Hartford Financial Services Group Inc Valuation – February 2019 $HIG

Company Profile (excerpt from Reuters): The Hartford Financial Services Group, Inc., incorporated on December 9, 1985, is a holding company for insurance and financial services subsidiaries. The Company, through its subsidiaries, provides property and casualty insurance, group life and disability products, and mutual funds and exchange-traded products to individual and business customers in the United States. The Company’s segments include Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits, Mutual Funds, and Corporate. The Company administers life insurance and annuity products previously sold.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HIG – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,456,035,313 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
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 -72.65% Fail
5. Moderate PEmg Ratio PEmg < 20 28.38 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.35 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.71
MG Growth Estimate -1.62%
MG Value $9.01
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $24.86
MG Value based on 0% Growth $14.57
Market Implied Growth Rate 9.94%
Current Price $48.66
% of Intrinsic Value 540.08%

Hartford Financial Services Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. 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 $1.92 in 2015 to an estimated $1.71 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.94% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Hartford Financial Services Group Inc revealed the company was trading below its Graham Number of $60.98. The company pays a dividend of $1.1 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 28.38, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Hartford Financial Services Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Graham Number $60.98
PEmg 28.38
PB Ratio 1.35
Dividend Yield 2.26%
TTM Dividend $1.10
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 12/1/2018
Long-Term Debt & Capital Lease Obligation $4,265,000,000
Total Assets $62,307,000,000
Intangible Assets $1,947,000,000
Total Liabilities $49,206,000,000
Shares Outstanding (Diluted Average) 364,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.65
Dec2018 $4.95
Dec2017 -$8.61
Dec2016 $2.27
Dec2015 $3.96
Dec2014 $1.73
Dec2013 $0.36
Dec2012 -$0.18
Dec2011 $1.40
Dec2010 $2.40
Dec2009 -$2.93
Dec2008 -$8.99
Dec2007 $9.24
Dec2006 $8.69
Dec2005 $7.44
Dec2004 $7.12
Dec2003 -$0.33
Dec2002 $3.97
Dec2001 $2.10
Dec2000 $4.34
Dec1999 $3.79

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.71
Dec2018 $0.45
Dec2017 -$1.22
Dec2016 $2.19
Dec2015 $1.92
Dec2014 $0.98
Dec2013 $0.48
Dec2012 -$0.20
Dec2011 -$0.06
Dec2010 $0.03
Dec2009 $0.13
Dec2008 $2.67
Dec2007 $7.81
Dec2006 $6.53
Dec2005 $4.98
Dec2004 $3.65
Dec2003 $2.20

Recommended Reading:

Other ModernGraham posts about the company

Hartford Financial Services Analysis – 2015 Annual Update $HIG
15 Companies in the Spotlight This Week – 5/31/14
Hartford Financial Services 2014 Annual Valuation $HIG

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Principal Financial Group Inc Valuation – January 2019 $PFG
Progressive Corp Valuation – January 2019 $PGR
Lincoln National Corp Valuation – January 2019 $LNC
Cincinnati Financial Corp Valuation – January 2019 $CINF
Aon PLC Valuation – November 2018 $AON

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.

Fidelity National Information Services Inc Valuation – January 2019 $FIS

Company Profile (excerpt from Reuters): Fidelity National Information Services, Inc. (FIS), incorporated on March 2, 2001, is a financial services technology company. The Company focuses on retail and institutional banking, payments, asset and wealth management, risk and compliance, consulting and outsourcing solutions. The Company operates through three segments: Integrated Financial Solutions (IFS), Global Financial Solutions (GFS), and Corporate and Other.

FIS Chart

FIS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FIS – 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 $34,661,328,720 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 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 183.97% Pass
6. Moderate PEmg Ratio PEmg < 20 36.36 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.45 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 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.94 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.91
MG Growth Estimate 8.96%
MG Value $76.92
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $42.20
MG Value based on 0% Growth $24.74
Market Implied Growth Rate 13.93%
Current Price $105.84
% of Intrinsic Value 137.61%

Fidelity National Information Servcs Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.82 in 2014 to an estimated $2.91 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.93% 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 Fidelity National Information Servcs Inc revealed the company was trading above its Graham Number of $48.48. The company pays a dividend of $1.16 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 36.36, which was above the industry average of 26.19. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-30.

