Schlumberger Ltd (SLB) Quarterly Valuation – March 2014

500px-Schlumberger.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  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 Schlumberger Ltd fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Schlumberger Limited (Schlumberger N.V.) is the supplier of technology, integrated project management and information solutions to the international oil and gas exploration and production industry. The Company’s segments include Reservoir Characterization Group, which consists of the principal technologies involved in finding and defining hydrocarbon deposits; Drilling Group, which consists of the principal technologies involved in the drilling and positioning of oil and gas wells, and Production Group consists of the principal technologies involved in the lifetime production of oil and gas reservoirs and includes Well Services, Completions, Artificial Lift, Well Intervention, Subsea, Water Services, Carbon Services and the Schlumberger Production Management field production projects.
SLB Chart

SLB data by YCharts

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

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

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

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

Valuation Summary

Key Data:

MG Value $60.18
MG Opinion Overvalued
Value Based on 3% Growth $59.59
Value Based on 0% Growth $34.93
Market Implied Growth Rate 7.62%
Net Current Asset Value (NCAV) -$1.08
PEmg 23.74
Current Ratio 1.94
PB Ratio 3.23

Balance Sheet – 12/31/2013

Current Assets $26,225,000,000
Current Liabilities $13,525,000,000
Total Debt $10,393,000,000
Total Assets $67,100,000,000
Intangible Assets $19,415,000,000
Total Liabilities $27,631,000,000
Outstanding Shares 1,307,330,000

Earnings Per Share

2013 $5.10
2012 $4.06
2011 $3.51
2010 $3.38
2009 $2.61
2008 $4.42
2007 $4.20
2006 $3.01
2005 $1.81
2004 $0.85
2003 $0.41
2002 $0.42

Earnings Per Share – ModernGraham

2013 $4.11
2012 $3.61
2011 $3.46
2010 $3.47
2009 $3.41
2008 $3.49

Dividend History

SLB Dividend Chart

SLB Dividend data by YCharts

Conclusion:

Schlumberger Ltd passes all of the requirements of the Enterprising Investor, but does not qualify for the Defensive Investor.  The company’s current ratio is too low while the PEmg and PB ratios are too high for the Defensive Investor.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors through a review of 5 Undervalued Companies for the Enterprising Investor while keeping in mind the 7 Key Tips to Value Investing.  From a valuation side of things, the company appears to be overvalued.  The company’s EPSmg (normalized earnings) have grown from $3.41 in 2009 to $4.11 in 2013, a demonstrated level of growth that does not support the market’s implied estimate of 7.62% earnings growth.  The low demonstrated growth leads the ModernGraham valuation model to return an intrinsic value estimate that falls below the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Schlumberger Ltd (SLB)?  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 Schlumberger Ltd (SLB) 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 wikipedia; this article is not affiliated with the company in any manner.

ModernGraham Valuation: Schlumberger Ltd. (SLB)

moneyCompany Profile (obtained from Google Finance): Schlumberger Limited (Schlumberger N.V.) is the supplier of technology, integrated project management and information solutions to the international oil and gas exploration and production industry. The Company’s segments include Reservoir Characterization Group, which consists of the principal technologies involved in finding and defining hydrocarbon deposits; Drilling Group, which consists of the principal technologies involved in the drilling and positioning of oil and gas wells, and Production Group consists of the principal technologies involved in the lifetime production of oil and gas reservoirs and includes Well Services, Completions, Artificial Lift, Well Intervention, Subsea, Water Services, Carbon Services and the Schlumberger Production Management field production projects.

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

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

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

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

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

Valuation Summary (Explanation of the ModernGraham Valuation Model)

Key Data:

MG Value $59.84
MG Opinion Overvalued
Value Based on 3% Growth $59.49
Value Based on 0% Growth $34.87
Market Implied Growth Rate 6.71%
Net Current Asset Value (NCAV) -$1.63
PEmg 21.91
Current Ratio 1.97
PB Ratio 3.13

Balance Sheet – 9/30/2013 

Current Assets $25,093,000,000
Current Liabilities $12,753,000,000
Total Debt $9,916,000,000
Total Assets $65,123,000,000
Intangible Assets $19,355,000,000
Total Liabilities $27,238,000,000
Outstanding Shares 1,316,950,000

Earnings Per Share

2013 (estimate) $5.08
2012 $4.06
2011 $3.51
2010 $3.38
2009 $2.61
2008 $4.42
2007 $4.20
2006 $3.01
2005 $1.81
2004 $0.85
2003 $0.41
2002 $0.42

