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Extra Space Storage Inc Valuation – March 2019 #EXR

Company Profile (excerpt from Reuters): Extra Space Storage Inc., incorporated on April 30, 2004, is a self-administered and self-managed real estate investment trust (REIT). The Company owns, operates, manages, acquires, develops and redevelops self-storage properties located throughout the United States. The Company operates through three segments: rental operations; tenant reinsurance, and property management, acquisition and development. The Company’s rental operations activities include rental operations of stores in which it has an ownership interest. The Tenant reinsurance activities include the reinsurance of risks relating to the loss of goods stored by tenants in its stores. The Company’s property management, acquisition and development activities include managing, acquiring, developing and selling stores.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EXR – 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 $12,701,894,064 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.50 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 403.54% Pass
6. Moderate PEmg Ratio PEmg < 20 32.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.79 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.50 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -65.05 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.10
MG Growth Estimate 15.00%
MG Value $119.20
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $44.89
MG Value based on 0% Growth $26.32
Market Implied Growth Rate 11.86%
Current Price $99.78
% of Intrinsic Value 83.71%

Extra Space Storage, 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, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.42 in 2015 to an estimated $3.1 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 11.86% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Extra Space Storage, Inc. revealed the company was trading above its Graham Number of $35.52. The company pays a dividend of $3.36 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 32.23, which was below the industry average of 61.92, 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 $-37.35.

Extra Space Storage, 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) -$37.35
Graham Number $35.52
PEmg 32.23
Current Ratio 0.50
PB Ratio 4.79
Current Dividend $3.36
Dividend Yield 3.37%
Number of Consecutive Years of Dividend Growth 9

Useful Links:

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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $72,690,000
Total Current Liabilities $146,658,000
Long-Term Debt $4,811,515,000
Total Assets $7,847,978,000
Intangible Assets $0
Total Liabilities $5,062,556,000
Shares Outstanding (Diluted Average) 133,589,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.94
Dec2018 $3.27
Dec2017 $3.76
Dec2016 $2.91
Dec2015 $1.56
Dec2014 $1.53
Dec2013 $1.53
Dec2012 $1.14
Dec2011 $0.54
Dec2010 $0.30
Dec2009 $0.37
Dec2008 $0.46
Dec2007 $0.53
Dec2006 $0.27
Dec2005 -$0.14
Dec2004 -$1.68
Dec2003 -$5.62
Dec2002 -$3.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.10
Dec2018 $2.98
Dec2017 $2.65
Dec2016 $1.97
Dec2015 $1.42
Dec2014 $1.24
Dec2013 $0.99
Dec2012 $0.66
Dec2011 $0.43
Dec2010 $0.38
Dec2009 $0.38
Dec2008 $0.22
Dec2007 -$0.38
Dec2006 -$1.29
Dec2005 -$2.13
Dec2004 -$2.83
Dec2003 -$2.90

Recommended Reading:

Other ModernGraham posts about the company

Extra Space Storage Inc Valuation – June 2018 $EXR
Extra Space Storage Inc Valuation – Initial Coverage $EXR

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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.