Fidelity National Information Servcs 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) -$30.00
Graham Number $48.48
PEmg 36.36
Current Ratio 1.34
PB Ratio 3.45
Current Dividend $1.16
Dividend Yield 1.10%
Number of Consecutive Years of Dividend Growth 1

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 $3,597,000,000
Total Current Liabilities $2,692,000,000
Long-Term Debt $8,998,000,000
Total Assets $23,694,000,000
Intangible Assets $18,599,000,000
Total Liabilities $13,528,000,000
Shares Outstanding (Diluted Average) 331,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.21
Dec2017 $3.93
Dec2016 $1.72
Dec2015 $2.19
Dec2014 $2.35
Dec2013 $1.68
Dec2012 $1.55
Dec2011 $1.53
Dec2010 $1.15
Dec2009 $0.44
Dec2008 $1.11
Dec2007 $2.86
Dec2006 $1.37
Dec2005 $1.53
Dec2004 $1.48
Dec2003 $1.40
Dec2002 $1.30
Dec2001 $1.26
Dec2000 $1.30
Dec1999 $1.07
Dec1998 $0.85

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.91
Dec2017 $2.63
Dec2016 $1.95
Dec2015 $2.00
Dec2014 $1.82
Dec2013 $1.46
Dec2012 $1.29
Dec2011 $1.24
Dec2010 $1.20
Dec2009 $1.30
Dec2008 $1.71
Dec2007 $1.92
Dec2006 $1.43
Dec2005 $1.44
Dec2004 $1.38
Dec2003 $1.31
Dec2002 $1.23

Recommended Reading:

Other ModernGraham posts about the company

Fidelity National Information Services Inc Valuation – March 2018 $FIS
Fidelity National Information Services Valuation – July 2016 $FIS
47 Companies in the Spotlight This Week – 5/16/15
Fidelity National Information Services Inc. Annual Valuation – 2015 $FIS
40 Companies in the Spotlight This Week – 2/21/15

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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.

Intercontinental Exchange Inc Valuation – January 2019 $ICE

Company Profile (excerpt from Reuters): Intercontinental Exchange, Inc., incorporated on March 6, 2013, is an operator of regulated exchanges, clearing houses and listings venues. The Company provides data services for commodity and financial markets. The Company’s segments include Trading and Clearing segment, and Data and Listings segment. The Trading and Clearing segment includes the Company’s transaction-based execution and clearing businesses. The Company’s Data and Listings segment includes its subscription-based data services and securities listings businesses. The Company operates regulated marketplaces for listing, trading and clearing a range of derivatives and securities contracts across the asset classes, including energy and agricultural commodities, interest rates, equities, equity derivatives, exchange traded funds, credit derivatives, bonds and currencies. The Company offers market data services to support the trading, investment, risk management and connectivity needs of customers across a range of asset classes.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ICE – 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 $43,077,628,792 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.00 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 196.61% Pass
6. Moderate PEmg Ratio PEmg < 20 24.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.58 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 1.00 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 28.21 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.09
MG Growth Estimate 15.00%
MG Value $118.84
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $44.76
MG Value based on 0% Growth $26.24
Market Implied Growth Rate 8.00%
Current Price $75.63
% of Intrinsic Value 63.64%

Intercontinental Exchange Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, 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 Undervalued after growing its EPSmg (normalized earnings) from $1.3 in 2014 to an estimated $3.09 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8% 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 Intercontinental Exchange Inc revealed the company was trading above its Graham Number of $45.72. The company pays a dividend of $0.8 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 24.5, which was above the industry average of 18. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.79.

