Edwards Lifesciences Corp Valuation – March 2019 $EW

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EW – March 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $36,091,033,254 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.61 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 258.21% Pass
6. Moderate PEmg Ratio PEmg < 20 47.51 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.73 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.42 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.66
MG Growth Estimate 8.64%
MG Value $94.29
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $53.01
MG Value based on 0% Growth $31.08
Market Implied Growth Rate 19.51%
Current Price $173.71
% of Intrinsic Value 184.24%

Edwards Lifesciences Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

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

At the time of valuation, further research into Edwards Lifesciences Corp revealed the company was trading above its Graham Number of $41.72. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 47.51, which was below the industry average of 53.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.49.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.49
Graham Number $41.72
PEmg 47.51
Current Ratio 2.61
PB Ratio 11.73
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

 

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,286,900,000
Total Current Liabilities $876,600,000
Long-Term Debt $593,800,000
Total Assets $5,323,700,000
Intangible Assets $1,455,400,000
Total Liabilities $2,183,300,000
Shares Outstanding (Diluted Average) 212,100,000

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

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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.

10 Undervalued Companies for the Defensive Investor – March 2019

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected ten undervalued companies reviewed by ModernGraham. Each company has been determined to be suitable for Defensive Investor according to the ModernGraham approach. Defensive Investors are defined as investors who need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, 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.

Principal Financial Group Inc (PFG)

Principal Financial Group 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 no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis. As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.9 in 2014 to an estimated $5.72 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.29% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. At the time of valuation, further research into Principal Financial Group Inc revealed the company was trading below its Graham Number of $76.24. The company pays a dividend of $1.87 per share, for a yield of 4.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.92, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Principal Financial Group Inc fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)  

Gilead Sciences, Inc. (GILD)

Gilead Sciences, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis. As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.61 in 2014 to an estimated $6.87 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.69% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price. At the time of valuation, further research into Gilead Sciences, Inc. revealed the company was trading above its Graham Number of $44.37. The company pays a dividend of $2.08 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.88, which was below the industry average of 35.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.88. Gilead Sciences, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)  

Molson Coors Brewing Co Class B (TAP)

Molson Coors Brewing Co Class B 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 $2.97 in 2014 to an estimated $5.89 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.12% 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 Molson Coors Brewing Co Class B revealed the company was trading below its Graham Number of $86.77. The company pays a dividend of $1.64 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.75, which was below the industry average of 19.84, 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 $-62.64. Molson Coors Brewing Co Class B fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)  

Nucor Corporation (NUE)

Nucor Corporation 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 no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis. As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.32 in 2015 to an estimated $4.86 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.04% 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 above the price. At the time of valuation, further research into Nucor Corporation revealed the company was trading above its Graham Number of $60.93. The company pays a dividend of $1.54 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.58, which was below the industry average of 18.08, 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 $2.96. Nucor Corporation performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)  

Celanese Corporation (CE)

Celanese Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor 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 $3.61 in 2015 to an estimated $7.8 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.04% 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 above the price. At the time of valuation, further research into Celanese Corporation revealed the company was trading above its Graham Number of $69.96. The company pays a dividend of $2.08 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.58, which was below the industry average of 22.8, 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 $-23.16. Celanese Corporation performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)  

D. R. Horton Inc (DHI)

D. R. Horton 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 no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis. As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.73 in 2015 to an estimated $3.22 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.97% 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 above the price. At the time of valuation, further research into D. R. Horton Inc revealed the company was trading below its Graham Number of $44.1. The company pays a dividend of $0.5 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 12.44, which was below the industry average of 20.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $18.75. D. R. Horton Inc fares extremely well in the ModernGraham grading system, scoring an A-.  (See the full valuation)  

Comcast Corporation (CMCSA)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.25 in 2014 to an estimated $2.79 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.13% 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 Comcast Corporation revealed the company was trading above its Graham Number of $29.05. The company pays a dividend of $0.63 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 12.76, which was below the industry average of 27.83, 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 $-22.75.

