There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I've selected the five undervalued companies reviewed by ModernGraham trading closest to their 52-week lows. Each of these companies has been determined to be suitable for the Defensive Investor according to the ModernGraham approach.
Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk.
PNC Financial Services Group
PNC Financial Services Group Inc. (PNC, Financial) qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. As a result, all value 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 $5.16 in 2012 to an estimated $7.04 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.57% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham Valuation Model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.
Bed Bath & Beyond
Bed Bath & Beyond Inc. (BBBY, Financial) qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. As a result, all value 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 $3.63 in 2013 to an estimated $4.91 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.18% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham Valuation Model returns an estimate of intrinsic value above the price. (See the full valuation)
Wells Fargo
Wells Fargo & Co. (WFC, Financial) qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. As a result, all value 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 $2.59 in 2012 to an estimated $3.93 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.56% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham Valuation Model returns an estimate of intrinsic value above the price. (See the full valuation)
U.S. Bancorp
U.S. Bancorp (USB, Financial) qualifies for both the Enterprising Investor and the more conservative Defensive Investor. In fact, the company passes all the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. As a result, all value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.19 in 2011 to an estimated $3.13 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.06% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham Valuation Model returns an estimate of intrinsic value above the price. (See the full valuation)
People's United Financial
People's United Financial Inc. (PBCT, Financial) qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. As a result, all value 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 51 cents in 2012 to an estimated 83 cents for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 4.97% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham Valuation Model returns an estimate of intrinsic value above the price. (See the full valuation)
What do you think? Are these companies a good value for Defensive Investors? Is there a company you like better? Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.
Disclosure:Â The author held a long position in People's United Financial but did not hold a position 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. 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. This article first appeared on ModernGraham.
Start a free seven-day trial of Premium Membership to GuruFocus.