Intercontinental Exchange 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) -$15.79
Graham Number $45.72
PEmg 24.50
Current Ratio 1.00
PB Ratio 2.58
Current Dividend $0.80
Dividend Yield 1.06%
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 9/1/2018
Total Current Assets $61,295,000,000
Total Current Liabilities $61,065,000,000
Long-Term Debt $6,488,000,000
Total Assets $87,242,000,000
Intangible Assets $23,379,000,000
Total Liabilities $70,388,000,000
Shares Outstanding (Diluted Average) 576,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.20
Dec2017 $4.23
Dec2016 $2.37
Dec2015 $2.28
Dec2014 $1.71
Dec2013 $0.64
Dec2012 $1.50
Dec2011 $1.38
Dec2010 $1.07
Dec2009 $0.85
Dec2008 $0.83
Dec2007 $0.68
Dec2006 $0.48
Dec2005 -$0.08
Dec2004 $0.08
Dec2003 $0.07
Dec2002 $0.07
Dec2001 $0.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.09
Dec2017 $2.77
Dec2016 $1.93
Dec2015 $1.64
Dec2014 $1.30
Dec2013 $1.09
Dec2012 $1.25
Dec2011 $1.07
Dec2010 $0.87
Dec2009 $0.70
Dec2008 $0.55
Dec2007 $0.35
Dec2006 $0.17
Dec2005 $0.02
Dec2004 $0.07
Dec2003 $0.05
Dec2002 $0.04

Recommended Reading:

Other ModernGraham posts about the company

Intercontinental Exchange Inc Valuation – March 2018 $ICE
Intercontinental Exchange Inc Valuation – July 2016 $ICE
21 Companies in the Spotlight This Week – 5/9/15
Intercontinental Exchange Inc. Annual Valuation – 2015 $ICE
18 Companies in the Spotlight This Week – 5/17/14

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Ameriprise Financial Inc Valuation – January 2019 $AMP
Invesco Ltd Valuation – January 2019 $IVZ
Capital One Financial Corp Valuation – January 2019 $COF
Total System Services Inc Valuation – December 2018 $TSS
Goldman Sachs Group Inc Valuation – November 2018 $GS

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.

PNC Financial Services Group Inc Valuation – January 2019 $PNC

Company Profile (excerpt from Reuters): The PNC Financial Services Group, Inc., incorporated on January 19, 1983, is a diversified financial services company. The Company has businesses engaged in retail banking, including residential mortgage, corporate and institutional banking and asset management, providing many of its products and services nationally. Its primary geographic markets located in Pennsylvania, Ohio, New Jersey, Michigan, Illinois, Maryland, Indiana, Florida, North Carolina, Kentucky, Washington, District of Columbia, Delaware, Virginia, Alabama, Georgia, Missouri, Wisconsin and South Carolina. It also provides various products and services internationally. The Company operates through four segments: Retail Banking, Corporate & Institutional Banking, Asset Management Group, and BlackRock. Its bank subsidiary is PNC Bank, National Association (PNC Bank), which is a national bank.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PNC – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $55,624,785,158 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 89.35% Pass
5. Moderate PEmg Ratio PEmg < 20 12.98 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.20 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 $9.29
MG Growth Estimate 6.31%
MG Value $196.11
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $134.68
MG Value based on 0% Growth $78.95
Market Implied Growth Rate 2.24%
Current Price $120.55
% of Intrinsic Value 61.47%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $6.54 in 2014 to an estimated $9.29 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.24% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

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

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

Stage 3: Information for Further Research

Graham Number $156.09
PEmg 12.98
PB Ratio 1.20
Dividend Yield 2.16%
TTM Dividend $2.60
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 9/1/2018
Long-Term Debt & Capital Lease Obligation $52,476,000,000
Total Assets $380,080,000,000
Intangible Assets $11,354,000,000
Total Liabilities $332,978,000,000
Shares Outstanding (Diluted Average) 467,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.78
Dec2017 $10.36
Dec2016 $7.30
Dec2015 $7.39
Dec2014 $7.30
Dec2013 $7.36
Dec2012 $5.28
Dec2011 $5.64
Dec2010 $5.02
Dec2009 $4.36
Dec2008 $2.44
Dec2007 $4.35
Dec2006 $8.73
Dec2005 $4.55
Dec2004 $4.21
Dec2003 $3.55
Dec2002 $4.15
Dec2001 $1.26
Dec2000 $4.31
Dec1999 $4.15
Dec1998 $3.60