Comcast Corporation performs fairly well in the ModernGraham grading system, scoring a B.  (See the full valuation)  

Applied Materials, Inc. (AMAT)

Applied Materials, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis. As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.76 in 2015 to an estimated $2.68 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.18% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price. At the time of valuation, further research into Applied Materials, Inc. revealed the company was trading above its Graham Number of $20.6. The company pays a dividend of $0.6 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 14.85, which was below the industry average of 29.46, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.19. Applied Materials, Inc. performs fairly well in the ModernGraham grading system, scoring a B.  (See the full valuation)

AT&T Inc. (T)

AT&T Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis. As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.89 in 2014 to an estimated $3.06 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.53% 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 AT&T Inc. revealed the company was trading below its Graham Number of $38.89. The company pays a dividend of $1.97 per share, for a yield of 6.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.56, which was below the industry average of 25.67, 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 $-40.55. AT&T Inc. fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)  

FedEx Corporation (FDX)

FedEx Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis. As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $6.08 in 2015 to an estimated $12.59 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.82% 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 FedEx Corporation revealed the company was trading above its Graham Number of $153.54. The company pays a dividend of $2 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 14.13, which was below the industry average of 17.22, 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 $-77.28. FedEx Corporation performs fairly well in the ModernGraham grading system, scoring a B.  (See the full valuation)

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.

Affiliated Managers Group Inc Valuation – February 2019 $AMG

Company Profile (excerpt from Reuters): Affiliated Managers Group, Inc., incorporated on December 29, 1993, is an asset management company with equity investments in boutique investment management firms (Affiliates). The Company is focused on investing around the globe in investment management firms that manage active return-oriented strategies, including traditional, alternative and wealth management firms. The Company operates through three business segments, which represent its principal distribution channels: Institutional, Mutual Fund and High Net Worth. The equity method investments in the Institutional distribution channel are made in relationships with public and private client entities, including foundations, endowments, sovereign wealth funds and retirement plans for corporations and municipalities. The equity method investments in the Mutual Fund distribution channel are made in advisory or sub-advisory relationships with active return-oriented mutual funds, Undertakings for Collective Investment in Transferable Securities (UCITS) and other retail products. The equity method investments in the High Net Worth distribution channel are made in relationships with high net worth and ultra-high net worth individuals, families, trusts, foundations, endowments and retirement plans.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMG – 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 $5,732,676,828 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.45 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 224.67% Pass
6. Moderate PEmg Ratio PEmg < 20 11.23 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.40 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 1.45 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.40 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 $9.81
MG Growth Estimate 5.82%
MG Value $197.46
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $142.18
MG Value based on 0% Growth $83.35
Market Implied Growth Rate 1.37%
Current Price $110.14
% of Intrinsic Value 55.78%

Affiliated Managers 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 low current ratio, poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $7.06 in 2015 to an estimated $9.81 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.37% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Affiliated Managers Group, Inc. revealed the company was trading below its Graham Number of $140.26. The company pays a dividend of $1.2 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 11.23, which was below the industry average of 20.29, 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 $-56.9.

Affiliated Managers Group, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$56.90
Graham Number $140.26
PEmg 11.23
Current Ratio 1.45
PB Ratio 1.40
Current Dividend $1.20
Dividend Yield 1.09%
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 $1,085,400,000
Total Current Liabilities $746,600,000
Long-Term Debt $1,829,600,000
Total Assets $8,219,100,000
Intangible Assets $3,943,300,000
Total Liabilities $4,084,200,000
Shares Outstanding (Diluted Average) 52,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.32
Dec2018 $4.52
Dec2017 $12.03
Dec2016 $8.57
Dec2015 $9.17
Dec2014 $7.70
Dec2013 $6.55
Dec2012 $3.28
Dec2011 $3.11
Dec2010 $2.81
Dec2009 $1.38
Dec2008 -$0.03
Dec2007 $4.55
Dec2006 $3.74
Dec2005 $2.81
Dec2004 $2.02
Dec2003 $1.05
Dec2002 $1.65
Dec2001 $1.47
Dec2000 $1.66
Dec1999 $2.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.81
Dec2018 $8.16
Dec2017 $9.59
Dec2016 $7.93
Dec2015 $7.06
Dec2014 $5.57
Dec2013 $4.15
Dec2012 $2.67
Dec2011 $2.36
Dec2010 $2.15
Dec2009 $2.05
Dec2008 $2.46
Dec2007 $3.42
Dec2006 $2.65
Dec2005 $2.00
Dec2004 $1.59
Dec2003 $1.45

Recommended Reading:

Other ModernGraham posts about the company

Affiliated Managers Group Inc Valuation – May 2018 $AMG
Affiliated Managers Group Inc Valuation – January 2017 $AMG
Affiliated Managers Group Analysis – Initial Coverage $AMG

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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.

