//www.

Jacobs Engineering Group Quarterly Valuation – June 2014 $JEC

Jacobs_logoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Enterprising Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Jacobs Engineering Group (JEC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Jacobs Engineering Group Inc. is a technical professional services firm. The Company provides a diverse range of technical, professional, and construction services to a number of industrial, commercial, and governmental clients. The Company provides four categories of services: Project Services, Process, Scientific, and Systems Consulting services, Construction services, and Operations and Maintenance services. In June 2013, the Company announced that it has acquired Compass Technology Services, Inc. In October 2013, Jacobs Engineering Group Inc announced that its South African joint venture, Jacobs Matasis (Proprietary) Limited acquired the business and assets of Ilitha Projects and Ilitha Staffing, two South African professional services companies. In November 2013, Jacobs Engineering Group Inc acquired an undisclosed majority interest in Guimar Engenharia SA. In February 2014, Jacobs Engineering Group Inc acquired Eagleton Engineering, LLC.

JEC Chart

JEC data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $54.71
MG Value $32.45
MG Opinion Overvalued
Value Based on 3% Growth $41.42
Value Based on 0% Growth $24.28
Market Implied Growth Rate 5.33%
Net Current Asset Value (NCAV) -$1.27
PEmg 19.15
Current Ratio 1.84
PB Ratio 1.64

Balance Sheet – 3/28/2014

Current Assets $3,648,800,000
Current Liabilities $1,982,800,000
Total Debt $932,200,000
Total Assets $8,236,000,000
Intangible Assets $3,397,200,000
Total Liabilities $3,816,600,000
Outstanding Shares 132,180,000

Earnings Per Share

2014 (estimate) $2.79
2013 $3.23
2012 $2.94
2011 $2.60
2010 $1.96
2009 $3.21
2008 $3.38
2007 $2.35
2006 $1.64
2005 $1.29
2004 $1.13

Earnings Per Share – ModernGraham

2014 (estimate) $2.86
2013 $2.86
2012 $2.72
2011 $2.64
2010 $2.61
2009 $2.75

Conclusion:

Jacobs Engineering is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the company’s low current ratio and lack of dividend payments.  The Enterprising Investor’s only initial concern is the lack of dividend payments.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.61 in 2010 to only an estimated $2.86 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 5.33% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value that is below the current price.

Be sure to review the previous ModernGraham Valuations of Jacobs Engineering Group (JEC)!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Jacobs Engineering Group (JEC)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Jacobs Engineering Group (JEC) or 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.  Logo taken from wikipedia; this article is not affiliated with the company in any manner.

Jacobs Engineering Group (JEC) Quarterly Valuation – March 2014

Jacobs_logoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Jacobs Engineering fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Jacobs Engineering Group Inc. is a technical professional services firm. The Company provides a diverse range of technical, professional, and construction services to a number of industrial, commercial, and governmental clients. The Company provides four categories of services: Project Services, Process, Scientific, and Systems Consulting services, Construction services, and Operations and Maintenance services. In June 2013, the Company announced that it has acquired Compass Technology Services, Inc. In October 2013, Jacobs Engineering Group Inc announced that its South African joint venture, Jacobs Matasis (Proprietary) Limited acquired the business and assets of Ilitha Projects and Ilitha Staffing, two South African professional services companies. In November 2013, Jacobs Engineering Group Inc acquired an undisclosed majority interest in Guimar Engenharia SA. In February 2014, Jacobs Engineering Group Inc acquired Eagleton Engineering, LLC.

JEC Chart

JEC data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $63.27
MG Value $45.40
MG Opinion Overvalued
Value Based on 3% Growth $45.39
Value Based on 0% Growth $26.61
Market Implied Growth Rate 5.86%
Net Current Asset Value (NCAV) -$1.32
PEmg 20.21
Current Ratio 1.82
PB Ratio 1.93

Balance Sheet – 12/27/2013

Current Assets $3,944,200,000
Current Liabilities $2,162,100,000
Total Debt $1,041,500,000
Total Assets $8,441,200,000
Intangible Assets $3,348,100,000
Total Liabilities $4,118,200,000
Outstanding Shares 131,860,000

Earnings Per Share

2014 (estimate) $3.61
2013 $3.23
2012 $2.94
2011 $2.60
2010 $1.96
2009 $3.21
2008 $3.38
2007 $2.35
2006 $1.64
2005 $1.29
2004 $1.13

Earnings Per Share – ModernGraham

2014 (estimate) $3.13
2013 $2.86
2012 $2.72
2011 $2.64
2010 $2.61
2009 $2.75

Conclusion:

