Delphi Technologies PLC Valuation – August 2018 $DLPH

Company Profile (excerpt from Reuters): Delphi Technologies PLC is a United Kingdom-based company that develops designs and manufactures powertrain technologies for original equipment manufacturers (OEMs). The Company also offers full suite of aftermarket products. The Company segments Products & Service Solutions (PSS).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DLPH – 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 $3,197,170,999 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.59 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 45649900.00% Pass
6. Moderate PEmg Ratio PEmg < 20 13.89 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.02 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 1.59 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.02 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.59
MG Growth Estimate 15.00%
MG Value $99.79
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $37.58
MG Value based on 0% Growth $22.03
Market Implied Growth Rate 2.70%
Current Price $36.01
% of Intrinsic Value 36.09%

Delphi Technologies PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability 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 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 Undervalued after growing its EPSmg (normalized earnings) from $0 in 2014 to an estimated $2.59 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.7% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Delphi Technologies PLC revealed the company was trading above its Graham Number of $8.45. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 13.89, which was below the industry average of 18.51, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.26.

Delphi Technologies PLC receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$15.26
Graham Number $8.45
PEmg 13.89
Current Ratio 1.59
PB Ratio 10.02
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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 6/1/2018
Total Current Assets $1,991,000,000
Total Current Liabilities $1,251,000,000
Long-Term Debt $1,498,000,000
Total Assets $3,670,000,000
Intangible Assets $77,000,000
Total Liabilities $3,350,000,000
Shares Outstanding (Diluted Average) 89,050,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.14
Dec2017 $3.21
Dec2016 $1.78

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.59
Dec2017 $1.54
Dec2016 $0.59

Recommended Reading:

Other ModernGraham posts about the company

Delphi Automotive PLC Valuation – February 2017 $DLPH
Delphi Automotive PLC Valuation – August 2016 $DLPH
Delphi Automotive Analysis – 2015 Update $DLPH
17 Companies in the Spotlight This Week – June 21, 2014
Delphi Automotive Annual Valuation – 2014 $DLPH

Other ModernGraham posts about related companies

Cooper-Standard Holdings Inc Valuation – August 2018 $CPS
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Advance Auto Parts Inc Valuation – June 2018 $AAP
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Aptiv PLC Valuation – Initial Coverage May 2018 $APTV
BorgWarner Inc Valuation – April 2018 $BWA
CarMax Inc Valuation – April 2018 $KMX
Ford Motor Company Valuation – April 2018 $F

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.

Delphi Automotive PLC Valuation – February 2017 $DLPH

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  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 or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  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 stock analysis showing a specific look at how Delphi Automotive PLC (DLPH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Delphi Automotive PLC is a global technology company serving the automotive sector. The Company designs and manufactures vehicle components, and provides electrical and electronic, powertrain and active safety technology solutions to the global automotive and commercial vehicle markets. The Company’s segments include Electrical/Electronic Architecture, Powertrain Systems, and Electronics and Safety. The Electrical/Electronic Architecture segment provides complete design of the vehicle’s electrical architecture, including connectors, wiring assemblies and harnesses, electrical centers and hybrid high voltage and safety distribution systems. The Powertrain Systems segment offers products for engine management systems (EMS). The Electronics and Safety segment offers a range of electronic and safety equipment and software in the areas of controls, security, infotainment, communications and safety systems.

DLPH Chart

DLPH data by YCharts

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ModernGraham Valuation of DLPH – February 2017

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,865,878,060 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.31 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 1628.26% Pass
6. Moderate PEmg Ratio PEmg < 20 14.82 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.74 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 1.31 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.11 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $5.18
MG Growth Estimate 12.23%
MG Value $170.59
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $75.05
MG Value based on 0% Growth $44.00
Market Implied Growth Rate 3.16%
Current Price $76.69
% of Intrinsic Value 44.95%

Delphi Automotive PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, 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 $2.85 in 2013 to an estimated $5.18 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.16% 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 Delphi Automotive PLC revealed the company was trading above its Graham Number of $35.31. The company pays a dividend of $1.16 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 14.82, which was below the industry average of 18.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.34.

