Regeneron Pharmaceuticals Inc Valuation – August 2016 $REGN

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 Regeneron Pharmaceuticals Inc (REGN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regeneron Pharmaceuticals, Inc. is a biopharmaceutical company that discovers, invents, develops, manufactures and commercializes medicines for the treatment of serious medical conditions. The Company’s segment includes activities related to the discovery, development and commercialization of pharmaceutical products for the treatment of serious medical conditions. It commercializes medicines for eye diseases, high low-density lipoprotein (LDL) cholesterol and a rare inflammatory condition, and has product candidates in development in other areas of unmet medical need, including oncology, rheumatoid arthritis (RA), asthma, atopic dermatitis, pain and infectious diseases. Its marketed products include EYLEA (aflibercept) injection, Praluent (alirocumab) Injection and ARCALYST (rilonacept) injection for subcutaneous use. Its other products include Sarilumab (REGN88), Dupilumab (REGN668), REGN2222, Fasinumab (REGN475), REGN2810, REGN2176-3, Evinacumab (REGN1500) and REGN1908-1909.

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REGN Chart

REGN data by YCharts

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ModernGraham Valuation of REGN – 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 $46,218,576,706 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.41 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 -580.81% Fail
6. Moderate PEmg Ratio PEmg < 20 76.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 13.15 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 3.41 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

REGN value chart August 2016

EPSmg $5.69
MG Growth Estimate 15.00%
MG Value $219.22
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $82.56
MG Value based on 0% Growth $48.40
Market Implied Growth Rate 33.81%
Current Price $433.40
% of Intrinsic Value 197.70%

Regeneron Pharmaceuticals Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.16 in 2012 to an estimated $5.69 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 33.81% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Regeneron Pharmaceuticals Inc revealed the company was trading above its Graham Number of $80.54. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 76.12, which was above the industry average of 38.69. Finally, the company was trading above its Net Current Asset Value (NCAV) of $8.70.

Regeneron Pharmaceuticals Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

REGN charts August 2016

Net Current Asset Value (NCAV) $8.70
Graham Number $80.54
PEmg 76.12
Current Ratio 3.41
PB Ratio 13.15
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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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 3/1/2016
Total Current Assets $3,133,379,000
Total Current Liabilities $919,724,000
Long-Term Debt $0
Total Assets $5,904,460,000
Intangible Assets $0
Total Liabilities $2,139,378,000
Shares Outstanding (Diluted Average) 114,228,000

Earnings Per Share History

Next Fiscal Year Estimate $8.04
Dec2015 $5.52
Dec2014 $2.98
Dec2013 $3.72
Dec2012 $6.75
Dec2011 -$2.45
Dec2010 -$1.26
Dec2009 -$0.85
Dec2008 -$1.00
Dec2007 -$1.59
Dec2006 -$1.77
Dec2005 -$1.71
Dec2004 $0.74
Dec2003 -$2.13
Dec2002 -$2.83
Dec2001 -$1.81
Dec2000 -$0.66
Dec1999 -$0.74
Dec1998 -$0.28
Dec1997 -$0.40
Dec1996 -$1.32

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.69
Dec2015 $4.12
Dec2014 $2.92
Dec2013 $2.33
Dec2012 $1.16
Dec2011 -$1.56
Dec2010 -$1.18
Dec2009 -$1.22
Dec2008 -$1.29
Dec2007 -$1.39
Dec2006 -$1.37
Dec2005 -$1.30
Dec2004 -$1.17
Dec2003 -$1.96
Dec2002 -$1.68
Dec2001 -$0.99
Dec2000 -$0.61

Recommended Reading:

Other ModernGraham posts about the company

Regeneron Pharmaceuticals Inc. Annual Valuation – 2015 $REGN
16 Companies in the Spotlight this Week – 4/19/14
Regeneron Pharmaceuticals Inc. (REGN) Annual Valuation – 2014

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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.