Jacobs Engineering is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is turned away by the low current ratio, insufficient dividend record, and high PEmg ratio.  The Enterprising Investor is satisfied with the company except for the lack of dividend payments, but that alone is not enough to eliminate the company from potential investment.  As a result, the Enterprising Investor following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research, including a look at 5 Undervalued Companies for the Defensive Investor as well as 5 Low PEmg Companies for the Enterprising Investor.   From a valuation perspective, the company appears to be overvalued presently.  The EPSmg (normalized earnings) have grown from $2.61 in 2010 to only $3.13 estimated for 2014, a level of demonstrated growth that does not support the market’s implied estimate of 5.86% earnings growth.  The ModernGraham valuation model accordingly returns an estimate of intrinsic value that falls well below the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Jacobs Engineering Group (JEC)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Jacobs Engineering Group (JEC) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

 

Home Depot Inc Valuation – April 2019 #HD

Company Profile (excerpt from Reuters): The Home Depot, Inc. (The Home Depot), incorporated on June 29, 1978, is a home improvement retailer. The Company sells an assortment of building materials, home improvement products, and lawn and garden products, and provides various services. The Home Depot stores averaged approximately 104,000 square feet of enclosed space, with over 24,000 additional square feet of outside garden area, as of January 29, 2017. The Home Depot stores serve three primary customer groups: do-it-yourself (DIY) customers, do-it-for-me (DIFM) customers and professional customers. The Company had approximately 2,278 stores located throughout the United States, including the Commonwealth of Puerto Rico and the territories of the United States Virgin Islands and Guam, Canada and Mexico, as of January 29, 2017.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HD – 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 $223,054,839,544 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.11 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 257.09% Pass
6. Moderate PEmg Ratio PEmg < 20 23.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -120.72 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 1.11 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 14.79 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 $8.51
MG Growth Estimate 14.05%
MG Value $311.32
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $123.35
MG Value based on 0% Growth $72.31
Market Implied Growth Rate 7.63%
Current Price $202.06
% of Intrinsic Value 64.90%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.39 in 2016 to an estimated $8.51 for 2020. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.63% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Home Depot Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $4.12 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 23.75, which was above the industry average of 21.52. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.38.

Home Depot 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) -$24.38
Graham Number $0.00
PEmg 23.75
Current Ratio 1.11
PB Ratio -120.72
Current Dividend $4.12
Dividend Yield 2.04%
Number of Consecutive Years of Dividend Growth 9

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 1/1/2019
Total Current Assets $18,529,000,000
Total Current Liabilities $16,716,000,000
Long-Term Debt $26,807,000,000
Total Assets $44,003,000,000
Intangible Assets $2,252,000,000
Total Liabilities $45,881,000,000
Shares Outstanding (Diluted Average) 1,122,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.69
Jan2019 $9.73
Jan2018 $7.29
Jan2017 $6.45
Jan2016 $5.46
Jan2015 $4.71
Jan2014 $3.76
Jan2013 $3.00
Jan2012 $2.47
Jan2011 $2.01
Jan2010 $1.57
Jan2009 $1.34
Jan2008 $2.37
Jan2007 $2.79
Jan2006 $2.72
Jan2005 $2.26
Jan2004 $1.88
Jan2003 $1.56
Jan2002 $1.29
Jan2001 $1.10
Jan2000 $1.00

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.51
Jan2019 $7.52
Jan2018 $6.12
Jan2017 $5.25
Jan2016 $4.39
Jan2015 $3.64
Jan2014 $2.92
Jan2013 $2.36
Jan2012 $2.01
Jan2011 $1.86
Jan2010 $1.91
Jan2009 $2.15
Jan2008 $2.50
Jan2007 $2.46
Jan2006 $2.18
Jan2005 $1.81
Jan2004 $1.51

Recommended Reading:

Other ModernGraham posts about the company

Home Depot Inc Valuation – November 2018 $HD
Home Depot Inc Valuation – February 2018 $HD
Home Depot Inc Valuation – February 2017 $HD
Home Depot Inc. Valuation – November 2015 Update $HD
30 Companies in the Spotlight This Week – 11/15/14

Other ModernGraham posts about related companies

Lowe’s Companies Inc Valuation – March 2019 #LOW
Quanta Services Inc Valuation – March 2019 #PWR
Mohawk Industries Inc Valuation – March 2019 #MHK
Jacobs Engineering Group Inc Valuation – March 2019 #JEC
Masco Corp Valuation – February 2019 $MAS
D.R. Horton Inc Valuation – February 2019 $DHI
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

Disclaimer:

The author held a long position in HD 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.