General Mills Inc Valuation – February 2019 $GIS

Company Profile (excerpt from Reuters): General Mills, Inc., incorporated on June 20, 1928, is a manufacturer and marketer of branded consumer foods and pet food products sold through retail stores. The Company is a supplier of branded and unbranded consumer food products to the North American foodservice and commercial baking industries. It also provides pet food products through its subsidiary Blue Buffalo Pet Products Inc. The Company has four segments: U.S. Retail, International, Pet operating, and Convenience Stores and Foodservice. The Company offers a range of food products with a focus on categories, including ready-to-eat cereal; convenient meals, including meal kits, ethnic meals, pizza, soup, side dish mixes, frozen breakfast and frozen entrees; snacks, including grain, fruit and savory snacks, nutrition bars and frozen hot snacks; yogurt, and super-premium ice cream. The Company’s other product categories include baking mixes and ingredients, and refrigerated and frozen dough. The Company’s products are marketed under various brands, which include Annie’s, Betty Crocker, Bisquick, Bugles, Cascadian Farm, Cheerios, Chex, Cinnamon Toast Crunch, Cocoa Puffs, Cookie Crisp, Fiber One, Food Should Taste Good, Fruit by the Foot, Fruit Gushers, Fruit Roll-Ups, Gardetto’s, Go-Gurt, Gold Medal, Golden Grahams, Haagen-Dazs, Helpers, Jeno’s, Jus-Rol, Kitano, Kix, La Saltena, Larabar, Latina, Liberte, Lucky Charms, Muir Glen, Nature Valley, Oatmeal Crisp, Old El Paso, Pillsbury, Progresso, Raisin Nut Bran, Total, Totino’s, Trix, Wanchai Ferry, Wheaties, Yoki and Yoplait. It also provides food products for dogs and cats through its subsidiary.

Downloadable PDF version of this valuation:

ModernGraham Valuation of GIS – 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 $27,927,852,744 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.58 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 24.28% Fail
6. Moderate PEmg Ratio PEmg < 20 16.09 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.05 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.58 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.98 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.91
MG Growth Estimate 2.72%
MG Value $40.53
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $42.18
MG Value based on 0% Growth $24.72
Market Implied Growth Rate 3.79%
Current Price $46.80
% of Intrinsic Value 115.48%

General Mills, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, 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 Overvalued after growing its EPSmg (normalized earnings) from $2.46 in 2015 to an estimated $2.91 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.79% 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 General Mills, Inc. revealed the company was trading above its Graham Number of $24.85. The company pays a dividend of $1.96 per share, for a yield of 4.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.09, which was below the industry average of 26.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-31.71.

General Mills, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$31.71
Graham Number $24.85
PEmg 16.09
Current Ratio 0.58
PB Ratio 4.05
Current Dividend $1.96
Dividend Yield 4.19%
Number of Consecutive Years of Dividend Growth 14

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 11/1/2018
Total Current Assets $4,233,800,000
Total Current Liabilities $7,298,100,000
Long-Term Debt $12,208,600,000
Total Assets $30,384,000,000
Intangible Assets $21,221,000,000
Total Liabilities $23,404,600,000
Shares Outstanding (Diluted Average) 604,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.65
May2018 $3.64
May2017 $2.77
May2016 $2.77
May2015 $1.97
May2014 $2.83
May2013 $2.79
May2012 $2.35
May2011 $2.70
May2010 $2.24
May2009 $1.90
May2008 $1.86
May2007 $1.59
May2006 $1.45
May2005 $1.54
May2004 $1.30
May2003 $1.22
May2002 $0.67
May2001 $1.14
May2000 $1.00
May1999 $0.85

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.91
May2018 $2.96
May2017 $2.62
May2016 $2.54
May2015 $2.46
May2014 $2.67
May2013 $2.52
May2012 $2.33
May2011 $2.23
May2010 $1.93
May2009 $1.74
May2008 $1.62
May2007 $1.48
May2006 $1.36
May2005 $1.27
May2004 $1.11
May2003 $1.00

Recommended Reading:

Other ModernGraham posts about the company

General Mills Inc Valuation – May 2018 $GIS
General Mills Inc Valuation – January 2017 $GIS
General Mills Inc Valuation – August 2016 $GIS
27 Companies in the Spotlight This Week – 4/4/15
General Mills Inc. Annual Valuation – 2015 $GIS

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Campbell Soup Co Valuation – January 2019 $CPB
Kellogg Co Valuation – January 2019 $K
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The Hershey Co Valuation – January 2019 $HSY
Coca-Cola Co Valuation – November 2018 $KO
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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.

