Company of the Week: JP Morgan Chase $JPM

image (12)The ModernGraham approach to investing has multiple layers to it.  Regular readers will be familiar with the first two steps; the first is to determine if the company is suitable for the Defensive Investor or the Enterprising Investor, and the second is to compare the price to the intrinsic value through quantitative analysis.  The next step in the analysis is to review the company’s management and other qualitative factors to determine how the company may compare to other companies that pass the first two steps.  In this Company of the Week series, we will delve into more detail about a specific company that performed well in the first two areas.  This week, the company chosen, JP Morgan Chase, is currently significantly undervalued based on the ModernGraham valuation model.

 

Results of Recent Valuation

Please be sure to review ModernGraham’s latest valuation of JP Morgan Chase in detail, but here is also a summary:

JP Morgan Chase is suitable for either Defensive Investors or Enterprising Investors.  The company passes all of the requirements of both investor types, which is a rare accomplishment.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing the company to other opportunities through the ModernGraham Valuation Index.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.92 in 2010 to an estimated $4.75 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of only 1.49% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price at this time.

Further Analysis

Price trend compared to the market

In the following chart, it is clear the market has not viewed JP Morgan in a very favorable light.  This is largely due to speculation regarding how recent litigation involving JP Morgan will work out and affect the company, but speculation does not drive the intrinsic value of a company.  In JP Morgan’s case that means the price has been driven down, but the earnings continue to demonstrate strong value.  Intelligent Investors know that the price trend has nothing to do with value, but this portion of an analysis can be useful in trying to understand Mr. Market’s movements.

JPM Chart

JPM data by YCharts

Earnings Per Share

The next chart shows JP Morgan’s earnings over the last 25 years.  At first glance, the reader will notice the wide swings in the chart, and a speculator would conclude the company is on another downward trend and end the analysis there.  But it is important to see the overall trend in the earnings, which indicate an upward movement over time.  Notice that even with the significant swings, it is easy to extrapolate an upward trajectory.  This conclusion is supported further in an analysis of the average earnings, a measure on ModernGraham called EPSmg.  JP Morgan has seen a rise in EPSmg from $2.51 in 2009 to an estimated $4.75 for 2014.

JPM EPS Diluted (TTM) Chart

JPM EPS Diluted (TTM) data by YCharts

Price to Book

In another confirmation that JP Morgan would seem to be an excellent value at this point in time, the price to book ratio is well below where it has normally been seen in the last 25 years.  As a result, it is possible we could see Mr. Market turn around and start pricing the company higher.

JPM Price to Book Value Chart

JPM Price to Book Value data by YCharts

Dividends

Dividend payments should be a critical part of any intelligent investment analysis.  There is no better way to ensure a return on investment than through dividend income.  With JP Morgan, it is clear the financial crisis had a significant effect on the company, as the company cut the dividend significantly during the crisis years.  However, the dividend has since recovered, though the yield remains lower than it was during the period before the crisis.  As a result, there appears to be some room for further growth in yield.

JPM Dividend Chart

JPM Dividend data by YCharts

ModernGraham Conclusion

JP Morgan is a very intriguing company for both Defensive Investors and Enterprising Investors to consider.  In addition, the quantitative analysis shows the company to be significantly undervalued.  It is possible that Mr. Market has overreacted to any perceived troubles the company has had in the recent past, speculating that the company would be crippled by the regulatory litigation issues.  However, as has been seen time and time again, large companies often have the resources to weather the ebbs and flows of business competition and that may be the case with Yahoo as well.

Management Tenets

Warren Buffett has promoted looking at some key management tenets, and I’d like to leave it up to readers to discuss how JP Morgan fulfills (or fails to fulfill) these qualities.  Please discuss the following in the comments below:

  1. Is the business simple and understandable?
  2. Does the business have a consistent operating history?
  3. Does the company have favorable long-term prospects?
  4. Is management rational?
  5. Is management candid with shareholders?

