Buffettology HA 2019 - WordPress.com€¦ · Title: Buffettology_HA_2019.xlsx Author: Joey Created Date: 2/20/2019 1:39:38 PM

Ticker: HA Current Price: $32.44 Prepared By MyMoneyTrainer On: 2/20/19Name: Hawaiian Holdings Inc Shares Outstanding 48,420,000

Industry: Airlines Market Cap $1,570,744,800

Write Up

I purchased this stock back in November 2017 @ $37.89. These are my thoughts after reviewing this when I completed my initial purchase in 2017:

PRO #1 - Great airline that is well run. Has not always been the case.PRO #2 - Has 80-90%% market share on interisland travel (25% of revenue). Their one competitor (Island Air) went bankrupt.PRO #3 - Has diversified out of simply interisland flights and US to HA flights (50% of revenue) to capture intercontinental traffic from other areas (25% of revenue). CON #1 - CEO just retired (planned). This is the CEO that has gotten the company in the good shape it is in today.CON #2 - Debt to equity is a bit high but it has been dropping like a rock (and is down to 53% in most recent quarter). Their quality score that I’m calcing is better than the other airlines (even those with lower debt ratios). So they are focused on it and improving it so I’ll take a chance on it continuing (although it will slow with buybacks and dividends…and cap ex).CON #3 - Other airlines are adding routes from US to Hawaii. 1) Southwest says they are adding routes to Hawaii in 2018-19 (and maybe interisland too). 2) United Continental said they would enter market too. 3) The threat of competition has been on the table for a while but hasn’t become official yet.

I'm using very conservative earnings estimates in my analysis (which is why some of my very important tests are showing low certainty--especially Test #0 and Test #4). Additionally, these are also skewed to be very low because the free cash flow is non-existent at the moment (which is basically making the DCF show zilch). I do consider this a very real and pertinent risk in this company. The free cash flow is currently low to negative because they are investing heavily in cap ex. This could be a short-term problem or it could be an ongoing problem. There is a pretty famous quote that says the best way to "become a millionaire is to invest $2 million dollars in an airline". Warren Buffett said (in his 2007 shareholder letter) "The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down." So over the past 10 years the average FCFPS for Hawaiian Airlines is $.72 but it has swung wildly from big negatives to big positives. Hence the joy of owning a cyclical. The question is will it improve over time.

One thing that has changed a bit in the airline industry over the years is there are only a few players and the industry is regulated heavily. It is decently hard to be in the airline business. It is not a monopoly/duopoly but it does have some characteristics of this. The players are competitive but over the years they have stopped price wars for the most part where they lose money to gain share and coexist much more than in the past. This could change at any time. Hawaiian definitely has semi monopoly characteristics in that they basically own certain routes in their market. Competition is coming and will impact their business (this is/has been a known threat for some time). It is actually happening right now as Southwest is finalizing approval to fly US to HA.

One thing I was surprised by (and that actually supports the thesis that airlines aren't so bad anymore...particularly this one) is the very decent return on invested capital. It hasn't always been high as over the past 5 years (the 5 years prior to that were lower). But the average is 16.5% and it is currently a bit ahead of that value. This airline is fairing even better than its peers in that respect. It seems they are making prudent investments as they allocate capital. Debt has decreased dramatically over the past 10 years (and is below the industry average), shares outstanding has decreased fairly dramatically from the all-time high (down 23%). The Free Cash Flows are very choppy (which leads to almost non-existent FCF) and so are the Cap Ex investments. Regardless, if they are able to invest this cash flow and earn a high return on it that is a good sign long term. I am hopeful that their seemingly great capital allocation will play out in their current very high Cap Ex number and that this investment will lead to good future results. I have no reason to doubt management in this respect at this point.

So, what am I doing? I'm not going to sell this stock right now (but also not going to add to my position either). There might be better things to invest in and I will look for those and if anything comes up I'll reassess then. Until then I don't expect this stock to rise dramatically to new highs but I also don't see terrible downside risk (barring some sort of overall collapse/recession). If that happens then this cyclical company will likely fall much further. I expect it to probably just hold its own and trade fairly sideways for some time and if things improve beyond the very conservative estimates that I've used to value this business I'll be nicely surprised. Not a bad company at all and one I won't mind owning. I’m sharing my analysis here. If you have thoughts on it I’d love to hear them hit me up on Twitter @mymoneytrainer

Certainty Rating

Test #0 - SUPER QUICK VALUATION 51%

Estimated 'Intrinsic Value' Between: Between $23.72 (73% of current price) and $40.23 (124% of current price)Expected Return: 4.4%

Test #1 - SCREEN SELECTION 68%

Valuation Score 18.60 75% Quality Score 17.70 62%

Test #2 - INDUSTRY METRICS COMPARE 100%

Average: 100%

Test #3 - PRICE HISTORY COMPARE 50%

Price/Earnings: 50% Price/Sales: 50% Price/Free CF: 25% Price/Book: 75%

Test #4 - VALUATION SCENARIOS 52%

Best Case - Expected Return: 6.4% Last 10 Year Average - Expected Return: 4.4%Stress Test - Expected Return: 2.4% Combined - Expected Return: 4.4%

Test #5 - FINANCIALS REVEW 72%

Sales Growth: 75% Gross Profit: 25% Debt To Equity: 100%Earnings Growth: 75% Operating Margin: 50% Dividend Sustainability: 100%

Sales Per Share Growth: 85% Cap Ex: 75%Earnings Per Share Growth: 85% Free Cash Flow: 50%

Test #6 - BUYING / OWNERSHIP 100%

Shares Outstanding / Buyback Program: 100% Insider Ownership / Activity: 100%

Test #7 - GOOD BUSINESS CHECK 75%

Return "Moat" Assessment: 57% Leverage Assessment: 88%Business "Moat" Assessment: 44% Compounding Assessment: 100%

Competition "Moat" Assessment: 60% Management Assessment: 100%

Test #8 - MY GUT 100%

Other's Analysis: 100% PROS: 100% Management Assessment: 100%CONS: 100% Moat / Competition Assessment: 60%

Test #9 - TECHNICALS / TIMING 75%

Point & Figure: 75% 50/200 Day: 25% MACD: 75%RSI: 100% Money Flow: 100%

Certainty Grand Total: 74%

Test #0 - SUPER QUICK VALUATION - Expected Case - Based On 1) NPV Earnings, 2) 5 Year DCF Free Cash Flow, 3) 10 Year NPV Cash Flow.

