Harley-Davidson Inc Valuation – April 2019 #HOG

Company Profile (excerpt from Reuters): Harley-Davidson, Inc., incorporated on March 8, 1991, is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two segments: the Motorcycles & Related Products (Motorcycles) and the Financial Services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HOG – April 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 $5,914,027,961 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.25 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 53.65% Pass
6. Moderate PEmg Ratio PEmg < 20 11.78 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.42 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 1.25 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.51 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.16
MG Growth Estimate -1.28%
MG Value $18.74
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $45.79
MG Value based on 0% Growth $26.84
Market Implied Growth Rate 1.64%
Current Price $37.19
% of Intrinsic Value 198.44%

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.45 in 2015 to an estimated $3.16 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.64% 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 Harley-Davidson Inc revealed the company was trading above its Graham Number of $26.38. The company pays a dividend of $1.48 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.78, which was below the industry average of 22.44, 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 $-27.04.

Harley-Davidson Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$27.04
Graham Number $26.38
PEmg 11.78
Current Ratio 1.25
PB Ratio 3.42
Current Dividend $1.48
Dividend Yield 3.98%
Number of Consecutive Years of Dividend Growth 8

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,484,442,000
Total Current Liabilities $3,597,600,000
Long-Term Debt $4,887,667,000
Total Assets $10,665,664,000
Intangible Assets $61,046,000
Total Liabilities $8,891,715,000
Shares Outstanding (Diluted Average) 162,973,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.84
Dec2018 $3.19
Dec2017 $3.02
Dec2016 $3.83
Dec2015 $3.69
Dec2014 $3.88
Dec2013 $3.28
Dec2012 $2.72
Dec2011 $2.55
Dec2010 $0.62
Dec2009 -$0.24
Dec2008 $2.79
Dec2007 $3.74
Dec2006 $3.93
Dec2005 $3.41
Dec2004 $3.00
Dec2003 $2.50
Dec2002 $1.90
Dec2001 $1.43
Dec2000 $1.13
Dec1999 $0.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.16
Dec2018 $3.39
Dec2017 $3.50
Dec2016 $3.66
Dec2015 $3.45
Dec2014 $3.09
Dec2013 $2.40
Dec2012 $1.86
Dec2011 $1.59
Dec2010 $1.46
Dec2009 $2.16
Dec2008 $3.37
Dec2007 $3.54
Dec2006 $3.28
Dec2005 $2.79
Dec2004 $2.31
Dec2003 $1.83

Recommended Reading:

Other ModernGraham posts about the company

Harley-Davidson Inc Valuation – June 2018 $HOG
Harley-Davidson Inc Valuation – August 2017 $HOG
12 Best Stocks For Value Investors This Week – 7/1/16
Harley-Davidson Inc Valuation – June 2016 $HOG
19 Best Stocks For Value Investors This Week – 1/9/16

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Ford Motor Co Valuation – February 2019 $F
General Motors Co Valuation – February 2019 $GM
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Goodyear Tire & Rubber Co Valuation – January 2019 $GT
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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.

Colgate-Palmolive Co Valuation – March 2019 #CL

Company Profile (excerpt from Reuters): Colgate-Palmolive Company (Colgate), incorporated on July 25, 1923, is a consumer products company. The Company operates in two product segments: Oral, Personal and Home Care, and Pet Nutrition. The Oral, Personal and Home Care product segment is operated through five geographic segments, which include North America, Latin America, Europe, Asia Pacific and Africa/Eurasia. It is engaged in oral care business with toothpaste and manual toothbrush brands around the world. The Company’s oral care products include Colgate Total, Colgate Sensitive Pro-Relief, Colgate Max Fresh, Colgate Maximum Cavity Protection plus Sugar Acid Neutralizer, Colgate Optic White and Colgate Luminous White toothpastes, Colgate 360 degree and Colgate Slim Soft manual toothbrushes and Colgate Optic White, Colgate Total and Colgate Plax mouthwashes. Colgate’s Oral Care business also includes pharmaceutical products for dentists and other oral health professionals.

CL Chart

CL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CL – 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 $57,098,959,614 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.14 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 7.02% Fail
6. Moderate PEmg Ratio PEmg < 20 26.06 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 291.66 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 1.14 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 14.06 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 $2.54
MG Growth Estimate 3.00%
MG Value $36.88
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $36.88
MG Value based on 0% Growth $21.62
Market Implied Growth Rate 8.78%
Current Price $66.27
% of Intrinsic Value 179.68%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.12 in 2015 to an estimated $2.54 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.78% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Colgate-Palmolive Company revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.66 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 26.06, which was below the industry average of 62.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.42.