Bristol-Myers Squibb Co Valuation – April 2019 #BMY

Company Profile (excerpt from Reuters): Bristol-Myers Squibb Company, incorporated on August 11, 1933, is engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of biopharmaceutical products. The Company’s pharmaceutical products include chemically synthesized drugs, or small molecules, and products produced from biological processes called biologics. Small molecule drugs are administered orally in the form of a pill or tablet. Biologics are administered to patients through injections or by infusion. The Company’s products include Empliciti, Opdivo, Sprycel, Yervoy, Eliquis, Orencia, Baraclude, Hepatitis C Franchise, Reyataz Franchise and Sustiva Franchise. It offers products for a range of therapeutic classes, which include virology, including human immunodeficiency virus (HIV) infection; oncology; immunoscience, and cardiovascular. Its products are sold to wholesalers, retail pharmacies, hospitals, government entities and the medical profession across the world.

Downloadable PDF version of this valuation:

ModernGraham Valuation of BMY – 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 $76,654,092,495 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.61 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 51.08% Pass
6. Moderate PEmg Ratio PEmg < 20 17.33 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.44 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 1.61 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.71
MG Growth Estimate 15.00%
MG Value $104.21
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $39.25
MG Value based on 0% Growth $23.01
Market Implied Growth Rate 4.42%
Current Price $46.91
% of Intrinsic Value 45.02%

Bristol-Myers Squibb Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.24 in 2015 to an estimated $2.71 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.42% 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 Bristol-Myers Squibb Co revealed the company was trading above its Graham Number of $28.16. The company pays a dividend of $1.61 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 17.33, which was below the industry average of 45.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.26.

Bristol-Myers Squibb Co performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.26
Graham Number $28.16
PEmg 17.33
Current Ratio 1.61
PB Ratio 5.44
Current Dividend $1.61
Dividend Yield 3.43%
Number of Consecutive Years of Dividend Growth 12

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 $17,160,000,000
Total Current Liabilities $10,654,000,000
Long-Term Debt $5,646,000,000
Total Assets $34,986,000,000
Intangible Assets $7,629,000,000
Total Liabilities $20,859,000,000
Shares Outstanding (Diluted Average) 1,637,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.10
Dec2018 $3.01
Dec2017 $0.61
Dec2016 $2.65
Dec2015 $0.93
Dec2014 $1.20
Dec2013 $1.54
Dec2012 $1.16
Dec2011 $2.16
Dec2010 $1.79
Dec2009 $5.34
Dec2008 $2.62
Dec2007 $1.09
Dec2006 $0.81
Dec2005 $1.52
Dec2004 $1.21
Dec2003 $1.59
Dec2002 $1.06
Dec2001 $0.95
Dec2000 $1.84
Dec1999 $1.81

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.71
Dec2018 $1.90
Dec2017 $1.36
Dec2016 $1.65
Dec2015 $1.24
Dec2014 $1.45
Dec2013 $1.85
Dec2012 $2.21
Dec2011 $2.69
Dec2010 $2.74
Dec2009 $2.91
Dec2008 $1.61
Dec2007 $1.15
Dec2006 $1.20
Dec2005 $1.35
Dec2004 $1.29
Dec2003 $1.37

Recommended Reading:

Other ModernGraham posts about the company

Bristol-Myers Squibb Company Valuation – June 2018 $BMY
Bristol-Myers Squibb Co Valuation – September 2017 $BMY
Bristol-Myers Squibb Company Valuation – February 2016 $BMY
27 Companies in the Spotlight This Week – 12/20/14
Bristol-Myers Squibb Company Annual Valuation – 2014 $BMY

Other ModernGraham posts about related companies

Biogen Inc Valuation – March 2019 #BIIB
Mylan NV Valuation – March 2019 #MYL
Celgene Corp Valuation – March 2019 #CELG
Amgen Inc Valuation – March 2019 #AMGN
AbbVie Inc Valuation – March 2019 #ABBV
Allergan PLC Valuation – February 2019 $AGN
Incyte Corp Valuation – February 2019 $INCY
Regeneron Pharmaceuticals Inc Valuation – February 2019 $REGN
Alexion Pharmaceuticals Inc Valuation – February 2019 $ALXN
Vertex Pharmaceuticals Inc Valuation – February 2019 $VRTX

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.

