Fortinet Inc Valuation – February 2019 $FTNT

Company Profile (excerpt from Reuters): Fortinet, Inc., incorporated on November 28, 2000, is a network security company. The Company provides cyber security solutions to a range of enterprises, service providers and government organizations across the world. It provides protection against cyber-attacks and the technology to take on security performance requirements of the network. It offers a range of security products and solutions, providing customers with an integrated network security architecture and a source of threat intelligence to identify and minimize security gaps. The Company’s network security solution consists of FortiGate physical, software and cloud solutions, which are deployable in the business environments of enterprises, service providers and small and medium-sized businesses, as well as government organizations. These platforms provide a range of integrated security and networking functions to help protect data, applications and users from network- and content-level security threats.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FTNT – 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 $13,931,162,505 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.87 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 54.37% Pass
6. Moderate PEmg Ratio PEmg < 20 160.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 16.11 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 1.87 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 Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.51
MG Growth Estimate 13.65%
MG Value $18.29
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $7.40
MG Value based on 0% Growth $4.34
Market Implied Growth Rate 75.81%
Current Price $81.77
% of Intrinsic Value 447.19%

Fortinet Inc is suitable for the Enterprising Investor but not 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 is only concerned with the lack of dividends. 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 Overvalued after growing its EPSmg (normalized earnings) from $0.27 in 2014 to an estimated $0.51 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 75.81% 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 Fortinet Inc revealed the company was trading above its Graham Number of $9.86. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 160.12, which was above the industry average of 56.55. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.17.

Fortinet 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) $1.17
Graham Number $9.86
PEmg 160.12
Current Ratio 1.87
PB Ratio 16.11
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 9/1/2018
Total Current Assets $2,078,100,000
Total Current Liabilities $1,111,900,000
Long-Term Debt $0
Total Assets $2,763,500,000
Intangible Assets $43,800,000
Total Liabilities $1,871,900,000
Shares Outstanding (Diluted Average) 175,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.23
Dec2017 $0.18
Dec2016 $0.18
Dec2015 $0.05
Dec2014 $0.15
Dec2013 $0.26
Dec2012 $0.40
Dec2011 $0.38
Dec2010 $0.26
Dec2009 $0.39
Dec2008 $0.01

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.51
Dec2017 $0.16
Dec2016 $0.16
Dec2015 $0.19
Dec2014 $0.27
Dec2013 $0.33
Dec2012 $0.34
Dec2011 $0.28
Dec2010 $0.19
Dec2009 $0.13

Recommended Reading:

Other ModernGraham posts about the company

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

Other ModernGraham posts about related companies

Synopsys Inc Valuation – February 2019 $SNPS
Symantec Corp Valuation – February 2019 $SYMC
Intuit Inc Valuation – February 2019 $INTU
Adobe Inc Valuation – February 2019 $ADBE
Autodesk Inc Valuation – February 2019 $ADSK
F5 Networks Inc Valuation – February 2019 $FFIV
Cadence Design Systems Inc Valuation – January 2019 $CDNS
Oracle Corporation Valuation – January 2019 $ORCL
Red Hat Inc Valuation – January 2019 $RHT
Alphabet Inc Valuation – January 2019 $GOOG $GOOGL

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.

Red Hat Inc Valuation – January 2019 $RHT

Company Profile (excerpt from Reuters): Red Hat, Inc. (Red Hat), incorporated on October 17, 1998, is a provider of open source software solutions, using a community-powered approach to develop and offer operating system, virtualization, management, middleware, cloud, mobile and storage technologies. The Company operates through three geographical segments: the Americas (the United States, Canada and Latin America); Europe, Middle East and Africa (EMEA), and Asia Pacific. The Company’s products and services include infrastructure-related offerings, application development-related and other technology offerings, and consulting, support and training services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RHT – 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 $31,069,105,955 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 Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 203.43% Pass
6. Moderate PEmg Ratio PEmg < 20 103.56 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 22.97 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 1.26 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.53 Pass
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 $1.70
MG Growth Estimate 14.77%
MG Value $64.55
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $24.61
MG Value based on 0% Growth $14.43
Market Implied Growth Rate 47.53%
Current Price $175.77
% of Intrinsic Value 272.29%

Red Hat 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 low current ratio, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.86 in 2015 to an estimated $1.7 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 47.53% 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 Red Hat Inc revealed the company was trading above its Graham Number of $21.7. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 103.56, which was above the industry average of 50.37. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.81.

