17 Companies in the Spotlight This Week – 5/10/14

We looked at 17 different companies this week.  Here’s a summary of the ModernGraham Valuations.  For more detailed analysis, click on the name of the company.  Yesterday we also screened all 282 companies in the database to find the 5 Most Undervalued Companies for the Defensive Investor.  To see more screens of the valuations, be sure to sign up to be a premium subscriber of ModernGraham Stocks and Screens!

The Elite (Defensive or Enterprising and Undervalued)

• Bed Bath & Beyond (BBBY) - Bed Bath & Beyond is a great company for Defensive Investors and Enterprising Investors to consider.  The only concern for either investor type is the lack of dividend payments.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research into the company and comparing it to other opportunities such as through a review of 5 Low PEmg Companies for the Defensive Investor and 5 Low PEmg Companies for the Enterprising Investor.  From a valuation perspective, the company appears to be significantly undervalued after growing its EPSmg (normalized earnings) from $2.38 in 2010 to an estimated $4.60 for 2014.  This demonstrated level of growth surpasses the market’s implied estimate of 2.5% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the price.

 

• Gannett Co. Inc. (GCI) - Gannett Co. is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the low current ratio and the lack of earnings stability or growth over the last ten years.  The Enterprising Investor has a shorter time horizon, though, and only finds a concern with regard to 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 into the company and comparing it to other opportunities through a review of 5 Undervalued Companies for Enterprising Investors.  From a valuation side of things, the company appears to be significantly undervalued after growing its EPSmg (normalized earnings) from -$3.75 in 2010 to an estimated $2.06 for 2014.  This solid level of demonstrated growth leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

 

• TE Connectivity (TEL) - TE Connectivity is suitable for Enterprising Investors but not for Defensive Investors.  The company’s operating history as a stand-alone entity is not long enough to satisfy the requirements of Defensive Investors, but the company passes all of the requirements of the Enterprising Investor.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research into the company and its competitors.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from -$0.41 in 2010 to an estimated $3.13 for 2014.  This strong level of growth outpaces the market’s implied estimate of 5.16% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

 

• Unum Group (UNM) - Unum Group is suitable for either the Defensive Investor or the Enterprising Investor.  The company passes all of the requirements of both investor types, which is a rare accomplishment.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing the company to other opportunities such as through a review of Aflac Inc. (AFL), Chubb Corporation (CB) and Travelers Companies (TRV).  From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $2.25 in 2010 to an estimated $2.97 for 2014.  This level of demonstrated growth is stronger than the market’s implied estimate of 1.48% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

The Good (Defensive or Enterprising and Fairly Valued)

• Celgene Corp (CELG) - Celgene Corp is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the lack of earnings stability over the last ten years, lack of dividends, and the high PEmg and PB ratios.  The Enterprising Investor’s only concern is the lack of dividend payments.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.46 in 2010 to an estimated $4.14 for 2014.  This level of demonstrated growth is in line with the market’s implied estimate of 13.48% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is within a margin of safety relative to the market price.

 

• Danaher Corp (DHR) - Danaher Corporation qualifies for the Enterprising Investor but not the Defensive Investor.  The company passes all of the requirements of the Enterprising Investor, but the PEmg and PB ratios are too high for Defensive Investors.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research into the company and comparing it to other opportunities through a review of Agilent Technologies (A) and 5 Undervalued Dow Components.  From a valuation perspective, the company appears fairly valued after growing its EPSmg (normalized earnings) from $2.09 in 2010 to an estimated $3.44 for 2014.  This is a strong level of demonstrated growth and is in line with the market’s implied estimate of 6.41% earnings growth, leading the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the price.

 

• Microsoft Corp (MSFT) - Microsoft Corporation is an excellent company for Defensive Investors and Enterprising Investors alike.  The company passes all of the requirements of the Enterprising Investor and only fails the PB ratio requirement of the 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 into the company and its competitors through a review of Apple Inc. (AAPL) and Oracle Corp. (ORCL).  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.78 in 2010 to an estimated $2.47 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 3.77% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the price.

 

• Whirlpool Corp (WHC) - Whirlpool Corp is suitable for both Defensive Investors and Enterprising Investors.  The Defensive Investor’s only concern is the low current ratio and while the Enterprising Investor is concerned with the level of debt relative to the current assets, the company qualifies for the Enterprising Investor by default as it is suitable for Defensive Investors.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research into the company and comparison to other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $6.42 in 2010 to an estimated $9.02 for 2014.  This demonstrated level of growth supports the market’s implied estimate of 4.22% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the price.