Disclosure:  The author did not hold a position in any company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

JP Morgan Chase & Co. May 2014 Quarterly Valuation $JPM

500px-J_P_Morgan_Chase_Logo_2008_1.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to widdle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  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 JP Morgan Chase & Co. fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): JPMorgan Chase & Co. (JPMorgan Chase) is a financial holding company. The Company is engaged in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management and private equity. One of the Company’s principal operating subsidiaries in the United Kingdom is J.P. Morgan Securities plc. JPMorgan Chase’s activities are organized into four business segments, as well as Corporate/Private Equity. The Company’s consumer business is the Consumer & Community Banking segment. Effective January 7, 2014, JPMorgan Chase & Co acquired an undisclosed minority stake in Chi-X Global Holdings LLC. In March 2014, Aurora Oil & Gas Ltd announced that JPMorgan Chase & Co and its affiliates has ceased to be substantial shareholder of Aurora Oil & Gas. In March 2014, Slater & Gordon Ltd announced that JPMorgan Chase & Co and its affiliates has ceased to be substantial shareholder of the Company.

JPM Chart

JPM data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 6/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. 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
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $54.55
MG Value $129.21
MG Opinion Undervalued
Value Based on 3% Growth $68.85
Value Based on 0% Growth $40.36
Market Implied Growth Rate 1.49%
PEmg 11.49
PB Ratio 0.94

Balance Sheet – 3/31/2014

Total Debt $306,463,000,000
Total Assets $2,476,986,000,000
Intangible Assets $58,106,000,000
Total Liabilities $2,257,331,000,000
Outstanding Shares 3,784,710,000

Earnings Per Share

2014 (estimate) $5.06
2013 $4.35
2012 $5.20
2011 $4.48
2010 $3.96
2009 $2.24
2008 $0.84
2007 $4.38
2006 $3.82
2005 $2.32
2004 $1.45

Earnings Per Share – ModernGraham 

2014 (estimate) $4.75
2013 $4.41
2012 $4.07
2011 $3.40
2010 $2.92
2009 $2.51

Dividend History

JPM Dividend Chart

JPM Dividend data by YCharts

Conclusion:

JP Morgan Chase is suitable for either Defensive Investors or Enterprising Investors.  The company passes all of the requirements of both investor types, which is a rare accomplishment.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing the company to other opportunities through the ModernGraham Valuation Index.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.92 in 2010 to an estimated $4.75 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of only 1.49% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price at this time.

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 JP Morgan Chase (JPM)?  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 valuations of JP Morgan Chase!

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 JP Morgan Chase (JPM) 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.

JP Morgan Chase (JPM) Quarterly Valuation

500px-J_P_Morgan_Chase_Logo_2008_1.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to widdle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  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 JP Morgan Chase fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): JPMorgan Chase & Co. (JPMorgan Chase) is a financial holding company. The Company is a global financial services firm and a banking institution in the United States, with global operations. The Company is engaged in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management and private equity. One of the Company’s principal operating subsidiaries in the United Kingdom is J.P. Morgan Securities plc., a subsidiary of JPMorgan Chase Bank, N.A. JPMorgan Chase’s activities are organized into four business segments, as well as Corporate/Private Equity. The Company’s consumer business is the Consumer & Community Banking segment. The Company’s wholesale businesses consists of Corporate & Investment Bank, Commercial Banking, and Asset Management segments. Effective January 7, 2014, JPMorgan Chase & Co acquired an undisclosed minority stake in Chi-X Global Holdings LLC.

JPM Chart

JPM data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 6/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. 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
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $57.61
MG Value $137.57
MG Opinion Undervalued
Value Based on 3% Growth $63.95
Value Based on 0% Growth $37.49
Market Implied Growth Rate 2.28%
PEmg 13.06
PB Ratio 1.02

Balance Sheet – 12/31/2013

Total Debt $295,883,000,000
Total Assets $2,415,689,000,000
Intangible Assets $59,313,000,000
Total Liabilities $2,204,511,000,000
Outstanding Shares 3,756,110,000

Earnings Per Share

2013 $4.35
2012 $5.20
2011 $4.48
2010 $3.96
2009 $2.24
2008 $0.84
2007 $4.38
2006 $3.82
2005 $2.32
2004 $1.45
2003 $3.24
2002 $0.80

Earnings Per Share – ModernGraham 

2013 $4.41
2012 $4.07
2011 $3.40
2010 $2.92
2009 $2.51
2008 $2.62

Dividend History

JPM Dividend Chart

JPM Dividend data by YCharts

Conclusion:

JP Morgan Chase is a very strong candidate for both the Defensive Investor and the Enterprising Investor.  Despite the financial crisis, the company passes all of the requirements of either investor type.  As a result, value investors seeking to follow the ModernGraham approach based on Benjamin Graham’s methods, should feel very comfortable proceeding with further research into the company to determine whether it would fit in their individual portfolios.  This research should include a review of some competitor companies, through a review of ModernGraham’s valuation of Wells Fargo (WFC) or other companies listed in ModernGraham Stocks & Screens.  From a valuation perspective, the company appears strong after growing its EPSmg (normalized earnings) from $2.51 in 2009 to $4.41 for 2013.  This solid level of demonstrated historical growth outpaces the market’s current implied estimate for growth of 2.28%, leading the ModernGraham valuation model to return an intrinsic value estimate that is well above 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 JP Morgan Chase (JPM)?  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 JP Morgan Chase (JPM) 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.

ModernGraham Valuation: JP Morgan Chase (JPM)

money

Company Profile (obtained from Google Finance): JPMorgan Chase & Co. (JPMorgan Chase) is a financial holding company. The Company is a global financial services firm and a banking institution in the United States, with global operations. The Company is engaged in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management and private equity. JPMorgan Chase’s principal bank subsidiaries are JPMorgan Chase Bank, National Association (JPMorgan Chase Bank, N.A.), and Chase Bank USA, National Association (Chase Bank USA, N.A.). JPMorgan Chase’s activities are organized into four business segments, as well as Corporate/Private Equity. The Company’s consumer business is the Consumer & Community Banking segment. The Corporate & Investment Bank, Commercial Banking, and Asset Management segments consists of the Company’s wholesale businesses.

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

Defensive Investor – must pass all 6 of the following tests: Score = 6/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. 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
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary (explanation of the ModernGraham valuation model):

Key Data:

MG Value $143
MG Opinion Undervalued
Value Based on 3% Growth $65
Value Based on 0% Growth $38
Market Implied Growth Rate 1.78%
PEmg 12.05
PB Ratio 0.98

Balance Sheet – 6/30/2013 (an Introduction to the Balance Sheet)

Total Debt $293,808,000,000
Total Assets $2,463,309,000,000
Intangible Assets $49,917,000,000
Total Liabilities $2,256,639,000,000
Outstanding Shares 3,759,190,000

 

Earnings Per Share – Diluted

2013 (estimate) $4.04
2012 $5.57
2011 $4.84
2010 $3.96
2009 $2.24
2008 $0.84
2007 $4.38
2006 $3.82
2005 $2.32
2004 $1.45
2003 $3.24
2002 $0.8

Earnings Per Share – Modern Graham

2013 (estimate) $4.48
2012 $4.29
2011 $3.52
2010 $2.92
2009 $2.51
2008 $2.62

Conclusion:

JP Morgan Chase is a very intriguing financial company, based on its earnings growth over the last 10 years.  The company passes all of the tests required for both the Defensive and Enterprising Investor because it has strong financials.  From a valuation perspective, the company fares well in the ModernGraham valuation model after achieving significant growth in EPSmg (normalized earnings) of $2.62 in 2008 to an estimated $4.48 in 2013.  The market is currently implying further growth of only 1.78%, which should be easily beatable by such a large bank.  As a result, investors of all kinds should be interested in JP Morgan Chase and should do further research to determine whether it would be a suitable investment for them individually.

What do you think?  Is JP Morgan Chase undervalued 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 JP Morgan Chase at the time of publication, and had no intention of purchasing a stake in the next 72 hours.

Photo Credit:  Andrew Magill

M&T Bank Corp Valuation – February 2019 $MTB

Company Profile (excerpt from Reuters): M&T Bank Corporation (M&T), incorporated on November 6, 1969, is a bank holding company. As of December 31, 2016, M&T had two bank subsidiaries: Manufacturers and Traders Trust Company (M&T Bank) and Wilmington Trust, National Association (Wilmington Trust, N.A.). The Company, along with its subsidiaries, offers a range of retail and commercial banking, trust and wealth management, and investment services. The Company’s segments are Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MTB – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,018,662,800 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 79.83% Pass
5. Moderate PEmg Ratio PEmg < 20 14.59 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.54 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $11.24
MG Growth Estimate 7.66%
MG Value $267.86
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $163.01
MG Value based on 0% Growth $95.56
Market Implied Growth Rate 3.04%
Current Price $164.00
% of Intrinsic Value 61.23%

