U.S. Bancorp Quarterly Valuation – July 2014 $USB

500px-U.S._Bancorp_logo.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to widdle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how U.S. Bancorp (USB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): U.S. Bancorp (U.S. Bancorp) is a multi-state financial services holding company. U.S. Bancorp provides a range of financial services, including lending and depository services, cash management, foreign exchange 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 operates in five segments: Wholesale Banking and Commercial Real Estate, Consumer and Small Business Banking, Wealth Management and Securities Services, Payment Services and Treasury and Corporate Support. U.S. Bancorp’s banking subsidiaries are engaged in the general banking business, principally in domestic markets. In June 2014, the Company acquired Charter One’s retail branch network, as well as small business operations and select middle market client relationships.

USB Chart

USB data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 5/6

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

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend - PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $42.75
MG Value $83.55
MG Opinion Undervalued
Value Based on 3% Growth $40.90
Value Based on 0% Growth $23.98
Market Implied Growth Rate 3.33%
PEmg 15.16
PB Ratio 1.85

Balance Sheet – 3/31/2014

Total Debt $23,774,000,000
Total Assets $371,289,000,000
Intangible Assets $12,626,000,000
Total Liabilities $329,235,000,000
Outstanding Shares 1,821,280,000

Earnings Per Share

2014 (estimate) $3.02
2013 $3.01
2012 $2.84
2011 $2.46
2010 $1.73
2009 $0.97
2008 $1.61
2007 $2.43
2006 $2.61
2005 $2.42
2004 $2.18

Earnings Per Share – ModernGraham 

2014 (estimate) $2.82
2013 $2.55
2012 $2.19
2011 $1.85
2010 $1.66
2009 $1.75

Dividend History

USB Dividend Chart

USB Dividend data by YCharts

Conclusion:

U.S. Bancorp is suitable for the Enterprising Investor as the company passes all of the investor type’s requirements, but is not suitable for the Defensive Investor as it has shown insufficient growth in earnings over the last ten years.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities through a review of ModernGraham’s valuation of Fifth Third Bancorp (FITB) and ModernGraham’s valuation of JP Morgan Chase (JPM).  From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.66 in 2010 to an estimated $2.82 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 3.33% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the market price.

Be sure to check out the previous ModernGraham valuations of U.S. Bancorp (USB) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on U.S. Bancorp (USB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in U.S. Bancorp (USB) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

US Bancorp (USB) Quarterly Valuation – April 2014

500px-U.S._Bancorp_logo.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to widdle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how US Bancorp fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): U.S. Bancorp (U.S. Bancorp) is a multi-state financial services holding company. It provides a range of financial services, including lending and depository services, cash management, foreign exchange 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 operates in five segments: Wholesale Banking and Commercial Real Estate, Consumer and Small Business Banking, Wealth Management and Securities Services, Payment Services and Treasury and Corporate Support.In January 2012, the Company’s bank, U.S. Bank National Association, acquired the banking operations of BankEast. In February 2013, Elavon, global payments provider and wholly owned subsidiary of the Company acquired Collective Point of Sale Solutions Ltd.

USB Chart

USB data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 5/6

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

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

MG Value $83.55
MG Opinion Undervalued
Value Based on 3% Growth $40.90
Value Based on 0% Growth $23.98
Market Implied Growth Rate 2.88%
PEmg 14.26
PB Ratio 1.79

Balance Sheet – 12/31/2013

Total Debt $20,049,000,000
Total Assets $364,021,000,000
Intangible Assets $12,734,000,000
Total Liabilities $322,908,000,000
Outstanding Shares 1,824,750,000

Earnings Per Share

2014 (estimate) $3.02
2013 $3.01
2012 $2.84
2011 $2.46
2010 $1.73
2009 $0.97
2008 $1.61
2007 $2.43
2006 $2.61
2005 $2.42
2004 $2.18

Earnings Per Share – ModernGraham 

2014 (estimate) $2.82
2013 $2.55
2012 $2.19
2011 $1.85
2010 $1.66
2009 $1.75

Dividend History

USB Dividend Chart

USB Dividend data by YCharts

Conclusion:

US Bancorp is suitable for Enterprising Investors but not Defensive Investors, who are concerned about the lack of growth over the last ten years.  Enterprising Investors have a shorter horizon of analysis and are very intrigued by the company.  As a result, Enterprising Investors seeking to follow the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing the company to other opportunities such as through a review of JP Morgan Chase (JPM) and Bank of America Corp (BAC).  From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.66 in 2010 to an estimated $2.82 for 2014.  This solid level of growth outpaces the market’s implied estimate of 2.88% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on US Bancorp (USB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in US Bancorp (USB) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

U.S. Bancorp (USB) Quarterly Valuation

money

U.S. Bancorp is one of the few banks that survived the financial crisis without suffering a loss.  That may make some investors immediately jump on board for the company, but it is important to keep the analysis based on fundamentals.  By using the ModernGraham analysis that we can determine which of those companies may have the least amount of risk going forward, and then compare the fundamental analysis of U.S. Bancorp to any other potential investment.  What follows is how U.S. Bancorp fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): U.S. Bancorp (U.S. Bancorp) is a multi-state financial services holding company. It provides a range of financial services, including lending and depository services, cash management, foreign exchange 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 operates in five segments: Wholesale Banking and Commercial Real Estate, Consumer and Small Business Banking, Wealth Management and Securities Services, Payment Services and Treasury and Corporate Support.In January 2012, the Company’s bank, U.S. Bank National Association, acquired the banking operations of BankEast. In February 2013, Elavon, global payments provider and wholly owned subsidiary of the Company acquired Collective Point of Sale Solutions Ltd.

Defensive and Enterprising Investor Tests:

Defensive Investor – must pass all 6 of the following tests: Score = 5/6

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

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

MG Value $56.64
MG Opinion Undervalued
Value Based on 3% Growth $36.95
Value Based on 0% Growth $21.66
Market Implied Growth Rate 3.63%
PEmg 15.75
PB Ratio 1.83

Balance Sheet – 9/30/2013 

Total Debt $18,750,000,000
Total Assets $360,681,000,000
Intangible Assets $9,173,000,000
Total Liabilities $320,549,000,000
Outstanding Shares 1,831,660,000

Earnings Per Share

2013 $3.01
2012 $2.84
2011 $2.46
2010 $1.73
2009 $0.97
2008 $1.61
2007 $2.43
2006 $2.61
2005 $2.42
2004 $2.18
1999 $1.92

Earnings Per Share – ModernGraham 

2013 $2.55
2012 $2.19
2011 $1.85
2010 $1.66
2009 $1.75
2008 $2.17

Conclusion:

U.S. Bancorp is very impressive, and is in fact one of the healthiest banks I have reviewed using the ModernGraham model.  The company nearly qualifies for the Defensive Investor, which is a very difficult task for financial companies in the wake of the financial crisis.  The only problem a Defensive Investor has with the company is the lack of sufficient growth in earnings over the ten year period.  The Enterprising Investor is not swayed away from the company, though, and should feel comfortable proceeding with further research such as a review of ModernGraham’s valuation of JP Morgan (JPM) or ModernGraham’s valuation of Capital One Financial (COF).  From a valuation perspective, the company has grown its EPSmg (normalized earnings) from $1.75 in 2009 to $2.55 for 2013.  While this is not a huge level of growth, the market is only implying a growth estimate of 3.63%, which is more than supported by the growth seen historically.  As a result, the intrinsic value of the company is significantly higher than the market price, and the company appears to be undervalued.

What do you think?  What value do you place on U.S. Bancorp?  Is the company suitable only for Enterprising Investors?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in U.S. Bancorp (USB) or any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Photo Credit:  Andrew Magill

