Huntington Ingalls Industries Inc Valuation – February 2019 $HII

Company Profile (excerpt from Reuters): Huntington Ingalls Industries, Inc., incorporated on August 4, 2010, is a military shipbuilding company and a provider of professional services to partners in government and industry. The Company’s business consists of the design, construction, repair and maintenance of nuclear-powered ships and non-nuclear ships for the United States Navy and coastal defense surface ships for the United States Coast Guard, as well as the refueling and overhaul and inactivation of nuclear-powered ships for the United States Navy. The Company operates through three segments: Ingalls Shipbuilding (Ingalls), Newport News Shipbuilding (Newport News) and Technical Solutions. The Company’s Ingalls segment includes its non-nuclear ship design, construction, repair and maintenance businesses. The Company’s Newport News includes all of its nuclear ship design, construction, overhaul, refueling, and repair and maintenance businesses. The Company’s Technical Solutions segment provides a range of professional services, including fleet support, integrated missions solutions, and nuclear and environmental and oil and gas services, to the governmental, energy, and oil and gas markets. The Company conducts majority of its business with the United States Government, principally the Department of Defense (DoD).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HII – 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 $9,109,897,923 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.14 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 6282.54% Pass
6. Moderate PEmg Ratio PEmg < 20 17.17 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.16 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 1.14 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.62 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $12.66
MG Growth Estimate 15.00%
MG Value $487.38
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $183.56
MG Value based on 0% Growth $107.60
Market Implied Growth Rate 4.34%
Current Price $217.42
% of Intrinsic Value 44.61%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.16 in 2014 to an estimated $12.66 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.34% 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 Huntington Ingalls Industries Inc revealed the company was trading above its Graham Number of $124.28. The company pays a dividend of $2.52 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 17.17, which was below the industry average of 53.93, 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 $-58.08.

Huntington Ingalls Industries 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) -$58.08
Graham Number $124.28
PEmg 17.17
Current Ratio 1.14
PB Ratio 5.16
Current Dividend $2.52
Dividend Yield 1.16%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,859,000,000
Total Current Liabilities $1,631,000,000
Long-Term Debt $1,282,000,000
Total Assets $6,199,000,000
Intangible Assets $1,697,000,000
Total Liabilities $4,374,000,000
Shares Outstanding (Diluted Average) 43,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.61
Dec2017 $10.46
Dec2016 $12.14
Dec2015 $8.36
Dec2014 $6.86
Dec2013 $5.18
Dec2012 $2.91
Dec2011 -$2.05
Dec2010 $2.68

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.66
Dec2017 $9.66
Dec2016 $8.53
Dec2015 $5.90
Dec2014 $4.16
Dec2013 $2.45
Dec2012 $0.96
Dec2011 $0.03
Dec2010 $0.89

Recommended Reading:

Other ModernGraham posts about the company

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

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Lockheed Martin Corp Valuation – January 2019 $LMT
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Axon Enterprises Inc Valuation – October 2018 $AAXN
Cubic Corp Valuation – September 2018 $CUB
KLX Inc Valuation – August 2018 $KLXI
Kaman Corp Valuation – August 2018 $KAMN
Raytheon Co Valuation – June 2018 $RTN

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.

L3 Technologies Inc Valuation – January 2019 $LLL

Company Profile (excerpt from Reuters): L3 Technologies, Inc., formerly L-3 Communications Holdings, Inc., incorporated on March 20, 1997, is a prime contractor in Intelligence, Surveillance and Reconnaissance (ISR) systems, aircraft sustainment, simulation and training, night vision and image intensification equipment and security and detection systems. The Company provides a broad range of communication and electronic systems and products used on military and commercial platforms. It operates through three segments: Electronic Systems, Communication Systems and Intelligence, Surveillance & Reconnaissance (ISR) Systems segment. The Company’s customers include the United States Department of Defense (DoD) and its prime contractors, the United States Government intelligence agencies, the United States Department of Homeland Security (DHS), foreign governments, and domestic and international commercial customers.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LLL – 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 $14,315,953,468 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.96 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 20.03% Fail
6. Moderate PEmg Ratio PEmg < 20 21.88 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 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 1.96 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.53 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.31
MG Growth Estimate 0.42%
MG Value $77.57
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $120.44
MG Value based on 0% Growth $70.60
Market Implied Growth Rate 6.69%
Current Price $181.70
% of Intrinsic Value 234.24%

L3 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 low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $8.08 in 2014 to an estimated $8.31 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.69% 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 L3 Technologies Inc revealed the company was trading above its Graham Number of $134.83. The company pays a dividend of $3 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 21.88, which was below the industry average of 47.17, 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 $-38.26.

