Loews Corporation (NYSE:L) is a holding company that utilizes value investing in its operating strategy, so it is naturally a very intriguing company to value investors. But just like any other company, it must be put through the same fundamental analysis in order to determine if it is suitable for Intelligent Investors. Just because a company sounds good because of its management strategies does not mean it automatically is a good investment. All companies must be analyzed on a fundamental level to determine whether the market's current price is fair. By using the ModernGraham analysis, we can determine which of those companies may have the least amount of risk going forward, and then compare the fundamental analysis of any other potential investment. What follows is how Loews Corporation fares in the ModernGraham valuation model.
L data by YCharts
Defensive and Enterprising Investor Tests:
Defensive Investor - must pass all 6 of the following tests: Score = 4/6
- Adequate Size of Enterprise - market capitalization of at least $2 billion - PASS
- Earnings Stability - positive earnings per share for at least 10 straight years - FAIL
- Dividend Record - has paid a dividend for at least 10 straight years - PASS
- 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
- Moderate PEmg ratio - PEmg is less than 20 - PASS
- Moderate Price to Assets - PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS
Enterprising Investor - must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3
- Earnings Stability - positive earnings per share for at least 5 years - PASS
- Dividend Record - currently pays a dividend - PASS
- Earnings growth - EPSmg greater than 5 years ago - PASS
|MG Opinion||Fairly Valued|
|Value Based on 3% Growth||$34.60|
|Value Based on 0% Growth||$20.28|
|Market Implied Growth Rate||4.85%|
Balance Sheet - 9/30/2013
Earnings Per Share
Earnings Per Share - ModernGraham
L Dividend data by YCharts
Loews Corporation is an intriguing company for Enterprising Investors and should be added to their watch lists. The company is not suitable for the Defensive Investor, having achieved insufficient earnings growth and stability over the ten-year historical period. Enterprising Investors look over a shorter time horizon, though, and should be very pleased with Loews Corporation's financials. Those who determine themselves to be Enterprising Investors after considering the definitions of each investor type should feel comfortable proceeding with further research to determine if the company is right for their individual portfolios.
From a valuation perspective, the company has grown its EPSmg (normalized earnings) from $1.68 in 2009 to an estimated $2.39 for 2013. While this is not a huge level of growth, it does support the market's implied growth rate of 4.85%, and the ModernGraham valuation model considers the company to be fairly valued.
What do you think? What value do you place on Loews Corporation? Is there a company you like better?
Disclosure: The author did not hold a position in Loews Corporation (L) 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.