Earnings Per Share – ModernGraham 

2013 (estimate) $4.10
2012 $3.61
2011 $3.46
2010 $3.47
2009 $3.41
2008 $3.49

Conclusion:

Schlumberger Ltd. has achieved moderate growth and may be suitable for the Enterprising Investor.  For the Defensive Investor, the company fails to qualify due to a current ratio that is not quite strong enough and because it is trading at high PEmg and PB ratios.  However, the company passes all of the requirements of the Enterprising Investor, and investors following that strategy should feel comfortable proceeding with further research beginning with a review of other Enterprising Investor companies.  From a valuation perspective, the company has grown EPSmg (normalized earnings) from $3.49 in 2008 to an estimated $4.10 for 2013.  The market is currently implying a growth rate of 6.71%, a rate that is higher than the historical growth can support.  As a result, the company would appear to be overvalued at the current time.

What do you think?  Do you agree that Schlumberger Ltd. is overvalued?  What would be your assessment?  Is the company only suitable for Enterprising Investors?  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 Schlumberger Ltd. (SLB) at the time of publication and had no intention of entering into a position within the next 72 hours.

Photo Credit:  Andrew Magill

Chevron Corp Valuation – April 2019 #CVX

Company Profile (excerpt from Reuters): Chevron Corporation (Chevron), incorporated on January 27, 1926, manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to the United States and international subsidiaries that engage in integrated energy and chemicals operations. The Company operates through two business segments: Upstream and Downstream. Upstream operations consist primarily of exploring for, developing and producing crude oil and natural gas; liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transporting crude oil by international oil export pipelines; processing, transporting, storage and marketing of natural gas, and a gas-to-liquids plant. Downstream operations consist primarily of refining of crude oil into petroleum products; marketing of crude oil and refined products; transporting of crude oil and refined products by pipeline, marine vessel, motor equipment and rail car, and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CVX – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $240,205,960,980 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.25 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 -49.28% Fail
6. Moderate PEmg Ratio PEmg < 20 24.83 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.55 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 1.25 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.19 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 $5.09
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $73.82
MG Value based on 0% Growth $43.28
Market Implied Growth Rate 8.17%
Current Price $126.42
% of Intrinsic Value N/A

Chevron Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg 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 $8.41 in 2015 to an estimated $5.09 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.17% 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 Chevron Corporation revealed the company was trading above its Graham Number of $102.65. The company pays a dividend of $4.48 per share, for a yield of 3.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.83, which was below the industry average of 52.47, 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 $-33.68.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$33.68
Graham Number $102.65
PEmg 24.83
Current Ratio 1.25
PB Ratio 1.55
Current Dividend $4.48
Dividend Yield 3.54%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $34,021,000,000
Total Current Liabilities $27,171,000,000
Long-Term Debt $28,733,000,000
Total Assets $253,863,000,000
Intangible Assets $4,518,000,000
Total Liabilities $98,221,000,000
Shares Outstanding (Diluted Average) 1,906,314,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.79
Dec2018 $7.74
Dec2017 $4.85
Dec2016 -$0.27
Dec2015 $2.45
Dec2014 $10.14
Dec2013 $11.09
Dec2012 $13.32
Dec2011 $13.44
Dec2010 $9.48
Dec2009 $5.24
Dec2008 $11.67
Dec2007 $8.77
Dec2006 $7.80
Dec2005 $6.54
Dec2004 $6.28
Dec2003 $3.48
Dec2002 $0.53
Dec2001 $1.55
Dec2000 $3.99
Dec1999 $1.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.09
Dec2018 $4.82
Dec2017 $4.13
Dec2016 $4.96
Dec2015 $8.41
Dec2014 $11.43
Dec2013 $11.55
Dec2012 $11.40
Dec2011 $10.20
Dec2010 $8.58
Dec2009 $8.09
Dec2008 $9.08
Dec2007 $7.38
Dec2006 $6.10
Dec2005 $4.72
Dec2004 $3.60
Dec2003 $2.25

Recommended Reading:

Other ModernGraham posts about the company

5 Overvalued Dow Components – April 2019
5 Overvalued Dow Components – January 2019
Chevron Corp Valuation – November 2018 $CVX
5 Overvalued Dow Components – June 2018
5 Overvalued Dow Components – February 2018

Other ModernGraham posts about related companies

Pioneer Natural Resources Co Valuation – April 2019 #PXD
Schlumberger NV Valuation – March 2019 #SLB
Anadarko Petroleum Corp Valuation – March 2019 #APC
Apache Corp Valuation – March 2019 #APA
Cabot Oil & Gas Corp Valuation – March 2019 #COG
Concho Resources Inc Valuation – March 2019 #CXO
Valero Energy Corp Valuation – March 2019 #VLO
Occidental Petroleum Corp Valuation – March 2019 #OXY
Phillips 66 Valuation – March 2019 #PSX
Halliburton Co Valuation – March 2019 #HAL

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.