L3 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) -$38.26
Graham Number $134.83
PEmg 21.88
Current Ratio 1.96
PB Ratio 2.53
Current Dividend $3.00
Dividend Yield 1.65%
Number of Consecutive Years of Dividend Growth 14

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 $4,435,000,000
Total Current Liabilities $2,260,000,000
Long-Term Debt $3,320,000,000
Total Assets $13,184,000,000
Intangible Assets $7,248,000,000
Total Liabilities $7,473,000,000
Shares Outstanding (Diluted Average) 79,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.38
Dec2017 $8.51
Dec2016 $9.01
Dec2015 -$2.97
Dec2014 $7.56
Dec2013 $8.24
Dec2012 $8.03
Dec2011 $9.05
Dec2010 $8.25
Dec2009 $7.61
Dec2008 $7.59
Dec2007 $5.98
Dec2006 $4.22
Dec2005 $4.20
Dec2004 $3.33
Dec2003 $2.62
Dec2002 $1.93
Dec2001 $1.47
Dec2000 $1.19
Dec1999 $0.88
Dec1998 $0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.31
Dec2017 $6.20
Dec2016 $5.36
Dec2015 $4.35
Dec2014 $8.08
Dec2013 $8.31
Dec2012 $8.26
Dec2011 $8.15
Dec2010 $7.38
Dec2009 $6.60
Dec2008 $5.75
Dec2007 $4.58
Dec2006 $3.67
Dec2005 $3.17
Dec2004 $2.47
Dec2003 $1.90
Dec2002 $1.43

Recommended Reading:

Other ModernGraham posts about the company

L3 Technologies Inc Valuation – March 2018 $LLL
L-3 Communications Holdings Inc Valuation – July 2016 $LLL
47 Companies in the Spotlight This Week – 5/16/15
L3 Communications Holdings Inc. Quarterly Valuation – May 2015 $LLL
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Other ModernGraham posts about related companies

Textron Inc Valuation – January 2019 $TXT
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United Technologies Corp Valuation – November 2018 $UTX
Boeing Co Valuation – November 2018 $BA
Axon Enterprises Inc Valuation – October 2018 $AAXN
Cubic Corp Valuation – September 2018 $CUB
KLX Inc Valuation – August 2018 $KLXI
Kaman Corp Valuation – August 2018 $KAMN
Raytheon Co Valuation – June 2018 $RTN
General Dynamics Corp Valuation – June 2018 $GD

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.

Textron Inc Valuation – January 2019 $TXT

Company Profile (excerpt from Reuters): Textron Inc., incorporated on July 31, 1967, is a multi-industry company engaged in aircraft, defense, industrial and finance businesses to provide customers with products and services across the world. The Company operates through five segments: Textron Aviation, Bell, Textron Systems, Industrial and Finance.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TXT – 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 $11,701,001,722 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.06 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 891.58% Pass
6. Moderate PEmg Ratio PEmg < 20 15.69 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.17 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.06 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.06 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 $3.07
MG Growth Estimate 12.07%
MG Value $100.14
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $44.50
MG Value based on 0% Growth $26.08
Market Implied Growth Rate 3.60%
Current Price $48.16
% of Intrinsic Value 48.09%

Textron Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the insufficient earnings stability over the last ten years. 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 $1.7 in 2014 to an estimated $3.07 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.6% 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 Textron Inc. revealed the company was trading above its Graham Number of $48.04. The company pays a dividend of $0.08 per share, for a yield of 0.2% Its PEmg (price over earnings per share – ModernGraham) was 15.69, which was below the industry average of 47.17, 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 $-8.3.

