Johnson & Johnson Quarterly Valuation – August 2014 $JNJ

500px-JohnsonandJohnsonLogo.svgBenjamin 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 Johnson & Johnson (JNJ) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Johnson & Johnson is a holding company. The Company is engaged in the research and development, manufacture and sale of a broad range of products in the health care field. The business of Johnson & Johnson is conducted by more than 275 operating companies located in 60 countries, including the United States, which sell products in virtually all countries throughout the world. In March 2013, Johnson & Johnson’s Cordis Corporation announced the acquisition of Flexible Stenting Solutions, Inc. In June 2013, Johnson & Johnson announced the opening of the Johnson & Johnson Innovation center in Boston. In July 2014, Johnson & Johnson completed the divestiture of Ortho-Clinical Diagnostics business to Carlyle Group.
JNJ Chart

JNJ 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 – PASS
  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 – PASS
  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 – FAIL

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

  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 – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $103.10
MG Value $51.62
MG Opinion Overvalued
Value Based on 3% Growth $69.00
Value Based on 0% Growth $40.45
Market Implied Growth Rate 6.58%
NCAV $1.05
PEmg 21.67
Current Ratio 2.47
PB Ratio 3.73

Balance Sheet – 6/30/2014

Current Assets $60,119,000,000
Current Liabilities $24,359,000,000
Total Debt $13,303,000,000
Total Assets $135,200,000,000
Intangible Assets $49,111,000,000
Total Liabilities $57,152,000,000
Outstanding Shares 2,822,580,000

Earnings Per Share

2014 (estimate) $5.76
2013 $4.81
2012 $3.86
2011 $3.49
2010 $4.78
2009 $4.40
2008 $4.57
2007 $3.63
2006 $3.73
2005 $3.46
2004 $2.84

Earnings Per Share – ModernGraham

2014 (estimate) $4.76
2013 $4.26
2012 $4.06
2011 $4.17
2010 $4.41
2009 $4.14

Dividend History

JNJ Dividend Chart

JNJ Dividend data by YCharts

Conclusion:

Johnson & Johnson is suitable for Enterprising Investors but not for Defensive Investors.  The Defensive Investor is concerned by the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  From a valuation standpoint, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $4.41 in 2010 to only an estimated $4.76 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 6.58% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out the previous ModernGraham valuations of Johnson & Johnson (JNJ) for more perspective!

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 Johnson & Johnson (JNJ)?  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 Johnson & Johnson (JNJ) 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 for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Johnson & Johnson May 2014 Quarterly Valuation $JNJ

500px-JohnsonandJohnsonLogo.svgBenjamin 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 Lowest PEmg Comapnies for Defensive Investors.  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 Johnson & Johnson (JNJ) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Johnson & Johnson is a holding company. The Company is engaged in the research and development, manufacture and sale of a broad range of products in the health care field. The business of Johnson & Johnson is conducted by more than 275 operating companies located in 60 countries, including the United States, which sell products in virtually all countries throughout the world. In March 2013, Johnson & Johnson’s Cordis Corporation announced the acquisition of Flexible Stenting Solutions, Inc. In June 2013, Johnson & Johnson announced the opening of the Johnson & Johnson Innovation center in Boston. In August 2013, Johnson & Johnson announced it has completed its acquisition of Aragon Pharmaceuticals, Inc., a pharmaceutical discovery and development company focused on drugs to treat hormonally driven cancers.

JNJ Chart

JNJ 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 – PASS
  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 – PASS
  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 – FAIL

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

  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 – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $100.98
MG Value $52.20
MG Opinion Overvalued
Value Based on 3% Growth $69.19
Value Based on 0% Growth $40.56
Market Implied Growth Rate 6.33%
NCAV $0.22
PEmg 21.16
Current Ratio 2.41
PB Ratio 3.73

Balance Sheet – 3/30/2014

Current Assets $57,369,000,000
Current Liabilities $23,840,000,000
Total Debt $13,343,000,000
Total Assets $133,330,000,000
Intangible Assets $49,821,000,000
Total Liabilities $56,748,000,000
Outstanding Shares 2,827,640,000

Earnings Per Share

2014 (estimate) $5.80
2013 $4.81
2012 $3.86
2011 $3.49
2010 $4.78
2009 $4.40
2008 $4.57
2007 $3.63
2006 $3.73
2005 $3.46
2004 $2.84