Delphi Automotive PLC receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$16.34
Graham Number $35.31
PEmg 14.82
Current Ratio 1.31
PB Ratio 8.74
Current Dividend $1.16
Dividend Yield 1.51%
Number of Consecutive Years of Dividend Growth 2

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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 12/1/2016
Total Current Assets $5,419,000,000
Total Current Liabilities $4,148,000,000
Long-Term Debt $3,959,000,000
Total Assets $12,292,000,000
Intangible Assets $2,748,000,000
Total Liabilities $9,891,000,000
Shares Outstanding (Diluted Average) 273,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.25
Dec2016 $4.59
Dec2015 $5.06
Dec2014 $4.48
Dec2013 $3.89
Dec2012 $3.33
Dec2011 $2.72
Dec2010 $0.92

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.18
Dec2016 $4.52
Dec2015 $4.28
Dec2014 $3.62
Dec2013 $2.85
Dec2012 $2.02
Dec2011 $1.15
Dec2010 $0.31

Recommended Reading:

Other ModernGraham posts about the company

Delphi Automotive Analysis – 2015 Update $DLPH
17 Companies in the Spotlight This Week – June 21, 2014
Delphi Automotive Annual Valuation – 2014 $DLPH

Other ModernGraham posts about related companies

Cooper-Standard Holdings Inc Valuation – Initial Coverage $CPS
Copart Inc Valuation – Initial Coverage $CPRT
Standard Motor Products Inc Valuation – Initial Coverage $SMP
Harman International Industries Inc Valuation – January 2017 $HAR
BorgWarner Inc Valuation – December 2016 $BWA
Ford Motor Company Valuation – November 2016 $F
CarMax Inc Valuation – November 2016 $KMX
Advance Auto Parts Inc Valuation – November 2016 $AAP
General Motors Company Valuation – November 2016 $GM
Delphi Automotive PLC Valuation – August 2016 $DLPH

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.

Delphi Automotive PLC Valuation – August 2016 $DLPH

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  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 or by reviewing the 10 Companies Benjamin Graham Would Invest In Today - July 2016.  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 stock analysis showing a specific look at how Delphi Automotive PLC (DLPH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Delphi Automotive PLC is a vehicle components manufacturer. The Company operates through three segments: Electrical/Electronic Architecture; Powertrain Systems, and Electronics and Safety. It serves automotive and commercial vehicle markets. Its Electrical/Electronic Architecture segment includes electrical architecture and component products. Its Powertrain Systems segment provides systems integration of end-to-end gasoline and diesel engine management systems, including fuel handling, fuel injection, combustion, electronic controls, test and validation capabilities, aftermarket and original equipment services. Its Electronics and Safety segment includes component and systems integration in infotainment and connectivity, body controls and security systems, displays, mechatronics, passive and active safety electronics and electric and hybrid electric vehicle power electronics, as well as advanced development of software.

DLPH Chart

DLPH data by YCharts

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of DLPH – August 2016

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 $17,879,974,329 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 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 49633.33% Pass
6. Moderate PEmg Ratio PEmg < 20 13.67 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.50 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 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.45 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

DLPH value chart August 2016

EPSmg $4.78
MG Growth Estimate 15.00%
MG Value $184.00
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $69.30
MG Value based on 0% Growth $40.62
Market Implied Growth Rate 2.58%
Current Price $65.31
% of Intrinsic Value 35.49%

Delphi Automotive PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, 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 $2.02 in 2012 to an estimated $4.78 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.58% 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 Delphi Automotive PLC revealed the company was trading above its Graham Number of $32.51. The company pays a dividend of $1.08 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 13.67, which was below the industry average of 17.79, 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 $-16.55.

