Feature Value Investing Weekly

27 Companies in the Spotlight This Week – 12/20/14

image (7)We evaluated 27 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)

B&G Foods Inc. (BGS)

bg-foods-logoB&G Foods Inc. qualifies for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the small size, low current ratio, short dividend history, and the high PEmg and PB ratios.  The Enterprising Investor is only concerned by 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 very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.49 in 2010 to an estimated $1.20 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 8.06% 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)

CF Industries Holdings Inc. (CF)

CfindustrieslogoCF Industries Holdings is suitable for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only concern is the lack of earnings stability over the last ten years while the Enterprising Investor is only concerned by the high level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $7.10 in 2010 to an estimated $21.45 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 1.55% 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)

Deere & Company (DE)

500px-John_Deere_logo.svgDeere & Company passes the initial requirements of both the Defensive Investor and the Enterprising Investor. In fact, the company receives a perfect score for both investor types, a rare accomplishment which indicates the company is in a very strong financial position. As a result, value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $3.71 in 2010 to $8.00 for 2014. This is a very strong level of demonstrated growth which is well above the market’s implied estimate for earnings growth of only 1.25% over the next 7-10 years. In fact, the historical growth is around 23.11% per year, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, and therefore returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.  (See the full valuation on Seeking Alpha)

Fifth Third Bancorp (FITB)

220px-Fifth_Third_Bank.svgFifth Third Bancorp performs well in the initial stages of the analysis for the Enterprising Investor, passing all of the requirements. Defensive Investors, however, are concerned by the insufficient earnings growth or stability over the last ten years. Therefore, only Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s teachings should feel comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

To determine an estimate of the intrinsic value, one must consider the company’s earnings. Here, the company has grown its EPSmg (normalized earnings) from $0.01 in 2010 to an estimated $1.62 for 2014. This achieved growth rate is well above the market’s implied forecast of only 1.96% earnings growth over the next 7-10 years. The company would have to see a significant slowdown in growth in order to be valued at the market’s current price. As a result, the ModernGraham valuation model returns an estimate of intrinsic value well above the price, supporting a clear conclusion that the company is significantly undervalued. All value investors are therefore encouraged to proceed with further research to determine whether the company is suitable for their own individual portfolios.  (See the full valuation on Seeking Alpha)

Fossil Group Inc. (FOSL)

220px-Fossil_logo.svgFossil Group performs quite well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the lack of dividends and the high PB ratio, while the Enterprising Investor is only concerned by the lack of dividends. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $2.52 in 2010 to an estimated $6.11 for 2014. This is a very strong level of demonstrated growth which is well above the market’s implied estimate 4.49% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 28.5% per year, which is clearly unsustainable over a long period of time. As a result, the ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. The ModernGraham estimate is capped at 15% annual growth, which is still significantly higher than the market estimate. A significant slowdown would have to occur to justify a price as low as the market is demonstrating. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (See the full valuation on Seeking Alpha)

Google Inc. (GOOGL)

Logo_Google_2013_Official.svgGoogle does fairly well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with 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 should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $9.67 in 2010 to an estimated $19.66 for 2014. This is a very strong level of demonstrated growth which is well above the market’s implied estimate of 8.96% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 20.67% per year, which is clearly unsustainable over a long period of time. As a result, the ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. The ModernGraham estimate is capped at 15% annual growth, which is still significantly higher than the market estimate. A significant slowdown would have to occur to justify a price as low as the market is demonstrating. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (See the full valuation on Seeking Alpha)

PulteGroup Inc. (PHM)

logo (1)PulteGroup performs quite well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the lack of earnings or dividend stability over the last ten years and the low earnings growth over that period, while the Enterprising Investor is only concerned by the lack of earnings stability over the last five years. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from a loss of $4.19 in 2010 to an estimated gain of $1.98 for 2014. This is a very strong level of demonstrated growth which is well above the market’s implied estimate of only 0.93% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 29.43% per year, which is clearly unsustainable over a long period of time. As a result, the ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. The ModernGraham estimate is capped at 15% annual growth, which is still significantly higher than the market estimate. A significant slowdown would have to occur to justify a price as low as the market is demonstrating. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (See the full valuation on Seeking Alpha)

