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The 20 Best Stocks For Value Investors This Week – 7/25/15

We evaluated 40 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. Out of those 40 companies, only 20 were found to be undervalued or fairly valued and suitable for either Defensive or Enterprising Investors.  Here’s a summary of those 9 best stocks for value investors this week. To see a listing and screenings of all the valuations, be sure to sign up to be a premium subscriber!

The Elite

The following companies were found to be suitable for either the Defensive Investor or Enterprising Investor and undervalued:

Cognizant Technology Solutions (CTSH)

139px-Cognizant_Logo.svgCognizant Technology Solutions passes the initial requirements of the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the lack of dividends, as well as the high PEmg and PB ratio. The Enterprising Investor is only initially concerned by the lack of dividends. 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 $1.11 in 2011 to an estimated $2.33 for 2015. This level of demonstrated growth outpaces the market’s implied estimate for annual earnings growth of 8.8% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 22% annually. The ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate but still returns an estimate of intrinsic value well above the current price, indicating that Cognizant Technology Solutions is undervalued at the present time.  (See the full valuation on Guru Focus)

Dow Chemical (DOW)

200px-Dow_Chemical_Company_logo.svgDow Chemical is not suitable for Defensive Investors but it does pass the initial requirements of the Enterprising Investor. The Defensive Investor is concerned with the low current ratio, the insufficient earnings growth over the last ten years, and the high PB ratio, while the Enterprising Investor’s only concern is the level of debt relative to the net current assets. 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 $1.49 in 2011 to an estimated $2.65 for 2015. This is a fairly strong level of demonstrated growth, and outpaces the market’s implied estimate for annual earnings growth of 5.61% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged considerably 15.59% 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 Dow Chemical is significantly undervalued at the present time.  (See the full valuation)

D.R. Horton Inc. (DHI)

DR_Horton_LogoD.R. Horton is not suitable for Defensive Investors but it does pass the initial requirements of the Enterprising Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last 10 years, 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, it has grown its EPSmg (normalized earnings) from a loss of $1.33 in 2011 to an estimated gain of $1.65 for 2015. This is a fairly strong level of demonstrated growth and outpaces the market’s implied estimate for annual earnings growth of only 4.08% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged considerably more than the market’s estimate 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 D.R.Horton is significantly undervalued at the present time, a result which is in line with some of its peers.  (See the full valuation)

Keurig Green Mountain Inc. (GMCR)

220px-Keurig_greenmount_logoKeurig Green Mountain Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short dividend history, and the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.71 in 2011 to an estimated $3.17 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.72% 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 above the price.  (See the full valuation)

MetLife Inc. (MET)

220px-MetLife_Logo.svgMetLife passes the initial requirements of the Enterprising Investor but not the Defensive Investor. In fact, the company passes every requirement of the Enterprising Investor types, but the Defensive Investor is concerned by the lack of earnings stability and insufficient earnings growth over the last ten years. 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 $3.02 in 2011 to an estimated $4.48 for 2015. This is a fairly strong level of demonstrated growth, and outpaces the market’s implied estimate for annual earnings growth of only 2.15% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 9.6% 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 MetLife is significantly undervalued at the present time.  (See the full valuation)

Qualcomm Inc. (QCOM)

500px-QualcommLogo.svgQualcomm Inc. passes the initial requirements of both the Defensive Investor and the Enterprising Investor. In fact, neither investor type has any initial concerns, which is indicative of the company’s strong financial position. 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 $1.94 in 2011 to an estimated $3.87 for 2015. This level of demonstrated growth outpaces the market’s implied estimate for annual earnings growth of 3.69% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 20% annually. The ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, but still returns an estimate of intrinsic value well above the current price, indicating that Qualcomm Inc. is undervalued at the present time.  (See the full valuation on Guru Focus)

Quanta Services Inc. (PWR)

220px-QScolorjpgQuanta Services passes the initial requirements of both the Defensive Investor and the Enterprising Investor. Both investor types are only initially 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 that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $0.74 in 2011 to an estimated $1.57 for 2015. This is a fairly strong level of demonstrated growth and outpaces the market’s implied estimate for annual earnings growth of only 4.64% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 22.7% 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 Quanta Services is significantly undervalued at the present time.  (See the full valuation)

TJX Companies (TJX)

tjx_logoTJX Companies is not suitable for Defensive Investors but it does pass the initial requirements of the Enterprising Investor. The Defensive Investor is concerned with the low current ratio along with the high PEmg and PB ratios, 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, it has grown its EPSmg (normalized earnings) from $1.56 in 2012 to an estimated $2.98 for 2016. This is a robust level of demonstrated growth and outpaces the market’s implied estimate for annual earnings growth of 7.3% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 18.3% 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 TJX Companies is significantly undervalued at the present time.  (See the full valuation)

