Feature Screens

5 Companies to Research with the Lowest PEmg Ratio for the Enterprising Investor – August 2014

imageThere are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the five lowest PEmg (price / normalized earnings) companies reviewed by ModernGraham. Each company has been determined to be suitable for the Enterprising Investor and undervalued according to the ModernGraham approach. This is a sample of one screen that is included in ModernGraham Stocks & Screens.  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. Enterprising Investors may also be interested in reviewing 5 Undervalued Companies for the Enterprising Investor while also conducting further research into the following companies.

Check out the history of this screen to find which companies have qualified in the past.  This month, Chubb Corporation (CB) is replaced by Assurant Inc. (AIZ).

SLM Corp (SLM)

Sallie_Mae_logo_2009SLM Corporation is suitable for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the lack of stable earnings over the last ten years and the lack of consistent dividend payments over the last ten years.  However, the company passes all of the Enterprising Investor’s requirements and the investor type thus has no significant initial concerns. 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 comparing it to other opportunities such as through ModernGraham’s valuation of Discover Financial Services (DFS).  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.28 in 2010 to an estimated $1.53 for 2014.  This level of demonstrated growth supports the market’s implied estimate of negative 1.52% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the price.  (See the full valuation)
SLM Chart

SLM data by YCharts

Ford Motor Company (F)

500px-Ford_Motor_Company_Logo.svgFord Motor Company qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years as well as the inconsistent dividend history.  The company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $1.14 in 2010 to an estimated gain of $1.92 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 0.27% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (See the full valuation)
F Chart

F data by YCharts

Assurant Inc. (AIZ)

220px-Assurant_LogoAssurant Inc. is suitable for the Enterprising Investor as the company passes all of the investor type’s requirements, but is not suitable for the Defensive Investor due to the lack of earnings growth over the last ten years.  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 comparing it to other opportunities through a review of ModernGraham’s valuation of Unum Group (UNM) and ModernGraham’s valuation of MetLife (MET).  From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $3.64 in 2010 to an estimated $5.68 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 1.33% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the market price.  (See the full valuation)
AIZ Chart

AIZ data by YCharts

Capital One Financial (COF)

500px-Capital_One_Financial_logo.svgCapital One is suitable for Enterprising Investors but not for Defensive Investors.  The Defensive Investor is concerned by the lack of sufficient earnings growth over the last ten years, 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 explore other opportunities through a review of ModernGraham’s valuation of Discover Financial Services (DFS) and ModernGraham’s Valuation of American Express (AXP).  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $3.90 in 2010 to an estimated $6.96 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of 1.78% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the market price.  (See the full valuation)
COF Chart

COF data by YCharts

Freeport McMoRan (FCX)

500px-Freeport_McMoRan.svgFreeport-McMoRan satisfies the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the low current ratio, as well as the lack of earnings stability over the last ten years and the lack of stable dividend payments over that time frame.  The Enterprising Investor’s only concern is with the high level of debt relative to the net 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 comparing it to other opportunities.  From a valuation side of things, the company appears to be significantly undervalued after growing its EPSmg (normalized earnings) from $0.01 in 2010 to an estimated $2.95 for 2014.  This level of demonstrated growth more than supports the market’s implied estimate of 1.43% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (See the full valuation)
FCX Chart

FCX data by YCharts

What do you think?  Are these companies a good value for Enterprising 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 held a long position in Ford Motor Company (F) but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing those holdings within the next 72 hours.  Company logos were obtained from Wikipedia for the sole purpose of identifying the company; this article is not related to the companies mentioned in any capacity.

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