Feature Screens

5 Undervalued Companies for the Enterprising Investor Near 52 Week Lows – May 2015

5def-ent-lows_edited-1There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the five undervalued companies reviewed by ModernGraham trading closest to their 52 week low. Each of these companies has been determined to be suitable for the Enterprising Investor 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. Defensive Investors may also be interested in reviewing 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – October 2014 while also conducting further research into the following companies.

Be sure to also check out the history of this screen!

Michael Kors Holdings (KORS)

MK_COOL_GRAY_7CMichael Kors performs well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the short earnings history as a publicly traded company, 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 valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $0.19 in 2011 to an estimated $2.81 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 7.81% annual earnings growth over the next 7-10 years. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. 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)

Fossil Group Inc. (FOSL)

220px-Fossil_logo.svgFossil Group Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of dividend payments and the high PB ratio, while the Enterprising Investor is concerned by the lack of 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.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.52 in 2010 to $6.10 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 2.34% 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)

Wynn Resorts Limited (WYNN)

220px-Wynn_Resorts_logo.svgWynn Resorts does fairly well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the inconsistent dividend history, unstable earnings over the last ten years, and the high PEmg ratio, while the Enterprising Investor is only concerned with the level of debt relative to the net current assets. 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 valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.59 in 2010 to $6.01 for 2014. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 7.16% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 55.67% per year, which is clearly unsustainable over the long term. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. 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)

Motorola Solutions Inc. (MSI)

Motorola_solutions_logoMotorola Solutions performs well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years, inconsistent dividend record, and the high PB ratios, while the Enterprising Investor has no initial concerns. 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 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 $1.37 in 2010 to a gain of $4.02 for 2014. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 3.46% annual earnings growth over the next 7-10 years. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. 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)

Teradata Corporation (TDC)

TeradataLogoVerticalTeradata Corporation should satisfy the Enterprising Investor but not the Defensive Investor. The Defensive Investor is concerned with the low current ratio, lack of dividends and the high PB ratio. The Enterprising Investor is only concerned by the lack of dividends. 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 $1.47 in 2010 to $2.26 for 2014. This is a strong and impressive level of demonstrated growth, which is in line with the market’s implied estimate for earnings growth of 5.49% over the next 7-10 years. 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)

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 did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing those holdings within the next 72 hours.

 

 

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