Feature Value Investing Weekly

23 Companies to Research This Week – 9/13/14

image (7)We evaluated 20 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)

Apple Inc. (AAPL)

500px-Apple_logo_black.svgApple Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the low current ratio, short dividend history, and high PB ratio.  The Enterprising Investor’s only concern is 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 research into the company and comparing it to other opportunities.  From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.32 in 2010 to an estimated $5.52 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 4.94% 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)

Fossil Group Inc. (FOSL)

220px-Fossil_logo.svgFossil Group satisfies the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the lack of dividend payments and the high PB ratio.  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.  From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.52 in 2010 to an estimated $6.04 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.20% 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)

Harris Corporation (HRS)

220px-Harris_Corporation_Logo.svgHarris Corporation is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the low current ratio, and high PB ratio.  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 research into the company and comparing it to other opportunities.  From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.28 in 2010 to an estimated $4.63 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 3.30% 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 qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the low current ratio and the high PEmg and PB ratios.  The Enterprising Investor’s only initial concern is 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 research into the company and comparing it to other opportunities.  From a valuation perspective, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.99 in 2010 to an estimated $4.00 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 5.91% 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)

Analog Devices Inc. (ADI)

Analog Devices Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the high PEmg and PB ratios while 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.  From a valuation perspective, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.66 in 2010 to an estimated $2.31 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 6.53% 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)

Chubb Corporation (CB)

Chubb Corporation is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the company’s insufficient earnings growth over the last ten years, while 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 $6.22 in 2010 to an estimated $6.98 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 2.29% 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)

Pfizer Inc. (PFE)

Pfizer satisfies both the Defensive Investor and 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.  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 4.78% 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)

WellPoint Inc. (WLP)

WellPoint Inc. is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the company’s short dividend history, while 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 $6.96 in 2010 to an estimated $8.16 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 3.04% 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)

The Mediocre (Defensive or Enterprising and Overvalued)

Abbott Laboratories (ABT)

Abbott Laboratories is suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor’s only initial concern is the low current ratio while the Enterprising Investor’s only concern is 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 feel comfortable proceeding with 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 $2.96 in 2010 to an estimated $2.49 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 4.31% 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)

Brown-Forman Corp (BF/B)

Brown-Forman Corp 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 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.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.15 in 2011 to an estimated $2.95 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 10.97% 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)

Cameron International Corporation (CAM)

Cameron International qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the low current ratio, lack of dividend payments, and high PEmg and PB ratios.  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.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.23 in 2010 to an estimated $3.15 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 7.09% 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)

Expeditors International of Washington (EXPD)

Expeditors International is suitable 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 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.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.33 in 2010 to an estimated $1.71 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 7.97% 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)

Garmin Limited (GRMN)

Garmin qualifies for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned with the lack of sufficient earnings growth over the last ten years as well as the high PB ratio while the Enterprising Investor’s only initial 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 research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be overvalued after growing seeing its EPSmg (normalized earnings) drop from $3.29 in 2010 to an estimated $2.92 for 2014.  This demonstrated drop in earnings clearly does not support the market’s implied estimate of 4.86% 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)

Regal-Beloit Corporation (RBC)

Regal-Beloit satisfies both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only initial concern is the lack of sufficient earnings growth over the last ten years while the Enterprising Investor has no initial concerns.  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.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.44 in 2010 to an estimated $3.83 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 5.07% 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)

Texas Instruments (TXN)

Texas Instruments is suitable 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 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.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.84 in 2010 to an estimated $2.02 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 7.64% 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)

Wolverine World Wide Inc. (WWW)

Wolverine World Wide is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the high PEmg and PB ratios.  The Enterprising Investor’s only initial concern is 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 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 an estimated $1.18 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 7.18% 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)

Xcel Energy Inc. (XEL)

Xcel Energy satisfies both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only initial concern is the low current ratio and though the Enterprising Investor is also concerned by the level of debt relative to the current assets, the investor type is satisfied 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.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.50 in 2010 to an estimated $1.80 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 4.79% 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)

Zimmer Holdings Inc. (ZMH)

Zimmer Holdings is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the short dividend history and 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.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.28 in 2010 to an estimated $4.78 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 6.45% 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)

The Bad (Speculative and Undervalued or Fairly Valued)

Dr Pepper Snapple Group Inc. (DPS)

Dr Pepper Snapple Group is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has numerous concerns and in fact is only satisfied by the size of the company and the earnings growth over the last ten years; the company fails the investor type’s other requirements.  The Enterprising Investor is concerned by 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 at this time.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.43 in 2010 to an estimated $3.07 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 5.86% 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)

Norfolk Southern Corporation (NSC)

Norfolk Southern Corp 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 PB ratio, while the Enterprising Investor is concerned by 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 fairly valued after growing its EPSmg (normalized earnings) from $3.74 in 2010 to an estimated $5.81 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 5.18% 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. MarketAllegion Public Limited Co. (ALLE)

Allegion Public Limited does not qualify for either the Defensive Investor or the Enterprising Investor, primarily because of its very short history as a stand-alone company.  The Defensive Investor is concerned with the short operating history as well as the high PEmg ratio and the poor PB ratio.  The Enterprising Investor is concerned with the high level of debt relative to the net current assets and the short operating history.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the ModernGraham model requires a longer operating history to return an estimate of a company’s intrinsic value; however, it should be noted the market is implying an estimate of 11.73% earnings growth.  Value investors choosing to speculate into the value of the company should determine whether this estimate of growth is reasonable.  (See the full valuation)

Boston Scientific Corporation (BSX)

Boston Scientific does not qualify for either the Defensive Investor or the Enterprising Investor.  Both investor types have significant concerns relating primarily to the company’s unstable earnings and financial condition.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time.  As for a valuation, the company appears to be overvalued as the company’s normalized earnings are negative.  This level of earnings does not support a positive valuation 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)

Clorox Company (CLX)

Clorox Company does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio as well as 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 at this time.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.71 in 2010 to an estimated $3.95 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 7.05% 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)

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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