Feature Value Investing Weekly

47 Companies in the Spotlight This Week – 5/16/15

image (7)We evaluated 47 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)

American Express Company (AXP)

200px-American_Express_logo.svgAmerican Express Company passes the initial requirements of the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor has an issue with the company’s high PB ratio, while the Enterprising Investor has no initial concerns. As a result, all 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 $3.11 in 2011 to an estimated $4.99 for 2015. This is a very strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of only 3.49% over the next 7-10 years. In fact, the historical growth is around 12.08% 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, but still returns an estimate of intrinsic value falling above the current price, indicating that the company is undervalued at the present time.  (Read the full valuation)

American International Group (AIG)

220px-AIG_logo.svgAmerican International Group Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the inconsistent dividend history, as well as the lack of earnings stability or growth over the last ten years, while 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 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 a loss of $109.06 in 2011 to an estimated gain of $5.14 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 1.56% 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.  (Read the full valuation)

CBS Corporation (CBS)

CBS-CorporationCBS Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, the insufficient earnings growth or stability over the last ten years, and the high PB ratio, while the Enterprising Investor 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.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $1.23 in 2011 to an estimated gain of $3.64 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 3.94% 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.  (Read the full valuation)

Discover Financial Services (DFS)

Discover_FinancialDiscover Financial Services passes the initial requirements of the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor has an issue with the company’s inconsistent dividend history. The Enterprising Investor has no initial concerns. As a result, all 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, it has grown its EPSmg (normalized earnings) from $2.49 in 2011 to an estimated $4.88 for 2015. This is a very strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of only 1.75% over the next 7-10 years. The ModernGraham valuation model returns an estimate of intrinsic value falling above the current price, indicating that Discover Financial Services is undervalued at the present time.  (Read the full valuation)

Lennar Corporation (LEN)

Lennar_corporation_logoLennar Corporation performs well in the ModernGraham model and is suitable for Enterprising Investors. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, 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 $1.95 in 2011 to an estimated gain of $2.63 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 4.64% annual earnings growth over the next 7-10 years.  (Read the full valuation)

Lincoln National Corporation (LNC)

LfglogoLincoln National Corporation passes the initial requirements of the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor is concerned by the company’s lack of earnings stability over the last ten years. The Enterprising Investor has no initial concerns. As a result, all 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, it has grown its EPSmg (normalized earnings) from $0.80 in 2011 to an estimated $5.01 for 2015. This is a very strong level of demonstrated growth, which is well above the market’s implied estimate for annual earnings growth of 1.59% over the next 7-10 years.  (Read the full valuation)

PNC Financial Services Group Inc. (PNC)

pnc_main_logoPNC Financial Services Group Inc. qualifies for both the Defensive Investor and the Enterprising Investor.  In fact, the company passes all of the requirements of both investor types, indicating it is in a very strong financial position.  As a result, all 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 $4.90 in 2011 to an estimated $6.82 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 2.65% 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.  (Read the full valuation)

Principal Financial Group Inc. (PFG)

Principal_LogoPrincipal Financial Group Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the insufficient earnings growth over the last ten years, while 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 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 $1.99 in 2011 to an estimated $3.47 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 3.3% 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.  (Read the full valuation)

SLM Corporation (SLM)

Sallie_Mae_logo_2009SLM Corporation passes the initial requirements of the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor has issues with the company’s inconsistent dividend history, and the lack of earnings stability or sufficient growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all 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, it has grown its EPSmg (normalized earnings) from $0.48 in 2011 to an estimated $1.26 for 2015. This is a very strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of an annual earnings loss of 0.14% over the next 7-10 years. The ModernGraham valuation model returns an estimate of intrinsic value falling above the current price, indicating that the company is undervalued at the present time.  (Read the full valuation)

Travelers Companies Inc. (TRV)

