There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I have selected five undervalued companies trading closest to their 52-week low. Each of these companies has been determined to be suitable for the Enterprising Investor using this 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.
Hanesbrands Inc. (HBI, Financial)
Hanesbrands Inc. is a manufacturer and marketer of apparels.
Hanesbrands Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, the high PEmg ratio and high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from 46 cents in 2012 to an estimated $1.16 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 6.71% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Hanesbrands Inc. revealed the company was trading above its Graham Number of $10.1. The company pays a dividend of 42 cents per share for a yield of 1.7%. Its PEmg (price over earnings per share) was 21.93, below the industry average of 26.26, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its net current asset value (NCAV) of $-5.05. (See the full valuation)
Cerner Corp. (CERN, Financial)
Cerner Corp. is a supplier of health care information technology (HCIT).
Cerner Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, the high PEmg ratio and high PB ratio. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from 87 cents in 2012 to an estimated $1.71 for 2016. This level of demonstrated earnings growth supports the market's implied estimate of 13.86% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into Cerner Corp. revealed the company was trading above its Graham Number of $24.52. The company does not pay a dividend. Its PEmg (price over earnings per share) was 36.23, below the industry average of 40.07, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its net current asset value (NCAV) of 15 cents. (See the full valuation)
Gilead Sciences Inc. (GILD, Financial)
Gilead Sciences Inc. is a research-based biopharmaceutical company.
Gilead Sciences Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history and the high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.61 in 2012 to an estimated $8.69 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.72% 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. (See the full valuation)
Kimco Realty Corp. (KIM, Financial)
Kimco Realty Corp. is a real estate investment trust (REIT).
Kimco Realty Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last 10 years and the high PEmg ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from 29 cents in 2012 to an estimated $1.24 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 7.79% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Kimco Realty Corp. revealed the company was trading above its Graham Number of $19.53. The company pays a dividend of $1.01 per share for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share) was 24.09, below the industry average of 34.03, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its net current asset value (NCAV) of $-13.21. (See the full valuation)
PPG Industries Inc. (PPG, Financial)
PPG Industries Inc. manufactures and distributes a range of coatings, specialty materials and glass products.
PPG Industries Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.63 in 2012 to an estimated $6.38 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 3.94% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into PPG Industries Inc. revealed the company was trading above its Graham Number of $49.66. The company pays a dividend of $1.48 per share for a yield of 1.4%. Its PEmg (price over earnings per share) was 16.37, below the industry average of 28.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its net current asset value (NCAV) of $-17.82. (See the full valuation)
What do you think? Are these companies a good value for Enterprising 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 did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.Â
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