pass
6. Moderate PEmg Ratio PEmg < 20 10.33 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.48 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 1.49 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.35 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 $4.34
MG Growth Estimate 15.00%
MG Value $167.17
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $62.96
MG Value based on 0% Growth $36.91
Market Implied Growth Rate 0.91%
Current Price $44.85
% of Intrinsic Value 26.83%

International Paper Co 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 $2.15 in 2015 to an estimated $4.34 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.91% 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 International Paper Co revealed the company was trading above its Graham Number of $44.07. The company pays a dividend of $1.93 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.33, which was below the industry average of 17, 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 $-47.06.

International Paper Co performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$47.06
Graham Number $44.07
PEmg 10.33
Current Ratio 1.49
PB Ratio 2.48
Current Dividend $1.93
Dividend Yield 4.29%
Number of Consecutive Years of Dividend Growth 9

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,996,000,000
Total Current Liabilities $4,694,000,000
Long-Term Debt $10,015,000,000
Total Assets $33,576,000,000
Intangible Assets $3,374,000,000
Total Liabilities $26,193,000,000
Shares Outstanding (Diluted Average) 407,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.75
Dec2018 $4.85
Dec2017 $5.13
Dec2016 $2.18
Dec2015 $2.23
Dec2014 $1.29
Dec2013 $3.11
Dec2012 $1.80
Dec2011 $3.03
Dec2010 $1.59
Dec2009 $1.55
Dec2008 -$3.05
Dec2007 $2.70
Dec2006 $2.18
Dec2005 $2.21
Dec2004 -$0.07
Dec2003 $0.63
Dec2002 -$1.83
Dec2001 -$2.50
Dec2000 $0.32
Dec1999 $0.44

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.34
Dec2018 $3.80
Dec2017 $3.12
Dec2016 $2.11
Dec2015 $2.15
Dec2014 $2.13
Dec2013 $2.44
Dec2012 $1.73
Dec2011 $1.52
Dec2010 $0.84
Dec2009 $0.68
Dec2008 $0.43
Dec2007 $1.96
Dec2006 $1.26
Dec2005 $0.43
Dec2004 -$0.53
Dec2003 -$0.71

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2019
10 Undervalued Companies for the Defensive Dividend Stock Investor – July 2018
International Paper Co Valuation – June 2018 $IP
International Paper Co Valuation – March 2017 $IP
International Paper Co Valuation – December 2015 Update $IP

Other ModernGraham posts about related companies

Ball Corporation Valuation – February 2019 $BLL
Westrock Co Valuation – February 2019 $WRK
Sealed Air Corp Valuation – February 2019 $SEE
Packaging Corp of America Valuation – January 2019 $PKG
Schweitzer-Mauduit International Inc Valuation – September 2018 $SWM
KapStone Paper and Packaging Corp Valuation – August 2018 $KS
Sonoco Products Co Valuation – August 2018 $SON
Silgan Holdings Inc Valuation – August 2018 $SLGN
Clearwater Paper Corp Valuation – July 2018 $CLW
Intertape Polymer Group Valuation – July 2018 $TSE-ITP

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.

Ball Corporation Valuation – February 2019 $BLL

Company Profile (excerpt from Reuters): Ball Corporation (Ball), incorporated on December 19, 1922, is a supplier of metal packaging to the beverage, food, personal care and household products industries. The Company’s packaging products are produced for a range of end uses and are manufactured in facilities around the world. Its segments include beverage packaging, North and Central America; beverage packaging, South America; beverage packaging, Europe; food and aerosol packaging; aerospace, and other. Its major product line is aluminum and steel beverage containers. It also produces steel food, aerosol containers, extruded aluminum aerosol containers and aluminum slugs. It sells its packaging products to multinational beverage, food, personal care and household products companies. Its aerospace business is engaged in the design, development and manufacture of aerospace systems for civil, commercial and national cyber security aerospace markets. It produces spacecraft, instruments and sensors, radio frequency systems and components, data exploitation solutions and a range of aerospace technologies and products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BLL – 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 $18,465,563,018 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.96 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 20.83% Fail
6. Moderate PEmg Ratio PEmg < 20 36.45 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.30 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 0.96 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -42.00 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.50
MG Growth Estimate 2.25%
MG Value $19.42
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $21.68
MG Value based on 0% Growth $12.71
Market Implied Growth Rate 13.97%
Current Price $54.50
% of Intrinsic Value 280.58%

Ball Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings 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 $1.3 in 2015 to an estimated $1.5 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.97% 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 Ball Corporation revealed the company was trading above its Graham Number of $23.31. The company pays a dividend of $0.4 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 36.45, which was above the industry average of 17.32. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.14.

