5 Undervalued Companies for the Enterprising Investor Near 52 Week Lows – January 2015

5def-ent-lows_edited-1There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the five undervalued companies reviewed by ModernGraham trading closest to their 52 week low. Each of these companies has been determined to be suitable for the Enterprising Investor according to the ModernGraham approach. This is a sample of one screen that is included in ModernGraham Stocks & Screens.  Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Defensive Investors may also be interested in reviewing 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – October 2014 while also conducting further research into the following companies.

Be sure to also check out the history of this screen!

FMC Technologies Inc. (FTI)

FMC Technologies is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the company’s low current ratio, the lack of dividends, and the high PEmg and PB ratios.  The Enterprising Investor’s only issue 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.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.39 in 2010 to an estimated $2.17 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 8.39% 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)

Fifth Third Bancorp (FITB)

Fifth Third Bancorp performs well in the initial stages of the analysis for the Enterprising Investor, passing all of the requirements. Defensive Investors, however, are concerned by the insufficient earnings growth or stability over the last ten years. Therefore, only Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s teachings should feel comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

To determine an estimate of the intrinsic value, one must consider the company’s earnings. Here, the company has grown its EPSmg (normalized earnings) from $0.01 in 2010 to an estimated $1.62 for 2014. This achieved growth rate is well above the market’s implied forecast of only 1.96% earnings growth over the next 7-10 years. The company would have to see a significant slowdown in growth in order to be valued at the market’s current price. As a result, the ModernGraham valuation model returns an estimate of intrinsic value well above the price, supporting a clear conclusion that the company is significantly undervalued. All value investors are therefore encouraged to proceed with further research to determine whether the company is suitable for their own individual portfolios.  (See the full valuation on Seeking Alpha)

Comerica Incorporated (CMA)

Comerica Inc. 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, 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 undervalued after growing its EPSmg (normalized earnings) from $1.30 in 2010 to an estimated $2.65 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.48% 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)

M&T Bank Corporation (MTB)

M&T Bank Corporation is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the low level of growth in earnings 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 undervalued after growing its EPSmg (normalized earnings) from $4.95 in 2010 to an estimated $7.38 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.02% 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)

Michael Kors Holdings Inc. (KORS)

Michael Kors Holdings Limited qualifies for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the insufficient earnings stability, short earnings history, lack of dividends, and the high PEmg and PB ratios.  The Enterprising Investor is only concerned by the lack of dividends.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.19 in 2011 to an estimated $2.75 for 2015.  This level of demonstrated growth is greater than the market’s implied estimate of 9.21% 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)

What do you think?  Are these companies a good value for Enterprising Investors?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing those holdings within the next 72 hours.


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