Colgate-Palmolive Company receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.42
Graham Number $0.00
PEmg 26.06
Current Ratio 1.14
PB Ratio 291.66
Current Dividend $1.66
Dividend Yield 2.50%
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 $3,793,000,000
Total Current Liabilities $3,341,000,000
Long-Term Debt $6,354,000,000
Total Assets $12,161,000,000
Intangible Assets $4,167,000,000
Total Liabilities $11,964,000,000
Shares Outstanding (Diluted Average) 867,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.67
Dec2018 $2.75
Dec2017 $2.28
Dec2016 $2.72
Dec2015 $1.52
Dec2014 $2.36
Dec2013 $2.38
Dec2012 $2.57
Dec2011 $2.47
Dec2010 $2.16
Dec2009 $2.19
Dec2008 $1.83
Dec2007 $1.60
Dec2006 $1.23
Dec2005 $1.22
Dec2004 $1.17
Dec2003 $1.23
Dec2002 $1.10
Dec2001 $0.95
Dec2000 $0.85
Dec1999 $0.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.54
Dec2018 $2.43
Dec2017 $2.26
Dec2016 $2.27
Dec2015 $2.12
Dec2014 $2.41
Dec2013 $2.41
Dec2012 $2.36
Dec2011 $2.19
Dec2010 $1.96
Dec2009 $1.78
Dec2008 $1.52
Dec2007 $1.34
Dec2006 $1.20
Dec2005 $1.17
Dec2004 $1.12
Dec2003 $1.05

Recommended Reading:

Other ModernGraham posts about the company

Colgate-Palmolive Co Valuation – June 2018 $CL
Colgate-Palmolive Co. Valuation – April 2017 $CL
Colgate-Palmolive Co Valuation – January 2016 Update $CL
32 Companies in the Spotlight This Week – 12/6/14
Colgate-Palmolive Annual Valuation – 2014 $CL

Other ModernGraham posts about related companies

Coty Inc Valuation – March 2019 #COTY
Signet Jewelers Ltd Valuation – March 2019 #SIG
Church & Dwight Co Inc Valuation – February 2019 $CHD
International Flavors & Fragrances Inc Valuation – January 2019 $IFF
Estee Lauder Companies Inc Valuation – December 2018 $EL
Proctor & Gamble Co Valuation – November 2018 $PG
Johnson & Johnson Valuation – November 2018 $JNJ
Inter Parfums Inc Valuation – July 2018 $IPAR
Service Corp International Valuation – July 2018 $SCI
Avon Products Inc Valuation – June 2018 $AVP

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.

Paypal Holdings Inc Valuation – March 2019 #PYPL

Company Profile (excerpt from Reuters): PayPal Holdings, Inc., incorporated on January 30, 2015, is a technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants. The Company’s combined payment solutions, including its PayPal, PayPal Credit, Braintree, Venmo, Xoom and Paydiant products, compose its Payments Platform. The Company operates a two-sided global technology platform that links its customers, both merchants and consumers, around the globe to facilitate the processing of payment transactions, allowing it to connect merchants and consumers. The Company allows its customers to use their account for both purchase and paying for goods, as well as to transfer and withdraw funds. The Company enables consumers to exchange funds with merchants using a range of funding sources, which include a bank account, a PayPal account balance, a PayPal Credit account, a credit and debit card or other stored value products, such as coupons and gift cards. The Company offers consumers person-to-person (P2P) payment solutions through its PayPal Website and mobile application, Venmo and Xoom.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PYPL – 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 $119,362,281,153 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.27 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 19566.67% Pass
6. Moderate PEmg Ratio PEmg < 20 54.19 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.89 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 1.27 Fail
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 $1.88
MG Growth Estimate 15.00%
MG Value $72.25
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $27.21
MG Value based on 0% Growth $15.95
Market Implied Growth Rate 22.84%
Current Price $101.69
% of Intrinsic Value 140.74%

Paypal 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 over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the low current ratio, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.58 in 2015 to an estimated $1.88 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 22.84% 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 Paypal Holdings Inc revealed the company was trading above its Graham Number of $28.32. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 54.19, which was above the industry average of 21.22. Finally, the company was trading above its Net Current Asset Value (NCAV) of $4.2.

