Bank of New York Mellon Corp Valuation – February 2019 $BK

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BK – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $52,474,421,623 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 97.25% Pass
5. Moderate PEmg Ratio PEmg < 20 14.41 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.34 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.68
MG Growth Estimate 10.24%
MG Value $106.77
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $53.41
MG Value based on 0% Growth $31.31
Market Implied Growth Rate 2.95%
Current Price $53.07
% of Intrinsic Value 49.70%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.19 in 2015 to an estimated $3.68 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.95% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Bank of New York Mellon Corp revealed the company was trading below its Graham Number of $59.25. The company pays a dividend of $1.04 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 14.41, which was below the industry average of 20.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

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

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $29,163,000,000
Total Assets $362,873,000,000
Intangible Assets $20,570,000,000
Total Liabilities $322,134,000,000
Shares Outstanding (Diluted Average) 1,030,404,000

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

Western Union Co Valuation – February 2019 $WU

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WU – February 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,879,832,269 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.88 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -48.67% Fail
6. Moderate PEmg Ratio PEmg < 20 17.06 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -25.68 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.88 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.32 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.05
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $15.18
MG Value based on 0% Growth $8.90
Market Implied Growth Rate 4.28%
Current Price $17.86
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.6 in 2015 to an estimated $1.05 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.28% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

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

The Western Union Company scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$10.15
Graham Number $0.00
PEmg 17.06
Current Ratio 0.88
PB Ratio -25.68
Current Dividend $0.76
Dividend Yield 4.26%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,787,200,000
Total Current Liabilities $5,432,700,000
Long-Term Debt $3,433,700,000
Total Assets $8,996,800,000
Intangible Assets $3,323,200,000
Total Liabilities $9,306,600,000
Shares Outstanding (Diluted Average) 445,400,000

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

Raymond James Financial Valuation – February 2019 $RJF

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RJF – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,570,757,649 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 171.22% Pass
5. Moderate PEmg Ratio PEmg < 20 15.25 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.94 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.38
MG Growth Estimate 12.03%
MG Value $175.15
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $77.98
MG Value based on 0% Growth $45.71
Market Implied Growth Rate 3.37%
Current Price $81.99
% of Intrinsic Value 46.81%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.98 in 2015 to an estimated $5.38 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.37% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Raymond James Financial, Inc. revealed the company was trading above its Graham Number of $81.73. The company pays a dividend of $1.1 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 15.25, which was below the industry average of 20.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

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

Useful Links:

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

Most Recent Balance Sheet Figures

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

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

Raymond James Financial Inc Valuation – March 2018 $RJF

Other ModernGraham posts about related companies

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

Disclaimer:

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

Nasdaq Inc Valuation – February 2019 $NDAQ

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

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NDAQ – February 2019

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

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,326,562,209 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.97 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 97.70% Pass
6. Moderate PEmg Ratio PEmg < 20 24.88 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.64 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.97 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -14.78 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

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

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.34 in 2015 to an estimated $3.51 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 8.19% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Nasdaq Inc revealed the company was trading above its Graham Number of $61.15. The company pays a dividend of $1.7 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 24.88, which was above the industry average of 20.29. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-23.59.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$23.59
Graham Number $61.15
PEmg 24.88
Current Ratio 0.97
PB Ratio 2.64
Current Dividend $1.70
Dividend Yield 1.95%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

 

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,370,000,000
Total Current Liabilities $6,570,000,000
Long-Term Debt $2,956,000,000
Total Assets $15,700,000,000
Intangible Assets $8,663,000,000
Total Liabilities $10,251,000,000
Shares Outstanding (Diluted Average) 164,500,000

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

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

Disclaimer:

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

E*Trade Financial Corp Valuation – January 2019 $ETFC

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

ETFC Chart

ETFC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ETFC – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,745,487,126 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -171.59% Fail
5. Moderate PEmg Ratio PEmg < 20 18.96 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.84 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Fail
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

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

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.4 in 2014 to an estimated $2.51 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.23% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into E*TRADE Financial Corp revealed the company was trading above its Graham Number of $46.23. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 18.96, which was above the industry average of 18.

