Synchrony Financial Valuation – March 2019 #SYF

Company Profile (excerpt from Reuters): Synchrony Financial (Synchrony), incorporated on September 12, 2003, is a consumer financial services company. The Company provides a range of credit products through programs it has established with a group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers. The Company’s revenue activities are managed through three sales platforms: Retail Card, Payment Solutions and CareCredit. It offers its credit products through its subsidiary, Synchrony Bank (the Bank). Through the Bank, it offers a range of deposit products insured by the Federal Deposit Insurance Corporation (FDIC), including certificates of deposit, individual retirement accounts (IRAs), money market accounts and savings accounts.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SYF – 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 $23,645,504,194 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 347.91% Pass
5. Moderate PEmg Ratio PEmg < 20 9.91 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.64 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 $3.36
MG Growth Estimate 7.74%
MG Value $80.62
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $48.76
MG Value based on 0% Growth $28.58
Market Implied Growth Rate 0.70%
Current Price $33.31
% of Intrinsic Value 41.32%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.22 in 2015 to an estimated $3.36 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.7% 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 Synchrony Financial revealed the company was trading below its Graham Number of $43.03. The company pays a dividend of $0.72 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.91, 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.

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

Stage 3: Information for Further Research

Graham Number $43.03
PEmg 9.91
PB Ratio 1.64
Dividend Yield 2.16%
TTM Dividend $0.72
Number of Consecutive Years of Dividend Growth 3

Useful Links:

ModernGraham tagged articles Morningstar
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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $23,996,000,000
Total Assets $106,792,000,000
Intangible Assets $2,161,000,000
Total Liabilities $92,114,000,000
Shares Outstanding (Diluted Average) 720,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.03
Dec2018 $3.74
Dec2017 $2.42
Dec2016 $2.71
Dec2015 $2.65
Dec2014 $2.78
Dec2013 $2.21
Dec2012 $0.00
Dec2011 $2.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.36
Dec2018 $2.97
Dec2017 $2.58
Dec2016 $2.46
Dec2015 $2.22
Dec2014 $1.82
Dec2013 $1.19
Dec2012 $0.61
Dec2011 $0.76

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Stocks for the Enterprising Investor – January 2019
Most Undervalued Stocks of the S&P 500 – August 2018
10 Undervalued Stocks for the Enterprising Investor – August 2018
10 Undervalued Stocks for the Enterprising Investor – July 2018
Synchrony Financial Valuation – June 2018 $SYF

Other ModernGraham posts about related companies

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Franklin Resources Inc Valuation – March 2019 #BEN
S&P Global Inc Valuation – March 2019 #SPGI
Equifax Inc Valuation – March 2019 #EFX
CME Group Inc Valuation – March 2019 #CME
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

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.

CBRE Group Inc Valuation – March 2019 #CBRE

Company Profile (excerpt from Reuters): CBRE Group, Inc., incorporated on February 20, 2001, is a holding company that conducts all of its operations through its subsidiaries. The Company operates as a commercial real estate services and investment company. The Company operates through the segments: The Americas; Europe, Middle East and Africa (EMEA); Asia Pacific; Global Investment Management, and Development Services. The Company provides services in the office, retail, industrial, multifamily and hotel sectors of commercial real estate.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CBRE – 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 $16,848,841,335 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.16 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 270.51% Pass
6. Moderate PEmg Ratio PEmg < 20 18.28 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.43 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 1.16 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.86 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.74
MG Growth Estimate 15.00%
MG Value $105.64
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $39.79
MG Value based on 0% Growth $23.32
Market Implied Growth Rate 4.89%
Current Price $50.16
% of Intrinsic Value 47.48%

CBRE 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, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.3 in 2015 to an estimated $2.74 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.89% 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 CBRE Group Inc revealed the company was trading above its Graham Number of $33.87. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 18.28, 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. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.94.

