Laboratory Corp of America Holdings Inc Valuation – January 2019 $LH

Company Profile (excerpt from Reuters): Laboratory Corporation of America Holdings, incorporated on March 8, 1994, is a life sciences company that is integrated in guiding patient care, providing clinical laboratory and end-to-end drug development services. The Company operates as a healthcare diagnostics company. The Company operates through two segments: LabCorp Diagnostics (LCD) and Covance Drug Development (CDD). The Company serves a range of customers, including managed care organizations (MCOs), biopharmaceutical companies, governmental agencies, physicians and other healthcare providers (such as physician assistants and nurse practitioners), hospitals and health systems, employers, patients and consumers, contract research organizations, food and nutritional companies and independent clinical laboratories.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LH – January 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 $13,766,796,246 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 86.48% Pass
6. Moderate PEmg Ratio PEmg < 20 15.54 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.93 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 1.55 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.13 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.78
MG Growth Estimate 7.45%
MG Value $205.57
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $127.37
MG Value based on 0% Growth $74.66
Market Implied Growth Rate 3.52%
Current Price $136.50
% of Intrinsic Value 66.40%

Laboratory Corp. of America Holdings 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 net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.87 in 2014 to an estimated $8.78 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.52% 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 Laboratory Corp. of America Holdings revealed the company was trading above its Graham Number of $119.38. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 15.54, which was below the industry average of 52.7, 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 $-59.78.

Laboratory Corp. of America Holdings receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$59.78
Graham Number $119.38
PEmg 15.54
Current Ratio 1.55
PB Ratio 1.93
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 9/1/2018
Total Current Assets $3,274,300,000
Total Current Liabilities $2,106,200,000
Long-Term Debt $5,992,000,000
Total Assets $16,661,400,000
Intangible Assets $11,353,600,000
Total Liabilities $9,413,300,000
Shares Outstanding (Diluted Average) 102,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.45
Dec2017 $12.21
Dec2016 $7.02
Dec2015 $4.35
Dec2014 $5.91
Dec2013 $6.25
Dec2012 $5.99
Dec2011 $5.11
Dec2010 $5.29
Dec2009 $4.98
Dec2008 $4.16
Dec2007 $3.93
Dec2006 $3.24
Dec2005 $2.71
Dec2004 $2.45
Dec2003 $2.11
Dec2002 $1.77
Dec2001 $1.27
Dec2000 $0.81
Dec1999 $0.29
Dec1998 $0.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.78
Dec2017 $8.02
Dec2016 $5.91
Dec2015 $5.42
Dec2014 $5.87
Dec2013 $5.74
Dec2012 $5.36
Dec2011 $4.93
Dec2010 $4.66
Dec2009 $4.17
Dec2008 $3.61
Dec2007 $3.18
Dec2006 $2.69
Dec2005 $2.30
Dec2004 $1.96
Dec2003 $1.56
Dec2002 $1.16

Recommended Reading:

Other ModernGraham posts about the company

Laboratory Corporation of America Holdings Valuation – March 2018 $LH
Laboratory Corp of America Holdings Valuation – July 2016 $LH
47 Companies in the Spotlight This Week – 5/16/15
Laboratory Corporation of America Holdings Annual Valuation – 2015 $LH
15 Companies in the Spotlight This Week – 5/3/2014

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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.

Zimmer Biomet Holdings Inc Valuation – January 2019 $ZBH

Company Profile (excerpt from Reuters): Zimmer Biomet Holdings, Inc., incorporated on January 12, 2001, is engaged in designing, manufacturing and marketing of orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; office-based technologies; spine, craniomaxillofacial and thoracic products; dental implants, and related surgical products. The Company’s products and solutions help treat patients suffering from disorders of, or injuries to, bones, joints or supporting soft tissues. The Company manages its operations through three geographic operating segments: the Americas, consisting principally of the United States and other North, Central and South American markets; EMEA, consisting principally of Europe and the Middle East and African markets, and Asia Pacific, consisting primarily of Japan and other Asian and Pacific markets. The Company’s product category segments include Americas Spine, Office Based Technologies, Craniomaxillofacial and Thoracic (CMF), and Dental.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ZBH – January 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 $21,078,879,093 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.89 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 46.03% Pass
6. Moderate PEmg Ratio PEmg < 20 22.41 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.74 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 1.89 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.05 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 $4.61
MG Growth Estimate 1.45%
MG Value $52.60
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $66.86
MG Value based on 0% Growth $39.20
Market Implied Growth Rate 6.96%
Current Price $103.34
% of Intrinsic Value 196.46%