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

Stage 3: Information for Further Research

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

Useful Links:

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

Most Recent Balance Sheet Figures

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

Earnings Per Share History

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

Earnings Per Share – ModernGraham History

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

Recommended Reading:

Other ModernGraham posts about the company

E*Trade Financial Corp Valuation – July 2016 $ETFC
58 Companies in the Spotlight This Week – 1/31/15
E*Trade Financial Corporation Annual Valuation – 2015 $ETFC
14 Companies in the Spotlight This Week – 1/18/14
ModernGraham Valuation: E*Trade Financial Corporation (ETFC)

Other ModernGraham posts about related companies

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

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.

Marsh & McLennan Companies Inc Valuation – January 2019 $MMC

Company Profile (excerpt from Reuters): Marsh & McLennan Companies, Inc., incorporated on March 17, 1969, is a professional services firm offering clients advice and solutions in risk, strategy and people. The Company is the parent company of various risk advisors and specialty consultants, including Marsh, the insurance broker, intermediary and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of human resource (HR) and investment related financial advice and services, and Oliver Wyman Group, the management, economic and brand consultancy. The Company conducts business through two segments: Risk and Insurance Services, which includes risk management activities (risk advice, risk transfer and risk control and mitigation solutions), as well as insurance and reinsurance broking and services, and Consulting includes health, retirement, talent and investments consulting services and products, and specialized management, economic and brand consulting services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MMC – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $42,064,656,156 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.26 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 169.15% Pass
6. Moderate PEmg Ratio PEmg < 20 25.27 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.65 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 4.45 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 $3.31
MG Growth Estimate 6.56%
MG Value $71.48
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $47.93
MG Value based on 0% Growth $28.10
Market Implied Growth Rate 8.38%
Current Price $83.51
% of Intrinsic Value 116.83%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.3 in 2014 to an estimated $3.31 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.38% 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 Marsh & McLennan Companies, Inc. revealed the company was trading above its Graham Number of $35.49. The company pays a dividend of $1.43 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 25.27, which was above the industry average of 18. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.95.

Marsh & McLennan Companies, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$14.95
Graham Number $35.49
PEmg 25.27
Current Ratio 1.26
PB Ratio 5.65
Current Dividend $1.43
Dividend Yield 1.71%
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 9/1/2018
Total Current Assets $5,966,000,000
Total Current Liabilities $4,727,000,000
Long-Term Debt $5,512,000,000
Total Assets $21,129,000,000
Intangible Assets $10,764,000,000
Total Liabilities $13,591,000,000
Shares Outstanding (Diluted Average) 510,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.87
Dec2017 $2.87
Dec2016 $3.38
Dec2015 $2.98
Dec2014 $2.65
Dec2013 $2.43
Dec2012 $2.13
Dec2011 $1.79
Dec2010 $1.55
Dec2009 $0.42
Dec2008 -$0.14
Dec2007 $4.53
Dec2006 $1.76
Dec2005 $0.74
Dec2004 $0.33
Dec2003 $2.81
Dec2002 $2.45
Dec2001 $1.70
Dec2000 $2.05
Dec1999 $1.31
Dec1998 $1.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.31
Dec2017 $2.97
Dec2016 $2.92
Dec2015 $2.59
Dec2014 $2.30
Dec2013 $1.97
Dec2012 $1.54
Dec2011 $1.38
Dec2010 $1.32
Dec2009 $1.29
Dec2008 $1.63
Dec2007 $2.36
Dec2006 $1.39
Dec2005 $1.34
Dec2004 $1.71
Dec2003 $2.29
Dec2002 $1.95

Recommended Reading:

Other ModernGraham posts about the company

Marsh & McLennan Companies Inc Valuation – March 2018 $MMC
5 Best Stocks For Value Investors This Week – 7/16/16
Marsh & McLennan Companies Inc Valuation – July 2016 $MMC
26 Best Stocks For Value Investors This Week – 2/6/16
Marsh & McLennan Company Valuation – January 2016 Update $MMC

Other ModernGraham posts about related companies

Intercontinental Exchange Inc Valuation – January 2019 $ICE
H&R Block Inc Valuation – January 2019 $HRB
State Street Corp Valuation – January 2019 $STT
Morgan Stanley Valuation – January 2019 $MS
MSCI Inc Valuation – January 2019 $MSCI
BlackRock Inc Valuation – January 2019 $BLK
Ameriprise Financial Inc Valuation – January 2019 $AMP
Invesco Ltd Valuation – January 2019 $IVZ
Capital One Financial Corp Valuation – January 2019 $COF
Total System Services Inc Valuation – December 2018 $TSS

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.

Intercontinental Exchange Inc Valuation – January 2019 $ICE

Company Profile (excerpt from Reuters): Intercontinental Exchange, Inc., incorporated on March 6, 2013, is an operator of regulated exchanges, clearing houses and listings venues. The Company provides data services for commodity and financial markets. The Company’s segments include Trading and Clearing segment, and Data and Listings segment. The Trading and Clearing segment includes the Company’s transaction-based execution and clearing businesses. The Company’s Data and Listings segment includes its subscription-based data services and securities listings businesses. The Company operates regulated marketplaces for listing, trading and clearing a range of derivatives and securities contracts across the asset classes, including energy and agricultural commodities, interest rates, equities, equity derivatives, exchange traded funds, credit derivatives, bonds and currencies. The Company offers market data services to support the trading, investment, risk management and connectivity needs of customers across a range of asset classes.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ICE – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $43,077,628,792 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.00 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 196.61% Pass
6. Moderate PEmg Ratio PEmg < 20 24.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.58 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 1.00 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 28.21 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.09
MG Growth Estimate 15.00%
MG Value $118.84
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $44.76
MG Value based on 0% Growth $26.24
Market Implied Growth Rate 8.00%
Current Price $75.63
% of Intrinsic Value 63.64%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.3 in 2014 to an estimated $3.09 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8% 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 Intercontinental Exchange Inc revealed the company was trading above its Graham Number of $45.72. The company pays a dividend of $0.8 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 24.5, which was above the industry average of 18. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.79.

Intercontinental Exchange 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) -$15.79
Graham Number $45.72
PEmg 24.50
Current Ratio 1.00
PB Ratio 2.58
Current Dividend $0.80
Dividend Yield 1.06%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $61,295,000,000
Total Current Liabilities $61,065,000,000
Long-Term Debt $6,488,000,000
Total Assets $87,242,000,000
Intangible Assets $23,379,000,000
Total Liabilities $70,388,000,000
Shares Outstanding (Diluted Average) 576,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.20
Dec2017 $4.23
Dec2016 $2.37
Dec2015 $2.28
Dec2014 $1.71
Dec2013 $0.64
Dec2012 $1.50
Dec2011 $1.38
Dec2010 $1.07
Dec2009 $0.85
Dec2008 $0.83
Dec2007 $0.68
Dec2006 $0.48
Dec2005 -$0.08
Dec2004 $0.08
Dec2003 $0.07
Dec2002 $0.07
Dec2001 $0.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.09
Dec2017 $2.77
Dec2016 $1.93
Dec2015 $1.64
Dec2014 $1.30
Dec2013 $1.09
Dec2012 $1.25
Dec2011 $1.07
Dec2010 $0.87
Dec2009 $0.70
Dec2008 $0.55
Dec2007 $0.35
Dec2006 $0.17
Dec2005 $0.02
Dec2004 $0.07
Dec2003 $0.05
Dec2002 $0.04

Recommended Reading:

Other ModernGraham posts about the company

Intercontinental Exchange Inc Valuation – March 2018 $ICE
Intercontinental Exchange Inc Valuation – July 2016 $ICE
21 Companies in the Spotlight This Week – 5/9/15
Intercontinental Exchange Inc. Annual Valuation – 2015 $ICE
18 Companies in the Spotlight This Week – 5/17/14