CBRE 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) -$4.94
Graham Number $33.87
PEmg 18.28
Current Ratio 1.16
PB Ratio 3.43
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,754,210,000
Total Current Liabilities $5,803,380,000
Long-Term Debt $1,767,260,000
Total Assets $13,456,793,000
Intangible Assets $5,093,617,000
Total Liabilities $8,446,891,000
Shares Outstanding (Diluted Average) 342,689,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.52
Dec2018 $3.10
Dec2017 $2.05
Dec2016 $1.69
Dec2015 $1.63
Dec2014 $1.45
Dec2013 $0.95
Dec2012 $0.97
Dec2011 $0.74
Dec2010 $0.63
Dec2009 $0.12
Dec2008 -$4.81
Dec2007 $1.66
Dec2006 $1.35
Dec2005 $0.95
Dec2004 $0.30
Dec2003 -$0.23
Dec2002 $0.15
Dec2001 $0.73

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.74
Dec2018 $2.23
Dec2017 $1.72
Dec2016 $1.48
Dec2015 $1.30
Dec2014 $1.07
Dec2013 $0.82
Dec2012 $0.34
Dec2011 -$0.09
Dec2010 -$0.41
Dec2009 -$0.67
Dec2008 -$0.74
Dec2007 $1.13
Dec2006 $0.74
Dec2005 $0.42
Dec2004 $0.17
Dec2003 $0.11

Recommended Reading:

Other ModernGraham posts about the company

CBRE Group Inc Valuation – June 2018 $CBRE

Other ModernGraham posts about related companies

Franklin Resources Inc Valuation – March 2019 #BEN
S&P Global Inc Valuation – March 2019 #SPGI
Equifax Inc Valuation – March 2019 #EFX
CME Group Inc Valuation – March 2019 #CME
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

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.

Franklin Resources Inc Valuation – March 2019 #BEN

Company Profile (excerpt from Reuters): Franklin Resources, Inc., incorporated on November 28, 1969, is a holding company. The Company, along with its subsidiaries, operates as Franklin Templeton Investments. The Company is a global investment management company that provides investment management and related services to retail, institutional and high net-worth clients in jurisdictions around the world. The Company offers its investment products and services under the Franklin, Templeton, Franklin Mutual Series, Franklin Bissett, Fiduciary Trust, Darby, Balanced Equity Management, K2 and LibertyShares brand names. The Company’s products include investment funds and institutional, high net-worth and separately managed accounts (collectively, sponsored investment products (SIPs)). The Company offers various types of SIPs, such as the United States funds, cross-border funds, local/regional funds, and other managed accounts, alternative investment products and trusts.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BEN – 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 $16,503,028,589 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.25 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -17.09% Fail
6. Moderate PEmg Ratio PEmg < 20 13.97 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.64 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 5.25 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.12 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.32
MG Growth Estimate -4.25%
MG Value $7.03
Opinion Overvalued
MG Grade B+
MG Value based on 3% Growth $33.60
MG Value based on 0% Growth $19.70
Market Implied Growth Rate 2.73%
Current Price $32.37
% of Intrinsic Value 460.50%

Franklin Resources, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the insufficient earnings growth over the last ten years. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. 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 Overvalued after seeing its EPSmg (normalized earnings) decline from $3.37 in 2015 to an estimated $2.32 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.73% 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 Franklin Resources, Inc. revealed the company was trading above its Graham Number of $30.72. The company pays a dividend of $0.92 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.97, 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. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.03.

Franklin Resources, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.03
Graham Number $30.72
PEmg 13.97
Current Ratio 5.25
PB Ratio 1.64
Current Dividend $0.92
Dividend Yield 2.84%
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 $7,464,500,000
Total Current Liabilities $1,420,500,000
Long-Term Debt $730,400,000
Total Assets $13,950,600,000
Intangible Assets $2,326,200,000
Total Liabilities $3,873,900,000
Shares Outstanding (Diluted Average) 510,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.20
Sep2018 $1.39
Sep2017 $3.01
Sep2016 $2.94
Sep2015 $3.29
Sep2014 $3.79
Sep2013 $3.37
Sep2012 $2.98
Sep2011 $2.87
Sep2010 $2.11
Sep2009 $1.28
Sep2008 $2.22
Sep2007 $2.34
Sep2006 $1.62
Sep2005 $1.35
Sep2004 $0.92
Sep2003 $0.66
Sep2002 $0.55
Sep2001 $0.64
Sep2000 $0.76
Sep1999 $0.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.32
Sep2018 $2.55
Sep2017 $3.18
Sep2016 $3.26
Sep2015 $3.37
Sep2014 $3.28
Sep2013 $2.86
Sep2012 $2.50
Sep2011 $2.23
Sep2010 $1.91
Sep2009 $1.80
Sep2008 $1.93
Sep2007 $1.65
Sep2006 $1.21
Sep2005 $0.94
Sep2004 $0.73
Sep2003 $0.63