Safeway Inc. (SWY)

220px-Safeway_Logo.svgSafeway Inc. qualifies for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, insufficient earnings growth or stability over the last ten years, and the high PEmg ratio.  The Enterprising Investor is only concerned by 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 very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.64 in 2010 to an estimated $1.38 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 8.31% 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)

Amgen Inc. (AMGN)

Amgen is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the short dividend history as well as the high PEmg and PB ratios.  The Enterprising Investor, on the other hand, is only concerned by 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 very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $4.09 in 2010 to an estimated $6.57 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 8.28% 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)

Amphenol Corporation (APH)

Amphenol Corporation qualifies for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios.  The Enterprising Investor, on the other hand, is only concerned by 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 very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.13 in 2010 to an estimated $1.90 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 9.54% 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)

Cameron International Corporation (CAM)

Cameron International Corporation qualifies for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio and the lack of dividends.  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 very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.21 in 2010 to an estimated $3.17 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 2.91% 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)

Infosys Limited (INFY)

Infosys should satisfy the Enterprising Investor, but not the Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns about the company. Therefore, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $1.15 in 2011 to an estimated $1.57 for 2015. This is very strong and an impressive level of demonstrated growth which is in line with the market’s implied estimate for earnings growth of 5.75% over the next 7-10 years. In fact, actual historical growth is about 7.16% per year, so the market has priced in a slight earnings drop to a more sustainable level over the long term. The ModernGraham valuation model therefore returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating the company is fairly valued at the present time.  (See the full valuation on Seeking Alpha)

Perrigo Company plc (PRGO)

Perrigo Company plc is suitable for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is concerned only by the high PEmg ratio.  The Enterprising Investor is only concerned by 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 very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.40 in 2011 to an estimated $4.63 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 12.28% 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)

Analog Devices Inc. (ADI)

Analog Devices Inc. is suitable for the Enterprising Investor, but not the Defensive Investor, who is concerned with the high PEmg and PB ratios. The Enterprising Investor, on the other hand, has no initial concerns with the company. As a result, the Enterprising Investor should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $1.84 in 2010 to only $2.19 for 2014. This demonstrated growth does not support the market’s implied estimate of 8.59%. In fact, the demonstrated growth over the last several years is only 3.82% per year. The company would have to see a significant change in its level of growth in order to meet the market’s estimated growth level. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.  (See the full valuation on Seeking Alpha)

Automatic Data Processing (ADP)

Automatic Data Processing is suitable for the Enterprising Investor, but not the Defensive Investor, who is concerned with the low current ratio, insufficient earnings growth over the last ten years and the high PEmg and PB ratios. The Enterprising Investor, on the other hand, is only concerned with the low current ratio. As a result, the Enterprising Investor should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $2.45 in 2011 to only an estimated $2.92 for 2015. This demonstrated growth does not support the market’s implied estimate of 9.93%. In fact, the demonstrated growth over the last several years is only 3.82% per year. The company would have to see a significant change in its level of growth in order to meet the market’s estimated growth level. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.  (See the full valuation on Seeking Alpha)

Lam Research Corporation (LRCX)

Lam Research Corporation qualifies for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of sufficient earnings growth or stability over the last ten years, short dividend history, and the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.96 in 2011 to only an estimated $3.14 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 8.22% 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)

Monster Beverage Corporation (MNST)

Monster Beverage Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of dividends and the high PEmg and PB ratios.  The Enterprising Investor is also concerned by the lack of dividends but has no other issues with the company.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.92 in 2010 to only an estimated $2.04 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 21.85% 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)

Stryker Corporation (SYK)

Stryker Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.81 in 2010 to only an estimated $3.62 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 8.28% 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)

Texas Instruments Inc. (TXN)