Delphi Automotive PLC receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

DLPH charts August 2016

Net Current Asset Value (NCAV) -$16.55
Graham Number $32.51
PEmg 13.67
Current Ratio 1.30
PB Ratio 7.50
Current Dividend $1.08
Dividend Yield 1.65%
Number of Consecutive Years of Dividend Growth 1

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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 6/1/2016
Total Current Assets $5,051,000,000
Total Current Liabilities $3,899,000,000
Long-Term Debt $3,969,000,000
Total Assets $11,957,000,000
Intangible Assets $2,916,000,000
Total Liabilities $9,576,000,000
Shares Outstanding (Diluted Average) 273,370,000

Earnings Per Share History

Next Fiscal Year Estimate $5.38
Dec2015 $5.06
Dec2014 $4.48
Dec2013 $3.89
Dec2012 $3.33
Dec2011 $2.72
Dec2010 $0.92

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.78
Dec2015 $4.28
Dec2014 $3.62
Dec2013 $2.85
Dec2012 $2.02
Dec2011 $1.15
Dec2010 $0.31

Recommended Reading:

Other ModernGraham posts about the company

Delphi Automotive Analysis – 2015 Update $DLPH
17 Companies in the Spotlight This Week – June 21, 2014
Delphi Automotive Annual Valuation – 2014 $DLPH

Other ModernGraham posts about related companies

Carmax Inc Valuation – August 2016 $KMX
BorgWarner Inc Valuation – August 2016 $BWA
Ford Motor Company Valuation – August 2016 $F
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
Genuine Parts Co Valuation – July 2016 $GPC
Johnson Controls Inc Valuation – July 2016 $JCI
Goodyear Tire & Rubber Co Valuation – July 2016 $GT
Harley-Davidson Inc Valuation – June 2016 $HOG
Autozone Inc Valuation – June 2016 $AZO
BorgWarner Inc Valuation – February 2016 Update $BWA

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.

Delphi Automotive Analysis – 2015 Update $DLPH

220px-Delphi_logoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  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 or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – June 2015.  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 stock analysis showing a specific look at how Delphi Automotive (DLPH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Delphi Automotive PLC is a vehicle components manufacturer. The Company provides electrical and electronic, powertrain, safety and thermal technology solutions to the automotive and commercial vehicle markets. The Company operates through four segments: Electrical/ Electronic Architecture; Powertrain Systems; Electronics and Safety, and Thermal Systems. Its Electrical/ Electronic Architecture segment provides a design of the vehicle’s electrical architecture. Its Powertrain Systems segment provides systems integration of end-to-end gasoline and diesel engine management systems. Its Electronics and Safety segment provides components, systems and software for passenger safety, security, and infotainment, as well as vehicle operation. Thermal Systems segment provides powertrain cooling and heating, ventilating and air conditioning systems.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 1/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years - FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years - FAIL
  5. 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
  6. Moderate PEmg ratio – PEmg is less than 20 - FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years - PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $87.64
MG Value $167.40
MG Opinion Undervalued
Value Based on 3% Growth $63.05
Value Based on 0% Growth $36.96
Market Implied Growth Rate 5.83%
Net Current Asset Value (NCAV) -$8.99
PEmg 20.16
Current Ratio 1.49
PB Ratio 11.87

Balance Sheet – March 2015

Current Assets $5,687,000,000
Current Liabilities $3,818,000,000
Total Debt $2,673,000,000
Total Assets $10,464,000,000
Intangible Assets $1,292,000,000
Total Liabilities $8,309,000,000
Outstanding Shares 291,800,000

Earnings Per Share

2015 (estimate) $5.25
2014 $4.48
2013 $3.89
2012 $3.33
2011 $2.72
2010 $0.92

Earnings Per Share – ModernGraham

2015 (estimate) $4.35
2014 $3.62
2013 $2.85
2012 $2.02
2011 $1.15
2010 $0.31

Dividend History

Conclusion:

Delphi Automotive is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the short history post bankruptcy, the low current ratio, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.15 in 2011 to an estimated $4.35 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.83% 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 well above the 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 Delphi Automotive (DLPH)?  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 any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Delphi Automotive Annual Valuation – 2014 $DLPH

220px-Delphi_logoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  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 or by reviewing the 5 Undervalued Companies for the Defensive Investor.  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 Delphi Automotive (DLPH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Delphi Automotive PLC (Delphi) is a global vehicle components manufacturer and provides electrical and electronic, powertrain, safety and thermal technology solutions to the global automotive and commercial vehicle markets. As of December 31, 2012, the Company operated 126 manufacturing facilities and 15 technical centers utilizing a regional service model that enables it to serve its global customers. The Company operates through four segments: Electrical / Electronic Architecture; Powertrain Systems; Electronics and Safety and Thermal Systems. In October 2012, the Company acquired FCI Group’s Motorized Vehicles Division.