Net Present Value Calculator (AKA Ben Graham Formula) (Run Assuming Zero Growth)

20-year AAA Corporate Bond Rate 4.0% https://fred.stlouisfed.org/series/AAA Last Updated: 1/3/19EPS $2.79

Constant PE (0% perpetual growth) 8.5Company's Perpetual Growth Rate 0.0%Minimum Risk Free Rate of Return 2.4% https://fred.stlouisfed.org/series/TB3MS Last Updated: 1/3/19

Graham's Intrinsic Value (Original Formula) $23.72% of Current Price 73% DON'T BUY - Current Price is Above IV

Graham's Intrinsic Value (Revised Formula) $40.23% of Current Price 124% BUY - Current Price Is Below IV

5 Year Discounted Free Cash Flow (Owners Earnings) Calculator (AKA NPV) (Run Assuming Zero Growth)

Perpetual Growth Rate 0.0% Explanation:

Discount Rate/WACC PV of CFs + Terminal Value = PVLast 3 Year Average: -$0.14 -0.4% ($0.68) $32.19 $32.33 0.3%

Last 10 Year Average: $0.72 2.2% $3.38 $33.09 $32.45 0.0%0.9%

Year FCFPS2008 $1.832009 $0.192010 -$1.312011 $0.392012 -$0.722013 -$3.072014 $3.972015 $7.062016 -$0.172017 -$0.692018 $0.45 TTM FCF: $22,000,000

Explanation:

Tells Us Quickly If It Makes Sense To Even Dive Deeper (No Sense In Investing Unless Margin Of Safety Exists And Likelihood Of Decent Returns Is High). Multiples Of RFRR Are Good (Meaing This Model Kicks Out Higher Certainty Ratings For Higher Multiples).

For some reason I used the '15 FCF number in my original estimate rather than the much lower (negative) values. Rookie!

Run at zero perpetual growth to be super conservative.

10 Year NPV of Future Cashflows (Run Assuming Updated EPS (using most likely future annual estimate) & DPS and Zero Growth)

Return On Shareholder's Equity 16.4%Retained To Equity 13.6% 83%Dividends Percent 2.8%

Current and Projected Shareholder Equity and Projected EarningsEquity Base EquityPS Earnings EarningsPS Dividends DivsPS Added To Base RetainedPS

2018 $825,076,800 $17.04 $135,091,800 $2.79 $23,241,600 $0.48 $111,850,200 $2.312019 $936,927,000 $19.35 $135,091,800 $2.79 $23,241,600 $0.48 $111,850,200 $2.312020 $1,048,777,200 $21.66 $135,091,800 $2.79 $23,241,600 $0.48 $111,850,200 $2.312021 $1,160,627,400 $23.97 $135,091,800 $2.79 $23,241,600 $0.48 $111,850,200 $2.312022 $1,272,477,600 $26.28 $135,091,800 $2.79 $23,241,600 $0.48 $111,850,200 $2.312023 $1,384,327,800 $28.59 $135,091,800 $2.79 $23,241,600 $0.48 $111,850,200 $2.312024 $1,496,178,000 $30.90 $135,091,800 $2.79 $23,241,600 $0.48 $111,850,200 $2.312025 $1,608,028,200 $33.21 $135,091,800 $2.79 $23,241,600 $0.48 $111,850,200 $2.312026 $1,719,878,400 $35.52 $135,091,800 $2.79 $23,241,600 $0.48 $111,850,200 $2.312027 $1,831,728,600 $37.83 $135,091,800 $2.79 $23,241,600 $0.48 $111,850,200 $2.312028 $1,943,578,800 $40.14 $135,091,800 $2.79 $23,241,600 $0.48 $111,850,200 $2.31

NPV of future cashflows $276.52 1% In Money EPS Estimates Avg Low High$137.30 2% In Money Consensus '19 (#13) $4.27 $3.55 $5.00$91.04 3% In Money Consensus '20 (#13) $4.21 $2.02 $5.50$68.01 4% In Money$54.25 5% In Money$45.11 6% In Money$38.62 7% In Money$33.77 8% In Money Average $4.24 $2.79 $5.25$30.01 9% Too Expensive$27.01 10% Too Expensive Explanation:$24.57 11% Too Expensive$22.53 12% Too Expensive$20.82 13% Too Expensive$19.35 14% Too Expensive$18.08 15% Too Expensive$16.97 16% Too Expensive$15.99 17% Too Expensive$15.12 18% Too Expensive$14.34 19% Too Expensive$13.64 20% Too Expensive$13.00 21% Too Expensive$12.43 22% Too Expensive$11.90 23% Too Expensive$11.41 24% Too Expensive$10.97 25% Too Expensive

Used $4.46 EPS in my original analysis. The average analyst (13 of them) right now for the next two years is $4.27 and $4.21 respectively. So not terribly off.

Regardless, I'm not in the business of using averages anymore. I like to use the worst estimates available in my planning. I'm going to use the average of the low estimates for the upcoming 2 years (which are substantially lower than the current average).

Expected Return - 5 Year DCF 0.9%Expected Return - 10 NPV Cash Flows 8%

Expected Return Average 4.4% 2.4% 0x 0%4.7% 1x 15%7.1% 2x 30%

73% Graham's Intrinsic Value (Original Formula) 9.5% 3x 45%124% Graham's Intrinsic Value (Revised Formula) 11.9% 4x 60%0% 5 Year Discounted Free Cash Flow 14.2% 5x 75%45% 10 Year NPV of Future Cashflows 16.6% 6x 90%15% Average 19.0% 7x 105%51% Total 21.3% 8x 120%

Explanation:

Certainty Rating

Hurdle Returns (vs. Risk Free)

The analyst estimate I'm using is the average low which is 38% lower than the current average. This should be a safe number to use. This also produces an 8% return which is not horrible compared against the overall market. The DCF a mess right now because they are investing the free cash flow into CapEx right now (not necessarily a negative).

Test #1 - SCREEN SELECTION - Expect Investment To Score Highly On Both Valuation AND Quality Criteria.

Valuation Scoring (Max Possible Score 25.25)5.00 Base (+5) – PE (FYF) vs. Market PE5.00 Base (+5) – PE (FYF) vs. Industry

18.60 Total Valuation Score 4.00 Base (+5) – PE (FYF) vs. Static Hurdle (Case Shiller Mean)74% Percent of Max Possible Score 1.00 Extra Credit (+1) – PE (TTM) vs. Market PE76% Percent of Current Universe 1.00 Extra Credit (+1) – PE (MRFY) vs. Market PE75% Combined 0.60 Extra Credit (+1) – Sales (TTM) vs. Industry

0.60 Extra Credit (+1) – CF (MRFY) vs. Industry1.00 Extra Credit (+1) – CF (MRFY) vs. Market0.40 Extra Credit (+1) – BV (MRQ) vs. Industry0.00 Extra Credit (+2) – PEG (TTM) vs. Market

Valuation: 75% 0.00 Extra Credit (+.25) – Analyst – SchwabQuality: 62% 0.00 Extra Credit (+.25) – Analyst – Morningstar