Pioneer Natural Resources Co Valuation – April 2019 #PXD

Company Profile (excerpt from Reuters): Pioneer Natural Resources Company (Pioneer), incorporated on April 2, 1997, is an oil and gas exploration and production company. The Company explores for, develops and produces oil, natural gas liquids (NGLs) and gas within the United States, with operations primarily in the Permian Basin in West Texas, the Eagle Ford Shale play in South Texas, the Raton field in southeast Colorado and the West Panhandle field in the Texas Panhandle. The Company’s operations include well stimulation and completion activities, such as hydraulic fracturing, and water distribution and disposal activities. As of December 31, 2016, the Company owned interests in eight gas processing plants and nine treating facilities.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PXD – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,703,246,605 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.42 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 10.03% Fail
6. Moderate PEmg Ratio PEmg < 20 43.92 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.07 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 1.42 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.00 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.34
MG Growth Estimate 15.00%
MG Value $128.69
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $48.47
MG Value based on 0% Growth $28.41
Market Implied Growth Rate 17.71%
Current Price $146.81
% of Intrinsic Value 114.08%

Pioneer Natural Resources 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 ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.52 in 2015 to an estimated $3.34 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.71% 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 Pioneer Natural Resources revealed the company was trading above its Graham Number of $82.52. The company pays a dividend of $0.32 per share, for a yield of 0.2% Its PEmg (price over earnings per share – ModernGraham) was 43.92, which was below the industry average of 52.47, 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 $-18.78.

Pioneer Natural Resources 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) -$18.78
Graham Number $82.52
PEmg 43.92
Current Ratio 1.42
PB Ratio 2.07
Current Dividend $0.32
Dividend Yield 0.22%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,580,000,000
Total Current Liabilities $1,818,000,000
Long-Term Debt $2,284,000,000
Total Assets $17,903,000,000
Intangible Assets $407,000,000
Total Liabilities $5,792,000,000
Shares Outstanding (Diluted Average) 171,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.26
Dec2018 $5.70
Dec2017 $4.85
Dec2016 -$3.34
Dec2015 -$1.83
Dec2014 $6.38
Dec2013 -$6.16
Dec2012 $1.50
Dec2011 $6.88
Dec2010 $5.08
Dec2009 -$0.46
Dec2008 $1.76
Dec2007 $3.06
Dec2006 $5.81
Dec2005 $3.80
Dec2004 $2.46
Dec2003 $3.46
Dec2002 $0.23
Dec2001 $1.00
Dec2000 $1.53
Dec1999 -$0.22

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.34
Dec2018 $2.71
Dec2017 $0.80
Dec2016 -$1.05
Dec2015 $0.52
Dec2014 $2.04
Dec2013 $0.37
Dec2012 $3.41
Dec2011 $3.99
Dec2010 $2.72
Dec2009 $1.96
Dec2008 $3.24
Dec2007 $3.89
Dec2006 $3.92
Dec2005 $2.71
Dec2004 $2.02
Dec2003 $1.60

Recommended Reading:

Other ModernGraham posts about the company

Pioneer Natural Resources Co Valuation – June 2018 $PXD
Pioneer Natural Resources Valuation – September 2017 $PXD
Pioneer Natural Resources Valuation – June 2016 $PXD
Pioneer Natural Resources Annual Valuation – 2015 $PXD

Other ModernGraham posts about related companies

Schlumberger NV Valuation – March 2019 #SLB
Anadarko Petroleum Corp Valuation – March 2019 #APC
Apache Corp Valuation – March 2019 #APA
Cabot Oil & Gas Corp Valuation – March 2019 #COG
Concho Resources Inc Valuation – March 2019 #CXO
Valero Energy Corp Valuation – March 2019 #VLO
Occidental Petroleum Corp Valuation – March 2019 #OXY
Phillips 66 Valuation – March 2019 #PSX
Halliburton Co Valuation – March 2019 #HAL
Kinder Morgan Inc Valuation – February 2019 $KMI

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.