Red Hat 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) -$3.81
Graham Number $21.70
PEmg 103.56
Current Ratio 1.26
PB Ratio 22.97
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 11/1/2018
Total Current Assets $2,970,491,000
Total Current Liabilities $2,363,585,000
Long-Term Debt $324,153,000
Total Assets $5,103,014,000
Intangible Assets $1,489,116,000
Total Liabilities $3,679,383,000
Shares Outstanding (Diluted Average) 186,062,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.52
Feb2018 $1.40
Feb2017 $1.39
Feb2016 $1.07
Feb2015 $0.95
Feb2014 $0.93
Feb2013 $0.77
Feb2012 $0.75
Feb2011 $0.55
Feb2010 $0.45
Feb2009 $0.39
Feb2008 $0.36
Feb2007 $0.29
Feb2006 $0.41
Feb2005 $0.24
Feb2004 $0.07
Feb2003 -$0.04
Feb2002 -$0.83
Feb2001 -$0.53
Feb2000 -$0.41
Feb1999 -$0.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.70
Feb2018 $1.24
Feb2017 $1.11
Feb2016 $0.95
Feb2015 $0.86
Feb2014 $0.77
Feb2013 $0.65
Feb2012 $0.56
Feb2011 $0.45
Feb2010 $0.39
Feb2009 $0.35
Feb2008 $0.32
Feb2007 $0.26
Feb2006 $0.15
Feb2005 -$0.06
Feb2004 -$0.25
Feb2003 -$0.40

Recommended Reading:

Other ModernGraham posts about the company

Red Hat Inc Valuation – March 2018 $RHT
Red Hat Inc Valuation – June 2016 $RHT
21 Companies in the Spotlight This Week – 5/9/15
Red Hat Inc. Annual Valuation – May 2015 $RHT
16 Companies in the Spotlight This Week – 4/26/14

Other ModernGraham posts about related companies

Citrix Systems Inc Valuation – January 2019 $CTXS
Microsoft Corporation Valuation – November 2018 $MSFT
Cisco Systems Inc Valuation – November 2018 $CSCO
Kinaxis Inc Valuation – August 2018 $TSE:KXS
CSG Systems International Inc Valuation – August 2018 $CSGS
SPS Commerce Inc Valuation – August 2018 $SPSC
Synchronoss Technologies Inc Valuation – August 2018 $SNCR
ACI Worldwide Inc Valuation – July 2018 $ACIW
Akamai Technologies Inc Valuation – May 2018 $AKAM
Symantec Corp Valuation – April 2018 $SYMC

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.

Ansys Inc Valuation – January 2019 $ANSS

Company Profile (excerpt from Reuters): ANSYS, Inc. (ANSYS), incorporated on January 12, 1994, develops and markets engineering simulation software and services used by engineers, designers, researchers and students across a range of industries and academia, including aerospace and defense, automotive, industrial equipment, electronics, biomedical, energy, materials and chemical processing, and semiconductors. The Company focuses on the development of open and flexible solutions that enable users to analyze designs directly on the desktop, providing a common platform for product development, from design concept to final-stage testing and validation. The Company distributes its ANSYS suite of simulation technologies through a network of independent resellers and distributors (collectively, channel partners) and direct sales offices in various locations. The Company’s product portfolio consists of Simulation Platform: ANSYS Workbench, Structures, Fluids, Electronics, Semiconductors, Multiphysics, AIM, Embedded Software, Systems, Three Dimensional (3-D) Direct Modeling and Academic.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ANSS – 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 $12,930,910,000 2. Sufficiently Strong Financial Condition 2.71 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 117.84% 6. Moderate PEmg Ratio PEmg < 20 44.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.22 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition 2.71 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 5. Earnings Growth EPSmg greater than 5 years ago Stage 2: Determination of Intrinsic Value

EPSmg $3.45
MG Growth Estimate 6.75%
MG Value $75.90
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $50.03
MG Value based on 0% Growth $29.33
Market Implied Growth Rate 18.17%
Current Price $154.75
% of Intrinsic Value 203.89%

ANSYS, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. 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 Overvalued after growing its EPSmg (normalized earnings) from $2.38 in 2014 to an estimated $3.45 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 18.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into ANSYS, Inc. revealed the company was trading above its Graham Number of $52.14. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 44.85, which was below the industry average of 50.37, 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 $7.21.