Regions Financial Corp – June 2016 $RF

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 – June 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 Regions Financial Corp (RF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regions Financial Corporation is a financial holding company. The Company conducts its banking operations through Regions Bank, an Alabama state-chartered commercial bank, which is a member of the Federal Reserve System. It operates in three segments: Corporate Bank, which represents its commercial banking functions, including commercial and industrial, commercial real estate and investor real estate lending; Consumer Bank, which represents its branch network, including consumer banking products and services related to residential first mortgages, home equity lines and loans, small business loans, indirect loans, consumer credit cards and other consumer loans, as well as the corresponding deposit relationships, and Wealth Management, which offers individuals, businesses, governmental institutions and non-profit entities a range of solutions to enable transfer of wealth. It provides traditional commercial, retail and mortgage banking services, as well as other financial services.

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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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ModernGraham Valuation of RF – June 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,753,138,513 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -130.53% Fail
5. Moderate PEmg Ratio PEmg < 20 11.13 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.64 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

RF value Chart June 2016

EPSmg $0.77
MG Growth Estimate 15.00%
MG Value $29.52
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $11.12
MG Value based on 0% Growth $6.52
Market Implied Growth Rate 1.31%
Current Price $8.53
% of Intrinsic Value 28.90%

Regions Financial Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.69 in 2012 to an estimated $0.77 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.31% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Regions Financial Corp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

RF Charts June 2016

Graham Number $14.93
PEmg 11.13
PB Ratio 0.64
Dividend Yield 2.81%
TTM Dividend $0.24
Number of Consecutive Years of Dividend Growth 4

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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 3/1/2016
Long-Term Debt $7,851,000,000
Total Assets $125,539,000,000
Intangible Assets $5,363,000,000
Total Liabilities $108,328,000,000
Shares Outstanding (Diluted Average) 1,291,000,000

Earnings Per Share History

Next Fiscal Year Estimate $0.77
Dec2015 $0.75
Dec2014 $0.80
Dec2013 $0.77
Dec2012 $0.71
Dec2011 -$0.34
Dec2010 -$0.62
Dec2009 -$1.27
Dec2008 -$8.09
Dec2007 $1.76
Dec2006 $2.67
Dec2005 $2.15
Dec2004 $2.19
Dec2003 $2.90
Dec2002 $2.72
Dec2001 $2.24
Dec2000 $2.38
Dec1999 $2.35
Dec1998 $1.88
Dec1997 $2.15
Dec1996 $1.81

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.77
Dec2015 $0.69
Dec2014 $0.53
Dec2013 $0.21
Dec2012 -$0.69
Dec2011 -$1.49
Dec2010 -$1.75
Dec2009 -$1.73
Dec2008 -$1.26
Dec2007 $2.21
Dec2006 $2.47
Dec2005 $2.39
Dec2004 $2.50
Dec2003 $2.61
Dec2002 $2.42
Dec2001 $2.25
Dec2000 $2.20

Recommended Reading:

Other ModernGraham posts about the company

58 Companies in the Spotlight This Week – 1/31/15
Regions Financial Corporation Annual Valuation – 2015 $RF
14 Companies in the Spotlight This Week – 1/25/14
Regions Financial Corp (RF) Annual Valuation

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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.

Regal-Beloit Corporation Analysis – 2015 Update $RBC

RBClogoBenjamin 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 Regal-Beloit Corporation (RBC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regal Beloit Corporation is a global manufacturer electric motors and controls, electric generators and controls, and power transmission products. The Company operates through three segments: Commercial and Industrial Systems segment, which designs, manufactures and sells Fractional, integral and large horsepower motors and controls, electronic variable speed controls and blowers, Solid state and electro-mechanical starters, contactors, relays, variable frequency drives and motors, artificial lift system pumping equipment, Precision stator and rotor kits, Hazardous duty motors and Electric generators; Climate Solutions segment, which designs, manufactures and sells Fractional motors, electronic variable speed controls and blowers, and Power Transmission Solutions segment, which designs, manufactures and markets enclosed gear drives, gearmotors, transmissions and custom open gearing used for motion control within complex equipment and systems.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  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 – PASS