Anadarko Petroleum Corp Valuation – March 2019 #APC

Company Profile (excerpt from Reuters): Anadarko Petroleum Corporation (Anadarko), incorporated on June 12, 1985, is an independent exploration and production company. The Company is engaged in developing, acquiring, and exploring for oil and natural-gas resources. The Company’s segments include Oil and Gas Exploration and Production; Midstream, and Marketing. The Company’s geographical segments include the United States and International. The Oil and Gas Exploration and Production segment explores for and produces oil, condensate, natural gas and natural gas liquids (NGLs), and focuses on the development and operation of the Company’s liquefied natural gas (LNG) project in Mozambique. The Midstream segment engages in gathering, processing, treating and transporting Anadarko and third-party oil, natural-gas and NGLs production. The Marketing segment sells Anadarko’s oil, natural-gas and NGLs production, as well as third-party purchased volumes. As of December 31, 2016, the Company had approximately 1.7 billion barrels of oil equivalent (BOE) of proved reserves.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of APC – 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 $22,116,234,175 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.81 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -160.64% Fail
6. Moderate PEmg Ratio PEmg < 20 -24.30 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.00 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 0.81 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -17.93 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg -$1.82
MG Growth Estimate 9.22%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$26.42
MG Value based on 0% Growth -$15.49
Market Implied Growth Rate -16.40%
Current Price $44.27
% of Intrinsic Value N/A

Anadarko Petroleum Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 growing its EPSmg (normalized earnings) from $-4.73 in 2015 to an estimated $-1.82 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 Anadarko Petroleum Corporation revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.05 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -24.3, which was below the industry average of 58.42, 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 $-51.79.

Anadarko Petroleum Corporation 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) -$51.79
Graham Number $0.00
PEmg -24.30
Current Ratio 0.81
PB Ratio 2.00
Current Dividend $1.05
Dividend Yield 2.37%
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 12/1/2018
Total Current Assets $3,795,000,000
Total Current Liabilities $4,658,000,000
Long-Term Debt $15,470,000,000
Total Assets $40,376,000,000
Intangible Assets $5,630,000,000
Total Liabilities $29,433,000,000
Shares Outstanding (Diluted Average) 495,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.92
Dec2018 $1.20
Dec2017 -$0.85
Dec2016 -$5.90
Dec2015 -$13.18
Dec2014 -$3.47
Dec2013 $1.58
Dec2012 $4.74
Dec2011 -$5.32
Dec2010 $1.52
Dec2009 -$0.28
Dec2008 $6.91
Dec2007 $8.08
Dec2006 $10.24
Dec2005 $2.45
Dec2004 $1.59
Dec2003 $2.55
Dec2002 $0.81
Dec2001 -$0.38
Dec2000 $2.08
Dec1999 $0.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.82
Dec2018 -$3.00
Dec2017 -$4.85
Dec2016 -$5.65
Dec2015 -$4.73
Dec2014 -$0.40
Dec2013 $0.91
Dec2012 $0.89
Dec2011 $0.04
Dec2010 $3.57
Dec2009 $4.89
Dec2008 $6.94
Dec2007 $6.30
Dec2006 $4.78
Dec2005 $1.83
Dec2004 $1.46
Dec2003 $1.27

Recommended Reading:

Other ModernGraham posts about the company

Anadarko Petroleum Corp Valuation – June 2018 $APC
Anadarko Petroleum Co Valuation – April 2017 $APC
Anadarko Petroleum Corp Valuation – January 2016 Update $APC
32 Companies in the Spotlight This Week – 12/6/14
Anadarko Petroleum Corporation Annual Valuation – 2014 $APC

Other ModernGraham posts about related companies

Cabot Oil & Gas Corp Valuation – March 2019 #COG
Concho Resources Inc Valuation – March 2019 #CXO
Valero Energy Corp Valuation – March 2019 #VLO
Occidental Petroleum Corp Valuation – March 2019 #OXY
Phillips 66 Valuation – March 2019 #PSX
Halliburton Co Valuation – March 2019 #HAL
Kinder Morgan Inc Valuation – February 2019 $KMI
National Oilwell Varco Inc Valuation – February 2019 $NOV
Diamondback Energy Inc Valuation – February 2019 $FANG
TechnipFMC PLC Valuation – February 2019 $FTI

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.

Lowe’s Companies Inc Valuation – March 2019 #LOW

Company Profile (excerpt from Reuters): Lowe’s Companies, Inc. (Lowe’s), incorporated on August 1, 1952, is a home improvement company. The Company operates approximately 2,370 home improvement and hardware stores. The Company offers a range of products for maintenance, repair, remodeling and decorating. The Company offers home improvement products in categories, including Lumber and Building Materials; Tools and Hardware; Appliances; Fashion Fixtures; Rough Plumbing and Electrical; Lawn and Garden; Seasonal and Outdoor Living; Paint; Flooring; Millwork, and Kitchens. The Company also supports the communities that focus on K-12 public education and community improvement projects. The Company serves its customers in the United States, Canada and Mexico.