Combined: 68% 0.00 Extra Credit (+.25) – Analyst – Credit Suisse0.00 Extra Credit (+.25) – Analyst – Ned Davis0.00 Extra Credit (+.25) – Analyst – S&P Cap IQ Earnings and Div Rank0.00 Extra Credit (+.25) – Analyst – S&P CFRA0.00 Extra Credit (+.25) – Analyst – Argus0.00 Extra Credit (+.25) – Analyst – Market Edge0.00 Extra Credit (+.25) – Analyst – Reuters

Quality Scoring (Max Possible Score 26.50)1.00 Base (+1) – Positive PE (FYF)1.00 Base (+1) – Positive Net Profit Margin

17.70 Total Quality Score 1.00 Base (+1) – Positive Price To Cash Flow67% Percent of Max Possible Score 1.00 Base (+1) – Positive Cash Flow Per Share57% Percent of Current Universe 1.00 Base (+1) – Positive ROE62% Combined 1.00 Base (+1) – Positive ROI

0.00 Base (+1) – Quick Ratio Greater Than Static HurdleExplanation: 1.20 Base (+1) – Quick Ratio Higher Than Industry

0.00 Base (+1) – Current Ratio Greater Than Static Hurdle1.00 Base (+1) – Current Ratio Higher Than Industry0.00 Base (+5) – Debt To Equity Lower Than Static Hurdle3.00 Base (+5) – Debt To Equity Lower Than Industry1.30 Base (+1) – Net Profit Margin Higher Than Industry1.50 Base (+1) – Industry ROE vs. Market ROE1.10 Base (+1) – ROE vs. Industry1.10 Base (+1) – Industry ROI vs. Market ROI1.50 Base (+1) – ROI vs. Industry0.00 Base (+1) – Market Cap0.00 Extra Credit (+.25%) – Morningstar Moat0.00 Extra Credit (+.25%) – Morningstar Stewardship

Tells Us Quickly If It Makes Sense To Even Dive Deeper (No Sense In Investing Unless Margin Of Safety Exists And Likelihood Of Decent Returns Is High).

Certainty Rating

Cyclical company that doesn't stack up well against the broad market in a few ways. In general it looks good against other airlines. So the low quality score is impacted due to that.

Test #2 - INDUSTRY METRICS COMPARE - Is it a good deal compared to other companies in the industry?

Industry: AirlinesNumber of Companies In Industry: 11

Industry StockAverage Price/Earnings (FYF): 9.3 4.9 Better 100%Average Price/Earnings (TTM): 17.8 5.0 Better 100%

Average Price/Earnings (MRFY): 11.7 5.4 Better 100%Average Price/Book (MRQ): 1.8 1.3 Better 100%Average Price/Sales (TTM): 0.7 0.5 Better 100%

Average Price/Cash Flow (MRFY): 5.6 3.5 Better 100%Average PEG (TTM): 2.0 NA

Average Debt To Equity (MRQ): 91.0% 62.0% Better 100%Average Net Profit Margin (MRFY): 7.4% 9.6% Better 100%

Average Return On Equity (TTM): 26.4% 29.6% Better 100%Average Return On Assets (MRFY): 5.2% 8.9% Better 100%

Average Quick Ratio (MRQ): 0.6 0.8 Better 100%Average Current Ratio (MRQ): 0.8 0.8 Better 100%

Average Cash Flow Per Share (TTM): $8.02 $7.82 Better 100%

Average (Certainty Rating): 100%

Explanation:

Compare a variety of financial valuation metrics of the company against the other companies in its industry to ensure a margin of safety.

The Average Cash Flow Per Share is much higher (in this dataset) than I see in an alternate dataset.

Test #3 - PRICE HISTORY COMPARE - Is it a good deal based on its own history? "Price is what you pay, value is what you get!"

Current Price Year High Price Low Price Volume Shares Out Drawdown Gain$32.44 2008 $11.10 $3.50 680,404 53,000,000 1% 68% 217%$32.44 2009 $9.18 $2.17 656,281 52,000,000 1% 76% 323%$32.44 2010 $8.69 $4.69 621,736 51,000,000 1% 46% 85%$32.44 2011 $8.10 $3.67 683,165 53,000,000 1% 55% 121%$32.44 2012 $7.00 $4.92 574,120 53,000,000 1% 30% 42%$32.44 2013 $9.76 $5.18 844,213 63,000,000 1% 47% 88%$32.44 2014 $26.66 $9.46 1,131,594 61,000,000 2% 65% 182%$32.44 2015 $40.13 $18.01 1,371,695 54,000,000 3% 55% 123%$32.44 2016 $60.90 $28.40 912,957 53,000,000 2% 53% 114%$32.44 2017 $59.45 $32.40 1,006,423 50,000,000 2% 46% 83%$32.44 2018 $44.25 $24.81 797,048 50,000,000 2% 44% 78%

Average: $25.93 $12.47 52% 108%Max: $60.90 $32.40 47% 88%Min: $7.00 $2.17 69% 223%

AT High vs. AT Low: $60.90 $2.17 96% 2706%

Explanation:

Compare a variety of financial valuation metrics of the company against the historical prices of the company to ensure a margin of safety.

Historical Pricing Max Price Movements

NA

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Historical Pricing

High Price Low Price Current Price

Current PE Year EPS Earnings High PE Low PE Avg. High Avg. Low7.0 2008 $2.21 $117,000,000 5.0 1.6 8.3 4.07.0 2009 $2.12 $110,000,000 4.3 1.0 8.3 4.07.0 2010 -$0.06 -$3,000,000 8.3 4.07.0 2011 $1.00 $53,000,000 8.1 3.7 8.3 4.07.0 2012 $0.98 $52,000,000 7.1 5.0 8.3 4.07.0 2013 $1.10 $69,000,000 8.9 4.7 8.3 4.07.0 2014 $3.00 $183,000,000 8.9 3.2 8.3 4.07.0 2015 $4.35 $235,000,000 9.2 4.1 8.3 4.07.0 2016 $6.87 $364,000,000 8.9 4.1 8.3 4.07.0 2017 $4.66 $233,000,000 12.8 7.0 8.3 4.07.0 2018 $4.66 $233,000,000 9.5 5.3 8.3 4.0

Average: $2.81 $149,636,364 8.3 4.0Max: $6.87 $364,000,000 12.8 7.0Min: -$0.06 -$3,000,000 4.3 1.0

Explanation:

Price To Earnings Over Time

Price to Earnings Over Time

Excluded negative year's PE. Currently at 7x which is closer to the average high of 8.3x than the average low of 4.0x. All time low is 1x and all time high is 12.8x so seeing a 7x seems low against most of the market but not really. This is a cyclical business.

