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Equifax Inc Valuation – March 2019 #EFX

Company Profile (excerpt from Reuters): Equifax Inc., incorporated on December 20, 1913, is a global provider of information solutions and human resources business process outsourcing services for businesses, governments and consumers. The Company operates in four segments: U.S. Information Solutions (USIS), International, Workforce Solutions and Global Consumer Solutions. Its products and services are based on databases of consumer and business information derived from various sources, including credit, financial assets, telecommunications and utility payments, employment, income, demographic and marketing data. It uses statistical techniques and software tools to analyze all available data, creating customized insights, decision-making solutions and processing services for its clients. It helps consumers understand, manage and protect their personal information and make more informed financial decisions. It also provides information, technology and services to support debt collections and recovery management.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EFX – 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 $13,221,478,110 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.09 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 107.89% Pass
6. Moderate PEmg Ratio PEmg < 20 25.64 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.20 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.09 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 34.84 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.27
MG Growth Estimate 6.60%
MG Value $92.70
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $61.92
MG Value based on 0% Growth $36.30
Market Implied Growth Rate 8.57%
Current Price $109.49
% of Intrinsic Value 118.12%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.96 in 2015 to an estimated $4.27 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.57% 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 Equifax Inc. revealed the company was trading above its Graham Number of $56.85. The company pays a dividend of $1.56 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 25.64, which was above the industry average of 21.22. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-25.56.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$25.56
Graham Number $56.85
PEmg 25.64
Current Ratio 1.09
PB Ratio 4.20
Current Dividend $1.56
Dividend Yield 1.42%
Number of Consecutive Years of Dividend Growth 9

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $902,300,000
Total Current Liabilities $826,800,000
Long-Term Debt $2,630,600,000
Total Assets $7,153,200,000
Intangible Assets $5,323,700,000
Total Liabilities $3,997,500,000
Shares Outstanding (Diluted Average) 121,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.61
Dec2018 $2.47
Dec2017 $4.83
Dec2016 $4.04
Dec2015 $3.55
Dec2014 $2.97
Dec2013 $2.84
Dec2012 $2.22
Dec2011 $1.88
Dec2010 $2.11
Dec2009 $1.83
Dec2008 $2.09
Dec2007 $2.02
Dec2006 $2.12
Dec2005 $1.86
Dec2004 $1.76
Dec2003 $1.20
Dec2002 $1.25
Dec2001 $0.85
Dec2000 $1.68
Dec1999 $1.55

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.27
Dec2018 $3.59
Dec2017 $3.98
Dec2016 $3.41
Dec2015 $2.96
Dec2014 $2.58
Dec2013 $2.32
Dec2012 $2.05
Dec2011 $1.97
Dec2010 $2.02
Dec2009 $1.98
Dec2008 $2.02
Dec2007 $1.93
Dec2006 $1.80
Dec2005 $1.55
Dec2004 $1.38
Dec2003 $1.23

Recommended Reading:

Other ModernGraham posts about the company

Equifax Inc Valuation – May 2018 $EFX
Equifax Inc Valuation – February 2017 $EFX
Equifax Inc Valuation – August 2016 $EFX
27 Companies in the Spotlight This Week – 4/4/15
Equifax Inc. Annual Valuation – 2015 $EFX

Other ModernGraham posts about related companies

CME Group Inc Valuation – March 2019 #CME
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Affiliated Managers Group Inc Valuation – February 2019 $AMG
Bank of New York Mellon Corp Valuation – February 2019 $BK
Western Union Co Valuation – February 2019 $WU
Raymond James Financial Valuation – February 2019 $RJF
Nasdaq Inc Valuation – February 2019 $NDAQ
E*Trade Financial Corp Valuation – January 2019 $ETFC
Marsh & McLennan Companies Inc Valuation – January 2019 $MMC
Intercontinental Exchange Inc Valuation – January 2019 $ICE

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.

CME Group Inc Valuation – March 2019 #CME

Company Profile (excerpt from Reuters): CME Group Inc., incorporated on August 2, 2001, through its exchanges, provides products across all asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The Company’s segment primarily consists of the Chicago Mercantile Exchange Inc. (CME), Board of Trade of the City of Chicago, Inc. (CBOT), New York Mercantile Exchange, Inc. (NYMEX) and Commodity Exchange, Inc. (COMEX) exchanges. The Company provides electronic trading around the globe on its CME Globex platform. The Company also offers clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives through its clearinghouses CME Clearing and CME Clearing Europe. It also provides hosting, connectivity and customer support for electronic trading through its co-location services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CME – 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 $63,440,275,956 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.01 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 121.84% Pass
6. Moderate PEmg Ratio PEmg < 20 25.32 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.41 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.01 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.23 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 $7.00
MG Growth Estimate 15.00%
MG Value $269.65
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $101.56
MG Value based on 0% Growth $59.53
Market Implied Growth Rate 8.41%
Current Price $177.31
% of Intrinsic Value 65.75%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.43 in 2015 to an estimated $7 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.41% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into CME Group Inc revealed the company was trading above its Graham Number of $104.74. The company pays a dividend of $2.8 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 25.32, which was above the industry average of 21.22. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-27.32.