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 – PASS
  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 – FAIL

Valuation Summary

Key Data:

Recent Price $76.04
MG Value $22.48
MG Opinion Overvalued
Value Based on 3% Growth $48.58
Value Based on 0% Growth $28.48
Market-Implied Growth Rate 7.10%
NCAV -$27.07
PEmg 22.70
Current Ratio 2.50
PB Ratio 1.76

Balance Sheet – March 2015

Current Assets $1,801,000,000
Current Liabilities $721,000,000
Total Debt $1,876,000,000
Total Assets $4,968,000,000
Intangible Assets $2,418,000,000
Total Liabilities $3,022,000,000
Outstanding Shares 45,100,000

Earnings Per Share

2015 (estimate) $5.30
2014 $0.69
2013 $2.64
2012 $4.64
2011 $3.79
2010 $3.84
2009 $2.63
2008 $3.78
2007 $3.49
2006 $3.28
2005 $2.25

Earnings Per Share – ModernGraham

2015 (estimate) $3.35
2014 $2.62
2013 $3.56
2012 $3.93
2011 $3.55
2010 $3.42

Dividend History

Conclusion:

Regal-Beloit Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor is concerned with the lack of earnings growth over the last five years and the level of debt relative to the net 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 overvalued after seeing its EPSmg (normalized earnings) drop from $3.55 in 2011 to only an estimated $3.35 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 7.1% 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 below 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 Regal-Beloit Corporation (RBC)?  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.

 

Regeneron Pharmaceuticals Inc. Annual Valuation – 2015 $REGN

Regeneron_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 – February 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 specific look at how Regeneron Pharmaceuticals Inc. (REGN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regeneron Pharmaceuticals, Inc. (Regeneron) is a biopharmaceutical company that discovers, invents, develops, manufactures and commercializes medicines for the treatment of serious medical conditions. Regeneron develops new product candidate using VelociSuite technology platforms. Regeneron’s discovery platforms are designed to identify specific proteins of therapeutic interest for a particular disease or cell type and validate these targets through high-throughput production of genetically modified mice using the Company’s VelociGene technology to understand the role of these proteins in normal physiology, as well as in models of disease. The Company also has human monoclonal antibody technology, VelocImmune and cell line expression technology VelociMab. Regeneron’s antibody product candidates in clinical trials were developed using VelocImmune. The Company has three marketed products: EYLEA, ZALTRAP and ARCALYST.

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

Valuation Summary

Key Data:

Recent Price $450.94
MG Value $114.68
MG Opinion Overvalued
Value Based on 3% Growth $43.19
Value Based on 0% Growth $25.32
Market Implied Growth Rate 71.44%
Net Current Asset Value (NCAV) $7.34
PEmg 151.39
Current Ratio 3.31
PB Ratio 20.22

Balance Sheet – December 2014

Current Assets $2,167,000,000
Current Liabilities $655,000,000
Total Debt $458,000,000
Total Assets $3,872,000,000
Intangible Assets $0
Total Liabilities $1,330,000,000
Outstanding Shares 114,000,000

Earnings Per Share

2014 $3.07
2013 $3.81
2012 $6.75
2011 -$2.45
2010 -$1.26
2009 -$0.85
2008 -$1.00
2007 -$1.59
2006 -$1.77
2005 -$1.71
2004 $0.74

Earnings Per Share – ModernGraham

2014 $2.98
2013 $2.36
2012 $1.16
2011 -$1.56
2010 -$1.18
2009 -$1.22

Dividend History
Regeneron does not pay a dividend.

Conclusion:

Regeneron Pharmaceuticals is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the lack of dividends, insufficient earnings growth or stability over the last ten years along with the high PEmg and PB ratios.  The Enterprising Investor is concerned with the lack of dividends and earnings stability over the last five years.  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 overvalued despite growing its EPSmg (normalized earnings) from a loss of $1.18 in 2010 to a gain of $2.98 for 2014.  This level of growth does not support the market’s implied estimate of 71.44% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.