M&T Bank Corporation qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $7.44 in 2015 to an estimated $11.24 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.04% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into M&T Bank Corporation revealed the company was trading below its Graham Number of $178.26. The company pays a dividend of $3.55 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.59, which was below the industry average of 16.24, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

M&T Bank Corporation fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $178.26
PEmg 14.59
PB Ratio 1.54
Dividend Yield 2.16%
TTM Dividend $3.55
Number of Consecutive Years of Dividend Growth 2

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $8,444,914,000
Total Assets $120,097,403,000
Intangible Assets $4,640,179,000
Total Liabilities $104,637,212,000
Shares Outstanding (Diluted Average) 145,271,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.75
Dec2018 $12.76
Dec2017 $8.70
Dec2016 $7.78
Dec2015 $7.18
Dec2014 $7.42
Dec2013 $8.20
Dec2012 $7.54
Dec2011 $6.35
Dec2010 $5.69
Dec2009 $2.89
Dec2008 $5.01
Dec2007 $5.95
Dec2006 $7.37
Dec2005 $6.73
Dec2004 $6.00
Dec2003 $4.95
Dec2002 $4.78
Dec2001 $3.82
Dec2000 $3.44
Dec1999 $3.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $11.24
Dec2018 $9.58
Dec2017 $7.95
Dec2016 $7.59
Dec2015 $7.44
Dec2014 $7.39
Dec2013 $6.97
Dec2012 $6.06
Dec2011 $5.28
Dec2010 $4.95
Dec2009 $4.92
Dec2008 $6.03
Dec2007 $6.42
Dec2006 $6.43
Dec2005 $5.73
Dec2004 $5.01
Dec2003 $4.37

Recommended Reading:

Other ModernGraham posts about the company

M&T Bank Corp Valuation – April 2018 $MTB
Best Stocks to Invest In: the Bank Industry – August 2016
9 Best Stocks For Value Investors This Week – 7/23/16
M&T Bank Corp Valuation – July 2016 $MTB
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – February 2016

Other ModernGraham posts about related companies

Bank of America Corp Valuation – January 2019 $BAC
Fifth Third Bancorp Valuation – January 2019 $FITB
Zions Bancorp Valuation – January 2019 $ZION
Regions Financial Corp Valuation – January 2019 $RF
Huntington Bancshares Inc Valuation – January 2019 $HBAN
PNC Financial Services Group Inc Valuation – January 2019 $PNC
KeyCorp Valuation – January 2019 $KEY
Citigroup Inc Valuation – January 2019 $C
People’s United Financial Inc Valuation – January 2019 $PBCT
JPMorgan Chase & Co Valuation – November 2018 $JPM

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.

Bank of America Corp Valuation – January 2019 $BAC

Company Profile (excerpt from Reuters): Bank of America Corporation, incorporated on July 31, 1998, is a bank holding company (BHC) and a financial holding company. The Company is a financial institution, serving individual consumers, small- and middle-market businesses, institutional investors, corporations and governments with a range of banking, investing, asset management and other financial and risk management products and services. The Company, through its banking and various non-bank subsidiaries, throughout the United States and in international markets, provides a range of banking and non-bank financial services and products through its business segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, Global Markets and All Other.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BAC – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $286,017,419,982 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -6372.73% Fail
5. Moderate PEmg Ratio PEmg < 20 13.42 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.11 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.20
MG Growth Estimate 15.00%
MG Value $84.85
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $31.96
MG Value based on 0% Growth $18.73
Market Implied Growth Rate 2.46%
Current Price $29.58
% of Intrinsic Value 34.86%

