Feature Value Investing Weekly

20 Companies to Research This Week – 9/6/14

image (7)We evaluated 20 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. We 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. Here’s a summary of the ModernGraham Valuations. To see a listing and screenings of all the valuations, be sure to sign up to be a premium subscriber!

The Elite (Defensive or Enterprising and Undervalued)

Aflac Inc. (AFL)

500px-Aflac.svgAflac Inc. qualifies for both the Defensive Investor and the Enterprising Investor.  In fact, the company satisfies 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 it to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $3.66 in 2010 to an estimated $5.95 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 0.89% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.  (See the full valuation)

Marsh & McLennan (MMC)

Mmc-logoMarsh & McLennan is not suitable for the Defensive Investor but does satisfy for the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio, instability of earnings over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is only concerned with the high level of debt relative to net current assets.  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.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.65 in 2010 to an estimated $2.29 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 7.37% 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)

Parker Hannifin Corporation (PH)

220px-Parker_Hannifin.svgParker Hannifin qualifies for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor’s only concern is the low current ratio while the Enterprising Investor has no initial issues.  As a result, value 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.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.93 in 2010 to $6.53 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.60% 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)

Ralph Lauren (RL)

Ralph_Lauren_CorporationRalph Lauren is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  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 $4.76 in 2011 to an estimated $8.00 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 6.35% 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)

Teradata Corporation (TDC)

TeradataLogoVerticalTeradata qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, lack of dividend payments, and the high PB ratio, while the Enterprising Investor’s only initial concern 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 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 $1.47 in 2010 to an estimated $2.36 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 5.43% 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)

T. Rowe Price Group (TROW)

220px-T-Rowe-Price-logoT. Rowe Price is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  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 $2.09 in 2010 to an estimated $3.78 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 6.43% 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)

VF Corporation (VFC)

Vfc-lVF Corporation qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  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 $1.24 in 2010 to an estimated $2.58 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 8.25% 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)

The Good (Defensive or Enterprising and Fairly Valued)

Halliburton Company (HAL)

Halliburton Company is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the low earnings growth over the last ten years as well as the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  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.  From a valuation perspective, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.93 in 2010 to an estimated $3.06 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 6.70% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.  (See the full valuation)

Intuitive Surgical Inc. (ISRG)

Intuitive Surgical does not qualify for the Defensive Investor but does satisfy for the Enterprising Investor.  The Defensive Investor has concerns with the lack of dividend payments and the high PEmg and PB ratios, while the Enterprising Investor’s only issue is 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 research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $6.38 in 2010 to an estimated $13.62 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 13.00% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.  (See the full valuation)

Moody’s Corporation (MCO)

Moody’s is not suitable for the Defensive Investor but does satisfy for the Enterprising Investor.  The Defensive Investor has concerns with the high PEmg and PB ratios, while the Enterprising Investor’s only issue is the 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 research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.06 in 2010 to an estimated $3.36 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 9.69% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.  (See the full valuation)

Waters Corporation (WAT)

Waters Corporation qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of dividend payments as well as the high PEmg and PB ratios, while the Enterprising Investor’s only initial concern is 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 research into the company and comparing it to other opportunities.  From a valuation perspective, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.38 in 2010 to an estimated $5.09 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 5.95% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.  (See the full valuation)

Wynn Resorts Limited (WYNN)

Wynn Resorts is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability over the last ten years, the lack of dividend stability over the same period, as well as the high PEmg and PB ratios.  The Enterprising Investor’s only concern is 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 research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.54 in 2010 to an estimated $6.37 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 10.23% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.  (See the full valuation)

The Mediocre (Defensive or Enterprising and Overvalued)

General Electric Company (GE)

General Electric is suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor’s only concern is the low level of growth over the last ten years, while the Enterprising Investor has no initial concerns.  As a result, value 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.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.44 in 2010 to an estimated $1.45 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 4.68% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)

Patterson Companies (PDCO)

Patterson Companies qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the short dividend history and the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  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.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.68 in 2010 to $1.95 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 6.06% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)

Sigma-Aldrich Corporation (SIAL)

Sigma-Aldrich qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  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 overvalued after growing its EPSmg (normalized earnings) from $2.77 in 2010 to an estimated $3.98 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 8.78% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)

Tiffany & Company (TIF)

Tiffany & Company qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  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.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.31 in 2011 to an estimated $3.09 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 12.40% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)

Urban Outfitters Inc. (URBN)

Urban Outfitters qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of dividends and the high PEmg and PB ratios, while the Enterprising Investor is only concerned by the lack of dividends.  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.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.28 in 2011 to an estimated $1.72 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 7.30% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)

The Bad (Speculative and Undervalued or Fairly Valued)

Republic Services Inc. (RSG)

Republic Services is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the level of earnings growth over the last ten years, the low current ratio, and the high PEmg ratio.  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.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.15 in 2010 to an estimated $1.68 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 7.40% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.  (See the full valuation)

Scripps Networks Interactive (SNI)

Scripps Networks does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is only satisfied by the company’s market size and earnings growth over the last ten years, but has numerous other concerns.  The Enterprising Investor is concerned by 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 explore other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.25 in 2010 to an estimated $3.61 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 6.76% 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)

The Ugly (Speculative and Overvalued)

Mr. MarketNorthern Trust Corporation (NTRS)

Northern Trust is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the insufficient earnings growth over the last ten years and the high PEmg ratio.  The Enterprising Investor has an issue with 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.  As for a valuation, the company appears overvalued after growing its EPSmg (normalized earnings) from $3.11 in 2010 to an estimated $3.00 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 7.30% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the market price.  (See the full valuation)

Disclaimer: The author did not hold a position in any of the 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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