JPMorgan Chase & Co Valuation – April 2019 #JPM

Company Profile (excerpt from Reuters): JPMorgan Chase & Co. (JPMorgan Chase), incorporated on October 28, 1968, is a financial holding company. The Company is engaged in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management. JPMorgan Chase’s activities are organized into four business segments, as well as a Corporate segment. The Company’s segments include Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management. Its principal bank subsidiaries include JPMorgan Chase Bank, National Association (JPMorgan Chase Bank, N.A.), a national banking association, and Chase Bank USA, National Association (Chase Bank USA, N.A.), a national banking association that is the Company’s credit card-issuing bank. JPMorgan Chase’s principal nonbank subsidiary is J.P. Morgan Securities LLC (JPMorgan Securities), the United States investment banking firm. The bank and nonbank subsidiaries of JPMorgan Chase operate nationally, as well as through overseas branches and subsidiaries, representative offices and subsidiary foreign banks. The Company’s principal operating subsidiary in the United Kingdom is J.P. Morgan Securities plc, a subsidiary of JPMorgan Chase Bank, N.A.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JPM – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $345,203,229,629 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 75.51% Pass
5. Moderate PEmg Ratio PEmg < 20 13.57 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.38 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 $7.76
MG Growth Estimate 7.10%
MG Value $176.18
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $112.58
MG Value based on 0% Growth $65.99
Market Implied Growth Rate 2.54%
Current Price $105.37
% of Intrinsic Value 59.81%

JPMorgan Chase & Co. 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 $5.27 in 2015 to an estimated $7.76 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.54% 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 JPMorgan Chase & Co. revealed the company was trading below its Graham Number of $116.88. The company pays a dividend of $2.72 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 13.57, which was below the industry average of 15.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

JPMorgan Chase & Co. fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $116.88
PEmg 13.57
PB Ratio 1.38
Dividend Yield 2.58%
TTM Dividend $2.72
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 $282,031,000,000
Total Assets $2,622,532,000,000
Intangible Assets $54,349,000,000
Total Liabilities $2,366,017,000,000
Shares Outstanding (Diluted Average) 3,347,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.63
Dec2018 $9.00
Dec2017 $6.31
Dec2016 $6.19
Dec2015 $6.00
Dec2014 $5.29
Dec2013 $4.34
Dec2012 $5.20
Dec2011 $4.48
Dec2010 $3.96
Dec2009 $2.26
Dec2008 $1.35
Dec2007 $4.38
Dec2006 $4.04
Dec2005 $2.38
Dec2004 $1.55
Dec2003 $3.24
Dec2002 $0.80
Dec2001 $0.80
Dec2000 $2.86
Dec1999 $3.69

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.76
Dec2018 $7.07
Dec2017 $5.95
Dec2016 $5.65
Dec2015 $5.27
Dec2014 $4.82
Dec2013 $4.41
Dec2012 $4.11
Dec2011 $3.47
Dec2010 $3.05
Dec2009 $2.69
Dec2008 $2.85
Dec2007 $3.44
Dec2006 $2.78
Dec2005 $2.01
Dec2004 $1.84
Dec2003 $2.08

Recommended Reading:

Other ModernGraham posts about the company

JPMorgan Chase & Co Valuation – November 2018 $JPM
JPMorgan Chase & Co Valuation – February 2018 $JPM
10 Best Dividend Paying Stocks for the Defensive Investor – August 2016
5 Most Undervalued Stocks in the Dow – August 2016
10 Low PE Stock Picks for the Defensive Investor – August 2016

Other ModernGraham posts about related companies

Wells Fargo & Co Valuation – April 2019 #WFC
SunTrust Banks Inc Valuation – March 2019 #STI
Comerica Inc Valuation – March 2019 #CMA
SVB Financial Group Valuation – March 2019 #SIVB
US Bancorp Valuation – March 2019 #USB
Citizens Financial Group Inc Valuation – February 2019 $CFG
BB&T Corp Valuation – February 2019 $BBT
M&T Bank Corp Valuation – February 2019 $MTB
Bank of America Corp Valuation – January 2019 $BAC
Fifth Third Bancorp Valuation – January 2019 $FITB

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.