W.W. Grainger Inc Valuation – February 2019 $GWW

Company Profile (excerpt from Reuters): W.W. Grainger, Inc. (Grainger), incorporated on December 27, 1928, is a distributor of maintenance, repair and operating (MRO) supplies and other related products and services. The Company offers its products and services to businesses and institutions in the United States and Canada, with presence also in Europe, Asia and Latin America. The Company operates through two segments, which include the United States and Canada. The Company’s business support functions provide coordination and guidance in the areas of accounting and finance, business development, communications and investor relations, compensation and benefits, information systems, health and safety, global supply chain functions, human resources, risk management, internal audit, legal, real estate, security, tax and treasury. The Company’s other businesses also include Zoro Tools, Inc. (Zoro), the single channel online business in the United States, MonotaRO Co. (MonotaRO) in Japan, and operations in Europe, Asia and Latin America.

Downloadable PDF version of this valuation:

ModernGraham Valuation of GWW – 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 $17,300,462,081 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.37 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 61.29% Pass
6. Moderate PEmg Ratio PEmg < 20 22.81 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.33 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 2.37 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.02 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $13.56
MG Growth Estimate 3.46%
MG Value $209.15
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $196.57
MG Value based on 0% Growth $115.23
Market Implied Growth Rate 7.15%
Current Price $309.17
% of Intrinsic Value 147.82%

W W Grainger Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $11.01 in 2015 to an estimated $13.56 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.15% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into W W Grainger Inc revealed the company was trading above its Graham Number of $121.15. The company pays a dividend of $5.36 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 22.81, which was below the industry average of 24.89, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.96.

W W Grainger Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.96
Graham Number $121.15
PEmg 22.81
Current Ratio 2.37
PB Ratio 8.33
Current Dividend $5.36
Dividend Yield 1.73%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,557,000,000
Total Current Liabilities $1,501,000,000
Long-Term Debt $2,090,000,000
Total Assets $5,873,000,000
Intangible Assets $884,000,000
Total Liabilities $3,780,000,000
Shares Outstanding (Diluted Average) 56,377,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.41
Dec2018 $13.73
Dec2017 $10.02
Dec2016 $9.87
Dec2015 $11.58
Dec2014 $11.45
Dec2013 $11.13
Dec2012 $9.52
Dec2011 $9.07
Dec2010 $6.93
Dec2009 $5.62
Dec2008 $5.97
Dec2007 $4.94
Dec2006 $4.24
Dec2005 $3.78
Dec2004 $3.13
Dec2003 $2.46
Dec2002 $2.24
Dec2001 $1.84
Dec2000 $2.05
Dec1999 $1.92

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $13.56
Dec2018 $11.53
Dec2017 $10.56
Dec2016 $10.79
Dec2015 $11.01
Dec2014 $10.36
Dec2013 $9.36
Dec2012 $8.13
Dec2011 $7.12
Dec2010 $5.94
Dec2009 $5.27
Dec2008 $4.87
Dec2007 $4.11
Dec2006 $3.52
Dec2005 $3.01
Dec2004 $2.53
Dec2003 $2.19

Recommended Reading:

Other ModernGraham posts about the company

W.W. Grainger Inc Valuation – May 2018 $GWW
Best Dividend Paying Stocks for Dividend Growth Investors – August 2017
Best Dividend Paying Stocks for Dividend Growth Investors – March 2017
15 Best Stocks for Value Investors This Week – 1/14/17
W. W. Grainger Inc Valuation – January 2017 $GWW

Other ModernGraham posts about related companies

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Deere & Co Valuation – January 2019 $DE
A.O. Smith Corp Valuation – January 2019 $AOS
Parker-Hannifin Corp Valuation – January 2019 $PH
Dover Corp Valuation – January 2019 $DOV
Caterpillar Inc Valuation – November 2018 $CAT

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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Intercontinental Exchange Inc Valuation – January 2019 $ICE
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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.