CME Group 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) -$27.32
Graham Number $104.74
PEmg 25.32
Current Ratio 1.01
PB Ratio 2.41
Current Dividend $2.80
Dividend Yield 1.58%
Number of Consecutive Years of Dividend Growth 8

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 $41,886,700,000
Total Current Liabilities $41,272,600,000
Long-Term Debt $3,826,800,000
Total Assets $77,475,700,000
Intangible Assets $33,480,700,000
Total Liabilities $51,510,400,000
Shares Outstanding (Diluted Average) 352,227,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.73
Dec2018 $5.71
Dec2017 $11.94
Dec2016 $4.53
Dec2015 $3.69
Dec2014 $3.35
Dec2013 $2.92
Dec2012 $2.70
Dec2011 $5.43
Dec2010 $2.86
Dec2009 $2.48
Dec2008 $2.43
Dec2007 $2.99
Dec2006 $2.32
Dec2005 $1.76
Dec2004 $1.28
Dec2003 $0.72
Dec2002 $0.63
Dec2001 $0.51
Dec2000 -$0.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.00
Dec2018 $6.71
Dec2017 $6.57
Dec2016 $3.73
Dec2015 $3.43
Dec2014 $3.35
Dec2013 $3.33
Dec2012 $3.41
Dec2011 $3.59
Dec2010 $2.65
Dec2009 $2.50
Dec2008 $2.39
Dec2007 $2.18
Dec2006 $1.64
Dec2005 $1.19
Dec2004 $0.81
Dec2003 $0.50

Recommended Reading:

Other ModernGraham posts about the company

CME Group Inc Valuation – May 2018 $CME
CME Group Inc Valuation – February 2017 $CME
CME Group Inc. Analysis – October 2015 Update $CME
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CME Group Inc. Annual Stock Valuation – 2014 $CME

Other ModernGraham posts about related companies

Northern Trust Corp Valuation – March 2019 #NTRS
Affiliated Managers Group Inc Valuation – February 2019 $AMG
Bank of New York Mellon Corp Valuation – February 2019 $BK
Western Union Co Valuation – February 2019 $WU
Raymond James Financial Valuation – February 2019 $RJF
Nasdaq Inc Valuation – February 2019 $NDAQ
E*Trade Financial Corp Valuation – January 2019 $ETFC
Marsh & McLennan Companies Inc Valuation – January 2019 $MMC
Intercontinental Exchange Inc Valuation – January 2019 $ICE
H&R Block Inc Valuation – January 2019 $HRB

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.

Northern Trust Corp Valuation – March 2019 #NTRS

Company Profile (excerpt from Reuters): Northern Trust Corporation, incorporated on August 23, 1971, is a financial holding company. The Company provides asset servicing, fund administration, asset management, fiduciary and banking solutions for corporations, institutions, families and individuals around the world. The Company’s segments include Corporate & Institutional Services (C&IS), Wealth Management, and Treasury and Other. The Company conducts its business through various subsidiaries, including The Northern Trust Company (Bank). The Asset Management business, through the Company’s subsidiaries, supports the C&IS and Wealth Management segments by providing a range of asset management and related services, and other products to customers around the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NTRS – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,238,028,921 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 121.45% Pass
5. Moderate PEmg Ratio PEmg < 20 16.36 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.95 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 $5.66
MG Growth Estimate 10.34%
MG Value $165.23
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $82.12
MG Value based on 0% Growth $48.14
Market Implied Growth Rate 3.93%
Current Price $92.66
% of Intrinsic Value 56.08%

