Feature Value Investing Weekly

19 Companies to Research This Week – 8/23/14

image (7)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)

Boeing Company (BA)

500px-Boeing-Logo.svgBoeing Company qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the low current ratio and the high PB ratio.  The Enterprising Investor’s only initial 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 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 $3.61 in 2010 to an estimated $6.26 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)

CA Incorporated (CA)

500px-CA_Technologies_brand.svgCA Incorporated qualifies for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor’s only concern is the low current ratio, and the company qualifies for the Enterprising Investor by default.  As a result, value 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 undervalued after growing its EPSmg (normalized earnings) from $1.32 in 2011 to an estimated $2.08 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 2.53% 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)

Ford Motor Company (F)

500px-Ford_Motor_Company_Logo.svgFord Motor Company qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years as well as the inconsistent dividend history.  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 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 a loss of $1.14 in 2010 to an estimated gain of $1.92 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 0.27% 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)

Intel Corp (INTC)

500px-Intel-logo.svgIntel Corporation is suitable for either the Defensive Investor or the Enterprising Investor.  The company passes all of the requirements of both investor types, which is a rare accomplishment.  As a result, value 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 undervalued after growing its EPSmg (normalized earnings) from $1.27 in 2010 to an estimated $2.09 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 3.91% 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)

NetApp Inc. (NTAP)

126px-Netapp_logo.svg

NetApp Inc. is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the short dividend history and the high PEmg and PB ratios.  Meanwhile, 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 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 $0.77 in 2010 to an estimated $1.59 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 8.72% 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)

People’s United Financial (PBCT)

PeoplesUnitedBankPeople’s United Financial qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the high PEmg ratio, 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 undervalued after growing its EPSmg (normalized earnings) from $0.34 in 2010 to an estimated $0.72 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 5.97% 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)

Precision Castparts Corporation (PCP)

200px-Precision_Castparts_Corp_logo.svgPrecision Castparts qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the high PEmg and PB ratios.  The Enterprising Investor has no major initial concerns.  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 undervalued after growing its EPSmg (normalized earnings) from $6.76 in 2011 to an estimated $11.27 for 2015.  This level of demonstrated growth outpaces the market’s implied estimate of 6.38% 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)

Sandisk Corporation (SNDK)

220px-SanDisk_Logo_2007.svgSandisk is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the short dividend history, the insufficient earnings stability over the last ten years as well as the high PEmg and PB ratios.  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 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 $0.65 in 2010 to an estimated $4.24 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 7.00% 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)

Progressive Corporation (PGR)

Progressive Corporation qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability or growth over the last ten years and the inconsistent dividend history, 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 fairly valued after growing its EPSmg (normalized earnings) from $1.30 in 2010 to an estimated $1.67 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 3.12% earnings growth and leads the ModernGraham valuation model, which is based on 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)

Visa Inc. (V)

Visa Inc. is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has numerous concerns and in fact the only requirement of the Defensive Investor which the company passes is the market cap size.  Meanwhile, 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 research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.00 in 2010 to an estimated $6.48 for 2014.  This level of demonstrated growth supports the market’s extremely high implied estimate of 11.97% 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)

Akamai Technologies Inc. (AKAM)

Akamai Technologies is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with 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 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 $0.76 in 2010 to an estimated $1.46 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 16.45% 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)

Baker Hughes Inc. (BHI)

Baker Hughes qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth over the last ten years as well as the high PEmg 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 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 $3.22 in 2010 to only an estimated $3.30 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 6.19% 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)

Facebook Inc. (FB)

Facebook qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years, the lack of dividend payments, as well as the high PEmg and PB ratios.  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 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 $0.11 in 2010 to an estimated $0.58 for 2014.  While this is a strong level of demonstrated growth, it does not support the market’s implied estimate of 60.24% 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)

Hasbro Inc. (HAS)

Hasbro Inc. is suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor’s only issue with the company is the high PB ratio, while the company passes all of the Enterprising Investor’s requirements.  As a result, value 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 $2.31 in 2010 to only an estimated $2.72 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 5.27% 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)

International Flavors and Fragrances (IFF)

International Flavors & Fragrances satisfies the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned 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 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 $2.87 in 2010 to an estimated $4.07 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 8.14% 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)

Netflix Inc. (NFLX)

Netflix is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns regarding the low current ratio, lack of dividend payments, and the high PEmg and PB ratios.  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 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 $1.96 in 2010 to an estimated $2.44 for 2014.  This level of demonstrated growth does not support the market’s extremely high implied estimate of 89.70% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (See the full valuation)

Tripadvisor Inc. (TRIP)

Tripadvisor does not qualify for the Defensive Investor but does satisfy the Enterprising Investor.  The Defensive Investor is concerned by the short earnings history, lack of dividend payments, and high PEmg and PB ratios.  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 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 $0.55 in 2010 to an estimated $1.45 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 29.43% 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)

Wyndham Worldwide Corporation (WYN)

Wyndham Worldwide Corporation does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio, short dividend history, lack of sufficient earnings growth or stability over the last ten years, and the high PEmg and PB ratios.  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 $0.31 in 2010 to an estimated $3.34 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 7.60% 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 Ugly (Speculative and Overvalued)

Mr. MarketRange Resources Inc. (RRC)

Range Resources Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The only Defensive Investor requirements the company satisfies are the market cap size and the dividend history.  Likewise, the only Enterprising Investor requirements the company passes are the dividend payment and the 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 at this time.  From a valuation standpoint, the company appears overvalued after growing its EPSmg (normalized earnings) from $0.08 in 2010 to an estimated $0.65 for 2014.  This level of demonstrated growth falls short of the market’s extremely high implied estimate of 53.98% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (See the full valuation)

Disclaimer: The author held a long position in Ford Motor Company (F) 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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