15 Companies in the Spotlight This Week – 5/31/14

image (7)We looked at 15 different companies this week.  Here’s a summary of the ModernGraham Valuations.  Yesterday we also screened all 300 companies in the database to find the 5 Undervalued Companies with a High Beta.  Last week, 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-Chevron_Logo.svgChevron Corporation (CVX) - Chevron Corporation qualifies for both Defensive Investors and Enterprising Investors.  The Defensive Investor is only concerned with the low current ratio, and the company by default also qualifies for the Enterprising Investor.  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 through a review of ModernGraham’s valuation of Exxon Mobil (XOM) and ModernGraham’s valuation of Conoco Philips (COP).  From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $8.58 in 2010 to an estimated $11.17 in 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 1.27% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the price. (See the full valuation)

 

  • Dover-co-logoDover Corporation (DOV) - Dover Corp qualifies for both Defensive Investors and Enterprising Investors.  The Defensive Investor’s only concern is the high PB ratio, while the Enterprising Investor’s only issue is with the level of debt relative to net current assets.  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.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $3.14 in 2010 to an estimated $4.82 for 2014.  This solid level of demonstrated growth outpaces the market’s implied estimate of 4.77% 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)

 

  • Franklin_Resources_LogoFranklin Resources (BEN) - Franklin Resources qualifies for both Defensive Investors and Enterprising Investors.  The Defensive Investor is only concerned with the high PB ratio, while the company passes all of the requirements of the Enterprising Investor.  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.  From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.91 in 2010 to an estimated $3.26 in 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.18% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the price. (See the full valuation)

 

  • 200px-Gap_logo.svgGap Inc. (GPS) - Gap Inc. qualifies for Enterprising Investors but not for Defensive Investors.  The company does not pass the Defensive Investor’s requirements regarding the current ratio or the 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 through a review of ModernGraham’s valuation of Urban Outfitters (URBN).  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.31 in 2010 to $2.20 in 2014.  This demonstrated level of growth surpasses the market’s implied estimate of 5.05% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value well above the market price. (See the full valuation)

The Good (Defensive or Enterprising and Fairly Valued)

  • Baxter International (BAX) - Baxter International qualifies for Enterprising Investors but not for Defensive Investors.  The Defensive Investor has concerns with the low current ratio and the high PB ratio, but the Enterprising Investor’s only concern is the high level of debt relative to the current assets.  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 through a review of ModernGraham’s valuation of Covidien plc (COV) and ModernGraham’s valuation of Cardinal Health (CAH).  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.88 in 2010 to an estimated $4.17 for 2014.  This level of demonstrated growth is in line with the market’s implied estimate of 4.69% 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)

 

  • Genuine Parts Company (GPC) - Genuine Parts Company is suitable for Enterprising Investors, but Defensive Investors are not quite as keen, and have concerns with the low current ratio along with the high PEmg and PB ratios.  The company passes all of the requirements of the Enterprising Investor, 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 through a review of ModernGraham’s valuation of O’Reilly Automotive (ORLY).  From a valuation standpoint, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.83 in 2010 to an estimated $4.19 for 2014.  This demonstrated level of growth supports the market’s implied estimate of 5.98% 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)

 

  • Harman International (HAR) - Harman International does not qualify for the Defensive Investor but is suitable for Enterprising Investors.  The only requirement of the Defensive Investor which the company passes is the market cap size, but the company manages to pass all of the requirements of the Enterprising Investor.  As a result, Enterprising Investors should feel comfortable proceeding with further research into the company and its competitors.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from negative $0.53 to an estimated $3.20 for 2014.  This strong level of demonstrated growth supports the market’s implied estimate of 12.48% 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)

  • Bemis Company (BMS) - Bemis Company is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the lack of sufficient earnings growth over the last ten years as well as the high PEmg ratio.  The Enterprising Investor’s only concern is the high level of debt relative to the current assets.  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 through a review of ModernGraham’s valuation of Sealed Air Corp (SEE) and ModernGraham’s valuation of Avery Denison (AVY).  From a valuation standpoint, the company appears overvalued after growing its EPSmg (normalized earnings) from $1.67 in 2010 to only an estimated $2.03 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 5.77% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below the market price. (See the full valuation)