Be sure to check out previous ModernGraham valuations of Regeneron Pharmaceuticals (REGN) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Regeneron Pharmaceuticals (REGN)?  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 Regeneron Pharmaceuticals (REGN) 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.

Regal-Beloit Corporation Quarterly Valuation – March 2015 $RBC

RBClogoBenjamin 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 – March 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 specific look at how Regal-Beloit Corporation (RBC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regal Beloit Corporation is a global manufacturer of electric motors and controls, electric generators and controls, variable speed drives and controllers and mechanical motion control products. The Company has two reporting segments: Electrical and Mechanical. The Company operates distribution facilities in Indianapolis, Indiana and LaVergne, Tennessee which serve as hubs for North American distribution and logistics operations. The Company’s manufacturing, sales, service facilities and corporate offices are located throughout the United States, Canada, Mexico, Europe and Asia. The Company’s electrical products primarily include heating, ventilation, air conditioning (HVAC) motors, AC and DC commercial and industrial electric motors, electric generators and controls, high-performance drives and controls and capacitors. The Company’s mechanical products primarily include gears and gearboxes, marine transmissions, manual valve actuators and electrical connectivity devices.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  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 – PASS

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

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  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 – FAIL

Valuation Summary

Key Data:

Recent Price $76.65
MG Value $0.00
MG Opinion Overvalued
Value Based on 3% Growth $38.04
Value Based on 0% Growth $22.30
Market-Implied Growth Rate 10.36%
NCAV $4.00
PEmg 29.22
Current Ratio 2.94
PB Ratio 1.77

Balance Sheet – December 2014

Current Assets $1,652,000,000
Current Liabilities $561,000,000
Total Debt $625,000,000
Total Assets $3,408,000,000
Intangible Assets $1,206,000,000
Total Liabilities $1,473,000,000
Outstanding Shares 44,700,000

Earnings Per Share

2014 $0.69
2013 $2.64
2012 $4.64
2011 $3.79
2010 $3.84
2009 $2.63
2008 $3.78
2007 $3.49
2006 $3.28
2005 $2.25
2004 $1.22

Earnings Per Share – ModernGraham

2014 $2.62
2013 $3.56
2012 $3.93
2011 $3.55
2010 $3.42
2009 $3.17

Dividend History

Conclusion:

Regal-Beloit Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low level of earnings growth over the last ten years along with the high PEmg ratio, while the Enterprising Investor is concerned by the lack of earnings growth over the last five years.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $3.42 in 2010 to only $2.62 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 10.36% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of Regal-Beloit Corporation (RBC) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Regal-Beloit Corporation (RBC)?  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 Regal-Beloit Corporation (RBC) or in 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 for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Regions Financial Corporation Annual Valuation – 2015 $RF

220px-Regions-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 – December 2014.  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 Regions Financial Corporation (RF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regions Financial Corporation (Regions) is a financial holding company. Regions operate throughout the South, Midwest and Texas. The Company provides traditional commercial, retail and mortgage banking services, as well as other financial services in the fields of investment banking, asset management, trust, mutual funds, securities brokerage, insurance and other specialty financing. Regions conduct its banking operations through Regions Bank, a commercial bank. As of December 31, 2011, Regions operated approximately 2,100 automated teller machines (ATMs) and 1,726 banking offices in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Texas and Virginia. It provides additional financial services through its subsidiaries, which includes Morgan Keegan & Company, Inc. and Regions Insurance Group, Inc. In April 2012, it sold Morgan Keegan & Company, Inc. and related affiliates to Raymond James.