Northern Trust 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 $3.35 in 2015 to an estimated $5.66 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.93% 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 Northern Trust Corporation revealed the company was trading above its Graham Number of $78.3. The company pays a dividend of $1.94 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.36, which was below the industry average of 21.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Northern Trust Corporation performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $78.30
PEmg 16.36
PB Ratio 1.95
Dividend Yield 2.09%
TTM Dividend $1.94
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 12/1/2018
Long-Term Debt & Capital Lease Obligation $11,303,000,000
Total Assets $132,212,500,000
Intangible Assets $669,300,000
Total Liabilities $121,704,200,000
Shares Outstanding (Diluted Average) 221,469,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.20
Dec2018 $6.64
Dec2017 $4.92
Dec2016 $4.32
Dec2015 $3.99
Dec2014 $3.32
Dec2013 $2.99
Dec2012 $2.81
Dec2011 $2.47
Dec2010 $2.74
Dec2009 $3.16
Dec2008 $3.47
Dec2007 $3.24
Dec2006 $3.00
Dec2005 $2.64
Dec2004 $2.27
Dec2003 $1.80
Dec2002 $1.97
Dec2001 $2.11
Dec2000 $2.08
Dec1999 $1.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.66
Dec2018 $5.14
Dec2017 $4.23
Dec2016 $3.75
Dec2015 $3.35
Dec2014 $2.98
Dec2013 $2.82
Dec2012 $2.80
Dec2011 $2.86
Dec2010 $3.08
Dec2009 $3.20
Dec2008 $3.12
Dec2007 $2.83
Dec2006 $2.53
Dec2005 $2.25
Dec2004 $2.05
Dec2003 $1.94

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Northern Trust Corp Valuation – April 2018 $NTRS
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Northern Trust Corp Valuation – January 2016 Update $NTRS

Other ModernGraham posts about related companies

Affiliated Managers Group Inc Valuation – February 2019 $AMG
Bank of New York Mellon Corp Valuation – February 2019 $BK
Western Union Co Valuation – February 2019 $WU
Raymond James Financial Valuation – February 2019 $RJF
Nasdaq Inc Valuation – February 2019 $NDAQ
E*Trade Financial Corp Valuation – January 2019 $ETFC
Marsh & McLennan Companies Inc Valuation – January 2019 $MMC
Intercontinental Exchange Inc Valuation – January 2019 $ICE
H&R Block Inc Valuation – January 2019 $HRB
State Street Corp Valuation – January 2019 $STT

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.

Affiliated Managers Group Inc Valuation – February 2019 $AMG

Company Profile (excerpt from Reuters): Affiliated Managers Group, Inc., incorporated on December 29, 1993, is an asset management company with equity investments in boutique investment management firms (Affiliates). The Company is focused on investing around the globe in investment management firms that manage active return-oriented strategies, including traditional, alternative and wealth management firms. The Company operates through three business segments, which represent its principal distribution channels: Institutional, Mutual Fund and High Net Worth. The equity method investments in the Institutional distribution channel are made in relationships with public and private client entities, including foundations, endowments, sovereign wealth funds and retirement plans for corporations and municipalities. The equity method investments in the Mutual Fund distribution channel are made in advisory or sub-advisory relationships with active return-oriented mutual funds, Undertakings for Collective Investment in Transferable Securities (UCITS) and other retail products. The equity method investments in the High Net Worth distribution channel are made in relationships with high net worth and ultra-high net worth individuals, families, trusts, foundations, endowments and retirement plans.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMG – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,732,676,828 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.45 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 224.67% Pass
6. Moderate PEmg Ratio PEmg < 20 11.23 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.40 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.45 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.40 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 $9.81
MG Growth Estimate 5.82%
MG Value $197.46
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $142.18
MG Value based on 0% Growth $83.35
Market Implied Growth Rate 1.37%
Current Price $110.14
% of Intrinsic Value 55.78%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $7.06 in 2015 to an estimated $9.81 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.37% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Affiliated Managers Group, Inc. revealed the company was trading below its Graham Number of $140.26. The company pays a dividend of $1.2 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 11.23, which was below the industry average of 20.29, 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 $-56.9.

Affiliated Managers Group, 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) -$56.90
Graham Number $140.26
PEmg 11.23
Current Ratio 1.45
PB Ratio 1.40
Current Dividend $1.20
Dividend Yield 1.09%
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
Total Current Assets $1,085,400,000
Total Current Liabilities $746,600,000
Long-Term Debt $1,829,600,000
Total Assets $8,219,100,000
Intangible Assets $3,943,300,000
Total Liabilities $4,084,200,000
Shares Outstanding (Diluted Average) 52,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.32
Dec2018 $4.52
Dec2017 $12.03
Dec2016 $8.57
Dec2015 $9.17
Dec2014 $7.70
Dec2013 $6.55
Dec2012 $3.28
Dec2011 $3.11
Dec2010 $2.81
Dec2009 $1.38
Dec2008 -$0.03
Dec2007 $4.55
Dec2006 $3.74
Dec2005 $2.81
Dec2004 $2.02
Dec2003 $1.05
Dec2002 $1.65
Dec2001 $1.47
Dec2000 $1.66
Dec1999 $2.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.81
Dec2018 $8.16
Dec2017 $9.59
Dec2016 $7.93
Dec2015 $7.06
Dec2014 $5.57
Dec2013 $4.15
Dec2012 $2.67
Dec2011 $2.36
Dec2010 $2.15
Dec2009 $2.05
Dec2008 $2.46
Dec2007 $3.42
Dec2006 $2.65
Dec2005 $2.00
Dec2004 $1.59
Dec2003 $1.45