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Franklin Resources Inc Valuation – May 2018 $BEN
Franklin Resources Inc Valuation – February 2017 $BEN
Best Dividend Paying Stocks for Dividend Growth Investors – February 2017
10 Low PE Stock Picks for the Defensive Investor – January 2017
Best Dividend Paying Stocks for Dividend Growth Investors – January 2017

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S&P Global Inc Valuation – March 2019 #SPGI
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CME Group Inc Valuation – March 2019 #CME
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

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.

IGM Financial Inc Valuation – July 2018 $TSE-IGM

Company Profile (excerpt from Reuters): IGM Financial Inc. is a Canada-based financial services company. The Company’s principal businesses are Investors Group Inc. and Mackenzie Financial Corporation, which operate within the advice segment of the financial services market. It operates in three segments: Investors Group, Mackenzie Investments, and Corporate and Other. The Investors Group provides a range of financial and investment planning services through its network of consultants across the country, and its products and services include Personal Financial Planner, Symphony Strategic Investment Planning Program and Mutual Funds. The Mackenzie Investments segment is engaged in the provision of investment management and related services offered through diversified investment solutions, distributed through multiple distribution channels. The Corporate and Other segment includes share of earnings of its affiliate, Great-West Lifeco Inc. (Lifeco) and operating results for Investment Planning Counsel Inc.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-IGM – 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,342,275,260 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 4.98% Fail
5. Moderate PEmg Ratio PEmg < 20 19.87 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.07 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 Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.92
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $27.81
MG Value based on 0% Growth $16.30
Market Implied Growth Rate 5.68%
Current Price $38.11
% of Intrinsic Value N/A

IGM Financial Inc. 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. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.01 in 2014 to an estimated $1.92 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.68% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into IGM Financial Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $2.25 per share, for a yield of 5.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.87, which was below the industry average of 21.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $0.00
PEmg 19.87
PB Ratio 2.07
Dividend Yield 5.90%
TTM Dividend $2.25
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
Long-Term Debt & Capital Lease Obligation $2,025,000,000
Total Assets $15,695,480,000
Intangible Assets $3,844,736,000
Total Liabilities $11,262,545,000
Shares Outstanding (Diluted Average) 241,081,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate
Dec2017 $2.50
Dec2016 $3.19
Dec2015 $3.11
Dec2014 $2.98
Dec2013 $3.02
Dec2012 $2.97
Dec2011 $3.24
Dec2010 $2.77
Dec2009 $2.12
Dec2008 $2.76
Dec2007 $3.29
Dec2006 $2.90
Dec2005 $2.56
Dec2004 $2.24
Dec2003 $2.03
Dec2002 $1.85
Dec2001 $1.05
Dec2000 $1.35
Dec1999 $1.12
Dec1998 $0.89

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.92
Dec2017 $2.90
Dec2016 $3.09
Dec2015 $3.05
Dec2014 $3.01
Dec2013 $2.96
Dec2012 $2.87
Dec2011 $2.83
Dec2010 $2.67
Dec2009 $2.66
Dec2008 $2.87
Dec2007 $2.82
Dec2006 $2.49
Dec2005 $2.17
Dec2004 $1.89
Dec2003 $1.64
Dec2002 $1.38

Recommended Reading:

Other ModernGraham posts about the company

IGM Financial Inc Valuation – Initial Coverage $IGM

Other ModernGraham posts about related companies

T. Rowe Price Group Inc Valuation – June 2018 $TROW
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Charles Schwab Corp Valuation – June 2018 $SCHW
Willis Towers Watson PLC Valuation – Initial Coverage June 2018 $WLTW
PayPal Holdings Inc Valuation – June 2018 $PYPL
Synchrony Financial Valuation – June 2018 $SYF
CBRE Group Inc Valuation – June 2018 $CBRE
Franklin Resources Inc Valuation – May 2018 $BEN
S&P Global Inc Valuation – May 2018 $SPGI
Equifax Inc Valuation – May 2018 $EFX

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.