Zimmer Biomet Holdings 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, and the high PEmg ratio. 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 Overvalued after growing its EPSmg (normalized earnings) from $4.2 in 2014 to an estimated $4.61 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.96% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Zimmer Biomet Holdings Inc revealed the company was trading above its Graham Number of $77.93. The company pays a dividend of $0.96 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 22.41, which was below the industry average of 52.7, 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 $-42.09.

Zimmer Biomet Holdings 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) -$42.09
Graham Number $77.93
PEmg 22.41
Current Ratio 1.89
PB Ratio 1.74
Current Dividend $0.96
Dividend Yield 0.93%
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 9/1/2018
Total Current Assets $4,513,300,000
Total Current Liabilities $2,391,200,000
Long-Term Debt $8,597,400,000
Total Assets $25,382,000,000
Intangible Assets $18,421,000,000
Total Liabilities $13,159,000,000
Shares Outstanding (Diluted Average) 205,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.66
Dec2017 $8.90
Dec2016 $1.51
Dec2015 $0.77
Dec2014 $4.20
Dec2013 $4.54
Dec2012 $4.29
Dec2011 $4.03
Dec2010 $2.97
Dec2009 $3.32
Dec2008 $3.72
Dec2007 $3.26
Dec2006 $3.40
Dec2005 $2.93
Dec2004 $2.19
Dec2003 $1.64
Dec2002 $1.31
Dec2001 $0.77
Dec2000 $0.91

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.61
Dec2017 $4.39
Dec2016 $2.44
Dec2015 $3.13
Dec2014 $4.20
Dec2013 $4.08
Dec2012 $3.79
Dec2011 $3.51
Dec2010 $3.28
Dec2009 $3.40
Dec2008 $3.33
Dec2007 $2.98
Dec2006 $2.66
Dec2005 $2.11
Dec2004 $1.59
Dec2003 $1.17
Dec2002 $0.82

Recommended Reading:

Other ModernGraham posts about the company

Zimmer Biomet Holdings Inc Valuation – March 2018 $ZBH
Zimmer Biomet Holdings Inc Valuation – June 2016 $ZBH
Zimmer Biomet Holdings Inc. Analysis – September 2015 Update $ZBH

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Chartwell Retirement Residences Valuation – August 2018 $TSE:CSH.UN
STERIS PLC Valuation – August 2018 $STE
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Charles River Laboratories International Inc Valuation – August 2018 $CRL
Surmodics Inc Valuation – August 2018 $SRDX

Disclaimer:

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

United Continental Holdings Inc Valuation – January 2019 $UAL

Company Profile (excerpt from Reuters): United Continental Holdings, Inc. (UAL), incorporated on December 30, 1968, is a holding company and its principal subsidiary is United Air Lines, Inc. (United). The Company transports people and cargo through its mainline operations. It has global air rights in North America, Asia-Pacific, Europe, Middle East, Africa and Latin America. The Company, through United and its regional carriers, operates flights from its hubs at Newark Liberty International Airport (Newark Liberty), Chicago O’Hare International Airport (Chicago O’Hare), Denver International Airport (Denver), George Bush Intercontinental Airport (Houston Bush), Los Angeles International Airport (LAX), A.B. Won Pat International Airport (Guam), San Francisco International Airport (SFO) and Washington Dulles International Airport (Washington Dulles).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of UAL – January 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 $21,767,148,793 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.63 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 -2302.04% Fail
6. Moderate PEmg Ratio PEmg < 20 9.29 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.31 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 0.63 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.44 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.60
MG Growth Estimate 15.00%
MG Value $331.23
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $124.75
MG Value based on 0% Growth $73.13
Market Implied Growth Rate 0.39%
Current Price $79.89
% of Intrinsic Value 24.12%

United Continental Holdings 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. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.32 in 2014 to an estimated $8.6 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.39% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into United Continental Holdings Inc revealed the company was trading above its Graham Number of $72.96. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 9.29, which was below the industry average of 9.65, 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 $-97.58.