Bank of America Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.76 in 2015 to an estimated $2.2 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.46% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Bank of America Corp revealed the company was trading below its Graham Number of $39.29. The company pays a dividend of $0.54 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 13.42, which was below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Bank of America Corp performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $39.29
PEmg 13.42
PB Ratio 1.11
Dividend Yield 1.83%
TTM Dividend $0.54
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $229,340,000,000
Total Assets $2,354,507,000,000
Intangible Assets $68,951,000,000
Total Liabilities $2,089,182,000,000
Shares Outstanding (Diluted Average) 9,996,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.73
Dec2018 $2.61
Dec2017 $1.56
Dec2016 $1.49
Dec2015 $1.31
Dec2014 $0.42
Dec2013 $0.90
Dec2012 $0.25
Dec2011 $0.01
Dec2010 -$0.37
Dec2009 -$0.29
Dec2008 $0.54
Dec2007 $3.29
Dec2006 $4.59
Dec2005 $4.04
Dec2004 $3.69
Dec2003 $3.57
Dec2002 $2.96
Dec2001 $2.09
Dec2000 $2.26
Dec1999 $2.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.20
Dec2018 $1.79
Dec2017 $1.30
Dec2016 $1.07
Dec2015 $0.76
Dec2014 $0.41
Dec2013 $0.30
Dec2012 $0.01
Dec2011 $0.14
Dec2010 $0.65
Dec2009 $1.59
Dec2008 $2.76
Dec2007 $3.86
Dec2006 $4.02
Dec2005 $3.58
Dec2004 $3.20
Dec2003 $2.85

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Stocks for the Enterprising Investor – April 2018
Best Stocks Below Their Graham Number – April 2018
Bank of America Corp Valuation – March 2018 $BAC
Best Stocks Below Their Graham Number – August 2016
Best Stocks to Invest In: the Bank Industry – August 2016

Other ModernGraham posts about related companies

Fifth Third Bancorp Valuation – January 2019 $FITB
Zions Bancorp Valuation – January 2019 $ZION
Regions Financial Corp Valuation – January 2019 $RF
Huntington Bancshares Inc Valuation – January 2019 $HBAN
PNC Financial Services Group Inc Valuation – January 2019 $PNC
KeyCorp Valuation – January 2019 $KEY
Citigroup Inc Valuation – January 2019 $C
People’s United Financial Inc Valuation – January 2019 $PBCT
JPMorgan Chase & Co Valuation – November 2018 $JPM
CVB Financial Corp Valuation – September 2018 $CVBF

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.

Fifth Third Bancorp Valuation – January 2019 $FITB

Company Profile (excerpt from Reuters): Fifth Third Bancorp, incorporated on October 7, 1974, is a bank holding company and a financial holding company. The Company conducts its principal lending, deposit gathering, transaction processing and service advisory activities through its banking and non-banking subsidiaries from banking centers located throughout the Midwestern and Southeastern regions of the United States. The Company operates through four segments: Commercial Banking, Branch Banking, Consumer Lending, and Wealth and Asset Management. The Company diversifies its loan and lease portfolio by offering a range of loan and lease products with various payment terms and rate structures. It offers commercial and industrial loans, commercial mortgage loans, commercial construction loans, commercial leases, residential mortgage loans, home equity, automobile loans, credit card, and other consumer loans and leases. The Company offers various types of deposits, such as demand deposits, interest checking deposits, savings deposits, money market deposits, transaction deposits and other time deposits. As of December 31, 2016, the Company’s total deposits were $103.8 billion. As of December 31, 2016, the Company’s total loans were $92.8 billion.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FITB – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,701,621,200 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 199.60% Pass
5. Moderate PEmg Ratio PEmg < 20 11.21 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.16 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.41
MG Growth Estimate 7.26%
MG Value $55.48
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $34.94
MG Value based on 0% Growth $20.48
Market Implied Growth Rate 1.35%
Current Price $27.00
% of Intrinsic Value 48.67%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.62 in 2014 to an estimated $2.41 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.35% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Fifth Third Bancorp revealed the company was trading below its Graham Number of $36.08. The company pays a dividend of $0.6 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.21, which was below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Fifth Third Bancorp fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $36.08
PEmg 11.21
PB Ratio 1.16
Dividend Yield 2.22%
TTM Dividend $0.60
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $14,460,000,000
Total Assets $141,685,000,000
Intangible Assets $3,500,000,000
Total Liabilities $125,835,000,000
Shares Outstanding (Diluted Average) 679,199,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.67
Dec2017 $2.83
Dec2016 $1.93
Dec2015 $2.01
Dec2014 $1.66
Dec2013 $2.02
Dec2012 $1.66
Dec2011 $1.18
Dec2010 $0.63
Dec2009 $0.67
Dec2008 -$3.91
Dec2007 $1.99
Dec2006 $2.13
Dec2005 $2.77
Dec2004 $2.68
Dec2003 $3.03
Dec2002 $2.59
Dec2001 $1.70
Dec2000 $1.83
Dec1999 $1.43
Dec1998 $1.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.41
Dec2017 $2.22
Dec2016 $1.89
Dec2015 $1.82
Dec2014 $1.62
Dec2013 $1.48
Dec2012 $0.82
Dec2011 $0.31
Dec2010 $0.01
Dec2009 $0.05
Dec2008 $0.20
Dec2007 $2.34
Dec2006 $2.56
Dec2005 $2.70
Dec2004 $2.57
Dec2003 $2.38
Dec2002 $1.95