DLPH Chart

DLPH data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years - FAIL
  5. 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
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 2/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years - FAIL
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $67.99
MG Value $53.40
MG Opinion Overvalued
Value Based on 3% Growth $53.40
Value Based on 0% Growth $31.30
Market Implied Growth Rate 4.98%
Net Current Asset Value (NCAV) -$7.69
PEmg 18.46
Current Ratio 1.50
PB Ratio 6.99

Balance Sheet – 3/31/2014

Current Assets $5,880,000,000
Current Liabilities $3,930,000,000
Total Debt $2,418,000,000
Total Assets $11,182,000,000
Intangible Assets $1,190,000,000
Total Liabilities $8,221,000,000
Outstanding Shares 304,250,000

Earnings Per Share

2014 (estimate) $4.85
2013 $3.89
2012 $3.33
2011 $2.72
2010 $0.00
2009 $0.00
2008 $0.00
2007 $0.00
2006 $0.00
2005 $0.00
2004 $0.00

Earnings Per Share – ModernGraham

2014 (estimate) $3.68
2013 $2.73
2012 $1.84
2011 $0.91
2010 $0.00
2009 $0.00

Dividend History
DLPH Dividend Chart

DLPH Dividend data by YCharts

Conclusion:

Delphi Automotive is not suitable for either the Defensive Investor or the Enterprising Investor, in large part due to its short operating history post-bankruptcy.  In time, it may demonstrate sufficient financials to warrant interest from Intelligent Investors, but for now value investors have too many concerns.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should seek other opportunities.  From a valuation perspective, the company appears to be overvalued.  The ModernGraham valuation model, based on Benjamin Graham’s formulas, returns an estimate of intrinsic value below the market price at this time.

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 Delphi Automotive (DLPH)?  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 Delphi Automotive (DLPH) 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.  Logo taken from wikipedia; this article is not affiliated with the company in any manner.

O’Reilly Automotive Inc Valuation – February 2019 $ORLY

Company Profile (excerpt from Reuters): O’Reilly Automotive, Inc., incorporated on December 20, 2010, is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The Company sells its products to both do-it-yourself (DIY) and professional service provider customers. The Company’s product line includes new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control, chassis parts, driveline parts and engine parts; maintenance items, such as oil, antifreeze, fluids, filters, wiper blades, lighting, engine additives and appearance products, and accessories, such as floor mats, seat covers and truck accessories. It operated 4,829 stores in 47 states, as of December 31, 2016.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ORLY – 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 $27,776,062,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.91 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 343.42% Pass
6. Moderate PEmg Ratio PEmg < 20 27.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 56.64 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.91 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.20 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 $12.58
MG Growth Estimate 15.00%
MG Value $484.20
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $182.36
MG Value based on 0% Growth $106.90
Market Implied Growth Rate 9.54%
Current Price $346.75
% of Intrinsic Value 71.61%

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.7 in 2014 to an estimated $12.58 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.54% 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 O’Reilly Automotive Inc revealed the company was trading above its Graham Number of $52.84. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 27.57, which was above the industry average of 21.23. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-47.12.

O’Reilly Automotive 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) -$47.12
Graham Number $52.84
PEmg 27.57
Current Ratio 0.91
PB Ratio 56.64
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,560,031,000
Total Current Liabilities $3,905,081,000
Long-Term Debt $3,174,327,000
Total Assets $7,894,714,000
Intangible Assets $832,750,000
Total Liabilities $7,396,335,000
Shares Outstanding (Diluted Average) 81,410,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $16.02
Dec2017 $12.67
Dec2016 $10.73
Dec2015 $9.17
Dec2014 $7.34
Dec2013 $6.03
Dec2012 $4.75
Dec2011 $3.71
Dec2010 $2.95
Dec2009 $2.23
Dec2008 $1.48
Dec2007 $1.67
Dec2006 $1.55
Dec2005 $1.45
Dec2004 $0.63
Dec2003 $0.92
Dec2002 $0.77
Dec2001 $0.63
Dec2000 $0.50
Dec1999 $0.46
Dec1998 $0.18

