We evaluated 19 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)
American Express Company (AXP)
American Express Company is suitable 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 Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through a review of ModernGraham’s valuation of Discover Financial Services (DFS) and ModernGraham’s valuation of Capital One Financial (COF).  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.68 in 2010 to an estimated $4.63 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of 5.78% 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)
Blackrock Inc. (BLK)
Blackrock is an intriguing opportunity for both Defensive Investors and Enterprising Investors.  The Defensive Investor’s only initial concern is the high PEmg ratio, while the Enterprising Investor’s only concern is 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.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $7.69 in 2010 to an estimated $15.80 for 2014. This high level of demonstrated growth significantly outpaces the market’s implied estimate of 5.85% 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)
Dollar Tree Inc. (DLTR)
Dollar Tree is suitable 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 initial concern is with 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 including a review of ModernGraham’s valuation of Dollar General (DG) and ModernGraham’s valuation of Family Dollar Stores (FDO). From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.14 in 2010 to an estimated $2.65 for 2014. This level of demonstrated growth outpaces the market’s implied estimate of 6.04% 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)
Time Warner Inc. (TWX)
Time Warner qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the low current ratio, lack of earning stability or growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor’s only initial 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 including a review of ModernGraham’s valuation of Viacom Inc. (VIAB) and ModernGraham’s valuation of CBS Corporation (CBS). From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $0.36 in 2010 to an estimated gain of $3.46 for 2014. This level of demonstrated growth outpaces the market’s implied estimate of 7.93% 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)
Torchmark Corporation (TMK)
Torchmark is an intriguing company for either Defensive Investors or Enterprising Investors.  The company passes all of the requirements of each investor type, an impressive accomplishment.  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 Unum Group (UNM).  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.45 in 2010 to an estimated $3.71 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of 3.19% 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)
The Good (Defensive or Enterprising and Fairly Valued)
Allergan Inc. (AGN)
Allergan Inc. is suitable for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the lack of earnings stability over the last ten years and the high PEmg and PB ratios.  The Enterprising Investor’s only initial concern is the lack of earnings stability 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 including a review of ModernGraham’s valuation of Eli Lilly & Co. (LLY). From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.11 in 2010 to an estimated $4.12 for 2014. This level of demonstrated growth supports the market’s implied estimate of 16.52% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)
Priceline Group (PCLN)
Priceline qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the lack of dividend payments as well as the high PEmg and PB ratios.  The Enterprising Investor’s only initial concern is with 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. From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $7.44 in 2010 to an estimated $34.60 for 2014. This very high level of demonstrated growth supports the market’s implied estimate of 13.32% 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 Mediocre (Defensive or Enterprising and Overvalued)
3M Company (MMM)
3M Company qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the low current ratio and the high PEmg and PB ratios while the Enterprising Investor does not have any major initial issues with the company. 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 including a review of ModernGraham’s valuation of Honeywell Inc. (HON). From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $5.14 in 2010 to an estimated $6.69 for 2014. This level of demonstrated growth does not support the market’s implied estimate of 6.57% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)
Archer Daniels Midland (ADM)
Archer Daniels Midland qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the low current ratio, and the insufficient earnings growth over the last ten years.  Meanwhile the Enterprising Investor’s only major concern is 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. From a valuation side of things, the company appears to be overvalued after seeing a drop in its EPSmg (normalized earnings) from $2.84 in 2010 to an estimated $2.50 for 2014. This demonstrated drop in earnings certainly does not support the market’s implied estimate of 5.35% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)
Becton Dickinson and Co. (BDX)
Becton Dickinson and Co. qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the high PEmg and PB ratios.  Meanwhile 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 including a review of ModernGraham’s valuation of Covidien (COV). From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $4.48 in 2010 to an estimated $5.46 for 2014. This level of demonstrated growth does not support the market’s implied estimate of 6.6% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)