Textron Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.30
Graham Number $48.04
PEmg 15.69
Current Ratio 2.06
PB Ratio 2.17
Current Dividend $0.08
Dividend Yield 0.17%
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 $7,055,000,000
Total Current Liabilities $3,423,000,000
Long-Term Debt $3,857,000,000
Total Assets $14,669,000,000
Intangible Assets $2,209,000,000
Total Liabilities $9,126,000,000
Shares Outstanding (Diluted Average) 249,378,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.75
Dec2017 $1.14
Dec2016 $3.53
Dec2015 $2.50
Dec2014 $2.13
Dec2013 $1.75
Dec2012 $2.00
Dec2011 $0.79
Dec2010 $0.28
Dec2009 -$0.12
Dec2008 $1.94
Dec2007 $3.60
Dec2006 $2.31
Dec2005 $0.75
Dec2004 $1.31
Dec2003 $0.95
Dec2002 -$0.45
Dec2001 $0.58
Dec2000 $0.75
Dec1999 $1.91
Dec1998 $1.37

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.07
Dec2017 $2.22
Dec2016 $2.64
Dec2015 $2.07
Dec2014 $1.70
Dec2013 $1.30
Dec2012 $1.05
Dec2011 $0.81
Dec2010 $1.08
Dec2009 $1.56
Dec2008 $2.26
Dec2007 $2.20
Dec2006 $1.33
Dec2005 $0.76
Dec2004 $0.72
Dec2003 $0.54
Dec2002 $0.50

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KLX Inc Valuation – August 2018 $KLXI
Kaman Corp Valuation – August 2018 $KAMN
Raytheon Co Valuation – June 2018 $RTN
General Dynamics Corp Valuation – June 2018 $GD
TransDigm Group Inc Valuation – June 2018 $TDG

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.

Lockheed Martin Corp Valuation – January 2019 $LMT

Company Profile (excerpt from Reuters): Lockheed Martin Corporation, incorporated on August 29, 1994, is a security and aerospace company. The Company is engaged in the research, design, development, manufacture, integration and sustainment of technology systems, products and services. The Company operates through four segments: Aeronautics; Missiles and Fire Control (MFC); Rotary and Mission Systems (RMS), and Space Systems. The Company also provides a range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services. Its main areas of focus are in defense, space, intelligence and homeland security. The Company serves both the United States and international customers with products and services that have defense, civil and commercial applications, with its principal customers being agencies of the United States Government.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LMT – 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 $74,735,778,537 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.11 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 80.05% Pass
6. Moderate PEmg Ratio PEmg < 20 19.56 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 75.23 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 1.11 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.15 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $13.44
MG Growth Estimate 6.44%
MG Value $287.46
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $194.94
MG Value based on 0% Growth $114.27
Market Implied Growth Rate 5.53%
Current Price $262.92
% of Intrinsic Value 91.46%

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

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $9.41 in 2014 to an estimated $13.44 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.53% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Lockheed Martin Corporation revealed the company was trading above its Graham Number of $0. The company pays a dividend of $7.46 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.56, which was below the industry average of 47.17, 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 $-96.39.

Lockheed Martin 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) -$96.39
Graham Number $0.00
PEmg 19.56
Current Ratio 1.11
PB Ratio 75.23
Current Dividend $7.46
Dividend Yield 2.84%
Number of Consecutive Years of Dividend Growth 15

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 $16,859,000,000
Total Current Liabilities $15,204,000,000
Long-Term Debt $13,486,000,000
Total Assets $45,495,000,000
Intangible Assets $14,358,000,000
Total Liabilities $44,493,000,000
Shares Outstanding (Diluted Average) 286,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.50
Dec2017 $6.89
Dec2016 $17.49
Dec2015 $11.46
Dec2014 $11.21
Dec2013 $9.13
Dec2012 $8.36
Dec2011 $7.81
Dec2010 $7.81
Dec2009 $7.64
Dec2008 $7.86
Dec2007 $7.10
Dec2006 $5.80
Dec2005 $4.10
Dec2004 $2.83
Dec2003 $2.34
Dec2002 $1.11
Dec2001 -$2.45
Dec2000 -$1.29
Dec1999 $0.99
Dec1998 $2.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $13.44
Dec2017 $11.36
Dec2016 $12.90
Dec2015 $10.27
Dec2014 $9.41
Dec2013 $8.39
Dec2012 $7.97
Dec2011 $7.74
Dec2010 $7.55
Dec2009 $7.11
Dec2008 $6.41
Dec2007 $5.27
Dec2006 $3.98
Dec2005 $2.57
Dec2004 $1.38
Dec2003 $0.48
Dec2002 -$0.23

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Other ModernGraham posts about the company

Lockheed Martin Corp Valuation – February 2018 $LMT
Lockheed Martin Corporation Valuation – June 2016 $LMT
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Lockheed Martin Corporation Annual Valuation – 2015 $LMT
14 Companies in the Spotlight This Week – 1/25/14

Other ModernGraham posts about related companies

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KLX Inc Valuation – August 2018 $KLXI
Kaman Corp Valuation – August 2018 $KAMN
Raytheon Co Valuation – June 2018 $RTN
General Dynamics Corp Valuation – June 2018 $GD
TransDigm Group Inc Valuation – June 2018 $TDG
Northrop Grumman Corp Valuation – May 2018 $NOC

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.

