Stocks Value Investing Weekly

21 Companies in the Spotlight This Week – June 14, 2014

image (7)We looked at 21 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)

  • 500px-Apple_logo_black.svgApple Inc. (AAPL)

    Apple is a very strong company for Enterprising Investors to explore, but the Defensive Investor has concerns with the low current ratio, lack of a long enough dividend record, and the high PB ratio.  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 through a review of ModernGraham’s valuation of Microsoft Corp (MSFT) and ModernGraham’s valuation of Google (GOOG).  From a valuation side of things, the company appears significantly undervalued after growing its EPSmg (normalized earnings) from $1.32 in 2010 to an estimated $5.47 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of 4.32% 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. (See the full valuation)

  • bg-foods-logoB&G Foods Inc. (BGS)

    B&G Foods is intriguing to Enterprising Investors but does not qualify for the Defensive Investor.  The Defensive Investor has some major concerns and in fact the only requirements of the investor type which the company passes are the earnings stability and earnings growth.  The Enterprising Investor, on the other hand, only has an issue with 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 comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.49 in 2010 to an estimated $1.22 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of 9.57% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value exceeding the market price. (See the full valuation)

  • CfindustrieslogoCF Industries (CF)

    CF Industries is a very intriguing company for both Defensive Investors and Enterprising Investors.  The Defensive Investor’s only concern is the lack of earnings stability over the last ten years, while the Enterprising Investor’s only issue is with the 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 proceeding with further research into the company and comparing it to other opportunities.  Looking at the company from a valuation angle shows the company to be significantly undervalued after growing its EPSmg (normalized earnings) from $7.11 in 2010 to an estimated $21.47 for 2014.  This strong level of demonstrated growth greatly exceeds the market’s implied estimate of 1.23% 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)

  • 500px-Freeport_McMoRan.svgFreeport-McMoRan Copper & Gold (FCX)

    Freeport-McMoRan satisfies the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the low current ratio, as well as the lack of earnings stability over the last ten years and the lack of stable dividend payments over that time frame.  The Enterprising Investor’s only concern is with 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 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 significantly undervalued after growing its EPSmg (normalized earnings) from $0.01 in 2010 to an estimated $2.95 for 2014.  This level of demonstrated growth more than supports the market’s implied estimate of 1.43% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price. (See the full valuation)

The Good (Defensive or Enterprising and Fairly Valued)

  • Accenture plc (ACN)

    Accenture satisfies the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the company’s low current ratio and its high PEmg and PB ratios while the Enterprising Investor is only concerned with the low current ratio.  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 International Business Machines (IBM) and ModernGraham’s valuation of Infosys Ltd (INFY).  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.99 in 2010 to an estimated $3.98 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 6.23% 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 falling within a margin of safety relative to the price. (See the full valuation)

  • Chubb Corporation (CB)

    Chubb Corporation qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the company’s insufficient level of growth over the ten year period, but the company passes all of the Enterprising Investor’s criteria.  As a result, the 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 competitors such as through a review of ModernGraham’s valuation of Aflac Inc. (AFL) and ModernGraham’s valuation of Travelers Companies (TRV).  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $6.22 in 2010 to an estimated $7.13 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 2.35% 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 falling within a margin of safety relative to the price. (See the full valuation)

  • Pfizer Inc. (PFE)

    Pfizer achieves a rare feat, which is satisfying all of the requirements of both the Defensive Investor and the Enterprising Investor.  Not many companies meet this level of low-risk, and as a result, both investor types should have few concerns about the financial stability of the company.  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 Merck & Co. (MRK) and ModernGraham’s valuation of Bristol-Myers Squibb (BMY).  From a valuation perspective, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.16 in 2010 to an estimated $1.64 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 4.73% 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)

  • WellPoint Inc. (WLP)

    WellPoint Inc. qualifies for Enterprising Investors but not for Defensive Investors.  The Defensive Investor is concerned with the short dividend record, but the company passes all of the requirements for 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 UnitedHealth Group (UNH) and ModernGraham’s valuation of Cigna Corporation (CI).  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $6.96 in 2010 to an estimated $8.18 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 2.24% earnings growth and leads the ModernGraham valuation model, which is based on one of Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the market price. (See the full valuation)

The Mediocre (Defensive or Enterprising and Overvalued)

  • Abbott Labs (ABT)

    Abbott Labs is suitable for the Enterprising Investor but not the Defensive Investor, who is concerned with the low current ratio and the lack of sufficient earnings growth over the last ten years.  The Enterprising Investor is only concerned with 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 comfortable proceeding with further research into the company and comparing it to other opportunities through a review of ModernGraham’s valuation of Johnson & Johnson (JNJ) and ModernGraham’s valuation of Medtronics (MDT).  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $2.96 in 2010 to only an estimated $2.47 in 2014.  This demonstrated lack of growth does not support the market’s implied estimate of 3.83% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the market price at this time. (See the full valuation)

  • Analog Devices Inc. (ADI)

    Analog Devices Inc. qualifies for the Enterprising Investor but not the Defensive Investor, who is concerned with the high PEmg and PB 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.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.66 in 2010 to only an estimated $2.30 in 2014.  This low level of demonstrated growth trails in comparison to the market’s implied estimate of 7.90% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the market price at this time. (See the full valuation)

  • Brown-Forman Corp (BF/B)

    Brown-Forman qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the high PEmg and PB ratios, 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 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 $1.90 in 2010 to only $2.71 in 2014.  This level of demonstrated growth does not support the market’s implied estimate of 13.05% 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 at this time. (See the full valuation)

