Feature Value Investing Weekly

20 Companies in the Research Spotlight This Week – June 7, 2014

image (7)We looked at 20 different companies this week.  Here’s a summary of the ModernGraham Valuations.  Yesterday we also screened all 313 companies in the database to find the 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows.  To see more screens of the valuations, be sure to sign up to be a premium subscriber!

The Elite (Defensive or Enterprising and Undervalued)

  • 500px-Aflac.svgAflac Inc. (AFL) – Aflac accomplishes a rare feat by passing all of the requirements of both the Defensive Investor and the Enterprising Investor.  Neither investor type has any major concerns with the company, and 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 competitors such as through a review of ModernGraham’s valuation of Chubb Corporation (CB) and ModernGraham’s valuation of Allstate Corporation (ALL).  From a valuation side of things, Aflac looks significantly undervalued after growing its EPSmg (normalized earnings) from $3.66 in 2010 to an estimated $5.96 in 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of only 0.94% earnings growth and leads the ModernGraham valuation model, which is based on one of Benjamin Graham’s formulas, to return an estimate of intrinsic value well above the market price. (See the full valuation)

 

  • Intuitive_Surgical_LogoIntuitive Surgical (ISRG) – Intuitive Surgical qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the lack of dividend payments 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 conducting further research into the company and its competitors through a review of ModernGraham’s valuation of Johnson & Johnson (JNJ).  From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $6.38 in 2010 to an estimated $12.97 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 10% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value above the market price. (See the full valuation)

 

  • 500px-Nsheadlogo.svgNorfolk Southern Corp (NSC) – Norfolk Southern is a great opportunity for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only concern is the low current ratio, and because the company satisfies the Defensive Investor, the Enterprising Investor is also satisfied by default.  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 it to other opportunities through a review of ModernGraham’s valuation of Union Pacific Corp (UNP).  From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.74 in 2010 to an estimated $5.74 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 4.58% earnings growth and leads the ModernGraham valuation model, which is 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)

 

  • Ralph_Lauren_CorporationRalph Lauren (RL) – Ralph Lauren is suitable for Enterprising Investors, having passed all of the investor type’s requirements, but the company is not suitable for Defensive Investors.  The Defensive Investor is concerned with the high price-to-earnings and price-to-book ratios.  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 through a review of ModernGraham’s valuation of Coach Inc. (COH).  As for a valuation, the company appears significantly undervalued after growing its EPSmg (normalized earnings) from $4.13 in 2010 to $7.45 for 2014.  This high level of demonstrated growth outpaces the market’s implied estimate of 6.03% and leads the ModernGraham valuation model, which is based on a Benjamin Graham formula, to return an estimate of intrinsic value well above the market price. (See the full valuation)

 

  • TeradataLogoVerticalTeradata Corporation (TDC) – Teradata Corporation is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the low current ratio, the lack of dividend payments, and the high price-to-book ratio.  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 including a review of ModernGraham’s valuation of International Business Machines (IBM) and ModernGraham’s valuation of Oracle Corp (ORCL).  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.47 in 2010 to an estimated $2.35 for 2014.  This demonstrated growth is greater than the market’s implied estimated 4.66% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value above the market price. (See the full valuation)

 

  • Vfc-lVF Corp (VFC) – VF Corp qualifies for the Enterprising Investor but not the Defensive Investor, who is concerned with the high price-to-earnings ratio and the high price-to-book ratio.  The company passes all of the Enterprising Investors 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 through a review of ModernGraham’s valuation of Nike (NKE).  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.24 in 2010 to an estimated $2.58 for 2014.  This level of demonstrated growth more than supports the market’s implied estimate of 8.05% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value that is well above the current price. (See the full valuation)

The Good (Defensive or Enterprising and Fairly Valued)

  • Halliburton Co. (HAL) – Halliburton is suitable for Enterprising Investors but not for Defensive Investors.  The Defensive Investor is concerned with the lack of sufficient earnings growth over the last ten years and the high price-to-earnings and price-to-book ratios.  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 comfortable proceeding with further research into the company and comparing it to other opportunities through a review of ModernGraham’s valuation of Schlumberger Ltd (SLB) and ModernGraham’s valuation of Baker Hughes (BHI).  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.93 in 2010 to an estimated $3.04 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 6.5% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value that is within a margin of safety relative to the price. (See the full valuation)

 

  • Moody’s Corporation (MCO) – Moody’s does not qualify for the Defensive Investor but is suitable for the Enterprising Investor.  The Defensive Investor has concerns with the high PEmg and PB ratios, while the company passes all of the requirements of Enterprising Investors.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods, should feel comfortable conducting further research into the company including a review of ModernGraham’s valuation of Equifax (EFX).  From a valuation perspective, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.06 in 2010 to an estimated $3.35 for 2014.  This demonstrated level of growth supports the market’s implied estimate of 8.53% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)

 

  • Urban Outfitters Inc. (URBN) – Urban Outfitters qualifies for the Enterprising Investor but not the Defensive Investor, who is concerned with the lack of dividend payments and the high price-to-book ratio.  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 comparing it to other opportunities through a review of ModernGraham’s valuation of Nordstrom Inc. (JWN) and ModernGraham’s valuation of Gap Inc. (GPS).  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.28 in 2011 to an estimated $1.73 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 5.45% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value that falls within a margin of safety relative to the current price. (See the full valuation)