Recommended Reading:

Other ModernGraham posts about the company

Affiliated Managers Group Inc Valuation – May 2018 $AMG
Affiliated Managers Group Inc Valuation – January 2017 $AMG
Affiliated Managers Group Analysis – Initial Coverage $AMG

Other ModernGraham posts about related companies

Raymond James Financial Valuation – February 2019 $RJF
Nasdaq Inc Valuation – February 2019 $NDAQ
E*Trade Financial Corp Valuation – January 2019 $ETFC
Marsh & McLennan Companies Inc Valuation – January 2019 $MMC
Intercontinental Exchange Inc Valuation – January 2019 $ICE
H&R Block Inc Valuation – January 2019 $HRB
State Street Corp Valuation – January 2019 $STT
Morgan Stanley Valuation – January 2019 $MS
MSCI Inc Valuation – January 2019 $MSCI
BlackRock Inc Valuation – January 2019 $BLK

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 New York Mellon Corp Valuation – February 2019 $BK

Company Profile (excerpt from Reuters): The Bank of New York Mellon Corporation, incorporated on February 9, 2007, is a global investments company. The Company is focused on helping its clients manage and service their financial assets throughout the investment lifecycle. It provides financial services for institutions, corporations or individual investors. It allows clients to create, trade, hold, manage, service, distribute or restructure investments. The Company operates businesses through two segments: Investment Management and Investment Services. The Company also has an Other segment, which includes the leasing portfolio, corporate treasury activities (including its investment securities portfolio), derivatives and other trading, corporate and bank-owned life insurance and renewable energy investments, and business exits. As of September 30, 2018, the Company had $34.5 trillion in assets under custody and/or administration and $1.8 trillion in assets under management.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BK – 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 $52,474,421,623 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 97.25% Pass
5. Moderate PEmg Ratio PEmg < 20 14.41 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 $3.68
MG Growth Estimate 10.24%
MG Value $106.77
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $53.41
MG Value based on 0% Growth $31.31
Market Implied Growth Rate 2.95%
Current Price $53.07
% of Intrinsic Value 49.70%

Bank of New York Mellon Corp 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 $2.19 in 2015 to an estimated $3.68 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.95% 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 New York Mellon Corp revealed the company was trading below its Graham Number of $59.25. The company pays a dividend of $1.04 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 14.41, which was below the industry average of 20.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Bank of New York Mellon Corp fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $59.25
PEmg 14.41
PB Ratio 1.34
Dividend Yield 1.96%
TTM Dividend $1.04
Number of Consecutive Years of Dividend Growth 8

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 $29,163,000,000
Total Assets $362,873,000,000
Intangible Assets $20,570,000,000
Total Liabilities $322,134,000,000
Shares Outstanding (Diluted Average) 1,030,404,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.04
Dec2018 $3.72
Dec2017 $3.72
Dec2016 $3.15
Dec2015 $2.71
Dec2014 $2.15
Dec2013 $1.73
Dec2012 $1.73
Dec2011 $2.03
Dec2010 $2.06
Dec2009 -$1.16
Dec2008 $1.20
Dec2007 $2.18
Dec2006 $3.94
Dec2005 $2.03
Dec2004 $1.85
Dec2003 $1.52
Dec2002 $1.24
Dec2001 $1.81
Dec2000 $1.92
Dec1999 $2.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.68
Dec2018 $3.37
Dec2017 $3.02
Dec2016 $2.55
Dec2015 $2.19
Dec2014 $1.93
Dec2013 $1.64
Dec2012 $1.46
Dec2011 $1.30
Dec2010 $1.17
Dec2009 $1.03
Dec2008 $2.16
Dec2007 $2.53
Dec2006 $2.51
Dec2005 $1.76
Dec2004 $1.64
Dec2003 $1.61

Recommended Reading:

Other ModernGraham posts about the company

Bank of New York Mellon Corp Valuation – May 2018 $BK
15 Best Stocks for Value Investors This Week – 1/14/17
Bank of New York Mellon Corp Valuation – January 2017 $BK
10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016
5 Best Undervalued Stocks of the Week – 8/14/16