Earnings Per Share – ModernGraham

2014 (estimate) $4.77
2013 $4.26
2012 $4.06
2011 $4.17
2010 $4.41
2009 $4.14

Dividend History

JNJ Dividend Chart

JNJ Dividend data by YCharts

Conclusion:

Johnson & Johnson qualifies for Enterprising Investors but not for Defensive Investors.  The Defensive Investor is concerned with the high PEmg and PB ratios, but the company passes all of the requirements of the Enterprising Investor.  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 its competitors by exploring the ModernGraham Valuation Index.  From a valuation side of things, the company appears overvalued after growing its EPSmg (normalized earnings) from $4.41 in 2010 to only an estimated $4.77 in 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 6.33% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below the 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 Johnson & Johnson (JNJ)?  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.

Be sure to check out the previous ModernGraham valuations of Johnson & Johnson as well as dig through the Valuation Index to find other companies!

Disclaimer:  The author did not hold a position in Johnson & Johnson (JNJ) 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.

Johnson & Johnson Company (JNJ) Quarterly Valuation

500px-JohnsonandJohnsonLogo.svgA company may have a big brand name, a long history, and a solid dividend but remain unsuitable for Intelligent Investors.  Benjamin Graham taught investors to analyze the company’s financial statements to determine an intrinsic value for the company, then compare the price to the value.  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 investment opportunity.  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 Johnson and Johnson Company fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Johnson & Johnson is a holding company. The Company is engaged in the research and development, manufacture and sale of a broad range of products in the health care field. The business of Johnson & Johnson is conducted by more than 275 operating companies located in 60 countries, including the United States, which sell products in virtually all countries throughout the world. In March 2013, Johnson & Johnson’s Cordis Corporation announced the acquisition of Flexible Stenting Solutions, Inc. In June 2013, Johnson & Johnson announced the opening of the Johnson & Johnson Innovation center in Boston. In August 2013, Johnson & Johnson announced it has completed its acquisition of Aragon Pharmaceuticals, Inc., a pharmaceutical discovery and development company focused on drugs to treat hormonally driven cancers.

JNJ Chart

JNJ 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 – PASS
  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 – PASS
  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 – FAIL
  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 – FAIL

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

  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 – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $91.11
MG Value $39.99
MG Opinion Overvalued
Value Based on 3% Growth $61.79
Value Based on 0% Growth $36.22
Market Implied Growth Rate 6.44%
NCAV $4.78
PEmg 21.38
Current Ratio 2.20
PB Ratio 2.86

Balance Sheet – 12/29/2013

Current Assets $56,407,000,000
Current Liabilities $25,675,000,000
Total Debt $13,328,000,000
Total Assets $132,683,000,000
Intangible Assets $50,745,000,000
Total Liabilities $42,930,000,000
Outstanding Shares 2,820,630,000

Earnings Per Share

2013 $4.81
2012 $3.86
2011 $3.49
2010 $4.78
2009 $4.40
2008 $4.57
2007 $3.63
2006 $3.73
2005 $3.46
2004 $2.84
2003 $2.40
2002 $2.16

Earnings Per Share – ModernGraham 

2013 $4.26
2012 $4.06
2011 $4.17
2010 $4.41
2009 $4.14
2008 $3.89

Dividend History

JNJ Dividend Chart

JNJ Dividend data by YCharts

Conclusion:

Johnson and Johnson is a perennial favorite among many investors because of its solid operating history and relative stability; however, it is not suitable for Defensive Investors because of the lack of sufficient earnings growth over the ten year historical period and the high PEmg and PB ratios.  It does pass the tests for the Enterprising Investor, so it remains suitable for that investor type.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods, should feel comfortable proceeding with further research including a review of 5 Undervalued Companies for the Enterprising Investor.  As for a valuation, the company has grown its EPSmg (normalized earnings) only from $4.14 in 2009 to $4.26 for 2013.  This level of growth is insufficient to support the market’s implied estimate for earnings growth of 6.44%; a more appropriate estimate may be in the 1-2% range.  The ModernGraham valuation model returns an estimate of intrinsic value that is below the market price, and the company appears to be overvalued presently.

