Feature Value Investing Weekly

30 Companies in the Spotlight This Week – 5/23/15

image (7)We evaluated 30 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)

Ace Limited (ACE)

200px-Ace_Limited_logo.svgAce Limited 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 $6.42 in 2011 to an estimated $8.77 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 1.92% 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)

Ameriprise Financial Inc. (AMP)

220px-Ameriprise_LogoAmeriprise 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 $3.42 in 2011 to an estimated $7.54 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 4.22% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has been astronomical, averaging nearly 25% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that the company is undervalued at the present time.  (See the full valuation)

BB&T Corporation (BBT)

500px-BB&T_Logo.svgBB&T 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 insufficient level of earnings growth over the last 10 years. The Enterprising Investor has no initial concerns, as the investor type is less conservative and looks at a shorter historical time period. 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 $1.72 in 2011 to an estimated $2.50 for 2015. This is a fairly strong level of demonstrated growth, and is well above the market’s implied estimate for annual earnings growth of 3.57% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 9% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that the company is undervalued at the present time.  (See the full valuation)

Dentsply International Inc. (XRAY)

200px-Dentsply_Logo.svgDentsply International Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, as well as the high PEmg and PB ratios, while 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.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.78 in 2011 to only an estimated $2.28 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 7.23% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling below the price.  (See the full valuation)

Helmerich & Payne Inc. (HP)

logo_HPIHelmerich & Payne Inc. is suitable for both the Defensive Investor and the Enterprising Investor.  The company passes all of the requirements of each investor type, which is a rare accomplishment indicative of the company’s strong financial position.  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 undervalued after growing its EPSmg (normalized earnings) from $3.24 in 2011 to an estimated $5.11 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 2.97% 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 well above the price.  (See the full valuation)

LyondellBassell Industries (LYB)

220px-Logo_Lyondellbasell.svgLyondellBassell Industries is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the short history as a publicy traded company, along with 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 $1.99 in 2011 to an estimated $6.97 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 3.15% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the price. (See the full valuation)

State Street Corporation (STT)

220px-State_Street_Corporation_logo.svgState Street Corporation qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by 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 $2.03 in 2011 to an estimated $4.66 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 4.23% 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)

Yahoo Inc. (YHOO)

200px-Yahoo!_logo.svgYahoo! 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 dividend payments, a concern shared by the Enterprising Investor. 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 $0.67 in 2011 to an estimated $2.90 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 3.47% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has been astronomical, averaging nearly 67% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that the company is undervalued at the present time. (See the full valuation)

The Good (Defensive or Enterprising and Fairly Valued)

Boeing Company (BA)

Boeing Company is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio as well as the high PEmg and PB ratios, while the Enterprising Investor is only concerned by the low current ratio.  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 $4.18 in 2011 to an estimated $6.93 for 2015.  This level of demonstrated growth supports 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 falling within a margin of safety relative to the price.  (See the full valuation)

Fastenal Company (FAST)

Fastenal Company is suitable for the Enterprising Investor but not for 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 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 $0.94 in 2011 to an estimated $1.60 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 9.02% 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.  (See the full valuation)

Flowserve Corporation (FLS)

Flowserve should satisfy the Enterprising Investor but not the Defensive Investor. The Defensive Investor is concerned by the short dividend history and the high PB ratio, while the Enterprising Investor is only concerned by the level of debt relative to the net current assets. 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 $2.41 in 2011 to an estimated $3.27 for 2015. This level of demonstrated growth is in line with the market’s implied estimate for earnings growth of 4.39% over the next 7-10 years.

The company’s recent earnings history shows an average annual growth in EPSmg of around 7.1%. The ModernGraham valuation model reduces such a rate to a more conservative figure, assuming some slowdown will occur, but still returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating Flowserve is fairly valued at the present time.  (See the full valuation)

Intel Corporation (INTC)

Intel Corporation passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The Defensive Investor’s only initial concern is the low current 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, Intel has grown its EPSmg (normalized earnings) from $1.69 in 2011 to an estimated $2.09 for 2015. This is not a healthy level of earnings growth, and supports the market’s implied estimate for 3.66% annual growth over the next 7-10 years.

In fact, the average earnings growth over the last several years is around 4.8%, so the market is pricing in a slight drop in growth going forward. The ModernGraham valuation model returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating that Intel is fairly valued at the present time.  (See the full valuation)

Progressive Corporation (PGR)

Progressive 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 insufficient earnings or dividend stability over the last 10 years. The Enterprising Investor has no initial concerns, as the investor type is less conservative and looks at a shorter historical time period. 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 $1.37 in 2011 to an estimated $1.80 for 2015. This is a fairly strong level of demonstrated growth, and supports the market’s implied estimate for annual earnings growth of 3.34% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 6.2% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value within a margin of safety relative to the current price, indicating that Progressive is fairly valued at the present time. (See the full valuation)

Total System Services Inc. (TSS)

Total System Services Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios, while 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.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.11 in 2011 to an estimated $1.70 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 7.94% 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.  (See the full valuation)

The Mediocre (Defensive or Enterprising and Overvalued)

Becton Dickinson and Co. (BDX)

Becton Dickinson and Co. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, as well as the high PEmg and PB ratios, while 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.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $5.16 in 2011 to only an estimated $6.02 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 7.54% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling below the price.  (See the full valuation)

Corning Inc. (GLW)

Corning Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the short dividend history, and insufficient earnings growth over the last ten years, while the Enterprising Investor is only concerned by the lack of earnings 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 $1.98 in 2011 to only an estimated $1.47 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 2.99% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling below the price.  (See the full valuation)

eBay Inc. (EBAY)

eBay 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, 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 $1.75 in 2011 to only an estimated $1.89 for 2015. This is a weak level of earnings growth, and does not support the market’s implied estimate for 11.65% annual growth over the next 7-10 years.

