Citizens Financial Group Inc Valuation – Initial Coverage $CFG

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 Citizens Financial Group Inc (CFG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Citizens Financial Group, Inc. is a retail bank holding company in the United States. The Company offers a range of retail and commercial banking products and services to individuals, institutions and companies. The Company operates in two segments: Consumer Banking and Commercial Banking. The Company’s Consumer Banking serves retail customers and small businesses. The Company offers traditional banking products and services, including checking, savings, home loans, student loans, credit cards, business loans and financial management services. Its subsidiaries are Citizens Bank, N.A. (CBNA) and Citizens Bank of Pennsylvania (CBPA). Its Commercial Banking offers financial products and solutions, including loans, leases, trade financing, deposits, cash management, commercial cards, foreign exchange, interest rate risk management, corporate finance and capital markets advisory capabilities.

CFG Chart

CFG data by YCharts

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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.

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Downloadable PDF version of this valuation:

moderngraham-valuation-of-cfg-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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,363,686,469 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 16733233.33% Pass
5. Moderate PEmg Ratio PEmg < 20 54.73 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.88 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

cfg-value-chart-december-2016

EPSmg $0.62
MG Growth Estimate 9.42%
MG Value $17.06
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $9.05
MG Value based on 0% Growth $5.30
Market Implied Growth Rate 23.11%
Current Price $34.15
% of Intrinsic Value 200.21%

Citizens Financial Group 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 stability over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding 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 Overvalued after growing its EPSmg (normalized earnings) from $0.38 in 2012 to an estimated $0.62 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 23.11% 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 below the price.

At the time of valuation, further research into Citizens Financial Group Inc revealed the company was trading below its Graham Number of $40.77. The company pays a dividend of $0.44 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 54.73, which was above the industry average of 13.43.

Citizens Financial Group Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

cfg-charts-december-2016

Graham Number $40.77
PEmg 54.73
PB Ratio 0.88
Dividend Yield 1.29%
TTM Dividend $0.44
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 9/16/2016
Long-Term Debt & Capital Lease Obligation $11,902,000,000
Total Assets $147,015,000,000
Intangible Assets $6,876,000,000
Total Liabilities $126,834,000,000
Shares Outstanding (Diluted Average) 521,122,000

Earnings Per Share History

Next Fiscal Year Estimate $1.92
Dec2015 $1.55
Dec2014 $1.55
Dec2013 -$6.12
Dec2012 $1.15

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.62
Dec2015 -$0.14
Dec2014 -$0.89
Dec2013 -$1.73
Dec2012 $0.38

Recommended Reading:

Other ModernGraham posts about the company

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

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Disclaimer:

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

CF Industries Holdings Inc Valuation – August 2016 $CF

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 CF Industries Holdings Inc (CF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CF Industries Holdings, Inc. is the manufacturer and distributor of nitrogen fertilizer and other nitrogen products. The Company’s nitrogen fertilizer products are ammonia, granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). Its other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to its industrial customers, and compound fertilizer products (NPKs). The Company’s segments include ammonia, granular urea, UAN, AN and Other. The Company’s ammonia segment produces anhydrous ammonia (ammonia), which is the concentrated nitrogen fertilizer product as it contains 82% nitrogen. Its granular urea segment produces granular urea, which contains 46% nitrogen. Its UAN segment produces UAN, which is a liquid fertilizer product with a nitrogen content that typically ranges from 28% to 32%. Its AN segment produces AN. Its Other segment includes DEF, urea liquor, nitric acid and NPKs.

CF Chart

CF data by YCharts

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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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CF – 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 $6,350,130,514 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.36 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 61.94% Pass
6. Moderate PEmg Ratio PEmg < 20 8.84 Pass
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 4.36 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.13 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

CF value chart August 2016

EPSmg $2.94
MG Growth Estimate -2.92%
MG Value $7.84
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $42.65
MG Value based on 0% Growth $25.00
Market Implied Growth Rate 0.17%
Current Price $26.00
% of Intrinsic Value 331.76%

CF Industries Holdings, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. . The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.65 in 2012 to an estimated $2.94 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into CF Industries Holdings, Inc. revealed the company was trading above its Graham Number of $5.55. The company pays a dividend of $1.2 per share, for a yield of 4.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.84, which was below the industry average of 12.12, 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 $-35.99.