Paychex Inc. (PAYX)
Paychex is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the low current ratio and the high PEmg and PB ratios.  The Enterprising Investor’s only initial concern is with the high level of debt relative to the 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 including a review of ModernGraham’s valuation of Automatic Data Processing (ADP).  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.41 in 2010 to only $1.57 for 2014. This low level of demonstrated growth does not support the market’s implied estimate of 9.29% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)
Quest Diagnostics (DGX)
Quest Diagnostics is suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor’s only concern is with the poor current ratio, and since the company qualifies for Defensive Investors, it also qualifies for Enterprising Investors 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 including a review of ModernGraham’s valuation of Psychemedics Corp (PMD).  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.62 in 2010 to only an estimated $4.17 for 2014. This low level of demonstrated growth does not support the market’s implied estimate of 3.12% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)
United Parcel Service (UPS)
United Parcel Service is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the low current ratio and the high PEmg and PB ratios.  The Enterprising Investor’s only initial 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 including a review of ModernGraham’s valuation of FedEx Corporation (FDX).  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.63 in 2010 to only an estimated $3.82 for 2014. This low level of demonstrated growth does not support the market’s implied estimate of 9.40% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)
Xilinx Inc. (XLNX)
Xilinx qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the high PEmg and PB ratios while the Enterprising Investor does not have any major initial issues with the company. 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 including a review of ModernGraham’s valuation of Qualcomm Inc. (QCOM). From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.65 in 2011 to an estimated $2.12 for 2015. This 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 formula, to return an estimate of intrinsic value below the price. (See the full valuation)
The Bad (Speculative and Undervalued or Fairly Valued)
Express Scripts Holding Co. (ESRX)
Express Scripts is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has significant concerns with the low current ratio, the lack of dividend payments, and the high PEmg ratio.  Likewise, the Enterprising Investor has issues with the high level of debt relative to current assets 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 through a review of ModernGraham’s valuation of United Health Group (UNH) and ModernGraham’s valuation of Cigna Corporation (CI).  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.67 in 2010 to an estimated $3.06 for 2014. This level of demonstrated growth outpaces the market’s implied estimate of 6.55% 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)
Ventas Inc. (VTR)
Ventas does not qualify for the Defensive Investor or the Enterprising Investor.  The Defensive Investor has issues with the low current ratio and the high PEmg ratio.  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 explore other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.30 in 2010 to an estimated $2.40 in 2014.  This level of demonstrated growth supports the market’s implied estimate of 9.22% 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)
C.H. Robinson Worldwide (CHRW)
C.H. Robinson Worldwide does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned by 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 current assets.  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 to be overvalued after growing its EPSmg (normalized earnings) from $2.11 in 2010 to only an estimated $2.86 for 2014. This low level of demonstrated growth does not support the market’s implied estimate of 7.30% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)
Ensco plc (ESV)
Ensco no longer qualifies for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio and the lack of sufficient earnings growth over the last ten years while the company fails the Enterprising Investor’s requirements by having too much debt relative to the net current assets and by having insufficient earnings 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.  As for a valuation, the company appears overvalued after seeing a drop in EPSmg (normalized earnings) from $5.58 in 2010 to an estimated $5.01 for 2014.  This demonstrated drop in earnings certainly does not support the market’s implied estimate of 1.11% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (See the full valuation)
WPX Energy Inc. (WPX)
WPX Energy does not qualify for either the Defensive Investor or the Enterprising Investor.  In fact, the company received one of the lowest scores out of all companies reviewed by ModernGraham.  The only requirement of either investor type which the company passes is the Defensive Investor’s market cap size requirement.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the negative EPSmg (normalized earnings) prevents the ModernGraham valuation model from returning a reliable estimate of intrinsic value.  Therefore, at this time, the value of the company appears to be significantly speculative and will remain so until the company achieves a positive EPSmg.  (See the full valuation)
Disclaimer:Â The author did not hold a position in any of the 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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