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.29
Dec2017 $8.34
Dec2016 $7.20
Dec2015 $6.96
Dec2014 $6.54
Dec2013 $5.95
Dec2012 $5.01
Dec2011 $4.71
Dec2010 $4.49
Dec2009 $4.44
Dec2008 $4.61
Dec2007 $5.49
Dec2006 $5.72
Dec2005 $3.99
Dec2004 $3.64
Dec2003 $3.39
Dec2002 $3.37

Recommended Reading:

Other ModernGraham posts about the company

PNC Financial Services Group Inc Valuation – March 2018 $PNC
10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017
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5 Companies for Defensive Investors Near 52 Week Lows – Aug 2016

Other ModernGraham posts about related companies

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Customers Bancorp Inc Valuation – September 2018 $CUBI
Sterling Bancorp Valuation – August 2018 $STL
S&T Bancorp Inc Valuation – August 2018 $STBA
Central Pacific Financial Corp Valuation – August 2018 $CPF
Synovus Financial Corp Valuation – August 2018 $SNV

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.

Total System Services Inc Valuation – December 2018 $TSS

Company Profile (excerpt from Reuters): Total System Services, Inc. (TSYS), incorporated on December 22, 1982, is a payment solutions provider that provides payment processing services, merchant services and related payment services to financial and non-financial institutions. The Company’s segments include North America Services, Merchant Services, NetSpend and International Services. In addition, it provides general purpose reloadable (GPR) prepaid and payroll cards, and alternative financial service solutions to the underbanked and other consumers. The Company’s Merchant Services segment provides third party processing services to merchant acquirers and Independent Sales Organizations (ISOs) and financial institutions. The Company’s NetSpend segment is engaged in the provision and sale of prepaid access devices, such as its GPR prepaid debit cards.

TSS Chart

TSS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSS – December 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 $16,044,737,508 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.57 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 157.28% Pass
6. Moderate PEmg Ratio PEmg < 20 31.74 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.98 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 2.57 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.24 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 $2.71
MG Growth Estimate 14.10%
MG Value $99.33
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $39.24
MG Value based on 0% Growth $23.00
Market Implied Growth Rate 11.62%
Current Price $85.89
% of Intrinsic Value 86.47%

Total System Services, 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 is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.39 in 2014 to an estimated $2.71 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.62% 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 Total System Services, Inc. revealed the company was trading above its Graham Number of $30.87. The company pays a dividend of $0.46 per share, for a yield of 0.5% Its PEmg (price over earnings per share – ModernGraham) was 31.74, which was above the industry average of 20.05. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.76.

Total System Services, 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) -$19.76
Graham Number $30.87
PEmg 31.74
Current Ratio 2.57
PB Ratio 5.98
Current Dividend $0.46
Dividend Yield 0.54%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,199,917,000
Total Current Liabilities $467,171,000
Long-Term Debt $3,837,659,000
Total Assets $7,473,044,000
Intangible Assets $5,410,100,000
Total Liabilities $4,832,862,000
Shares Outstanding (Diluted Average) 183,846,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.42
Dec2017 $3.16
Dec2016 $1.73
Dec2015 $1.97
Dec2014 $1.72
Dec2013 $1.29
Dec2012 $1.29
Dec2011 $1.15
Dec2010 $0.99
Dec2009 $1.09
Dec2008 $1.26
Dec2007 $1.20
Dec2006 $1.26
Dec2005 $0.99
Dec2004 $0.76
Dec2003 $0.71
Dec2002 $0.64
Dec2001 $0.53
Dec2000 $0.45
Dec1999 $0.35
Dec1998 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.71
Dec2017 $2.22
Dec2016 $1.70
Dec2015 $1.62
Dec2014 $1.39
Dec2013 $1.21
Dec2012 $1.16
Dec2011 $1.11
Dec2010 $1.12
Dec2009 $1.17
Dec2008 $1.17
Dec2007 $1.08
Dec2006 $0.97
Dec2005 $0.80
Dec2004 $0.67
Dec2003 $0.60
Dec2002 $0.51

Recommended Reading:

Other ModernGraham posts about the company

Total System Services Inc Valuation – February 2018 $TSS
10 Best Stocks For Value Investors This Week – 5/21/16
Total System Services Inc Valuation – May 2016 $TSS
Total System Services Inc. Valuation – November 2015 Update $TSS
Total System Services Inc. Analysis – August 2015 Update $TSS

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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.