WPX Energy Inc Valuation – July 2018 $WPX

Company Profile (excerpt from Reuters): WPX Energy, Inc., incorporated on April 19, 2011, is an independent oil and natural gas exploration and production company. The Company is engaged in the exploitation and development of long-life unconventional properties. It operates in the exploration and production segment of the oil and gas industry and its operations are conducted in the United States. It is focused on exploiting, developing and growing its oil positions in the Delaware (a subset of the Permian Basin) and San Juan Basins in the southwestern United States and the Williston Basin in North Dakota. As of December 31, 2016, it operated 642 wells in the Delaware Basin and also owned interests in 783 wells operated by others. As of December 31, 2016, it held approximately 98,000 net acres in the Delaware Basin, with operations located in Eddy, Lea and Chaves Counties in New Mexico and Loving, Pecos, Reeves, Ward and Winkler Counties in Texas.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WPX – July 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,213,143,954 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.26 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -71.41% Fail
6. Moderate PEmg Ratio PEmg < 20 -12.63 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.79 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 1.26 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 10.92 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg -$1.43
MG Growth Estimate 5.15%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$20.70
MG Value based on 0% Growth -$12.13
Market Implied Growth Rate -10.57%
Current Price $18.03
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-2.17 in 2014 to an estimated $-1.43 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 WPX Energy Inc revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -12.63, which was below the industry average of 49.12, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.43.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.43
Graham Number $0.00
PEmg -12.63
Current Ratio 1.26
PB Ratio 1.79
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,161,000,000
Total Current Liabilities $925,000,000
Long-Term Debt $2,576,000,000
Total Assets $8,127,000,000
Intangible Assets $0
Total Liabilities $4,121,000,000
Shares Outstanding (Diluted Average) 398,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.18
Dec2017 -$0.08
Dec2016 -$2.05
Dec2015 -$7.42
Dec2014 $0.80
Dec2013 -$5.91
Dec2012 -$1.12
Dec2011 -$1.53
Dec2010 -$6.55

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.43
Dec2017 -$2.34
Dec2016 -$3.36
Dec2015 -$3.69
Dec2014 -$2.17
Dec2013 -$3.45
Dec2012 -$2.09
Dec2011 -$2.26
Dec2010 -$2.18

Recommended Reading:

Other ModernGraham posts about the company

WPX Energy Inc Valuation – September 2016 $WPX
WPX Energy Inc. Analysis – 2015 Update $WPX
19 Companies in the Spotlight This Week – 7/26/14
WPX Energy Inc. Annual Valuation – 2014 $WPX

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Noble Corp PLC Valuation – June 2018 $NE
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Diamond Offshore Drilling Inc Valuation – June 2018 $DO
Transocean Ltd Valuation – June 2018 $RIG
Nabors Industries Ltd Valuation – June 2018 $NBR
QEP Resources Inc Valuation – June 2018 $QEP
Pioneer Natural Resources Co Valuation – June 2018 $PXD
Schlumberger Ltd Valuation – June 2018 $SLB
Anadarko Petroleum Corp Valuation – June 2018 $APC
Apache Corp Valuation – June 2018 $APA

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.

Magellan Midstream Partners LP Valuation – July 2018 $MMP

Company Profile (excerpt from Reuters): Magellan Midstream Partners, L.P., incorporated on August 30, 2000, is principally engaged in the transportation, storage and distribution of refined petroleum products and crude oil. The Company operates through three segments: refined products, crude oil and marine storage. As of December 31, 2016, its asset portfolio, including the assets of its joint ventures, consisted of its refined products segment, consisting 9,700-mile refined products pipeline system with 53 terminals, as well as 26 independent terminals not connected to its pipeline system and its 1,100-mile ammonia pipeline system; its crude oil segment, consisted of approximately 2,200 miles of crude oil pipelines and storage facilities with an aggregate storage capacity of approximately 26 million barrels, of which 16 million are used for contract storage, and its marine storage segment, consisted of five marine terminals located along coastal waterways with an aggregate storage capacity of approximately 26 million barrels.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MMP – July 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,772,946,945 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.63 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 157.11% Pass
6. Moderate PEmg Ratio PEmg < 20 18.48 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.37 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 0.63 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -14.47 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 $3.74
MG Growth Estimate 6.28%
MG Value $78.69
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $54.20
MG Value based on 0% Growth $31.77
Market Implied Growth Rate 4.99%
Current Price $69.08
% of Intrinsic Value 87.78%

Magellan Midstream Partners, L.P. 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 PB 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.64 in 2014 to an estimated $3.74 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 4.99% 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 Magellan Midstream Partners, L.P. revealed the company was trading above its Graham Number of $28.55. The company pays a dividend of $3.52 per share, for a yield of 5.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.48, which was below the industry average of 49.12, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.77.