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.58
Dec2017 $10.30
Dec2016 $8.61
Dec2015 $7.10
Dec2014 $5.70
Dec2013 $4.56
Dec2012 $3.56
Dec2011 $2.78
Dec2010 $2.20
Dec2009 $1.78
Dec2008 $1.48
Dec2007 $1.40
Dec2006 $1.20
Dec2005 $0.98
Dec2004 $0.72
Dec2003 $0.73
Dec2002 $0.60

Recommended Reading:

Other ModernGraham posts about the company

O’Reilly Automotive Inc Valuation – April 2018 $ORLY
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
O’Reilly Automotive Inc. Annual Valuation – 2015 $ORLY
16 Companies in the Spotlight this Week – 4/19/14
O’Reilly Automotive Inc. (ORLY) Annual Valuation – 2014

Other ModernGraham posts about related companies

Goodyear Tire & Rubber Co Valuation – January 2019 $GT
Genuine Parts Co Valuation – January 2019 $GPC
Autozone Inc Valuation – January 2019 $AZO
Linamar Corp Valuation – October 2018 $TSE-LNR
AutoNation Inc Valuation – September 2018 $AN
Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL
Delphi Technologies PLC Valuation – August 2018 $DLPH

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.

Goodyear Tire & Rubber Co Valuation – January 2019 $GT

Company Profile (excerpt from Reuters): The Goodyear Tire & Rubber Company (Goodyear), incorporated on August 29, 1898, is a manufacturer of tires. The Company operates through three segments: Americas; Europe, Middle East and Africa (EMEA), and Asia Pacific. The Company also manufactures and markets rubber-related chemicals for various applications. The Company also operates commercial truck service and tire retreading centers. The Company manufactures and markets a range of rubber tires for automobiles, trucks, buses, aircraft, motorcycles, earthmoving and mining equipment, farm implements, industrial equipment and various other applications. Its tires are offered for sale to vehicle manufacturers for mounting as original equipment (OE) and for replacement around the world. The Company manufactures and sells tires under the Goodyear, Dunlop, Kelly, Debica, Sava and Fulda brands, and various other Goodyear owned house brands, and the private-label brands of certain customers. In certain geographic areas it also retreads truck, aviation and off-the-road (OTR) tires; manufactures and sells tread rubber and other tire retreading materials; sells chemical products, and provides automotive and commercial repair services and miscellaneous other products and services. As of December 31, 2016, the Company had operated approximately 1,100 tire and auto service center outlets where it offered its products for retail sale and provided automotive repair and other services. As of December 31, 2016, the Company had manufactured its products in 48 manufacturing facilities in 21 countries, including the United States, and it had marketing operations across the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GT – 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 $4,795,345,782 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 Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -869.49% Fail
6. Moderate PEmg Ratio PEmg < 20 6.77 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.98 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.28 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.04
MG Growth Estimate -2.98%
MG Value $7.71
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $44.05
MG Value based on 0% Growth $25.82
Market Implied Growth Rate -0.86%
Current Price $20.58
% of Intrinsic Value 266.80%

Goodyear Tire & Rubber Co 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 poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.79 in 2014 to an estimated $3.04 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.86% annual earnings loss 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 Goodyear Tire & Rubber Co revealed the company was trading below its Graham Number of $35.79. The company pays a dividend of $0.44 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 6.77, which was below the industry average of 19.88, 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 $-24.53.

