I evaluated 53 different companies this week to determine whether they are suitable for Defensive Investors, those unwilling to do substantial research, or Enterprising Investors, those who are willing to do such research. I also put each company through the ModernGraham valuation model, which is based on Benjamin Graham's value investing formulas, in order to determine an intrinsic value for each. Out of those 53 companies, only 15 were found to be undervalued or fairly valued and suitable for either Defensive or Enterprising Investors. Therefore, these 15 companies are the best undervalued stocks of the week.
The elite
The following companies were found to be suitable for either the Defensive Investor or Enterprising Investor and undervalued:
Bank of New York Mellon
Bank of New York Mellon Corp. (BK, Financial) 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. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.46 in 2012 to an estimated $2.54 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 5.25% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on Graham's formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Bank of New York Mellon revealed the company was trading below its Graham Number of $48.91. The company pays a dividend of 70 cents per share for a yield of 1.5%. Its PEmg (price over earnings per share) was 19, below the industry average of 21.43, which by some methods of valuation makes it one of the most undervalued stocks in its industry. (See the full valuation.)
D.R Horton
D.R Horton Inc. (DHI, Financial) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last 10 years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be undervalued after growing its EPSmg from $1.22 in 2013 to an estimated $2.18 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.23% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into D.R. Horton revealed the company was trading below its Graham Number of $32.39. The company pays a dividend of 32 cents per share for a yield of 1.1%. Its PEmg was 12.97, below the industry average of 28.49, 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 $13.03. (See the full valuation.)
Inteliquent
Inteliquent Inc. (IQNT, Financial) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last 10 years, the poor dividend history and the high PEmg and price-book (P/B) ratios. The Enterprising Investor is only concerned with the lack of earnings stability over the last five years. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be undervalued after growing its EPSmg from negative 22 cents in 2012 to an estimated 95 cents for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 7.77% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Inteliquent Inc. revealed the company was trading above its Graham Number of $11.88. The company pays a dividend of 62 cents per share for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg was 24.04, below the industry average of 68.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally the company was trading above its NCAV of $4.02. (See the full valuation.)
PVH Corp.
PVH Corp. (PVH, Financial) 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 is only concerned with the level of debt relative to the net current assets. As a result, all value investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be undervalued after growing its EPSmg from $3.65 in 2013 to an estimated $5.73 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 3.55% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into PVH revealed the company was trading below its Graham Number of $95.06. The company pays a dividend of 15 cents per share for a yield of 0.2%. Its PEmg was 15.59, below the industry average of 22.16, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally the company was trading above its NCAV of $-41.22. (See the full valuation.)
Signet Jewelers
Signet Jewelers Ltd. (SIG, Financial) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last 10 years and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be undervalued after growing its EPSmg from $2.84 in 2013 to an estimated $5.77 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 3.39% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Signet Jewelers revealed the company was trading above its Graham Number of $71.41. The company pays a dividend of $1 per share for a yield of 1.1%. Its PEmg was 15.29, below the industry average of 26.36, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally the company was trading above its NCAV of $4.06. (See the full valuation.)
Selective Insurance Group
Selective Insurance Group (SIGI, Financial) 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. As a result, all value investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be undervalued after growing its EPSmg from 72 cents in 2012 to an estimated $2.4 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 4.62% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Selective Insurance Group revealed the company was trading above its Graham Number of $39.44. The company pays a dividend of 60 cents per share for a yield of 1.4%. Its PEmg was 17.74, below the industry average of 18.78, which by some methods of valuation makes it one of the most undervalued stocks in its industry. (See the full valuation.)
Celestica
Celestica Inc. (TSE:CLS) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last 10 years and the poor dividend history. 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 valuation, the company appears to be undervalued after growing its EPSmg from 29 cents in 2012 to an estimated 98 cents for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 4% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Celestica revealed the company was trading below its Graham Number of $20.71. The company does not pay a dividend. Its PEmg was 16.51, below the industry average of 28.12, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally the company was trading above its NCAV of $6.81. (See the full valuation.)