KLX Inc Valuation – August 2018 $KLXI

Company Profile (excerpt from Reuters): KLX Inc. (KLX), incorporated on July 31, 2014, is the distributor and service provider of aerospace fasteners and consumables. The Company offers ranges of aerospace hardware and consumables and inventory management services across the world. The Company operates through two segments: Aerospace Solutions Group (ASG) and Energy Services Group (ESG). Through the Company’s global facilities network and information technology systems, it offers service to commercial airlines, business jet and defense original equipment manufacturers and their subcontractors (OEMs), maintenance, repair and overhaul (MRO) operators, and fixed base operators (FBOs). Its systems support both internal distribution processes, along with customer services, including just-in-time (JIT) deliveries and kitting solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KLXI – 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 $3,694,982,546 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.38 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 20766.67% Pass
6. Moderate PEmg Ratio PEmg < 20 79.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.61 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 6.38 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.67 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 $0.91
MG Growth Estimate 15.00%
MG Value $35.01
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $13.19
MG Value based on 0% Growth $7.73
Market Implied Growth Rate 35.75%
Current Price $72.74
% of Intrinsic Value 207.77%

KLX 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 ratio. 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 $0.45 in 2015 to an estimated $0.91 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 35.75% 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 KLX Inc revealed the company was trading above its Graham Number of $65.75. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 79.99, which was above the industry average of 50.18. Finally, the company was trading above its Net Current Asset Value (NCAV) of $10.72.

KLX 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) $10.72
Graham Number $65.75
PEmg 79.99
Current Ratio 6.38
PB Ratio 1.61
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 4/1/2018
Total Current Assets $2,109,400,000
Total Current Liabilities $330,400,000
Long-Term Debt $1,185,200,000
Total Assets $3,857,100,000
Intangible Assets $1,349,900,000
Total Liabilities $1,563,500,000
Shares Outstanding (Diluted Average) 50,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.30
Jan2018 $1.04
Jan2017 $0.92
Jan2016 -$7.39
Jan2015 $0.00
Dec2014 $1.68

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.91
Jan2018 -$0.77
Jan2017 -$1.44
Jan2016 -$2.13
Jan2015 $0.45
Dec2014 $0.56

Recommended Reading:

Other ModernGraham posts about the company

KLX Inc Valuation – Initial Coverage $KLXI

Other ModernGraham posts about related companies

Raytheon Co Valuation – June 2018 $RTN
General Dynamics Corp Valuation – June 2018 $GD
TransDigm Group Inc Valuation – June 2018 $TDG
Northrop Grumman Corp Valuation – May 2018 $NOC
Rockwell Collins Inc Valuation – May 2018 $COL
L3 Technologies Inc Valuation – March 2018 $LLL
Textron Inc Valuation – March 2018 $TXT
Lockheed Martin Corp Valuation – February 2018 $LMT
United Technologies Corp Valuation – February 2018 $UTX
Triumph Group Inc Valuation – Initial Coverage $TGI

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.

Kaman Corp Valuation – August 2018 $KAMN

Company Profile (excerpt from Reuters): Kaman Corporation, incorporated on December 13, 1945, conducts business in the aerospace and distribution markets. The Company operates through two segments: Distribution and Aerospace. The Company’s brands include KAflex, KAron and K-MAX. The Company is focused on producing the wing control surfaces (inboard and outboard flaps, slats and deceleron assemblies) for the United States Air Force’s (USAF’s) A-10 fleet. Its bearings products are included on various military platforms manufactured in North America, Asia and Europe. These products are used as original equipment or specified as replacement parts by the manufacturers. These products are self-lubricating, ball and roller bearings for aircraft flight controls, turbine engines, landing gear and helicopter driveline couplings. Its bearings offerings include super precision miniature ball bearings used in aerospace applications, dental products, surgical power tools, analytical devices and various industrial applications.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KAMN – 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 $1,848,561,867 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.06 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 51.54% Pass
6. Moderate PEmg Ratio PEmg < 20 27.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.87 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 3.06 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.67 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 $2.33
MG Growth Estimate 2.38%
MG Value $30.94
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $33.85
MG Value based on 0% Growth $19.84
Market Implied Growth Rate 9.74%
Current Price $65.34
% of Intrinsic Value 211.16%