Certainty Rating

50%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Historical Price To Earnings

Current PE High PE Low PE Avg. High Avg. Low AT Highest AT Lowest

Current PS Year SPS Sales High PS Low PS Avg. High Avg. Low0.6 2008 $22.32 $1,183,000,000 0.5 0.2 0.6 0.30.6 2009 $25.19 $1,310,000,000 0.4 0.1 0.6 0.30.6 2010 $32.35 $1,650,000,000 0.3 0.1 0.6 0.30.6 2011 $37.02 $1,962,000,000 0.2 0.1 0.6 0.30.6 2012 $40.68 $2,156,000,000 0.2 0.1 0.6 0.30.6 2013 $36.75 $2,315,000,000 0.3 0.1 0.6 0.30.6 2014 $37.98 $2,317,000,000 0.7 0.2 0.6 0.30.6 2015 $45.39 $2,451,000,000 0.9 0.4 0.6 0.30.6 2016 $50.87 $2,696,000,000 1.2 0.6 0.6 0.30.6 2017 $56.74 $2,837,000,000 1.0 0.6 0.6 0.30.6 2018 $56.74 $2,837,000,000 0.8 0.4 0.6 0.3

Average: $40.18 $2,155,818,182 0.6 0.3Max: $56.74 $2,837,000,000 1.2 0.6Min: $22.32 $1,183,000,000 0.2 0.1

Explanation:

Price To Sales Over Time

Price to Sales Over Time

Certainty Rating

50%

Currently at .6x which is near the average high. The average low is .3x. The all time high is 1.2x so it could trade up but…

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Historical Price To Sales

Current PS High PS Low PS Avg. High Avg. Low AT Highest AT Lowest

Current BVPS Year BVPS Book Value High BVPS Low BVPS Avg. High Avg. Low1.658487 2008 $3.42 $181,260,000 3.2 1.0 2.4 1.11.658487 2009 $5.53 $287,560,000 1.7 0.4 2.4 1.11.658487 2010 $5.29 $269,790,000 1.6 0.9 2.4 1.11.658487 2011 $5.22 $276,660,000 1.6 0.7 2.4 1.11.658487 2012 $6.00 $318,000,000 1.2 0.8 2.4 1.11.658487 2013 $8.46 $532,980,000 1.2 0.6 2.4 1.11.658487 2014 $7.06 $430,660,000 3.8 1.3 2.4 1.11.658487 2015 $12.46 $672,840,000 3.2 1.4 2.4 1.11.658487 2016 $16.43 $870,790,000 3.7 1.7 2.4 1.11.658487 2017 $20.26 $1,013,000,000 2.9 1.6 2.4 1.11.658487 2018 $19.56 $978,000,000 2.3 1.3 2.4 1.1

Average: $9.97 $530,140,000 2.4 1.1Max: $20.26 $1,013,000,000 3.8 1.7Min: $3.42 $181,260,000 1.2 0.4

Explanation:

Price To Book Over Time

Price to Book Over Time

Certainty Rating

75%

Currently 1.7x which is right between the average high and low.

0

0.5

1

1.5

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2.5

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3.5

4

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Historical Price To Book Value

Current BVPS High BVPS Low BVPS Avg. High Avg. Low AT Highest AT Lowest

Current FCFPS Year FCFPS Free Cash Flow High FCFPS Low FCFPS Avg. High Avg. Low71.39749 2008 $1.83 $96,990,000 6.1 1.9 -25.4 -13.171.39749 2009 $0.19 $9,880,000 48.3 11.4 -25.4 -13.171.39749 2010 -$1.31 -$66,810,000 -6.6 -3.6 -25.4 -13.171.39749 2011 $0.39 $20,670,000 20.8 9.4 -25.4 -13.171.39749 2012 -$0.72 -$38,160,000 -9.7 -6.8 -25.4 -13.171.39749 2013 -$3.07 -$193,410,000 -3.2 -1.7 -25.4 -13.171.39749 2014 $3.97 $242,170,000 6.7 2.4 -25.4 -13.171.39749 2015 $7.06 $381,240,000 5.7 2.6 -25.4 -13.171.39749 2016 -$0.17 -$9,010,000 -358.2 -167.1 -25.4 -13.171.39749 2017 -$0.69 -$34,500,000 -86.2 -47.0 -25.4 -13.171.39749 2018 $0.45 $22,717,885 97.4 54.6 -25.4 -13.1

Average: $0.72 $39,252,535 -25.4 -13.1Max: $7.06 $381,240,000 97.4 54.6Min: -$3.07 -$193,410,000 -358.2 -167.1

Explanation:

Price To Free Cash Flow Over Time

Price to Free Cash Flow Over Time

Certainty Rating

25%

Lots of negative free cash flow and very, very erratic. Has been high in the past. FCF is currently at low levels because Cap Ex is currently pretty high.

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-100

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200

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Historical Price To Free Cash Flow

Current FCFPS High FCFPS Low FCFPS Avg. High Avg. Low AT Highest AT Lowest

Test #4 - VALUATION SCENARIOS - 1) Best Case, 2) Stress Test (50% Reduction In Expected) 3) Last 10 Year Earnings Average.




Graham's Intrinsic Value (Original Formula) $36.04% of Current Price 111% BUY - Current Price Is Below IV


5 Year Discounted Free Cash Flow (Owners Earnings) Calculator (AKA NPV) (Run Assuming Expected Growth)


Discount Rate/WACC PV of CFs + Terminal Value = PVMorningstar Current -$0.14 -0.4% ($0.68) $32.19 $32.33 0.3%Brokerage CF (TTM) $0.72 2.2% $3.38 $33.09 $32.45 0.0%

0.9%

Explanation:

10 Year NPV of Future Cashflows (Run Assuming Updated EPS (using best case future annual estimate) & DPS and Expected Growth)



2018 $825,076,800 $17.04 $205,300,800 $4.24 $23,241,600 $0.48 $182,059,200 $3.762019 $1,007,136,000 $20.80 $205,300,800 $4.24 $23,241,600 $0.48 $182,059,200 $3.762020 $1,189,195,200 $24.56 $205,300,800 $4.24 $23,241,600 $0.48 $182,059,200 $3.762021 $1,371,254,400 $28.32 $205,300,800 $4.24 $23,241,600 $0.48 $182,059,200 $3.762022 $1,553,313,600 $32.08 $205,300,800 $4.24 $23,241,600 $0.48 $182,059,200 $3.762023 $1,735,372,800 $35.84 $205,300,800 $4.24 $23,241,600 $0.48 $182,059,200 $3.762024 $1,917,432,000 $39.60 $205,300,800 $4.24 $23,241,600 $0.48 $182,059,200 $3.762025 $2,099,491,200 $43.36 $205,300,800 $4.24 $23,241,600 $0.48 $182,059,200 $3.76

Since Valuation Models Can Be Made To Spit Out Any Result Anyone Wants We Make Sure To Run Several Convservative Scenarios. Multiples Of RFRR Are Good.