Goodyear Tire & Rubber Co receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.53
Graham Number $35.79
PEmg 6.77
Current Ratio 1.34
PB Ratio 0.98
Current Dividend $0.44
Dividend Yield 2.14%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $6,753,000,000
Total Current Liabilities $5,047,000,000
Long-Term Debt $5,604,000,000
Total Assets $17,591,000,000
Intangible Assets $709,000,000
Total Liabilities $12,591,000,000
Shares Outstanding (Diluted Average) 238,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.97
Dec2017 $1.37
Dec2016 $4.74
Dec2015 $1.12
Dec2014 $8.78
Dec2013 $2.28
Dec2012 $0.74
Dec2011 $1.26
Dec2010 -$0.89
Dec2009 -$1.55
Dec2008 -$0.32
Dec2007 $2.65
Dec2006 -$1.86
Dec2005 $1.16
Dec2004 $0.63
Dec2003 -$4.61
Dec2002 -$7.47
Dec2001 -$1.59
Dec2000 $0.31
Dec1999 $1.53
Dec1998 $4.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.04
Dec2017 $3.27
Dec2016 $3.99
Dec2015 $3.35
Dec2014 $3.79
Dec2013 $0.99
Dec2012 $0.18
Dec2011 $0.01
Dec2010 -$0.54
Dec2009 -$0.24
Dec2008 $0.42
Dec2007 $0.40
Dec2006 -$1.30
Dec2005 -$1.47
Dec2004 -$2.70
Dec2003 -$3.70
Dec2002 -$2.38

Recommended Reading:

Other ModernGraham posts about the company

Goodyear Tire & Rubber Co Valuation – March 2018 $GT
Goodyear Tire & Rubber Co Valuation – July 2016 $GT
34 Companies in the Spotlight This Week – 2/7/15
Goodyear Tire & Rubber Company Annual Valuation – 2015 $GT
15 Companies in the Spotlight This Week – 2/1/14

Other ModernGraham posts about related companies

Genuine Parts Co Valuation – January 2019 $GPC
Autozone Inc Valuation – January 2019 $AZO
Linamar Corp Valuation – October 2018 $TSE-LNR
AutoNation Inc Valuation – September 2018 $AN
Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL
Delphi Technologies PLC Valuation – August 2018 $DLPH
Cooper-Standard Holdings Inc Valuation – August 2018 $CPS

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.

Genuine Parts Co Valuation – January 2019 $GPC

Company Profile (excerpt from Reuters): Genuine Parts Company, incorporated on May 7, 1928, is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company’s segments include Automotive, Industrial, Office Products Group and Electrical/Electronic Materials. As of December 31, 2016, the Company conducted its business from approximately 2,670 locations throughout the United States, Canada, Mexico, Australia and New Zealand.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GPC – January 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,785,072,914 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.33 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 57.16% Pass
6. Moderate PEmg Ratio PEmg < 20 19.61 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.78 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 1.33 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.30 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 $4.79
MG Growth Estimate 2.05%
MG Value $60.34
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $69.46
MG Value based on 0% Growth $40.72
Market Implied Growth Rate 5.55%
Current Price $93.93
% of Intrinsic Value 155.68%

Genuine Parts Company does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, 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 Overvalued after growing its EPSmg (normalized earnings) from $4.22 in 2014 to an estimated $4.79 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.55% 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 Genuine Parts Company revealed the company was trading above its Graham Number of $53.66. The company pays a dividend of $2.7 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.61, which was below the industry average of 19.88, 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 $-9.79.

Genuine Parts 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) -$9.79
Graham Number $53.66
PEmg 19.61
Current Ratio 1.33
PB Ratio 3.78
Current Dividend $2.70
Dividend Yield 2.87%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $7,550,495,000
Total Current Liabilities $5,661,189,000
Long-Term Debt $2,463,452,000
Total Assets $12,657,119,000
Intangible Assets $3,518,470,000
Total Liabilities $8,994,040,000
Shares Outstanding (Diluted Average) 147,453,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.50
Dec2017 $4.18
Dec2016 $4.59
Dec2015 $4.63
Dec2014 $4.61
Dec2013 $4.40
Dec2012 $4.14
Dec2011 $3.58
Dec2010 $3.00
Dec2009 $2.50
Dec2008 $2.92
Dec2007 $2.98
Dec2006 $2.76
Dec2005 $2.50
Dec2004 $2.25
Dec2003 $1.91
Dec2002 -$0.16
Dec2001 $1.71
Dec2000 $2.20
Dec1999 $2.11
Dec1998 $1.98

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.79
Dec2017 $4.45
Dec2016 $4.55
Dec2015 $4.44
Dec2014 $4.22
Dec2013 $3.85
Dec2012 $3.46
Dec2011 $3.08
Dec2010 $2.83
Dec2009 $2.74
Dec2008 $2.80
Dec2007 $2.66
Dec2006 $2.28
Dec2005 $1.91
Dec2004 $1.60
Dec2003 $1.37
Dec2002 $1.26