Advanced Micro Devices Inc Valuation – February 2019 $AMD

Company Profile (excerpt from Reuters): Advanced Micro Devices, Inc. (AMD), incorporated on May 1, 1969, is a global semiconductor company. The Company is engaged in offering x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs) and professional graphics, and, server and embedded processors and semi-custom System-on-Chip (SoC) products and technology for game consoles. The Company’s segments include the Computing and Graphics segment, and the Enterprise, Embedded and Semi-Custom segment. The Computing and Graphics segment primarily includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics. The Enterprise, Embedded and Semi-Custom segment primarily includes server and embedded processors, semi-custom SoC products, development services, technology for game consoles and licensing portions of its intellectual property portfolio. The Company sells its products through its direct sales force and through independent distributors and sales representatives in both domestic and international markets. Its microprocessor customers consist primarily of original equipment manufacturers (OEMs), original design manufacturers (ODMs), system builders and independent distributors in both domestic and international markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMD – 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 $24,489,084,253 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.78 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -333.33% Fail
6. Moderate PEmg Ratio PEmg < 20 304.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 20.82 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.78 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.72 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.08
MG Growth Estimate 15.00%
MG Value $3.08
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $1.16
MG Value based on 0% Growth $0.68
Market Implied Growth Rate 148.00%
Current Price $24.36
% of Intrinsic Value 790.91%

Advanced Micro Devices, 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 lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.61 in 2015 to an estimated $0.08 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 148% 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 Advanced Micro Devices, Inc. revealed the company was trading above its Graham Number of $3.42. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 304.5, which was above the industry average of 29.46. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.23.

Advanced Micro Devices, Inc. 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) $0.23
Graham Number $3.42
PEmg 304.50
Current Ratio 1.78
PB Ratio 20.82
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,540,000,000
Total Current Liabilities $1,984,000,000
Long-Term Debt $1,114,000,000
Total Assets $4,556,000,000
Intangible Assets $515,000,000
Total Liabilities $3,290,000,000
Shares Outstanding (Diluted Average) 1,082,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.41
Dec2018 $0.32
Dec2017 -$0.03
Dec2016 -$0.60
Dec2015 -$0.84
Dec2014 -$0.53
Dec2013 -$0.11
Dec2012 -$1.60
Dec2011 $0.66
Dec2010 $0.64
Dec2009 $0.45
Dec2008 -$5.15
Dec2007 -$6.06
Dec2006 -$0.34
Dec2005 $0.40
Dec2004 $0.25
Dec2003 -$0.79
Dec2002 -$3.81
Dec2001 -$0.18
Dec2000 $2.89
Dec1999 -$0.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.08
Dec2018 -$0.17
Dec2017 -$0.42
Dec2016 -$0.65
Dec2015 -$0.61
Dec2014 -$0.40
Dec2013 -$0.22
Dec2012 -$0.51
Dec2011 -$0.61
Dec2010 -$1.53
Dec2009 -$2.45
Dec2008 -$3.33
Dec2007 -$2.05
Dec2006 -$0.32
Dec2005 -$0.48
Dec2004 -$0.72
Dec2003 -$0.95

Recommended Reading:

Other ModernGraham posts about the company

Advanced Micro Devices Inc Valuation – May 2018 $AMD
Advanced Micro Devices Inc Valuation – January 2017 $AMD
Advanced Micro Devices Inc. Analysis – Initial Coverage $AMD
Valuation: Advanced Micro Devices (AMD)

Other ModernGraham posts about related companies

Qorvo Inc Valuation – February 2019 $QRVO
FLIR Systems Inc Valuation – February 2019 $FLIR
NetApp Inc Valuation – February 2019 $NTAP
Applied Materials Inc Valuation – February 2019 $AMAT
Microchip Technology Inc Valuation – February 2019 $MCHP
Broadcom Inc Valuation – February 2019 $AVGO
KLA-Tencor Corp Valuation – January 2019 $KLAC
TE Connectivity Ltd Valuation – January 2019 $TEL
NVIDIA Corp Valuation – January 2019 $NVDA
Seagate Technology PLC Valuation – January 2019 $STX

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.