Best Case (with expected growth)

NA

NA

2026 $2,281,550,400 $47.12 $205,300,800 $4.24 $23,241,600 $0.48 $182,059,200 $3.762027 $2,463,609,600 $50.88 $205,300,800 $4.24 $23,241,600 $0.48 $182,059,200 $3.762028 $2,645,668,800 $54.64 $205,300,800 $4.24 $23,241,600 $0.48 $182,059,200 $3.76

NPV of future cashflows $420.24 1% In Money$208.66 2% In Money$138.36 3% In Money$103.35 4% In Money$82.44 5% In Money$68.56 6% In Money$58.69 7% In Money$51.32 8% In Money$45.60 9% In Money$41.05 10% In Money Explanation:$37.33 11% In Money$34.25 12% In Money$31.64 13% Too Expensive$29.41 14% Too Expensive$27.47 15% Too Expensive$25.79 16% Too Expensive$24.30 17% Too Expensive$22.97 18% Too Expensive$21.79 19% Too Expensive$20.72 20% Too Expensive$19.76 21% Too Expensive$18.88 22% Too Expensive$18.08 23% Too Expensive$17.35 24% Too Expensive$16.67 25% Too Expensive




Explanation:


Certainty Rating

So at 12% this is a good scenario. The FCF is abnormally low at the moment due to high Cap Ex (which could continue or could be outsized for a bit). It is fine that these balance out.

Used $4.46 EPS in my original analysis. The average analyst (13 of them) right now for the next two years is $4.27 and $4.21 respectively. So not terribly off.

For this case I'm using the average.





Graham's Intrinsic Value (Revised Formula) $20.11% of Current Price 62% DON'T BUY - Current Price is Above IV




0.9%

Explanation:

10 Year NPV of Future Cashflows (Run Assuming Updated EPS (using 1/2 best case future annual estimate) & DPS and Zero Growth)



2018 $825,076,800 $17.04 $67,545,900 $1.40 $23,241,600 $0.48 $44,304,300 $0.922019 $869,381,100 $17.96 $67,545,900 $1.40 $23,241,600 $0.48 $44,304,300 $0.922020 $913,685,400 $18.87 $67,545,900 $1.40 $23,241,600 $0.48 $44,304,300 $0.922021 $957,989,700 $19.79 $67,545,900 $1.40 $23,241,600 $0.48 $44,304,300 $0.922022 $1,002,294,000 $20.70 $67,545,900 $1.40 $23,241,600 $0.48 $44,304,300 $0.922023 $1,046,598,300 $21.62 $67,545,900 $1.40 $23,241,600 $0.48 $44,304,300 $0.922024 $1,090,902,600 $22.53 $67,545,900 $1.40 $23,241,600 $0.48 $44,304,300 $0.922025 $1,135,206,900 $23.45 $67,545,900 $1.40 $23,241,600 $0.48 $44,304,300 $0.922026 $1,179,511,200 $24.36 $67,545,900 $1.40 $23,241,600 $0.48 $44,304,300 $0.922027 $1,223,815,500 $25.28 $67,545,900 $1.40 $23,241,600 $0.48 $44,304,300 $0.922028 $1,268,119,800 $26.19 $67,545,900 $1.40 $23,241,600 $0.48 $44,304,300 $0.92

Stress Test (50% Reduction In Expected) (with zero growth)



NPV of future cashflows $138.26 1% In Money$68.65 2% In Money$45.52 3% In Money$34.00 4% In Money$27.12 5% Too Expensive$22.56 6% Too Expensive$19.31 7% Too Expensive$16.88 8% Too Expensive$15.00 9% Too Expensive$13.51 10% Too Expensive Explanation:$12.28 11% Too Expensive$11.27 12% Too Expensive$10.41 13% Too Expensive$9.67 14% Too Expensive$9.04 15% Too Expensive$8.48 16% Too Expensive$7.99 17% Too Expensive$7.56 18% Too Expensive$7.17 19% Too Expensive$6.82 20% Too Expensive$6.50 21% Too Expensive$6.21 22% Too Expensive$5.95 23% Too Expensive$5.71 24% Too Expensive$5.48 25% Too Expensive




Explanation:


Certainty Rating

NA

NA








0.9%

Explanation:

10 Year NPV of Future Cashflows (Run Assuming Updated EPS (using 1/2 best case future annual estimate) & DPS and Zero Growth)



2018 $825,076,800 $17.04 $135,929,267 $2.81 $23,241,600 $0.48 $112,687,667 $2.332019 $937,764,467 $19.37 $135,929,267 $2.81 $23,241,600 $0.48 $112,687,667 $2.332020 $1,050,452,134 $21.69 $135,929,267 $2.81 $23,241,600 $0.48 $112,687,667 $2.332021 $1,163,139,801 $24.02 $135,929,267 $2.81 $23,241,600 $0.48 $112,687,667 $2.332022 $1,275,827,468 $26.35 $135,929,267 $2.81 $23,241,600 $0.48 $112,687,667 $2.332023 $1,388,515,135 $28.68 $135,929,267 $2.81 $23,241,600 $0.48 $112,687,667 $2.332024 $1,501,202,802 $31.00 $135,929,267 $2.81 $23,241,600 $0.48 $112,687,667 $2.332025 $1,613,890,469 $33.33 $135,929,267 $2.81 $23,241,600 $0.48 $112,687,667 $2.332026 $1,726,578,137 $35.66 $135,929,267 $2.81 $23,241,600 $0.48 $112,687,667 $2.332027 $1,839,265,804 $37.99 $135,929,267 $2.81 $23,241,600 $0.48 $112,687,667 $2.332028 $1,951,953,471 $40.31 $135,929,267 $2.81 $23,241,600 $0.48 $112,687,667 $2.33

NPV of future cashflows $278.24 1% In Money



Last 10 Years Earnings

Last 10 Year Earnings Average (with zero growth)

$138.15 2% In Money Year EPS Earnings Shares Out$91.61 3% In Money 2008 $2.21 $117,000,000 53,000,000$68.43 4% In Money 2009 $2.12 $110,000,000 52,000,000$54.58 5% In Money 2010 -$0.06 -$3,000,000 51,000,000$45.39 6% In Money 2011 $1.00 $53,000,000 53,000,000$38.86 7% In Money 2012 $0.98 $52,000,000 53,000,000$33.98 8% In Money 2013 $1.10 $69,000,000 63,000,000$30.19 9% Too Expensive 2014 $3.00 $183,000,000 61,000,000$27.18 10% Too Expensive 2015 $4.35 $235,000,000 54,000,000$24.72 11% Too Expensive 2016 $6.87 $364,000,000 53,000,000$22.67 12% Too Expensive 2017 $4.66 $233,000,000 50,000,000$20.95 13% Too Expensive 2018 $4.66 $233,000,000 50,000,000$19.47 14% Too Expensive Average EPS $2.81$18.19 15% Too Expensive$17.07 16% Too Expensive Explanation:$16.09 17% Too Expensive$15.21 18% Too Expensive$14.43 19% Too Expensive$13.72 20% Too Expensive$13.08 21% Too Expensive$12.50 22% Too Expensive$11.97 23% Too Expensive$11.48 24% Too Expensive$11.04 25% Too Expensive