Main Street Capital Corp Valuation – July 2018 $MAIN

Company Profile (excerpt from Reuters): Main Street Capital Corporation (MSCC), incorporated on March 9, 2007, is a principal investment firm. MSCC’s principal investment objective is to maximize its portfolio’s total return by generating current income from the Company’s debt investments and capital appreciation from its equity and equity related investments, including warrants, convertible securities and other rights to acquire equity securities in a portfolio company. The Company is primarily focused on providing customized debt and equity financing to lower middle market (LMM) companies and debt capital to middle market (Middle Market) companies. The Company’s portfolio investments are made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in various industry sectors. MSCC partners with entrepreneurs, business owners and management teams and generally provides financing alternatives within its LMM portfolio. The Company invests primarily in secured debt investments, equity investments, warrants and other securities of LMM companies based in the United States and in secured debt investments of Middle Market companies generally headquartered in the United States. The Company’s investment portfolio includes its investments in LMM portfolio companies, investments in Middle Market portfolio companies, Private Loan portfolio investments, Other Portfolio investments, and the investment in MSC Adviser I, LLC (the External Investment Manager).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MAIN – 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 $2,270,334,307 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.36 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 28.00% Fail
6. Moderate PEmg Ratio PEmg < 20 14.74 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.60 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.36 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.21 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.58
MG Growth Estimate -0.71%
MG Value $18.29
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $37.43
MG Value based on 0% Growth $21.94
Market Implied Growth Rate 3.12%
Current Price $38.06
% of Intrinsic Value 208.13%

Main Street Capital 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 growth over the last ten years. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings 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 $2.71 in 2014 to an estimated $2.58 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.12% 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 Main Street Capital Corporation revealed the company was trading above its Graham Number of $35.8. The company pays a dividend of $2.25 per share, for a yield of 5.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.74, which was below the industry average of 21.47, 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 $-15.65.

Main Street Capital Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$15.65
Graham Number $35.80
PEmg 14.74
Current Ratio 0.36
PB Ratio 1.60
Current Dividend $2.25
Dividend Yield 5.90%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $83,560,000
Total Current Liabilities $230,406,000
Long-Term Debt $765,482,000
Total Assets $2,401,175,000
Intangible Assets $0
Total Liabilities $1,004,575,000
Shares Outstanding (Diluted Average) 58,852,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.42
Dec2017 $3.01
Dec2016 $2.67
Dec2015 $2.13
Dec2014 $2.31
Dec2013 $2.65
Dec2012 $3.53
Dec2011 $2.76
Dec2010 $2.38
Dec2009 $1.19
Dec2008 $1.20
Dec2007 $0.76

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.58
Dec2017 $2.63
Dec2016 $2.51
Dec2015 $2.51
Dec2014 $2.71
Dec2013 $2.77
Dec2012 $2.63
Dec2011 $2.00
Dec2010 $1.45
Dec2009 $0.87
Dec2008 $0.60
Dec2007 $0.25

Recommended Reading:

Other ModernGraham posts about the company

Main Street Capital Corporation Valuation – September 2016 $MAIN
Main Street Capital Corporation Analysis – Initial Coverage $MAIN

Other ModernGraham posts about related companies

Legg Mason Inc Valuation – June 2018 $LM
T. Rowe Price Group Inc Valuation – June 2018 $TROW
Moody’s Corporation – June 2018 $MCO
Charles Schwab Corp Valuation – June 2018 $SCHW
Willis Towers Watson PLC Valuation – Initial Coverage June 2018 $WLTW
PayPal Holdings Inc Valuation – June 2018 $PYPL
Synchrony Financial Valuation – June 2018 $SYF
CBRE Group Inc Valuation – June 2018 $CBRE
Franklin Resources Inc Valuation – May 2018 $BEN
S&P Global Inc Valuation – May 2018 $SPGI

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.