Kaman Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, 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 $2.02 in 2014 to an estimated $2.33 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.74% 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 Kaman Corporation revealed the company was trading above its Graham Number of $39.66. The company pays a dividend of $0.8 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 27.99, which was below the industry average of 50.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.9.

Kaman 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) -$2.90
Graham Number $39.66
PEmg 27.99
Current Ratio 3.06
PB Ratio 2.87
Current Dividend $0.80
Dividend Yield 1.22%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $761,656,000
Total Current Liabilities $248,541,000
Long-Term Debt $341,591,000
Total Assets $1,485,761,000
Intangible Assets $469,957,000
Total Liabilities $843,432,000
Shares Outstanding (Diluted Average) 28,168,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.06
Dec2017 $1.75
Dec2016 $2.10
Dec2015 $2.17
Dec2014 $2.08
Dec2013 $2.10
Dec2012 $2.07
Dec2011 $1.93
Dec2010 $1.36
Dec2009 $1.27
Dec2008 $1.40
Dec2007 $2.23
Dec2006 $1.30
Dec2005 $0.57
Dec2004 -$0.52
Dec2003 $0.86
Dec2002 -$1.50
Dec2001 $0.52
Dec2000 $1.57
Dec1999 $1.05
Dec1998 $1.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.33
Dec2017 $1.99
Dec2016 $2.11
Dec2015 $2.10
Dec2014 $2.02
Dec2013 $1.90
Dec2012 $1.74
Dec2011 $1.60
Dec2010 $1.46
Dec2009 $1.45
Dec2008 $1.36
Dec2007 $1.19
Dec2006 $0.50
Dec2005 $0.06
Dec2004 -$0.07
Dec2003 $0.27
Dec2002 $0.17

Recommended Reading:

Other ModernGraham posts about the company

Kaman Corporation Valuation – Initial Coverage $KAMN

Other ModernGraham posts about related companies

Raytheon Co Valuation – June 2018 $RTN
General Dynamics Corp Valuation – June 2018 $GD
TransDigm Group Inc Valuation – June 2018 $TDG
Northrop Grumman Corp Valuation – May 2018 $NOC
Rockwell Collins Inc Valuation – May 2018 $COL
L3 Technologies Inc Valuation – March 2018 $LLL
Textron Inc Valuation – March 2018 $TXT
Lockheed Martin Corp Valuation – February 2018 $LMT
United Technologies Corp Valuation – February 2018 $UTX
Triumph Group Inc Valuation – Initial Coverage $TGI

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.

Raytheon Co Valuation – June 2018 $RTN

Company Profile (excerpt from Reuters): Raytheon Company, incorporated on December 17, 1953, is a technology company, which specializes in defense and other government markets. The Company develops integrated products, services and solutions in various markets, including sensing; effects; command, control, communications, computers, cyber and intelligence; mission support, and cybersecurity. The Company operates through five segments: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS), and Forcepoint. The Company serves both domestic and international customers, primarily as a prime contractor or subcontractor on a range of defense and related programs for government customers.

RTN Chart

RTN data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RTN – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $55,548,401,568 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.62 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 61.46% Pass
6. Moderate PEmg Ratio PEmg < 20 24.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.46 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 1.62 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.14 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.03
MG Growth Estimate 4.44%
MG Value $139.59
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $116.44
MG Value based on 0% Growth $68.26
Market Implied Growth Rate 7.79%
Current Price $193.38
% of Intrinsic Value 138.53%

Raytheon Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. 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 $6.2 in 2014 to an estimated $8.03 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.79% 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 Raytheon Company revealed the company was trading above its Graham Number of $87.34. The company pays a dividend of $3.19 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 24.08, which was below the industry average of 51.81, 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 $-32.2.

