ModernGraham Quarterly Valuation Of B&G Foods Inc.

Mar.14.14 | About: B&G Foods, (BGS)

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 B&G Foods (NYSE:BGS) fares in the ModernGraham valuation model.

BGS Chart

BGS 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 – FAIL
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  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 – 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 – PASS
  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 = 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 – 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 $29.83
MG Value $37.47
MG Opinion Fairly Valued
Value Based on 3% Growth $14.11
Value Based on 0% Growth $8.27
Market Implied Growth Rate 11.07%
NCAV $1.42
PEmg 30.65
Current Ratio 1.72
PB Ratio 4.21
Click to enlarge

Balance Sheet – 12/28/2013

Current Assets $181,700,000
Current Liabilities $105,700,000
Total Debt $844,600,000
Total Assets $1,484,300,000
Intangible Assets $1,163,400,000
Total Liabilities $1,106,000,000
Outstanding Shares 53,450,000
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Earnings Per Share

2013 $0.98
2012 $1.20
2011 $1.04
2010 $0.67
2009 $0.44
2008 $0.27
2007 $0.54
2006 $0.42
2005 $0.29
2004 $0.18
2003 $0.07
2002 $0.13
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Earnings Per Share – ModernGraham

2013 $0.97
2012 $0.89
2011 $0.69
2010 $0.49
2009 $0.40
2008 $0.37
Click to enlarge

Dividend History

BGS Dividend Chart

BGS Dividend data by YCharts


B&G Foods is not suitable for the Defensive Investor, having only passed the investor type’s requirements regarding earnings stability and earnings growth. The Enterprising Investor, being willing to do much more research into the company, does not have such strict requirements, and the company qualifies for further research. As a result, Enterprising Investors should feel comfortable proceeding with their research, beginning with a review of a Glance at the Dow and 5 Low PEmg Companies for the Enterprising Investor. From a valuation side of things, the company appears to be fairly valued. EPSmg (normalized earnings) have grown from $0.40 in 2009 to $0.97 for 2013, a level of demonstrated growth that supports the market’s implied estimate of 11.07% earnings growth. The ModernGraham valuation model has returned an estimate of intrinsic value that falls within a margin of safety in relation to 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 B&G Foods Inc. (BGS)? 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 B&G Foods Inc. (BGS) 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.