Maxim Integrated Products Inc Valuation – April 2019 #MXIM

Company Profile (excerpt from Reuters): Maxim Integrated Products, Inc., incorporated on August 19, 1987, is engaged in designing, developing, manufacturing and marketing a range of linear and mixed-signal integrated circuits, referred to as analog circuits. The Company also provides a range of high-frequency process technologies and capabilities for use in custom designs. The Company caters to automotive, communications and data center, computing, consumer and industrial markets. The Company offers a range of products, such as switching regulators, battery management, isolated power, charge pumps, linear regulators, light emitting diode (LED) drivers, motor driver integrated circuits (ICs), monitors and sequencers, transceivers, controllers and expanders, level translators, signal line protection ICs, broadband switches, universal serial bus (USB) products, current loop products, powerline communications, real-time clocks, embedded security, microcontrollers, 1-Wire, iButton, data loggers, clock generation and distribution, memory products, optical, signal integrity, high-speed signaling, and display power and control.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MXIM – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,578,217,914 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.54 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 76.97% Pass
6. Moderate PEmg Ratio PEmg < 20 33.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.09 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 6.54 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.44 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 $1.73
MG Growth Estimate 7.55%
MG Value $40.74
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $25.03
MG Value based on 0% Growth $14.67
Market Implied Growth Rate 12.26%
Current Price $56.99
% of Intrinsic Value 139.88%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.15 in 2015 to an estimated $1.73 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.26% 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 Maxim Integrated Products Inc. revealed the company was trading above its Graham Number of $18.6. The company pays a dividend of $1.56 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 33.02, which was below the industry average of 35.4, 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 $1.87.

Maxim Integrated Products 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) $1.87
Graham Number $18.60
PEmg 33.02
Current Ratio 6.54
PB Ratio 9.09
Current Dividend $1.56
Dividend Yield 2.74%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,657,918,000
Total Current Liabilities $406,480,000
Long-Term Debt $991,866,000
Total Assets $3,888,927,000
Intangible Assets $599,412,000
Total Liabilities $2,133,513,000
Shares Outstanding (Diluted Average) 280,008,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.22
Jun2018 $1.64
Jun2017 $1.98
Jun2016 $0.79
Jun2015 $0.71
Jun2014 $1.23
Jun2013 $1.52
Jun2012 $1.29
Jun2011 $1.61
Jun2010 $0.40
Jun2009 $0.03
Jun2008 $0.98
Jun2007 $0.87
Jun2006 $1.14
Jun2005 $1.35
Jun2004 $0.88
Jun2003 $0.70
Jun2002 $0.73
Jun2001 $0.93
Jun2000 $1.04
Jun1999 $0.64

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.73
Jun2018 $1.41
Jun2017 $1.28
Jun2016 $0.99
Jun2015 $1.15
Jun2014 $1.31
Jun2013 $1.23
Jun2012 $1.01
Jun2011 $0.84
Jun2010 $0.53
Jun2009 $0.69
Jun2008 $1.03
Jun2007 $1.03
Jun2006 $1.06
Jun2005 $0.98
Jun2004 $0.82
Jun2003 $0.80

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

Skyworks Solutions Inc Valuation – March 2019 #SWKS
Garmin Ltd Valuation – March 2019 #GRMN
Hewlett Packard Enterprise Co Valuation – March 2019 #HPE
Fortive Corp Valuation – March 2019 #FTV
Analog Devices Inc Valuation – March 2019 #ADI
IPG Photonics Corp Valuation – March 2019 #IPGP
Micron Technology Inc Valuation – March 2019 #MU
Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC

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.

Wells Fargo & Co Valuation – April 2019 #WFC

Company Profile (excerpt from Reuters): Wells Fargo & Company, incorporated on January 24, 1929, is a bank holding company. The Company is a diversified financial services company. The Company has three operating segments: Community Banking, Wholesale Banking, and Wealth and Investment Management. The Company provides retail, commercial and corporate banking services through banking locations and offices, the Internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia and in other countries. The Company provides other financial services through its subsidiaries engaged in various businesses, principally: wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, insurance agency and brokerage services, computer and data processing services, trust services, investment advisory services, mortgage-backed securities servicing and venture capital investment. The Company has its administrative facilities at various locations, including Phoenix, Arizona; San Francisco, California; San Jose, California; Greenwood Village, Colorado; Littleton, Colorado; Rochester, Minnesota; St. Louis, Missouri; Las Vegas, Nevada; Portland, Oregon, and Austin, Texas. The Company offers approximately 13,000 automated teller machines (ATMs) and over 6,000 retail banking stores coast to coast.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WFC – April 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $220,466,305,698 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 55.90% Pass
5. Moderate PEmg Ratio PEmg < 20 11.21 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.16 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 $4.33
MG Growth Estimate 1.75%
MG Value $52.06
Opinion Fairly Valued
MG Grade A-
MG Value based on 3% Growth $62.85
MG Value based on 0% Growth $36.84
Market Implied Growth Rate 1.36%
Current Price $48.61
% of Intrinsic Value 93.38%