LOW Chart

LOW data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LOW – 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 $84,769,831,466 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.98 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 184.80% Pass
6. Moderate PEmg Ratio PEmg < 20 25.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 23.25 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 0.98 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -53.50 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.22
MG Growth Estimate 11.58%
MG Value $133.62
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $61.19
MG Value based on 0% Growth $35.87
Market Implied Growth Rate 8.28%
Current Price $105.79
% of Intrinsic Value 79.17%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.38 in 2016 to an estimated $4.22 for 2020. This level of demonstrated earnings growth supports the market’s implied estimate of 8.28% 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 Lowe’s Companies, Inc. revealed the company was trading above its Graham Number of $24.75. The company pays a dividend of $1.85 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 25.07, which was above the industry average of 20.99. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.77.

Lowe’s Companies, 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) -$20.77
Graham Number $24.75
PEmg 25.07
Current Ratio 0.98
PB Ratio 23.25
Current Dividend $1.85
Dividend Yield 1.75%
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 1/1/2019
Total Current Assets $14,228,000,000
Total Current Liabilities $14,497,000,000
Long-Term Debt $14,391,000,000
Total Assets $34,508,000,000
Intangible Assets $303,000,000
Total Liabilities $30,864,000,000
Shares Outstanding (Diluted Average) 801,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.00
Jan2019 $2.84
Jan2018 $4.09
Jan2017 $3.47
Jan2016 $2.73
Jan2015 $2.71
Jan2014 $2.14
Jan2013 $1.69
Jan2012 $1.43
Jan2011 $1.42
Jan2010 $1.21
Jan2009 $1.49
Jan2008 $1.86
Jan2007 $1.99
Jan2006 $1.73
Jan2005 $1.35
Jan2004 $1.13
Jan2003 $0.93
Jan2002 $0.65
Jan2001 $0.52
Jan2000 $0.44

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.22
Jan2019 $3.28
Jan2018 $3.34
Jan2017 $2.82
Jan2016 $2.38
Jan2015 $2.10
Jan2014 $1.72
Jan2013 $1.49
Jan2012 $1.42
Jan2011 $1.47
Jan2010 $1.55
Jan2009 $1.71
Jan2008 $1.75
Jan2007 $1.61
Jan2006 $1.33
Jan2005 $1.06
Jan2004 $0.85

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – February 2019
Best Dividend Paying Stocks for Dividend Growth Investors – August 2018
Best Dividend Paying Stocks for Dividend Growth Investors – June 2018
Lowe’s Companies Inc Valuation – June 2018 $LOW
Lowe’s Companies Inc Valuation – March 2017 $LOW

Other ModernGraham posts about related companies

Quanta Services Inc Valuation – March 2019 #PWR
Mohawk Industries Inc Valuation – March 2019 #MHK
Jacobs Engineering Group Inc Valuation – March 2019 #JEC
Masco Corp Valuation – February 2019 $MAS
D.R. Horton Inc Valuation – February 2019 $DHI
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

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.

Celgene Corp Valuation – March 2019 #CELG

Company Profile (excerpt from Reuters): Celgene Corporation, incorporated on April 17, 1986, is an integrated global biopharmaceutical company. The Company, together with its subsidiaries, is engaged in the discovery, development and commercialization of therapies for the treatment of cancer and inflammatory diseases through solutions in protein homeostasis, immuno-oncology, epigenetics, immunology and neuro-inflammation. The Company’s commercial-stage products include REVLIMID (lenalidomide), POMALYST/IMNOVID (pomalidomide), OTEZLA (apremilast), ABRAXANE (paclitaxel albumin-bound particles for injectable suspension), VIDAZA, azacitidine for injection (generic version of VIDAZA) and THALOMID (thalidomide). Its clinical trial activity includes trials across the disease areas of hematology, solid tumors, and inflammation and immunology. The Company also markets ISTODAX, which is an epigenetic modifier.

CELG Chart

CELG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CELG – 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 $61,820,626,782 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.23 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 391.91% Pass
6. Moderate PEmg Ratio PEmg < 20 14.21 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.20 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 2.23 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.95 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.19
MG Growth Estimate 15.00%
MG Value $238.39
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $89.78
MG Value based on 0% Growth $52.63
Market Implied Growth Rate 2.86%
Current Price $88.00
% of Intrinsic Value 36.91%

Celgene Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.94 in 2015 to an estimated $6.19 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.86% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Celgene Corporation revealed the company was trading above its Graham Number of $45.81. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 14.21, which was below the industry average of 47.6, 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 $-28.36.