Recommended Reading:

Other ModernGraham posts about the company

Genuine Parts Co Valuation – March 2018 $GPC
Best Dividend Paying Stocks for Dividend Growth Investors – August 2017
Genuine Parts Co Valuation – July 2016 $GPC
Dividend Growth Stocks for Intelligent Investors – June 2016
Dividend Growth Stocks for Intelligent Investors – February 2016

Other ModernGraham posts about related companies

Autozone Inc Valuation – January 2019 $AZO
Linamar Corp Valuation – October 2018 $TSE-LNR
AutoNation Inc Valuation – September 2018 $AN
Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL
Delphi Technologies PLC Valuation – August 2018 $DLPH
Cooper-Standard Holdings Inc Valuation – August 2018 $CPS
Copart Inc Valuation – August 2018 $CPRT

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.

Autozone Inc Valuation – January 2019 $AZO

Company Profile (excerpt from Reuters): AutoZone, Inc., incorporated on November 25, 1991, is a retailer and distributor of automotive replacement parts and accessories in the United States. The Company operates through the Auto Parts Locations segment. The Auto Parts Locations segment is a retailer and distributor of automotive parts and accessories. As of February 10, 2018, the Company operated through 6,088 locations in the United States, Puerto Rico, Mexico and Brazil. The Company’s stores carry product lines for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products. The Company’s domestic stores also have a commercial sales program, which provides commercial credit and delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. The Company’s other operating segments include ALLDATA, which produces, sells and maintains diagnostic and repair information software used in the automotive repair industry; E-commerce, which includes direct sales to customers through www.autozone.com.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AZO – 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 $21,130,360,376 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 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 210.15% Pass
6. Moderate PEmg Ratio PEmg < 20 94.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.15 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -40.50 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.83
MG Growth Estimate 15.00%
MG Value $339.80
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $127.98
MG Value based on 0% Growth $75.02
Market Implied Growth Rate 43.24%
Current Price $838.34
% of Intrinsic Value 246.71%

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

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.13 in 2014 to an estimated $8.83 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 43.24% 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 AutoZone, Inc. revealed the company was trading above its Graham Number of $151.94. The company pays a dividend of $5.68 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 94.99, which was above the industry average of 20.05. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-56.29.

AutoZone, 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) -$56.29
Graham Number $151.94
PEmg 94.99
Current Ratio 0.72
PB Ratio 11.15
Current Dividend $5.68
Dividend Yield 0.68%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $478,342,000
Total Current Liabilities $664,357,000
Long-Term Debt $7,533,228,000
Total Assets $18,662,119,000
Intangible Assets $0
Total Liabilities $8,264,721,000
Shares Outstanding (Diluted Average) 138,323,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.64
Dec2017 $6.35
Dec2016 $7.52
Dec2015 $5.51
Dec2014 $5.21
Dec2013 $2.78
Dec2012 $4.32
Dec2011 $4.87
Dec2010 $2.07
Dec2009 $1.93
Dec2008 $5.17
Dec2007 $4.38
Dec2006 $3.42
Dec2005 $4.05
Dec2004 $2.92
Dec2003 $3.73
Dec2002 $2.23
Dec2001 $3.02
Dec2000 $2.53
Dec1999 $2.03
Dec1998 $1.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.83
Dec2017 $6.10
Dec2016 $5.68
Dec2015 $4.68
Dec2014 $4.13
Dec2013 $3.46
Dec2012 $3.75
Dec2011 $3.54
Dec2010 $3.05
Dec2009 $3.62
Dec2008 $4.31
Dec2007 $3.82
Dec2006 $3.45
Dec2005 $3.37
Dec2004 $2.99
Dec2003 $2.91
Dec2002 $2.45

Recommended Reading:

Other ModernGraham posts about the company

AutoZone Inc Valuation – February 2018 $AZO
Autozone Inc Valuation – June 2016 $AZO
AutoZone Inc. Annual Valuation – 2015 $AZO