500px-The_Travelers_Companies.svgTravelers Companies qualifies for both the Defensive Investor and the Enterprising Investor.  The company passes all of the requirements of both investor types, a rare accomplishment.  As a result, all 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 $5.25 in 2011 to an estimated $8.80 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 1.61% 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.  (Read the full valuation)

Unum Group (UNM)

Unum-logoUnum Group qualifies for both the Defensive Investor and the Enterprising Investor.  The company passes all of the requirements of both investor types, a rare accomplishment.  As a result, all 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 $1.89 in 2011 to an estimated $2.74 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 2.08% 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.  (Read the full valuation)

U.S. Bancorp (USB)

500px-U.S._Bancorp_logo.svgU.S. Bancorp passes all of the initial requirements of both the Defensive Investor and the Enterprising Investor, which is a rare accomplishment indicative of the company’s strong financials. As a result, all 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 $1.85 in 2011 to an estimated $3.01 for 2015. This is a very strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of only 2.92% over the next 7-10 years. The ModernGraham valuation model returns an estimate of intrinsic value falling above the current price, indicating that U.S. Bancorp is undervalued at the present time.  (Read the full valuation)

The Good (Defensive or Enterprising and Fairly Valued)

Assurant Inc. (AIZ)

Assurant Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the insufficient earnings growth over the last ten years, while 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 further research into the company and comparing it to other opportunities.  As for a valuation, the company appears fairly valued after growing its EPSmg (normalized earnings) from $4.09 in 2011 to an estimated $5.18 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 1.99% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the market price.  (Read the full valuation)

Boston Properties Inc. (BXP)

Boston Properties Inc. is suitable for the Enterprising Investor but not for the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth 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 the net current assets.  As a result, Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with further research into the company.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.12 in 2011 to an estimated $3.89 for 2015.  This level of growth supports the market’s implied estimate of 12.78% annual earnings growth over the next 7-10 years, leading the ModernGraham valuation model to return an estimate of intrinsic value falling within a margin of safety relative to the current price.  (Read the full valuation)

Cisco Systems Inc. (CSCO)

Cisco Systems Inc. passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The Defensive Investor’s only initial concern is the short dividend history, and the Enterprising Investor has no initial concerns. As a result, all 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 seen its EPSmg (normalized earnings) grow from $1.21 in 2011 to an estimated $1.66 for 2015. This is a strong level of growth and supports the market’s implied estimate for earnings growth of 4.52% annual growth over the next 7-10 years. The ModernGraham valuation model 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.  (Read the full valuation)

C.R. Bard Inc. (BCR)

C.R. Bard Inc. 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. 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 $4.36 in 2011 to an estimated $6.74 for 2015. This level of demonstrated growth is in line with the market’s implied estimate for earnings growth of 8.36% 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 C.R. Bard Inc. is fairly valued at the present time.  (Read the full valuation)

Danaher Corporation (DHR)

Danaher Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, 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 very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.49 in 2011 to an estimated $3.79 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 7.26% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling within a margin of safety relative to the price.  (Read the full valuation)

E. I. Du Pont De Nemours and Company (DD)

Du Pont should satisfy the Enterprising Investor, but not the Defensive Investor. The Defensive Investor is concerned with the low current ratio and high PB ratio, while the Enterprising Investor has no initial concerns. 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 $2.99 in 2011 to an estimated $4.01 for 2015. This level of demonstrated growth is in line with the market’s implied estimate for earnings growth of 4.81% 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 Du Pont is fairly valued at the present time.  (Read the full valuation)

FMC Technologies Inc. (FTI)

FMC Technologies Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, 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 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 fairly valued after growing its EPSmg (normalized earnings) from $1.50 in 2011 to an estimated $2.21 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 5.15% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling within a margin of safety relative to the price.  (Read the full valuation)

Nvidia Corporation (NVDA)

Nvidia should satisfy the Enterprising Investor but not the Defensive Investor. The Defensive Investor has multiple concerns, including the short dividend history, the insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns. 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 $0.48 in 2012 to an estimated $0.79 for 2016. This level of demonstrated growth is in line with the market’s implied estimate for earnings growth of 8.96% over the next 7-10 years.  (Read the full valuation)