ANSYS, 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) $7.21
Graham Number $52.14
PEmg 44.85
Current Ratio 2.71
PB Ratio 5.22
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 9/1/2018
Total Current Assets $1,127,567,000
Total Current Liabilities $415,439,000
Long-Term Debt $0
Total Assets $3,056,111,000
Intangible Assets $1,795,131,000
Total Liabilities $507,565,000
Shares Outstanding (Diluted Average) 86,043,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.53
Dec2017 $2.98
Dec2016 $2.99
Dec2015 $2.76
Dec2014 $2.70
Dec2013 $2.58
Dec2012 $2.14
Dec2011 $1.91
Dec2010 $1.64
Dec2009 $1.27
Dec2008 $1.29
Dec2007 $1.02
Dec2006 $0.19
Dec2005 $0.65
Dec2004 $0.53
Dec2003 $0.34
Dec2002 $0.31
Dec2001 $0.22
Dec2000 $0.25
Dec1999 $0.22
Dec1998 $0.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.45
Dec2017 $2.87
Dec2016 $2.76
Dec2015 $2.57
Dec2014 $2.38
Dec2013 $2.12
Dec2012 $1.81
Dec2011 $1.57
Dec2010 $1.29
Dec2009 $1.04
Dec2008 $0.86
Dec2007 $0.61
Dec2006 $0.41
Dec2005 $0.48
Dec2004 $0.37
Dec2003 $0.29
Dec2002 $0.25

Recommended Reading:

Other ModernGraham posts about the company

Ansys Inc Valuation – March 2018 $ANSS
Ansys Inc Valuation – June 2016 $ANSS
Ansys Inc. Valuation – November 2015 Update $ANSS
The Best Companies of the Software Industry – August 2015
Ansys Inc. Analysis – Initial Coverage $ANSS

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Citrix Systems Inc Valuation – January 2019 $CTXS
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CSG Systems International Inc Valuation – August 2018 $CSGS
SPS Commerce Inc Valuation – August 2018 $SPSC
Synchronoss Technologies Inc Valuation – August 2018 $SNCR
ACI Worldwide Inc Valuation – July 2018 $ACIW
Akamai Technologies Inc Valuation – May 2018 $AKAM
Symantec Corp Valuation – April 2018 $SYMC

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.

Citrix Systems Inc Valuation – January 2019 $CTXS

Company Profile (excerpt from Reuters): Citrix Systems, Inc., incorporated on April 17, 1989, offers Enterprise and Service Provider products, which include Workspace Services solutions and Delivery Networking products. The Company’s Enterprise and Service Provider products include Cloud Services solutions, and related license updates and maintenance, support and professional services. The Company’s NetScaler nCore Technology is an architecture that enables execution of multiple packet engines in parallel.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CTXS – 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 $13,807,714,396 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.83 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 75.69% Pass
6. Moderate PEmg Ratio PEmg < 20 41.47 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 19.57 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 0.83 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.41 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.47
MG Growth Estimate 6.95%
MG Value $55.32
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $35.82
MG Value based on 0% Growth $21.00
Market Implied Growth Rate 16.49%
Current Price $102.46
% of Intrinsic Value 185.20%

Citrix Systems, 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, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.69 in 2014 to an estimated $2.47 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.49% 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 Citrix Systems, Inc. revealed the company was trading above its Graham Number of $26.09. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 41.47, which was below the industry average of 54.3, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.68.

Citrix Systems, 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) -$14.68
Graham Number $26.09
PEmg 41.47
Current Ratio 0.83
PB Ratio 19.57
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 9/1/2018
Total Current Assets $2,497,961,000
Total Current Liabilities $3,023,161,000
Long-Term Debt $741,551,000
Total Assets $5,436,527,000
Intangible Assets $1,789,561,000
Total Liabilities $4,664,021,000
Shares Outstanding (Diluted Average) 147,568,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.38
Dec2017 -$0.13
Dec2016 $3.41
Dec2015 $1.99
Dec2014 $1.47
Dec2013 $1.80
Dec2012 $1.86
Dec2011 $1.87
Dec2010 $1.46
Dec2009 $1.03
Dec2008 $0.96
Dec2007 $1.14
Dec2006 $0.97
Dec2005 $0.93
Dec2004 $0.75
Dec2003 $0.70
Dec2002 $0.53
Dec2001 $0.54
Dec2000 $0.47
Dec1999 $0.31
Dec1998 $0.08