Legg Mason Inc Valuation – June 2018 $LM

Company Profile (excerpt from Reuters): Legg Mason, Inc., incorporated on January 13, 1981, is a holding company. The Company and its subsidiaries are principally engaged in providing asset management and related financial services to individuals, institutions, corporations and municipalities. The Company operates through Global Asset Management segment. Global Asset Management provides investment advisory services to institutional and individual clients and to the Company-sponsored investment funds. The Company, through its subsidiaries, provides investment management and related services to institutional and individual clients, Company-sponsored investment funds and retail separately managed account programs. The Company offers its products and services directly and through various financial intermediaries. The Company has operations principally in the United States and the United Kingdom and also have offices in Australia, Bahamas, Brazil, Canada, Chile, China, Dubai, France, Germany, Italy, Japan, Luxembourg, Poland, Singapore, Spain, Switzerland and Taiwan.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LM – June 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 $2,972,262,474 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.96 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 92.87% Pass
6. Moderate PEmg Ratio PEmg < 20 13.90 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.77 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 1.96 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.35 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 $2.50
MG Growth Estimate 15.00%
MG Value $96.17
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $36.22
MG Value based on 0% Growth $21.23
Market Implied Growth Rate 2.70%
Current Price $34.73
% of Intrinsic Value 36.11%

Legg Mason Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years. 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 Undervalued after growing its EPSmg (normalized earnings) from $1.09 in 2015 to an estimated $2.5 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.7% 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 Legg Mason Inc revealed the company was trading below its Graham Number of $59.43. The company pays a dividend of $1.12 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.9, which was below the industry average of 22.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-27.85.

Legg Mason Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$27.85
Graham Number $59.43
PEmg 13.90
Current Ratio 1.96
PB Ratio 0.77
Current Dividend $1.12
Dividend Yield 3.22%
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 3/1/2018
Total Current Assets $1,928,382,000
Total Current Liabilities $982,042,000
Long-Term Debt $2,221,810,000
Total Assets $8,152,534,000
Intangible Assets $5,730,014,000
Total Liabilities $4,300,398,000
Shares Outstanding (Diluted Average) 85,179,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.47
Mar2018 $3.01
Mar2017 $2.18
Mar2016 -$0.25
Mar2015 $2.04
Mar2014 $2.33
Mar2013 -$2.65
Mar2012 $1.54
Mar2011 $1.63
Mar2010 $1.32
Mar2009 -$13.99
Mar2008 $1.86
Mar2007 $4.48
Mar2006 $8.80
Mar2005 $3.53
Mar2004 $2.65
Mar2003 $1.78
Mar2002 $1.45
Mar2001 $1.53
Mar2000 $1.51
Mar1999 $1.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.50
Mar2018 $1.96
Mar2017 $1.20
Mar2016 $0.68
Mar2015 $1.09
Mar2014 $0.68
Mar2013 -$0.90
Mar2012 -$0.53
Mar2011 -$1.36
Mar2010 -$1.73
Mar2009 -$1.86
Mar2008 $4.22
Mar2007 $5.02
Mar2006 $4.74
Mar2005 $2.53
Mar2004 $1.95
Mar2003 $1.56

Recommended Reading:

Other ModernGraham posts about the company

Legg Mason Inc Valuation – June 2016 $LM
Stocks Trading Below Their Graham Number – May 2016
Stocks Trading Below Their Graham Number – February 2016
10 Companies Benjamin Graham Would Invest In Today – February 2016
13 Best Stocks For Value Investors This Week – 12/12/15

Other ModernGraham posts about related companies

T. Rowe Price Group Inc Valuation – June 2018 $TROW
Moody’s Corporation – June 2018 $MCO
Charles Schwab Corp Valuation – June 2018 $SCHW
Willis Towers Watson PLC Valuation – Initial Coverage June 2018 $WLTW
PayPal Holdings Inc Valuation – June 2018 $PYPL
Synchrony Financial Valuation – June 2018 $SYF
CBRE Group Inc Valuation – June 2018 $CBRE
Franklin Resources Inc Valuation – May 2018 $BEN
S&P Global Inc Valuation – May 2018 $SPGI
Equifax Inc Valuation – May 2018 $EFX

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.

T. Rowe Price Group Inc Valuation – June 2018 $TROW

Company Profile (excerpt from Reuters): T. Rowe Price Group, Inc., incorporated on February 4, 2000, is a financial services holding company. The Company provides global investment management services through its subsidiaries to investors across the world. The Company provides an array of Company sponsored the United States mutual funds, other sponsored pooled investment vehicles, sub advisory services, separate account management, recordkeeping, and related services to individuals, advisors, institutions, financial intermediaries and retirement plan sponsors.