Paypal Holdings Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $4.20
Graham Number $28.32
PEmg 54.19
Current Ratio 1.27
PB Ratio 7.89
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 $32,963,000,000
Total Current Liabilities $25,904,000,000
Long-Term Debt $0
Total Assets $43,332,000,000
Intangible Assets $7,109,000,000
Total Liabilities $27,946,000,000
Shares Outstanding (Diluted Average) 1,194,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.72
Dec2018 $1.71
Dec2017 $1.47
Dec2016 $1.15
Dec2015 $1.00
Dec2014 $0.34
Dec2013 $0.78

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.88
Dec2018 $1.35
Dec2017 $1.09
Dec2016 $0.82
Dec2015 $0.58
Dec2014 $0.32
Dec2013 $0.26

Recommended Reading:

Other ModernGraham posts about the company

PayPal Holdings Inc Valuation – June 2018 $PYPL
Paypal Holdings Inc Valuation – Initial Coverage $PYPL

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Northern Trust Corp Valuation – March 2019 #NTRS
Affiliated Managers Group Inc Valuation – February 2019 $AMG
Bank of New York Mellon Corp Valuation – February 2019 $BK
Western Union Co Valuation – February 2019 $WU

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.

Western Digital Corp Valuation – March 2019 #WDC

Company Profile (excerpt from Reuters): Western Digital Corporation (Western Digital), incorporated on October 26, 2000, is a developer, manufacturer and provider of data storage devices and solutions that address the needs of the information technology (IT) industry and the infrastructure that enables the proliferation of data in virtually every industry. The Company’s portfolio of offerings addresses three categories: Datacenter Devices and Solutions (capacity and performance enterprise hard disk drives (HDDs), enterprise solid state drives (SSDs), datacenter software and system solutions); Client Devices (mobile, desktop, gaming and digital video hard drives, client SSDs, embedded products and wafers), and Client Solutions (removable products, hard drive content solutions and flash content solutions). The Company also generates license and royalty revenue related to its intellectual property which is included in each of the three categories.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WDC – 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 $14,501,831,037 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.24 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 -73.33% Fail
6. Moderate PEmg Ratio PEmg < 20 31.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.32 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.24 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.92 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.61
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $23.30
MG Value based on 0% Growth $13.66
Market Implied Growth Rate 11.26%
Current Price $49.84
% of Intrinsic Value N/A

Western Digital Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings 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 $5.72 in 2015 to an estimated $1.61 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.26% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Western Digital Corp revealed the company was trading above its Graham Number of $23.31. The company pays a dividend of $2 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 31.02, which was below the industry average of 35.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-25.12.

Western Digital Corp 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) -$25.12
Graham Number $23.31
PEmg 31.02
Current Ratio 2.24
PB Ratio 1.32
Current Dividend $2.00
Dividend Yield 4.01%
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 $9,742,000,000
Total Current Liabilities $4,350,000,000
Long-Term Debt $10,370,000,000
Total Assets $27,939,000,000
Intangible Assets $12,222,000,000
Total Liabilities $17,027,000,000
Shares Outstanding (Diluted Average) 290,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.62
Jun2018 $2.20
Jun2017 $1.34
Jun2016 $1.00
Jun2015 $6.18
Jun2014 $6.68
Jun2013 $3.98
Jun2012 $6.58
Jun2011 $3.09
Jun2010 $5.93
Jun2009 $2.08
Jun2008 $3.84
Jun2007 $2.50
Jun2006 $1.76
Jun2005 $0.90
Jun2004 $0.69
Jun2003 $0.87
Jun2002 $0.34
Jun2001 -$0.31
Jun2000 -$2.69
Jun1999 -$5.51

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.61
Jun2018 $2.56
Jun2017 $3.11
Jun2016 $4.29
Jun2015 $5.72
Jun2014 $5.41
Jun2013 $4.63
Jun2012 $4.74
Jun2011 $3.71
Jun2010 $3.75
Jun2009 $2.51
Jun2008 $2.46
Jun2007 $1.63
Jun2006 $1.10
Jun2005 $0.68
Jun2004 $0.31
Jun2003 -$0.41

Recommended Reading:

Other ModernGraham posts about the company

Western Digital Corp Valuation – May 2018 $WDC
Western Digital Corporation Valuation – February 2017 $WDC
Best Stocks Below Their Graham Number – August 2016
Western Digital Corporation Valuation – August 2016 $WDC
10 Low PE Stock Picks for the Defensive Investor – August 2016

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NetApp Inc Valuation – February 2019 $NTAP
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Disclaimer:

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

Coty Inc Valuation – March 2019 #COTY

Company Profile (excerpt from Reuters): Coty Inc., incorporated on January 20, 1995, is a beauty company. The Company operates through four segments: Fragrances, Color Cosmetics, Skin & Body Care and Brazil Acquisition. The Company sells products in each of its segments through retailers, including hypermarkets, supermarkets, independent and chain drug stores and pharmacies, upscale perfumeries, upscale and mid-tier department stores, nail salons, specialty retailers, duty-free shops and traditional food, drug and mass retailers. It sells a range of its products through travel retail sales channels, including duty-free shops, airlines, cruise lines and other tax-free zones. In addition, the Company sells its products through the Internet over its retail partners’ e-commerce sites and through online retailers, and the Company sells its philosophy products through philosophy-branded Websites and through direct marketing through television. The Company operates in the Americas (comprising North, Central and South America); Europe, the Middle East and Africa (EMEA), and Asia Pacific (comprising Asia and Australia).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of COTY – 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 $8,372,757,379 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.96 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 185.71% Pass
6. Moderate PEmg Ratio PEmg < 20 -24.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.10 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.96 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -50.21 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 -$0.45
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$6.51
MG Value based on 0% Growth -$3.81
Market Implied Growth Rate -16.68%
Current Price $11.15
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.12 in 2015 to an estimated $-0.45 for 2019. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Coty Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.5 per share, for a yield of 4.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -24.85, which was below the industry average of 62.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-13.24.

Coty 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) -$13.24
Graham Number $0.00
PEmg -24.85
Current Ratio 0.96
PB Ratio 1.10
Current Dividend $0.50
Dividend Yield 4.48%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,714,400,000
Total Current Liabilities $3,865,000,000
Long-Term Debt $7,560,900,000
Total Assets $21,270,700,000
Intangible Assets $15,594,400,000
Total Liabilities $13,659,400,000
Shares Outstanding (Diluted Average) 751,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.07
Jun2018 -$0.23
Jun2017 -$0.66
Jun2016 $0.44
Jun2015 $0.64
Jun2014 -$0.26
Jun2013 $0.42
Jun2012 -$0.85
Jun2011 $0.00
Jun2010 $0.16

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.45
Jun2018 -$0.10
Jun2017 $0.02
Jun2016 $0.26
Jun2015 $0.12
Jun2014 -$0.13
Jun2013 -$0.06
Jun2012 -$0.25
Jun2011 $0.04
Jun2010 $0.05

Recommended Reading:

Other ModernGraham posts about the company

10 Most Overvalued Stocks of the S&P 500 – July 2018
Coty Inc Valuation – May 2018 $COTY
Coty Inc Valuation – Initial Coverage $COTY

Other ModernGraham posts about related companies

Signet Jewelers Ltd Valuation – March 2019 #SIG
Church & Dwight Co Inc Valuation – February 2019 $CHD
International Flavors & Fragrances Inc Valuation – January 2019 $IFF
Estee Lauder Companies Inc Valuation – December 2018 $EL
Proctor & Gamble Co Valuation – November 2018 $PG
Johnson & Johnson Valuation – November 2018 $JNJ
Inter Parfums Inc Valuation – July 2018 $IPAR
Service Corp International Valuation – July 2018 $SCI
Avon Products Inc Valuation – June 2018 $AVP
Colgate-Palmolive Co Valuation – June 2018 $CL

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.

Signet Jewelers Ltd Valuation – March 2019 #SIG

Company Profile (excerpt from Reuters): Signet Jewelers Limited, incorporated on June 25, 2008, is a retailer of diamond jewelry. As of January 28, 2017, the Company had 3,682 stores and kiosks. The Company’s segments include the Sterling Jewelers division; the Zale division, which consists of the Zale Jewelry and Piercing Pagoda segments; the UK Jewelry division, and Other. The Sterling Jewelers division’s stores operate in the United States in malls and off-mall locations principally as Kay Jewelers (Kay), Kay Jewelers Outlet, Jared The Galleria Of Jewelry (Jared) and Jared Vault. The Zale division operates jewelry stores (Zale Jewelry) and kiosks (Piercing Pagoda), located primarily in shopping malls throughout the United States, Canada and Puerto Rico. Zale Jewelry includes the United States store brand, Zales (Zales Jewelers and Zales Outlet), and the Canadian store brand, Peoples Jewellers. Piercing Pagoda operates through mall-based kiosks. The UK Jewelry division operates stores in the United Kingdom, Republic of Ireland and Channel Islands, principally as H.Samuel and Ernest Jones. The Other segment includes the operations of subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SIG – 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 $1,440,038,868 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.20 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 5.20% Fail
6. Moderate PEmg Ratio PEmg < 20 11.44 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.73 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.20 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.40 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.42
MG Growth Estimate -4.25%
MG Value $1.29
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $35.13
MG Value based on 0% Growth $20.59
Market Implied Growth Rate 1.47%
Current Price $27.71
% of Intrinsic Value 2149.19%