5 Undervalued Stocks for Value Investors with a High Beta – February 2019

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the five undervalued companies for value investors reviewed by ModernGraham with the highest beta.

A company’s beta indicates the correlation at which its price moves in relation to the market.  A beta greater than 1 indicates a company is more volatile than the market.

Each company has been determined to be suitable for the Defensive Investor and/or the Enterprising Investor according to the ModernGraham approach. Defensive Investors are defined as investors who need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to select companies that present a moderate (though still low) amount of risk.

Lincoln National Corporation (LNC)

Lincoln National Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.25 in 2014 to an estimated $7.01 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.58% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Lincoln National Corporation revealed the company was trading below its Graham Number of $117.31. The company pays a dividend of $0.87 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 7.33, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Lincoln National Corporation performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Ameriprise Financial, Inc. (AMP)

Ameriprise Financial, 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 no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $6.29 in 2014 to an estimated $10.35 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.23% 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.

At the time of valuation, further research into Ameriprise Financial, Inc. revealed the company was trading above its Graham Number of $112.58. The company pays a dividend of $3.24 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 10.96, which was below the industry average of 18, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Ameriprise Financial, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Packaging Corp Of America (PKG)

Packaging Corp Of America qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB 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 $3.21 in 2014 to an estimated $6.28 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.21% 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 Packaging Corp Of America revealed the company was trading above its Graham Number of $63.49. The company pays a dividend of $2.52 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.93, which was below the industry average of 15.32, 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 $-19.74.

Packaging Corp Of America performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

BorgWarner Inc. (BWA)

BorgWarner Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.58 in 2015 to an estimated $3.51 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.72% 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 BorgWarner Inc. revealed the company was trading below its Graham Number of $43.32. The company pays a dividend of $0.68 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 11.93, which was below the industry average of 21.23, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.33.

BorgWarner Inc. performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Textron Inc. (TXT)

Textron Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.7 in 2014 to an estimated $3.07 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.6% 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 Textron Inc. revealed the company was trading above its Graham Number of $48.04. The company pays a dividend of $0.08 per share, for a yield of 0.2% Its PEmg (price over earnings per share – ModernGraham) was 15.69, which was below the industry average of 47.17, 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 $-8.3.

Textron Inc. performs fairly well in the ModernGraham grading system, scoring a B.  (See the full valuation)

What do you think?  Are these companies a good value for Defensive Investors and Enterprising 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 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.

Sealed Air Corp Valuation – February 2019 $SEE

Company Profile (excerpt from Reuters): Sealed Air Corporation, incorporated on January 29, 1996, is engaged in food safety and security, facility hygiene and product protection business. The Company serves a range of end markets, including food and beverage processing, food service, retail, healthcare and industrial, and commercial and consumer applications. The Company’s segments are Food Care (includes Corporate, Medical Applications and New Ventures businesses), Product Care and Corporate.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SEE – 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 $6,636,362,622 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.04 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 -261.02% Fail
6. Moderate PEmg Ratio PEmg < 20 16.84 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -18.93 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.04 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 48.89 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.51
MG Growth Estimate 15.00%
MG Value $96.66
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $36.40
MG Value based on 0% Growth $21.34
Market Implied Growth Rate 4.17%
Current Price $42.28
% of Intrinsic Value 43.74%

Sealed Air 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 PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.05 in 2015 to an estimated $2.51 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.17% 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 above the price.

At the time of valuation, further research into Sealed Air Corp revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.64 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 16.84, 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 $-24.63.