Canadian Imperial Bank of Commerce
Canadian Imperial Bank of Commerce (TSE:CM) 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. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be undervalued after growing its EPSmg from $7.07 in 2013 to an estimated $9.62 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.5% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Canadian Imperial Bank of Commerce revealed the company was trading below its Graham Number of $114.08. The company pays a dividend of $4.75 per share for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg was 11.5, below the industry average of 21.43, which by some methods of valuation makes it one of the most undervalued stocks in its industry. (See the full valuation.)
Intertape Polymer Group
Intertape Polymer Group (TSE:ITP) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last 10 years, the poor dividend history and the high PEmg and P/B ratios. 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 valuation, the company appears to be undervalued after growing its EPSmg from negative 18 cents in 2012 to an estimated $1.17 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 5.91% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Intertape Polymer Group revealed the company was trading above its Graham Number of $13.53. The company pays a dividend of 70 cents per share for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg was 20.32, below the industry average of 28.3, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally the company was trading above its NCAV of $-1.93. (See the full valuation.)
Stella-Jones
Stella-Jones Inc. (TSE:SJ) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and P/B ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be undervalued after growing its EPSmg from 84 cents in 2012 to an estimated $1.9 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 6.88% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Stella-Jones revealed the company was trading above its Graham Number of $27.89. The company pays a dividend of 38 cents per share for a yield of 0.9%. Its PEmg was 22.26, below the industry average of 28.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally the company was trading above its NCAV of $2.03. (See the full valuation.)
The good
The following companies were found to be suitable for the Defensive Investor or Enterprising Investor and fairly valued:
Commercial Metals
Commercial Metals Co. (CMC, Financial) 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 has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be fairly valued after growing its EPSmg from 24 cents in 2013 to an estimated 63 cents for 2017. This level of demonstrated earnings growth supports the market's implied estimate of 11.92% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into Commercial Metals revealed the company was trading above its Graham Number of $12.47. The company pays a dividend of 48 cents per share for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg was 32.35, below the industry average of 35.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally the company was trading above its NCAV of $2.06. (See the full valuation.)
Cisco Systems
Cisco Systems Inc. (CSCO) 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 has no initial concerns. As a result, all value investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be fairly valued after growing its EPSmg from $1.5 in 2013 to an estimated $2 for 2017. This level of demonstrated earnings growth supports the market's implied estimate of 3.34% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into Cisco revealed the company was trading above its Graham Number of $25.55. The company pays a dividend of 99 cents per share for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg was 15.17, below the industry average of 38.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally the company was trading above its NCAV of $4. (See the full valuation.)
W.W. Grainger
W.W. Grainger Inc. (GWW) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and P/B ratios. 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 valuation, the company appears to be fairly valued after growing its EPSmg from $8.13 in 2012 to an estimated $11.16 for 2016. This level of demonstrated earnings growth supports the market's implied estimate of 6.36% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into W. W. Grainger revealed the company was trading above its Graham Number of $92.08. The company pays a dividend of $4.78 per share for a yield of 2%. Its PEmg was 21.21, below the industry average of 22.25, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally the company was trading above its NCAV of $-11.81. (See the full valuation.)
Steve Madden
Steve Madden Ltd. (SHOO) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history and the high P/B 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 valuation, the company appears to be fairly valued after growing its EPSmg from $1.38 in 2012 to an estimated $1.88 for 2016. This level of demonstrated earnings growth supports the market's implied estimate of 4.98% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into Steven Madden revealed the company was trading above its Graham Number of $22.88. The company does not pay a dividend. Its PEmg was 18.46, below the industry average of 22.16, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally the company was trading above its NCAV of $4.5. (See the full valuation.)
Shaw Communications
Shaw Communications Inc. (TSE:SJR.B) 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. As a result, all value investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be fairly valued after growing its EPSmg from $1.42 in 2013 to an estimated $1.81 for 2017. This level of demonstrated earnings growth supports the market's implied estimate of 3.46% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into Shaw Communications revealed the company was trading above its Graham Number of $19.31. The company pays a dividend of $1.18 per share for a yield of 4.2%, putting it among the best dividend paying stocks today. Its PEmg was 15.43, below the industry average of 68.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally the company was trading above its NCAV of $-16.78. (See the full valuation.)
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. See my current holdings here.Â
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