Celgene Corporation receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$28.36
Graham Number $45.81
PEmg 14.21
Current Ratio 2.23
PB Ratio 10.20
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 $9,067,000,000
Total Current Liabilities $4,057,000,000
Long-Term Debt $19,769,000,000
Total Assets $35,480,000,000
Intangible Assets $24,216,000,000
Total Liabilities $29,319,000,000
Shares Outstanding (Diluted Average) 714,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.60
Dec2018 $5.51
Dec2017 $3.64
Dec2016 $2.49
Dec2015 $1.94
Dec2014 $2.39
Dec2013 $1.68
Dec2012 $1.65
Dec2011 $1.43
Dec2010 $0.94
Dec2009 $0.83
Dec2008 -$1.73
Dec2007 $0.27
Dec2006 $0.09
Dec2005 $0.09
Dec2004 $0.08
Dec2003 $0.04
Dec2002 -$0.15
Dec2001 $0.00
Dec2000 -$0.03
Dec1999 -$0.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.19
Dec2018 $3.72
Dec2017 $2.70
Dec2016 $2.16
Dec2015 $1.94
Dec2014 $1.83
Dec2013 $1.47
Dec2012 $1.11
Dec2011 $0.68
Dec2010 $0.23
Dec2009 -$0.11
Dec2008 -$0.47
Dec2007 $0.14
Dec2006 $0.06
Dec2005 $0.04
Dec2004 $0.00
Dec2003 -$0.03

Recommended Reading:

Other ModernGraham posts about the company

Celgene Corp Valuation – June 2018 $CELG
Celgene Corporation Valuation – March 2017 $CELG
Celgene Corp Valuation – December 2015 Update $CELG
Celgene Corporation Analysis – September 2015 Update $CELG
Celgene Corporation Stock Analysis – May 2015 Quarterly Update

Other ModernGraham posts about related companies

Amgen Inc Valuation – March 2019 #AMGN
AbbVie Inc Valuation – March 2019 #ABBV
Allergan PLC Valuation – February 2019 $AGN
Incyte Corp Valuation – February 2019 $INCY
Regeneron Pharmaceuticals Inc Valuation – February 2019 $REGN
Alexion Pharmaceuticals Inc Valuation – February 2019 $ALXN
Vertex Pharmaceuticals Inc Valuation – February 2019 $VRTX
Perrigo Company Valuation – February 2019 $PRGO
Eli Lilly and Co Valuation – January 2019 $LLY
Zoetis Inc Valuation – January 2019 $ZTS

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.

Essex Property Trust Inc Valuation – March 2019 #ESS

Company Profile (excerpt from Reuters): Essex Property Trust, Inc., incorporated on March 11, 1994, is a self-administered and self-managed real estate investment trust (REIT). The Company is engaged primarily in the ownership, operation, management, acquisition, development and redevelopment of predominantly apartment communities, located along the West Coast. Its segments include Southern California, Northern California, Seattle Metro and Other real estate assets. The Company owns all of its interest in its real estate and other investments directly or indirectly through Essex Portfolio, L.P. (the Operating Partnership). As of December 31, 2016, the Company owned or held an interest in 245 communities, aggregating 59,645 apartment homes, excluding the Company’s ownership in preferred equity investments, as well as two operating commercial buildings (totaling approximately 140,564 square feet), and six active development projects with 2,223 apartment homes in various stages of development.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ESS – 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 $19,097,355,643 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.83 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 196.37% Pass
6. Moderate PEmg Ratio PEmg < 20 52.67 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.00 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 0.83 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -107.33 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.52
MG Growth Estimate 12.07%
MG Value $180.19
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $80.03
MG Value based on 0% Growth $46.91
Market Implied Growth Rate 22.09%
Current Price $290.71
% of Intrinsic Value 161.34%

Essex Property Trust 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 $3.06 in 2015 to an estimated $5.52 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 22.09% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Essex Property Trust Inc revealed the company was trading above its Graham Number of $100.18. The company pays a dividend of $7.44 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 52.67, which was below the industry average of 61.92, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-86.69.