In fact, the recent earnings growth has averaged only 1.6% per year, so the market is expecting a very significant shift in earnings in order to justify the current price. The ModernGraham valuation model returns an estimate of intrinsic value falling below the market’s price, indicating that the company is overvalued at the present time.  (See the full valuation)

Kohl’s Corporation (KSS)

Kohl’s Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, short dividend history, and insufficient earnings growth 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, 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 $3.65 in 2012 to only an estimated $4.25 for 2016.  This level of demonstrated growth does not support the market’s implied estimate of 3.53% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling below the price.  (See the full valuation)

Mattel Inc. (MAT)

Mattel qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor’s only concern is the insufficient earnings growth over the last ten years, and the Enterprising Investor is willing to overlook concerns with the level of debt relative to the net current assets and lack of growth over the last five years because the company satisfies the more conservative Defensive Investor. 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 seen its EPSmg (normalized earnings) drop from $1.76 in 2011 to only an estimated $1.74 for 2015. This drop in EPSmg is particularly concerning because it demonstrates a trend in the earnings, as the EPSmg calculation takes five years of earnings figures into account. As a result, the company’s earnings appear to be in a downward spiral, and there must be a turn around before the valuation will improve. Interestingly, the market’s implied estimate for annual earnings growth is 3.07% over the next 7-10 years, so the market is expecting that turn-around even if the data doesn’t currently support that position.

In recent years, the company’s actual growth in EPSmg has drop an average of 0.2% annually, and due to this drop, the ModernGraham valuation model returns an estimate of intrinsic value well below the current price, indicating that the company is overvalued at the present time.  (See the full valuation)

Mead Johnson Nutrition Company (MJN)

Mead Johnson Nutrition Company is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability over the last ten years, short dividend history, as well as the high PEmg and PB ratios, while 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.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.28 in 2011 to an estimated $3.44 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 9.92% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling below the price.  (See the full valuation)

Paychex Inc. (PAYX)

Paychex passes the initial requirements of the Enterprising Investor but not of the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned by the low current ratio. 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 $1.42 in 2011 to only an estimated $1.67 for 2015. This is a weak level of earnings growth, and does not support the market’s implied estimate for 10.71% annual growth over the next 7-10 years.

In fact, the recent earnings growth has averaged only 3.49% per year, so the market is expecting a very significant shift in earnings in order to justify the current price. The ModernGraham valuation model returns an estimate of intrinsic value falling below the market’s price, indicating that the company is overvalued at the present time.  (See the full valuation)

Tripadvisor Inc. (TRIP)

Tripadvisor Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the short history as a publicy traded company, along with 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 $0.87 in 2011 to an estimated $1.66 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 19.81% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling below the price.  (See the full valuation)

The Bad (Speculative and Undervalued or Fairly Valued)

Eaton Corporation (ETN)

Eaton 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 growth over the last ten years.  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 $2.92 in 2011 to an estimated $4.06 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 4.68% 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 within a margin of safety relative to the price.  (See the full valuation)

Priceline Group Inc. (PCLN)

Priceline Group Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the lack of dividends, 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 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 $12.34 in 2011 to an estimated $41.22 for 2015.  This level of growth supports the market’s implied estimate of 10.47% 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.  (See the full valuation)

The Ugly (Speculative and Overvalued)

Mr. MarketAbbvie Inc. (ABBV)

Abbvie Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the short operating history as a stand-alone company, 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 $2.36 in 2011 to only an estimated $2.79 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 7.59% 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.  (See the full valuation)

Leucadia National Corporation (LUK)

Leucadia National Corporation 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, the inconsistent dividend history, 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 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 $1.25 in 2011 to only an estimated $0.35 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 30.05% 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.  (See the full valuation)

Sealed Air Corporation (SEE)

Sealed Air Corporation 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 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 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 $1.18 in 2011 to only an estimated $0.21 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 113.42% 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.  (See the full valuation)

Tenet Healthcare Corporation (THC)

Tenet Healthcare Corporation 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, the lack of dividends, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the current assets, the lack of dividends, 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 $2.61 in 2011 to only an estimated $0.57 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 38.23% 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.  (See the full valuation)

Vornado Realty Trust (VNO)

Vornado Realty Trust 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 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 growing its EPSmg (normalized earnings) from $2.49 in 2011 to only an estimated $3.66 for 2015.  This level of growth does not support the market’s implied estimate of 9.62% 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.  (See the full valuation)

Vulcan Materials Company (VMC)

Vulcan Materials Company 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 high PEmg ratio.  The Enterprising Investor is concerned with the level of debt relative to the net 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 despite growing its EPSmg (normalized earnings) from a loss of $0.03 in 2011 to an estimated $0.92 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 45.68% 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.  (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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