Explanation:

NA


Certainty Rating

NA

55% Weighting

Expected Return - 5 Year DCF 0.9%Expected Return - 10 NPV Cash Flows 8.0%

Expected Return Total 4.4%

Certainty Rating 51%

15% Weighting




15% Weighting




15% Weighting







Test #2 - Last 10 Year Earnings Average (with zero growth)

Consolidation Of All Scenarios (Weighted)

Valuation Scenarios Summary

Test #1 - Expected Case (with zero growth)

Test #2 - Best Case (with expected growth)

Test #2 - Stress Test (50% Reduction In Expected Case)

Year2008 $1,183,000,0002009 $1,310,000,000 11%2010 $1,650,000,000 26%2011 $1,962,000,000 19%2012 $2,156,000,000 10%2013 $2,315,000,000 7%2014 $2,317,000,000 0%2015 $2,451,000,000 6%2016 $2,696,000,000 10%2017 $2,837,000,000 5%2018 $2,837,000,000 0%

Certainty Rating: 75%

Explanation:

Year2008 $117,000,0002009 $110,000,000 -6%2010 -$3,000,000 -103%2011 $53,000,000 -1867%2012 $52,000,000 -2%2013 $69,000,000 33%2014 $183,000,000 165%2015 $235,000,000 28%2016 $364,000,000 55%2017 $233,000,000 -36%2018 $233,000,000 0%


Explanation:

Sales have grown considerably over the ten years. But it has slowed recently. As competition enters market will sales remain consistent? Or will they fall? Can they offset any losses by continuing international route expansion?

Earnings growth has slowed (and actually have fallen from 2016 levels).

Tells Us The Business Has Pricing Power, History Of Success, Growth, Rate Of Growth, And Our Initial Rate Of Return.

Earnings

Sales

Test #5 - FINANCIALS REVEW - Review Of 10 Year Financial Trends For Key Metrics

Growing Sales & Growing Earnings - Earnings and Sales are 1) Consistent, 2) Strong, and 3) Growing At A Steady Rate.

0%

5%

10%

15%

20%

25%

30%

$0

$500,000,000

$1,000,000,000

$1,500,000,000

$2,000,000,000

$2,500,000,000

$3,000,000,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Sales Growth

Sales % Change Trend - SPS Trend - % Change

-2000%

-1500%

-1000%

-500%

0%

500%

-$50,000,000$0

$50,000,000$100,000,000$150,000,000$200,000,000$250,000,000$300,000,000$350,000,000$400,000,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Earnings Growth

Earnings % Change Trend - EPS Trend - % Change

Year2008 $22.322009 $25.19 13%2010 $32.35 28%2011 $37.02 14%2012 $40.68 10%2013 $36.75 -10%2014 $37.98 3%2015 $45.39 19%2016 $50.87 12%2017 $56.74 12%2018 $56.74 0%


Explanation:

Year2008 $2.212009 $2.12 -4%2010 -$0.06 -103%2011 $1.00 -1800%2012 $0.98 -2%2013 $1.10 12%2014 $3.00 174%2015 $4.35 45%2016 $6.87 58%2017 $4.66 -32%2018 $4.66 0%


Explanation:

Earnings Per Share

SPS & EPS - Earnings are 1) Consistent, 2) Strong, and 3) Growing At A Steady Rate. Ideally Closesly Matching Growing Sales.

Same basic story. Share count is decreasing so on a per share basis this is a bit better.

Same basic story. Share count is decreasing so on a per share basis this is a bit better.

Sales Per Share

-15%-10%-5%0%5%10%15%20%25%30%35%

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Sales Per Share Growth

Sales Per Share % Change Trend - SPS Trend - % Change

-2000%

-1500%

-1000%

-500%

0%

500%

-$1.00$0.00$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.00

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Earnings Per Share Growth

Earnings Per Share % Change Trend - EPS Trend - % Change

Year2008 $904,995,000 77%2009 $972,020,000 74%2010 $1,054,350,000 64%2011 $396,324,000 20%2012 $433,356,000 20%2013 $550,970,000 24%2014 $660,345,000 29%2015 $757,359,000 31%2016 $784,536,000 29%2017 $629,814,000 22%2018 $629,814,000 22%

Average: 37%High: 77%Low: 20%


Explanation:

Year2008 $414,000,000 35%2009 $432,000,000 33%2010 $90,000,000 5%2011 $129,000,000 7%2012 $134,000,000 6%2013 $245,000,000 11%2014 $426,000,000 18%2015 $505,000,000 21%2016 $507,000,000 19%2017 $314,000,000 11%2018 $314,000,000 11%



Explanation:

Gross Profit

Margins - Are 1) Consistent, 2) Strong, and 3) Growing At A Steady Rate.

Lower than the 5 year average (and the full 10 year average). This will likely go lower with increased competition as well. Already at near all time low. I'm not sure how the 65%+ margins exist in 2008-2010.

Lower than the 5 year average (and the full 10 year average).

Operating Margin

0%10%20%30%40%50%60%70%80%90%

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Gross Profit

Gross Profit GP % Trend - GP Trend - % Change

0%5%10%15%20%25%30%35%40%

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Operating Margin

Operating Margin OM % Trend - OM Trend - % Change

Year2008 $40,000,000 3%2009 $140,000,000 11%2010 $282,000,000 17%2011 $291,000,000 15%2012 $342,000,000 16%2013 $442,000,000 19%2014 $119,000,000 5%2015 $179,000,000 7%2016 $342,000,000 13%2017 $487,000,000 17%2018 $487,000,000 17%



Explanation:

Year2008 $96,990,000 8%2009 $9,880,000 1%2010 -$66,810,000 -4%2011 $20,670,000 1%2012 -$38,160,000 -2%2013 -$193,410,000 -8%2014 $242,170,000 10%2015 $381,240,000 16%2016 -$9,010,000 0%2017 -$34,500,000 -1%2018 $22,717,885 1%

Average: 2%High: 16%Low: -8%


Explanation:

72%

Free Cash Flow

Free Cash Flow - Is 1) Consistent, 2) Strong, and 3) Growing At A Steady Rate.

Currently at near all time highs as a percentage of sales and coming off near all time lows. Pretty choppy. If we are going into a recession the current high level of investment might not fair too well

The high values from 2014-2015 are mainly due to low cap ex investment (which is being paid for now).