Recommended Reading:

Other ModernGraham posts about the company

Fifth Third Bancorp Valuation – March 2018 $FITB
Best Stocks Below Their Graham Number – March 2017
Best Stocks to Invest In: the Bank Industry – August 2016
10 Most Undervalued Companies for the Enterprising Investor – July 2016
9 Best Stocks For Value Investors This Week – 7/8/16

Other ModernGraham posts about related companies

Zions Bancorp Valuation – January 2019 $ZION
Regions Financial Corp Valuation – January 2019 $RF
Huntington Bancshares Inc Valuation – January 2019 $HBAN
PNC Financial Services Group Inc Valuation – January 2019 $PNC
KeyCorp Valuation – January 2019 $KEY
Citigroup Inc Valuation – January 2019 $C
People’s United Financial Inc Valuation – January 2019 $PBCT
JPMorgan Chase & Co Valuation – November 2018 $JPM
CVB Financial Corp Valuation – September 2018 $CVBF
Customers Bancorp Inc Valuation – September 2018 $CUBI

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.

Zions Bancorp Valuation – January 2019 $ZION

Company Profile (excerpt from Reuters): Zions Bancorporation, incorporated on April 25, 1955, is a financial holding company. The Company conducts its banking operations through separately managed and branded segments, including Zions Bank, Amegy Bank, California Bank & Trust, National Bank of Arizona, Nevada State Bank (NSB), Vectra Bank Colorado, The Commerce Bank of Washington (TCBW) and Other. The Company provides a range of banking and related services, primarily in Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington and Wyoming.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ZION – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,880,873,295 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -173.64% Fail
5. Moderate PEmg Ratio PEmg < 20 17.29 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.26 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.67
MG Growth Estimate 15.00%
MG Value $102.92
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $38.76
MG Value based on 0% Growth $22.72
Market Implied Growth Rate 4.39%
Current Price $46.21
% of Intrinsic Value 44.90%

Zions Bancorp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.12 in 2014 to an estimated $2.67 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.39% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Zions Bancorp revealed the company was trading below its Graham Number of $56.43. The company pays a dividend of $0.44 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 17.29, which was above the industry average of 14.65.

Zions Bancorp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Graham Number $56.43
PEmg 17.29
PB Ratio 1.26
Dividend Yield 0.95%
TTM Dividend $0.44
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $879,000,000
Total Assets $66,731,000,000
Intangible Assets $1,015,000,000
Total Liabilities $59,178,000,000
Shares Outstanding (Diluted Average) 205,765,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.93
Dec2017 $2.60
Dec2016 $1.99
Dec2015 $1.20
Dec2014 $1.68
Dec2013 $1.58
Dec2012 $0.97
Dec2011 $0.83
Dec2010 -$2.48
Dec2009 -$9.92
Dec2008 -$2.68
Dec2007 $4.42
Dec2006 $5.36
Dec2005 $5.16
Dec2004 $4.47
Dec2003 $3.72
Dec2002 $2.78
Dec2001 $3.07
Dec2000 $1.86
Dec1999 $2.26
Dec1998 $1.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.67
Dec2017 $1.97
Dec2016 $1.59
Dec2015 $1.35
Dec2014 $1.12
Dec2013 -$0.04
Dec2012 -$1.45
Dec2011 -$2.43
Dec2010 -$3.06
Dec2009 -$2.08
Dec2008 $2.34
Dec2007 $4.78
Dec2006 $4.74
Dec2005 $4.23
Dec2004 $3.57
Dec2003 $2.99
Dec2002 $2.54