Signet Jewelers Ltd. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding 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 $4.32 in 2015 to an estimated $2.42 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.47% 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 Signet Jewelers Ltd. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.24 per share, for a yield of 4.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.44, which was below the industry average of 62.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.29.

Signet Jewelers Ltd. 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) $1.29
Graham Number $0.00
PEmg 11.44
Current Ratio 2.20
PB Ratio 0.73
Current Dividend $1.24
Dividend Yield 4.47%
Number of Consecutive Years of Dividend Growth 7

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 $3,010,100,000
Total Current Liabilities $1,365,700,000
Long-Term Debt $660,400,000
Total Assets $4,907,500,000
Intangible Assets $849,200,000
Total Liabilities $2,943,700,000
Shares Outstanding (Diluted Average) 51,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$6.23
Jan2018 $7.44
Jan2017 $7.08
Jan2016 $5.87
Jan2015 $4.75
Jan2014 $4.56
Jan2013 $4.35
Jan2012 $3.73
Jan2011 $2.32
Jan2010 $1.83
Jan2009 -$4.62
Jan2008 $2.55
Jan2007 $3.07
Jan2006 $2.71
Jan2005 $2.94
Jan2004 $0.10
Jan2003 $2.47
Jan2002 $1.98
Jan2001 $1.90
Jan2000 $1.71
Jan1999 $0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.42
Jan2018 $6.48
Jan2017 $5.77
Jan2016 $4.96
Jan2015 $4.32
Jan2014 $3.86
Jan2013 $2.84
Jan2012 $1.78
Jan2011 $0.88
Jan2010 $0.48
Jan2009 $0.31
Jan2008 $2.61
Jan2007 $2.51
Jan2006 $2.17
Jan2005 $1.89
Jan2004 $1.45
Jan2003 $1.97

Recommended Reading:

Other ModernGraham posts about the company

Best Stocks Below Their Graham Number – February 2019
10 Undervalued Stocks for the Enterprising Investor – January 2019
10 Undervalued Stocks for the Enterprising Investor – July 2018
10 Best Dividend Paying Stocks for the Enterprising Investor – May 2018
10 Stocks for Using A Benjamin Graham Value Investing Strategy – May 2018

Other ModernGraham posts about related companies

Church & Dwight Co Inc Valuation – February 2019 $CHD
International Flavors & Fragrances Inc Valuation – January 2019 $IFF
Estee Lauder Companies Inc Valuation – December 2018 $EL
Proctor & Gamble Co Valuation – November 2018 $PG
Johnson & Johnson Valuation – November 2018 $JNJ
Inter Parfums Inc Valuation – July 2018 $IPAR
Service Corp International Valuation – July 2018 $SCI
Avon Products Inc Valuation – June 2018 $AVP
Colgate-Palmolive Co Valuation – June 2018 $CL
Coty Inc Valuation – May 2018 $COTY

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.

D.R. Horton Inc Valuation – February 2019 $DHI

Company Profile (excerpt from Reuters): D.R. Horton, Inc., incorporated on July 1, 1991, is a homebuilding company. The Company has operations in 84 markets in 29 states across the United States. The Company’s segments include its 44 homebuilding divisions, its financial services operations and its other business activities. It operates under the names of D.R. Horton, America’s Builder, Express Homes, Emerald Homes, Regent Homes, Crown Communities and Pacific Ridge Homes.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DHI – 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 $14,964,927,009 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 9.26 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 169.76% Pass
6. Moderate PEmg Ratio PEmg < 20 12.44 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.64 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 9.26 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.30 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 $3.22
MG Growth Estimate 12.97%
MG Value $110.91
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $46.70
MG Value based on 0% Growth $27.38
Market Implied Growth Rate 1.97%
Current Price $40.08
% of Intrinsic Value 36.14%

D. R. Horton Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.73 in 2015 to an estimated $3.22 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.97% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into D. R. Horton Inc revealed the company was trading below its Graham Number of $44.1. The company pays a dividend of $0.5 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 12.44, which was below the industry average of 20.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $18.75.