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.47
Dec2017 $1.58
Dec2016 $2.33
Dec2015 $1.79
Dec2014 $1.69
Dec2013 $1.73
Dec2012 $1.61
Dec2011 $1.42
Dec2010 $1.17
Dec2009 $1.02
Dec2008 $0.99
Dec2007 $0.97
Dec2006 $0.85
Dec2005 $0.76
Dec2004 $0.65
Dec2003 $0.57
Dec2002 $0.46

Recommended Reading:

Other ModernGraham posts about the company

Citrix Systems Inc Valuation – February 2018 $CTXS
Citrix Systems Inc Valuation – May 2016 $CTXS
Citrix Systems Inc. Annual Valuation – 2015 $CTXS

Other ModernGraham posts about related companies

Microsoft Corporation Valuation – November 2018 $MSFT
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Kinaxis Inc Valuation – August 2018 $TSE:KXS
CSG Systems International Inc Valuation – August 2018 $CSGS
SPS Commerce Inc Valuation – August 2018 $SPSC
Synchronoss Technologies Inc Valuation – August 2018 $SNCR
ACI Worldwide Inc Valuation – July 2018 $ACIW
Akamai Technologies Inc Valuation – May 2018 $AKAM
Symantec Corp Valuation – April 2018 $SYMC
Intuit Inc Valuation – April 2018 $INTU

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.

Microsoft Corporation Valuation – November 2018 $MSFT

Company Profile (excerpt from Reuters): Microsoft Corporation, incorporated on September 22, 1993, is a technology company. The Company develops, licenses, and supports a range of software products, services and devices. The Company’s segments include Productivity and Business Processes, Intelligent Cloud and More Personal Computing. The Company’s products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; video games, and training and certification of computer system integrators and developers. It also designs, manufactures, and sells devices, including personal computers (PCs), tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories, that integrate with its cloud-based offerings. It offers an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content, and it provides solution support and consulting services. It also delivers online advertising to a global audience.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MSFT – November 2018 $MSFT

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 $786,398,728,564 1 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.92 1 Pass
3. Earnings Stability Positive EPS for 10 years prior 1 Pass
4. Dividend Record Dividend Payments for 10 years prior 1 Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 44.48% 1 Pass
6. Moderate PEmg Ratio PEmg < 20 32.62 0 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.24 0 Fail
Score 5
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 2.92 1 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.65 1 Pass
3. Earnings Stability Positive EPS for 5 years prior 1 Pass
4. Dividend Record Currently Pays Dividend 1 Pass
5. Earnings Growth EPSmg greater than 5 years ago 1 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.13
MG Growth Estimate 6.80%
MG Value $69.29
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $45.45
MG Value based on 0% Growth $26.64
Market Implied Growth Rate 12.06%
Current Price $102.24
% of Intrinsic Value 147.55%

Microsoft Corporation 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 Overvalued after growing its EPSmg (normalized earnings) from $2.16 in 2015 to an estimated $3.13 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.06% 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 Microsoft Corporation revealed the company was trading above its Graham Number of $32.77. The company pays a dividend of $1.65 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 32.62, which was below the industry average of 54.3, 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 $-0.96.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.96
Graham Number $32.77
PEmg 32.62
Current Ratio 2.92
PB Ratio 9.24
Current Dividend $1.65
Dividend Yield 1.61%
Number of Consecutive Years of Dividend Growth 17

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 $164,195,000,000
Total Current Liabilities $56,277,000,000
Long-Term Debt $69,733,000,000
Total Assets $257,619,000,000
Intangible Assets $43,434,000,000
Total Liabilities $171,652,000,000
Shares Outstanding (Diluted Average) 7,766,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.43
Jun2018 $2.13
Jun2017 $3.25
Jun2016 $2.56
Jun2015 $1.48
Jun2014 $2.63
Jun2013 $2.58
Jun2012 $2.00
Jun2011 $2.69
Jun2010 $2.10
Jun2009 $1.62
Jun2008 $1.87
Jun2007 $1.42
Jun2006 $1.20
Jun2005 $1.12
Jun2004 $0.75
Jun2003 $0.69
Jun2002 $0.48
Jun2001 $0.66
Jun2000 $0.85
Jun1999 $0.71

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.13
Jun2018 $2.46
Jun2017 $2.58
Jun2016 $2.25
Jun2015 $2.16
Jun2014 $2.46
Jun2013 $2.32
Jun2012 $2.14
Jun2011 $2.12
Jun2010 $1.78
Jun2009 $1.56
Jun2008 $1.44
Jun2007 $1.16
Jun2006 $0.97
Jun2005 $0.82
Jun2004 $0.67
Jun2003 $0.65