CF Industries Holdings, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

CF charts August 2016

Net Current Asset Value (NCAV) -$35.99
Graham Number $5.55
PEmg 8.84
Current Ratio 4.36
PB Ratio 1.52
Current Dividend $1.20
Dividend Yield 4.62%
Number of Consecutive Years of Dividend Growth 6

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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 $3,374,000,000
Total Current Liabilities $773,000,000
Long-Term Debt $5,540,000,000
Total Assets $15,762,000,000
Intangible Assets $2,363,000,000
Total Liabilities $11,778,000,000
Shares Outstanding (Diluted Average) 233,500,000

Earnings Per Share History

Next Fiscal Year Estimate $0.08
Dec2015 $2.96
Dec2014 $5.42
Dec2013 $4.95
Dec2012 $5.72
Dec2011 $4.40
Dec2010 $1.07
Dec2009 $1.48
Dec2008 $2.43
Dec2007 $1.31
Dec2006 $0.12
Dec2005 -$0.14
Dec2004 $0.25
Dec2003 -$0.07
Dec2002 -$0.10

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.94
Dec2015 $4.48
Dec2014 $4.93
Dec2013 $4.30
Dec2012 $3.65
Dec2011 $2.46
Dec2010 $1.42
Dec2009 $1.41
Dec2008 $1.18
Dec2007 $0.47
Dec2006 $0.04
Dec2005 -$0.01
Dec2004 $0.04
Dec2003 -$0.05
Dec2002 -$0.03

Recommended Reading:

Other ModernGraham posts about the company

CF Industries Valuation – March 2016 $CF
10 Companies Benjamin Graham Would Invest In Today – March 2016
10 Most Undervalued Companies for the Defensive Investor – February 2016
10 Low PE Stocks for the Defensive Investor – February 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2016

Other ModernGraham posts about related companies

Monsanto Company Valuation – January 2016 Update $MON
Mosaic Company Valuation – October 2015 Update $MOS
CF Industries Holdings Inc. Analysis – September 2015 Update $CF
Monsanto Company Analysis – September 2015 Update $MON
Mosaic Company Analysis – July 2015 Update $MOS
CF Industries Holdings Analysis – June 2015 Update $CF
Mosaic Inc. Quarterly Valuation – April 2015 $MOS
CF Industries Holdings Inc. Quarterly Valuation – March 2015 $CF
Mosaic Company Quarterly Valuation – January 2015 $MOS
CF Industries Holdings Inc. Quarterly Valuation – December 2014 $CF

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.

CF Industries Valuation – March 2016 $CF

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 – March 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 CF Industries (CF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CF Industries Holdings, Inc. is the manufacturer and distributor of nitrogen fertilizer and other nitrogen products. The Company’s nitrogen fertilizer products include ammonia, granular urea and urea ammonium nitrate solution (UAN). The Company’s other nitrogen products include ammonium nitrate (AN), diesel exhaust fluid (DEF), urea liquor and aqua ammonia. The Company’s customers include cooperatives, independent fertilizer distributors and industrial users. It operates seven nitrogen fertilizer production facilities in North America. The Company owns four production facilities in the Central United States, one in Medicine Hat, Alberta, Canada and one in Courtright, Ontario, Canada. It also has a 75.3% interest in Terra Nitrogen Company, L.P. (TNCLP) and its subsidiary, TNLP, which owns a nitrogen fertilizer facility in Verdigris, Oklahoma.

[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]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of CF

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 $8,188,223,738 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.93 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 95.25% Pass
6. Moderate PEmg Ratio PEmg < 20 9.96 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.05 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 0.93 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -63.48 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

CF value chart March 2016

EPSmg $3.52
MG Growth Estimate -0.54%
MG Value $26.16
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $51.06
MG Value based on 0% Growth $29.93
Market Implied Growth Rate 0.73%
Current Price $35.06
% of Intrinsic Value 134.01%

CF Industries Holdings, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.65 in 2012 to an estimated $3.52 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.73% 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 below the price.