Wells Fargo & Co 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 $3.88 in 2015 to an estimated $4.33 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 1.36% 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 Wells Fargo & Co revealed the company was trading below its Graham Number of $63.18. The company pays a dividend of $1.64 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.21, which was below the industry average of 15.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Wells Fargo & Co fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $63.18
PEmg 11.21
PB Ratio 1.16
Dividend Yield 3.37%
TTM Dividend $1.64
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 $229,044,000,000
Total Assets $1,895,883,000,000
Intangible Assets $43,055,000,000
Total Liabilities $1,698,817,000,000
Shares Outstanding (Diluted Average) 4,698,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.70
Dec2018 $4.28
Dec2017 $4.10
Dec2016 $3.99
Dec2015 $4.12
Dec2014 $4.10
Dec2013 $3.89
Dec2012 $3.36
Dec2011 $2.82
Dec2010 $2.21
Dec2009 $1.75
Dec2008 $0.70
Dec2007 $2.38
Dec2006 $2.47
Dec2005 $2.25
Dec2004 $2.05
Dec2003 $1.83
Dec2002 $1.58
Dec2001 $0.99
Dec2000 $1.16
Dec1999 $1.15

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.33
Dec2018 $4.14
Dec2017 $4.06
Dec2016 $3.99
Dec2015 $3.88
Dec2014 $3.60
Dec2013 $3.17
Dec2012 $2.59
Dec2011 $2.13
Dec2010 $1.83
Dec2009 $1.73
Dec2008 $1.80
Dec2007 $2.30
Dec2006 $2.18
Dec2005 $1.94
Dec2004 $1.69
Dec2003 $1.46

Recommended Reading:

Other ModernGraham posts about the company

Wells Fargo & Co Valuation – June 2018 $WFC
10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2018
Wells Fargo & Co Valuation – August 2017 $WFC
10 Undervalued Companies for the Defensive Dividend Stock Investor – January 2017
10 Undervalued Companies for the Defensive Dividend Stock Investor – December 2016

Other ModernGraham posts about related companies

Comerica Inc Valuation – March 2019 #CMA
SVB Financial Group Valuation – March 2019 #SIVB
US Bancorp Valuation – March 2019 #USB
Citizens Financial Group Inc Valuation – February 2019 $CFG
BB&T Corp Valuation – February 2019 $BBT
M&T Bank Corp Valuation – February 2019 $MTB
Bank of America Corp Valuation – January 2019 $BAC
Fifth Third Bancorp Valuation – January 2019 $FITB
Zions Bancorp Valuation – January 2019 $ZION
Regions Financial Corp Valuation – January 2019 $RF

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.

SunTrust Banks Inc Valuation – March 2019 #STI

Company Profile (excerpt from Reuters): SunTrust Banks, Inc., incorporated on July 24, 1984, is a provider of financial services. The Company’s principal subsidiary is SunTrust Bank (the Bank). The Company’s business segments include Consumer Banking and Private Wealth Management, Wholesale Banking, Mortgage Banking and Corporate Other. The Company offers a line of financial services for consumers, businesses, corporations, institutions and not-for-profit entities, both through its branches (located primarily in Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee, Virginia, and the District of Columbia), and through other national delivery channels. The Bank provides clients with a selection of full-, self- and assisted-service channels, including branch, call center, Teller Connect machines, automated teller machines (ATMs), Internet, mobile and tablet. The Company’s other subsidiaries provide capital markets, mortgage banking, securities brokerage, online consumer lending, and asset and wealth management services. As of December 31, 2016, the Company had total deposits of $160 billion. As of December 31, 2016, the Company’s total loans held for investment amounted to $143.3 billion.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of STI – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $26,262,864,675 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 261.38% Pass
5. Moderate PEmg Ratio PEmg < 20 11.90 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.11 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 $4.98
MG Growth Estimate 9.27%
MG Value $134.65
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $72.21
MG Value based on 0% Growth $42.33
Market Implied Growth Rate 1.70%
Current Price $59.25
% of Intrinsic Value 44.00%

SunTrust Banks, Inc. 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 $3.08 in 2015 to an estimated $4.98 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.7% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into SunTrust Banks, Inc. revealed the company was trading below its Graham Number of $78.57. The company pays a dividend of $1.8 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.9, which was below the industry average of 16.75, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