Recommended Reading:

Other ModernGraham posts about the company

Microsoft Corp Valuation – February 2018 $MSFT
Microsoft Corporation Valuation – February 2017 $MSFT
Microsoft Corporation Valuation – August 2016 $MSFT
Microsoft Corp Valuation – February 2016 $MSFT
Microsoft Corporation Valuation – November 2015 Update $MSFT

Other ModernGraham posts about related companies

Cisco Systems Inc Valuation – November 2018 $CSCO
Kinaxis Inc Valuation – August 2018 $TSE:KXS
CSG Systems International Inc Valuation – August 2018 $CSGS
SPS Commerce Inc Valuation – August 2018 $SPSC
Synchronoss Technologies Inc Valuation – August 2018 $SNCR
ACI Worldwide Inc Valuation – July 2018 $ACIW
Akamai Technologies Inc Valuation – May 2018 $AKAM
Symantec Corp Valuation – April 2018 $SYMC
Intuit Inc Valuation – April 2018 $INTU
CommVault Systems Inc Valuation – April 2018 $CVLT

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.

Cisco Systems Inc Valuation – November 2018 $CSCO

Company Profile (excerpt from Reuters): Cisco Systems, Inc. (Cisco), incorporated on December 10, 1984, is engaged in designing and selling a range of technologies across networking, security, collaboration, applications and the cloud. The Company operates through three geographic segments: Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).The Company’s product and technologies includes, infrastructure platforms; applications; security and other products. It also offers technical support services and advanced services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSCO – November 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 $215,355,529,110 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.29 Pass
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 20.30% Fail
6. Moderate PEmg Ratio PEmg < 20 27.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.29 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 2.29 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.58 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 $1.74
MG Growth Estimate 1.05%
MG Value $18.48
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $25.28
MG Value based on 0% Growth $14.82
Market Implied Growth Rate 9.26%
Current Price $47.11
% of Intrinsic Value 254.96%

Cisco Systems, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the poor dividend history, and 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 Overvalued after growing its EPSmg (normalized earnings) from $1.63 in 2015 to an estimated $1.74 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.26% 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 Cisco Systems, Inc. revealed the company was trading above its Graham Number of $24.63. The company pays a dividend of $1.24 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 27.02, which was below the industry average of 57.15, 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 $-0.77.

Cisco Systems, 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) -$0.77
Graham Number $24.63
PEmg 27.02
Current Ratio 2.29
PB Ratio 5.29
Current Dividend $1.24
Dividend Yield 2.63%
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 7/1/2018
Total Current Assets $61,837,000,000
Total Current Liabilities $27,035,000,000
Long-Term Debt $20,331,000,000
Total Assets $108,784,000,000
Intangible Assets $34,258,000,000
Total Liabilities $65,580,000,000
Shares Outstanding (Diluted Average) 4,848,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.88
Jul2018 $0.02
Jul2017 $1.90
Jul2016 $2.11
Jul2015 $1.75
Jul2014 $1.49
Jul2013 $1.86
Jul2012 $1.49
Jul2011 $1.17
Jul2010 $1.33
Jul2009 $1.05
Jul2008 $1.31
Jul2007 $1.17
Jul2006 $0.89
Jul2005 $0.87
Jul2004 $0.62
Jul2003 $0.50
Jul2002 $0.25
Jul2001 -$0.14
Jul2000 $0.36
Jul1999 $0.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.74
Jul2018 $1.27
Jul2017 $1.87
Jul2016 $1.82
Jul2015 $1.63
Jul2014 $1.54
Jul2013 $1.50
Jul2012 $1.30
Jul2011 $1.21
Jul2010 $1.20
Jul2009 $1.11
Jul2008 $1.08
Jul2007 $0.92
Jul2006 $0.74
Jul2005 $0.58
Jul2004 $0.40
Jul2003 $0.27

Recommended Reading:

Other ModernGraham posts about the company

Cisco Systems Inc Valuation – February 2018 $CSCO
5 Undervalued Dow Components to Research – March 2017
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2017
5 Undervalued Dow Components to Research – February 2017
15 Best Stocks for Value Investors This Week – 1/14/17

Other ModernGraham posts about related companies

Kinaxis Inc Valuation – August 2018 $TSE:KXS
CSG Systems International Inc Valuation – August 2018 $CSGS
SPS Commerce Inc Valuation – August 2018 $SPSC
Synchronoss Technologies Inc Valuation – August 2018 $SNCR
ACI Worldwide Inc Valuation – July 2018 $ACIW
Akamai Technologies Inc Valuation – May 2018 $AKAM
Symantec Corp Valuation – April 2018 $SYMC
Intuit Inc Valuation – April 2018 $INTU
CommVault Systems Inc Valuation – April 2018 $CVLT
Constellation Software Inc Valuation – April 2018 $TSE-CSU

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.