  • Cameron International (CAM)

    Cameron International is suitable for Enterprising Investors but not for Defensive Investors.  The Defensive Investor is concerned with the low current ratio, the lack of dividend payments, and the high PEmg and PB ratios while 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 National Oilwell Varco (NOV) and ModernGraham’s valuation of Dover Corp (DOV).  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.23 in 2010 to only an estimated $3.07 in 2014.  This low level of demonstrated growth trails in comparison to the market’s implied estimate of 6.36% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the market price at this time. (See the full valuation)

  • Regal-Beloit Corp (RBC)

    Regal-Beloit is suitable for Enterprising Investors but not for Defensive Investors.  The Defensive Investor has issues with the lack of sufficient growth over the last ten years and the high PEmg ratio, but the company passes all of the requirements for 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 Emerson Electric (EMR) and ModernGraham’s valuation of General Electric (GE).  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.44 in 2010 to only an estimated $3.87 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 5.93% earnings growth and leads the ModernGraham valuation model, which is based on one of Benjamin Graham’s formula, to return an estimate of intrinsic value below the market price. (See the full valuation)

  • Texas Instruments (TXN)

    Texas Instruments is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has issues with the lack of sufficient earnings growth over the last ten years as well as the high PEmg and PB ratios. The 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 perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.84 in 2010 to only an estimated $1.96 for 2014.  This very low level of demonstrated growth does not support the market’s implied estimate of 8.02% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formulas, to return an estimate of intrinsic value well below the price. (See the full valuation)

  • Wolverine World Wide (WWW)

    Wolverine World Wide is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has issues with the high PEmg and PB ratios while the Enterprising Investor’s only concern is 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 comfortable proceeding with further research into the company and comparing it to other opportunities.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.88 in 2010 to only an estimated $1.19 for 2014.  This very low level of demonstrated growth does not support the market’s implied estimate of 7.01% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formulas, to return an estimate of intrinsic value well below the price. (See the full valuation)

  • Zimmer Holdings (ZMH)

    Zimmer Holdings is suitable for Enterprising Investors but not for Defensive Investors, as the Defensive Investor has concerns with the short dividend history and the high PEmg and PB ratios.  Meanwhile the company passes all of the Enterprising Investor’s requirements so the investor type has no significant preliminary concerns.  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 $3.28 in 2010 to only an estimated $4.79 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 6.94% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling below the market price. (See the full valuation)

The Bad (Speculative and Undervalued or Fairly Valued)

  • Occidental Petroleum (OXY)

    Occidental Petroleum Corp is no longer suitable for the Defensive Investor or the Enterprising Investor.  The company has shown a lack of sufficient earnings growth over the last ten years, which when combined with the low current ratio, disqualifies it from the Defensive Investor’s portfolio.  The Enterprising Investor also has concerns with the high level of debt relative to current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should seek other opportunities through a review of ModernGraham’s valuation of Chevron Corp (CVX) and ModernGraham’s valuation of Exxon Mobil (XOM).  From a valuation side of things, the company appears to be fairly valued after having grown its EPSmg (normalized earnings) from $5.64 in 2010 to an estimated $6.71 for 2014.  This demonstrated level of growth is enough to support the market’s implied estimate of 3.20% earnings growth and leads 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. Market

  • Adobe Systems Inc. (ADBE) 

    Adobe Systems Inc. is no longer suitable for either the Defensive Investor or the Enterprising Investor at this time.  The Defensive Investor has concerns with the low current ratio, lack of dividend payments, lack of sufficient earnings growth over the last ten years and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the lack of dividend payments and lack of growth in earnings over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should seek other opportunities through a review of ModernGraham’s valuation of Microsoft Corp (MSFT).  As for a valuation, the company appears significantly overvalued after seeing its EPSmg (normalized earnings) fall from $1.22 in 2010 to only an estimated $0.99 for 2014.  This demonstrated drop in earnings clearly does not support the market’s implied estimate of 29.39% 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)

  • Ameren Corporation (AEE) 

    Ameren Corporation is not suitable for either Defensive Investors or Enterprising Investors.  The company’s high level of debt is a concern for both investor types along with the instability in earnings, and lack of earnings growth.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As far as a valuation is concerned, the company is grossly overvalued based on the drop in EPSmg (normalized earnings) from $2.09 in 2010 to an estimated $0.85 for 2014.  Clearly this does not support the market’s implied estimate of 18.56% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value well below the market price. (See the full valuation)

  • Consolidated Edison (ED)

    Consolidated Edison is not suitable for either the Defensive Investor or the Enterprising Investor at this time.  The Defensive Investor has concerns with the low current ratio and the lack of sufficient earnings growth over the last ten years while the Enterprising Investor is concerned with the high level of debt relative to current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should seek other opportunities.  As for a valuation, the company appears significantly overvalued after growing its EPSmg (normalized earnings) from $3.32 in 2010 to only an estimated $3.67 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 3.15% 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)

  • Tidewater Inc. (TDW) 

    Tidewater is not suitable for either the Defensive Investor or the Enterprising Investor at this time.  The Defensive Investor has concerns with the lack of sufficient earnings growth over the last ten years and the high PEmg ratio while the Enterprising Investor is concerned with the high level of debt relative to net current assets and the lack of earnings growth over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should seek other opportunities.  As for a valuation, the company appears significantly overvalued after seeing its EPSmg (normalized earnings) drop from $6.18 in 2010 to $2.70 for 2014.  This demonstrated shrinking of earnings does not support the market’s implied estimate of 5.91% 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)

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.

 

 

 

 

 

 

 

 

 

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