Chevron Corporation passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The Defensive Investor’s only concern is the low current ratio while the Enterprising Investor is willing to overlook concerns because the company passes the more conservative Defensive Investor requirements.
Edwards Lifesciences Corp is suitable for the Enterprising Investor but not for the Defensive Investor. The Defensive Investor is concerned by the lack of dividends as well as the high PEmg and PB ratios, while the Enterprising Investor is only concerned by the lack of dividend payments.
We evaluated 22 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.
After reviewing the data, Baxter should satisfy the Enterprising Investor, but not the Defensive Investor. The Defensive Investor is concerned with the low current ratio as well as the high PB ratio, while the Enterprising Investor’s only issue with the company is the high level of debt relative to the net current assets.
As shown by the data, it is clear that conservative value investors may wish to seek other opportunities. The Defensive Investor is concerned with the low current ratio in combination with the high PEmg and PB ratios, while the Enterprising Investor has concerns with the high level of debt relative to the current assets.
By using the ModernGraham Valuation Model, I’ve selected the five lowest PEmg (price / normalized earnings) companies reviewed by ModernGraham. Each company has been determined to be undervalued and suitable for the Defensive Investor according to the ModernGraham approach. Here’s a summary of each company’s valuation.
Bemis Company Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is concerned with the level of earnings growth over the last ten years, while the Enterprising Investor is only concerned with the level of debt relative to the net current assets.