SunTrust Banks, Inc. fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $78.57
PEmg 11.90
PB Ratio 1.11
Dividend Yield 3.04%
TTM Dividend $1.80
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 $15,460,000,000
Total Assets $215,543,000,000
Intangible Assets $8,393,000,000
Total Liabilities $191,263,000,000
Shares Outstanding (Diluted Average) 452,826,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.51
Dec2018 $5.74
Dec2017 $4.47
Dec2016 $3.60
Dec2015 $3.58
Dec2014 $3.23
Dec2013 $2.41
Dec2012 $3.59
Dec2011 $0.94
Dec2010 -$0.18
Dec2009 -$3.98
Dec2008 $2.12
Dec2007 $4.55
Dec2006 $5.82
Dec2005 $5.47
Dec2004 $5.19
Dec2003 $4.73
Dec2002 $4.66
Dec2001 $4.72
Dec2000 $4.30
Dec1999 $4.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.98
Dec2018 $4.52
Dec2017 $3.76
Dec2016 $3.36
Dec2015 $3.08
Dec2014 $2.55
Dec2013 $1.66
Dec2012 $1.02
Dec2011 $0.06
Dec2010 $0.30
Dec2009 $1.29
Dec2008 $4.16
Dec2007 $5.17
Dec2006 $5.38
Dec2005 $5.09
Dec2004 $4.84
Dec2003 $4.61

Recommended Reading:

Other ModernGraham posts about the company

SunTrust Banks Inc Valuation – June 2018 $STI
SunTrust Banks Inc Valuation – April 2017 $STI
10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017
21 Best Undervalued Stocks of the Week – 8/27/16
Best Stocks Below Their Graham Number – August 2016

Other ModernGraham posts about related companies

Comerica Inc Valuation – March 2019 #CMA
SVB Financial Group Valuation – March 2019 #SIVB
US Bancorp Valuation – March 2019 #USB
Citizens Financial Group Inc Valuation – February 2019 $CFG
BB&T Corp Valuation – February 2019 $BBT
M&T Bank Corp Valuation – February 2019 $MTB
Bank of America Corp Valuation – January 2019 $BAC
Fifth Third Bancorp Valuation – January 2019 $FITB
Zions Bancorp Valuation – January 2019 $ZION
Regions Financial Corp Valuation – January 2019 $RF

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.

Comerica Inc Valuation – March 2019 #CMA

Company Profile (excerpt from Reuters): Comerica Incorporated, incorporated on November 13, 1972, is a financial services company. The Company’s principal activity is lending to and accepting deposits from businesses and individuals. The Company’s segments include the Business Bank, the Retail Bank, Wealth Management, Finance and Other. The Business Bank serves middle market businesses, multinational corporations and governmental entities by offering various products and services, including commercial loans and lines of credit, deposits, cash management, capital market products, international trade finance, letters of credit, foreign exchange management services and loan syndication services. The Retail Bank includes small business banking and personal financial services, consisting of consumer lending, consumer deposit gathering and mortgage loan origination. In addition to a range of financial services provided to small business customers, this business segment offers a range of consumer products, including deposit accounts, installment loans, credit cards, student loans, home equity lines of credit and residential mortgage loans.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CMA – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,991,666,519 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 238.83% Pass
5. Moderate PEmg Ratio PEmg < 20 13.98 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.81 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 $5.88
MG Growth Estimate 15.00%
MG Value $226.56
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $85.33
MG Value based on 0% Growth $50.02
Market Implied Growth Rate 2.74%
Current Price $82.27
% of Intrinsic Value 36.31%

Comerica Incorporated 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 $2.85 in 2015 to an estimated $5.88 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.74% 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 Comerica Incorporated revealed the company was trading below its Graham Number of $90.55. The company pays a dividend of $1.84 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.98, which was below the industry average of 16.75, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Comerica Incorporated fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $90.55
PEmg 13.98
PB Ratio 1.81
Dividend Yield 2.24%
TTM Dividend $1.84
Number of Consecutive Years of Dividend Growth 9