Regeneron Pharmaceuticals Inc Valuation – February 2019 $REGN

Company Profile (excerpt from Reuters): Regeneron Pharmaceuticals, Inc., incorporated on January 11, 1988, is a biopharmaceutical company that discovers, invents, develops, manufactures and commercializes medicines for the treatment of serious medical conditions. The Company commercializes medicines for eye diseases, high low-density lipoprotein (LDL) cholesterol, and an inflammatory condition and have product candidates in development in other areas, including rheumatoid arthritis, asthma, atopic dermatitis, pain, cancer, and infectious diseases. The Company’s marketed products include EYLEA (aflibercept) Injection, Praluent (alirocumab) Injection, ARCALYST (rilonacept) Injection for Subcutaneous Use, Kevzara (sarilumab) Solution for Subcutaneous Injection and ZALTRAP (ziv-aflibercept) Injection for intravenous infusion. As of December 31, 2016, the Company had 16 product candidates in clinical development, which consisted of a Trap-based clinical program and 15 fully human monoclonal antibody product candidates. Its antibodies are generated using its VelocImmune technology.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of REGN – 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 $45,297,630,364 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.47 Pass
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 1470.07% Pass
6. Moderate PEmg Ratio PEmg < 20 29.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.52 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 4.47 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $14.51
MG Growth Estimate 15.00%
MG Value $558.51
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $210.35
MG Value based on 0% Growth $123.31
Market Implied Growth Rate 10.29%
Current Price $421.90
% of Intrinsic Value 75.54%

Regeneron Pharmaceuticals Inc 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, and 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 Fairly Valued after growing its EPSmg (normalized earnings) from $4.12 in 2015 to an estimated $14.51 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 10.29% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Regeneron Pharmaceuticals Inc revealed the company was trading above its Graham Number of $170.59. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 29.08, which was below the industry average of 39.51, 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 $30.26.

Regeneron Pharmaceuticals 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) $30.26
Graham Number $170.59
PEmg 29.08
Current Ratio 4.47
PB Ratio 5.52
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 $6,447,600,000
Total Current Liabilities $1,442,800,000
Long-Term Debt $0
Total Assets $11,734,500,000
Intangible Assets $0
Total Liabilities $2,977,200,000
Shares Outstanding (Diluted Average) 114,671,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $16.10
Dec2018 $21.29
Dec2017 $10.34
Dec2016 $7.70
Dec2015 $5.52
Dec2014 $2.98
Dec2013 $3.72
Dec2012 $6.75
Dec2011 -$2.45
Dec2010 -$1.26
Dec2009 -$0.85
Dec2008 -$1.00
Dec2007 -$1.59
Dec2006 -$1.77
Dec2005 -$1.71
Dec2004 $0.74
Dec2003 -$2.13
Dec2002 -$2.83
Dec2001 -$1.81
Dec2000 -$0.66
Dec1999 -$0.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $14.51
Dec2018 $12.33
Dec2017 $7.25
Dec2016 $5.58
Dec2015 $4.12
Dec2014 $2.92
Dec2013 $2.33
Dec2012 $1.16
Dec2011 -$1.56
Dec2010 -$1.18
Dec2009 -$1.22
Dec2008 -$1.29
Dec2007 -$1.39
Dec2006 -$1.37
Dec2005 -$1.30
Dec2004 -$1.17
Dec2003 -$1.96

Recommended Reading:

Other ModernGraham posts about the company

Regeneron Pharmaceuticals Inc Valuation – April 2018 $REGN
Regeneron Pharmaceuticals Inc Valuation – November 2016 $REGN
Regeneron Pharmaceuticals Inc Valuation – August 2016 $REGN
Regeneron Pharmaceuticals Inc. Annual Valuation – 2015 $REGN
16 Companies in the Spotlight this Week – 4/19/14

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Eli Lilly and Co Valuation – January 2019 $LLY
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Pfizer Inc Valuation – November 2018 $PFE
Nektar Therapeutics Valuation – November 2018 $NKTR
Merck & Co Inc Valuation – November 2018 $MRK
Ligand Pharmaceuticals Inc Valuation – September 2018 $LGND

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.