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 Johnson and Johnson Company (JNJ)?  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 Johnson and Johnson Company (JNJ) 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.

ModernGraham Valuation: Johnson & Johnson (JNJ)

money

Company Profile (obtained from Google Finance): Johnson & Johnson is a holding company. The Company is engaged in the research and development, manufacture and sale of a broad range of products in the health care field. The business of Johnson & Johnson is conducted by more than 275 operating companies located in 60 countries, including the United States, which sell products in virtually all countries throughout the world. In March 2013, Johnson & Johnson’s Cordis Corporation announced the acquisition Of Flexible Stenting Solutions, Inc. In June 2013, Johnson & Johnson announced the opening of the Johnson & Johnson Innovation center in Boston. In August 2013, Johnson & Johnson announced it has completed its acquisition of Aragon Pharmaceuticals, Inc., a pharmaceutical discovery and development company focused on drugs to treat hormonally driven cancers.

 

Defensive and Enterprising Investor Tests (What is the significance of these tests, and what is PEmg ratio?):

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 – PASS
  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 – PASS
  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 – FAIL
  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 – FAIL

 

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

  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 – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary (explanation of the ModernGraham valuation model):

MG Value $38.67
MG Opinion Overvalued
Value Based on 3% Growth $61.23
Value Based on 0% Growth $35.89
Market Implied Growth Rate 6.83%
NCAV -$1.76
PEmg 22.15
Current Ratio 2.02
PB Ratio 3.78

Key Data:

Balance Sheet – 9/30/2013 (an Introduction to the Balance Sheet)

Current Assets $52,176,000,000
Current Liabilities $25,835,000,000
Total Debt $9,748,000,000
Total Assets $126,933,000,000
Intangible Assets $51,319,000,000
Total Liabilities $57,129,000,000
Outstanding Shares 2,820,660,000

Earnings Per Share – Diluted

2013 (estimate) $4.79
2012 $3.74
2011 $3.49
2010 $4.78
2009 $4.40
2008 $4.57
2007 $3.63
2006 $3.73
2005 $3.35
2004 $2.74
2003 $2.40
2002 $2.16

Earnings Per Share – Modern Graham

2013 (estimate) $4.22
2012 $4.02
2011 $4.17
2010 $4.41
2009 $4.13
2008 $3.87

Conclusion:

Johnson & Johnson is a strong company from a financial standpoint, with a healthy current ratio, relatively low debt, and a good dividend record.  However, the company’s PEmg and PB ratios are too high for the Defensive Investor.  The company may be suitable for an Enterprising Investor, and those investors that are able to take more time to do further research should do so.  From a valuation standpoint, the company appears to currently be overvalued, as the earnings growth has not been substantial enough to justify the current price.

What do you think?  Is Johnson & Johnson overvalued or does Mr. Market have it right?  Leave a comment or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Johnson & Johnson at the time of publication and had no intention of purchasing a position in the next 72 hours.

Photo Credit:  Andrew Magill

Company of the Week – Johnson & Johnson (JNJ)

The company of the week this week is Johnson & Johnson (JNJ), a manufacturer of a range of products in the healthcare field.  As we did last week, we will be looking reviewing the company using Warren Buffett’s approach for the Business & Management Review.  We will also use Benjamin Graham’s overall philosophies to guide our Financial & Value Review.

Business & Management Review

1.  Is the business simple and understandable?

     Though over the years the products and research methods of the company have become more sophisticated as technology has improved, the overall business plan has stayed the same.  The company is in the business of providing products that help improve the quality of life from a health and personal care standpoint.  The company is well diversified across the healthcare industry, but has remained focused on segments related to its overall business plan.

2.  Does the business have a consistent operating history?

     Johnson & Johnson was founded in 1886 and has been a driving force in developing state of the art healthcare solutions ever since.  Dividends have been paid to shareholders every year since 1944, and have increased each year for 44 straight years.  Sales have increased each year for 73 years, and the company has experienced double-digit earnings increases for 21 consecutive years. 

3.  Does the business have favorable long-term prospects?

     The company’s customers will always have a need for healthcare products.  This persistent need is evident in the company’s low beta of about 0.21.  The real question is whether or not the company can continue to grow consistently into the long-term future.  We believe it can.  In the developed world, the average lifespan is increasing as well as the number of elderly overall.  In the developing world, the need for healthcare products will increase as cultures become more open to using the products and economic situations improve for consumers to afford the products.  These two factors combined lead to favorable long-term prospects for Johnson & Johnson and the rest of the pharmaceuticals and healthcare industry.