Magellan Midstream Partners, L.P. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$20.77
Graham Number $28.55
PEmg 18.48
Current Ratio 0.63
PB Ratio 7.37
Current Dividend $3.52
Dividend Yield 5.10%
Number of Consecutive Years of Dividend Growth 18

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $493,192,000
Total Current Liabilities $788,540,000
Long-Term Debt $4,272,747,000
Total Assets $7,376,049,000
Intangible Assets $105,823,000
Total Liabilities $5,236,862,000
Shares Outstanding (Diluted Average) 228,360,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.88
Dec2017 $3.81
Dec2016 $3.52
Dec2015 $3.59
Dec2014 $3.69
Dec2013 $2.56
Dec2012 $1.92
Dec2011 $1.83
Dec2010 $1.42
Dec2009 $1.11
Dec2008 $0.70
Dec2007 $0.49
Dec2006 $1.12
Dec2005 $1.02
Dec2004 $0.86
Dec2003 $1.02
Dec2002 $0.92
Dec2001 $0.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.74
Dec2017 $3.59
Dec2016 $3.34
Dec2015 $3.07
Dec2014 $2.64
Dec2013 $1.99
Dec2012 $1.61
Dec2011 $1.34
Dec2010 $1.05
Dec2009 $0.87
Dec2008 $0.78
Dec2007 $0.85
Dec2006 $1.01
Dec2005 $0.92
Dec2004 $0.80
Dec2003 $0.68
Dec2002 $0.43

Recommended Reading:

Other ModernGraham posts about the company

Magellan Midstream Partners LP Valuation – August 2016 $MMP
Magellan Midstream Partners LP Analysis – Initial Coverage $MMP

Other ModernGraham posts about related companies

Noble Corp PLC Valuation – June 2018 $NE
Rowan Companies PLC Valuation – June 2018 $RDC
Diamond Offshore Drilling Inc Valuation – June 2018 $DO
Transocean Ltd Valuation – June 2018 $RIG
Nabors Industries Ltd Valuation – June 2018 $NBR
QEP Resources Inc Valuation – June 2018 $QEP
Pioneer Natural Resources Co Valuation – June 2018 $PXD
Schlumberger Ltd Valuation – June 2018 $SLB
Anadarko Petroleum Corp Valuation – June 2018 $APC
Apache Corp Valuation – June 2018 $APA

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.

Ensco PLC Valuation – July 2018 $ESV

Company Profile (excerpt from Reuters): Ensco plc, incorporated on September 18, 2009, is an offshore contract drilling company. The Company provides offshore contract drilling services to the international oil and gas industry. The Company operates through three segments: Floaters, Jackups and Other. Its Floaters segment includes the Company’s drillships and semisubmersible rigs. The Other segment consists of management services on rigs owned by third parties. The Floaters and the Jackups segments provide contract drilling. It owned and operated an offshore drilling rig fleet of 57 rigs, including two rigs under construction, with drilling operations in markets around the world, as of December 31, 2016.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ESV – July 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,102,978,475 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.75 Pass
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 -94.06% Fail
6. Moderate PEmg Ratio PEmg < 20 -3.38 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.37 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.75 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.96 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg -$2.15
MG Growth Estimate 1.10%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$31.17
MG Value based on 0% Growth -$18.27
Market Implied Growth Rate -5.94%
Current Price $7.26
% of Intrinsic Value N/A

ENSCO PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg 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 over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-2.32 in 2014 to an estimated $-2.15 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 ENSCO PLC revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.04 per share, for a yield of 0.6% Its PEmg (price over earnings per share – ModernGraham) was -3.38, which was below the industry average of 49.12, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.06.