General Motors Co Valuation – February 2019 $GM

Company Profile (excerpt from Reuters): General Motors Company, incorporated on August 11, 2009, designs, builds and sells cars, trucks, crossovers and automobile parts. The Company’s segments include GM North America (GMNA), GM Europe (GME), GM International Operations (GMIO), GM South America (GMSA) and General Motors Financial Company, Inc. (GM Financial). The Company provides automotive financing services through General Motors Financial Company, Inc. The Company develops, manufactures and/or markets vehicles in North America under the brands, including Buick, Cadillac, Chevrolet and GMC. The Company also develops, manufactures and/or markets vehicles outside North America under the brands, including Buick, Cadillac, Chevrolet, GMC, Holden, Opel and Vauxhall.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GM – 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 $55,096,534,325 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.92 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 -14.05% Fail
6. Moderate PEmg Ratio PEmg < 20 9.41 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.31 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.92 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.52 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.16
MG Growth Estimate 2.41%
MG Value $55.33
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $60.25
MG Value based on 0% Growth $35.32
Market Implied Growth Rate 0.45%
Current Price $39.09
% of Intrinsic Value 70.65%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.58 in 2015 to an estimated $4.16 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.45% 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 General Motors Company revealed the company was trading below its Graham Number of $61.47. The company pays a dividend of $1.52 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.41, 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 $-76.36.

General Motors Company performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$76.36
Graham Number $61.47
PEmg 9.41
Current Ratio 0.92
PB Ratio 1.31
Current Dividend $1.52
Dividend Yield 3.89%
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 $75,293,000,000
Total Current Liabilities $82,237,000,000
Long-Term Debt $73,060,000,000
Total Assets $227,339,000,000
Intangible Assets $5,579,000,000
Total Liabilities $184,562,000,000
Shares Outstanding (Diluted Average) 1,431,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.05
Dec2018 $5.53
Dec2017 -$2.65
Dec2016 $6.00
Dec2015 $5.91
Dec2014 $1.65
Dec2013 $2.38
Dec2012 $2.92
Dec2011 $4.58
Dec2010 $2.89
Dec2009 $113.18
Dec2008 -$53.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.16
Dec2018 $3.23
Dec2017 $2.28
Dec2016 $4.42
Dec2015 $3.58
Dec2014 $2.57
Dec2013 $10.42
Dec2012 $14.30
Dec2011 $17.80
Dec2010 $20.45
Dec2009 $23.47
Dec2008 -$17.82

Recommended Reading:

Other ModernGraham posts about the company

General Motors Co Valuation – April 2018 $GM
General Motors Company Valuation – November 2016 $GM
General Motors Company Analysis – 2015 Update $GM
17 Companies in the Spotlight This Week – 8/2/14
General Motors Co. Annual Valuation – 2014 $GM

Other ModernGraham posts about related companies

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Linamar Corp Valuation – October 2018 $TSE-LNR
AutoNation Inc Valuation – September 2018 $AN
Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL

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.

Waste Management Inc Valuation – February 2019 $WM

Company Profile (excerpt from Reuters): Waste Management, Inc. (WM), incorporated on April 28, 1995, is a holding company. The Company, through its subsidiaries, is a provider of waste management environmental services. The Company’s segments include Solid Waste and Other. The Company’s Solid Waste segment includes its solid waste business. The Other segment includes its Strategic Business Solutions (WMSBS) organization; its landfill gas-to-energy operations and third-party subcontract and administration services managed by its Energy and Environmental Services and WM Renewable Energy organizations; its recycling brokerage services, and its service offerings and solutions, such as portable self-storage and long distance moving services, fluorescent lamp recycling and interests it holds in oil and gas producing properties.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WM – 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 $42,195,563,110 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.87 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 87.89% Pass
6. Moderate PEmg Ratio PEmg < 20 28.00 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.83 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.87 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -24.23 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.54
MG Growth Estimate 15.00%
MG Value $136.11
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $51.26
MG Value based on 0% Growth $30.05
Market Implied Growth Rate 9.75%
Current Price $98.99
% of Intrinsic Value 72.73%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.74 in 2014 to an estimated $3.54 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.75% 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 Waste Management, Inc. revealed the company was trading above its Graham Number of $36.53. The company pays a dividend of $1.7 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 28, which was below the industry average of 42.59, 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 $-31.74.