D. R. Horton Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $18.75
Graham Number $44.10
PEmg 12.44
Current Ratio 9.26
PB Ratio 1.64
Current Dividend $0.50
Dividend Yield 1.25%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $12,363,900,000
Total Current Liabilities $1,335,500,000
Long-Term Debt $3,342,300,000
Total Assets $14,535,800,000
Intangible Assets $158,400,000
Total Liabilities $5,237,600,000
Shares Outstanding (Diluted Average) 380,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.62
Sep2018 $3.81
Sep2017 $2.74
Sep2016 $2.36
Sep2015 $2.03
Sep2014 $1.50
Sep2013 $1.33
Sep2012 $2.77
Sep2011 $0.23
Sep2010 $0.77
Sep2009 -$1.73
Sep2008 -$8.34
Sep2007 -$2.27
Sep2006 $3.90
Sep2005 $4.62
Sep2004 $2.32
Sep2003 $1.37
Sep2002 $1.44
Sep2001 $1.11
Sep2000 $0.84
Sep1999 $0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.22
Sep2018 $2.84
Sep2017 $2.24
Sep2016 $1.99
Sep2015 $1.73
Sep2014 $1.49
Sep2013 $1.22
Sep2012 $0.35
Sep2011 -$1.33
Sep2010 -$1.92
Sep2009 -$2.43
Sep2008 -$1.83
Sep2007 $1.61
Sep2006 $3.27
Sep2005 $2.70
Sep2004 $1.63
Sep2003 $1.21

Recommended Reading:

Other ModernGraham posts about the company

D.R. Horton Inc Valuation – May 2018 $DHI
Stocks Trading Closest to Net Current Asset Value – April 2017
15 Best Stocks for Value Investors This Week – 1/14/17
D.R. Horton Inc Valuation – January 2017 $DHI
10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016

Other ModernGraham posts about related companies

Martin Marietta Materials Inc Valuation – February 2019 $MLM
Fluor Corp Valuation – February 2019 $FLR
Lennar Corp Valuation – February 2019 $LEN
Vulcan Materials Co Valuation – February 2019 $VMC
PulteGroup Inc Valuation – January 2019 $PHM
Sherwin-Williams Co Valuation – January 2019 $SHW
Johnson Controls International PC Valuation – January 2019 $JCI
Cummins Inc Valuation – January 2019 $CMI
Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD

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.

Martin Marietta Materials Inc Valuation – February 2019 $MLM

Company Profile (excerpt from Reuters): Martin Marietta Materials, Inc., incorporated on November 12, 1993, is a supplier of aggregates products (crushed stone, sand, and gravel) used for the construction of infrastructure, nonresidential, and residential projects. Aggregates products are also used for railroad ballast and in agricultural, utility and environmental applications. The Company’s Aggregates business operates through three segments: the Mid-America Group, Southeast Group and West Group. The Company’s business is categorized into Aggregates Business, Cement Business and Magnesia Specialties Business. Its Cement business is reported through the Cement segment. Its Magnesia Specialties business manufactures and markets magnesia-based chemical products used in industrial, agricultural, and environmental applications, and dolomitic lime sold to customers in the steel industry. Its Aggregates business consists of mining, processing, and selling granite, limestone, sand and gravel. Its Aggregates business also includes aggregates-related downstream product lines (including its building materials, such as asphalt products, ready mixed concrete, and road paving construction services). It is also a supplier of cement, ready mixed concrete, and asphalt and paving services. Its Cement business produces Portland and specialty cements.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MLM – 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 $11,875,000,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.74 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 377.76% Pass
6. Moderate PEmg Ratio PEmg < 20 22.98 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.42 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.74 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.72 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 $8.27
MG Growth Estimate 15.00%
MG Value $318.32
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $119.89
MG Value based on 0% Growth $70.28
Market Implied Growth Rate 7.24%
Current Price $190.00
% of Intrinsic Value 59.69%

Martin Marietta Materials, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, 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 Undervalued after growing its EPSmg (normalized earnings) from $3.04 in 2015 to an estimated $8.27 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.24% 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 Martin Marietta Materials, Inc. revealed the company was trading above its Graham Number of $123.79. The company pays a dividend of $1.84 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 22.98, which was above the industry average of 20.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-51.44.