Raytheon Company receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$32.20
Graham Number $87.34
PEmg 24.08
Current Ratio 1.62
PB Ratio 5.46
Current Dividend $3.19
Dividend Yield 1.65%
Number of Consecutive Years of Dividend Growth 13

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $10,960,000,000
Total Current Liabilities $6,779,000,000
Long-Term Debt $4,751,000,000
Total Assets $30,497,000,000
Intangible Assets $14,871,000,000
Total Liabilities $20,260,000,000
Shares Outstanding (Diluted Average) 288,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.80
Dec2017 $6.95
Dec2016 $7.55
Dec2015 $6.91
Dec2014 $7.18
Dec2013 $6.16
Dec2012 $5.65
Dec2011 $5.28
Dec2010 $4.88
Dec2009 $4.89
Dec2008 $3.92
Dec2007 $5.79
Dec2006 $2.85
Dec2005 $1.92
Dec2004 $0.94
Dec2003 $0.88
Dec2002 -$1.59
Dec2001 -$2.12
Dec2000 $0.41
Dec1999 $1.17
Dec1998 $2.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.03
Dec2017 $7.08
Dec2016 $6.99
Dec2015 $6.56
Dec2014 $6.20
Dec2013 $5.59
Dec2012 $5.18
Dec2011 $4.95
Dec2010 $4.68
Dec2009 $4.34
Dec2008 $3.74
Dec2007 $3.26
Dec2006 $1.66
Dec2005 $0.71
Dec2004 -$0.03
Dec2003 -$0.42
Dec2002 -$0.69

Recommended Reading:

Other ModernGraham posts about the company

Raytheon Company Valuation – April 2017 $RTN
Raytheon Company Valuation – August 2016 $RTN
Raytheon Co Valuation – February 2016 $RTN
10 Best Stocks For Value Investors This Week – 10/31/15
Raytheon Company Valuation – October 2015 Update $RTN

Other ModernGraham posts about related companies

TransDigm Group Inc Valuation – June 2018 $TDG
Northrop Grumman Corp Valuation – May 2018 $NOC
Rockwell Collins Inc Valuation – May 2018 $COL
L3 Technologies Inc Valuation – March 2018 $LLL
Textron Inc Valuation – March 2018 $TXT
Lockheed Martin Corp Valuation – February 2018 $LMT
United Technologies Corp Valuation – February 2018 $UTX
Triumph Group Inc Valuation – Initial Coverage $TGI
Raytheon Company Valuation – April 2017 $RTN
General Dynamics Corp Valuation – March 2017 $GD

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.

General Dynamics Corp Valuation – June 2018 $GD

Company Profile (excerpt from Reuters): General Dynamics Corporation, incorporated on February 21, 1952, is a global aerospace and defense company. The Company offers a portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; information technology (IT) services and C4ISR (command, control, communications, computers, intelligence, surveillance and reconnaissance) solutions, and shipbuilding and ship repair. The Company operates through four business groups: Aerospace, Combat Systems, Information Systems and Technology, and Marine Systems.

GD Chart

GD data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GD – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $56,252,193,939 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 43.78% Pass
6. Moderate PEmg Ratio PEmg < 20 19.93 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.84 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.76 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 $9.50
MG Growth Estimate 11.23%
MG Value $294.34
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $137.81
MG Value based on 0% Growth $80.78
Market Implied Growth Rate 5.71%
Current Price $189.38
% of Intrinsic Value 64.34%

General Dynamics Corporation is suitable for the Enterprising Investor but not 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 high PB ratio. The Enterprising Investor is only concerned with the low current ratio. 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 $5.43 in 2014 to an estimated $9.5 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.71% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into General Dynamics Corporation revealed the company was trading above its Graham Number of $96.25. The company pays a dividend of $3.28 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 19.93, which was below the industry average of 51.81, 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 $-16.54.