TROW Chart

TROW data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TROW – June 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 $28,836,464,613 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.87 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 148.03% Pass
6. Moderate PEmg Ratio PEmg < 20 20.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.07 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 3.87 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.76
MG Growth Estimate 7.81%
MG Value $138.96
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $83.51
MG Value based on 0% Growth $48.95
Market Implied Growth Rate 6.15%
Current Price $119.74
% of Intrinsic Value 86.17%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.79 in 2014 to an estimated $5.76 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.15% 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 T. Rowe Price Group Inc revealed the company was trading above its Graham Number of $60.69. The company pays a dividend of $2.28 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 20.79, which was below the industry average of 22.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.21.

T. Rowe Price Group Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $3.21
Graham Number $60.69
PEmg 20.79
Current Ratio 3.87
PB Ratio 5.07
Current Dividend $2.28
Dividend Yield 1.90%
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 $2,275,000,000
Total Current Liabilities $588,200,000
Long-Term Debt $0
Total Assets $7,374,300,000
Intangible Assets $665,700,000
Total Liabilities $1,472,400,000
Shares Outstanding (Diluted Average) 249,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.89
Dec2017 $5.97
Dec2016 $4.75
Dec2015 $4.63
Dec2014 $4.55
Dec2013 $3.90
Dec2012 $3.36
Dec2011 $2.92
Dec2010 $2.53
Dec2009 $1.65
Dec2008 $1.82
Dec2007 $2.40
Dec2006 $1.90
Dec2005 $1.58
Dec2004 $1.26
Dec2003 $0.88
Dec2002 $0.76
Dec2001 $0.76
Dec2000 $1.04
Dec1999 $0.93
Dec1998 $0.67

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.76
Dec2017 $5.05
Dec2016 $4.47
Dec2015 $4.18
Dec2014 $3.79
Dec2013 $3.23
Dec2012 $2.75
Dec2011 $2.38
Dec2010 $2.09
Dec2009 $1.87
Dec2008 $1.92
Dec2007 $1.85
Dec2006 $1.47
Dec2005 $1.19
Dec2004 $0.98
Dec2003 $0.85
Dec2002 $0.83

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – August 2017
10 Best Stocks for Value Investors This Week – 7/22/17
T.Rowe Price Group Inc Valuation – July 2017 $TROW
T.Rowe Price Group Inc Valuation – June 2017 $TROW
Best Dividend Paying Stocks for Dividend Growth Investors – March 2017

Other ModernGraham posts about related companies

Charles Schwab Corp Valuation – June 2018 $SCHW
Willis Towers Watson PLC Valuation – Initial Coverage June 2018 $WLTW
PayPal Holdings Inc Valuation – June 2018 $PYPL
Synchrony Financial Valuation – June 2018 $SYF
CBRE Group Inc Valuation – June 2018 $CBRE
Franklin Resources Inc Valuation – May 2018 $BEN
S&P Global Inc Valuation – May 2018 $SPGI
Equifax Inc Valuation – May 2018 $EFX
CME Group Inc Valuation – May 2018 $CME
Discover Financial Services Valuation – May 2018 $DFS

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.

Moody’s Corporation – June 2018 $MCO

Company Profile (excerpt from Reuters): Moody’s Corporation (Moody’s), incorporated on June 2, 2000, is a provider of credit ratings; credit, capital markets and economic related research, data and analytical tools; software solutions and related risk management services, quantitative credit risk measures, financial services training and certification services, and research and analytical services to financial institution customers. The Company operates in two segments: Moody’s Investors Service (MIS) and Moody’s Analytics (MA). The Company’s MIS segment consists of the Company’s ratings operations. The Company’s MA segment develops a range of products and services that support financial analysis and risk management activities of institutional participants in financial markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MCO – June 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 $33,085,476,772 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.47 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 121.17% Pass
6. Moderate PEmg Ratio PEmg < 20 34.03 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 79.84 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 1.47 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.70 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.07
MG Growth Estimate 6.22%
MG Value $106.07
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $73.47
MG Value based on 0% Growth $43.07
Market Implied Growth Rate 12.76%
Current Price $172.41
% of Intrinsic Value 162.55%

Moody’s 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, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.58 in 2014 to an estimated $5.07 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.76% 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 Moody’s Corporation revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.52 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 34.03, which was above the industry average of 22.96. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-29.69.