Other ModernGraham posts about related companies

H&R Block Inc Valuation – January 2019 $HRB
State Street Corp Valuation – January 2019 $STT
Morgan Stanley Valuation – January 2019 $MS
MSCI Inc Valuation – January 2019 $MSCI
BlackRock Inc Valuation – January 2019 $BLK
Ameriprise Financial Inc Valuation – January 2019 $AMP
Invesco Ltd Valuation – January 2019 $IVZ
Capital One Financial Corp Valuation – January 2019 $COF
Total System Services Inc Valuation – December 2018 $TSS
Goldman Sachs Group Inc Valuation – November 2018 $GS

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.

H&R Block Inc Valuation – January 2019 $HRB

Company Profile (excerpt from Reuters): H&R Block, Inc. (H&R Block), incorporated on July 27, 1955, through its subsidiaries, provides tax preparation and other services. The Company provides assisted income tax return preparation, digital do-it-yourself (DIY) tax solutions and other services and products related to income tax return preparation to the general public primarily in the United States, Canada, Australia and their respective territories. Assisted income tax return preparation and related services are provided by tax professionals through a system of retail offices operated directly by the Company or its franchisees. It offers tax support, planning, and business accounting and advisory services to its clients. The Company offers a range of online tax services, including preparation of federal and state income tax returns, review of tax returns by a tax professional, access to tax tips, advice and tax-related news, use of calculators for tax planning, error checking and electronic filing.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HRB – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,230,687,756 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.04 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 80.99% Pass
6. Moderate PEmg Ratio PEmg < 20 12.39 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -166.97 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 2.04 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.28 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.05
MG Growth Estimate 4.87%
MG Value $37.46
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $29.78
MG Value based on 0% Growth $17.46
Market Implied Growth Rate 1.95%
Current Price $25.45
% of Intrinsic Value 67.94%

H & R Block Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.55 in 2015 to an estimated $2.05 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.95% 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 H & R Block Inc revealed the company was trading above its Graham Number of $8.61. The company pays a dividend of $0.96 per share, for a yield of 3.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.39, which was below the industry average of 18, 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 $-6.68.

H & R Block Inc performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$6.68
Graham Number $8.61
PEmg 12.39
Current Ratio 2.04
PB Ratio -166.97
Current Dividend $0.96
Dividend Yield 3.77%
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 10/1/2018
Total Current Assets $891,002,000
Total Current Liabilities $435,721,000
Long-Term Debt $1,491,328,000
Total Assets $2,233,296,000
Intangible Assets $871,715,000
Total Liabilities $2,264,621,000
Shares Outstanding (Diluted Average) 205,520,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.75
Apr2018 $2.91
Apr2017 $1.91
Apr2016 $1.49
Apr2015 $1.71
Apr2014 $1.72
Apr2013 $1.58
Apr2012 $0.89
Apr2011 $1.31
Apr2010 $1.43
Apr2009 $1.45
Apr2008 -$0.95
Apr2007 -$1.34
Apr2006 $1.47
Apr2005 $1.85
Apr2004 $1.92
Apr2003 $1.30
Apr2002 $1.17
Apr2001 $0.77
Apr2000 $0.64
Apr1999 $0.54

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.05
Apr2018 $2.12
Apr2017 $1.71
Apr2016 $1.57
Apr2015 $1.55
Apr2014 $1.44
Apr2013 $1.31
Apr2012 $1.06
Apr2011 $0.89
Apr2010 $0.59
Apr2009 $0.28
Apr2008 -$0.01
Apr2007 $0.66
Apr2006 $1.62
Apr2005 $1.60
Apr2004 $1.37
Apr2003 $1.02

Recommended Reading:

Other ModernGraham posts about the company

10 Best Dividend Paying Stocks for the Enterprising Investor – September 2018
5 Undervalued Companies for Value Investors with a Low Beta – May 2018
10 Best Dividend Paying Stocks for the Enterprising Investor – May 2018
H&R Block Inc Valuation – March 2018 $HRB
H&R Block Inc Valuation – June 2016 $HRB

Other ModernGraham posts about related companies

State Street Corp Valuation – January 2019 $STT
Morgan Stanley Valuation – January 2019 $MS
MSCI Inc Valuation – January 2019 $MSCI
BlackRock Inc Valuation – January 2019 $BLK
Ameriprise Financial Inc Valuation – January 2019 $AMP
Invesco Ltd Valuation – January 2019 $IVZ
Capital One Financial Corp Valuation – January 2019 $COF
Total System Services Inc Valuation – December 2018 $TSS
Goldman Sachs Group Inc Valuation – November 2018 $GS
KKR & Co Inc Valuation – September 2018 $KKR

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.

US Bancorp Valuation – May 2018 $USB

Company Profile (excerpt from Reuters): U.S. Bancorp, incorporated on April 2, 1929, is a multi-state financial services holding company. The Company provides a full range of financial services, including lending and depository services, cash management, capital markets, and trust and investment management services. It also engages in credit card services, merchant and automated teller machine (ATM) processing, mortgage banking, insurance, brokerage and leasing. The Company’s banking subsidiary, U.S. Bank National Association, is engaged in the general banking business, principally in domestic markets. U.S. Bank National Association provides a range of products and services to individuals, businesses, institutional organizations, governmental entities and other financial institutions.

USB Chart

USB data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of USB – May 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 $83,522,451,199 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 107.56% Pass
5. Moderate PEmg Ratio PEmg < 20 14.50 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.72 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 $3.53
MG Growth Estimate 3.66%
MG Value $55.86
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $51.19
MG Value based on 0% Growth $30.01
Market Implied Growth Rate 3.00%
Current Price $51.18
% of Intrinsic Value 91.62%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.84 in 2014 to an estimated $3.53 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 3% 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 U.S. Bancorp revealed the company was trading above its Graham Number of $48.45. The company pays a dividend of $1.16 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.5, which was below the industry average of 21.11, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $48.45
PEmg 14.50
PB Ratio 1.72
Dividend Yield 2.27%
TTM Dividend $1.16
Number of Consecutive Years of Dividend Growth 7

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Long-Term Debt & Capital Lease Obligation $33,201,000,000
Total Assets $460,119,000,000
Intangible Assets $12,828,000,000
Total Liabilities $410,932,000,000
Shares Outstanding (Diluted Average) 1,657,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.96
Dec2017 $3.51
Dec2016 $3.24
Dec2015 $3.16
Dec2014 $3.08
Dec2013 $3.00
Dec2012 $2.84
Dec2011 $2.46
Dec2010 $1.73
Dec2009 $0.97
Dec2008 $1.61
Dec2007 $2.43
Dec2006 $2.61
Dec2005 $2.42
Dec2004 $2.18
Dec2003 $1.93
Dec2002 $1.65
Dec2001 $0.88
Dec2000 $1.50
Dec1999 $2.06
Dec1998 $1.78

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.53
Dec2017 $3.28
Dec2016 $3.13
Dec2015 $3.02
Dec2014 $2.84
Dec2013 $2.54
Dec2012 $2.19
Dec2011 $1.85
Dec2010 $1.66
Dec2009 $1.75
Dec2008 $2.17
Dec2007 $2.41
Dec2006 $2.32
Dec2005 $2.05
Dec2004 $1.79
Dec2003 $1.60
Dec2002 $1.48

Recommended Reading:

Other ModernGraham posts about the company

12 Best Stocks for Value Investors This Week – 2/4/17
U.S. Bancorp Valuation – February 2017 $USB
15 Best Undervalued Stocks of the Week – 8/20/16
US Bancorp Valuation – August 2016 $USB
Best Stocks to Invest In: the Bank Industry – August 2016