ENSCO PLC 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) -$10.06
Graham Number $0.00
PEmg -3.38
Current Ratio 2.75
PB Ratio 0.37
Current Dividend $0.04
Dividend Yield 0.55%
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 3/1/2018
Total Current Assets $1,578,700,000
Total Current Liabilities $573,300,000
Long-Term Debt $4,987,300,000
Total Assets $14,533,700,000
Intangible Assets $14,200,000
Total Liabilities $5,942,600,000
Shares Outstanding (Diluted Average) 433,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.47
Dec2017 -$0.91
Dec2016 $3.13
Dec2015 -$6.88
Dec2014 -$16.88
Dec2013 $6.07
Dec2012 $5.04
Dec2011 $3.08
Dec2010 $4.06
Dec2009 $5.48
Dec2008 $8.02
Dec2007 $6.73
Dec2006 $5.04
Dec2005 $1.87
Dec2004 $0.62
Dec2003 $0.66
Dec2002 $0.33
Dec2001 $1.50
Dec2000 $0.61
Dec1999 $0.00
Dec1998 $1.81

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.15
Dec2017 -$2.69
Dec2016 -$3.02
Dec2015 -$4.70
Dec2014 -$2.32
Dec2013 $4.89
Dec2012 $4.58
Dec2011 $4.72
Dec2010 $5.65
Dec2009 $6.11
Dec2008 $5.77
Dec2007 $4.09
Dec2006 $2.41
Dec2005 $1.06
Dec2004 $0.69
Dec2003 $0.69
Dec2002 $0.75

Recommended Reading:

Other ModernGraham posts about the company

Ensco PLC Valuation – August 2016 $ESV
Ensco plc Analysis – 2015 Update $ESV
19 Companies in the Spotlight This Week – 7/26/14
Ensco plc Annual Valuation – 2014 $ESV
5 Companies to Research with the Lowest PEmg Ratios for Defensive Investors – June 2014

Other ModernGraham posts about related companies

Noble Corp PLC Valuation – June 2018 $NE
Rowan Companies PLC Valuation – June 2018 $RDC
Diamond Offshore Drilling Inc Valuation – June 2018 $DO
Transocean Ltd Valuation – June 2018 $RIG
Nabors Industries Ltd Valuation – June 2018 $NBR
QEP Resources Inc Valuation – June 2018 $QEP
Pioneer Natural Resources Co Valuation – June 2018 $PXD
Schlumberger Ltd Valuation – June 2018 $SLB
Anadarko Petroleum Corp Valuation – June 2018 $APC
Apache Corp Valuation – June 2018 $APA

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.

Enterprise Products Partners LP Valuation – July 2018 $EPD

Company Profile (excerpt from Reuters): Enterprise Products Partners L.P. (Enterprise), incorporated on April 9, 1998, is a provider of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals and refined products in North America. The Company’s segments include NGL Pipelines & Services; Crude Oil Pipelines & Services; Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services. The Company owns and operates certain NGLs related businesses of Enterprise Products Company (EPCO). The Company’s midstream energy operations include natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage, and import and export terminals, including liquefied petroleum gas (LPG); crude oil gathering, transportation, storage and terminals; petrochemical and refined products transportation, storage, export and import terminals, and related services, and a marine transportation business that operates primarily on the United States inland and Intracoastal Waterway systems.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EPD – July 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $60,574,911,153 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.77 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 75.66% Pass
6. Moderate PEmg Ratio PEmg < 20 20.61 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.62 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 0.77 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.24 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.34
MG Growth Estimate 0.11%
MG Value $11.70
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $19.47
MG Value based on 0% Growth $11.41
Market Implied Growth Rate 6.05%
Current Price $27.67
% of Intrinsic Value 236.40%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.33 in 2014 to an estimated $1.34 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.05% 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 Enterprise Products Partners L.P. revealed the company was trading above its Graham Number of $18.58. The company pays a dividend of $1.67 per share, for a yield of 6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.61, which was below the industry average of 49.12, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.82.

