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)
Assurant Inc. (AIZ)
Assurant Inc. is suitable for the Enterprising Investor as the company passes all of the investor type’s requirements, but is not suitable for the Defensive Investor due to the lack of earnings growth over the last ten 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 Unum Group (UNM) and ModernGraham’s valuation of MetLife (MET).  From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $3.64 in 2010 to an estimated $5.68 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 1.33% 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)
Bed Bath & Beyond Inc. (BBBY)
Bed Bath & Beyond qualifies for either the Defensive Investor or the Enterprising Investor.  The only issue 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 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 $2.38 in 2011 to an estimated $4.55 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 2.52% 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)
Discover Financial Services (DFS)
Discover Financial Services is suitable for the Enterprising Investor as the company passes all of the investor type’s requirements, but is not suitable for the Defensive Investor as its dividend history is too short.  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 American Express (AXP) and ModernGraham’s valuation of Capital One Financial (COF).  From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.78 in 2010 to an estimated $4.56 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 2.34% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.  (See the full valuation)
Ross Stores Inc. (ROST)
Ross Stores qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the low current ratio and the high PB ratio, but the Enterprising Investor’s only concern is 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 including a review of ModernGraham’s valuation of The TJX Companies (TJX).  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.66 in 2010 to an estimated $3.66 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.58% 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)
Snap-on Incorporated (SNA)
Snap-on Incorporated qualifies for Enterprising Investors but not for Defensive Investors.  The Defensive Investor is concerned by the high PEmg and PB ratios.  The Enterprising Investor has no initial 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.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.04 in 2010 to an estimated $5.71 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 6.24% 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)
TE Connectivity (TEL)
TE Connectivity qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has numerous concerns and in fact the only things the investor type likes are the market cap and the PEmg ratio.  Meanwhile, the Enterprising Investor has no initial concerns as the company passes all of the investor type’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 Corning Inc. (GLW).  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $0.41 in 2010 to an estimated gain of $3.13 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 5.59% 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)
Microsoft Corporation (MSFT)
Microsoft is suitable for either the Defensive Investor or the Enterprising Investor.  The only issue for the Defensive Investor is the high PB ratio while the Enterprising Investor has no concerns at this time.  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 Google Inc. (GOOG) and ModernGraham’s valuation of Oracle Corporation (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 $2.46 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 4.45% 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)
Robert Half Incorporated (RHI)
Robert Half International is suitable for Enterprising Investors but not for Defensive Investors.  The Defensive Investor is concerned by the insufficient level of earnings growth over the last ten years along with the high PEmg and PB ratios.  The Enterprising Investor has no initial 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 fairly valued after growing its EPSmg (normalized earnings) from $0.89 in 2010 to an estimated $1.68 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 10.25% 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)
Autodesk Inc. (ADSK)
Autodesk qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the lack of sufficient earnings growth over the last ten years, lack of dividend payments, and the high PEmg and PB ratios.  Meanwhile, the Enterprising Investor’s only initial 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 Adobe Systems Inc. (ADBE).  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.81 in 2011 to only an estimated $0.91 for 2015.  This low level of demonstrated growth does not support the market’s implied estimate of 25.42% 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)
Celgene Corporation (CELG)
Celgene qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the lack of sufficient earnings stability over the last ten years, lack of dividend payments, and the high PEmg and PB ratios.  Meanwhile, the Enterprising Investor’s only initial 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 Amgen Inc. (AMGN).  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.23 in 2010 to an estimated $1.99 for 2014.  While a strong level of demonstrated growth, it does not support the market’s implied estimate of 17.20% 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)
E.I. Du Pont de Nemours (DD)
Du Pont qualifies for the Enterprising Investor but not 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.  Meanwhile, the Enterprising Investor has no initial concerns as the company passes all of the investor type’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 Dow Chemical (DOW) and ModernGraham’s valuation of Monsanto (MON).  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.71 in 2010 to an estimated $3.34 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 5.33% 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)
Loews Corporation (L)
Loews Corporation is suitable for the Enterprising Investor as the company passes all of the investor type’s requirements, but is not suitable for the Defensive Investor due to the lack of earnings stability or growth over the last ten 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 overvalued after growing its EPSmg (normalized earnings) from $2.05 in 2010 to only an estimated $2.26 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 5.10% 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)
Molson Coors Brewing Company (TAP)
Molson Coors is suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor’s only initial concern with the company is the low current ratio, and while the Enterprising Investor is also concerned with the high level of debt relative to the current assets, the company qualifies for Enterprising Investors by default.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.19 in 2010 to only an estimated $3.49 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 5.73% 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)
Gannett Company Inc. (GCI)
Gannett Company no longer qualifies for the Enterprising Investor or 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 is no longer interested due to the drop in current ratio over the last quarter.  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 undervalued after growing its EPSmg (normalized earnings) from a loss of $3.75 in 2010 to an estimated gain of $2.05 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of 3.95% 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)
Thermo Fisher Scientific (TMO)
Thermo Fisher Scientific does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio, the lack of a long dividend history, and the high PEmg ratio 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 ModernGraham’s valuation of General Electric (GE) and ModernGraham’s valuation of Agilent Technologies (A).  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.12 in 2010 to an estimated $4.43 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 9.45% 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 Western Union Company (WU)
The Western Union Company is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio, the lack of a long dividend history, and the high PB ratio 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.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.25 in 2010 to an estimated $1.52 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 1.26% 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)
Whirlpool Corporation (WHR)
Whirlpool is not suitable for either the Defensive Investor or the Enterprising Investor at this time.  The Defensive Investor is concerned by the low current ratio and the insufficient growth over the last ten years, while the Enterprising Investor has issues 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 ModernGraham’s valuation of General Electric (GE).  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 $8.66 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 4.06% 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)
Ball Corporation (BLL)
Ball Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned by the low current ratio, lack of sufficient earnings growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor has an issue 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.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.01 in 2010 to only an estimated $1.48 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 16.88% 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)
Cincinnati Financial Corporation (CINF)
Cincinnati Financial Corp does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned by the lack of sufficient earnings growth over the last ten years, while the Enterprising Investor has an issue with 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 explore other opportunities.  From a valuation side of things, the company appears overvalued after seeing its EPSmg (normalized earnings) drop from $3.02 in 2010 to only an estimated $2.33 for 2014.  This demonstrated drop in earnings does not support the market’s implied estimate of 5.73% 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)
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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