Martin Marietta Materials, 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) -$51.44
Graham Number $123.79
PEmg 22.98
Current Ratio 1.74
PB Ratio 2.42
Current Dividend $1.84
Dividend Yield 0.97%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,365,816,000
Total Current Liabilities $786,750,000
Long-Term Debt $2,730,439,000
Total Assets $9,551,419,000
Intangible Assets $2,900,400,000
Total Liabilities $4,602,007,000
Shares Outstanding (Diluted Average) 62,918,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.60
Dec2018 $7.43
Dec2017 $11.25
Dec2016 $6.63
Dec2015 $4.29
Dec2014 $2.71
Dec2013 $2.61
Dec2012 $1.83
Dec2011 $1.78
Dec2010 $2.10
Dec2009 $1.91
Dec2008 $4.18
Dec2007 $6.06
Dec2006 $5.29
Dec2005 $4.08
Dec2004 $2.66
Dec2003 $1.91
Dec2002 $1.77
Dec2001 $2.19
Dec2000 $2.39
Dec1999 $2.68

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.27
Dec2018 $7.56
Dec2017 $6.91
Dec2016 $4.37
Dec2015 $3.04
Dec2014 $2.34
Dec2013 $2.12
Dec2012 $2.04
Dec2011 $2.50
Dec2010 $3.21
Dec2009 $3.94
Dec2008 $4.79
Dec2007 $4.73
Dec2006 $3.76
Dec2005 $2.83
Dec2004 $2.20
Dec2003 $2.04

Recommended Reading:

Other ModernGraham posts about the company

Martin Marietta Materials Inc Valuation – May 2018 $MLM
Martin Marietta Materials Inc Valuation – December 2016 $MLM
Martin Marietta Materials Inc Valuation – August 2016 $MLM
Martin Marietta Materials Inc Valuation – February 2016 Update $MLM
Martin Marietta Materials Inc. Valuation – October 2015 Update $MLM

Other ModernGraham posts about related companies

Lennar Corp Valuation – February 2019 $LEN
Vulcan Materials Co Valuation – February 2019 $VMC
PulteGroup Inc Valuation – January 2019 $PHM
Sherwin-Williams Co Valuation – January 2019 $SHW
Johnson Controls International PC Valuation – January 2019 $JCI
Cummins Inc Valuation – January 2019 $CMI
Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD
Cavco Industries Inc Valuation – September 2018 $CVCO
LGI Homes Inc Valuation – September 2018 $LGIH

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.

Fluor Corp Valuation – February 2019 $FLR

Company Profile (excerpt from Reuters): Fluor Corporation (Fluor), incorporated on September 11, 2000, is a holding company. The Company operates its business in four segments: Energy, Chemicals & Mining; Industrial, Infrastructure & Power; Government, and Maintenance, Modification & Asset Integrity (MMAI). The Company, through its subsidiaries, offers professional services providing engineering, procurement, construction, fabrication and modularization, commissioning and maintenance, as well as project management services on a global basis. The Company is an integrated solutions provider for various industries, including oil and gas, chemicals and petrochemicals, mining and metals, transportation, power, life sciences and advanced manufacturing. The Company is also a service provider to the United States federal Government and governments abroad, and it performs operations and maintenance activities around the world for its industrial clients. The Company offers services in various categories, including engineering and design, procurement, construction, fabrication, maintenance, modification and asset integrity and project management. The Company offers these services both independently, as well as through its integrated solutions offerings. Its services range from basic consulting activities, at the early stages of a project, to complete design-build and maintenance contracts.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FLR – 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 $5,303,183,707 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.52 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 -43.59% Fail
6. Moderate PEmg Ratio PEmg < 20 19.36 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.67 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 1.52 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.87 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.95
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $28.24
MG Value based on 0% Growth $16.55
Market Implied Growth Rate 5.43%
Current Price $37.70
% of Intrinsic Value N/A

Fluor Corporation (NEW) 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 growth over the last ten years. The Enterprising Investor is only concerned with the lack of earnings growth 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 seeing its EPSmg (normalized earnings) decline from $3.28 in 2014 to an estimated $1.95 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.43% 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 Fluor Corporation (NEW) revealed the company was trading above its Graham Number of $31.02. The company pays a dividend of $0.84 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.36, which was below the industry average of 20.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.57.