Defensive Investor – must pass all 6 following tests: Score = 4/6

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

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 2/3

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

Valuation Summary

Key Data:

Recent Price $9.01
MG Value $20.30
MG Opinion Undervalued
Value Based on 3% Growth $7.65
Value Based on 0% Growth $4.48
Market Implied Growth Rate 4.29%
PEmg 17.09
PB Ratio 0.73

Balance Sheet – September 2014

Total Debt $3,462,000,000
Total Assets $119,679,000,000
Intangible Assets $5,348,000,000
Total Liabilities $102,690,000,000
Outstanding Shares 1,377,000,000

Earnings Per Share

2014 $0.80
2013 $0.77
2012 $0.71
2011 -$0.34
2010 -$0.62
2009 -$1.27
2008 -$8.09
2007 $1.76
2006 $2.67
2005 $2.15
2004 $2.20

Earnings Per Share – ModernGraham

2014 $0.53
2013 $0.21
2012 -$0.69
2011 -$1.49
2010 -$1.75
2009 -$1.73

Dividend History

Conclusion:

Regions Financial Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years.  The Enterprising Investor is concerned with the lack of earnings stability over the last five years.  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 a loss of $1.75 in 2010 to a gain of  $0.53 for 2014.  This level of growth outpaces the market’s implied estimate of 4.29% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the price.

Be sure to check out previous ModernGraham valuations of Regions Financial Corporation (RF) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Regions Financial Corporation (RF)?  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 Regions Financial Corporation (RF) 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.

Regal-Beloit Corporation Quarterly Valuation – December 2014 $RBC

RBClogoBenjamin 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 Dow Components to Research – December 2014.  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 Regal-Beloit Corporation (RBC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance):  Regal Beloit Corporation is a global manufacturer of electric motors and controls, electric generators and controls, and mechanical motion control products. The Company operates in two segments: Electrical and Mechanical. Its electrical products include motors used in commercial and residential heating, ventilation, air conditioning ( HVAC) applications, a full line of alternating current ( AC) and direct current ( DC) commercial and industrial electric motors, electric generators and controls, high-performance drives and controls, and capacitors. Its mechanical products include primarily gears and gearboxes, marine transmissions, automotive transmissions, manual valve actuators, and electrical connectivity devices. In February 2013, it acquired RAM motor business. In July 2014, the Company acquired Benshaw Inc.

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  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 – PASS

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

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  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 $71.20
MG Value $45.20
MG Opinion Overvalued
Value Based on 3% Growth $55.68
Value Based on 0% Growth $32.64
Market-Implied Growth Rate 5.02%
NCAV $3.96
PEmg 18.54
Current Ratio 2.90
PB Ratio 1.51

Balance Sheet – September 2014

Current Assets $1,719,000,000
Current Liabilities $593,000,000
Total Debt $669,000,000
Total Assets $3,671,000,000
Intangible Assets $1,361,000,000
Total Liabilities $1,540,000,000
Outstanding Shares 45,200,000

Earnings Per Share

2014 (estimate) $4.34
2013 $2.64
2012 $4.64
2011 $3.79
2010 $3.84
2009 $2.63
2008 $3.78
2007 $3.49
2006 $3.28
2005 $2.25
2004 $1.22

Earnings Per Share – ModernGraham

2014 (estimate) $3.84
2013 $3.56
2012 $3.93
2011 $3.55
2010 $3.42
2009 $3.17

Dividend History

Conclusion:

Regal-Beloit Corporation qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only concern is the low level of earnings growth over the last ten years, and the Enterprising Investor has no initial concerns.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.42 in 2010 to only $3.84 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 5.02% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of Regal-Beloit Corporation (RBC) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Regal-Beloit Corporation (RBC)?  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 Regal-Beloit Corporation (RBC) or in 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 for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Regal-Beloit Corporation Quarterly Stock Valuation – September 2014 $RBC