Moody’s Corporation 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) -$29.69
Graham Number $0.00
PEmg 34.03
Current Ratio 1.47
PB Ratio 79.84
Current Dividend $1.52
Dividend Yield 0.88%
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 3/1/2018
Total Current Assets $2,818,800,000
Total Current Liabilities $1,920,900,000
Long-Term Debt $5,118,000,000
Total Assets $9,014,000,000
Intangible Assets $5,473,100,000
Total Liabilities $8,594,000,000
Shares Outstanding (Diluted Average) 194,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.49
Dec2017 $5.15
Dec2016 $1.36
Dec2015 $4.63
Dec2014 $4.61
Dec2013 $3.60
Dec2012 $3.05
Dec2011 $2.49
Dec2010 $2.15
Dec2009 $1.69
Dec2008 $1.87
Dec2007 $2.58
Dec2006 $2.58
Dec2005 $1.84
Dec2004 $1.40
Dec2003 $1.19
Dec2002 $0.92
Dec2001 $0.66
Dec2000 $0.49
Dec1999 $0.48
Dec1998 $0.82

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.07
Dec2017 $3.86
Dec2016 $3.29
Dec2015 $4.07
Dec2014 $3.58
Dec2013 $2.91
Dec2012 $2.46
Dec2011 $2.16
Dec2010 $2.06
Dec2009 $2.04
Dec2008 $2.17
Dec2007 $2.18
Dec2006 $1.85
Dec2005 $1.39
Dec2004 $1.09
Dec2003 $0.87
Dec2002 $0.70

Recommended Reading:

Other ModernGraham posts about the company

Moody’s Corporation Valuation – March 2017 $MCO
21 Best Undervalued Stocks of the Week – 8/27/16
Moody’s Corporation Valuation – August 2016 $MCO
Moody’s Corporation Stock Valuation – February 2016 $MCO
10 Best Stocks For Value Investors This Week – 9/26/15

Other ModernGraham posts about related companies

Charles Schwab Corp Valuation – June 2018 $SCHW
Willis Towers Watson PLC Valuation – Initial Coverage June 2018 $WLTW
PayPal Holdings Inc Valuation – June 2018 $PYPL
Synchrony Financial Valuation – June 2018 $SYF
CBRE Group Inc Valuation – June 2018 $CBRE
Franklin Resources Inc Valuation – May 2018 $BEN
S&P Global Inc Valuation – May 2018 $SPGI
Equifax Inc Valuation – May 2018 $EFX
CME Group Inc Valuation – May 2018 $CME
Discover Financial Services Valuation – May 2018 $DFS

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.

Charles Schwab Corp Valuation – June 2018 $SCHW

Company Profile (excerpt from Reuters): The Charles Schwab Corporation (CSC), incorporated on November 25, 1986, is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, money management and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services and other corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services as well as retirement business services. The Company’s subsidiaries include Charles Schwab & Co., Inc. (Schwab), which is a securities broker-dealer with over 335 domestic branch offices in 46 states, as well as a branch in each of the Commonwealth of Puerto Rico and London, England, and serves clients in Hong Kong through one of the Company’s subsidiaries, as of December 31, 2016; Charles Schwab Bank (Schwab Bank), which is a federal savings bank located in Nevada, and Charles Schwab Investment Management, Inc. (CSIM), which is the investment advisor for Schwab’s mutual funds referred to as the Schwab Funds, and Schwab’s exchange-traded funds (ETFs), referred to as the Schwab ETFs.

SCHW Chart

SCHW data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SCHW – June 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $77,456,710,587 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 195.45% Pass
5. Moderate PEmg Ratio PEmg < 20 34.75 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.05 Fail
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.65
MG Growth Estimate 15.00%
MG Value $63.60
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $23.95
MG Value based on 0% Growth $14.04
Market Implied Growth Rate 13.13%
Current Price $57.41
% of Intrinsic Value 90.26%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.78 in 2014 to an estimated $1.65 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 13.13% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Charles Schwab Corp revealed the company was trading above its Graham Number of $24.49. The company pays a dividend of $0.32 per share, for a yield of 0.6% Its PEmg (price over earnings per share – ModernGraham) was 34.75, which was above the industry average of 22.96.