Other ModernGraham posts about related companies

Western Union Co Valuation – February 2019 $WU
Raymond James Financial Valuation – February 2019 $RJF
Nasdaq Inc Valuation – February 2019 $NDAQ
E*Trade Financial Corp Valuation – January 2019 $ETFC
Marsh & McLennan Companies Inc Valuation – January 2019 $MMC
Intercontinental Exchange Inc Valuation – January 2019 $ICE
H&R Block Inc Valuation – January 2019 $HRB
State Street Corp Valuation – January 2019 $STT
Morgan Stanley Valuation – January 2019 $MS
MSCI Inc Valuation – January 2019 $MSCI

Disclaimer:

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

Western Union Co Valuation – February 2019 $WU

Company Profile (excerpt from Reuters): The Western Union Company (Western Union), incorporated on February 17, 2006, is a provider of money movement and payment services. The Company operates through three segments: Consumer-to-Consumer, Consumer-to-Business and Business Solutions. Western Union’s Consumer-to-Consumer segment is engaged in individual money transfers from one consumer to another. The Company’s Consumer-to-Business segment provides options to make one-time or recurring payments from consumers to businesses and other organizations, including utilities, auto finance companies, mortgage servicers, financial service providers and government agencies. Western Union’s Business Solutions segment facilitates payment and foreign exchange solutions, primarily cross-border, cross-currency transactions, for small and medium size enterprises and other organizations and individuals.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WU – 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 $7,879,832,269 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.88 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -48.67% Fail
6. Moderate PEmg Ratio PEmg < 20 17.06 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -25.68 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 0.88 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.32 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 $1.05
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $15.18
MG Value based on 0% Growth $8.90
Market Implied Growth Rate 4.28%
Current Price $17.86
% of Intrinsic Value N/A

The Western Union 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 stability or growth over the last ten years, and the high PB ratio. 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 $1.6 in 2015 to an estimated $1.05 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.28% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into The Western Union Company revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.76 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 17.06, which was below the industry average of 20.29, 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 $-10.15.

The Western Union Company 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) -$10.15
Graham Number $0.00
PEmg 17.06
Current Ratio 0.88
PB Ratio -25.68
Current Dividend $0.76
Dividend Yield 4.26%
Number of Consecutive Years of Dividend Growth 4

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 $4,787,200,000
Total Current Liabilities $5,432,700,000
Long-Term Debt $3,433,700,000
Total Assets $8,996,800,000
Intangible Assets $3,323,200,000
Total Liabilities $9,306,600,000
Shares Outstanding (Diluted Average) 445,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.83
Dec2018 $1.87
Dec2017 -$1.19
Dec2016 $0.51
Dec2015 $1.62
Dec2014 $1.59
Dec2013 $1.43
Dec2012 $1.69
Dec2011 $1.84
Dec2010 $1.36
Dec2009 $1.21
Dec2008 $1.24
Dec2007 $1.11
Dec2006 $1.19
Dec2005 $1.21
Dec2004 $0.00
Dec2003 $0.00
Dec2002 $0.65

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.05
Dec2018 $0.73
Dec2017 $0.37
Dec2016 $1.22
Dec2015 $1.60
Dec2014 $1.59
Dec2013 $1.56
Dec2012 $1.57
Dec2011 $1.46
Dec2010 $1.25
Dec2009 $1.20
Dec2008 $1.11
Dec2007 $0.93
Dec2006 $0.76
Dec2005 $0.49
Dec2004 $0.13
Dec2003 $0.17

Recommended Reading:

Other ModernGraham posts about the company

The Western Union Co Valuation – April 2018 $WU
The Western Union Company Valuation – December 2016 $WU
Western Union Company Analysis – 2015 Update $WU
19 Companies in the Spotlight This Week – 8/9/14
The Western Union Company Annual Valuation – 2014 $WU

Other ModernGraham posts about related companies

Raymond James Financial Valuation – February 2019 $RJF
Nasdaq Inc Valuation – February 2019 $NDAQ
E*Trade Financial Corp Valuation – January 2019 $ETFC
Marsh & McLennan Companies Inc Valuation – January 2019 $MMC
Intercontinental Exchange Inc Valuation – January 2019 $ICE
H&R Block Inc Valuation – January 2019 $HRB
State Street Corp Valuation – January 2019 $STT
Morgan Stanley Valuation – January 2019 $MS
MSCI Inc Valuation – January 2019 $MSCI
BlackRock Inc Valuation – January 2019 $BLK

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.