Essex Property Trust 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) -$86.69
Graham Number $100.18
PEmg 52.67
Current Ratio 0.83
PB Ratio 3.00
Current Dividend $7.44
Dividend Yield 2.56%
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 $262,729,000
Total Current Liabilities $314,960,000
Long-Term Debt $5,605,942,000
Total Assets $12,383,596,000
Intangible Assets $0
Total Liabilities $5,989,752,000
Shares Outstanding (Diluted Average) 66,061,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.69
Dec2018 $5.90
Dec2017 $6.57
Dec2016 $6.27
Dec2015 $3.49
Dec2014 $2.06
Dec2013 $4.04
Dec2012 $3.41
Dec2011 $1.24
Dec2010 $1.14
Dec2009 $2.91
Dec2008 $2.09
Dec2007 $4.24
Dec2006 $2.45
Dec2005 $3.32
Dec2004 $3.36
Dec2003 $1.57
Dec2002 $2.60
Dec2001 $2.63
Dec2000 $2.37
Dec1999 $2.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.52
Dec2018 $5.58
Dec2017 $5.10
Dec2016 $4.20
Dec2015 $3.06
Dec2014 $2.69
Dec2013 $2.85
Dec2012 $2.22
Dec2011 $1.86
Dec2010 $2.30
Dec2009 $2.92
Dec2008 $2.98
Dec2007 $3.28
Dec2006 $2.76
Dec2005 $2.84
Dec2004 $2.57
Dec2003 $2.22

Recommended Reading:

Other ModernGraham posts about the company

Essex Property Trust Inc Valuation – June 2018 $ESS
Essex Property Trust Inc Valuation – March 2017 $ESS
Essex Property Trust Inc. Analysis – October 2015 Update $ESS
Essex Property Trust Inc. Analysis – Initial Coverage $ESS

Other ModernGraham posts about related companies

Federal Realty Investment Trust Valuation – March 2019 #FRT
UDR Inc Valuation – March 2019 #UDR
Mid-America Apartment Communities Inc Valuation – March 2019 #MAA
Extra Space Storage Inc Valuation – March 2019 #EXR
Digital Realty Trust Inc Valuation – March 2019 #DLR
Equity Residential Valuation – March 2019 #EQR
Prologis Inc Valuation – March 2019 #PLD
Duke Realty Corp Valuation – March 2019 $DRE
Realty Income Corp Valuation – February 2019 $O
Ventas Inc Valuation – February 2019 $VTR

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.

Hewlett Packard Enterprise Co Valuation – March 2019 #HPE

Company Profile (excerpt from Reuters): Hewlett Packard Enterprise Company, incorporated on February 25, 2015, is a provider of technology solutions. The Company’s segments include: Enterprise Group, Software, Financial Services and Corporate Investments. The Enterprise Group segment provides its customers with the technology infrastructure they need to optimize traditional information technology (IT). The Software segment allows its customers to automate IT operations to simplify, accelerate and secure business processes and drives the analytics that turn raw data into actionable knowledge. The Financial Services segment enables flexible IT consumption models, financial architectures and customized investment solutions for its customers. The Corporate Investments segment includes Hewlett Packard Labs and certain business incubation projects, among others. The Company’s customers range from small and medium-sized businesses (SMBs) to large global enterprises.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HPE – 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 $21,727,342,562 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.94 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -137.37% Fail
6. Moderate PEmg Ratio PEmg < 20 12.98 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.22 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.94 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.01 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 $1.22
MG Growth Estimate 15.00%
MG Value $47.05
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $17.72
MG Value based on 0% Growth $10.39
Market Implied Growth Rate 2.24%
Current Price $15.86
% of Intrinsic Value 33.71%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.2 in 2015 to an estimated $1.22 for 2019. 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 the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Hewlett Packard Enterprise Co revealed the company was trading below its Graham Number of $22.89. The company pays a dividend of $0.38 per share, for a yield of 2.4%, 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 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 $-12.74.

Hewlett Packard Enterprise Co performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.74
Graham Number $22.89
PEmg 12.98
Current Ratio 0.94
PB Ratio 1.22
Current Dividend $0.38
Dividend Yield 2.36%
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 1/1/2019
Total Current Assets $15,432,000,000
Total Current Liabilities $16,459,000,000
Long-Term Debt $10,280,000,000
Total Assets $51,758,000,000
Intangible Assets $18,334,000,000
Total Liabilities $33,423,000,000
Shares Outstanding (Diluted Average) 1,412,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.56
Oct2018 $1.23
Oct2017 $0.21
Oct2016 $1.82
Oct2015 $1.34
Oct2014 $0.75
Oct2013 $1.12
Oct2012 -$8.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.22
Oct2018 $1.06
Oct2017 $1.00
Oct2016 $0.73
Oct2015 -$0.20
Oct2014 -$1.06
Oct2013 -$1.77
Oct2012 -$2.68

Recommended Reading:

Other ModernGraham posts about the company

Hewlett Packard Enterprise Co Valuation – June 2018 $HPE
Hewlett Packard Enterprise Co Valuation – Initial Valuation $HPE

Other ModernGraham posts about related companies

Fortive Corp Valuation – March 2019 #FTV
Analog Devices Inc Valuation – March 2019 #ADI
IPG Photonics Corp Valuation – March 2019 #IPGP
Micron Technology Inc Valuation – March 2019 #MU
Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC
Texas Instruments Inc Valuation – March 2019 #TXN
Qualcomm Inc Valuation – March 2019 #QCOM
Ametek Inc Valuation – March 2019 #AME

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.