Sealed Air Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.63
Graham Number $0.00
PEmg 16.84
Current Ratio 1.04
PB Ratio -18.93
Current Dividend $0.64
Dividend Yield 1.51%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,554,800,000
Total Current Liabilities $1,488,600,000
Long-Term Debt $3,236,500,000
Total Assets $5,050,200,000
Intangible Assets $2,049,300,000
Total Liabilities $5,398,800,000
Shares Outstanding (Diluted Average) 156,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.69
Dec2018 $1.20
Dec2017 $4.29
Dec2016 $2.46
Dec2015 $1.62
Dec2014 $1.20
Dec2013 $0.58
Dec2012 -$7.32
Dec2011 $0.80
Dec2010 $1.44
Dec2009 $1.35
Dec2008 $0.99
Dec2007 $1.89
Dec2006 $1.47
Dec2005 $1.35
Dec2004 $1.13
Dec2003 $1.00
Dec2002 -$2.15
Dec2001 $0.61
Dec2000 $0.97
Dec1999 $0.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.51
Dec2018 $2.33
Dec2017 $2.61
Dec2016 $1.08
Dec2015 $0.05
Dec2014 -$0.71
Dec2013 -$1.32
Dec2012 -$1.69
Dec2011 $1.18
Dec2010 $1.39
Dec2009 $1.38
Dec2008 $1.38
Dec2007 $1.51
Dec2006 $1.06
Dec2005 $0.70
Dec2004 $0.36
Dec2003 $0.07

Recommended Reading:

Other ModernGraham posts about the company

Sealed Air Corp Valuation – April 2018 $SEE
Sealed Air Corp Valuation – November 2016 $SEE
30 Companies in the Spotlight This Week – 5/23/15
Sealed Air Corporation Annual Valuation – 2015 $SEE
17 Companies in the Spotlight This Week – 5/10/14

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 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.

5 Undervalued Companies for the Defensive Investor Nearest 52 Week Lows – February 2019

5def-und-lows_edited-1

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the five undervalued companies reviewed by ModernGraham trading closest to their 52 week low. Each of these companies has been determined to be suitable for the Defensive Investor according to the ModernGraham approach.

Defensive Investors are defined as investors who 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.

H & R Block Inc (HRB)

H & R Block Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB 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 $1.55 in 2015 to an estimated $2.05 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.95% 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 H & R Block Inc revealed the company was trading above its Graham Number of $8.61. The company pays a dividend of $0.96 per share, for a yield of 3.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.39, which was below the industry average of 18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-6.68.

H & R Block Inc performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Gilead Sciences, Inc. (GILD)

Gilead Sciences, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.61 in 2014 to an estimated $6.87 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.69% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Gilead Sciences, Inc. revealed the company was trading above its Graham Number of $44.37. The company pays a dividend of $2.08 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.88, which was below the industry average of 35.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.88.

Gilead Sciences, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Molson Coors Brewing Co Class B (TAP)

Molson Coors Brewing Co Class B 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 $2.97 in 2014 to an estimated $5.89 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.12% 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 Molson Coors Brewing Co Class B revealed the company was trading below its Graham Number of $86.77. The company pays a dividend of $1.64 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.75, which was below the industry average of 19.84, 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 $-62.64.

Molson Coors Brewing Co Class B fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

AT&T Inc. (T)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.89 in 2014 to an estimated $3.06 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.53% 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 AT&T Inc. revealed the company was trading below its Graham Number of $38.89. The company pays a dividend of $1.97 per share, for a yield of 6.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.56, which was below the industry average of 25.67, 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 $-40.55.

AT&T Inc. fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

PNC Financial Services Group Inc (PNC)

PNC Financial Services Group 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 no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $6.54 in 2014 to an estimated $9.29 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.24% 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.

At the time of valuation, further research into PNC Financial Services Group Inc revealed the company was trading below its Graham Number of $156.09. The company pays a dividend of $2.6 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.98, which was below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

PNC Financial Services Group Inc fares extremely well in the ModernGraham grading system, scoring an A.  (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 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.