United Continental Holdings 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) -$97.58
Graham Number $72.96
PEmg 9.29
Current Ratio 0.63
PB Ratio 2.31
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 9/1/2018
Total Current Assets $8,671,000,000
Total Current Liabilities $13,684,000,000
Long-Term Debt $12,218,000,000
Total Assets $44,837,000,000
Intangible Assets $7,905,000,000
Total Liabilities $35,368,000,000
Shares Outstanding (Diluted Average) 273,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.71
Dec2017 $7.02
Dec2016 $6.85
Dec2015 $19.47
Dec2014 $2.93
Dec2013 $1.53
Dec2012 -$2.18
Dec2011 $2.26
Dec2010 $1.08
Dec2009 -$4.32
Dec2008 -$42.59
Dec2007 $2.79
Dec2006 $196.75
Dec2005 -$182.29
Dec2004 -$15.25
Dec2003 -$27.36
Dec2002 -$53.55
Dec2001 -$40.04
Dec2000 $0.04
Dec1999 $9.94
Dec1998 $6.83

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.60
Dec2017 $8.55
Dec2016 $8.12
Dec2015 $7.44
Dec2014 $1.32
Dec2013 $0.24
Dec2012 -$3.32
Dec2011 -$5.32
Dec2010 $4.18
Dec2009 $1.84
Dec2008 $0.58
Dec2007 $13.08
Dec2006 $6.70
Dec2005 -$80.11
Dec2004 -$28.43
Dec2003 -$30.74
Dec2002 -$26.74

Recommended Reading:

Other ModernGraham posts about the company

United Continental Holdings Inc Valuation – Initial Coverage $UAL

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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.

Goldman Sachs Group Inc Valuation – November 2018 $GS

Company Profile (excerpt from Reuters): The Goldman Sachs Group, Inc., incorporated on July 21, 1998, is an investment banking, securities and investment management company that provides a range of financial services to corporations, financial institutions, governments and individuals. The Company operates in four business segments: Investment Banking, Institutional Client Services, Investing & Lending, and Investment Management. As of December 2016, it had offices in over 30 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GS – November 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $75,183,330,715 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 26.44% Fail
5. Moderate PEmg Ratio PEmg < 20 12.05 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.91 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $16.77
MG Growth Estimate 2.81%
MG Value $236.89
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $243.13
MG Value based on 0% Growth $142.52
Market Implied Growth Rate 1.78%
Current Price $202.12
% of Intrinsic Value 85.32%

Goldman Sachs Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth 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 Fairly Valued after growing its EPSmg (normalized earnings) from $14.12 in 2014 to an estimated $16.77 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 1.78% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Goldman Sachs Group Inc revealed the company was trading below its Graham Number of $325.35. The company pays a dividend of $2.9 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 12.05, which was below the industry average of 20.05, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Goldman Sachs Group Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Graham Number $325.35
PEmg 12.05
PB Ratio 0.91
Dividend Yield 1.43%
TTM Dividend $2.90
Number of Consecutive Years of Dividend Growth 6

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $255,886,000,000
Total Assets $957,190,000,000
Intangible Assets $4,101,000,000
Total Liabilities $870,428,000,000
Shares Outstanding (Diluted Average) 390,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $25.05
Dec2017 $9.01
Dec2016 $16.29
Dec2015 $12.14
Dec2014 $17.07
Dec2013 $15.46
Dec2012 $14.13
Dec2011 $4.51
Dec2010 $13.18
Dec2009 $22.13
Nov2008 $4.47
Nov2007 $24.73
Nov2006 $19.69
Nov2005 $11.21
Nov2004 $8.92
Nov2003 $5.87
Nov2002 $4.03
Nov2001 $4.26
Nov2000 $6.00
Nov1999 $5.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $16.77
Dec2017 $13.08
Dec2016 $15.08
Dec2015 $13.88
Dec2014 $14.12
Dec2013 $13.06
Dec2012 $11.80
Dec2011 $11.69
Dec2010 $15.80
Dec2009 $16.89
Nov2008 $14.11
Nov2007 $17.32
Nov2006 $12.39
Nov2005 $8.11
Nov2004 $6.31
Nov2003 $5.05
Nov2002 $4.42

Recommended Reading:

Other ModernGraham posts about the company

Goldman Sachs Group Inc Valuation – February 2018 $GS
Goldman Sachs Group Inc Valuation – June 2016 $GS
10 Low PE Stocks for the Enterprising Investor – June 2016
Stocks Trading Below Their Graham Number – May 2016
Stocks Trading Below Their Graham Number – March 2016

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SLM Corp Valuation – July 2018 $SLM

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.