Waste Management, 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) -$31.74
Graham Number $36.53
PEmg 28.00
Current Ratio 0.87
PB Ratio 6.83
Current Dividend $1.70
Dividend Yield 1.72%
Number of Consecutive Years of Dividend Growth 14

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,675,000,000
Total Current Liabilities $3,070,000,000
Long-Term Debt $9,569,000,000
Total Assets $22,591,000,000
Intangible Assets $6,944,000,000
Total Liabilities $16,350,000,000
Shares Outstanding (Diluted Average) 430,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.27
Dec2017 $4.41
Dec2016 $2.65
Dec2015 $1.65
Dec2014 $2.79
Dec2013 $0.21
Dec2012 $1.76
Dec2011 $2.04
Dec2010 $1.98
Dec2009 $2.01
Dec2008 $2.19
Dec2007 $2.23
Dec2006 $2.10
Dec2005 $2.09
Dec2004 $1.61
Dec2003 $1.06
Dec2002 $1.33
Dec2001 $0.80
Dec2000 -$0.16
Dec1999 -$0.65
Dec1998 -$1.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.54
Dec2017 $2.89
Dec2016 $2.03
Dec2015 $1.71
Dec2014 $1.74
Dec2013 $1.35
Dec2012 $1.94
Dec2011 $2.05
Dec2010 $2.07
Dec2009 $2.12
Dec2008 $2.13
Dec2007 $2.01
Dec2006 $1.81
Dec2005 $1.57
Dec2004 $1.18
Dec2003 $0.80
Dec2002 $0.45

Recommended Reading:

Other ModernGraham posts about the company

Waste Management Inc Valuation – April 2018 $WM
Waste Management Inc Valuation – August 2016 $WM
5 Speculative and Overvalued Companies to Avoid – July 2015
Waste Management Inc. Analysis – 2015 Update $WM

Other ModernGraham posts about related companies

Clean Harbors Inc Valuation – July 2018 $CLH
Stericycle Inc Valuation – May 2018 $SRCL
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Waste Management Inc Valuation – April 2018 $WM
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Stericycle Inc Valuation – February 2017 $SRCL
Republic Services Inc Valuation – January 2017 $RSG
Clean Harbors Inc Valuation – Initial Coverage $CLH
Waste Management Inc Valuation – August 2016 $WM
Stericycle Inc. Analysis – October 2015 Update $SRCL

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.

Baker Hughes, a GE Co Valuation – February 2019 $BHGE

Company Profile (excerpt from Reuters): Baker Hughes, a GE Company, incorporated on October 28, 2016, is an oil and gas company. The Company is a provider of integrated oilfield products, services and digital solutions. The Company’s products and services include upstream, midstream, downstream, industrial and digital. The Company’s upstream, which includes evaluation, drilling, completions and production. Midstream enables the power and compression efficiency for LNG and pipeline and storage. Downstream is build reliability and safety into process operations that includes refining and petrochemical and fertilizer solutions. In addition downstream offers process chemical, water treatment, turbo machinery, condition monitoring, process services and flow and process technologies.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BHGE – 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 $25,573,144,062 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.66 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 346666566.67% Pass
6. Moderate PEmg Ratio PEmg < 20 398.55 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.78 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 1.66 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.06 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.06
MG Growth Estimate 15.00%
MG Value $2.39
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $0.90
MG Value based on 0% Growth $0.53
Market Implied Growth Rate 195.10%
Current Price $24.72
% of Intrinsic Value 1035.61%

Baker Hughes A GE Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor is only concerned with the lack of earnings stability over the last five years. 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 $0 in 2015 to an estimated $0.06 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 195.1% 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 Baker Hughes A GE Co revealed the company was trading above its Graham Number of $23.33. The company pays a dividend of $0.72 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 398.71, which was above the industry average of 43.92. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.23.