Recommended Reading:

Other ModernGraham posts about the company

Zions Bancorp Valuation – June 2016 $ZION
40 Companies in the Spotlight This Week – 2/21/15
Zions Bancorporation Annual Valuation – 2015 $ZION
14 Companies in the Spotlight This Week – 2/15/14
Zions Bancorporation (ZION) Annual Valuation

Other ModernGraham posts about related companies

Regions Financial Corp Valuation – January 2019 $RF
Huntington Bancshares Inc Valuation – January 2019 $HBAN
PNC Financial Services Group Inc Valuation – January 2019 $PNC
KeyCorp Valuation – January 2019 $KEY
Citigroup Inc Valuation – January 2019 $C
People’s United Financial Inc Valuation – January 2019 $PBCT
JPMorgan Chase & Co Valuation – November 2018 $JPM
CVB Financial Corp Valuation – September 2018 $CVBF
Customers Bancorp Inc Valuation – September 2018 $CUBI
Sterling Bancorp Valuation – August 2018 $STL

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.

Regions Financial Corp Valuation – January 2019 $RF

Company Profile (excerpt from Reuters): Regions Financial Corporation, incorporated on February 13, 2004, is a financial holding company. The Company conducts its banking operations through Regions Bank, an Alabama state-chartered commercial bank, which is a member of the Federal Reserve System. The Company operates in three segments: Corporate Bank, Consumer Bank and Wealth Management. The Company provides traditional commercial, retail and mortgage banking services, as well as other financial services in the fields of asset management, wealth management, securities brokerage, insurance brokerage, trust services, merger and acquisition advisory services, and other specialty financing. As of December 31, 2016, the Company operated 1,906 automatic teller machines (ATMs) and over 1,527 banking offices in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, and Texas.

Downloadable PDF version of this valuation:

ModernGraham Valuation of RF – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,962,952,366 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -252.47% Fail
5. Moderate PEmg Ratio PEmg < 20 13.99 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.14 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.10
MG Growth Estimate 15.00%
MG Value $42.48
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $16.00
MG Value based on 0% Growth $9.38
Market Implied Growth Rate 2.75%
Current Price $15.44
% of Intrinsic Value 36.35%

Regions Financial Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.52 in 2014 to an estimated $1.1 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.75% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Regions Financial Corp revealed the company was trading below its Graham Number of $21.6. The company pays a dividend of $0.32 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 13.99, which was below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Regions Financial Corp fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $21.60
PEmg 13.99
PB Ratio 1.14
Dividend Yield 2.04%
TTM Dividend $0.32
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $11,178,000,000
Total Assets $124,578,000,000
Intangible Assets $5,357,000,000
Total Liabilities $109,808,000,000
Shares Outstanding (Diluted Average) 1,095,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.53
Dec2017 $1.00
Dec2016 $0.87
Dec2015 $0.75
Dec2014 $0.79
Dec2013 $0.75
Dec2012 $0.71
Dec2011 -$0.34
Dec2010 -$0.62
Dec2009 -$1.27
Dec2008 -$8.09
Dec2007 $1.76
Dec2006 $2.67
Dec2005 $2.15
Dec2004 $2.19
Dec2003 $2.90
Dec2002 $2.72
Dec2001 $1.82
Dec2000 $1.92
Dec1999 $1.90
Dec1998 $1.88

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.10
Dec2017 $0.87
Dec2016 $0.80
Dec2015 $0.68
Dec2014 $0.52
Dec2013 $0.20
Dec2012 -$0.69
Dec2011 -$1.49
Dec2010 -$1.75
Dec2009 -$1.73
Dec2008 -$1.26
Dec2007 $2.21
Dec2006 $2.47
Dec2005 $2.36
Dec2004 $2.42
Dec2003 $2.44
Dec2002 $2.15

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Stocks for the Enterprising Investor – April 2018
Regions Financial Corp Valuation – March 2018 $RF
Best Stocks Below Their Graham Number – August 2016
Best Stocks to Invest In: the Bank Industry – August 2016
Stocks Trading Below Their Graham Number – July 2016

Other ModernGraham posts about related companies

PNC Financial Services Group Inc Valuation – January 2019 $PNC
KeyCorp Valuation – January 2019 $KEY
Citigroup Inc Valuation – January 2019 $C
People’s United Financial Inc Valuation – January 2019 $PBCT
JPMorgan Chase & Co Valuation – November 2018 $JPM
CVB Financial Corp Valuation – September 2018 $CVBF
Customers Bancorp Inc Valuation – September 2018 $CUBI
Sterling Bancorp Valuation – August 2018 $STL
S&T Bancorp Inc Valuation – August 2018 $STBA
Central Pacific Financial Corp Valuation – August 2018 $CPF

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.