Lumentum Holdings Inc Valuation – October 2018 $LITE

Company Profile (excerpt from Reuters): Lumentum Holdings Inc., incorporated on February 10, 2015, is a provider of optical and photonic products for a range of end market applications, including data communications (Datacom) and telecommunications (Telecom) networking and commercial lasers (commercial lasers) for manufacturing, inspection and life-science applications. The Company operates in two segments: Optical Communications (OpComms) and Commercial Lasers (Lasers). The Company’s customers include original equipment manufacturers (OEMs).

LITE Chart

LITE data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LITE – October 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,813,220,204 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.27 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 19333.33% Pass
6. Moderate PEmg Ratio PEmg < 20 31.59 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.13 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 5.27 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.37 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 $1.91
MG Growth Estimate 15.00%
MG Value $73.38
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $27.64
MG Value based on 0% Growth $16.20
Market Implied Growth Rate 11.54%
Current Price $60.21
% of Intrinsic Value 82.05%

Lumentum Holdings Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.05 in 2015 to an estimated $1.91 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 11.54% 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 Lumentum Holdings Inc revealed the company was trading above its Graham Number of $35.14. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 31.59, which was below the industry average of 42.74, 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 $7.42.

Lumentum Holdings 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) $7.42
Graham Number $35.14
PEmg 31.59
Current Ratio 5.27
PB Ratio 4.13
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 6/1/2018
Total Current Assets $1,127,200,000
Total Current Liabilities $214,000,000
Long-Term Debt $334,200,000
Total Assets $1,581,500,000
Intangible Assets $18,300,000
Total Liabilities $655,400,000
Shares Outstanding (Diluted Average) 63,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.72
Jun2018 $3.82
Jun2017 -$1.71
Jun2016 -$0.05
Jun2015 -$0.06
Jun2014 $0.18
Jun2013 $0.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.91
Jun2018 $0.81
Jun2017 -$0.56
Jun2016 $0.02
Jun2015 $0.05
Jun2014 $0.09
Jun2013 $0.04

Recommended Reading:

Other ModernGraham posts about the company

Lumentum Holdings Inc Valuation – Initial Coverage $LITE

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Iridium Communications Inc Valuation – July 2018 $IRDM
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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.

Windstream Holdings Inc Valuation – September 2018 $WIN

Company Profile (excerpt from Reuters): Windstream Holdings, Inc., incorporated on May 23, 2013, is a holding company. The Company is a provider of advanced network communications and technology solutions for consumers, businesses, enterprise organizations and wholesale customers in the United States. The Company operates through four segments: ILEC Consumer and Small Business, Wholesale, Enterprise, and CLEC Consumer and Small Business. It provides data, cloud solutions, unified communications and managed services to small business and enterprise clients. The Company also offers bundled services, including broadband, security solutions, voice and digital television to consumers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WIN – September 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $164,000,000 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.70 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 -283.03% Fail
6. Moderate PEmg Ratio PEmg < 20 -0.15 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -0.11 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.70 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -14.44 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$24.92
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$361.39
MG Value based on 0% Growth -$211.85
Market Implied Growth Rate -4.33%
Current Price $3.82
% of Intrinsic Value N/A

Windstream Holdings Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, 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 $6.74 in 2014 to an estimated $-24.92 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 Windstream Holdings Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.5 per share, for a yield of 39.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -0.15, which was below the industry average of 43.01, 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 $-290.03.