Baker Hughes A GE Co receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.23
Graham Number $23.33
PEmg 398.71
Current Ratio 1.66
PB Ratio 0.78
Current Dividend $0.72
Dividend Yield 2.91%
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 $14,971,000,000
Total Current Liabilities $9,020,000,000
Long-Term Debt $6,285,000,000
Total Assets $52,439,000,000
Intangible Assets $26,436,000,000
Total Liabilities $17,426,000,000
Shares Outstanding (Diluted Average) 1,099,932,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.76
Dec2018 $0.45
Dec2017 -$0.17
Dec2016 -$2.08

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.06
Dec2018 -$0.31
Dec2017 -$0.61
Dec2016 -$0.69

Recommended Reading:

Other ModernGraham posts about the company

Baker Hughes, a GE Co Valuation – April 2018 $BHGE

Other ModernGraham posts about related companies

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Marathon Oil Corp Valuation – January 2019 $MRO
HollyFrontier Corp Valuation – January 2019 $HFC
Hess Corp Valuation – January 2019 $HES
Cimarex Energy Co Valuation – January 2019 $XEC
EQT Corp Valuation – January 2019 $EQT

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.

Dollar General Corp Valuation – February 2019 $DG

Company Profile (excerpt from Reuters): Dollar General Corporation, incorporated on May 29, 1998, is a discount retailer. The Company operated 13,429 stores located in 44 states in the United States, as of March 3, 2017. It offers a selection of merchandise, including consumables, seasonal items, home products and apparel. Its consumables category includes paper and cleaning products (such as paper towels, bath tissue, paper dinnerware, trash and storage bags, laundry and other home cleaning supplies); packaged food (such as cereals, canned soups and vegetables, condiments, spices, sugar and flour); perishables (such as milk, eggs, bread, frozen meals, beer and wine); snacks (such as candy, cookies, crackers, salty snacks and carbonated beverages); health and beauty (such as over-the-counter medicines and personal care products, such as soap, body wash, shampoo, dental hygiene and foot care products); pet (such as pet supplies and pet food), and tobacco products. Its seasonal products include decorations, toys, batteries, small electronics, greeting cards, stationery, prepaid phones and accessories, gardening supplies, hardware, automotive and home office supplies. Its home products include kitchen supplies, cookware, small appliances, light bulbs, storage containers, frames, candles, craft supplies and kitchen, and bed and bath soft goods.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DG – 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 $30,578,666,799 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.55 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 215.16% Pass
6. Moderate PEmg Ratio PEmg < 20 22.67 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.86 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 1.55 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.76 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.13
MG Growth Estimate 10.68%
MG Value $153.23
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $74.39
MG Value based on 0% Growth $43.61
Market Implied Growth Rate 7.09%
Current Price $116.32
% of Intrinsic Value 75.91%

Dollar General Corp. 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, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3 in 2015 to an estimated $5.13 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 7.09% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Dollar General Corp. revealed the company was trading above its Graham Number of $55.24. The company pays a dividend of $1.04 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 22.67, which was below the industry average of 27. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-8.04.

Dollar General 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) -$8.04
Graham Number $55.24
PEmg 22.67
Current Ratio 1.55
PB Ratio 4.86
Current Dividend $1.04
Dividend Yield 0.89%
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 10/1/2018
Total Current Assets $4,630,344,000
Total Current Liabilities $2,982,182,000
Long-Term Debt $2,902,439,000
Total Assets $13,121,021,000
Intangible Assets $5,538,859,000
Total Liabilities $6,765,133,000
Shares Outstanding (Diluted Average) 265,522,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.95
Jan2018 $5.63
Jan2017 $4.43
Jan2016 $3.95
Jan2015 $3.49
Jan2014 $3.17
Jan2013 $2.85
Jan2012 $2.22
Jan2011 $1.82
Jan2010 $1.04
Jan2009 $0.34
Jan2008 $0.00
Jan2007 $0.44
Jan2006 $1.08
Jan2005 $1.04
Jan2004 $0.89
Jan2003 $0.78
Jan2002 $0.62
Jan2001 $0.21
Jan2000 $0.55
Jan1999 $0.45