Applied Materials Inc Valuation – February 2019 $AMAT

Company Profile (excerpt from Reuters): Applied Materials, Inc. (Applied), incorporated on March 18, 1987, provides manufacturing equipment, services and software to the global semiconductor, display and related industries. The Company’s segments are Semiconductor Systems; Applied Global Services; Display and Adjacent Markets, and Corporate and Other. The Semiconductor Systems segment includes semiconductor capital equipment for etch, rapid thermal processing, deposition, chemical mechanical planarization, metrology and inspection, wafer packaging and ion implantation. Its Applied Global Services segment provides integrated solutions to optimize equipment and fab performance and productivity, including spares, upgrades, services, certain remanufactured earlier generation equipment and factory automation software for semiconductor, display and solar products. The Display and Adjacent Markets segment includes products for manufacturing liquid crystal displays (LCDs), organic light-emitting diodes (OLEDs), upgrades and roll-to-roll Web coating systems and other display technologies for televisions, personal computers, smart phones and other consumer-oriented devices. The Corporate and Other segment includes revenues from products, as well as costs of products sold for fabricating solar photovoltaic cells and modules, and certain operating expenses.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMAT – 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 $37,944,390,515 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.64 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 306.70% Pass
6. Moderate PEmg Ratio PEmg < 20 14.85 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.74 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.64 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.79 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.68
MG Growth Estimate 15.00%
MG Value $103.13
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $38.84
MG Value based on 0% Growth $22.77
Market Implied Growth Rate 3.18%
Current Price $39.78
% of Intrinsic Value 38.57%

Applied Materials, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.76 in 2015 to an estimated $2.68 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.18% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Applied Materials, Inc. revealed the company was trading above its Graham Number of $20.6. The company pays a dividend of $0.6 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 14.85, which was below the industry average of 29.46, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.19.

Applied Materials, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.19
Graham Number $20.60
PEmg 14.85
Current Ratio 2.64
PB Ratio 5.74
Current Dividend $0.60
Dividend Yield 1.51%
Number of Consecutive Years of Dividend Growth 1

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Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2018
Total Current Assets $10,747,000,000
Total Current Liabilities $4,068,000,000
Long-Term Debt $5,309,000,000
Total Assets $17,773,000,000
Intangible Assets $3,581,000,000
Total Liabilities $10,934,000,000
Shares Outstanding (Diluted Average) 987,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.71
Oct2018 $3.23
Oct2017 $3.17
Oct2016 $1.54
Oct2015 $1.12
Oct2014 $0.87
Oct2013 $0.21
Oct2012 $0.09
Oct2011 $1.45
Oct2010 $0.70
Oct2009 -$0.23
Oct2008 $0.70
Oct2007 $1.20
Oct2006 $0.97
Oct2005 $0.73
Oct2004 $0.78
Oct2003 -$0.09
Oct2002 $0.16
Oct2001 $0.30
Oct2000 $1.20
Oct1999 $0.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.68
Oct2018 $2.44
Oct2017 $1.82
Oct2016 $1.02
Oct2015 $0.76
Oct2014 $0.60
Oct2013 $0.46
Oct2012 $0.57
Oct2011 $0.80
Oct2010 $0.54
Oct2009 $0.53
Oct2008 $0.90
Oct2007 $0.90
Oct2006 $0.67
Oct2005 $0.47
Oct2004 $0.39
Oct2003 $0.26

Recommended Reading:

Other ModernGraham posts about the company

5 Companies for Enterprising Investors Near 52 Week Lows – September 2018
Applied Materials Inc Valuation – April 2018 $AMAT
7 Best Undervalued Stocks of the Week – 9/3/16
Applied Materials Inc Valuation – August 2016 $AMAT
Applied Materials Inc Valuation – February 2016 $AMAT

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CTS Corporation Valuation – August 2018 $CTS

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.

10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2019

defensive dividend investorThere are a number of great companies in the market today. I’ve selected the highest dividend yields among the undervalued companies for defensive dividend stock investors reviewed by ModernGraham. Each company has been determined to be suitable for the Defensive Investor according to the ModernGraham approach.

Defensive Investors are defined as investors who 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.

The companies selected for this list may not pay what some consider to be a huge dividend, but they have demonstrated strong financial positions through passing the rigorous requirements of the Defensive Investor and show potential for capital growth based on their current price in relation to intrinsic value.  As such, these defensive dividend stocks may be a great investment if they prove to be suitable for your portfolio after your own additional research.