Enterprise Products Partners L.P. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.82
Graham Number $18.58
PEmg 20.61
Current Ratio 0.77
PB Ratio 2.62
Current Dividend $1.67
Dividend Yield 6.03%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $6,791,000,000
Total Current Liabilities $8,839,600,000
Long-Term Debt $23,016,400,000
Total Assets $55,482,300,000
Intangible Assets $9,481,600,000
Total Liabilities $32,517,400,000
Shares Outstanding (Diluted Average) 2,177,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.47
Dec2017 $1.30
Dec2016 $1.20
Dec2015 $1.26
Dec2014 $1.47
Dec2013 $1.41
Dec2012 $1.35
Dec2011 $1.19
Dec2010 $0.58
Dec2009 $0.50
Dec2008 $0.92
Dec2007 $0.48
Dec2006 $0.61
Dec2005 $0.46
Dec2004 $0.44
Dec2003 $0.21
Dec2002 $0.24
Dec2001 $0.70
Dec2000 $0.66
Dec1999 $0.41
Dec1998 $0.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.34
Dec2017 $1.30
Dec2016 $1.31
Dec2015 $1.35
Dec2014 $1.33
Dec2013 $1.18
Dec2012 $1.01
Dec2011 $0.80
Dec2010 $0.61
Dec2009 $0.62
Dec2008 $0.65
Dec2007 $0.49
Dec2006 $0.46
Dec2005 $0.39
Dec2004 $0.38
Dec2003 $0.39
Dec2002 $0.46

Recommended Reading:

Other ModernGraham posts about the company

Enterprise Products Partners LP Valuation – August 2016 $EPD
Enterprise Products Partners LP Analysis – Initial Coverage $EPD

Other ModernGraham posts about related companies

Noble Corp PLC Valuation – June 2018 $NE
Rowan Companies PLC Valuation – June 2018 $RDC
Diamond Offshore Drilling Inc Valuation – June 2018 $DO
Transocean Ltd Valuation – June 2018 $RIG
Nabors Industries Ltd Valuation – June 2018 $NBR
QEP Resources Inc Valuation – June 2018 $QEP
Pioneer Natural Resources Co Valuation – June 2018 $PXD
Schlumberger Ltd Valuation – June 2018 $SLB
Anadarko Petroleum Corp Valuation – June 2018 $APC
Apache Corp Valuation – June 2018 $APA

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.

Marathon Oil Corp Valuation – March 2018 $MRO

Company Profile (excerpt from Reuters): Marathon Oil Corporation, incorporated on May 30, 2001, is an exploration and production (E&P) company. The Company operates through three segments: North America E&P, International E&P and Oil Sands Mining. The North America E&P segment explores for, produces and markets crude oil and condensate, natural gas liquids (NGLs) and natural gas in North America. The International E&P segment explores for, produces and markets crude oil and condensate, NGLs and natural gas outside of North America, and produces and markets products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol, in Equatorial Guinea (E.G.). The Oil Sands Mining segment mines, extracts and transports bitumen from oil sands deposits in Alberta, Canada, and upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil.

MRO Chart

MRO data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MRO – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,824,028,886 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 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 -195.31% Fail
6. Moderate PEmg Ratio PEmg < 20 -6.63 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.18 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 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.19 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 -$2.45
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$35.58
MG Value based on 0% Growth -$20.86
Market Implied Growth Rate -7.56%
Current Price $16.27
% of Intrinsic Value N/A

Marathon Oil does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 $3.38 in 2014 to an estimated $-2.45 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 Marathon Oil revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.2 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was -6.63, which was below the industry average of 104.43, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.1.

Marathon Oil 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) -$9.10
Graham Number $0.00
PEmg -6.63
Current Ratio 1.30
PB Ratio 1.18
Current Dividend $0.20
Dividend Yield 1.23%
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 12/1/2017
Total Current Assets $2,566,000,000
Total Current Liabilities $1,968,000,000
Long-Term Debt $5,494,000,000
Total Assets $22,012,000,000
Intangible Assets $115,000,000
Total Liabilities $10,304,000,000
Shares Outstanding (Diluted Average) 850,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.00
Dec2017 -$6.73
Dec2016 -$2.61
Dec2015 -$3.26
Dec2014 $4.46
Dec2013 $2.47
Dec2012 $2.23
Dec2011 $4.13
Dec2010 $3.61
Dec2009 $2.06
Dec2008 $4.95
Dec2007 $5.69
Dec2006 $7.25
Dec2005 $4.22
Dec2004 $1.86
Dec2003 $2.13
Dec2002 $0.83
Dec2001 $0.53
Dec2000 $0.68
Dec1999 $0.87
Dec1998 $0.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.45
Dec2017 -$2.83
Dec2016 -$0.37
Dec2015 $1.17
Dec2014 $3.38
Dec2013 $2.86
Dec2012 $3.17
Dec2011 $3.79
Dec2010 $3.98
Dec2009 $4.39
Dec2008 $5.30
Dec2007 $5.06
Dec2006 $4.25
Dec2005 $2.47
Dec2004 $1.47
Dec2003 $1.18
Dec2002 $0.72