Charles Schwab Corp receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Graham Number $24.49
PEmg 34.75
PB Ratio 4.05
Dividend Yield 0.56%
TTM Dividend $0.32
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 3/1/2018
Long-Term Debt & Capital Lease Obligation $4,128,000,000
Total Assets $248,320,000,000
Intangible Assets $1,328,000,000
Total Liabilities $228,990,000,000
Shares Outstanding (Diluted Average) 1,362,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.28
Dec2017 $1.61
Dec2016 $1.31
Dec2015 $1.03
Dec2014 $0.95
Dec2013 $0.78
Dec2012 $0.69
Dec2011 $0.70
Dec2010 $0.38
Dec2009 $0.68
Dec2008 $1.05
Dec2007 $1.97
Dec2006 $0.95
Dec2005 $0.55
Dec2004 $0.21
Dec2003 $0.35
Dec2002 $0.08
Dec2001 $0.14
Dec2000 $0.51
Dec1999 $0.49
Dec1998 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.65
Dec2017 $1.27
Dec2016 $1.05
Dec2015 $0.89
Dec2014 $0.78
Dec2013 $0.68
Dec2012 $0.65
Dec2011 $0.74
Dec2010 $0.84
Dec2009 $1.06
Dec2008 $1.15
Dec2007 $1.07
Dec2006 $0.56
Dec2005 $0.33
Dec2004 $0.23
Dec2003 $0.27
Dec2002 $0.25

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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.

Willis Towers Watson PLC Valuation – Initial Coverage June 2018 $WLTW

Company Profile (excerpt from Reuters): Willis Towers Watson Public Limited Company (Willis Towers Watson), incorporated on September 24, 2009, is a holding company. The Company operates as a global advisory, broking and solutions company. It is engaged in offering risk management, insurance broking, consulting, technology and solutions, and private exchanges. The Company operates through eight segments: Willis International; Willis North America; Willis Capital, Wholesale & Reinsurance (CWR); Willis GB; Towers Watson Benefits; Towers Watson Exchange Solutions; Towers Watson Risk and Financial Services, and Towers Watson Talent and Rewards.

WLTW Chart

WLTW data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WLTW – June 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 $20,847,850,672 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.11 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 -1.53% Fail
6. Moderate PEmg Ratio PEmg < 20 26.51 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.95 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 1.11 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.50 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.97
MG Growth Estimate 15.00%
MG Value $229.67
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $86.50
MG Value based on 0% Growth $50.71
Market Implied Growth Rate 9.00%
Current Price $158.13
% of Intrinsic Value 68.85%

Willis Towers Watson PLC 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. 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 $2.72 in 2014 to an estimated $5.97 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9% 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 Willis Towers Watson PLC revealed the company was trading above its Graham Number of $127.98. The company pays a dividend of $2.12 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 26.51, which was above the industry average of 22.96. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-43.64.

Willis Towers Watson 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) -$43.64
Graham Number $127.98
PEmg 26.51
Current Ratio 1.11
PB Ratio 1.95
Current Dividend $2.12
Dividend Yield 1.34%
Number of Consecutive Years of Dividend Growth 1

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $17,606,000,000
Total Current Liabilities $15,804,000,000
Long-Term Debt $4,507,000,000
Total Assets $34,212,000,000
Intangible Assets $14,316,000,000
Total Liabilities $23,410,000,000
Shares Outstanding (Diluted Average) 133,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.50
Dec2017 $4.18
Dec2016 $3.04
Dec2015 $5.41
Dec2014 $5.32
Dec2013 $5.37
Dec2012 -$6.83
Dec2011 $3.07
Dec2010 $7.05
Dec2009 $6.86
Dec2008 $5.43
Dec2007 $7.36
Dec2006 $7.52
Dec2005 $4.56
Dec2004 $6.41
Dec2003 $5.75
Dec2002 $3.39
Dec2001 $0.03
Dec2000 $0.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.97
Dec2017 $4.35
Dec2016 $3.78
Dec2015 $3.59
Dec2014 $2.72
Dec2013 $1.98
Dec2012 $1.23
Dec2011 $5.49
Dec2010 $6.75
Dec2009 $6.51
Dec2008 $6.31
Dec2007 $6.61
Dec2006 $6.00
Dec2005 $4.83
Dec2004 $4.36
Dec2003 $2.85
Dec2002 $1.17

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None. This is the first time ModernGraham has covered the company.

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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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