After looking over the company’s fundamentals, Texas Instruments qualifies for the Enterprising Investor, as the investor type has no initial concerns. As for the more conservative Defensive Investor, there are numerous concerns including the low level of earnings growth over the last ten years, along with the high PEmg and PB ratios. As a result, only Enterprising Investors should feel comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

Estimating the intrinsic value requires examining the company’s earnings history. Texas Instruments has grown its EPSmg (normalized earnings) from $1.90 in 2010 to only an estimated $2.07 for 2014. This demonstrated level of earnings growth does not support the market’s implied estimate of 8.84% earnings growth. In recent years, the company has seen an average annual growth in earnings of only around 1.75%. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.  (See the full valuation on Seeking Alpha)

The Bad (Speculative and Undervalued or Fairly Valued)

Airgas Inc. (ARG)

Airgas is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the 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 overvalued after growing its EPSmg (normalized earnings) from $2.71 in 2011 to an estimated $4.50 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 8.52% 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)

Apple Inc. (AAPL)

Apple Inc. is a great company, but it currently does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, short dividend history, and high PB ratio while the Enterprising Investor is concerned with the 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 undervalued after growing its EPSmg (normalized earnings) from $1.36 in 2010 to an estimated $5.60 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 5.72% 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)

Cintas Corporation (CTAS)

Cintas Corporation qualifies for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios.  The Enterprising Investor, on the other hand, has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.66 in 2011 to an estimated $2.76 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 8.62% 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)

Phillips 66 (PSX)

Phillips 66 is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, and the short dividend history.  The Enterprising Investor is concerned with the 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 undervalued after growing its EPSmg (normalized earnings) from $2.82 in 2011 to an estimated $5.99 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 1.74% 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. Market

Air Products and Chemicals Inc. (APD)

Air Products & Chemicals does not qualify for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is concerned with the low current ratio, and high PEmg and PB ratios. The Enterprising Investor takes issue with the level of debt relative to the current assets. As a result, any purchase of the company is made with a speculative nature behind it. That said, any speculator interested in pursuing the company should still proceed to the next part of the analysis, which is a determination of the company’s intrinsic value.

With regard to that intrinsic value, the company has grown its EPSmg (normalized earnings) from $4.03 in 2010 to only an estimated $4.94 for 2014. This level of demonstrated growth does not support the market’s implied estimate for earnings growth of 10.13% over the next 7-10 years. In fact, actual growth has been closer to 4.51% in recent years. The ModernGraham valuation model therefore returns an estimate of intrinsic value below the current price, indicating the company is overvalued at the present time.  (See the full valuation on Seeking Alpha)

Bristol-Myers Squibb Company (BMY)

Bristol-Myers Squibb is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the net 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.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $2.74 in 2010 to an estimated $1.64 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 13.84% 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)

CenturyLink Inc. (CTL)

CenturyLink is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, and the high PEmg ratio.  The Enterprising Investor is concerned with the level of debt relative to the 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 to be overvalued after seeing its EPSmg (normalized earnings) drop from $3.31 in 2010 to an estimated $1.36 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 10.22% 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)

Prudential Financial (PRU)

Prudential does not perform well in the initial stages of the analysis, as it is not suitable for either the Enterprising Investor or the Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years along with the high PEmg ratio. The Enterprising Investor is concerned with the lack of earnings growth or stability over the last five years. Any value investor following the ModernGraham approach based on Benjamin Graham’s teachings should be very cautious proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

To determine an estimate of the intrinsic value, one must consider the company’s earnings. Here, the company has seen its EPSmg (normalized earnings) drop from $4.75 in 2010 to only an estimated $4.19 for 2014. This drop in earnings does not support the market’s implied forecast of 5.87% earnings growth over the next 7-10 years. The company would have to see a significant change in growth in order to be valued at the market’s current price. As a result, the ModernGraham valuation model returns an estimate of intrinsic value well below the price, supporting a clear conclusion that the company is significantly overvalued.  (See the full valuation on Seeking Alpha)

Disclaimer: The author held a long position in Deere & Company (DE) and Apple Inc. (AAPL) 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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