 

  • Cerner Corporation (CERN) - Cerner Corporation is suitable for the Enterprising Investor but not the Defensive Investor.  The company fails the Defensive Investor’s requirements regarding the dividend record and the PEmg and PB ratio levels.  However, the Enterprising Investor’s only concern is with the lack of dividend payments.  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 standpoint, the company appears overvalued after growing its EPSmg (normalized earnings) from $0.57 in 2010 to only an estimated $1.18 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 18.18% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is below the market price. (See the full valuation)

 

  • Johnson & Johnson (JNJ) - Johnson & Johnson 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 side of things, the company appears overvalued after growing its EPSmg (normalized earnings) from $4.41 in 2010 to only an estimated $4.77 in 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 6.33% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below the price. (See the full valuation)

The Bad (Speculative and Undervalued or Fairly Valued)

  • ADT Corporation (ADT) - ADT Corporation does not qualify for either the Defensive Investor or the Enterprising Investor.  The company’s history as a publicly traded company is not long enough for the Defensive Investor, and the Enterprising Investor is concerned with the high level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through the ModernGraham Valuation Index.  From a valuation perspective, the company appears undervalued after growing its EPSmg (normalized earnings) from $0.80 in 2010 to an estimated $1.72 for 2014.  This level of demonstrated growth surpasses the market’s implied estimate of 5.3% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is above the market price. (See the full valuation)

 

  • Discovery Communications (DISCA) - Discovery Communications does not qualify for either the Defensive Investor or the Enterprising Investor.  The only Defensive Investor requirements the company satisfies are the market capitalization size and the current ratio.  Meanwhile, the Enterprising Investor has concerns with the high level of debt relative to the current assets and the lack of dividend payments.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through a review of ModernGraham’s valuation of Viacom (VIAB) and ModernGraham’s valuation of CBS Corporation (CBS).  From a valuation perspective, the company appears undervalued after growing its EPSmg (normalized earnings) from $0.96 in 2010 to an estimated $2.93 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of 9.09% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls well above the market price. (See the full valuation)

 

  • Fiserv Inc. (FISV) - Fiserv Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio, the lack of dividend payments, 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 dividend payments.  As a result, value investors following the ModernGraham approach should explore other opportunities through a review of ModernGraham’s valuation of Capital One Financial (COF) and ModernGraham’s valuation of Visa Inc. (V).  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.42 in 2010 to an estimated $2.52 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 7.62% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value above the market price. (See the full valuation)

 

  • Genworth Financial (GNW) - Genworth Financial does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the lack of earnings stability or growth over the last ten years, and the lack of dividend payments.  The Enterprising Investor is concerned by the lack of dividend payments.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through a review of ModernGraham’s valuation of JP Morgan Chase (JPM) and ModernGraham’s valuation of Wells Fargo (WFC).  From a valuation side of things, the company does appear undervalued after growing its EPSmg (normalized earnings) from $0.13 in 2010 to an estimated $0.92 for 2014.  This level of growth outpaces the market’s implied estimate of 5.13% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value well above the market price. (See the full valuation)

 

  • Hartford Financial Services (HIG) - Hartford Financial does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the lack of earnings growth or stability or growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor is concerned by the lack of earnings stability 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 side of things, the company does appear undervalued after growing its EPSmg (normalized earnings) from $0.04 in 2010 to an estimated $1.61 for 2014.  This level of growth outpaces the market’s implied estimate of 6.57% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value well above the market price. (See the full valuation)

The Ugly (Speculative and Overvalued)

Mr. Market

  • EOG Resources (EOG) - EOG Resources is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio, the lack of sufficient earnings growth 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.  As a result, value investors following the ModernGraham approach should explore other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.84 in 2010 to only an estimated $2.97 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 13.38% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below the market price. (See the full valuation)

Disclaimer:  The author held a long position in Dover Corporation (DOV) 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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