California Water Service Group Valuation – October 2018 $CWT

Company Profile (excerpt from Reuters): California Water Service Group, incorporated on August 2, 1999, is a holding company. The Company operates through the supply and distribution of water and providing water-related utility services segment. The Company, through its subsidiaries, provides non-regulated services and non-regulated services to private companies and municipalities. The bulk of the business consists of the production, purchase, storage, treatment, testing, distribution and sale of water for domestic, industrial, public and irrigation uses, and for fire protection. It also provides non-regulated water-related services under agreements with municipalities and other private companies. The non-regulated services include water system operation, billing and meter reading services. Non-regulated operations also include the lease of communication antenna sites, lab services and promotion of other non-regulated services. Its subsidiaries include California Water Service Company (Cal Water), New Mexico Water Service Company (New Mexico Water), Washington Water Service Company (Washington Water), Hawaii Water Service Company, Inc. (Hawaii Water) and CWS Utility Services and HWS Utility Services LLC.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CWT – 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 $2,037,687,186 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.30 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 28.65% Fail
6. Moderate PEmg Ratio PEmg < 20 36.33 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.97 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 0.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -0.96 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 $1.17
MG Growth Estimate 1.16%
MG Value $12.63
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $16.92
MG Value based on 0% Growth $9.92
Market Implied Growth Rate 13.92%
Current Price $42.39
% of Intrinsic Value 335.57%

California Water Service Group 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 $1.08 in 2014 to an estimated $1.17 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.92% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into California Water Service Group revealed the company was trading above its Graham Number of $19.42. The company pays a dividend of $0.72 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 36.33, which was above the industry average of 22.78. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-39.81.

California Water Service Group 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) -$39.81
Graham Number $19.42
PEmg 36.33
Current Ratio 0.30
PB Ratio 2.97
Current Dividend $0.72
Dividend Yield 1.70%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $189,570,000
Total Current Liabilities $622,300,000
Long-Term Debt $414,530,000
Total Assets $2,789,514,000
Intangible Assets $2,615,000
Total Liabilities $2,103,582,000
Shares Outstanding (Diluted Average) 48,073,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.16
Dec2017 $1.40
Dec2016 $1.01
Dec2015 $0.94
Dec2014 $1.19
Dec2013 $1.02
Dec2012 $1.17
Dec2011 $0.90
Dec2010 $0.90
Dec2009 $0.98
Dec2008 $0.95
Dec2007 $0.75
Dec2006 $0.67
Dec2005 $0.74
Dec2004 $0.70
Dec2003 $0.57
Dec2002 $0.63
Dec2001 $0.49
Dec2000 $0.66
Dec1999 $0.72
Dec1998 $0.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.17
Dec2017 $1.15
Dec2016 $1.04
Dec2015 $1.05
Dec2014 $1.08
Dec2013 $1.02
Dec2012 $1.00
Dec2011 $0.91
Dec2010 $0.89
Dec2009 $0.87
Dec2008 $0.80
Dec2007 $0.71
Dec2006 $0.68
Dec2005 $0.66
Dec2004 $0.62
Dec2003 $0.59
Dec2002 $0.61

Recommended Reading:

Other ModernGraham posts about the company

California Water Service Group Valuation – Initial Coverage $CWT

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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.