Windstream Holdings 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) -$290.03
Graham Number $0.00
PEmg -0.15
Current Ratio 0.70
PB Ratio -0.11
Current Dividend $1.50
Dividend Yield 39.27%
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 6/1/2018
Total Current Assets $935,200,000
Total Current Liabilities $1,341,500,000
Long-Term Debt $5,867,900,000
Total Assets $10,839,800,000
Intangible Assets $4,223,300,000
Total Liabilities $12,246,300,000
Shares Outstanding (Diluted Average) 39,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$12.39
Dec2017 -$62.60
Dec2016 -$20.55
Dec2015 $1.20
Dec2014 -$2.25
Dec2013 $12.05
Dec2012 $8.40
Dec2011 $9.60
Dec2010 $19.80
Dec2009 $22.80
Dec2008 $27.90
Dec2007 $58.20
Dec2006 $37.50
Dec2005 $27.90
Dec2004 $28.80
Dec2003 $21.90
Dec2002 $5.10
Dec2001 -$23.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$24.92
Dec2017 -$25.60
Dec2016 -$4.81
Dec2015 $3.97
Dec2014 $6.74
Dec2013 $12.34
Dec2012 $14.22
Dec2011 $20.64
Dec2010 $28.52
Dec2009 $33.54
Dec2008 $37.96
Dec2007 $40.28
Dec2006 $28.96
Dec2005 $20.50
Dec2004 $13.38
Dec2003 $4.04
Dec2002 -$4.46

Recommended Reading:

Other ModernGraham posts about the company

Windstream Holdings Inc Valuation – March 2017 $WIN
Windstream Holdings Inc Valuation – August 2016 $WIN
Windstream Holdings Analysis – 2015 Update $WIN
16 Companies in the Spotlight This Week – 5/24/14
Windstream Holdings Inc. 2014 Annual Valuation $WIN

Other ModernGraham posts about related companies

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Comtech Telecommunications Corp Valuation – August 2018 $CMTL
Shaw Communications Inc Valuation – July 2018 $TSE:SJR.B
ARRIS International PLC Valuation – July 2018 $ARRS
Iridium Communications Inc Valuation – July 2018 $IRDM
CenturyLink Inc Valuation – June 2018 $CTL
American Tower Corp Valuation – June 2018 $AMT
Charter Communications Inc Valuation – May 2018 $CHTR

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.

Lincoln Electric Holdings Inc Valuation – August 2018 $LECO

Company Profile (excerpt from Reuters): Lincoln Electric Holdings, Inc., incorporated on January 22, 1998, is a manufacturer of welding, cutting and brazing products. The Company operates through three segments: Americas Welding, International Welding and The Harris Products Group. The Americas Welding segment includes welding operations in North and South America. The International Welding segment primarily includes welding operations in Europe, Africa, Asia and Australia. The Harris Products Group includes the Company’s global cutting, soldering and brazing businesses, as well as the retail business in the United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LECO – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $6,046,009,933 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.62 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 133.48% Pass
6. Moderate PEmg Ratio PEmg < 20 27.39 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.58 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 2.62 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.80 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 $3.43
MG Growth Estimate 1.82%
MG Value $41.62
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $49.74
MG Value based on 0% Growth $29.16
Market Implied Growth Rate 9.44%
Current Price $93.94
% of Intrinsic Value 225.70%

Lincoln Electric Holdings, 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 $3.06 in 2014 to an estimated $3.43 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.44% 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 Lincoln Electric Holdings, Inc. revealed the company was trading above its Graham Number of $36.88. The company pays a dividend of $1.44 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 27.39, which was below the industry average of 29.32, 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 $-1.19.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.19
Graham Number $36.88
PEmg 27.39
Current Ratio 2.62
PB Ratio 6.58
Current Dividend $1.44
Dividend Yield 1.53%
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 6/1/2018
Total Current Assets $1,411,567,000
Total Current Liabilities $539,758,000
Long-Term Debt $700,194,000
Total Assets $2,433,731,000
Intangible Assets $233,982,000
Total Liabilities $1,490,223,000
Shares Outstanding (Diluted Average) 66,121,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.26
Dec2017 $3.71
Dec2016 $2.91
Dec2015 $1.70
Dec2014 $3.18
Dec2013 $3.54
Dec2012 $3.06
Dec2011 $2.56
Dec2010 $1.53
Dec2009 $0.57
Dec2008 $2.47
Dec2007 $2.34
Dec2006 $2.04
Dec2005 $1.45
Dec2004 $0.97
Dec2003 $0.66
Dec2002 $0.34
Dec2001 $0.98
Dec2000 $0.92
Dec1999 $0.81
Dec1998 $0.96

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.43
Dec2017 $3.01
Dec2016 $2.74
Dec2015 $2.70
Dec2014 $3.06
Dec2013 $2.75
Dec2012 $2.25
Dec2011 $1.86
Dec2010 $1.60
Dec2009 $1.68
Dec2008 $2.11
Dec2007 $1.78
Dec2006 $1.37
Dec2005 $0.98
Dec2004 $0.76
Dec2003 $0.68
Dec2002 $0.73

Recommended Reading:

Other ModernGraham posts about the company

Lincoln Electric Holdings Inc Valuation – Initial Coverage $LECO

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Pentair PLC Valuation – June 2018 $PNR
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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.