Other ModernGraham posts about related companies

Bank of New York Mellon Corp Valuation – May 2018 $BK
Citizens Financial Group Inc Valuation – April 2018 $CFG
BB&T Corporation Valuation – April 2018 $BBT
M&T Bank Corp Valuation – April 2018 $MTB
Bank of America Corp Valuation – March 2018 $BAC
Fifth Third Bancorp Valuation – March 2018 $FITB
Regions Financial Corp Valuation – March 2018 $RF
Huntington Bancshares Inc Valuation – March 2018 $HBAN
Zions Bancorp Valuation – March 2018 $ZION
State Street Corp Valuation – March 2018 $STT

Disclaimer:

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

Bank of New York Mellon Corp Valuation – May 2018 $BK

Company Profile (excerpt from Reuters): The Bank of New York Mellon Corporation, incorporated on February 9, 2007, is an investments company. The Company operates businesses through two segments: Investment Management and Investment Services. The Company also has an Other segment, which includes the leasing portfolio, corporate treasury activities (including its investment securities portfolio), derivatives and other trading, corporate and bank-owned life insurance and renewable energy investments, and business exits. As of December 31, 2016, the Company had $29.9 trillion in assets under custody and/or administration and $1.6 trillion in assets under management.

BK Chart

BK data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BK – May 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 $55,043,947,962 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 269.62% Pass
5. Moderate PEmg Ratio PEmg < 20 15.81 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.33 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 $3.45
MG Growth Estimate 11.76%
MG Value $110.36
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $49.98
MG Value based on 0% Growth $29.30
Market Implied Growth Rate 3.65%
Current Price $54.49
% of Intrinsic Value 49.37%

Bank of New York Mellon Corp 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. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.93 in 2014 to an estimated $3.45 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.65% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Bank of New York Mellon Corp revealed the company was trading below its Graham Number of $57.58. The company pays a dividend of $0.86 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 15.81, which was below the industry average of 21.11, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $57.58
PEmg 15.81
PB Ratio 1.33
Dividend Yield 1.58%
TTM Dividend $0.86
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Long-Term Debt & Capital Lease Obligation $27,939,000,000
Total Assets $373,597,000,000
Intangible Assets $20,966,000,000
Total Liabilities $331,869,000,000
Shares Outstanding (Diluted Average) 1,021,731,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.96
Dec2017 $3.72
Dec2016 $3.15
Dec2015 $2.71
Dec2014 $2.15
Dec2013 $1.73
Dec2012 $1.73
Dec2011 $2.03
Dec2010 $2.06
Dec2009 -$1.16
Dec2008 $1.20
Dec2007 $2.18
Dec2006 $3.94
Dec2005 $2.03
Dec2004 $1.85
Dec2003 $1.52
Dec2002 $1.24
Dec2001 $1.81
Dec2000 $1.92
Dec1999 $2.27
Dec1998 $1.53

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.45
Dec2017 $3.02
Dec2016 $2.55
Dec2015 $2.19
Dec2014 $1.93
Dec2013 $1.64
Dec2012 $1.46
Dec2011 $1.30
Dec2010 $1.17
Dec2009 $1.03
Dec2008 $2.16
Dec2007 $2.53
Dec2006 $2.51
Dec2005 $1.76
Dec2004 $1.64
Dec2003 $1.61
Dec2002 $1.68

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Citizens Financial Group Inc Valuation – April 2018 $CFG
BB&T Corporation Valuation – April 2018 $BBT
M&T Bank Corp Valuation – April 2018 $MTB
Bank of America Corp Valuation – March 2018 $BAC
Fifth Third Bancorp Valuation – March 2018 $FITB
Regions Financial Corp Valuation – March 2018 $RF
Huntington Bancshares Inc Valuation – March 2018 $HBAN
Zions Bancorp Valuation – March 2018 $ZION
State Street Corp Valuation – March 2018 $STT
PNC Financial Services Group Inc Valuation – March 2018 $PNC

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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