Raymond James Financial Valuation – February 2019 $RJF

Company Profile (excerpt from Reuters): Raymond James Financial, Inc. (RJF), incorporated on January 24, 1974, is a financial holding company. The Company’s subsidiaries include Raymond James & Associates, Inc. (RJ&A), Raymond James Financial Services, Inc. (RJFS), Raymond James Financial Services Advisors, Inc. (RJFSA), Raymond James Ltd. (RJ Ltd.), Eagle Asset Management, Inc. (Eagle), and Raymond James Bank, N.A. (RJ Bank). The Company operates through five segments: Private Client Group (PCG), Capital Markets, Asset Management, RJ Bank and the Other segment. The Private Client Group segment includes the retail branches of the Company’s broker-dealer subsidiaries located throughout the United States, Canada and the United Kingdom. The Capital Markets segment includes institutional sales and trading in the United States, Canada and Europe. The Asset Management segment includes the operations of Eagle, the Eagle Family of Funds, Cougar Global Investments Limited (Cougar), the asset management operations of RJ&A, trust services of RJ Trust, and other fee-based asset management programs. RJ Bank segment provides corporate loans, securities based loans (SB) and residential loans. The Other segment includes principal capital and private equity activities, as well as certain corporate costs of RJF.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RJF – 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 $11,570,757,649 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 171.22% Pass
5. Moderate PEmg Ratio PEmg < 20 15.25 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.94 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 $5.38
MG Growth Estimate 12.03%
MG Value $175.15
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $77.98
MG Value based on 0% Growth $45.71
Market Implied Growth Rate 3.37%
Current Price $81.99
% of Intrinsic Value 46.81%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.98 in 2015 to an estimated $5.38 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.37% 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 Raymond James Financial, Inc. revealed the company was trading above its Graham Number of $81.73. The company pays a dividend of $1.1 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 15.25, which was below the industry average of 20.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Raymond James Financial, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Graham Number $81.73
PEmg 15.25
PB Ratio 1.94
Dividend Yield 1.34%
TTM Dividend $1.10
Number of Consecutive Years of Dividend Growth 6

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $2,448,000,000
Total Assets $38,544,000,000
Intangible Assets $633,000,000
Total Liabilities $32,319,000,000
Shares Outstanding (Diluted Average) 147,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.79
Sep2018 $5.75
Sep2017 $4.33
Sep2016 $3.65
Sep2015 $3.43
Sep2014 $3.32
Sep2013 $2.58
Sep2012 $2.20
Sep2011 $2.19
Sep2010 $1.83
Sep2009 $1.25
Sep2008 $1.97
Sep2007 $2.11
Sep2006 $1.85
Sep2005 $1.33
Sep2004 $1.15
Sep2003 $0.78
Sep2002 $0.71
Sep2001 $0.88
Sep2000 $1.19
Sep1999 $0.78

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.38
Sep2018 $4.48
Sep2017 $3.72
Sep2016 $3.29
Sep2015 $2.98
Sep2014 $2.65
Sep2013 $2.21
Sep2012 $1.98
Sep2011 $1.87
Sep2010 $1.74
Sep2009 $1.70
Sep2008 $1.84
Sep2007 $1.67
Sep2006 $1.35
Sep2005 $1.06
Sep2004 $0.93
Sep2003 $0.84

Recommended Reading:

Other ModernGraham posts about the company

Raymond James Financial Inc Valuation – March 2018 $RJF

Other ModernGraham posts about related companies

Nasdaq Inc Valuation – February 2019 $NDAQ
E*Trade Financial Corp Valuation – January 2019 $ETFC
Marsh & McLennan Companies Inc Valuation – January 2019 $MMC
Intercontinental Exchange Inc Valuation – January 2019 $ICE
H&R Block Inc Valuation – January 2019 $HRB
State Street Corp Valuation – January 2019 $STT
Morgan Stanley Valuation – January 2019 $MS
MSCI Inc Valuation – January 2019 $MSCI
BlackRock Inc Valuation – January 2019 $BLK
Ameriprise Financial Inc Valuation – January 2019 $AMP

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.

Nasdaq Inc Valuation – February 2019 $NDAQ

Company Profile (excerpt from Reuters): Nasdaq, Inc. (Nasdaq), incorporated on November 13, 1979, is a holding company. The Company is a provider of trading, clearing, exchange technology, regulatory, securities listing, information and public company services. The Company manages, operates and provides its products and services through four segments: Market Services, Corporate Services, Information Services and Market Technology. Its global offerings include trading and clearing across various asset classes, trade management services, data products, financial indexes, capital formation solutions, corporate solutions, and market technology products and services. Its technology powers markets across the globe, supporting equity derivative trading, clearing and settlement, cash equity trading, fixed income trading and various other functions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NDAQ – February 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,326,562,209 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.97 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 97.70% Pass
6. Moderate PEmg Ratio PEmg < 20 24.88 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.64 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 0.97 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -14.78 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.51
MG Growth Estimate 7.56%
MG Value $82.94
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $50.93
MG Value based on 0% Growth $29.86
Market Implied Growth Rate 8.19%
Current Price $87.38
% of Intrinsic Value 105.36%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.34 in 2015 to an estimated $3.51 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 8.19% 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 Nasdaq Inc revealed the company was trading above its Graham Number of $61.15. The company pays a dividend of $1.7 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 24.88, which was above the industry average of 20.29. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-23.59.