Stewart Information Services Corp Valuation – August 2018 $STC

Company Profile (excerpt from Reuters): Stewart Information Services Corporation, incorporated March 25, 1970, is a global real estate services company. The Company is engaged in offering products and services through its direct operations, network of Stewart Trusted Providers and family of companies. The Company operates through two segments: title insurance and ancillary services (title) and corporate. The Company operates through a network of production facilities, owned policy-issuing offices and independent agencies in the United States and international markets. The Company provides its services to homebuyers and sellers; residential and commercial real estate professionals; mortgage lenders and servicers; title agencies and real estate attorneys; home builders, and the United States Government. It also provides services to mortgage lenders and servicers, mortgage brokers and mortgage investors, which are primarily related to appraisal and valuation services (referred to as ancillary services operations). Its primary international operations are located in Canada, the United Kingdom, Australia and Central Europe.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of STC – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,074,196,017 Fail
2. Earnings Stability Positive EPS for 10 years prior Fail
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 -284.27% Fail
5. Moderate PEmg Ratio PEmg < 20 26.09 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.60 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.73
MG Growth Estimate -1.99%
MG Value $7.85
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $25.14
MG Value based on 0% Growth $14.74
Market Implied Growth Rate 8.79%
Current Price $45.24
% of Intrinsic Value 576.27%

Stewart Information Services Corp 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 high PEmg ratio. 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 $2 in 2014 to an estimated $1.73 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.79% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Stewart Information Services Corp revealed the company was trading above its Graham Number of $38.3. The company pays a dividend of $1.2 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 26.09, which was below the industry average of 36.08, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Stewart Information Services Corp scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Graham Number $38.30
PEmg 26.09
PB Ratio 1.60
Dividend Yield 2.65%
TTM Dividend $1.20
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Long-Term Debt & Capital Lease Obligation $107,657,000
Total Assets $1,357,899,000
Intangible Assets $253,874,000
Total Liabilities $691,662,000
Shares Outstanding (Diluted Average) 23,625,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.30
Dec2017 $2.06
Dec2016 $1.85
Dec2015 -$0.26
Dec2014 $1.24
Dec2013 $2.60
Dec2012 $4.61
Dec2011 $0.12
Dec2010 -$0.69
Dec2009 -$2.80
Dec2008 -$13.68
Dec2007 -$2.21
Dec2006 $2.36
Dec2005 $4.86
Dec2004 $4.53
Dec2003 $6.88
Dec2002 $5.43
Dec2001 $2.98
Dec2000 $0.04
Dec1999 $1.95
Dec1998 $3.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.73
Dec2017 $1.47
Dec2016 $1.45
Dec2015 $1.39
Dec2014 $2.00
Dec2013 $1.84
Dec2012 $0.15
Dec2011 -$2.68
Dec2010 -$3.85
Dec2009 -$4.38
Dec2008 -$3.73
Dec2007 $1.93
Dec2006 $4.27
Dec2005 $5.13
Dec2004 $4.83
Dec2003 $4.47
Dec2002 $3.09

Recommended Reading:

Other ModernGraham posts about the company

Stewart Information Services Corp Valuation – Initial Coverage $STC

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Genworth Financial Inc Valuation – June 2018 $GNW
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Humana Inc Valuation – June 2018 $HUM

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.

Superior Energy Services Inc Valuation – August 2018 $SPN

Company Profile (excerpt from Reuters): Superior Energy Services, Inc., incorporated on April 26, 1991, provides a range of services and products to the energy industry related to the exploration, development and production of oil and natural gas. The Company’s segments include Drilling Products and Services; Onshore Completion and Workover Services; Production Services, and Technical Solutions. The Drilling Products and Services segment rents and sells bottom hole assemblies, drill pipe, tubulars and specialized equipment for use with onshore and offshore oil and gas well drilling, completion, production and workover activities. It also provides on-site accommodations and machining services. The Onshore Completion and Workover Services segment provides pressure pumping services used to complete and stimulate production in new oil and gas wells, fluid handling services and well servicing rigs that provide a range of well completion, workover and maintenance services. The Production Services segment provides intervention services, such as coiled tubing, cased hole and mechanical wireline, hydraulic workover and snubbing, production testing and optimization, and remedial pumping services. The Technical Solutions segment provides services typically requiring specialized engineering, manufacturing or project planning, including well containment systems, stimulation and sand control services and well plug and abandonment services. It also includes production handling arrangements and the production and sale of oil and gas.

SPN Chart

SPN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SPN – 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 $1,511,280,681 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.97 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 -656.76% Fail
6. Moderate PEmg Ratio PEmg < 20 -2.76 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.38 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 1.97 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.42 Fail
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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$3.41
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$49.45
MG Value based on 0% Growth -$28.99
Market Implied Growth Rate -5.63%
Current Price $9.42
% of Intrinsic Value N/A

Superior Energy Services, 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 poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.15 in 2014 to an estimated $-3.41 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 Superior Energy Services, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -2.76, which was below the industry average of 59.52, 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 $-7.82.

