ModernGraham Quarterly Valuation Of The Chubb Corporation

Mar.10.14 | About: The Chubb (CB)

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. 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 The Chubb Corporation (NYSE:CB) fares in the ModernGraham valuation model.CB Chart

CB data by YCharts

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

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

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

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

Valuation Summary

Key Data:

Recent Price $87.42
MG Value $99.75
MG Opinion Fairly Valued
Value Based on 3% Growth $101.44
Value Based on 0% Growth $59.47
Market Implied Growth Rate 2.00%
PEmg 12.50
PB Ratio 1.35
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Balance Sheet - 12/31/2013

Total Debt $3,300,000,000
Total Assets $50,433,000,000
Intangible Assets $467,000,000
Total Liabilities $34,336,000,000
Outstanding Shares 248,310,000
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Earnings Per Share

2013 $9.04
2012 $5.69
2011 $5.76
2010 $6.76
2009 $6.18
2008 $4.92
2007 $7.01
2006 $5.98
2005 $4.47
2004 $4.01
2003 $2.23
2002 $0.80
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Earnings Per Share - ModernGraham

2013 $7.00
2012 $5.94
2011 $6.08
2010 $6.22
2009 $5.87
2008 $5.57
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Dividend History

CB Dividend Chart

CB Dividend data by YCharts


The Chubb Corporation is a strong company that is suitable for either the Defensive Investor or the Enterprising Investor. The company passes all of the requirements of each investor type, indicating it has strong fundamentals and should present a lower level of risk than many other companies. As a result, value investors seeking to follow the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research, including a review of 5 Outstanding Dow Components and keeping in mind the 7 Key Tips to Value Investing.

From a valuation side of things, the company appears fairly valued, having grown its EPSmg (normalized earnings) from $5.87 in 2009 to $7.00 for 2013. This level of growth supports the market's implied estimate of 2% earnings growth, and the ModernGraham valuation model returns an estimate of intrinsic value that falls within a safety margin in relation to 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 The Chubb Corporation? Where do you see the company going in the future? Is there a company you like better?

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