CF Industries Holdings, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

CF charts March 2016

Net Current Asset Value (NCAV) -$32.09
Graham Number $26.63
PEmg 9.96
Current Ratio 0.93
PB Ratio 2.05
Dividend Yield 3.42%
Number of Consecutive Years of Dividend Growth 6

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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 Dec2015
Total Current Assets $1,127,100,000
Total Current Liabilities $1,215,200,000
Long-Term Debt $5,592,700,000
Total Assets $12,738,900,000
Intangible Assets $2,390,100,000
Total Liabilities $8,703,700,000
Shares Outstanding (Diluted Average) 236,100,000

Earnings Per Share History

Next Fiscal Year Estimate $1.82
Dec2015 $2.96
Dec2014 $5.42
Dec2013 $4.95
Dec2012 $5.72
Dec2011 $4.40
Dec2010 $1.07
Dec2009 $1.48
Dec2008 $2.43
Dec2007 $1.31
Dec2006 $0.12
Dec2005 -$0.14
Dec2004 $0.25
Dec2003 -$0.07
Dec2002 -$0.10

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.52
Dec2015 $4.48
Dec2014 $4.93
Dec2013 $4.30
Dec2012 $3.65
Dec2011 $2.46
Dec2010 $1.42
Dec2009 $1.41
Dec2008 $1.18
Dec2007 $0.47
Dec2006 $0.04
Dec2005 -$0.01
Dec2004 $0.04
Dec2003 -$0.05
Dec2002 -$0.03

Recommended Reading:

Other ModernGraham posts about the company

10 Companies Benjamin Graham Would Invest In Today – March 2016
CF Industries Holdings Inc. Analysis – September 2015 Update $CF
10 Most Undervalued Companies for the Defensive Investor – September 2015
10 Companies Benjamin Graham Would Invest In Today – September 2015
10 Low PE Stocks for the Defensive Investor – August 2015

Other ModernGraham posts about related companies

Monsanto Company Valuation – January 2016 Update $MON
Mosaic Company Valuation – October 2015 Update $MOS
CF Industries Holdings Inc. Analysis – September 2015 Update $CF
Monsanto Company Analysis – September 2015 Update $MON
Mosaic Company Analysis – July 2015 Update $MOS
CF Industries Holdings Analysis – June 2015 Update $CF
Mosaic Inc. Quarterly Valuation – April 2015 $MOS
CF Industries Holdings Inc. Quarterly Valuation – March 2015 $CF
Mosaic Company Quarterly Valuation – January 2015 $MOS
CF Industries Holdings Inc. Quarterly Valuation – December 2014 $CF

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.

CF Industries Holdings Inc. Analysis – September 2015 Update $CF

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 CF Industries Holdings (CF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CF Industries Holdings, Inc. is the manufacturer and distributor of nitrogen fertilizer and other nitrogen products. The Company’s nitrogen fertilizer products include ammonia, granular urea and urea ammonium nitrate solution (UAN). The Company’s other nitrogen products include ammonium nitrate (AN), diesel exhaust fluid (DEF), urea liquor and aqua ammonia. The Company’s customers include cooperatives, independent fertilizer distributors and industrial users. It operates seven nitrogen fertilizer production facilities in North America. The Company owns four production facilities in the Central United States, one in Medicine Hat, Alberta, Canada and one in Courtright, Ontario, Canada. It also has a 75.3% interest in Terra Nitrogen Company, L.P. (TNCLP) and its subsidiary, TNLP, which owns a nitrogen fertilizer facility in Verdigris, Oklahoma.