Superior Energy Services, 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) -$7.82
Graham Number $0.00
PEmg -2.76
Current Ratio 1.97
PB Ratio 1.38
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 $762,448,000
Total Current Liabilities $387,946,000
Long-Term Debt $1,281,145,000
Total Assets $3,020,985,000
Intangible Assets $944,162,000
Total Liabilities $1,968,270,000
Shares Outstanding (Diluted Average) 154,278,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.04
Dec2017 -$1.35
Dec2016 -$5.85
Dec2015 -$12.33
Dec2014 $1.65
Dec2013 -$0.70
Dec2012 $2.42
Dec2011 $1.76
Dec2010 $1.03
Dec2009 -$1.31
Dec2008 $4.33
Dec2007 $3.41
Dec2006 $2.32
Dec2005 $0.85
Dec2004 $0.47
Dec2003 $0.41
Dec2002 $0.30
Dec2001 $0.77
Dec2000 $0.28
Dec1999 -$0.25
Dec1998 -$1.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$3.41
Dec2017 -$4.30
Dec2016 -$4.84
Dec2015 -$3.37
Dec2014 $1.15
Dec2013 $0.81
Dec2012 $1.60
Dec2011 $1.40
Dec2010 $1.47
Dec2009 $1.77
Dec2008 $2.96
Dec2007 $2.02
Dec2006 $1.17
Dec2005 $0.58
Dec2004 $0.45
Dec2003 $0.39
Dec2002 $0.24

Recommended Reading:

Other ModernGraham posts about the company

Superior Energy Services Inc Valuation – Initial Coverage $SPN

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Shawcor Ltd Valuation – July 2018 $TSE-SCL

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.

Kelly Services Inc Valuation – August 2018 $KELYA

Company Profile (excerpt from Reuters): Kelly Services, Inc., incorporated on August 27, 1952, is a workforce solutions provider, which is engaged in offering a range of specialty services. The Company provides workforce solutions in three regions: the Americas; Europe, the Middle East and Africa (EMEA), and Asia Pacific (APAC). The Company’s segments are Americas Commercial, Americas Professional and Technical (Americas PT), EMEA Commercial, EMEA Professional and Technical (EMEA PT), and Outsourcing and Consulting Group (OCG). The Company places professional and technical employees at various levels in engineering, information technology (IT), law, healthcare and finance.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KELYA – 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 $937,235,822 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.50 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 -1283.33% Fail
6. Moderate PEmg Ratio PEmg < 20 11.83 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.80 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 1.50 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 Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.06
MG Growth Estimate 11.87%
MG Value $66.46
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $29.89
MG Value based on 0% Growth $17.52
Market Implied Growth Rate 1.66%
Current Price $24.38
% of Intrinsic Value 36.68%

Kelly Services, Inc. Class A is suitable for the Enterprising Investor but not 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 poor dividend history. The Enterprising Investor is only concerned with the low current ratio. 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 $1.15 in 2014 to an estimated $2.06 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.66% 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 Kelly Services, Inc. Class A revealed the company was trading below its Graham Number of $38.61. The company pays a dividend of $0.3 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 11.83, which was below the industry average of 33.97, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.92.