Kinaxis Inc Valuation – August 2018 $TSE:KXS

Company Profile (excerpt from Reuters): Kinaxis Inc. is a provider of cloud-based subscription software for supply chain operations. The Company offers RapidResponse as a collection of cloud-based configurable applications. The Company’s RapidResponse product provides supply chain planning and analytics capabilities that create the foundation for managing multiple, interconnected supply chain management processes, including demand planning, supply planning, inventory management, order fulfillment and capacity planning. The Company’s customers include companies in various industries, including high technology and electronics; aerospace and defense; life sciences and pharmaceuticals; industrial, and automotive. Its sales and operations planning solutions include demand planning, aggregate supply planning, capacity planning (constraints), inventory planning and optimization, and inventory management. The Company’s supply chain management applications include capacity planning, order fulfillment and supplier collaboration.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-KXS – August 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 $2,495,212,529 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.84 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 9300.00% Pass
6. Moderate PEmg Ratio PEmg < 20 107.82 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.52 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 2.84 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.89
MG Growth Estimate 15.00%
MG Value $34.35
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $12.94
MG Value based on 0% Growth $7.58
Market Implied Growth Rate 49.66%
Current Price $96.20
% of Intrinsic Value 280.06%

Kinaxis 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 over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.17 in 2014 to an estimated $0.89 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 49.66% 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 Kinaxis Inc revealed the company was trading above its Graham Number of $13.47. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 107.82, which was above the industry average of 47.04. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.84.

Kinaxis 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) $5.84
Graham Number $13.47
PEmg 107.82
Current Ratio 2.84
PB Ratio 11.52
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 6/1/2018
Total Current Assets $289,554,000
Total Current Liabilities $101,912,000
Long-Term Debt $0
Total Assets $356,681,000
Intangible Assets $0
Total Liabilities $133,266,000
Shares Outstanding (Diluted Average) 26,749,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.29
Dec2017 $0.98
Dec2016 $0.55
Dec2015 $0.69
Dec2014 -$0.01
Dec2013 -$0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.89
Dec2017 $0.57
Dec2016 $0.28
Dec2015 $0.10
Dec2014 -$0.17
Dec2013 -$0.21

Recommended Reading:

Other ModernGraham posts about the company

Kinaxis Inc Valuation – Initial Coverage $TSE:KXS

Other ModernGraham posts about related companies

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Akamai Technologies Inc Valuation – May 2018 $AKAM
Symantec Corp Valuation – April 2018 $SYMC
Intuit Inc Valuation – April 2018 $INTU
CommVault Systems Inc Valuation – April 2018 $CVLT
Constellation Software Inc Valuation – April 2018 $TSE-CSU
Adobe Systems Inc Valuation – April 2018 $ADBE
Synopsys Inc Valuation – April 2018 $SNPS

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.

CSG Systems International Inc Valuation – August 2018 $CSGS

Company Profile (excerpt from Reuters): CSG Systems International, Inc. (CSG), incorporated on October 17, 1994, is a provider of business support solutions primarily serving the communications industry. The Company provides business support solutions (BSS) to the communications service providers (CSPs), as well as clients in various industries. CSG’s solutions coordinate and manage various aspects of a service provider’s customer interactions, from the initial activation of customer accounts, to the support and fulfillment of various services, and through the calculation, presentment, and accounts receivables management of monthly customer statements. Its primary product solutions include Revenue Management & Customer Experience Solutions; Customer Interaction Management; Managed Services; Mediation and Data Management, and Wholesale Settlement and Routing. The Company employs professional services across various sectors, including solution architecture, project management, systems implementation and business consultancy.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSGS – August 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 $1,240,700,031 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.68 Pass
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 89.41% Pass
6. Moderate PEmg Ratio PEmg < 20 18.80 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.48 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 2.68 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.10 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 $1.97
MG Growth Estimate 8.84%
MG Value $51.54
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $28.55
MG Value based on 0% Growth $16.73
Market Implied Growth Rate 5.15%
Current Price $37.02
% of Intrinsic Value 71.83%

CSG Systems International, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, poor dividend history, and the high PB ratio. 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 $1.24 in 2014 to an estimated $1.97 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.15% 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 above the price.