General Dynamics Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$16.54
Graham Number $96.25
PEmg 19.93
Current Ratio 1.34
PB Ratio 4.84
Current Dividend $3.28
Dividend Yield 1.73%
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 3/1/2018
Total Current Assets $20,464,000,000
Total Current Liabilities $15,242,000,000
Long-Term Debt $3,981,000,000
Total Assets $37,219,000,000
Intangible Assets $12,657,000,000
Total Liabilities $25,445,000,000
Shares Outstanding (Diluted Average) 301,104,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.69
Dec2017 $9.56
Dec2016 $8.29
Dec2015 $9.29
Dec2014 $7.42
Dec2013 $6.67
Dec2012 -$0.94
Dec2011 $6.87
Dec2010 $6.81
Dec2009 $6.17
Dec2008 $6.17
Dec2007 $5.08
Dec2006 $4.56
Dec2005 $3.61
Dec2004 $3.05
Dec2003 $2.52
Dec2002 $2.26
Dec2001 $2.33
Dec2000 $2.24
Dec1999 $2.18
Dec1998 $1.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.50
Dec2017 $8.69
Dec2016 $7.55
Dec2015 $6.74
Dec2014 $5.43
Dec2013 $4.67
Dec2012 $4.11
Dec2011 $6.50
Dec2010 $6.13
Dec2009 $5.57
Dec2008 $5.01
Dec2007 $4.21
Dec2006 $3.58
Dec2005 $2.98
Dec2004 $2.60
Dec2003 $2.35
Dec2002 $2.21

Recommended Reading:

Other ModernGraham posts about the company

General Dynamics Corp Valuation – March 2017 $GD
General Dynamics Corporation Valuation – January 2016 Update $GD
5 Speculative and Overvalued Companies to Avoid – December 2014
32 Companies in the Spotlight This Week – 12/6/14
General Dynamics Corporation Annual Valuation – 2014 $GD

Other ModernGraham posts about related companies

TransDigm Group Inc Valuation – June 2018 $TDG
Northrop Grumman Corp Valuation – May 2018 $NOC
Rockwell Collins Inc Valuation – May 2018 $COL
L3 Technologies Inc Valuation – March 2018 $LLL
Textron Inc Valuation – March 2018 $TXT
Lockheed Martin Corp Valuation – February 2018 $LMT
United Technologies Corp Valuation – February 2018 $UTX
Triumph Group Inc Valuation – Initial Coverage $TGI
Raytheon Company Valuation – April 2017 $RTN
General Dynamics Corp Valuation – March 2017 $GD

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.

TransDigm Group Inc Valuation – June 2018 $TDG

Company Profile (excerpt from Reuters): TransDigm Group Incorporated, incorporated on July 8, 2003, is a global designer, producer and supplier of engineered aircraft components for commercial and military aircraft in service. The Company operates through three segments: Power & Control, Airframe and Non-aviation.

TDG Chart

TDG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TDG – June 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,632,347,924 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.04 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 288.96% Pass
6. Moderate PEmg Ratio PEmg < 20 31.31 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -8.10 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 3.04 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.86 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $10.74
MG Growth Estimate 15.00%
MG Value $413.57
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $155.76
MG Value based on 0% Growth $91.31
Market Implied Growth Rate 11.40%
Current Price $336.30
% of Intrinsic Value 81.32%

TransDigm Group Incorporated 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, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of 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 Fairly Valued after growing its EPSmg (normalized earnings) from $3.48 in 2014 to an estimated $10.74 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.4% 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 within a margin of safety relative to the price.

At the time of valuation, further research into TransDigm Group Incorporated 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 31.31, which was below the industry average of 51.81, 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 $-184.05.

TransDigm Group Incorporated 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) -$184.05
Graham Number $0.00
PEmg 31.31
Current Ratio 3.04
PB Ratio -8.10
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $2,470,104,000
Total Current Liabilities $812,835,000
Long-Term Debt $11,365,790,000
Total Assets $10,394,677,000
Intangible Assets $7,458,844,000
Total Liabilities $12,704,014,000
Shares Outstanding (Diluted Average) 55,605,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $15.92
Sep2017 $7.88
Sep2016 $10.39
Sep2015 $7.84
Sep2014 $3.16
Sep2013 $2.39
Sep2012 $5.97
Sep2011 $3.17
Sep2010 $2.52
Sep2009 $3.10
Sep2008 $2.65
Sep2007 $1.83
Sep2006 $0.53
Sep2005 $0.75
Sep2004 $0.29
Sep2003 -$10.92
Sep2002 $221.95

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.74
Sep2017 $7.55
Sep2016 $6.90
Sep2015 $4.94
Sep2014 $3.48
Sep2013 $3.57
Sep2012 $3.93
Sep2011 $2.82
Sep2010 $2.48
Sep2009 $2.23
Sep2008 $1.60
Sep2007 $0.21
Sep2006 $13.78
Sep2005 $27.74
Sep2004 $41.57
Sep2003 $55.55
Sep2002 $73.98

Recommended Reading:

Other ModernGraham posts about the company

TransDigm Group Inc Valuation – Initial Coverage $TDG

Other ModernGraham posts about related companies

Northrop Grumman Corp Valuation – May 2018 $NOC
Rockwell Collins Inc Valuation – May 2018 $COL
L3 Technologies Inc Valuation – March 2018 $LLL
Textron Inc Valuation – March 2018 $TXT
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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.