Recommended Reading:

Other ModernGraham posts about the company

18 Companies in the Spotlight This Week – 3/21/15
Marathon Oil Corporation Annual Valuation – 2015 $MRO
19 Companies in the Spotlight This Week – 3/15/14
Marathon Oil Corp (MRO) Annual Valuation

Other ModernGraham posts about related companies

EQT Corporation Valuation – March 2018 $EQT
Helmerich & Payne Inc Valuation – March 2018 $HP
Chesapeake Energy Corp Valuation – March 2018 $CHK
Williams Companies Inc Valuation – March 2018 $WMB
Exxon Mobil Corp Valuation – February 2018 $XOM
Chevron Corp Valuation – February 2018 $CVX
Seven Generations Energy Ltd Valuation – Initial Coverage $TSE:VII
Pioneer Natural Resources Valuation – September 2017 $PXD
Gulfport Energy Corp Valuation – Initial Coverage $GPOR
Schlumberger Limited Valuation – July 2017 $SLB

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.

Hess Corp Valuation – March 2018 $HES

Company Profile (excerpt from Reuters): Hess Corporation, incorporated on February 7, 1920, is an exploration and production company. The Company is engaged in exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids (NGL) and natural gas. The Company’s segments include Exploration and Production, and Bakken Midstream. Its Exploration and Production segment explores for, develops, produces, purchases and sells crude oil, NGLs and natural gas with production operations primarily in the United States, Denmark, the Malaysia/Thailand Joint Development Area (JDA), Malaysia and Norway. The Bakken Midstream segment provides fee-based services, including crude oil and natural gas gathering, processing of natural gas and the fractionation of NGLs, transportation of crude oil by rail car, terminaling and loading crude oil and NGLs, and the storage and terminaling of propane, primarily in the Bakken shale play of North Dakota.

HES Chart

HES data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HES – March 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,582,549,729 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.53 Pass
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 -364.15% Fail
6. Moderate PEmg Ratio PEmg < 20 -5.20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.40 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.53 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.72 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 -$9.51
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$137.91
MG Value based on 0% Growth -$80.85
Market Implied Growth Rate -6.85%
Current Price $49.46
% of Intrinsic Value N/A

Hess 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 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 $8.75 in 2014 to an estimated $-9.51 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 Hess Corp. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was -5.2, which was below the industry average of 104.43, 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 $-18.83.

Hess Corp. 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) -$18.83
Graham Number $0.00
PEmg -5.20
Current Ratio 2.53
PB Ratio 1.40
Current Dividend $1.00
Dividend Yield 2.02%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $6,157,000,000
Total Current Liabilities $2,435,000,000
Long-Term Debt $6,397,000,000
Total Assets $23,112,000,000
Intangible Assets $360,000,000
Total Liabilities $12,061,000,000
Shares Outstanding (Diluted Average) 313,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$3.28
Dec2017 -$13.12
Dec2016 -$19.92
Dec2015 -$10.78
Dec2014 $7.53
Dec2013 $14.82
Dec2012 $5.95
Dec2011 $5.01
Dec2010 $6.47
Dec2009 $2.27
Dec2008 $7.24
Dec2007 $5.74
Dec2006 $6.08
Dec2005 $3.93
Dec2004 $3.19
Dec2003 $2.37
Dec2002 -$0.83
Dec2001 $3.42
Dec2000 $3.79
Dec1999 $1.62
Dec1998 -$1.71

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$9.51
Dec2017 -$9.85
Dec2016 -$5.64
Dec2015 $2.51
Dec2014 $8.75
Dec2013 $8.54
Dec2012 $5.40
Dec2011 $5.20
Dec2010 $5.38
Dec2009 $4.91
Dec2008 $5.90
Dec2007 $4.90
Dec2006 $3.97
Dec2005 $2.75
Dec2004 $2.24
Dec2003 $1.87
Dec2002 $1.50

Recommended Reading:

Other ModernGraham posts about the company

47 Companies in the Spotlight This Week – 5/16/15
Hess Corporation Annual Valuation – 2015 $HES
10 Companies Benjamin Graham Would Invest In Today – May 2015
5 Most Undervalued Companies for the Defensive Investor – April 2015
5 Companies to Research with the Lowest PEmg Ratio for the Defensive Investor – March 2015

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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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