Other ModernGraham posts about related companies

Linamar Corp Valuation – October 2018 $TSE-LNR
AutoNation Inc Valuation – September 2018 $AN
Superior Industries International Inc Valuation – August 2018 $SUP
Lydall Inc Valuation – August 2018 $LDL
Lithia Motors Inc Valuation – August 2018 $LAD
Carlisle Companies Inc Valuation – August 2018 $CSL
Delphi Technologies PLC Valuation – August 2018 $DLPH
Cooper-Standard Holdings Inc Valuation – August 2018 $CPS
Copart Inc Valuation – August 2018 $CPRT
Standard Motor Products Inc Valuation – August 2018 $SMP

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.

Linamar Corp Valuation – October 2018 $TSE-LNR

Company Profile (excerpt from Reuters): Linamar Corporation is a Canada-based diversified manufacturing company of engineered products powering vehicles, motion, work and lives. The Company operates through two segments: the Powertrain/Driveline and the Industrial. The segments are divided into four operating groups: Machining & Assembly, Light Metal Casting, Forging and Skyjack. The Company’s Machining and Assembly, Casting and Forging operating groups focus on precision metallic components, modules and systems for engine, transmission, driveline and body systems designed for global vehicle and industrial markets. The Company’s Skyjack operating group is noted for its mobile industrial equipment, notably its aerial work platforms and tele handlers. The Company provides core engine components, including cylinder blocks and heads, camshafts and connecting rods. For transmission, it builds differential assemblies, gear sets, shaft and shell assemblies, as well as clutch modules.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-LNR- October 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 $3,840,394,427 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.92 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 1044.39% Pass
6. Moderate PEmg Ratio PEmg < 20 7.25 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.11 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.92 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.62 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 $8.11
MG Growth Estimate 15.00%
MG Value $312.11
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $117.55
MG Value based on 0% Growth $68.91
Market Implied Growth Rate -0.63%
Current Price $58.76
% of Intrinsic Value 18.83%

Linamar 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. 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 Undervalued after growing its EPSmg (normalized earnings) from $3.32 in 2014 to an estimated $8.11 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.63% annual earnings loss 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 Linamar Corporation revealed the company was trading below its Graham Number of $99.21. The company pays a dividend of $0.48 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 7.25, which was below the industry average of 26.58, 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 $-18.85.

Linamar Corporation performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$18.85
Graham Number $99.21
PEmg 7.25
Current Ratio 1.92
PB Ratio 1.11
Current Dividend $0.48
Dividend Yield 0.82%
Number of Consecutive Years of Dividend Growth 1

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $3,291,655,000
Total Current Liabilities $1,715,388,000
Long-Term Debt $2,551,147,000
Total Assets $8,048,907,000
Intangible Assets $1,809,028,000
Total Liabilities $4,538,710,000
Shares Outstanding (Diluted Average) 66,148,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.28
Dec2017 $8.32
Dec2016 $7.92
Dec2015 $6.63
Dec2014 $4.90
Dec2013 $3.52
Dec2012 $2.25
Dec2011 $1.56
Dec2010 $1.40
Dec2009 -$0.73
Dec2008 $1.05
Dec2007 $1.57
Dec2006 $1.40
Dec2005 $1.41
Dec2004 $1.31
Dec2003 $0.57
Dec2002 $0.81
Dec2001 $0.60
Dec2000 $1.12
Dec1999 $0.92
Dec1998 $1.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.11
Dec2017 $7.10
Dec2016 $6.01
Dec2015 $4.62
Dec2014 $3.32
Dec2013 $2.22
Dec2012 $1.42
Dec2011 $0.99
Dec2010 $0.78
Dec2009 $0.63
Dec2008 $1.32
Dec2007 $1.39
Dec2006 $1.23
Dec2005 $1.08
Dec2004 $0.91
Dec2003 $0.74
Dec2002 $0.85

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Stocks for the Enterprising Investor – August 2017
10 Low PE Stock Picks for the Enterprising Investor – July 2017
10 Undervalued Stocks for the Enterprising Investor – July 2017
10 Low PE Stock Picks for the Enterprising Investor – April 2017
Best Stocks Below Their Graham Number – March 2017

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Disclaimer:

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

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