At the time of valuation, further research into CSG Systems International, Inc. revealed the company was trading above its Graham Number of $23.05. The company pays a dividend of $0.79 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.8, which was below the industry average of 47.04, 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 $-1.92.

CSG Systems International, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.92
Graham Number $23.05
PEmg 18.80
Current Ratio 2.68
PB Ratio 3.48
Current Dividend $0.79
Dividend Yield 2.13%
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 6/1/2018
Total Current Assets $514,245,000
Total Current Liabilities $191,766,000
Long-Term Debt $353,904,000
Total Assets $927,231,000
Intangible Assets $318,631,000
Total Liabilities $577,371,000
Shares Outstanding (Diluted Average) 32,908,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.31
Dec2017 $1.87
Dec2016 $1.90
Dec2015 $1.87
Dec2014 $1.06
Dec2013 $1.38
Dec2012 $1.51
Dec2011 $1.28
Dec2010 $0.67
Dec2009 $1.26
Dec2008 $1.54
Dec2007 $1.52
Dec2006 $1.27
Dec2005 $1.09
Dec2004 $0.92
Dec2003 -$0.51
Dec2002 $0.85
Dec2001 $2.08
Dec2000 $1.60
Dec1999 $1.10
Dec1998 $1.62

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.97
Dec2017 $1.74
Dec2016 $1.63
Dec2015 $1.47
Dec2014 $1.24
Dec2013 $1.29
Dec2012 $1.25
Dec2011 $1.16
Dec2010 $1.15
Dec2009 $1.38
Dec2008 $1.38
Dec2007 $1.15
Dec2006 $0.89
Dec2005 $0.76
Dec2004 $0.72
Dec2003 $0.76
Dec2002 $1.41

Recommended Reading:

Other ModernGraham posts about the company

11 Best Stocks for Value Investors This Week – 3/4/17
CSG Systems International Inc Valuation – Initial Coverage $CSGS

Other ModernGraham posts about related companies

SPS Commerce Inc Valuation – August 2018 $SPSC
Synchronoss Technologies Inc Valuation – August 2018 $SNCR
ACI Worldwide Inc Valuation – July 2018 $ACIW
Akamai Technologies Inc Valuation – May 2018 $AKAM
Symantec Corp Valuation – April 2018 $SYMC
Intuit Inc Valuation – April 2018 $INTU
CommVault Systems Inc Valuation – April 2018 $CVLT
Constellation Software Inc Valuation – April 2018 $TSE-CSU
Adobe Systems Inc Valuation – April 2018 $ADBE
Synopsys Inc Valuation – April 2018 $SNPS

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.

SPS Commerce Inc Valuation – August 2018 $SPSC

Company Profile (excerpt from Reuters): SPS Commerce, Inc., incorporated on April 17, 2001, is a provider of cloud-based supply chain management solutions, providing network-proven fulfillment, sourcing and item assortment management solutions, along with retail performance analytics. The Company provides its solutions through the SPS Commerce platform, a cloud-based product suite that manages the way suppliers, retailers, distributors and logistics firms orchestrate the sourcing, set up of new vendors and items, and fulfillment of products that customers buy from retailers and suppliers. The Fulfillment solution provides fulfillment automation and replaces or augments an organization’s existing trading partner electronic communication infrastructure, enabling suppliers to have visibility into the journey of an order and comply with retailers’ rule books and enabling the electronic exchange of information among various trading partners through various protocols.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SPSC – August 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 $1,599,063,521 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.96 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 0.68% Fail
6. Moderate PEmg Ratio PEmg < 20 187.29 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.60 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 4.96 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.50
MG Growth Estimate 15.00%
MG Value $19.33
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $7.28
MG Value based on 0% Growth $4.27
Market Implied Growth Rate 89.40%
Current Price $94.02
% of Intrinsic Value 486.47%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.25 in 2014 to an estimated $0.5 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 89.4% 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 SPS Commerce, Inc. revealed the company was trading above its Graham Number of $21.57. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 187.29, which was above the industry average of 47.04. Finally, the company was trading above its Net Current Asset Value (NCAV) of $10.42.