Huntington Bancshares Inc Valuation – January 2019 $HBAN

Company Profile (excerpt from Reuters): Huntington Bancshares Incorporated (Huntington), incorporated on April 14, 1966, is a bank holding company. Through its subsidiaries, including its bank subsidiary, The Huntington National Bank (the Bank), the Company provides commercial and consumer banking services, mortgage banking services, automobile financing, recreational vehicle and marine financing, equipment leasing, investment management, trust services, brokerage services, insurance programs, and other financial products and services. Its segments include Consumer and Business Banking, Commercial Banking, Commercial Real Estate and Vehicle Finance, Regional Banking and The Huntington Private Client Group, Home Lending and Treasury/Other.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HBAN – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,059,951,483 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -153.73% Fail
5. Moderate PEmg Ratio PEmg < 20 13.86 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.34 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.96
MG Growth Estimate 6.68%
MG Value $20.90
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $13.86
MG Value based on 0% Growth $8.13
Market Implied Growth Rate 2.68%
Current Price $13.25
% of Intrinsic Value 63.38%

Huntington Bancshares Incorporated is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.66 in 2014 to an estimated $0.96 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.68% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Huntington Bancshares Incorporated revealed the company was trading below its Graham Number of $15.53. The company pays a dividend of $0.35 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 13.86, which was below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Huntington Bancshares Incorporated fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $15.53
PEmg 13.86
PB Ratio 1.34
Dividend Yield 2.64%
TTM Dividend $0.35
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $9,385,000,000
Total Assets $105,652,000,000
Intangible Assets $2,550,000,000
Total Liabilities $94,718,000,000
Shares Outstanding (Diluted Average) 1,103,740,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.18
Dec2017 $1.00
Dec2016 $0.70
Dec2015 $0.81
Dec2014 $0.72
Dec2013 $0.72
Dec2012 $0.69
Dec2011 $0.59
Dec2010 $0.19
Dec2009 -$6.14
Dec2008 -$0.44
Dec2007 $0.25
Dec2006 $1.92
Dec2005 $1.77
Dec2004 $1.71
Dec2003 $1.61
Dec2002 $1.33
Dec2001 $0.54
Dec2000 $1.29
Dec1999 $1.62
Dec1998 $1.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.96
Dec2017 $0.83
Dec2016 $0.74
Dec2015 $0.74
Dec2014 $0.66
Dec2013 $0.16
Dec2012 -$0.42
Dec2011 -$1.02
Dec2010 -$1.50
Dec2009 -$1.74
Dec2008 $0.65
Dec2007 $1.28
Dec2006 $1.76
Dec2005 $1.58
Dec2004 $1.42
Dec2003 $1.28
Dec2002 $1.14

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Huntington Bancshares Valuation – January 2016 Update $HBAN
The Best Companies of the Banking Industry – October 2015
13 Best Stocks For Value Investors This Week – 10/3/15
Huntington Bancshares Inc. Analysis – October 2015 Update $HBAN

Other ModernGraham posts about related companies

PNC Financial Services Group Inc Valuation – January 2019 $PNC
KeyCorp Valuation – January 2019 $KEY
Citigroup Inc Valuation – January 2019 $C
People’s United Financial Inc Valuation – January 2019 $PBCT
JPMorgan Chase & Co Valuation – November 2018 $JPM
CVB Financial Corp Valuation – September 2018 $CVBF
Customers Bancorp Inc Valuation – September 2018 $CUBI
Sterling Bancorp Valuation – August 2018 $STL
S&T Bancorp Inc Valuation – August 2018 $STBA
Central Pacific Financial Corp Valuation – August 2018 $CPF

Disclaimer:

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

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