Nasdaq 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) -$23.59
Graham Number $61.15
PEmg 24.88
Current Ratio 0.97
PB Ratio 2.64
Current Dividend $1.70
Dividend Yield 1.95%
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 12/1/2018
Total Current Assets $6,370,000,000
Total Current Liabilities $6,570,000,000
Long-Term Debt $2,956,000,000
Total Assets $15,700,000,000
Intangible Assets $8,663,000,000
Total Liabilities $10,251,000,000
Shares Outstanding (Diluted Average) 164,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.00
Dec2018 $2.73
Dec2017 $4.33
Dec2016 $0.64
Dec2015 $2.50
Dec2014 $2.39
Dec2013 $2.25
Dec2012 $2.04
Dec2011 $2.15
Dec2010 $1.91
Dec2009 $1.25
Dec2008 $1.55
Dec2007 $3.46
Dec2006 $0.95
Dec2005 $0.57
Dec2004 -$0.02
Dec2003 -$1.45
Dec2002 $0.40
Dec2001 $0.35
Dec2000 $0.21
Dec1999 $0.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.51
Dec2018 $2.69
Dec2017 $2.58
Dec2016 $1.79
Dec2015 $2.34
Dec2014 $2.22
Dec2013 $2.06
Dec2012 $1.91
Dec2011 $1.91
Dec2010 $1.80
Dec2009 $1.69
Dec2008 $1.70
Dec2007 $1.42
Dec2006 $0.30
Dec2005 -$0.03
Dec2004 -$0.25
Dec2003 -$0.22

Recommended Reading:

Other ModernGraham posts about the company

Nasdaq Inc Valuation – April 2018 $NDAQ
Nasdaq Inc Valuation – July 2016 $NDAQ
24 Companies in the Spotlight This Week – 3/28/15
Nasdaq OMX Group Inc. Annual Valuation – 2015 $NDAQ
17 Companies in the Spotlight This Week – 3/29/14

Other ModernGraham posts about related companies

E*Trade Financial Corp Valuation – January 2019 $ETFC
Marsh & McLennan Companies Inc Valuation – January 2019 $MMC
Intercontinental Exchange Inc Valuation – January 2019 $ICE
H&R Block Inc Valuation – January 2019 $HRB
State Street Corp Valuation – January 2019 $STT
Morgan Stanley Valuation – January 2019 $MS
MSCI Inc Valuation – January 2019 $MSCI
BlackRock Inc Valuation – January 2019 $BLK
Ameriprise Financial Inc Valuation – January 2019 $AMP
Invesco Ltd Valuation – January 2019 $IVZ

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.

E*Trade Financial Corp Valuation – January 2019 $ETFC

Company Profile (excerpt from Reuters): E*Trade Financial Corporation, incorporated on September 4, 2003, is a financial services company. The Company provides online brokerage and related products and services primarily to individual retail investors under the brand E*TRADE Financial. The Company also provides investor-focused banking products, primarily sweep deposits, to retail investors. It provides its services to customers through its digital platforms and network of industry-licensed customer service representatives and Financial Consultants, over the phone and by e-mail. It operates federally chartered savings banks with the primary purpose of maximizing the value of deposits generated through its brokerage business. The Company’s hybrid service delivery model is delivered through various digital platforms: E*TRADE and OptionsHouse products. It offers trading applications for smartphones, tablets and watches, which manages accounts and offers stock and portfolio alerts. Its active trading platform is a software-based trading application that offers trading tools, idea generation and analysis, and advanced portfolio and market tracking. Its digital platforms are complemented by its offline channels, which include its network of customer service representatives and financial consultants and its round the clock customer service available via phone, e-mail and online.

ETFC Chart

ETFC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ETFC – 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 $11,745,487,126 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -171.59% Fail
5. Moderate PEmg Ratio PEmg < 20 18.96 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.84 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 Fail
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.51
MG Growth Estimate 15.00%
MG Value $96.66
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $36.40
MG Value based on 0% Growth $21.34
Market Implied Growth Rate 5.23%
Current Price $47.59
% of Intrinsic Value 49.23%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.4 in 2014 to an estimated $2.51 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.23% 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 E*TRADE Financial Corp revealed the company was trading above its Graham Number of $46.23. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 18.96, which was above the industry average of 18.

