There are a number of great companies in the market today. I've selected the 10 most undervalued companies. Each company has been determined to be suitable for 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. Each company suitable for the defensive investor is also suitable for enterprising investors.
Twenty-First Century Fox Inc. (FOXA, Financial)
Twenty-First Century Fox Inc. qualifies for both the enterprising investor and the more conservative defensive investor. The defensive investor is only concerned about the insufficient earnings stability over the last 10 years, and the enterprising investor is only concerned with the level of debt relative to the net current assets.Â
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from 58 cents in 2012 to an estimated $2.43 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.09% annual earnings growth over the next 7 to 10 years.Â
Eastman Chemical Company (EMN, Financial)
Eastman Chemical Company qualifies for both the defensive investor and the enterprising investor. The defensive investor is only initially concerned with the low current ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets.Â
As for a valuation, the company appears to be endervalued after growing its EPSmg (normalized earnings) from $3.14 in 2012 to an estimated $5.89 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.51% annual earnings growth over the next 7 to 10 years.Â
Dow Chemical Co. (DOW, Financial)
Dow Chemical Co. qualifies for both the defensive investor and the enterprising investor. The defensive investor is only initially concerned with the low current ratio. The enterprising investor is only concerned with the level of debt relative to the net current assets.Â
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.21 in 2012 to an estimated $3.85 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.2% annual earnings growth over the next 7 to 10 years.Â
Principal Financial Group Inc. (PFG, Financial)
Principal Financial Group Inc. qualifies for both the defensive investor and the enterprising investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. The enterprising investor has no initial concerns.Â
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.13 in 2012 to an estimated $3.73 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.3% annual earnings growth over the next 7 to 10 years.
Travelers Companies Inc. (TRV, Financial)
Travelers Companies Inc. qualifies for both the defensive investor and the enterprising investor.Â
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.49 in 2012 to an estimated $9.60 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.52% annual earnings growth over the next 7 to 10 years.Â
Paccar Inc. qualifies for both the enterprising investor and the more conservative defensive investor. The defensive investor is only concerned by the insufficient earnings growth over the last 10 years while the enterprising investor has no initial concerns.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.94 in 2011 to an estimated $3.76 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.98% annual earnings growth over the next 7 to 10 years.
Gap Inc. qualifies for both the enterprising investor and the more conservative defensive investor. The defensive investor is only initially concerned by the low current ratio while the enterprising investor has no initial concerns.Â
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.59 in 2012 to an estimated $2.44 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.66% annual earnings growth over the next 7 to 10 years.Â
Robert Half International Inc. (RHI, Financial)
Robert Half International Inc. qualifies for the enterprising investor and the more conservative defensive investor. The defensive investor is only concerned with the high PB ratio. The enterprising investor only has concerns regarding the level of debt relative to the net current assets.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.00 in 2012 to an estimated $2.46 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 3.4% annual earnings growth over the next 7 to 10 years.Â
Invesco Ltd. qualifies for both the enterprising Investor and the more conservative defensive investor. The defensive investor is only initially concerned by the low current ratio while the enterprising investor is willing to overlook concerns regarding the level of debt relative to the current assets because the company passes the more stringent defensive investor requirements.Â
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.22 in 2011 to an estimated $2.12 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.52% annual earnings growth over the next 7 to 10 years.Â
Ryder System Inc. (R, Financial)
Ryder System Inc. qualifies for both the defensive investor and the enterprising investor. The defensive investor is only initially concerned with the low current ratio. The enterprising investor has concerns regarding the level of debt relative to the current assets.Â
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.07 in 2012 to an estimated $5.23 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.68% annual earnings growth over the next 7 to 10 years.
Disclaimer:
The author held a long position in Invesco Ltd. (IVZ, 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. 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.Â
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