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $6,463,000,000
Total Assets $70,818,000,000
Intangible Assets $0
Total Liabilities $63,311,000,000
Shares Outstanding (Diluted Average) 165,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.77
Dec2018 $7.20
Dec2017 $4.14
Dec2016 $2.68
Dec2015 $2.84
Dec2014 $3.16
Dec2013 $2.85
Dec2012 $2.67
Dec2011 $2.09
Dec2010 $0.88
Dec2009 -$0.79
Dec2008 $1.28
Dec2007 $4.43
Dec2006 $5.49
Dec2005 $5.11
Dec2004 $4.36
Dec2003 $3.75
Dec2002 $3.40
Dec2001 $3.88
Dec2000 $4.31
Dec1999 $4.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.88
Dec2018 $4.63
Dec2017 $3.27
Dec2016 $2.84
Dec2015 $2.85
Dec2014 $2.68
Dec2013 $2.14
Dec2012 $1.60
Dec2011 $1.24
Dec2010 $1.30
Dec2009 $2.04
Dec2008 $3.68
Dec2007 $4.79
Dec2006 $4.79
Dec2005 $4.33
Dec2004 $3.94
Dec2003 $3.78

Recommended Reading:

Other ModernGraham posts about the company

Comerica Inc Valuation – June 2018 $CMA
11 Best Stocks for Value Investors This Week – 3/4/17
Comerica Inc Valuation – March 2017 $CMA
21 Best Undervalued Stocks of the Week – 8/27/16
Comerica Inc Valuation – August 2016 $CMA

Other ModernGraham posts about related companies

SVB Financial Group Valuation – March 2019 #SIVB
US Bancorp Valuation – March 2019 #USB
Citizens Financial Group Inc Valuation – February 2019 $CFG
BB&T Corp Valuation – February 2019 $BBT
M&T Bank Corp Valuation – February 2019 $MTB
Bank of America Corp Valuation – January 2019 $BAC
Fifth Third Bancorp Valuation – January 2019 $FITB
Zions Bancorp Valuation – January 2019 $ZION
Regions Financial Corp Valuation – January 2019 $RF
Huntington Bancshares Inc Valuation – January 2019 $HBAN

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.

SVB Financial Group Valuation – March 2019 #SIVB

Company Profile (excerpt from Reuters): SVB Financial Group (SVB Financial), incorporated on March 22, 1999, is a diversified financial services company, as well as a bank holding and a financial holding company. The Company operates through three segments: Global Commercial Bank, SVB Private Bank and SVB Capital. The Company, through its subsidiaries and divisions, offers a range of banking and financial products and services to clients across the United States. The Company offers services in the technology, life science/healthcare, private equity/venture capital and wine industries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SIVB – March 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,930,426,391 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
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 361.84% Pass
5. Moderate PEmg Ratio PEmg < 20 16.91 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.50 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 $14.52
MG Growth Estimate 15.00%
MG Value $558.84
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $210.47
MG Value based on 0% Growth $123.38
Market Implied Growth Rate 4.21%
Current Price $245.49
% of Intrinsic Value 43.93%

SVB Financial Group does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with 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 $5.34 in 2015 to an estimated $14.52 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.21% 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 SVB Financial Group revealed the company was trading above its Graham Number of $205.49. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 16.91, which was above the industry average of 16.75.

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

Stage 3: Information for Further Research

Graham Number $205.49
PEmg 16.91
PB Ratio 2.50
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 $696,465,000
Total Assets $56,927,979,000
Intangible Assets $0
Total Liabilities $51,663,136,000
Shares Outstanding (Diluted Average) 53,688,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $19.29
Dec2018 $18.11
Dec2017 $9.20
Dec2016 $7.31
Dec2015 $6.62
Dec2014 $5.31
Dec2013 $4.67
Dec2012 $3.91
Dec2011 $3.94
Dec2010 $2.24
Dec2009 $0.66
Dec2008 $2.16
Dec2007 $3.37
Dec2006 $2.38
Dec2005 $2.40
Dec2004 $1.70
Dec2003 $0.35
Dec2002 $1.21
Dec2001 $1.79
Dec2000 $3.23
Dec1999 $1.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $14.52
Dec2018 $11.19
Dec2017 $7.36
Dec2016 $6.15
Dec2015 $5.34
Dec2014 $4.47
Dec2013 $3.73
Dec2012 $3.03
Dec2011 $2.56
Dec2010 $1.96
Dec2009 $1.95
Dec2008 $2.53
Dec2007 $2.49
Dec2006 $1.90
Dec2005 $1.60
Dec2004 $1.36
Dec2003 $1.31

