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Benjamin Clark
Benjamin Clark
Articles (281)  | Author's Website |

5 Great Stocks This Week

I put 39 companies through the ModernGraham approach last week. These are 5 of the best

March 13, 2018 | About:

I evaluated 39 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 based on Benjamin Graham's value investing formulas in order to determine an intrinsic value for each.

Out of those companies, the following were found to be suitable for Defensive and/or Enterprising Investors. I've selected five that were either undervalued or fairly valued based on the ModernGraham value formula. Therefore, these companies are some of the best stocks of the week.

FMC Corp. (NYSE:FMC)

FMC Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg (price over earnings per share - ModernGraham) and price-book ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (defined here) from $2.36 in 2014 to an estimated $3.78 for 2018. This level of demonstrated earnings growth supports the market's implied estimate of 6.63% 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 FMC Corp. revealed the company was trading above its Graham Number of $48.75. The company pays a dividend of 66 cents per share, for a yield of 0.8%. Its PEmg was 21.76, which was below the industry average of 31.55, 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 $-21.36. 

Ingevity Corp. (NYSE:NGVT)

Ingevity 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, the poor dividend history and the high PEmg and price-book ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg from $1.02 in 2014 to an estimated $2.44 for 2018. This level of demonstrated earnings growth supports the market's implied estimate of 11.78% 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 Ingevity Corp. revealed the company was trading above its Graham Number of $20.88. The company does not pay a dividend. Its PEmg was 32.06, which was above the industry average of 31.55. Finally, the company was trading above its NCAV of $-6.98. 

AFLAC Inc. (NYSE:AFL)

AFLAC 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. 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 from $6.07 in 2014 to an estimated $8.08 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.21% 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.

At the time of valuation, further research into AFLAC Inc. revealed the company was trading below its Graham Number of $103.31. The company pays a dividend of $1.74 per share, for a yield of 2%. Its PEmg was 10.92, which was below the industry average of 22.76, which by some methods of valuation makes it one of the most undervalued stocks in its industry. 

Hanesbrands Inc. (NYSE:HBI)

Hanesbrands 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 high price-book ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg from 75 cents in 2014 to an estimated $1.11 for 2018. This level of demonstrated earnings growth supports the market's implied estimate of 4.92% 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 Hanesbrands Inc. revealed the company was trading above its Graham Number of $8.59. The company pays a dividend of 6 cents per share, for a yield of 3%, putting it among the best dividend-paying stocks today. Its PEmg was 18.35, which was below the industry average of 40.48, 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 of $-7.73. 

Principal Financial Group Inc. (NASDAQ:PFG)

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. 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 from $2.90 in 2014 to an estimated $5.62 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.21% 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.

At the time of valuation, further research into Principal Financial Group Inc. revealed the company was trading below its Graham Number of $74.18. The company pays a dividend of $1.87 per share, for a yield of 3%, putting it among the best dividend-paying stocks today. Its PEmg was 10.92, which was below the industry average of 20.16, which by some methods of valuation makes it one of the most undervalued stocks in its industry. 

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; 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.

About the author:

Benjamin Clark
Benjamin is one of TipRank's top bloggers. He is the founder of ModernGraham.com, a value investing website devoted to the study and modernization of the teachings of Benjamin Graham.

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