Northrop Grumman Corp Valuation – May 2018 $NOC

Company Profile (excerpt from Reuters): Northrop Grumman Corporation, incorporated on August 4, 2010, is a global security company. The Company provides products, systems and solutions in autonomous systems; cyber; command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR); strike, and logistics and modernization. The Company’s segments include Aerospace Systems, Mission Systems and Technology Services. The Company participates in a range of defense and government programs in the United States and abroad. The Company also conducts business with foreign, state and local governments, as well as commercial customers.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of NOC – May 2018

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $56,993,625,552 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.52 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 99.28% Pass
6. Moderate PEmg Ratio PEmg < 20 26.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.57 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 2.52 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.48 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $12.63
MG Growth Estimate 7.30%
MG Value $291.86
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $183.16
MG Value based on 0% Growth $107.37
Market Implied Growth Rate 8.87%
Current Price $331.36
% of Intrinsic Value 113.54%

Northrop Grumman 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 is only concerned with the level of debt relative to the net current assets. 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 $8.5 in 2014 to an estimated $12.63 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.87% 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 Northrop Grumman Corporation revealed the company was trading above its Graham Number of $118.05. The company pays a dividend of $3.9 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 26.23, which was below the industry average of 42.88, 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 $-62.47.

Northrop Grumman 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) -$62.47
Graham Number $118.05
PEmg 26.23
Current Ratio 2.52
PB Ratio 7.57
Current Dividend $3.90
Dividend Yield 1.18%
Number of Consecutive Years of Dividend Growth 14

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $16,157,000,000
Total Current Liabilities $6,415,000,000
Long-Term Debt $14,392,000,000
Total Assets $34,795,000,000
Intangible Assets $12,455,000,000
Total Liabilities $27,115,000,000
Shares Outstanding (Diluted Average) 175,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $15.30
Dec2017 $11.47
Dec2016 $12.19
Dec2015 $10.39
Dec2014 $9.75
Dec2013 $8.35
Dec2012 $7.81
Dec2011 $7.52
Dec2010 $6.82
Dec2009 $5.21
Dec2008 -$3.77
Dec2007 $5.12
Dec2006 $4.37
Dec2005 $3.85
Dec2004 $2.97
Dec2003 $2.09
Dec2002 $1.84
Dec2001 $2.37
Dec2000 $4.29
Dec1999 $3.35
Dec1998 $1.40

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.63
Dec2017 $11.01
Dec2016 $10.42
Dec2015 $9.28
Dec2014 $8.50
Dec2013 $7.63
Dec2012 $6.42
Dec2011 $5.21
Dec2010 $3.88
Dec2009 $2.59
Dec2008 $1.69
Dec2007 $4.18
Dec2006 $3.48
Dec2005 $2.90
Dec2004 $2.52
Dec2003 $2.46
Dec2002 $2.64

Recommended Reading:

Other ModernGraham posts about the company

Northrop Grumman Corp Valuation – February 2017 $NOC
Northrop Grumman Corporation Valuation – November 2015 Update $NOC
30 Companies in the Spotlight This Week – 11/15/14
Northrop Grumman Corporation Annual Valuation – 2014 $NOC
17 Companies in the Spotlight This Week – 8/2/14

Other ModernGraham posts about related companies

Rockwell Collins Inc Valuation – May 2018 $COL
L3 Technologies Inc Valuation – March 2018 $LLL
Textron Inc Valuation – March 2018 $TXT
Lockheed Martin Corp Valuation – February 2018 $LMT
United Technologies Corp Valuation – February 2018 $UTX
Triumph Group Inc Valuation – Initial Coverage $TGI
Raytheon Company Valuation – April 2017 $RTN
General Dynamics Corp Valuation – March 2017 $GD
TASER International Inc Valuation – Initial Coverage $TASR
Cubic Corporation Valuation – Initial Coverage $CUB

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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