Cap Ex - Is Consistent.

Cap Ex

0%

5%

10%

15%

20%

25%

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Cap Ex

Cap Ex CapEx % Trend - CapEx Trend - % Change

-10%

-5%

0%

5%

10%

15%

20%

-$300,000,000

-$200,000,000

-$100,000,000

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Free Cash Flow

Free Cash Flow FCF % Trend - FCFPS Trend - % Change

Year2008 108%2009 62% -43%2010 190% 206%2011 206% 8%2012 188% -9%2013 243% 29%2014 156% -36%2015 73% -53%2016 53% -27%2017 64% 21%2018 64% 0%



Explanation:

Year2008200920102011201220132014201520162017 7%2018 10% 60%



Explanation:

Debt To Equity - Is 1) Consistent, and 2) Low (and/or Lowering Quickly).

Debt To Equity

The company's debt picture has stabilized recently and stabilized at near all time lows for the company. I have not issues really with anything going on here. They are seemingly taking on a bit more debt right now to do share buybacks (and seem to be active doing this now). There debt level is better than the industry as a whole already/still.

Dividend Sustainability

Payout Ratio

They just started paying a dividend and the payout ratio is low. So no issues here.

-100%

-50%

0%

50%

100%

150%

200%

250%

0%

50%

100%

150%

200%

250%

300%

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Debt To Equity

Debt To Equity % Change Trend - DE Trend - % Change

0%

10%

20%

30%

40%

50%

60%

70%

-100%

-80%

-60%

-40%

-20%

0%

20%

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Dividend Payout Ratio

Payout Ratio % Change Trend - DP Trend - % Change

Shares Outstanding / Buyback Program

YearPeak Past 10 Years 63,000,000 2008Current Outstanding 48,420,000 2009

Shares Added/Subtracted -14,580,000 2010% Added/Subtracted -23% 2011

20122013

Years 0 2014Value $0 2015

Potential Shares At Current Price 0 2016Potential Shares Repurchased 0% 2017

2018Certainty Rating: 100%

Explanation:

100%

Insider Ownership / Activity

Institutions 2,536,760,000 73%Mutual Funds 926,800,000 27%

Insiders 33,470,000 1%Total 3,497,030,000

6 Month Buying Yes6 Month Selling No


Explanation:

Ownership (In Millions)

Insider Buying / Selling

53,000,00050,000,00050,000,000

Test #6 - BUYING / OWNERSHIPTells Us Whether The People Closest To The Business Are 1) Buying (And At Attractive Valuations) and/or 2) Owners.

Shares Outstanding

Current Buyback Program

I'm not sure exactly what the current buyback program is but the current shares outstanding are below one of my current datasets (which tells me they are buying back stock actively). The shares are pretty depressed right now in price so probably not a bad investment of capital. Shares outstanding are down 23% from all time highs.

There is actually some insider ownership showing on the chart (1%ish). Not bad. Director bought back in March at $37.79 to increase his shares by 1/3rdish.

52,000,00051,000,00053,000,00053,000,00063,000,00061,000,00054,000,000

Shares Out53,000,000

Ownership

Institutions Mutual Funds Insiders

Test #7 - GOOD BUSINESS CHECK - Do important metrics indicating a 'good business' show that it is indeed a 'good business'?

Return "Moat" Assessment - Not A "Low Return" Business. Charlie Munger says that eventually over time returns will match ROIC.

Company (10 Year Average) 16.5%Year Company (10 Year High) 34.7%2008 34.7% Company (10 Year Low) 1.3%2009 26.6% Company (Current Year/TTM) 15.4%2010 1.3%2011 9.1% Industry (Current Year) 13.6%2012 7.0%2013 7.8% Overall Market Without Financials (Current Year) 14.1%2014 16.2%2015 20.7% Explanation:2016 27.3%2017 15.4%2018 15.4%

100% Yes Is the ROIC equal to or higher than the overall market?100% Yes Is the ROIC equal to or higher than the industry?100% Yes Has the ROIC always been positive?100% Yes Is the ROIC steady (not really far from average, or high/low)?

Company (10 Year Average) 34.9%Year Company (10 Year High) 101.8%2008 101.8% Company (10 Year Low) -1.1%2009 48.6% Company (Current Year/TTM) 24.4%2010 -1.1%2011 21.7% Industry (Current Year) 26.4%2012 15.6%2013 18.0% Overall Market Without Financials (Current Year) 12.5%2014 44.9%2015 41.8% Explanation:2016 44.2%2017 24.4%2018 24.4%

100% Yes Is the ROE equal to or higher than the overall market?0% No Is the ROE equal to or higher than the industry?0% No Has the ROE always been positive?0% No Is the ROE steady (not really far from average, or high/low)?

Return on Invested Capital

Tells Us The Business Has A Good Financial Model And Whether Management Understands How To Operate It Effectively Compared To The Industry and Market.

Surprising to see this (especially over the past 5 years or so). Maybe airlines are not so bad after all!?!?

Return on Equity

NA


100% Yes Is the ROA equal to or higher than the overall market?100% Yes Is the ROA equal to or higher than the industry?

0% No Has the ROA always been positive?0% No Is the ROA steady (not really far from average, or high/low)?

Company (10 Year Average) 1.06Year Company (10 Year High) 1.272008 1.21 Company (10 Year Low) 0.912009 1.22 Company (Current Year/TTM) 0.942010 1.272011 1.172012 1.072013 0.972014 0.912015 0.94 Explanation:2016 0.972017 0.942018 0.94

100% Yes Is the Asset Turnover consistent over time?0% No Is the Asset Turnover improving (trending higher)?

Certainty Rating: 57% Explanation:

Return on Assets

NA

Asset Turnover

NA

NA

Business "Moat" Assessment - Not A "Mediocre" Business


0% No Is the Net Margin % equal to or higher than the overall market?100% Yes Is the Net Margin % equal to or higher than the industry?

0% No Has the Net Margin % always been positive?0% No Is the Net Margin % steady (not really far from average, or high/low)?

Company (10 Year Average) 37.4%Year Company (10 Year High) 76.5%2008 76.5% Company (10 Year Low) 20.1%2009 74.2% Company (Current Year/TTM) 22.2%2010 63.9%2011 20.2%2012 20.1%2013 23.8%2014 28.5%2015 30.9% Explanation:2016 29.1%2017 22.2%2018 22.2%

100% Yes Has the Gross Margin % always been positive?0% No Is the Gross Margin % generally improving?0% No Is the Gross Margin % steady (not really far from average, or high/low)?