4.  Is management rational?

     In the latest annual report, management addresses the fact that they had informed shareholders in the previous annual report of their intent to purchase Guidant Corporation.  However, over the year events changed leading to the acquisition price of Guidant to increase significantly.  After the increase, management was remained rational and focused on the needs of shareholders and determined that a purchase was no longer in the interests of their shareholders.  This is very rational behavior among management that is all too often missed in many managers today.  Frequently, managers will become determined that a particular action is best for shareholders, and refuse to reexamine the action as time goes by and the situation changes.  Johnson & Johnson’s management clearly was rational in this situation and can be expected to remain rational in the future.

5.  Is management candid with its shareholders?

     Johnson & Johnson has an extensive investor relations page on their website, which can be found at:  http://www.investor.jnj.com/  We feel that William Weldon, Chairman and CEO, also provides a rather in depth and candid letter to shareholders in the company’s annual reports that is worth mentioning.

6.  Does management resist the institutional imperative?

    The company has a history of being a leader in their industry, and often is the first to develop a new product or approach to healthcare for their customers.  It seems that instead of following the institutional imperative and replicating the performance and processes of other managers, the management at Johnson & Johnson has historically been extremely innovative.
 

Financial and Value Review

Upon our review, we find Johnson & Johnson to be suitable for the enterprising investor following Benjamin Graham’s value investing strategy, but not suitable for the defensive investor.  The company is currently trading at a PE ratio of 23.09 and price to book ratio of 6.29 – other than these two factors, all aspects of the company’s financial situation and our valuation look good.

We believe the company has potential to reach $81/share in the next few years. 

Neither of us held a position in Johnson & Johnson at the time of publication.  Also, please read our disclaimer and Our Methods.

Please discuss this article in our forums.  Your comments help us mold our future articles.

 

Colgate-Palmolive Co Valuation – March 2019 #CL

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

CL Chart

CL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CL – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $57,098,959,614 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.14 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 7.02% Fail
6. Moderate PEmg Ratio PEmg < 20 26.06 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 291.66 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.14 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 14.06 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.54
MG Growth Estimate 3.00%
MG Value $36.88
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $36.88
MG Value based on 0% Growth $21.62
Market Implied Growth Rate 8.78%
Current Price $66.27
% of Intrinsic Value 179.68%

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

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

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

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.42
Graham Number $0.00
PEmg 26.06
Current Ratio 1.14
PB Ratio 291.66
Current Dividend $1.66
Dividend Yield 2.50%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,793,000,000
Total Current Liabilities $3,341,000,000
Long-Term Debt $6,354,000,000
Total Assets $12,161,000,000
Intangible Assets $4,167,000,000
Total Liabilities $11,964,000,000
Shares Outstanding (Diluted Average) 867,000,000

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

Coty Inc Valuation – March 2019 #COTY

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of COTY – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,372,757,379 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.96 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 185.71% Pass
6. Moderate PEmg Ratio PEmg < 20 -24.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.10 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.96 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -50.21 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.45
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$6.51
MG Value based on 0% Growth -$3.81
Market Implied Growth Rate -16.68%
Current Price $11.15
% of Intrinsic Value N/A

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

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

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

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

Stage 3: Information for Further Research

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

Useful Links:

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

Most Recent Balance Sheet Figures

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

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

Signet Jewelers Ltd Valuation – March 2019 #SIG

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SIG – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,440,038,868 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.20 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 5.20% Fail
6. Moderate PEmg Ratio PEmg < 20 11.44 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.73 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.20 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.40 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

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

Signet Jewelers Ltd. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.32 in 2015 to an estimated $2.42 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.47% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Signet Jewelers Ltd. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.24 per share, for a yield of 4.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.44, which was below the industry average of 62.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.29.