Federal Realty Investment Trust Valuation – March 2019 #FRT

Company Profile (excerpt from Reuters): Federal Realty Investment Trust, incorporated on May 21, 1999, is an equity real estate investment trust (REIT). The Company specializes in the ownership, management and redevelopment of retail and mixed-use properties located primarily in affluent communities in selected metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as in California and South Florida. As of December 31, 2016, the Company owned or had an interest in community and neighborhood shopping centers and mixed-use properties, which operated as 96 retail real estate projects and included approximately 22.6 million square feet. As of December 31, 2016, its 96 retail shopping center and mixed-use properties were located in 12 states and the District of Columbia. As of December 31, 2016, there were approximately 2,900 leases with tenants providing a range of retail products and services. These tenants range from sole proprietorships to national retailers, or corporate group of tenants.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FRT – 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 $9,809,619,332 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.83 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 52.19% Pass
6. Moderate PEmg Ratio PEmg < 20 40.21 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.95 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 1.83 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 13.82 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 $3.28
MG Growth Estimate 3.85%
MG Value $53.18
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $47.57
MG Value based on 0% Growth $27.89
Market Implied Growth Rate 15.85%
Current Price $131.91
% of Intrinsic Value 248.06%

Federal Realty Investment Trust 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 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 Overvalued after growing its EPSmg (normalized earnings) from $2.61 in 2015 to an estimated $3.28 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.85% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Federal Realty Investment Trust revealed the company was trading above its Graham Number of $43.9. The company pays a dividend of $4.04 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 40.21, which was below the industry average of 61.92, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-44.98.

Federal Realty Investment Trust performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$44.98
Graham Number $43.90
PEmg 40.21
Current Ratio 1.83
PB Ratio 3.95
Current Dividend $4.04
Dividend Yield 3.06%
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 $502,456,000
Total Current Liabilities $274,004,000
Long-Term Debt $3,157,685,000
Total Assets $6,289,644,000
Intangible Assets $0
Total Liabilities $3,822,314,000
Shares Outstanding (Diluted Average) 73,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.91
Dec2018 $3.18
Dec2017 $3.97
Dec2016 $3.50
Dec2015 $3.03
Dec2014 $2.41
Dec2013 $2.46
Dec2012 $2.35
Dec2011 $2.28
Dec2010 $1.98
Dec2009 $1.63
Dec2008 $2.19
Dec2007 $3.45
Dec2006 $1.92
Dec2005 $1.94
Dec2004 $1.41
Dec2003 $1.59
Dec2002 $0.85
Dec2001 $1.09
Dec2000 $1.35
Dec1999 $1.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.28
Dec2018 $3.38
Dec2017 $3.35
Dec2016 $2.94
Dec2015 $2.61
Dec2014 $2.37
Dec2013 $2.28
Dec2012 $2.15
Dec2011 $2.14
Dec2010 $2.12
Dec2009 $2.20
Dec2008 $2.39
Dec2007 $2.34
Dec2006 $1.71
Dec2005 $1.53
Dec2004 $1.30
Dec2003 $1.22

Recommended Reading:

Other ModernGraham posts about the company

Federal Realty Investment Trust Valuation – June 2018 $FRT
Federal Realty Investment Trust Valuation – Initial Coverage $FRT

Other ModernGraham posts about related companies

UDR Inc Valuation – March 2019 #UDR
Mid-America Apartment Communities Inc Valuation – March 2019 #MAA
Extra Space Storage Inc Valuation – March 2019 #EXR
Digital Realty Trust Inc Valuation – March 2019 #DLR
Equity Residential Valuation – March 2019 #EQR
Prologis Inc Valuation – March 2019 #PLD
Duke Realty Corp Valuation – March 2019 $DRE
Realty Income Corp Valuation – February 2019 $O
Ventas Inc Valuation – February 2019 $VTR
SL Green Realty Corp Valuation – February 2019 $SLG

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.

Back To Top