Robert Half International Inc. (RHI)

Robert Half International should satisfy the Enterprising Investor, but not the Defensive Investor. The Defensive Investor is concerned with the level of earnings growth over the last ten years, and high PEmg and PB ratios, while the Enterprising Investor has no initial concerns. 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 $0.88 in 2011 to $1.71 for 2014. This level of demonstrated growth is in line with the market’s implied estimate for earnings growth of 12.01% 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 Robert Half International is fairly valued at the present time.  (Read the full valuation)

Weyerhaeuser Company (WY)

Weyerhaeuser Company is suitable for the Enterprising Investor but not for the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability or growth 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 the net current assets.  As a result, Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with further research into the company.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.89 in 2011 to an estimated $1.47 for 2015.  This level of growth supports the market’s implied estimate of 6.77% annual earnings growth over the next 7-10 years, leading the ModernGraham valuation model to return an estimate of intrinsic value falling within a margin of safety relative to the current price.  (Read the full valuation)

The Mediocre (Defensive or Enterprising and Overvalued)

Alexion Pharmaceuticals (ALXN)

Alexion Pharmaceuticals is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of dividends, insufficient earnings stability or growth over the last ten years, 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 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 despite growing its EPSmg (normalized earnings) from $0.75 in 2011 to an estimated $2.79 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 24.62% annual earnings growth over the next 7-10 years and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling within a margin of safety relative to the price.  (Read the full valuation)

Applied Materials Inc. (AMAT)

Applied Materials Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios, while the Enterprising Investor is only concerned by the lack of growth over the last five years.  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 seeing its EPSmg (normalized earnings) drop from $0.80 in 2011 to an estimated $0.77 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 8.71% annual earnings growth over the next 7-10 years and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling below the price.  (Read the full valuation)

Autodesk Inc. (ADSK)

Autodesk Inc. passes the initial requirements of the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, the lack of dividends, insufficient earnings growth over the last ten years and the high PEmg and PB ratios. The Enterprising Investor is only concerned by the lack of dividends. As a result, all 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 valuation, it is critical to consider the company’s earnings history. In this case, the company has seen its EPSmg (normalized earnings) rise from $0.80 in 2011 to only $0.82 for 2015. This is a weak level of earnings growth, and does not support the market’s implied estimate for 30.78% annual growth over the next 7-10 years. The ModernGraham valuation model returns an estimate of intrinsic value falling below the current price, indicating that the company is overvalued at the present time.  (Read the full valuation)

FLIR Systems Inc. (FLIR)

FLIR Systems Inc. is suitable for the Enterprising Investor but not for 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 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 $1.39 in 2011 to only an estimated $1.43 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 6.8% annual earnings growth over the next 7-10 years and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling below the price.  (Read the full valuation)

Health Care REIT Inc. (HCN)

Health Care REIT Inc. is suitable for the Enterprising Investor but not for the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor is only concerned with the high level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with further research into the company.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.28 in 2011 to only an estimated $2.02 for 2015.  This level of growth does not support the market’s implied estimate of 13.08% annual earnings growth over the next 7-10 years, leading the ModernGraham valuation model to return an estimate of intrinsic value falling below the current price.  As a result, the company is considered to be overvalued at this time.  (Read the full valuation)

Joy Global Inc. (JOY)

Joy Global Inc. passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The Defensive Investor’s only initial concern is insufficient earnings growth over the last ten years, and the Enterprising Investor is likewise only concerned by the lack of earnings growth over the last five years. As a result, all 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 seen its EPSmg (normalized earnings) drop from $4.59 in 2011 to an estimated $3.94 for 2015. This is a significant drop in earnings, and does not support the market’s implied estimate for earnings growth of 1.17% annual growth over the next 7-10 years. The ModernGraham valuation model returns an estimate of intrinsic value falling below the current price, indicating the company is overvalued at the present time.  (Read the full valuation)