Torchmark Corporation (TMK)

Torchmark_LogoTorchmark Corporation qualifies for both the Defensive Investor and the Enterprising Investor.  The company passes all of the initial requirements of both investor types, an indication that the company has  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 the evaluation.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.63 in 2011 to an estimated $3.95 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.42% 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 above the price.  (See the full valuation)

Twenty-First Century Fox (FOXA)

220px-21st_Century_Fox_logo.svgTwenty-First Century Fox is not suitable for Defensive Investors but it does pass the initial requirements of the Enterprising Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the high PB ratio, while the Enterprising Investor’s only concern is the level of debt relative to the net current assets. 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 $0.66 in 2011 to an estimated $2.64 for 2015. This is a fairly strong level of demonstrated growth, and outpaces the market’s implied estimate for annual earnings growth of 2.11% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged nearly 60% 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 Twenty-First Century Fox is significantly undervalued at the present time.  (See the full valuation)

Valero Energy Corporation (VLO)

VALERO_logoValero Energy Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, and the insufficient earnings growth or stability over the last ten years.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.95 in 2011 to an estimated $5.66 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.58% 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 above the price.  (See the full valuation)

Western Digital Corporation (WDC)

500px-WesternDigitalLogo.svgWestern Digital Corporation passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only concerned by the short dividend history, while 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 $3.71 in 2011 to an estimated $5.80 for 2015. This is a fairly strong level of demonstrated growth and outpaces the market’s implied estimate for annual earnings growth of 2.53% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 11.29% 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 Western Digital Corporation is significantly undervalued at the present time.  (See the full valuation)

The Good

The following companies were found to be suitable for the Defensive Investor or Enterprising Investor and Fairly Valued:

Aetna Inc. (AET)

220px-Aetna_logo_2012Aetna Inc. qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is only concerned with the low current ratio.  The Enterprising Investor is willing to overlook concerns with the level of debt relative to the current assets because the company passes the more conservative Defensive Investor requirements.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $4.03 in 2011 to an estimated $6.02 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 4.96% 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 below the price.  (See the full valuation)

Biogen IDEC Inc. (BIIB)

BI_logo_biogenidecBiogen IDEC Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends, along with the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.89 in 2011 to an estimated $11.36 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 13.13% 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)

Coach Inc. (COH)

Official_Coach_Inc_LogoCoach Inc. qualifies for the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned with the short dividend history.  The Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.38 in 2011 to an estimated $2.67 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 1.58% 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)

Dollar Tree Inc. (DLTR)

220px-Dollar_Tree_logoDollar Tree Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends, along with the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.48 in 2012 to an estimated $2.84 for 2016.  This level of demonstrated earnings growth supports the market’s implied estimate of 9.7% 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)

Fluor Corporation (FLR)

220px-Logo_FLUOR.svgFluor Corporation qualifies for the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned with the low current ratio.  The Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.13 in 2011 to an estimated $3.62 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 2.5% 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 within a margin of safety relative to the price.  (See the full valuation)

MTS Systems Corporation (MTSC)

mts_logoMTS Systems Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the small company size, low current ratio, insufficient earnings growth over the last ten years, along with the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.12 in 2011 to an estimated $3.13 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 6.1% 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 below the price.  (See the full valuation)

National Oilwell Varco (NOV)

National_Oilwell_Varco_Logo.svgNational Oilwell Varco passes the initial requirements of the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years and the short dividend history. 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 $4.24 in 2011 to an estimated $4.50 for 2015. This level of demonstrated growth supports the market’s implied estimate for annual earnings growth of 0.41% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 1.27% annually. The ModernGraham valuation model reduces the actual growth to an even more conservative figure when making an estimate, but still returns an estimate of intrinsic value within a margin of safety relative to the current price, indicating that National Oilwell Varco is fairly valued at the present time.  (See the full valuation on Guru Focus)

Rockwell Automation (ROK)

220px-Rockwell_Automation_logo.svgRockwell Automation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned by the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns. Therefore, all Enterprising Investors should feel very comfortable proceeding with the next stage of the analysis, which is a determination of an estimate of intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $3.90 in 2011 to an estimated $5.74 for 2015. This level of demonstrated growth is in line with the market’s implied estimate for earnings growth of 6.3% over the next 7-10 years.

The company’s recent earnings history shows an average annual growth in EPSmg of around 9.4%. 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 Rockwell Automation is fairly valued at the present time.  (See the full valuation)

Disclaimer: The author held a long position in Coach Inc. 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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