Signet Jewelers Ltd. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.29
Graham Number $0.00
PEmg 11.44
Current Ratio 2.20
PB Ratio 0.73
Current Dividend $1.24
Dividend Yield 4.47%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2018
Total Current Assets $3,010,100,000
Total Current Liabilities $1,365,700,000
Long-Term Debt $660,400,000
Total Assets $4,907,500,000
Intangible Assets $849,200,000
Total Liabilities $2,943,700,000
Shares Outstanding (Diluted Average) 51,500,000

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

Church & Dwight Co Inc Valuation – February 2019 $CHD

Company Profile (excerpt from Reuters): Church & Dwight Co., Inc., incorporated on December 14, 1925, develops, manufactures and markets a range of household, personal care and specialty products. The Company’s segments include Consumer Domestic, Consumer International and Specialty Products Division (SPD). The Company sells its consumer products under a range of brands through a distribution platform that includes supermarkets, mass merchandisers, wholesale clubs, drugstores, convenience stores, home stores, dollar, pet, and other specialty stores and Websites. The Company also sells specialty products to industrial customers and distributors. The Company’s brands include ARM & HAMMER, which is used in multiple product categories, such as baking soda, cat litter, carpet deodorization and laundry detergent; TROJAN condoms, lubricants and vibrators; OXICLEAN stain removers, cleaning solutions, laundry detergents, dishwashing detergent and bleach alternatives; SPINBRUSH battery-operated and manual toothbrushes; FIRST RESPONSE home pregnancy and ovulation test kits; NAIR depilatories; ORAJEL oral analgesics; XTRA laundry detergent, and BATISTE dry shampoo. It also offers the combination of the L’IL CRITTERS and VITAFUSION brand names for the Company’s gummy dietary supplement business.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CHD – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $16,335,096,318 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.81 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 136.02% Pass
6. Moderate PEmg Ratio PEmg < 20 28.46 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.83 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.81 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.08 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 $2.33
MG Growth Estimate 9.47%
MG Value $63.98
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $33.80
MG Value based on 0% Growth $19.82
Market Implied Growth Rate 9.98%
Current Price $66.34
% of Intrinsic Value 103.69%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.43 in 2015 to an estimated $2.33 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 9.98% 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 Church & Dwight Co., Inc. revealed the company was trading above its Graham Number of $23.34. The company pays a dividend of $0.87 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 28.46, which was below the industry average of 50.15, 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 $-10.05.

Church & Dwight Co., 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) -$10.05
Graham Number $23.34
PEmg 28.46
Current Ratio 0.81
PB Ratio 6.83
Current Dividend $0.87
Dividend Yield 1.31%
Number of Consecutive Years of Dividend Growth 14

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,078,200,000
Total Current Liabilities $1,326,300,000
Long-Term Debt $1,508,800,000
Total Assets $6,069,200,000
Intangible Assets $4,266,900,000
Total Liabilities $3,615,400,000
Shares Outstanding (Diluted Average) 252,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.43
Dec2018 $2.27
Dec2017 $2.90
Dec2016 $1.75
Dec2015 $1.54
Dec2014 $1.51
Dec2013 $1.40
Dec2012 $1.23
Dec2011 $1.06
Dec2010 $0.94
Dec2009 $0.85
Dec2008 $0.70
Dec2007 $0.62
Dec2006 $0.52
Dec2005 $0.46
Dec2004 $0.34
Dec2003 $0.32
Dec2002 $0.27
Dec2001 $0.19
Dec2000 $0.14
Dec1999 $0.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.33
Dec2018 $2.19
Dec2017 $2.04
Dec2016 $1.56
Dec2015 $1.43
Dec2014 $1.32
Dec2013 $1.19
Dec2012 $1.04
Dec2011 $0.91
Dec2010 $0.79
Dec2009 $0.69
Dec2008 $0.58
Dec2007 $0.50
Dec2006 $0.42
Dec2005 $0.36
Dec2004 $0.29
Dec2003 $0.25

Recommended Reading:

Other ModernGraham posts about the company

Church & Dwight Co Inc Valuation – April 2018 $CHD
Church & Dwight Co Inc Valuation – Initial Coverage $CHD

Other ModernGraham posts about related companies

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

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.

