There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the five undervalued companies reviewed by ModernGraham trading closest to their 52 week low. Each of these companies has been determined to be suitable for the Enterprising Investor according to the ModernGraham approach. This is a sample of one screen that is included in ModernGraham Stocks & Screens.  Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Defensive Investors may also be interested in reviewing 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – June 2014 while also conducting further research into the following companies.
Be sure to also check out the history of this screen!
Whole Foods Company (WFM)
Whole Foods Market is suitable for Enterprising Investors but not Defensive Investors.  For Defensive Investors, the company’s current ratio is too low, it does not have a strong enough dividend history, and its PEmg and PB ratios are too high.  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.  From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.56 in 2010 to an estimated $1.35 for 2014.  This demonstrated level of growth outpaces the market’s implied estimate of 9.53% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value above the price.  (See the full valuation)
The TJX Companies (TJX)
The TJX Companies qualify for the Enterprising Investor but not the Defensive Investor. The Defensive Investor is concerned with the low current ratio and the high PB ratio, 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 through a review of ModernGraham’s valuation of Nordstrom Inc. (JWN) and ModernGraham’s valuation of Urban Outfitters (URBN).  From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.30 in 2011 to an estimated $2.69 for 2015.  This strong level of demonstrated growth outpaces the market’s implied estimate of 5.55% 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)
W.W. Grainger Inc. (GWW)
W.W. Grainger qualifies for Enterprising Investors but not for Defensive Investors.  The Defensive Investor is concerned with the high PEmg and PB ratios, but 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 to be undervalued after growing its EPSmg (normalized earnings) from $6.04 in 2010 to an estimated $10.77 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of 7.64% 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 market price.  (See the full valuation)
Teradata 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.
People’s United Financial Inc. (PBCT)
People’s United Financial is suitable for Enterprising Investors but not for Defensive Investors.  The Defensive Investor is concerned with 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 the company to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from a $0.34 in 2010 to an estimated $0.71 for 2014.  This level of demonstrated growth surpasses the market’s implied estimate of 5.81% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the price at this time.  (See the full valuation)
What do you think?  Are these companies a good value for Enterprising Investors?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.
Disclaimer: Â The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing those holdings within the next 72 hours.
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