Fluor Corporation (NEW) receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.57
Graham Number $31.02
PEmg 19.36
Current Ratio 1.52
PB Ratio 1.67
Current Dividend $0.84
Dividend Yield 2.23%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $5,584,161,000
Total Current Liabilities $3,662,103,000
Long-Term Debt $1,667,359,000
Total Assets $9,147,976,000
Intangible Assets $553,294,000
Total Liabilities $5,948,047,000
Shares Outstanding (Diluted Average) 141,549,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.79
Dec2017 $1.36
Dec2016 $2.00
Dec2015 $2.81
Dec2014 $3.20
Dec2013 $4.06
Dec2012 $2.71
Dec2011 $3.40
Dec2010 $1.98
Dec2009 $3.75
Dec2008 $3.93
Dec2007 $2.93
Dec2006 $1.48
Dec2005 $1.31
Dec2004 $1.13
Dec2003 $0.98
Dec2002 $1.03
Dec2001 $0.13
Oct2000 $0.81
Oct1999 $0.69
Oct1998 $1.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.95
Dec2017 $2.25
Dec2016 $2.78
Dec2015 $3.19
Dec2014 $3.28
Dec2013 $3.27
Dec2012 $2.97
Dec2011 $3.13
Dec2010 $2.94
Dec2009 $3.17
Dec2008 $2.64
Dec2007 $1.85
Dec2006 $1.26
Dec2005 $1.08
Dec2004 $0.91
Dec2003 $0.78
Dec2002 $0.73

Recommended Reading:

Other ModernGraham posts about the company

Fluor Corporation Valuation – April 2018 $FLR
Fluor Corporation Valuation – December 2016 $FLR
Fluor Corporation Valuation – August 2016 $FLR
26 Best Stocks For Value Investors This Week – 2/6/16
Fluor Corp Valuation – February 2016 Update $FLR

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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.

Incyte Corp Valuation – February 2019 $INCY

Company Profile (excerpt from Reuters): Incyte Corporation, incorporated on April 8, 1991, is a biopharmaceutical company. The Company is focused on the discovery, development and commercialization of therapeutics. The Company’s portfolio includes compounds in various stages, ranging from preclinical to late-stage development, and commercialized products, such as JAKAFI (ruxolitinib) and ICLUSIG (ponatinib). The Company has initiated REACH1, a pivotal Phase II trial in steroid-refractory acute graft-versus-host-disease (GVHD) and the first in a registration program for ruxolitinib in GVHD. A proof-of-concept trial of itacitinib, a selective janus associated kinases 1 (JAK1) inhibitor, is ongoing for the treatment of patients with acute GVHD.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of INCY – 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 $17,967,189,642 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.31 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 -89.95% Fail
6. Moderate PEmg Ratio PEmg < 20 482.41 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.41 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 4.31 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.01 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.17
MG Growth Estimate 15.00%
MG Value $6.70
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $2.52
MG Value based on 0% Growth $1.48
Market Implied Growth Rate 236.96%
Current Price $83.94
% of Intrinsic Value 1253.02%

Incyte Corporation 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 or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.32 in 2015 to an estimated $0.17 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 236.96% 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 Incyte Corporation revealed the company was trading above its Graham Number of $12.83. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 482.41, which was above the industry average of 39.51. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.15.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $5.15
Graham Number $12.83
PEmg 482.41
Current Ratio 4.31
PB Ratio 9.41
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 $1,832,254,000
Total Current Liabilities $425,277,000
Long-Term Debt $17,434,000
Total Assets $2,645,762,000
Intangible Assets $370,957,000
Total Liabilities $719,795,000
Shares Outstanding (Diluted Average) 215,992,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.81
Dec2018 $0.51
Dec2017 -$1.53
Dec2016 $0.54
Dec2015 $0.03
Dec2014 -$0.29
Dec2013 -$0.56
Dec2012 -$0.34
Dec2011 -$1.49
Dec2010 -$0.26
Dec2009 -$2.06
Dec2008 -$1.99
Dec2007 -$1.03
Dec2006 -$0.89
Dec2005 -$1.24
Dec2004 -$2.21
Dec2003 -$2.33
Dec2002 -$2.03
Dec2001 -$2.77
Dec2000 -$0.47
Dec1999 -$0.48

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.17
Dec2018 -$0.15
Dec2017 -$0.44
Dec2016 $0.03
Dec2015 -$0.32
Dec2014 -$0.53
Dec2013 -$0.75
Dec2012 -$0.97
Dec2011 -$1.31
Dec2010 -$1.23
Dec2009 -$1.62
Dec2008 -$1.43
Dec2007 -$1.28
Dec2006 -$1.52
Dec2005 -$1.92
Dec2004 -$2.16
Dec2003 -$1.97

Recommended Reading:

Other ModernGraham posts about the company

Incyte Corp Valuation – April 2018 $INCY

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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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