The Mediocre (Defensive or Enterprising and Overvalued)

• Autodesk Inc. (ADSK) - Autodesk qualifies for the Enterprising Investor but not the Defensive Investor.  The company fails the Defensive Investor’s requirements due to the lack of consistent dividend payments or sufficient earnings growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor’s only concern is the lack of dividend payments.  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 its competitors through a review of Adobe Systems (ADBE).  From a valuation side of things, the company appears to be significantly overvalued after growing its EPSmg (normalized earnings) from $0.84 in 2010 to only $1.00 in 2014.  This low level of demonstrated earnings growth does not support the market’s implied estimate of 19.11% earnings growth.

 

• E I Du Pont de Nemours and Co. (DD) - Du Pont is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor has concerns with the low current ratio, lack of sufficient earnings growth over the last ten years, and the high PB ratio.  The company passes all of the requirements of the Enterprising Investor.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research into the company and its competitors through a review of Dow Chemical (DOW) and Monsanto Company (MON).  From a valuation side of things, the company appears to be overvalued after growing EPSmg (normalized earnings) from $2.71 in 2010 to only an estimated $3.44 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 5.54% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below the price.

 

• Loews Corporation (L) - Loews Corporation is suitable for Enterprising Investors but not for Defensive Investors.  The company has shown insufficient earnings growth or stability over the last ten years for the Defensive Investor, but currently passes all of the requirements of the Enterprising Investor.  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 the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.05 in 2010 to only an estimated $2.24 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 5.58% and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below the price at this time.

 

• Molson Coors Brewing Co. (TAP) - Molson Coors Brewing Co. satisfies the requirements of the Defensive Investor, though the low current ratio is a concern.  As a result, the company qualifies for both the Defensive Investor and the Enterprising Investor.  Value investors should feel very comfortable proceeding with further research into the company and comparing it to other opportunities.  As fora valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.19 in 2010 to only an estimated $3.33 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 5.06% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below the market price.

 

• Robert Half International (RHI) - Robert Half International is suitable for Enterprising Investors but not Defensive Investors.  The company does not pass the Defensive Investor’s requirements regarding earnings growth over the ten year period and has PEmg and PB ratios that are too high.  However, 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.  From a valuation side of things, the company appears overvalued after growing its EPSmg (normalized earnings) from $1.19 in 2009 to only $1.30 for 2013.  This low level of demonstrated growth does not support the market’s implied estimate of 13% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below the market price.

The Bad (Speculative and Undervalued or Fairly Valued)

• eBay Inc. (EBAY) - eBay is not suitable for the Defensive Investor or the Enterprising Investor.  For the Defensive Investor, the concerns are the low current ratio, lack of dividend payments, and high PEmg and PB ratios.  The Enterprising Investor is concerned with the lack of dividend payments and low current ratio.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.30 in 2010 to an estimated $2.24 for 2014.  This demonstrated level of growth supports the market’s implied estimate of 7.35% and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the price.

The Ugly (Speculative and Overvalued)

• Dentsply International Inc. (XRAY) - Dentsply International is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has issues with the low current ratio and the high PEmg and PB ratios while the Enterprising Investor is concerned with the high 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 through a review of 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows.  From a valuation side of things, the company appears overvalued after growing its EPSmg (normalized earnings) from $1.79 in 2010 to only an estimated $2.19 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 6.13% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below the market price.

 

• Sealed Air Corp (SEE) – Sealed Air Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The company’s significant loss in 2012 causes great concern to both investor types, and in fact the company’s only redeeming quality for the Defensive Investor is its size.  For the Enterprising Investor, the only requirement the company passes is the dividend payment.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities such as Bemis Company (BMS).  From a valuation side of things, the company appears to be significantly overvalued due to the significant loss in 2012, as that has led the company’s EPSmg (normalized earnings) figure to drop from $1.36 in 2009 to -$1.64 for 2013.  This demonstrated drop in earnings does not support the market’s implied estimate of earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls well below the market price.

 

• Vulcan Materials Co. (VMC) - Vulcan Materials Company is not suitable for either the Defensive Investor or the Enterprising Investor.  The company only satisfies the Defensive Investor’s requirements regarding size, current ratio, and a long dividend history (though it should be noted the company is currently barely paying a dividend).  The Enterprising Investor has serious concerns with the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation side of things, the company appears significantly overvalued due to the drop in EPSmg (normalized earnings) from $1.84 in 2009 to -$0.27 for 2013.  This demonstrated lack of growth leads the ModernGraham valuation model to return an estimate of intrinsic value that falls well below the market price.

Disclaimer:  The author held a long position in Apple Inc. (AAPL) but did not hold a position in any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logos taken from either the company website or Wikipedia; this article is not affiliated with the companies in any manner.