International Flavors & Fragrances Inc Valuation – January 2019 $IFF

Company Profile (excerpt from Reuters): International Flavors & Fragrances Inc., incorporated on December 6, 1909, creates, manufactures and supplies flavors and fragrances (including cosmetic active ingredients) used to impart or improve flavor or fragrance in a range of consumer products. The Company operates in two segments: Flavors and Fragrances. The Flavors segment offers flavor compounds that are sold to the food and beverage industries for use in consumer products, such as prepared foods, beverages, dairy, food and sweet products. The Fragrances segment offers fragrance compounds and fragrance ingredients. Its cosmetic active ingredients consist of active and functional ingredients, botanicals and delivery systems to support its customers’ cosmetic and personal care product lines. The Company’s products are sold to manufacturers of perfumes and cosmetics, hair and other personal care products, soaps and detergents, cleaning products, dairy, meat and other processed foods, beverages, snacks and savory foods, sweet and baked goods, and pharmaceutical and oral care products. As of December 31, 2016, the Company had 42 manufacturing facilities and over 70 creative centers and application laboratories located in over 35 countries that support over 35,000 products. Its manufacturing facilities are located in the United States, the Netherlands, Spain, Great Britain, Turkey, Brazil, Mexico, Australia, China, India and Singapore.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IFF – 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 $14,388,233,724 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 9.16 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 56.57% Pass
6. Moderate PEmg Ratio PEmg < 20 28.17 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.73 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 9.16 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.70 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 $4.79
MG Growth Estimate 2.52%
MG Value $64.90
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $69.46
MG Value based on 0% Growth $40.72
Market Implied Growth Rate 9.83%
Current Price $134.95
% of Intrinsic Value 207.92%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.1 in 2014 to an estimated $4.79 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.83% 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 International Flavors & Fragrances Inc revealed the company was trading above its Graham Number of $50.39. The company pays a dividend of $2.66 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 28.17, which was below the industry average of 45.62, 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 $16.77.

International Flavors & Fragrances 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) $16.77
Graham Number $50.39
PEmg 28.17
Current Ratio 9.16
PB Ratio 2.73
Current Dividend $2.66
Dividend Yield 1.97%
Number of Consecutive Years of Dividend Growth 15

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 $6,946,827,000
Total Current Liabilities $758,456,000
Long-Term Debt $4,331,242,000
Total Assets $9,615,542,000
Intangible Assets $1,538,439,000
Total Liabilities $5,577,593,000
Shares Outstanding (Diluted Average) 81,647,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.29
Dec2017 $3.72
Dec2016 $5.05
Dec2015 $5.16
Dec2014 $5.06
Dec2013 $4.29
Dec2012 $3.09
Dec2011 $3.26
Dec2010 $3.26
Dec2009 $2.46
Dec2008 $2.86
Dec2007 $2.82
Dec2006 $2.48
Dec2005 $2.04
Dec2004 $2.05
Dec2003 $1.83
Dec2002 $1.84
Dec2001 $1.20
Dec2000 $1.22
Dec1999 $1.53
Dec1998 $1.90

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.79
Dec2017 $4.58
Dec2016 $4.85
Dec2015 $4.56
Dec2014 $4.10
Dec2013 $3.50
Dec2012 $3.07
Dec2011 $3.02
Dec2010 $2.86
Dec2009 $2.61
Dec2008 $2.61
Dec2007 $2.40
Dec2006 $2.15
Dec2005 $1.92
Dec2004 $1.78
Dec2003 $1.61
Dec2002 $1.51

Recommended Reading:

Other ModernGraham posts about the company

International Flavors & Fragrances Inc Valuation – March 2018 $IFF
9 Best Stocks For Value Investors This Week – 6/24/16
International Flavors & Fragrances Inc Valuation – June 2016 $IFF
13 Best Stocks For Value Investors This Week – 12/12/15
International Flavors & Fragrances Valuation – December 2015 Update $IFF

Other ModernGraham posts about related companies

Estee Lauder Companies Inc Valuation – December 2018 $EL
Proctor & Gamble Co Valuation – November 2018 $PG
Johnson & Johnson Valuation – November 2018 $JNJ
Inter Parfums Inc Valuation – July 2018 $IPAR
Service Corp International Valuation – July 2018 $SCI
Avon Products Inc Valuation – June 2018 $AVP
Colgate-Palmolive Co Valuation – June 2018 $CL
Coty Inc Valuation – May 2018 $COTY
Church & Dwight Co Inc Valuation – April 2018 $CHD
Kimberly-Clark Corp Valuation – March 2018 $KMB

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