Kelly Services, Inc. Class A performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $3.92
Graham Number $38.61
PEmg 11.83
Current Ratio 1.50
PB Ratio 0.80
Current Dividend $0.30
Dividend Yield 1.23%
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 3/1/2018
Total Current Assets $1,397,700,000
Total Current Liabilities $934,200,000
Long-Term Debt $0
Total Assets $2,436,600,000
Intangible Assets $107,300,000
Total Liabilities $1,245,300,000
Shares Outstanding (Diluted Average) 38,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.21
Dec2017 $1.81
Dec2016 $3.08
Dec2015 $1.39
Dec2014 $0.61
Dec2013 $1.54
Dec2012 $1.32
Dec2011 $1.69
Dec2010 $0.71
Dec2009 -$3.00
Dec2008 -$2.37
Dec2007 $1.67
Dec2006 $1.75
Dec2005 $1.09
Dec2004 $0.60
Dec2003 $0.14
Dec2002 $0.51
Dec2001 $0.47
Dec2000 $2.43
Dec1999 $2.36
Dec1998 $2.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.06
Dec2017 $1.89
Dec2016 $1.81
Dec2015 $1.22
Dec2014 $1.15
Dec2013 $1.10
Dec2012 $0.47
Dec2011 -$0.05
Dec2010 -$0.70
Dec2009 -$0.99
Dec2008 $0.19
Dec2007 $1.33
Dec2006 $1.05
Dec2005 $0.65
Dec2004 $0.56
Dec2003 $0.76
Dec2002 $1.24

Recommended Reading:

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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.

Secure Energy Services Inc Valuation – July 2018 $TSE-SES

Company Profile (excerpt from Reuters): Secure Energy Services Inc is a Canada-based energy services company. It owns and operates midstream infrastructure and provides environmental services and products to upstream oil and natural gas companies operating in Western Canada and certain regions in the United States. It operates through three divisions. The Processing, Recovery and Disposal division owns and operates midstream infrastructure that provides processing, storing, shipping and marketing of crude oil, oilfield waste disposal and recycling. Its Drilling Services division provides equipment and product solutions for drilling, completion and production operations for oil and gas producers. Its Onsite Services division includes Environmental services, which provide pre-drilling assessment planning, drilling waste management, and remediation and reclamation assessment services; Integrated Fluid Solutions, which include water management, and pumping and storage solutions, and Projects, which include pipeline integrity.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-SES – July 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 $1,278,502,426 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.69 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 -237.93% Fail
6. Moderate PEmg Ratio PEmg < 20 -35.73 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.49 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 1.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.17 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 -$0.22
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$3.19
MG Value based on 0% Growth -$1.87
Market Implied Growth Rate -22.11%
Current Price $7.86
% of Intrinsic Value N/A

Secure Energy Services 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 poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.28 in 2014 to an estimated $-0.22 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 Secure Energy Services Inc revealed the company was trading above its Graham Number of $3.96. The company pays a dividend of $0.25 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -35.73, which was below the industry average of 49.12, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.9.

Secure Energy Services 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) -$1.90
Graham Number $3.96
PEmg -35.73
Current Ratio 1.69
PB Ratio 1.49
Current Dividend $0.25
Dividend Yield 3.19%
Number of Consecutive Years of Dividend Growth 1

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $385,883,000
Total Current Liabilities $227,844,000
Long-Term Debt $342,673,000
Total Assets $1,579,907,000
Intangible Assets $58,849,000
Total Liabilities $701,374,000
Shares Outstanding (Diluted Average) 166,080,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.13
Dec2017 -$0.21
Dec2016 -$0.32
Dec2015 -$1.20
Dec2014 $0.25
Dec2013 $0.35
Dec2012 $0.33
Dec2011 $0.27
Dec2010 $0.09
Dec2009 -$0.07
Dec2008 -$0.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.22
Dec2017 -$0.34
Dec2016 -$0.31
Dec2015 -$0.20
Dec2014 $0.28
Dec2013 $0.27
Dec2012 $0.19
Dec2011 $0.09
Dec2010 $0.00
Dec2009 -$0.04
Dec2008 -$0.02

Recommended Reading:

Other ModernGraham posts about the company

Secure Energy Services Inc Valuation – Initial Coverage $TSE:SES

Other ModernGraham posts about related companies

Imperial Oil Ltd Valuation – July 2018 $IMO
CES Energy Solutions Corp – July 2018 $TSE-CEU
WPX Energy Inc Valuation – July 2018 $WPX
Magellan Midstream Partners LP Valuation – July 2018 $MMP
Ensco PLC Valuation – July 2018 $ESV
Enterprise Products Partners LP Valuation – July 2018 $EPD
Noble Corp PLC Valuation – June 2018 $NE
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Diamond Offshore Drilling Inc Valuation – June 2018 $DO
Transocean Ltd Valuation – June 2018 $RIG

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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