There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I've selected the 10 most undervalued companies reviewed by ModernGraham. Each company has been determined to be suitable for the Enterprising 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.
Be sure to check out the history of this screen to find out which companies have been selected in the past!
Seagate Technology PLC (STX, Financial)
Seagate Technology qualifies 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 short dividend history, and the high PB ratio. The Enterprising Investor is only initially concerned with the level of debt relative to the net current assets. As a result, all Enterprising 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 $2.39 in 2012 to an estimated $4.63 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.11% 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. (Read the full valuation)
PulteGroup Inc. (PHM, Financial)
PulteGroup qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last 10 years, along with the inconsistent dividend history. The Enterprising Investor is only initially concerned by the lack of earnings stability over the last five years. As a result, all Enterprising 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 a loss of $3.12 in 2011 to an estimated gain of $2.14 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.23% 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. (Read the full valuation)
Lincoln National Corporation (LNC, Financial)
Lincoln National Corporation qualifies 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, while the Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with the next stage of the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from 80 cents in 2011 to an estimated $5.48 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.88% 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. (Read the full valuation)
Starwood Property Trust Inc. (STWD, Financial)
Starwood Property Trust qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor has concerns regarding the company's short history as a publicly traded entity, while the Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with the next stage of the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from 75 cents in 2011 to an estimated $1.97 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.91% 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. (Read the full valuation)
Tegna Inc. (TGNA, Financial)
Tegna qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last 10 years along with the low current ratio. The Enterprising Investor is concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with the evaluation.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $2.00 in 2011 to an estimated gain of $2.50 for 2015. This level of demonstrated earnings growth surpasses the market's implied estimate of 1.06% 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. (Read the full valuation)
Western Refining Inc. (WNR, Financial)
Western Refining qualifies 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 as well as the inconsistent dividend record. The Enterprising Investor is only concerned by the level of debt relative to the net current assets. As a result, all Enterprising 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 a loss of 13 cents in 2011 to an estimated gain of $3.98 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.98% 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. (Read the full valuation)
Valero Energy Corporation (VLO, Financial)
Valero Energy Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, and the insufficient earnings growth or stability over the last 10 years. The Enterprising Investor has no initial concerns. As a result, all Enterprising 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 95 cents in 2011 to an estimated $6.06 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.71% 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. (Read the full valuation)
Discover Financial Services (DFS, Financial)
Discover Financial Services qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the short dividend record. The Enterprising Investor has no initial concerns. As a result, all Enterprising 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 $2.49 in 2011 to an estimated $4.89 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.53% 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. (Read the full valuation)
Kors Holdings Ltd. (KORS, Financial)
Kors Holdings qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the short operating history as a publicly traded company. The Enterprising Investor is only initially concerned by the lack of dividends. As a result, all Enterprising 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 39 cents in 2012 to an estimated $3.41 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.85% 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. (Read the full valuation)
LyondellBasell Industries NV (LYB, Financial)
LyondellBasell Industries qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the short history post bankruptcy, and the high PB ratio. The Enterprising Investor is only initially concerned with the level of debt relative to the net current assets. As a result, all Enterprising 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) post bankruptcy to an estimated $7.50 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.28% 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. (Read the full valuation)
Disclaimer:
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. This article is not investment advice and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions. Please also read our full disclaimer.
This article first appeared on ModernGraham.