[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 CF – 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 $10,777,257,347 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.81 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 265.73% Pass
6. Moderate PEmg Ratio PEmg < 20 9.74 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.65 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 1.81 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 7.49 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

CF value Chart September 2015

EPSmg $4.75
MG Growth Estimate 13.95%
MG Value $172.75
Opinion Undervalued
MG Value based on 3% Growth $68.81
MG Value based on 0% Growth $40.34
Market Implied Growth Rate 0.62%
Current Price $46.24
% of Intrinsic Value 26.77%

CF Industries Holdings Inc. qualifies for both the Defensive Investor and for the Enterprising Investor.  The Defensive Investor is only concerned by 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 $2.46 in 2011 to an estimated $4.75 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.62% 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 CF Industries Holdings Inc. (CF)?  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

CF Charts September 2015

Net Current Asset Value (NCAV) -$23.36
Graham Number $38.66
PEmg 9.74
Current Ratio 1.81
PB Ratio 2.65
Dividend Yield 2.60%
Number of Consecutive Years of Dividend Growth 5

 

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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

Total Current Assets $1,366,400,000
Total Current Liabilities $753,500,000
Long-Term Debt $4,592,600,000
Total Assets $10,998,400,000
Intangible Assets $2,090,800,000
Total Liabilities $6,882,500,000
Shares Outstanding (Diluted Average) 236,100,000

Earnings Per Share History

Next Fiscal Year Estimate $3.77
Dec14 $5.42
Dec13 $4.95
Dec12 $5.72
Dec11 $4.40
Dec10 $1.07
Dec09 $1.48
Dec08 $2.43
Dec07 $1.31
Dec06 $0.12
Dec05 -$0.41
Dec04 $0.25
Dec03 -$0.07
Dec02 -$0.10

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.75
Dec14 $4.93
Dec13 $4.29
Dec12 $3.65
Dec11 $2.46
Dec10 $1.42
Dec09 $1.39
Dec08 $1.15
Dec07 $0.42
Dec06 -$0.04
Dec05 -$0.10
Dec04 $0.04
Dec03 -$0.05
Dec02 -$0.03

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – September 2015
10 Companies Benjamin Graham Would Invest In Today – September 2015
10 Low PE Stocks for the Defensive Investor – August 2015
10 Most Undervalued Companies for the Defensive Investor – August 2015
5 Low PE Stocks for the Defensive Investor – July 2015

Other ModernGraham posts about related companies

Monsanto Company Analysis – September 2015 Update $MON
Mosaic Company Analysis – July 2015 Update $MOS
CF Industries Holdings Analysis – June 2015 Update $CF
Mosaic Inc. Quarterly Valuation – April 2015 $MOS
CF Industries Holdings Inc. Quarterly Valuation – March 2015 $CF
Mosaic Company Quarterly Valuation – January 2015 $MOS
CF Industries Holdings Inc. Quarterly Valuation – December 2014 $CF
Mosaic Company Quarterly Stock Valuation – October 2014 $MOS
CF Industries Holding Company Quarterly Stock Valuation – September 2014 $CF
Monsanto Company Quarterly Valuation – June 2014 $MON

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.

CF Industries Holdings Analysis – June 2015 Update $CF

CfindustrieslogoCF Industries (CF) currently yields about a 1.9% dividend, and has grown its earnings well over the last few years. Recently, multiple analysts have focused on qualitative factors when reviewing the company. For example, Seeking Alpha contributor Eric Gregg recently wrote that the company is significantly undervalued partially based on its aggressive share buybacks. On the other hand, Peter Mantas posited that the company is overvalued due in part to its extensive stock price run up in recent years. These are great factors to consider in the final stages of an investment decision, but first one must use quantitative metrics to determine the company’s intrinsic value.

Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using theModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

CF Chart

CF data by YCharts

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

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – FAIL
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – Must pass at least 4 of the following 5 tests or be suitable for a Defensive Investor: Score = 4/5

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

Valuation Summary

Key Data

Recent Price $63.47
MG Value $180.22
MG Opinion Undervalued
Value Based on 3% Growth $69.96
Value Based on 0% Growth $41.01
Market Implied Growth Rate 2.33%
Net Current Asset Value (NCAV) -$20.97
PEmg 13.16
Current Ratio 1.82
PB Ratio 3.76

Balance Sheet – March 2015

Current Assets $2,380,000,000
Current Liabilities $1,311,000,000
Total Debt $4,593,000,000
Total Assets $11,485,000,000
Intangible Assets $2,090,000,000
Total Liabilities $7,423,000,000
Outstanding Shares 240,500,000

Earnings Per Share

2015 (estimate) $4.00
2014 $5.42
2013 $4.95
2012 $5.72
2011 $4.40
2010 $1.07
2009 $1.48
2008 $2.43
2007 $1.31
2006 $0.12
2005 -$0.14

Earnings Per Share – ModernGraham

2015 (estimate) $4.82
2014 $4.93
2013 $4.30
2012 $3.65
2011 $2.46
2010 $1.42

Dividend History

CF Dividend Chart

CF Dividend data by YCharts

Conclusion

CF Industries passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only concerned by 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 should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $2.46 in 2011 to an estimated $4.82 for 2015. This is a fairly strong level of demonstrated growth, and outpaces the market’s implied estimate for annual earnings growth of only 2.33% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 19.25% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that CF Industries is significantly undervalued at the present time.

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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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CF Industries Holdings Inc. Quarterly Valuation – March 2015 $CF

Cfindustrieslogo

CF Industries Holdings Inc. passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The only issue the Defensive Investor has with the company is the lack of earnings stability over the last ten years, while the Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $7.10 in 2010 to $24.63 for 2014. This is a strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of only 1.73% annually over the next 7-10 years. In fact, the historical growth is nearly 50% per year, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.

Be sure to check out previous ModernGraham valuations of CF Industries Holdings Inc. (CF) for a greater perspective!

Read the full valuation on Seeking Alpha!

CF Chart

CF data by YCharts

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

CareFusion Corporation Quarterly Valuation – January 2015 $CFN

Care_Fusion_LogoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – December 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how CareFusion Corporation (CFN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CareFusion Corporation is a global medical technology company. The Company operates in two business segments: Medical Systems and Procedural Solutions. The Company’s primary product brands include: Alaris intravenous (IV) infusion systems; Pyxis and Rowa automated medication dispensing and supply management systems; AVEA, Vela and LTV Series respiratory ventilators; ChloraPrep skin antiseptic products; MaxGuard, MaxPlus, MaxZero, SmartSite and Texium needle-free IV infusion valves, administration sets and accessories; V. Mueller and Snowden-Pencer open surgical and laparoscopic instrumentation; PleurX, Achieve and Temno interventional specialty products; AirLife disposable ventilator circuits and oxygen masks used for providing respiratory therapy; Vital Signs single-use consumables for respiratory care and anesthesiology; Jaeger and SensorMedics cardiopulmonary diagnostic equipment, and MedMined data mining surveillance software and analytics.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years - FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

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

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

Valuation Summary

Key Data:

Recent Price $59.77
MG Value $68.73
MG Opinion Fairly Valued
Value Based on 3% Growth $29.68
Value Based on 0% Growth $17.40
Market Implied Growth Rate 10.35%
Net Current Asset Value (NCAV) -$2.75
PEmg 29.20
Current Ratio 4.96
PB Ratio 2.32

Balance Sheet – September 2014

Current Assets $3,106,000,000
Current Liabilities $626,000,000
Total Debt $1,988,000,000
Total Assets $9,007,000,000
Intangible Assets $4,312,000,000
Total Liabilities $3,676,000,000
Outstanding Shares 207,000,000

Earnings Per Share

2015 (estimate) $2.80
2014 $1.96
2013 $1.72
2012 $1.30
2011 $1.10
2010 $0.87
2009 $2.58
2008 $0.00
2007 $0.00
2006 $0.00
2005 $0.00

Earnings Per Share – ModernGraham

2015 (estimate) $2.05
2014 $1.58
2013 $1.43
2012 $1.24
2011 $1.11
2010 $0.98

Dividend History
CareFusion Corporation does not pay a dividend.