CSG Systems International Inc Valuation – August 2018 $CSGS

Company Profile (excerpt from Reuters): CSG Systems International, Inc. (CSG), incorporated on October 17, 1994, is a provider of business support solutions primarily serving the communications industry. The Company provides business support solutions (BSS) to the communications service providers (CSPs), as well as clients in various industries. CSG’s solutions coordinate and manage various aspects of a service provider’s customer interactions, from the initial activation of customer accounts, to the support and fulfillment of various services, and through the calculation, presentment, and accounts receivables management of monthly customer statements. Its primary product solutions include Revenue Management & Customer Experience Solutions; Customer Interaction Management; Managed Services; Mediation and Data Management, and Wholesale Settlement and Routing. The Company employs professional services across various sectors, including solution architecture, project management, systems implementation and business consultancy.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSGS – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,240,700,031 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.68 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 89.41% Pass
6. Moderate PEmg Ratio PEmg < 20 18.80 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.48 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 2.68 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.10 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.97
MG Growth Estimate 8.84%
MG Value $51.54
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $28.55
MG Value based on 0% Growth $16.73
Market Implied Growth Rate 5.15%
Current Price $37.02
% of Intrinsic Value 71.83%

CSG Systems International, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, poor dividend history, and the high PB ratio. 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 $1.24 in 2014 to an estimated $1.97 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.15% 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 above the price.

At the time of valuation, further research into CSG Systems International, Inc. revealed the company was trading above its Graham Number of $23.05. The company pays a dividend of $0.79 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 18.8, which was below the industry average of 47.04, 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 $-1.92.

CSG Systems International, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.92
Graham Number $23.05
PEmg 18.80
Current Ratio 2.68
PB Ratio 3.48
Current Dividend $0.79
Dividend Yield 2.13%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $514,245,000
Total Current Liabilities $191,766,000
Long-Term Debt $353,904,000
Total Assets $927,231,000
Intangible Assets $318,631,000
Total Liabilities $577,371,000
Shares Outstanding (Diluted Average) 32,908,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.31
Dec2017 $1.87
Dec2016 $1.90
Dec2015 $1.87
Dec2014 $1.06
Dec2013 $1.38
Dec2012 $1.51
Dec2011 $1.28
Dec2010 $0.67
Dec2009 $1.26
Dec2008 $1.54
Dec2007 $1.52
Dec2006 $1.27
Dec2005 $1.09
Dec2004 $0.92
Dec2003 -$0.51
Dec2002 $0.85
Dec2001 $2.08
Dec2000 $1.60
Dec1999 $1.10
Dec1998 $1.62

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.97
Dec2017 $1.74
Dec2016 $1.63
Dec2015 $1.47
Dec2014 $1.24
Dec2013 $1.29
Dec2012 $1.25
Dec2011 $1.16
Dec2010 $1.15
Dec2009 $1.38
Dec2008 $1.38
Dec2007 $1.15
Dec2006 $0.89
Dec2005 $0.76
Dec2004 $0.72
Dec2003 $0.76
Dec2002 $1.41

Recommended Reading:

Other ModernGraham posts about the company

11 Best Stocks for Value Investors This Week – 3/4/17
CSG Systems International Inc Valuation – Initial Coverage $CSGS

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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.

Knight-Swift Transportation Holdings Inc Valuation – August 2018 $KNX

 

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KNX – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,840,169,100 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.47 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 274.51% Pass
6. Moderate PEmg Ratio PEmg < 20 13.99 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.10 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 1.47 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.33 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 $2.38
MG Growth Estimate 15.00%
MG Value $91.45
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $34.44
MG Value based on 0% Growth $20.19
Market Implied Growth Rate 2.74%
Current Price $33.22
% of Intrinsic Value 36.33%

Knight-Swift Transportation Holdings Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. 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 $0.95 in 2014 to an estimated $2.38 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.74% 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 Knight-Swift Transportation Holdings Inc revealed the company was trading below its Graham Number of $37.64. The company pays a dividend of $0.24 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 13.99, which was below the industry average of 39.96, 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 $-7.89.