Microsoft Corporation (MSFT)

Microsoft Corporation passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The Defensive Investor’s only initial concern is the high PB ratio, and the Enterprising Investor has no initial concerns. As a result, all 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, Microsoft has seen its EPSmg (normalized earnings) rise from $2.12 in 2011 to only an estimated $2.46 for 2015. This is not a very high level of earnings growth, and does not support the market’s implied estimate for 5.57% annual growth over the next 7-10 years. The ModernGraham valuation model returns an estimate of intrinsic value falling below the current price, indicating that Microsoft is overvalued at the present time.  (Read the full valuation)

NextEra Energy Inc. (NEE)

NextEra Energy Inc. is suitable for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is concerned by the low current ratio, and while the Enterprising Investor is concerned by the level of debt relative to the current assets, the Enterprising Investor overlooks those concerns as the company qualifies for the more conservative Defensive Investor.  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.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $4.35 in 2011 to an estimated $5.14 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 5.5% annual earnings growth over the next 7-10 years and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling below the price.  (Read the full valuation)

Nike Inc. (NKE)

Nike Inc. passes the initial requirements of the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios, and the Enterprising Investor has no initial concerns. As a result, all 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 valuation, it is critical to consider the company’s earnings history. In this case, the company has seen its EPSmg (normalized earnings) rise from $1.90 in 2011 to an estimated $2.96 for 2015. This is a strong level of earnings growth, but does not support the market’s implied estimate for 13.14% annual growth over the next 7-10 years. The ModernGraham valuation model returns an estimate of intrinsic value falling below the current price, indicating that the company is overvalued at the present time.  (Read the full valuation)

Varian Medical Systems Inc. (VAR)

Varian Medical Systems Inc. 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, 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 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 $2.82 in 2011 to only an estimated $3.88 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 7.08% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling within a margin of safety relative to the price.  (Read the full valuation)

Xilinx Inc. (XLNX)

Xilinx Inc. passes the initial requirements of the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios, and the Enterprising Investor has no initial concerns. As a result, all 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 valuation, it is critical to consider the company’s earnings history. In this case, the company has seen its EPSmg (normalized earnings) rise from $1.64 in 2011 to only an estimated $2.14 for 2015. This is not a very high level of earnings growth, and does not support the market’s implied estimate for 5.81% annual growth over the next 7-10 years. The ModernGraham valuation model returns an estimate of intrinsic value falling below the current price, indicating that the company is overvalued at the present time.  (Read the full valuation)

The Bad (Speculative and Undervalued or Fairly Valued)

Fidelity National Information Services (FIS)

Fidelity National Information Services does not qualify for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is concerned with the low current ratio along with the 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 the intrinsic value, the company has seen its EPSmg (normalized earnings) rise from $1.24 in 2011 to an estimated $2.36 for 2015. This level of demonstrated growth supports the market’s implied estimate for earnings growth of 9.49% annually over the next 7-10 years. The ModernGraham valuation model therefore returns an estimate of intrinsic value within a margin of safety relative to the current price, indicating the company is fairly valued at the present time.  (Read the full valuation)

Laboratory Corporation of America Holdings (LH)

Laboratory Corporation of America Holdings is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, and the insufficient lack of dividends.  The Enterprising Investor is concerned with the level of debt relative to the current assets and the lack of dividends.  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 $4.93 in 2011 to an estimated $6.50 for 2015.  This level of growth supports the market’s implied estimate of 4.72% annual growth over the next 7-10 years, leading 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.  (Read the full valuation)

McKesson Corporation (MCK)

McKesson Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, and the poor 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 fairly valued after growing its EPSmg (normalized earnings) from $3.99 in 2011 to an estimated $7.21 for 2015.  This level of growth supports the market’s implied estimate of 11.63% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well within a margin of safety relative to the price.  (Read the full valuation)

Sherwin Williams Company (SHW)

