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Benjamin Clark
Benjamin Clark
Articles (298)  | Author's Website |

5 Undervalued Companies for the Defensive Investor Nearest 52-Week Lows - February 2019

There are a number of great companies in the market today

February 20, 2019 | About:

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I've selected the five undervalued companies trading closest to their 52 week low. Each of these companies has been determined to be suitable for the Defensive Investor according to the ModernGraham approach.

Defensive Investors are defined as investors who 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.

H&R Block Inc. (NYSE:HRB)

H&R Block Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the 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 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 (normalized earnings) from $1.55 in 2015 to an estimated $2.05 for 2019. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.95% 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 H&R Block Inc. revealed the company was trading above its Graham Number of $8.61. The company pays a dividend of 96 cents per share, for a yield of 3.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share) was 12.39, which was below the industry average of 18, 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 $-6.68.

H&R Block Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Gilead Sciences Inc. (NASDAQ:GILD)

Gilead Sciences Inc. 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 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 (normalized earnings) from $3.61 in 2014 to an estimated $6.87 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.69% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Gilead Sciences Inc. revealed the company was trading above its Graham Number of $44.37. The company pays a dividend of $2.08 per share, for a yield of 3.1%, putting it among the best dividend-paying stocks today. Its PEmg (price over earnings per share) was 9.88, which was below the industry average of 35.4, 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 $-4.88.

Gilead Sciences Inc. performs fairly well in the ModernGraham grading system, scoring a B+. 

Molson Coors Brewing Co. Class B (NYSE:TAP)

Molson Coors Brewing Co. Class B qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is initially concerned only 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 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 (normalized earnings) from $2.97 in 2014 to an estimated $5.89 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.12% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Molson Coors Brewing Co. Class B revealed the company was trading below its Graham Number of $86.77. The company pays a dividend of $1.64 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share) was 10.75, which was below the industry average of 19.84, 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 $-62.64.

Molson Coors Brewing Co. Class B fares extremely well in the ModernGraham grading system, scoring an A. 

AT&T Inc. (NYSE:T)

AT&T Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is initially concerned only 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 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 (normalized earnings) from $1.89 in 2014 to an estimated $3.06 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.53% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model returns an estimate of intrinsic value above the price.

At the time of valuation, further research into AT&T Inc. revealed the company was trading below its Graham Number of $38.89. The company pays a dividend of $1.97 per share, for a yield of 6.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share) was 9.56, which was below the industry average of 25.67, 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 $-40.55.

AT&T Inc. fares extremely well in the ModernGraham grading system, scoring an A.

PNC Financial Services Group Inc. (NYSE:PNC)

PNC Financial Services 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 (normalized earnings) from $6.54 in 2014 to an estimated $9.29 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.24% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model returns an estimate of intrinsic value above the price.

At the time of valuation, further research into PNC Financial Services Group Inc. revealed the company was trading below its Graham Number of $156.09. The company pays a dividend of $2.60 per share, for a yield of 2.2%, putting it among the best dividend-paying stocks today. Its PEmg (price over earnings per share) was 12.98, which was below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

PNC Financial Services Group Inc fares extremely well in the ModernGraham grading system, scoring an A.

What do you think? Are these companies a good value for Defensive Investors? Is there a company you like better? Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

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. 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

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.

Visit Benjamin Clark's Website


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