SPS Commerce, 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) $10.42
Graham Number $21.57
PEmg 187.29
Current Ratio 4.96
PB Ratio 5.60
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 6/1/2018
Total Current Assets $239,886,000
Total Current Liabilities $48,378,000
Long-Term Debt $0
Total Assets $351,673,000
Intangible Assets $64,757,000
Total Liabilities $56,984,000
Shares Outstanding (Diluted Average) 17,549,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.28
Dec2017 -$0.14
Dec2016 $0.33
Dec2015 $0.27
Dec2014 $0.16
Dec2013 $0.07
Dec2012 $0.09
Dec2011 $1.08
Dec2010 $0.25
Dec2009 $0.13
Dec2008 -$6.45

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.50
Dec2017 $0.12
Dec2016 $0.23
Dec2015 $0.23
Dec2014 $0.25
Dec2013 $0.31
Dec2012 -$0.04
Dec2011 -$0.41
Dec2010 -$1.17
Dec2009 -$1.68
Dec2008 -$2.15

Recommended Reading:

Other ModernGraham posts about the company

SPS Commerce Inc Valuation – Initial Coverage $SPSC

Other ModernGraham posts about related companies

Synchronoss Technologies Inc Valuation – August 2018 $SNCR
ACI Worldwide Inc Valuation – July 2018 $ACIW
Akamai Technologies Inc Valuation – May 2018 $AKAM
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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.

Synchronoss Technologies Inc Valuation – August 2018 $SNCR

Company Profile (excerpt from Reuters): Synchronoss Technologies, Inc. (Synchronoss), incorporated on September 19, 2000, is a global software and services company, which provides technologies and services for the mobile transformation of business. The Company’s portfolio in the Consumer and Enterprise markets contains offerings, such as personal cloud, secure-mobility, identity management and scalable messaging platforms, products and solutions. The Company’s products and platforms are designed to enable multiple converged communication services to be managed across a range of distribution channels including e-commerce, m-commerce, telesales, customer stores, indirect and other retail outlets. The Company operates in and markets their solutions and services directly through their sales organizations in North America, Europe, the Middle East and Africa (EMEA), Latin America and the Asia-Pacific region. Synchronoss delivers technologies for mobile transformation to two primary types of customers: service provider and enterprise customers in regulated verticals and use cases.

Downloadable PDF version of this valuation:

ModernGraham Valuation of SNCR – August 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 $175,774,648 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.43 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -586.17% Fail
6. Moderate PEmg Ratio PEmg < 20 -3.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.44 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 3.43 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.82 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$1.32
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$19.18
MG Value based on 0% Growth -$11.24
Market Implied Growth Rate -5.78%
Current Price $4.06
% of Intrinsic Value N/A

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

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.68 in 2014 to an estimated $-1.32 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Synchronoss Technologies, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -3.07, which was below the industry average of 47.04, 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 $-4.78.

Synchronoss Technologies, 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) -$4.78
Graham Number $0.00
PEmg -3.07
Current Ratio 3.43
PB Ratio 0.44
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $390,581,000
Total Current Liabilities $113,910,000
Long-Term Debt $228,057,000
Total Assets $982,900,000
Intangible Assets $370,073,000
Total Liabilities $592,081,000
Shares Outstanding (Diluted Average) 42,181,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$2.39
Dec2017 -$2.45
Dec2016 $0.27
Dec2015 $0.07
Dec2014 $0.96
Dec2013 $0.58
Dec2012 $0.69
Dec2011 $0.43
Dec2010 $0.12
Dec2009 $0.39
Dec2008 $0.37
Dec2007 $0.71
Dec2006 $0.35
Dec2005 $0.50
Dec2004 $0.00
Dec2003 -$0.11
Dec2002 -$0.68
Dec2001 -$1.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.32
Dec2017 -$0.56
Dec2016 $0.42
Dec2015 $0.52
Dec2014 $0.68
Dec2013 $0.51
Dec2012 $0.45
Dec2011 $0.35
Dec2010 $0.34
Dec2009 $0.45
Dec2008 $0.45
Dec2007 $0.42
Dec2006 $0.19
Dec2005 -$0.03
Dec2004 -$0.34
Dec2003 -$0.48
Dec2002 -$0.57

Recommended Reading:

Other ModernGraham posts about the company

Synchronoss Technologies Inc Valuation – Initial Coverage $SNCR

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Adobe Systems Inc Valuation – April 2018 $ADBE
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Autodesk Inc Valuation – April 2018 $ADSK
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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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