 

  • Waters Corporation (WAT) – Waters corporation satisfies the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the lack of dividend payments and the high price-to-earnings and price-to-book ratios.  The Enterprising Investor’s only major 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 comparing it to other opportunities through a review of ModernGraham’s valuation of Agilent Technologies (A).  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.38 in 2010 to an estimated $5.07 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 5.86% earnings growth and leads the ModernGraham valuation model, which is 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)

 

  • Xcel Energy (XEL) – Xcel Energy qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only concern is the low current ratio, and because the company satisfies the Defensive Investor, the Enterprising Investor is also satisfied by default.  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 it to other opportunities through a review of ModernGraham’s valuation of Wisconsin Energy (WEC) and ModernGraham’s valuation of Itegrys Energy (TEG).  In terms of a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.50 in 2010 to an estimated $1.86 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 4.19% earnings growth and leads the ModernGraham valuation model, which is 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)

  • Garmin Limited (GRMN) – Garmin qualifies for the Enterprising Investor but not the Defensive Investor, who has major concerns with the insufficient earnings growth over the last ten years as well as the high PEmg and PB ratios.  The Enterprising Investor is only concerned with the lack of sufficient earnings growth over the last five years.  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 to be overvalued after seeing a drop in its EPSmg (normalized earnings) from $3.29 in 2010 to an estimated $2.79 for 2014.  This drop in earnings clearly does not support the market’s implied estimate of 6.51% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the market price. (See the full valuation)

 

  • General Electric (GE) – General Electric is suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor’s only concern is the insufficient earnings growth over the last ten years, but the company passes all of the requirements of the Enterprising Investor.  As a result, value investors should feel comfortable proceeding with further research into the company and its competitors.  From a valuation perspective, the company appears overvalued after growing its EPSmg (normalized earnings) from $1.44 in 2010 to only an estimated $1.46 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 4.92% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value well below the market price. (See the full valuation)

 

  • L3 Communications (LLL) – L3 Communications is suitable for either Defensive Investors or Enterprising Investors.  The Defensive Investor’s only concern is the current ratio, while the Enterprising Investor is concerned with the high level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods, should feel comfortable conducting further research into the company.  From a valuation side of things, the company appears overvalued after growing its EPSmg (normalized earnings) from $7.37 in 2010 to only an estimated $8.37 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 2.99% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below the market price. (See the full valuation)

 

  • Patterson Companies (PDCO) – Patterson Companies qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the the lack of dividend payments, and the high price-to-book 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 comfortable proceeding with further research into the company and its competitors.  As for a valuation, the company appears overvalued after growing its EPSmg (normalized earnings) from $1.68 in 2010 to only $2.00 for 2014.  This demonstrated growth is below the market’s implied estimate of 5.56% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value below the market price. (See the full valuation)

 

  • Sigma-Aldrich Corp (SIAL) – Sigma-Aldrich is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns about the high price-to-earnings ratio and the high price-to-book ratio, but the company passes all of the Enterprising Investors 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 to be overvalued after growing its EPSmg (normalized earnings) from $2.77 in 2010 to only an estimated $3.97 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 8.18% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value that is below the current price. (See the full valuation)

 

  • Tiffany & Co. (TIF) – Tiffany & Co. qualifies for the Enterprising Investor but not the Defensive Investor.  The company passes all of the Enterprising Investor’s requirements, but the Defensive Investor has concerns with the high price-to-earnings and price-to-book ratios.  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 to be overvalued after growing its EPSmg (normalized earnings) from $2.31 in 2011 to only an estimated $3.07 for 2015.  This low level of demonstrated growth does not support the market’s implied estimate of 12.03% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the market price. (See the full valuation)

The Bad (Speculative and Undervalued or Fairly Valued)

  • Exxon Mobil (XOM) – Exxon Mobil is no longer suitable for the Defensive Investor or the Enterprising Investor.  The Defensive Investor now has concerns with the poor current ratio and the lack of sufficient earnings growth over the last ten years.  The Enterprising Investor has significant concerns with the level of debt relative to 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 ModernGraham’s valuation of Chevron Corp (CVX).  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $6.31 in 2010 to an estimated $7.88 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 2.09% 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. (See the full valuation)

 

  • Verisign Inc. (VRSN) – Verisign does not satisfy either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the poor current ratio, lack of earnings stability or dividend payments, and the high PEmg and PB ratios.  The Enterprising Investor has issues with the high level of debt, and the lack of dividend payments.  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 undervalued after growing its EPSmg (normalized earnings) from $0.52 in 2010 to an estimated $2.25 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 7.14% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the market price at this time. (See the full valuation)

The Ugly (Speculative and Overvalued)

Mr. Market

  • Newfield Exploration Co. (NFX) – Newfield Exploration is unsuitable for either the Defensive Investor or the Enterprising Investor.  Both investor types have major concerns with the company, ranging from a lack of earnings stability and growth to a lack of dividend payments.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods, should explore other opportunities.  From a valuation perspective, the company appears significantly overvalued after seeing a drop in EPSmg (normalized earnings) from $0.09 in 2010 to an estimated negative $0.20 for 2014.  This drop in earnings does not support the market’s current pricing and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well below the market price. (See the full valuation)

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