Ball Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$26.14
Graham Number $23.31
PEmg 36.45
Current Ratio 0.96
PB Ratio 5.30
Current Dividend $0.40
Dividend Yield 0.73%
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 $3,940,000,000
Total Current Liabilities $4,095,000,000
Long-Term Debt $6,510,000,000
Total Assets $16,554,000,000
Intangible Assets $6,663,000,000
Total Liabilities $12,992,000,000
Shares Outstanding (Diluted Average) 346,274,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.30
Dec2018 $1.29
Dec2017 $1.05
Dec2016 $0.81
Dec2015 $1.00
Dec2014 $1.65
Dec2013 $1.37
Dec2012 $1.25
Dec2011 $1.32
Dec2010 $1.28
Dec2009 $1.02
Dec2008 $0.83
Dec2007 $0.69
Dec2006 $0.79
Dec2005 $0.62
Dec2004 $0.66
Dec2003 $0.50
Dec2002 $0.34
Dec2001 -$0.12
Dec2000 $0.03
Dec1999 $0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.50
Dec2018 $1.12
Dec2017 $1.08
Dec2016 $1.13
Dec2015 $1.30
Dec2014 $1.42
Dec2013 $1.29
Dec2012 $1.21
Dec2011 $1.14
Dec2010 $1.01
Dec2009 $0.84
Dec2008 $0.74
Dec2007 $0.68
Dec2006 $0.65
Dec2005 $0.52
Dec2004 $0.41
Dec2003 $0.25

Recommended Reading:

Other ModernGraham posts about the company

Ball Corporation Valuation – April 2018 $BLL
Ball Corporation Valuation – December 2016 $BLL
Ball Corporation Analysis – 2015 Update $BLL
19 Companies in the Spotlight This Week – 8/9/14
Ball Corporation Annual Valuation – 2014 $BLL

Other ModernGraham posts about related companies

Westrock Co Valuation – February 2019 $WRK
Sealed Air Corp Valuation – February 2019 $SEE
Packaging Corp of America Valuation – January 2019 $PKG
Schweitzer-Mauduit International Inc Valuation – September 2018 $SWM
KapStone Paper and Packaging Corp Valuation – August 2018 $KS
Sonoco Products Co Valuation – August 2018 $SON
Silgan Holdings Inc Valuation – August 2018 $SLGN
Clearwater Paper Corp Valuation – July 2018 $CLW
Intertape Polymer Group Valuation – July 2018 $TSE-ITP
Bemis Co Inc Valuation – June 2018 $BMS

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.

10 Most Overvalued Stocks of the S&P 500 – February 2019

There are a number of great companies in the market today, but there are also a number of companies that are vastly overvalued by the market. By using the ModernGraham Valuation Model, I’ve selected the ten most overvalued companies of the S&P 500 recently reviewed by ModernGraham.

All of these companies are not suitable for the Defensive Investor and/or the Enterprising Investor. Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

Autodesk, Inc. (ADSK)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.82 in 2015 to an estimated $-1.47 for 2019. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Autodesk, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -103.19, which was below the industry average of 56.55, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.52.

Autodesk, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.  (See the full valuation)

AES Corp (AES)

AES Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 $0.16 in 2014 to an estimated $-0.04 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into AES Corp revealed the company was trading above its Graham Number of $12.73. The company pays a dividend of $0.48 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -380.66, which was below the industry average of 21.62, 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 $-32.73.

AES Corp scores quite poorly in the ModernGraham grading system, with an overall grade of D+.  (See the full valuation)

ConocoPhillips (COP)

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $6.85 in 2014 to an estimated $0.41 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 79.31% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

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

ConocoPhillips scores quite poorly in the ModernGraham grading system, with an overall grade of F.  (See the full valuation)

DISCOVERY COMMUNICATIONS INC. Common Stock (DISCA)

DISCOVERY COMMUNICATIONS INC. Common Stock does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg 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, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.31 in 2014 to an estimated $0.88 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.78% 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 DISCOVERY COMMUNICATIONS INC. Common Stock revealed the company was trading above its Graham Number of $16.36. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 32.05, which was above the industry average of 31.72. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.9.

DISCOVERY COMMUNICATIONS INC. Common Stock scores quite poorly in the ModernGraham grading system, with an overall grade of F.  (See the full valuation)

Devon Energy Corp (DVN)

Devon Energy Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $3.37 in 2014 to an estimated $-2.61 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Devon Energy Corp revealed the company was trading below its Graham Number of $39.63. The company pays a dividend of $0.24 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was -10.16, which was below the industry average of 41.28, 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 $-13.33.

Devon Energy Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.  (See the full valuation)

EOG Resources Inc (EOG)

EOG Resources 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 high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 $3.35 in 2014 to an estimated $1.82 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 22.22% 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 EOG Resources Inc revealed the company was trading above its Graham Number of $58.15. The company pays a dividend of $0.67 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 52.95, which was above the industry average of 43.92. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.68.

EOG Resources Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.  (See the full valuation)

FirstEnergy Corp. (FE)

FirstEnergy Corp. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $1.31 in 2014 to an estimated $-2.96 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into FirstEnergy Corp. revealed the company was trading above its Graham Number of $20.98. The company pays a dividend of $1.44 per share, for a yield of 3.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -13.12, which was below the industry average of 21.62, 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 $-59.35.