Sherwin Williams Company 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 fairly valued after growing its EPSmg (normalized earnings) from $4.11 in 2011 to an estimated $8.51 for 2015.  This level of growth supports the market’s implied estimate of 12.9% annual growth over the next 7-10 years, leading 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.  (Read the full valuation)

The Ugly (Speculative and Overvalued)

Mr. MarketEdison International (EIX)

Edison International 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 poor PEmg ratio.  The Enterprising Investor is concerned with the level of debt relative to the current assets and 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.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.21 in 2011 to only an estimated $2.93 for 2015.  This level of growth does not support the market’s implied estimate of 6.11% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

Eli Lilly & Co. (LLY)

Eli Lilly & Co. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the 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) not grow at all from $3.24 in 2011 to the estimated $3.24 for 2015.  This level of growth does not support the market’s implied estimate of 7.14% annual growth over the next 7-10 years, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

EQT Corporation (EQT)

EQT Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low level of earnings growth over the last ten years, and the poor 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 $2.13 in 2011 to only an estimated $1.72 for 2015.  This level of growth does not support the market’s implied estimate of 22.21% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

FirstEnergy Corporation (FE)

FirstEnergy 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 poor PEmg ratio.  The Enterprising Investor is concerned with the level of debt relative to the 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 $2.91 in 2011 to only an estimated $1.61 for 2015.  This level of growth does not support the market’s implied estimate of 6.65% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

Hess Corporation (HES)

Hess Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, and the insufficient earnings stability or growth over the last ten years.  The Enterprising Investor is concerned with the level of debt relative to the current assets and the lack of earnings growth or 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.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $5.20 in 2011 to an estimated $4.68 for 2015.  This level of growth does not support the market’s implied estimate of 3.4% annual growth over the next 7-10 years, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

L3 Communications Holdings Inc. (LLL)

L3 Communications is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio and the insufficient earnings or growth over the last ten years.  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 $8.14 in 2011 to only an estimated $7.71 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 3.5% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value well below the price.  (Read the full valuation)

Olin Corporation (OLN)

Olin Corporation does not qualify for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is concerned with the low earnings growth over the last ten years and the lack of earnings stability during that period. The Enterprising Investor takes issue with the level of debt relative to the current assets and the lack of earnings growth over the last five years. 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 the intrinsic value, the company has seen its EPSmg (normalized earnings) drop from $1.83 in 2011 to only an estimated $1.67 for 2015. This level of demonstrated growth does not support the market’s implied estimate for earnings growth of 4.63% annually over the next 7-10 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.  (Read the full valuation)

Plum Creek Timber Company Inc. (PCL)

Plum Creek Timber Company Inc. is not suitable for either the Enterprising Investor or the more conservative Defensive 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 high level of debt relative to the current assets as well as the lack of earnings growth over the last five years.  As a result, all value investors following the ModernGraham approach should explore other opportunities at this time.  From a valuation side of things, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $1.32 in 2011 to only an estimated $1.18 for 2015.  This level of growth does not support the market’s implied estimate of 13.4% annual earnings growth over the next 7-10 years, leading the ModernGraham valuation model to return an estimate of intrinsic value falling below the current price.  As a result, the company is considered to be overvalued at this time.  (Read the full valuation)

Transocean Limited (RIG)

Transocean Limited is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the insufficient earnings stability or growth over the last ten years, and the short dividend history.  The Enterprising Investor is concerned with the level of debt relative to the net current assets and the lack of earnings growth or 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.  As for a valuation, the company appears to be overvalued due to its negative EPSmg (normalized earnings).  One of the primary goals of investing and good business is to not lose money, and that is what this company is currently doing.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value well below the price.  (Read the full valuation)

Walgreens Boots Alliance (WBA)

Walgreens Boots Alliance Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, and the poor 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 $2.37 in 2011 to only an estimated $3.01 for 2015.  This level of growth does not support the market’s implied estimate of 9.89% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read 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.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top