E*TRADE Financial Corp scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Graham Number $46.23
PEmg 18.96
PB Ratio 1.84
Dividend Yield 0.00%
TTM Dividend $0.00
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $1,409,000,000
Total Assets $65,003,000,000
Intangible Assets $2,976,000,000
Total Liabilities $58,441,000,000
Shares Outstanding (Diluted Average) 254,239,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.06
Dec2017 $2.15
Dec2016 $1.98
Dec2015 $0.91
Dec2014 $1.00
Dec2013 $0.29
Dec2012 -$0.39
Dec2011 $0.54
Dec2010 -$0.13
Dec2009 -$11.85
Dec2008 -$10.00
Dec2007 -$34.00
Dec2006 $14.40
Dec2005 $11.20
Dec2004 $9.90
Dec2003 $5.50
Dec2002 -$5.20
Dec2001 -$7.30
Sep2000 $0.60
Sep1999 -$2.10
Sep1998 -$0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.51
Dec2017 $1.58
Dec2016 $1.12
Dec2015 $0.61
Dec2014 $0.40
Dec2013 -$0.71
Dec2012 -$2.26
Dec2011 -$5.82
Dec2010 -$8.78
Dec2009 -$10.75
Dec2008 -$7.37
Dec2007 -$3.57
Dec2006 $10.15
Dec2005 $6.29
Dec2004 $2.79
Dec2003 -$1.07
Dec2002 -$3.85

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Disclaimer:

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

Cimarex Energy Co Valuation – January 2019 $XEC

Company Profile (excerpt from Reuters): Cimarex Energy Co., incorporated on February 14, 2002, is an independent oil and gas exploration and production company. The Company operates in exploration and production (E&P) segment. The Company’s operations are located mainly in Oklahoma, Texas and New Mexico. The Company’s E&P activities take place primarily in two areas: the Permian Basin and the Mid-Continent region. Its Permian Basin region encompasses west Texas and southeast New Mexico. Its Mid-Continent region consists of Oklahoma and the Texas Panhandle. As of fiscal year ended December 31, 2016 (fiscal 2016), its activities in the Mid-Continent were focused in the Woodford shale and the Meramec horizon, both in Oklahoma. During fiscal 2016, production from the Mid-Continent averaged 457 millions of cubic feet equivalent (MMcfe) per day, or 47% of total company production.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of XEC – 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 $6,962,019,156 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.69 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -20.71% Fail
6. Moderate PEmg Ratio PEmg < 20 -107.81 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.26 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.56 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 -$0.68
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$9.79
MG Value based on 0% Growth -$5.74
Market Implied Growth Rate -58.16%
Current Price $72.81
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $5.81 in 2014 to an estimated $-0.68 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Cimarex Energy Co revealed the company was trading above its Graham Number of $62.01. The company pays a dividend of $0.32 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was -107.81, which was below the industry average of 41.28, 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 $-14.54.

Cimarex Energy Co 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) -$14.54
Graham Number $62.01
PEmg -107.81
Current Ratio 1.69
PB Ratio 2.26
Current Dividend $0.32
Dividend Yield 0.44%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

 

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,427,715,000
Total Current Liabilities $845,345,000
Long-Term Debt $1,488,147,000
Total Assets $5,818,435,000
Intangible Assets $620,232,000
Total Liabilities $2,792,613,000
Shares Outstanding (Diluted Average) 93,867,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.35
Dec2017 $5.19
Dec2016 -$4.38
Dec2015 -$27.75
Dec2014 $6.00
Dec2013 $6.47
Dec2012 $4.07
Dec2011 $6.15
Dec2010 $6.70
Dec2009 -$3.82
Dec2008 -$11.22
Dec2007 $4.09
Dec2006 $4.11
Dec2005 $4.90
Dec2004 $3.59
Dec2003 $2.22
Dec2002 $1.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.68
Dec2017 -$3.76
Dec2016 -$6.53
Dec2015 -$5.40
Dec2014 $5.81
Dec2013 $5.11
Dec2012 $3.08
Dec2011 $1.85
Dec2010 -$0.21
Dec2009 -$2.57
Dec2008 -$0.93
Dec2007 $4.07
Dec2006 $3.78
Dec2005 $3.21
Dec2004 $2.05
Dec2003 $1.09
Dec2002 $0.44

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Cimarex Energy Co Valuation – Initial Coverage $XEC

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Disclaimer:

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

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