NA

Net Margin %

NA

Gross Margin %

Company (10 Year Average) 16.1%Year Company (10 Year High) 35.0%2008 35.0% Company (10 Year Low) 5.5%2009 33.0% Company (Current Year/TTM) 11.1%2010 5.5%2011 6.6% Industry (Current Year) 9.7%2012 6.2%2013 10.6% Overall Market Without Financials (Current Year) 11.3%2014 18.4%2015 20.6% Explanation:2016 18.8%2017 11.1%2018 11.1%

0% No Is the Operating Margin % equal to or higher than the overall market?100% Yes Is the Operating Margin % equal to or higher than the industry?100% Yes Has the Operating Margin % always been positive?

0% No Is the Operating Margin % generally improving?0% No Is the Operating Margin % steady (not really far from average, or high/low)?

100% Yes Is The Business Unique? Or Does It Have Something That Makes It Unique?0% No Price Is Not The Single Most Important Motivating Factor In Purchase Of Product.

100% Yes Prices Can Be Adjusted For Inflation?0% No Is Revenue "Safe" (Long-Term Contracts, Long-Term Retention, Don't Have To Resell Everything Every Time)?

100% Yes Does The Company Have Strong/Recognized Brands?100% Yes Is There An Attachment To The Companies Brand(s)? Is There An Identifiable Consumer Monopoly?


Competition "Moat" Assessment - Not A "Commodity-Type" Business0% No Is Business Competition Free? There Is Not A Company That Directly Competes With This One.

100% Yes Is Business Competition Free? There Is Not A Presence Of Multiple Producers In Industry?0% No Is Business Competition Free? There Is Not Substantial Excess Production Capacity In Industry?

100% Yes It Would Be Hard To Start A Company To Compete With This Business. There Are Large Barriers To Entry To This Business.100% Yes It Would Be Hard To Make A Dent In Business Without The Most Money and Best Management Talent.

Certainty Rating: 60% Explanation: Commodity business but kinda not a commodity business?!?!? Confusing enough?!?!

Operating Margin %

NA

Airlines are not unique/monopolies, per se, but this one is as close to that as it gets at the moment. Competition will errode that over time but pretty focused.

Leverage Assessment - Is The Business Conservatively Financed (Providing Additional Margin Of Safety…Oh And Saving Money)?

Year Company (10 Year Average) 5.032008 5.84 Company (10 Year High) 7.092009 4.02 Company (10 Year Low) 2.962010 6.67 Company (Current Year/TTM) 3.372011 6.952012 5.452013 7.092014 5.632015 3.98 Explanation:2016 2.962017 3.372018 3.37

100% Yes Is the Financial Leverage consistent over time?100% Yes Is the Financial Leverage improving (ie lowering)?

Shares Company (10 Year Average) 127.9%Year Company (10 Year High) 243.0%2008 108% 53,000,000 Company (10 Year Low) 53.0%2009 62% 52,000,000 Company (Current Year/TTM) 64.0%2010 190% 51,000,0002011 206% 53,000,000 Industry (Current Year) 91.0%2012 188% 53,000,0002013 243% 63,000,000 Overall Market Without Financials (Current Year) 119.0%2014 156% 61,000,0002015 73% 54,000,000 Explanation:2016 53% 53,000,0002017 64% 50,000,0002018 64% 50,000,000

0% No Is The Debt To Equity Low Versus Static Measure (Less Than 50%)?100% Yes Is The Debt To Equity Low Versus Market (Less Than Market)?100% Yes Is The Debt To Equity Low Versus Industry (Less Than Industry)?100% Yes Has The Debt To Equity Lowered Over Time?100% Yes The Company Is Not Adding Debt In Order To Increase ROE.100% Yes The Company Is Not Adding Debt In Order To Do Share Buybacks.


Financial Leverage(Asset To Equity Ratio)

Near all time lows.

Debt To Equity

Near all time lows…but off incredibly high historic values. Transformation.

Higher than a static value but otherwise not bad at all.

Compounding Assessment - Is The Company A (Or Going To Continue To Be A) Compounder?100% Yes Does The Company Retain Its Earnings (Ideally No Payouts Unless There Is No Additional Expansion Opportunity)?100% Yes Is The Company Able To Spend Little On Maintaining Current Operations (Is CapEx Rebuilding Or Expansion)?100% Yes Is Company Reinvesting Earnings In New Businesses, Expansion Of Existing Businesses (That Will Increase Value)?100% Yes Is Company Reinvesting Earnings In Share Repurchases (That Will Increase Value)?


Management Assessment - Does The Company's Management Add Value To The Business?100% Yes Management Has Candor And Can Admit Mistakes100% Yes Management Has Been In Place For Some Time100% Yes Management Does What It Says It Will Do100% Yes Management Knows The Business (Rarely Surprised)100% Yes Management Is Allocating Capital (Reinvested Earnings) Into Businesses, Expansion That Will Increase Value.100% Yes Profitability Is Not Almost Entirely Dependent Upon Management's Abilities To Efficiently Utilize Tangible Assets (Idiot Run Test).


Return "Moat" Assessment: 57%Business "Moat" Assessment: 44%

Competition "Moat" Assessment: 60%Leverage Assessment: 88%

Compounding Assessment: 100%Management Assessment: 100%

75%

Explanation:

NA

GOOD BUSINESS CHECK

It is an airline…but seemingly a well run airline that has transformed from a not so well run airline over the past decade.

NA

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PROS


CONS

Certainty Rating: 100% Explanation: Comments at beginning.

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NA

Test #8 - MY GUTTrust My Gut…It Is Large And In Charge (Unfortunately)!

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Comments at beginning

Point And Figure


Explanation:

Weekly Candlestick


Explanation:


Explanation:


Explanation:


Explanation: Oversold back in last October 2017 (about where I bought it). Nearly now.

MACD (Crossing?)

Money Flow (Oversold?)

Just crossed the 200 day…not good.

NA

No realy trend/turn here to reverse down/flat trend.

No real trend in P&F chart.

The stock was trending up strongly over 2015-2017 (and was bouncing along overbought every step of the way). It reset in Oct 2017 and moved into oversold territory and then traded pretty sideways for the remainder of the year. It dipped again early this year and got near oversold territory again. There is a lot of price support at current levels even dating back to 2015. The 50/200 cross that recently occurred is not welcome news (and points towards the sideways/downtrend remaining in place). I don't expect this stock to take off to new highs anytime soon but I also don't anticipate sharp losses/drawdowns (without a major recession...which could obviously happen).

50/200 Day Trend Line (Crossing?)

RSI (Cheap, Falling Knife?)

Test #9 - TECHNICALS / TIMINGDo Weekly Technicals Point Towards An Attractive Entry Point (Either Oversold / Turning / Trending)

Buffettology HA 2019 - WordPress.com€¦ · Title: Buffettology_HA_2019.xlsx Author: Joey Created Date: 2/20/2019 1:39:38 PM

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