B&G Foods, Inc. (BGS)

B&G Foods, 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 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 $0.94 in 2014 to an estimated $2.09 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.92% 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 B&G Foods, Inc. revealed the company was trading above its Graham Number of $24.23. The company pays a dividend of $1.86 per share, for a yield of 6.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.34, which was below the industry average of 25.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.95.

B&G Foods, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

AT&T Inc. (T)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.89 in 2014 to an estimated $3.06 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.53% 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 AT&T Inc. revealed the company was trading below its Graham Number of $38.89. The company pays a dividend of $1.97 per share, for a yield of 6.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.56, which was below the industry average of 25.67, 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 $-40.55.

AT&T Inc. fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

Invesco Ltd. (IVZ)

Invesco Ltd. 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 no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.89 in 2014 to an estimated $2.39 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.65% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Invesco Ltd. revealed the company was trading below its Graham Number of $33.89. The company pays a dividend of $1.15 per share, for a yield of 6.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.21, which was below the industry average of 18, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Invesco Ltd. fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

Tanger Factory Outlet Centers Inc. (SKT)

Tanger Factory Outlet Centers Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB 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 $0.76 in 2014 to an estimated $1.25 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.18% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Tanger Factory Outlet Centers Inc. revealed the company was trading above its Graham Number of $11.47. The company pays a dividend of $1.35 per share, for a yield of 5.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.86, which was below the industry average of 49.54, 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 $-17.97.

Tanger Factory Outlet Centers Inc. fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

People’s United Financial, Inc. (PBCT)

People’s United Financial, 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 no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.71 in 2014 to an estimated $1.04 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.89% 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.

At the time of valuation, further research into People’s United Financial, Inc. revealed the company was trading below its Graham Number of $21.65. The company pays a dividend of $0.69 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 14.28, which was below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

People’s United Financial, Inc. fares extremely well in the ModernGraham grading system, scoring an A+.  (See the full valuation)

H & R Block Inc (HRB)

H & R Block Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB 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 $1.55 in 2015 to an estimated $2.05 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.95% 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 H & R Block Inc revealed the company was trading above its Graham Number of $8.61. The company pays a dividend of $0.96 per share, for a yield of 3.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.39, which was below the industry average of 18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-6.68.

H & R Block Inc performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

International Paper Co (IP)

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 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 $2.13 in 2014 to an estimated $3.71 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.9% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into International Paper Co revealed the company was trading above its Graham Number of $40.25. The company pays a dividend of $1.86 per share, for a yield of 3.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.3, which was below the industry average of 22.87, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-46.64.

International Paper Co performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Infosys Ltd ADR (INFY)

Infosys Ltd ADR qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.79 in 2015 to an estimated $0.99 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.56% 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 Infosys Ltd ADR revealed the company was trading above its Graham Number of $10.1. The company pays a dividend of $0.43 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.63, which was below the industry average of 44.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $2.47.

Infosys Ltd ADR performs fairly well in the ModernGraham grading system, scoring a B-.  (See the full valuation)

Principal Financial Group Inc (PFG)

Principal Financial Group 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 no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.9 in 2014 to an estimated $5.72 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.29% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Principal Financial Group Inc revealed the company was trading below its Graham Number of $76.24. The company pays a dividend of $1.87 per share, for a yield of 4.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.92, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Principal Financial Group Inc fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

Pentair PLC (PNR)

Pentair plc. Ordinary Share qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the insufficient earnings stability 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 stability 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 Undervalued after growing its EPSmg (normalized earnings) from $1.01 in 2014 to an estimated $2.31 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.31% 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 above the price.

At the time of valuation, further research into Pentair plc. Ordinary Share revealed the company was trading above its Graham Number of $37.69. The company pays a dividend of $1.38 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 19.12, which was below the industry average of 28.31, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.63.

Pentair plc. Ordinary Share performs fairly well in the ModernGraham grading system, scoring a B+.  (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 Invesco Ltd (IVZ) and People’s United Financial Inc (PBCT) 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.

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