Conclusion:

CareFusion Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short operating history, lack of dividends, and the high PEmg ratio. The Enterprising Investor’s only concern is the lack of dividends.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.11 in 2011 to an estimated $2.05 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 10.35% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out previous ModernGraham valuations of CareFusion Corporation (CFN) for greater perspective!

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 CareFusion Corporation (CFN)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

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

 

CF Industries Holdings Inc. Quarterly Valuation – December 2014 $CF

CfindustrieslogoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – December 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how CF Industries Holdings Inc. (CF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CF Industries Holdings, Inc. is a manufacturer and distributor of nitrogen and phosphate fertilizer products worldwide. The Company operates in two segments: the nitrogen segment and the phosphate segment. The Company’s principal products in the nitrogen segment are ammonia, granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN).Its other nitrogen products include urea liquor, diesel exhaust fluid (DEF) and aqua ammonia, which are sold primarily to its industrial customers. Its principal products in the phosphate segment are diammonium phosphate (DAP) and monoammonium phosphate (MAP). During the year ended December 31, 2012, the Company sold 13.0 million tons of nitrogen fertilizers and 2.0 million tons of phosphate fertilizers. In May 2013, CF Industries Holdings Inc acquired 34% stake in Canadian Fertilizers Ltd.

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - PASS
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

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

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

Valuation Summary

Key Data:

Recent Price $248.80
MG Value $825.65
MG Opinion Undervalued
Value Based on 3% Growth $310.96
Value Based on 0% Growth $182.29
Market Implied Growth Rate 1.55%
Net Current Asset Value (NCAV) -$76.63
PEmg 11.60
Current Ratio 3.18
PB Ratio 2.76

Balance Sheet – September 2014

Current Assets $3,339,000,000
Current Liabilities $1,049,000,000
Total Debt $4,592,000,000
Total Assets $11,660,000,000
Intangible Assets $2,137,000,000
Total Liabilities $7,163,000,000
Outstanding Shares 49,900,000

Earnings Per Share

2014 (estimate) $17.53
2013 $24.74
2012 $28.59
2011 $21.98
2010 $5.34
2009 $7.42
2008 $12.13
2007 $6.57
2006 $0.60
2005 -$0.71
2004 $1.23

Earnings Per Share – ModernGraham

2014 (estimate) $21.45
2013 $21.47
2012 $18.26
2011 $12.29
2010 $7.10
2009 $7.05

Dividend History

Conclusion:

CF Industries Holdings is suitable for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only concern is the lack of earnings stability over the last ten years while the Enterprising Investor is only concerned by the high level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $7.10 in 2010 to an estimated $21.45 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 1.55% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out previous ModernGraham valuations of CF Industries Holdings Inc. (CF) for greater perspective!

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 CF Industries Holdings Inc. (CF)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

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

CareFusion Corporation Quarterly Stock Valuation – October 2014 $CFN

Care_Fusion_LogoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Highest Dividend Yields Among Undervalued Companies for the Defensive Investor – September 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how CareFusion Corporation (CFN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CareFusion Corporation (CareFusion) is a global medical technology company. Its offerings include established brands used in hospitals throughout the United States and approximately 130 countries worldwide. The Company operates in two segments: Medical Systems and Procedural Solutions. The Medical Systems segment is organized around its medical equipment businesses. The Company’s Medical Systems segment’s business units and product lines include Infusion Systems, Dispensing Technologies, and Respiratory Technologies. The Procedural Solutions segment is organized around the Company’s disposable products and reusable surgical instruments businesses. The Company’s Procedural Solutions segment’s business units and product lines include Infection Prevention, Medical Specialties and Specialty Disposables. On October 1, 2013, it completed the acquisition of Grupo Sendal, S.L (Sendal). Effective December 31, 2013, it acquired Vital Signs Inc from GE Healthcare, a unit of General Electric Co.
CFN Chart

CFN data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years - FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

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

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

Valuation Summary

Key Data:

Recent Price $46.17
MG Value $63.94
MG Opinion Undervalued
Value Based on 3% Growth $24.08
Value Based on 0% Growth $14.12
Market Implied Growth Rate 9.65%
Net Current Asset Value (NCAV) -$2.66
PEmg 27.80
Current Ratio 3.11
PB Ratio 1.75

Balance Sheet – 6/30/2014

Current Assets $3,721,000,000
Current Liabilities $1,195,000,000
Total Debt $1,990,000,000
Total Assets $9,655,000,000
Intangible Assets $4,327,000,000
Total Liabilities $4,265,000,000
Outstanding Shares 204,400,000

Earnings Per Share

2014 (estimate) $1.96
2013 $1.74
2012 $1.60
2011 $1.29
2010 $0.77
2009 $0.00
2008 $0.00
2007 $0.00
2006 $0.00
2005 $0.00
2004 $0.00

Earnings Per Share – ModernGraham

2014 (estimate) $1.66
2013 $1.37
2012 $1.03
2011 $0.64
2010 $0.26
2009 $0.00

Dividend History

CareFusion Corporation does not pay a dividend.

Conclusion:

CareFusion is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns regarding the short earnings history, the lack of dividend payments and the high PEmg ratio.  The Enterprising Investor’s only initial concern is the lack of dividend payments.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities. As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.26 in 2010 to an estimated $1.66 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 9.65% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out the previous ModernGraham valuations of CareFusion Corporation (CFN) for more perspective!

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 CareFusion Corporation (CFN)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

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

CF Industries Holding Company Quarterly Stock Valuation – September 2014 $CF

CfindustrieslogoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – September 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how CF Industries (CF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CF Industries Holdings, Inc. is a manufacturer and distributor of nitrogen and phosphate fertilizer products worldwide. The Company operates in two segments: the nitrogen segment and the phosphate segment. The Company’s principal products in the nitrogen segment are ammonia, granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN).Its other nitrogen products include urea liquor, diesel exhaust fluid (DEF) and aqua ammonia, which are sold primarily to its industrial customers. Its principal products in the phosphate segment are diammonium phosphate (DAP) and monoammonium phosphate (MAP). During the year ended December 31, 2012, the Company sold 13.0 million tons of nitrogen fertilizers and 2.0 million tons of phosphate fertilizers. In May 2013, CF Industries Holdings Inc acquired 34% stake in Canadian Fertilizers Ltd.
CF Chart

CF data by YCharts

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period -PASS
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

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

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

Valuation Summary

Key Data:

Recent Price $250.64
MG Value $832.73
MG Opinion Undervalued
Value Based on 3% Growth $313.63
Value Based on 0% Growth $183.85
Market Implied Growth Rate 1.54%
Net Current Asset Value (NCAV) -$68.79
PEmg 11.59
Current Ratio 4.73
PB Ratio 2.78

Balance Sheet – 6/30/2014

Current Assets $3,405,700,000
Current Liabilities $720,300,000
Total Debt $4,592,400,000
Total Assets $11,304,900,000
Intangible Assets $2,095,700,000
Total Liabilities $6,822,600,000
Outstanding Shares 49,670,000

Earnings Per Share

2014 (estimate) $18.09
2013 $24.74
2012 $28.57
2011 $21.99
2010 $5.34
2009 $7.43
2008 $12.14
2007 $6.57
2006 $0.60
2005 -$1.99
2004 $1.23

Earnings Per Share – ModernGraham

2014 (estimate) $21.63
2013 $21.47
2012 $18.26
2011 $12.30
2010 $7.11
2009 $6.98

Dividend History

CF Dividend Chart

CF Dividend data by YCharts

Conclusion:

CF Industries is suitable for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only initial concern is the lack of earnings stability over the last ten years.  The Enterprising Investor’s only concern is the high level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $7.11 in 2010 to an estimated $21.63 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 1.54% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out the previous ModernGraham valuations of CF Industries Holding Co. (CF) for more perspective!

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 CF Industries Holding Co. (CF)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

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

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