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.13
Jan2018 $4.52
Jan2017 $3.84
Jan2016 $3.41
Jan2015 $3.00
Jan2014 $2.57
Jan2013 $2.07
Jan2012 $1.48
Jan2011 $0.98
Jan2010 $0.57
Jan2009 $0.41
Jan2008 $0.53
Jan2007 $0.81
Jan2006 $0.96
Jan2005 $0.84
Jan2004 $0.69
Jan2003 $0.57

Recommended Reading:

Other ModernGraham posts about the company

Dollar General Corp Valuation – April 2018 $DG
14 Best Undervalued Stocks of the Week – 8/6/16
Dollar General Corp Valuation – August 2016 $DG
27 Companies in the Spotlight This Week – 4/4/15
Dollar General Corporation Annual Valuation – April 2015 $DG

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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.

AmerisourceBergen Corp Valuation – February 2019 $ABC

Company Profile (excerpt from Reuters): AmerisourceBergen Corporation, incorporated on March 16, 2001, is a pharmaceutical sourcing and distribution services company. The Company’s segments include Pharmaceutical Distribution and Other. The Company provides services to healthcare providers, and pharmaceutical and biotech manufacturers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ABC – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,168,516,235 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.94 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 107.14% Pass
6. Moderate PEmg Ratio PEmg < 20 16.20 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.87 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.94 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.22 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.30
MG Growth Estimate 15.00%
MG Value $204.05
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $76.85
MG Value based on 0% Growth $45.05
Market Implied Growth Rate 3.85%
Current Price $85.84
% of Intrinsic Value 42.07%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.01 in 2015 to an estimated $5.3 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.85% 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 AmerisourceBergen Corp. revealed the company was trading above its Graham Number of $44.49. The company pays a dividend of $1.52 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 16.2, which was below the industry average of 51.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-39.87.

AmerisourceBergen 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) -$39.87
Graham Number $44.49
PEmg 16.20
Current Ratio 0.94
PB Ratio 5.87
Current Dividend $1.52
Dividend Yield 1.77%
Number of Consecutive Years of Dividend Growth 13

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 $27,476,207,000
Total Current Liabilities $29,351,737,000
Long-Term Debt $4,165,400,000
Total Assets $39,267,823,000
Intangible Assets $9,622,245,000
Total Liabilities $36,103,090,000
Shares Outstanding (Diluted Average) 216,360,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.49
Sep2018 $7.53
Sep2017 $1.64
Sep2016 $6.32
Sep2015 -$0.63
Sep2014 $1.16
Sep2013 $1.84
Sep2012 $2.80
Sep2011 $2.54
Sep2010 $2.22
Sep2009 $1.66
Sep2008 $0.77
Sep2007 $1.25
Sep2006 $1.13
Sep2005 $0.62
Sep2004 $1.02
Sep2003 $0.98
Sep2002 $0.79
Sep2001 $0.53
Sep2000 $0.48
Sep1999 $0.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.30
Sep2018 $4.20
Sep2017 $2.38
Sep2016 $2.60
Sep2015 $1.01
Sep2014 $1.92
Sep2013 $2.27
Sep2012 $2.33
Sep2011 $1.96
Sep2010 $1.58
Sep2009 $1.20
Sep2008 $0.97
Sep2007 $1.04
Sep2006 $0.93
Sep2005 $0.81
Sep2004 $0.86
Sep2003 $0.73

Recommended Reading:

Other ModernGraham posts about the company

AmerisourceBergen Corp Valuation – April 2018 $ABC
AmerisourceBergen Corp Valuation – July 2016 $ABC
27 Companies in the Spotlight This Week – 4/4/15
AmerisourceBergen Corporation Annual Valuation – 2015 $ABC
14 Companies in the Spotlight This Week – 4/5/14

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Disclaimer:

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

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