Recommended Reading:

Other ModernGraham posts about the company

SVB Financial Group Valuation – June 2018 $SIVB
SVB Financial Group Valuation – Initial Coverage $SIVB

Other ModernGraham posts about related companies

US Bancorp Valuation – March 2019 #USB
Citizens Financial Group Inc Valuation – February 2019 $CFG
BB&T Corp Valuation – February 2019 $BBT
M&T Bank Corp Valuation – February 2019 $MTB
Bank of America Corp Valuation – January 2019 $BAC
Fifth Third Bancorp Valuation – January 2019 $FITB
Zions Bancorp Valuation – January 2019 $ZION
Regions Financial Corp Valuation – January 2019 $RF
Huntington Bancshares Inc Valuation – January 2019 $HBAN
PNC Financial Services Group Inc Valuation – January 2019 $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.

ServisFirst Bancshares Inc Valuation – July 2018 $SFBS

Company Profile (excerpt from Reuters): ServisFirst Bancshares, Inc., incorporated on August 16, 2007, is a bank holding company whose business is conducted by its subsidiary, ServisFirst Bank (the Bank). The Company’s principal business is to accept deposits from the public and to make loans and other investments. The Company, through its bank, originates commercial, consumer and other loans; accept deposits; provides electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services, and provides correspondent banking services to other financial institutions. The Company offers a range of products and services, including round the clock telephone banking, direct deposit, Internet banking, mobile banking, traveler’s checks, safe deposit boxes, attorney trust accounts and automatic account transfers. It also participates in a shared network of automated teller machines and a debit card system. Additionally, it offers Visa credit cards.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SFBS – July 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,190,725,210 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 872.79% Pass
5. Moderate PEmg Ratio PEmg < 20 23.09 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.48 Fail
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.82
MG Growth Estimate 15.00%
MG Value $70.04
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $26.38
MG Value based on 0% Growth $15.46
Market Implied Growth Rate 7.30%
Current Price $42.01
% of Intrinsic Value 59.98%

ServisFirst Bancshares, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, 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 Undervalued after growing its EPSmg (normalized earnings) from $0.85 in 2014 to an estimated $1.82 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.3% 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 above the price.

At the time of valuation, further research into ServisFirst Bancshares, Inc. revealed the company was trading above its Graham Number of $25.28. The company pays a dividend of $0.2 per share, for a yield of 0.5% Its PEmg (price over earnings per share – ModernGraham) was 23.09, which was above the industry average of 20.05.

ServisFirst Bancshares, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Graham Number $25.28
PEmg 23.09
PB Ratio 3.48
Dividend Yield 0.48%
TTM Dividend $0.20
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 6/1/2018
Long-Term Debt & Capital Lease Obligation $64,648,000
Total Assets $7,084,562,000
Intangible Assets $14,584,000
Total Liabilities $6,429,448,000
Shares Outstanding (Diluted Average) 54,196,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.48
Dec2017 $1.72
Dec2016 $1.52
Dec2015 $1.20
Dec2014 $1.05
Dec2013 $0.95
Dec2012 $0.83
Dec2011 $0.59

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.82
Dec2017 $1.42
Dec2016 $1.22
Dec2015 $1.02
Dec2014 $0.85
Dec2013 $0.65
Dec2012 $0.43
Dec2011 $0.20

Recommended Reading:

Other ModernGraham posts about the company

ServisFirst Bancshares Inc Valuation – Initial Coverage $SFBS

Other ModernGraham posts about related companies

Cullen/Frost Bankers Inc Valuation – July 2018 $CFR
Signature Bank Valuation – July 2018 $SBNY
City Holding Co Valuation – July 2018 $CHCO
Southside Bancshares Inc Valuation – July 2018 $SBSI
Independent Bank Corp Valuation – July 2018 $INDB
Wells Fargo & Co Valuation – June 2018 $WFC
SunTrust Banks Inc Valuation – June 2018 $STI
Comerica Inc Valuation – June 2018 $CMA
SVB Financial Group Valuation – June 2018 $SIVB
US Bancorp Valuation – May 2018 $USB

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.

Back To Top