Knight-Swift Transportation Holdings Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.89
Graham Number $37.64
PEmg 13.99
Current Ratio 1.47
PB Ratio 1.10
Current Dividend $0.24
Dividend Yield 0.72%
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 6/1/2018
Total Current Assets $941,332,000
Total Current Liabilities $641,221,000
Long-Term Debt $699,473,000
Total Assets $7,753,741,000
Intangible Assets $4,360,291,000
Total Liabilities $2,357,357,000
Shares Outstanding (Diluted Average) 179,398,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.14
Dec2017 $4.34
Dec2016 $1.16
Dec2015 $1.42
Dec2014 $1.25
Dec2013 $0.86
Dec2012 $0.80
Dec2011 $0.74
Dec2010 $0.70
Dec2009 $0.60
Dec2008 $0.66
Dec2007 $0.72
Dec2006 $0.84
Dec2005 $0.71
Dec2004 $0.55
Dec2003 $0.41
Dec2002 $0.32
Dec2001 $0.24
Dec2000 $0.24
Dec1999 $0.20
Dec1998 $0.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.38
Dec2017 $2.26
Dec2016 $1.18
Dec2015 $1.13
Dec2014 $0.95
Dec2013 $0.78
Dec2012 $0.73
Dec2011 $0.69
Dec2010 $0.68
Dec2009 $0.68
Dec2008 $0.71
Dec2007 $0.71
Dec2006 $0.66
Dec2005 $0.53
Dec2004 $0.41
Dec2003 $0.32
Dec2002 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Knight Transportation Valuation – Initial Coverage $KNX

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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.

Cooper-Standard Holdings Inc Valuation – August 2018 $CPS

Company Profile (excerpt from Reuters): Cooper-Standard Holdings Inc., incorporated on September 10, 2004, is a holding company. The Company designs, manufactures and sells sealing, fuel and brake delivery, fluid transfer and anti-vibration systems for use in passenger vehicles and light trucks manufactured by global original equipment manufacturers (OEMs). The Company operates through four segments: North America, Europe, Asia Pacific and South America. The Company’s products are used in passenger vehicles and light trucks. As of December 31, 2016, the Company’s operations were conducted through 123 leased and joint venture facilities in 20 countries (North America: Canada, Mexico and the United States; Asia Pacific: China, India, Japan, South Korea and Thailand; Europe: Czech Republic, France, Germany, Italy, the Netherlands, Poland, Romania, Serbia, Spain, Sweden and the United Kingdom, and South America: Brazil), of which 90 are manufacturing facilities and 33 have design, engineering, administrative or logistics designations.
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Downloadable PDF version of this valuation:

ModernGraham Valuation of CPS – August 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,340,159,355 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 545.80% Pass
6. Moderate PEmg Ratio PEmg < 20 17.15 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.82 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 1.78 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.19 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.96
MG Growth Estimate 15.00%
MG Value $306.46
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $115.42
MG Value based on 0% Growth $67.66
Market Implied Growth Rate 4.33%
Current Price $136.54
% of Intrinsic Value 44.55%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.75 in 2014 to an estimated $7.96 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.33% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Cooper-Standard Holdings Common Stock revealed the company was trading above its Graham Number of $105.65. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 17.15, which was below the industry average of 18.51, 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 $-23.06.

ChoicePoint Inc. Common Stock receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$23.06
Graham Number $105.65
PEmg 17.15
Current Ratio 1.78
PB Ratio 2.82
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $1,388,544,000
Total Current Liabilities $781,261,000
Long-Term Debt $723,002,000
Total Assets $2,700,283,000
Intangible Assets $231,915,000
Total Liabilities $1,812,164,000
Shares Outstanding (Diluted Average) 18,372,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.75
Dec2017 $7.21
Dec2016 $7.42
Dec2015 $6.08
Dec2014 $2.39
Dec2013 $2.24
Dec2012 $4.14
Dec2011 $3.93

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.96
Dec2017 $6.07
Dec2016 $5.15
Dec2015 $3.93
Dec2014 $2.75
Dec2013 $2.64
Dec2012 $2.43
Dec2011 $1.31

Recommended Reading:

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Cooper-Standard Holdings Inc Valuation – Initial Coverage $CPS

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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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