FirstEnergy Corp. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.  (See the full valuation)

Flowserve Corp (FLS)

Flowserve Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings 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 $3.21 in 2014 to an estimated $1.04 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.04% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Flowserve Corp revealed the company was trading above its Graham Number of $16.73. The company pays a dividend of $0.76 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 36.58, which was above the industry average of 20.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.95.

Flowserve Corp scores quite poorly in the ModernGraham grading system, with an overall grade of F.  (See the full valuation)

FleetCor Technologies, Inc. (FLT)

FleetCor Technologies, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings 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 $3.21 in 2014 to an estimated $1.76 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 48.63% 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 FleetCor Technologies, Inc. revealed the company was trading above its Graham Number of $29.9. The company pays a dividend of $0.76 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 105.76, which was above the industry average of 25.74. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.95.

FleetCor Technologies, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.  (See the full valuation)

HCP, Inc. (HCP)

HCP, 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 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 $1.85 in 2014 to an estimated $0.67 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.91% 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 HCP, Inc. revealed the company was trading above its Graham Number of $12.24. The company pays a dividend of $1.48 per share, for a yield of 5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 44.33, which was below the industry average of 70.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.6.

HCP, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.  (See the full valuation)

What do you think?  Are these companies a good value for Defensive Investors?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:

The author held a long position in WestRock Co (WRK) but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  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 read our full disclaimer.

Schweitzer-Mauduit International Inc Valuation – September 2018 $SWM

Company Profile (excerpt from Reuters): Schweitzer-Mauduit International, Inc. (SWM), incorporated on August 21, 1995, is a diversified producer of engineered solutions and materials for a variety of industries. The Company has two operating product line segments: Engineered Papers, and Advanced Materials and Structures. As of December 31, 2016, the Company conducted business in over 90 countries and operate 18 production locations across the world, with facilities in the United States, Canada, the United Kingdom, France, Luxembourg, Russia, Brazil, China and Poland.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SWM – September 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 $1,231,218,084 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.98 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 22.72% Fail
6. Moderate PEmg Ratio PEmg < 20 16.41 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.27 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.98 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.37 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.44
MG Growth Estimate -0.96%
MG Value $16.07
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $35.37
MG Value based on 0% Growth $20.73
Market Implied Growth Rate 3.96%
Current Price $40.03
% of Intrinsic Value 249.07%

Schweitzer-Mauduit International, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should 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 $2.61 in 2014 to an estimated $2.44 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.96% 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 Schweitzer-Mauduit International, Inc. revealed the company was trading above its Graham Number of $34.89. The company pays a dividend of $1.69 per share, for a yield of 4.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.41, which was below the industry average of 20.11, 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 $-17.46.

Schweitzer-Mauduit International, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.46
Graham Number $34.89
PEmg 16.41
Current Ratio 2.98
PB Ratio 2.27
Current Dividend $1.69
Dividend Yield 4.22%
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 6/1/2018
Total Current Assets $406,400,000
Total Current Liabilities $136,200,000
Long-Term Debt $639,800,000
Total Assets $1,485,100,000
Intangible Assets $624,400,000
Total Liabilities $942,600,000
Shares Outstanding (Diluted Average) 30,706,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.04
Dec2017 $1.12
Dec2016 $2.70
Dec2015 $2.94
Dec2014 $2.93
Dec2013 $2.42
Dec2012 $2.51
Dec2011 $2.73
Dec2010 $1.76
Dec2009 $1.10
Dec2008 $0.02
Dec2007 $0.11
Dec2006 -$0.03
Dec2005 $0.63
Dec2004 $1.18
Dec2003 $1.11
Dec2002 $1.09
Dec2001 $0.82
Dec2000 $0.91
Dec1999 $0.98
Dec1998 $0.96

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.44
Dec2017 $2.23
Dec2016 $2.76
Dec2015 $2.76
Dec2014 $2.61
Dec2013 $2.33
Dec2012 $2.06
Dec2011 $1.61
Dec2010 $0.90
Dec2009 $0.43
Dec2008 $0.19
Dec2007 $0.39
Dec2006 $0.62
Dec2005 $0.94
Dec2004 $1.07
Dec2003 $1.01
Dec2002 $0.96

Recommended Reading:

Other ModernGraham posts about the company

5 Best Stocks for Value Investors This Week – 3/18/17
Schweitzer-Mauduit International Inc Valuation – Initial Coverage $SWM

Other ModernGraham posts about related companies

KapStone Paper and Packaging Corp Valuation – August 2018 $KS
Sonoco Products Co Valuation – August 2018 $SON
Silgan Holdings Inc Valuation – August 2018 $SLGN
Clearwater Paper Corp Valuation – July 2018 $CLW
Intertape Polymer Group Valuation – July 2018 $TSE-ITP
Bemis Co Inc Valuation – June 2018 $BMS
Owens-Illinois Inc Valuation – June 2018 $OI
International Paper Co Valuation – June 2018 $IP
Ball Corporation Valuation – April 2018 $BLL
WestRock Co Valuation – April 2018 $WRK

Disclaimer:

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

Back To Top