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Feature Value Investing Weekly

16 Companies in the Spotlight This Week – 5/24/14

image (7)We looked at 16 different companies this week.  Here’s a summary of the ModernGraham Valuations.  Yesterday we also screened all 296 companies in the database to find the 5 Lowest PEmg Companies Suitable for Defensive Investors.  We also redesigned the site’s navigation menu, making it easier to explore our free content.  To see more screens of the valuations, be sure to sign up to be a premium subscriber of ModernGraham Stocks and Screens!

The Elite (Defensive or Enterprising and Undervalued)

  • 500px-CA_Technologies_brand.svgCA Inc. (CA) – CA Inc. qualifies for Defensive Investors and thus also qualifies for Enterprising Investors.  The Defensive Investor’s only concern is the low current ratio, and even though the Enterprising Investor has concerns with the level of debt relative to the current assets, the Enterprising Investor is satisfied because the company is suitable for Defensive Investors.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors.  From a valuation perspective, the company appears to be undervalued, after growing its EPSmg (normalized earnings) from $1.06 in 2010 to $1.91 for 2014.  This demonstrated level of growth is greater than the market’s implied estimate of 3.37% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is above the market price at this time. (See the full valuation)

 

  • 500px-Ford_Motor_Company_Logo.svgFord Motor Co. (F) – Ford Motor Company is suitable for Enterprising Investors but not for Defensive Investors.  Defensive Investors have concerns with the lack of earnings stability over the last ten years as well as the lack of a strong dividend history over that time frame.  The company passes all of the requirements of Enterprising Investors, though.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors.  From a valuation perspective, the company appears to be undervalued currently, after growing its EPSmg (normalized earnings) from negative $1.14 in 2010 to an estimated $1.92 for 2014.  This demonstrated level of growth dwarfs the market’s implied estimate of a negative 0.10% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls well above the market price at this time. (See the full valuation)

 

  • 500px-Intel-logo.svgIntel Corp (INTC) – Intel Corp is an outstanding company for both Defensive Investors and Enterprising Investors to consider.  The company passes all of the requirements of both investor types.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors.  From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.27 in 2010 to an estimated $1.96 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of only 2.33% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price. (See the full valuation)

 

  • 500px-J_P_Morgan_Chase_Logo_2008_1.svgJP Morgan Chase (JPM) – JP Morgan Chase is suitable for either Defensive Investors or Enterprising Investors.  The company passes all of the requirements of both investor types, which is a rare accomplishment.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing the company to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.92 in 2010 to an estimated $4.75 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of only 1.49% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price at this time. (See the full valuation)

The Good (Defensive or Enterprising and Fairly Valued)

  • Boeing Company (BA) – Boeing Company is not suitable for Defensive Investors but is suitable for Enterprising Investors.  The Defensive Investor is concerned with the low current ratio and the high PEmg and PB ratios.  The Enterprising Investor’s only concern is the low current ratio.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors.  As for a valuation, the company appears fairly valued at this time after growing its EPSmg (normalized earnings) from $3.61 in 2010 to an estimated $6.05 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 6.57% and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the price.  (See the full valuation)

 

  • Precision Castparts Corp (PCP) – Precision Castparts is suitable for the Enterprising Investor but not the Defensive Investor, as the Defensive Investor is concerned with the high PEmg and PB ratios.  The company passes all of the requirements of the Enterprising Investor, however.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors.  From a valuation side of things, the company appears fairly valued after growing its EPSmg (normalized earnings) from $6.28 in 2010 to $9.66 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 8.18% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the price. (See the full valuation)

 

  • Xylem Inc. (XYL) – Xylem qualifies for Enterprising Investors but not for Defensive Investors.  The company does not have a long enough history as a publicly traded enterprise for the Defensive Investor, but it passes all of the requirements of the Enterprising Investor.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors.  From a valuation perspective, the company appears fairly valued after growing its EPSmg (normalized earnings) from $0.97 in 2010 to an estimated $1.61 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 7.72% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the price.  (See the full valuation)

The Mediocre (Defensive or Enterprising and Overvalued)

  • Baker Hughes Inc. (BHI) – Baker Hughes is suitable for Enterprising Investors but not for Defensive Investors.  Defensive Investors have concerns with the lack of sufficient earnings growth over the last ten years as well as the high PEmg ratio.  The company passes all of the requirements of Enterprising Investors, though.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors.  From a valuation perspective, the company appears to be overvalued currently, after growing its EPSmg (normalized earnings) from $3.22 in 2010 to an estimated $3.26 for 2014.  This demonstrated level of growth does not support the market’s implied estimate of 6.28% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls well below the market price at this time. (See the full valuation)