RBClogoBenjamin 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 Enterprising 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 Regal-Beloit Corporation (RBC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regal Beloit Corporation is a global manufacturer of electric motors and controls, electric generators and controls, and mechanical motion control products. The Company operates in two segments: Electrical and Mechanical. Its electrical products include motors used in commercial and residential heating, ventilation, air conditioning ( HVAC) applications, a full line of alternating current ( AC) and direct current ( DC) commercial and industrial electric motors, electric generators and controls, high-performance drives and controls, and capacitors. Its mechanical products include primarily gears and gearboxes, marine transmissions, automotive transmissions, manual valve actuators, and electrical connectivity devices. In February 2013, it acquired RAM motor business. In July 2014, the Company acquired Benshaw Inc.
RBC Chart

RBC data by YCharts

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

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  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 – PASS

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

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  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 $71.34
MG Value $44.10
MG Opinion Overvalued
Value Based on 3% Growth $55.47
Value Based on 0% Growth $32.52
Market-Implied Growth Rate 5.07%
NCAV $4.17
PEmg 18.65
Current Ratio 2.42
PB Ratio 1.50

Balance Sheet – 6/28/2014

Current Assets $1,841,600,000
Current Liabilities $761,900,000
Total Debt $608,800,000
Total Assets $3,799,400,000
Intangible Assets $1,355,100,000
Total Liabilities $1,653,400,000
Outstanding Shares 45,100,000

Earnings Per Share

2014 (estimate) $4.29
2013 $2.64
2012 $4.65
2011 $3.79
2010 $3.84
2009 $2.63
2008 $3.87
2007 $3.49
2006 $3.28
2005 $2.25
2004 $1.22

Earnings Per Share – ModernGraham

2014 (estimate) $3.83
2013 $3.57
2012 $3.94
2011 $3.56
2010 $3.44
2009 $3.19

Dividend History

RBC Dividend Chart

RBC Dividend data by YCharts

Conclusion:

Regal-Beloit satisfies both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only initial concern is the lack of sufficient earnings growth over the last ten years while the Enterprising Investor has no initial concerns.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.44 in 2010 to an estimated $3.83 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 5.07% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out the previous ModernGraham valuations of Regal-Beloit Corporation (RBC) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Regal-Beloit Corporation (RBC)?  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 Regal-Beloit Corporation (RBC) or in 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 for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Regal-Beloit Corp Quarterly Valuation – June 2014 $RBC

RBClogoBenjamin 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 Near 52 Week Lows.  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 Regal-Beloit Corp (RBC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regal Beloit Corporation is a global manufacturer of electric motors and controls, electric generators and controls, and mechanical motion control products. The Company operates in two segments: Electrical and Mechanical. Its electrical products include motors used in commercial and residential heating, ventilation, air conditioning ( HVAC) applications, a full line of alternating current ( AC) and direct current ( DC) commercial and industrial electric motors, electric generators and controls, high-performance drives and controls, and capacitors. Its mechanical products include primarily gears and gearboxes, marine transmissions, automotive transmissions, manual valve actuators, and electrical connectivity devices. In February 2014, Regal Beloit Corp acquired Hy-Bon Engineering Company, Inc.

RBC Chart

RBC data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  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 – PASS

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

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  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 $78.73
MG Value $45.76
MG Opinion Overvalued
Value Based on 3% Growth $56.10
Value Based on 0% Growth $32.88
Market-Implied Growth Rate 5.93%
NCAV $2.58
PEmg 20.35
Current Ratio 2.33
PB Ratio 1.70

Balance Sheet – 3/29/2014

Current Assets $1,758,300,000
Current Liabilities $754,400,000
Total Debt $608,900,000
Total Assets $3,726,500,000
Intangible Assets $1,365,600,000
Total Liabilities $1,641,800,000
Outstanding Shares 45,100,000

Earnings Per Share

2014 (estimate) $4.42
2013 $2.64
2012 $4.65
2011 $3.79
2010 $3.84
2009 $2.63
2008 $3.87
2007 $3.49
2006 $3.28
2005 $2.25
2004 $1.22

Earnings Per Share – ModernGraham

2014 (estimate) $3.87
2013 $3.57
2012 $3.94
2011 $3.56
2010 $3.44
2009 $3.19

Dividend History

RBC Dividend Chart

RBC Dividend data by YCharts

Conclusion:

Regal-Beloit is suitable for Enterprising Investors but not for Defensive Investors.  The Defensive Investor has issues with the lack of sufficient growth over the last ten years and the high PEmg ratio, but the company passes all of the requirements for the Enterprising Investor.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities through a review of ModernGraham’s valuation of Emerson Electric (EMR) and ModernGraham’s valuation of General Electric (GE).  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.44 in 2010 to only an estimated $3.87 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 5.93% earnings growth and leads the ModernGraham valuation model, which is based on one of Benjamin Graham’s formula, to return an estimate of intrinsic value below the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Regal-Beloit Corp (RBC)?  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.

Be sure to review the previous ModernGraham Valuations of Regal-Beloit Corp (RBC)!

Disclaimer:  The author did not hold a position in Regal-Beloit Corp (RBC) 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.

Regeneron Pharmaceuticals Inc. (REGN) Annual Valuation – 2014

Regeneron_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 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 Regeneron Pharmaceuticals Inc. fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Regeneron Pharmaceuticals, Inc. (Regeneron) is an integrated biopharmaceutical company, which discovers, invents, develops, manufactures, and commercializes medicines for the treatment of serious medical conditions. As of December 31, 2011, the Company had two marketed products: EYLEA (aflibercept) Injection and ARCALYST (rilonacept) Injection for Subcutaneous Use. As of December 31, 2011, the Company had 13 product candidates in clinical development. Its Trap-based, late-stage programs are EYLEA, which is being developed for the treatment of additional serious eye diseases; ZALTRAP (aflibercept), known in the scientific literature as vascular endothelial growth factor (VEGF) trap, which is being developed in oncology in collaboration with Sanofi; and ARCALYST, which is being developed for the prevention of gout flares in patients initiating uric acid-lowering treatment.

REGN Chart

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

Valuation Summary

Key Data:

Recent Price $290.01
MG Value $88.11
MG Opinion Overvalued
Value Based on 3% Growth $33.19
Value Based on 0% Growth $19.45
Market Implied Growth Rate 59.11%
Net Current Asset Value (NCAV) $8.00
PEmg 126.72
Current Ratio 6.01
PB Ratio 14.81

Balance Sheet – 12/31/2013

Current Assets $1,796,900,000
Current Liabilities $298,800,000
Total Debt $504,600,000
Total Assets $2,951,000,000
Intangible Assets $0
Total Liabilities $998,900,000
Outstanding Shares 99,690,000

Earnings Per Share

2013 $3.81
2012 $6.50
2011 -$2.45
2010 -$1.26
2009 -$0.85
2008 -$1.05
2007 -$1.59
2006 -$1.78
2005 -$1.71
2004 $0.74

Earnings Per Share – ModernGraham

2013 $2.29
2012 $1.08
2011 -$1.57
2010 -$1.19
2009 -$1.23
2008 -$1.31

 

Conclusion:

Regeneron Pharmaceuticals is not suitable for either the Defensive Investor or the Enterprising Investor.  For the Defensive Investor, the company has shown insufficient earnings stability or growth over the ten year historical period, does not pay dividends, and is trading at a high PEmg ratio.  For the Enterprising Investor, the company’s lack of earnings stability and growth over the 5 year period is very concerning.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through a review of ModernGraham’s valuation of Amgen (AMGN) and ModernGraham’s valuation of Pfizer (PFE).  From a valuation standpoint, the company appears significantly overvalued despite growing its EPSmg (normalized earnings) from -$1.23 in 2009 to $2.29 for 2013.  This demonstrated level of growth still falls well below the market’s implied estimate of 59.11% earnings growth(!) and leads the ModernGraham valuation model to return an estimate of intrinsic value that is considerably lower than the market price.

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

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

Disclaimer:  The author did not hold a position in Regeneron Pharmaceuticals (REGN) or any other company mentioned in the 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.

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