 

  • Facebook Inc. (FB) – Facebook is suitable for the Enterprising Investor but not the Defensive Investor, as the Defensive Investor is concerned with the lack of dividends, short operating history, and high PEmg and PB ratios.  The Enterprising Investor’s only concern at this point is the lack of dividends.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors.  From a valuation side of things, the company appears overvalued after growing its EPSmg (normalized earnings) from $0.11 in 2010 to an estimated $0.55 for 2014.  This level of demonstrated growth falls below the market’s implied estimate of 48.18% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well below the price. (See the full valuation)

 

  • Hasbro Inc. (HAS) – Hasbro Inc. qualifies for Enterprising Investors but not for Defensive Investors.  The Defensive Investor is concerned with the low current ratio and the high PB ratio, but the company passes all of the requirements of the Enterprising Investor.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors.  From a valuation perspective, the company appears to be overvalued currently, after growing its EPSmg (normalized earnings) from $2.31 in 2010 to only an estimated $2.71 for 2014.  This demonstrated level of growth does not support the market’s implied estimate of 5.70% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls well below the market price at this time. (See the full valuation)

 

  • International Flavors & Fragrances (IFF) – International Flavors & Fragrances qualifies for Enterprising Investors but not for Defensive Investors.  The Defensive Investor is concerned with the high PEmg and PB ratios, but the company passes all of the requirements of the Enterprising Investor.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors.  From a valuation perspective, the company appears to be overvalued currently, after growing its EPSmg (normalized earnings) from $2.87 in 2010 to only an estimated $4.08 for 2014.  This demonstrated level of growth does not support the market’s implied estimate of 7.62% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls well below the market price at this time. (See the full valuation)

The Bad (Speculative and Undervalued or Fairly Valued)

  • Sherwin-Williams Company (SHW) – Sherwin-Williams is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio and the high PEmg and PB ratios while the Enterprising Investor is concerned with the high level of debt relative to current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $4.13 in 2010 to an estimated $6.79 for 2014.  This strong level of demonstrated growth supports the market’s implied estimate of 10.51% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the price.  (See the full valuation)

The Ugly (Speculative and Overvalued)

Mr. Market

  • Tenet Healthcare Corp (THC) – Tenet Healthcare does not qualify for either the Defensive Investor or the Enterprising Investor.  In fact, the only requirement of either investor type which the company passes is the Defensive Investor’s requirement regarding market cap.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation perspective, the company appears to be overvalued, after seeing its EPSmg (normalized earnings) fall from $2.70 in 2010 to an estimated $0.97 for 2014.  This demonstrated drop in earnings clearly does not support the market’s implied estimate of 19.46% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls well below the market price at this time. (See the full valuation)

 

  • Transocean Ltd. (RIG) – Transocean is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has major concerns with the lack of earnings stability or growth over the last ten years, the lack of a strong dividend record, and the high PEmg ratio.  The Enterprising Investor has concerns with the high level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears significantly overvalued after seeing a drop in its EPSmg (normalized earnings from $8.42 in 2010 to an estimated $0.34 for 2014.  This demonstrated lack of growth does not support the market’s implied estimate of 57.65% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls well below the market price. (See the full valuation)

 

  • Vornado Realty Trust (VNO) – Vornado Realty is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the the lack of sufficient earnings growth or stability over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the high level of debt relative to the current assets and the lack of stable earnings over the last five years.  As a result, value investors following the ModernGraham approach should explore other opportunities through a review of 5 Undervalued Companies for the Defensive Investor and 5 Undervalued Companies for the Enterprising Investor.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.93 in 2010 to only an estimated $2.39 in 2014.  This demonstrated level of earnings growth does not support the market’s implied estimate of 17.75% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well below the market price. (See the full valuation)

 

  • Windstream Holdings Inc. (WIN) – Windstream Holdings does not qualify for the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio, the lack of earnings growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor has an issue with the high level of debt relative to the current assets and the lack of earnings growth over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation perspective, the company appears to be significantly overvalued, after seeing its EPSmg drop (normalized earnings) from $0.95 in 2010 to an estimated $0.31 for 2014.  This demonstrated lack of growth clearly does not support the market’s implied estimate of 10.44% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well below the market price at this time. (See the full valuation)

Disclaimer:  The author held a long position in Ford Motor Co. (F) but did not hold a position in any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logos taken from either the company website or Wikipedia; this article is not affiliated with the companies in any manner.

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