58 Companies in the Spotlight This Week – 1/31/15

We evaluated 58 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)

American International Group Inc. (AIG)

American International Group 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 dividends, 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 a loss of $158.11 in 2010 to an estimated gain of $5.79 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 0.2% 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.  (Read the full valuation)

Bank of New York Mellon (BNY)

Bank of New York Mellon 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 $1.17 in 2010 to an estimated $2.07 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.64% 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.  (Read the full valuation)

BorgWarner Inc. (BWA)

BorgWarner Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, lack of sufficient earnings stability over the last ten years, poor dividend history, along with the high PEmg and PB ratios. The Enterprising Investor is only concerned by the low current ratio.  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 $0.74 in 2010 to an estimated $2.59 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 6.31% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (Read the full valuation)

Capital One Financial (COF)

Capital One Financial 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 $3.20 in 2010 to $6.93 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 1.35% 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.  (Read the full valuation)

CBS Corporation (CBS)

CBS Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, lack of sufficient earnings stability or growth over the last ten years, along with the high PB ratio. The Enterprising Investor is only concerned by 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 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 a loss of $2.68 in 2010 to an estimated gain of $3.37 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 4.05% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (Read the full valuation)

Cigna Corporation (CI)

Cigna Corporation passes the initial requirements of both the Defensive Investor and the Enterprising Investor. In fact, the company receives a perfect score for both investor types, a rare accomplishment which indicates the company is in a very strong financial position. As a result, value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $3.77 in 2010 to $5.86 for 2014. This is a very strong level of demonstrated growth which is well above the market’s implied estimate for earnings growth of only 5.08% over the next 7-10 years. In fact, the historical growth is around 11% per year, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, and therefore returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.  (Read the full valuation on Seeking Alpha)

Citigroup Inc. (C)

Citigroup 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 and the inconsistent dividend record, 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 a loss of $8.38 in 2010 to a gain of $3.10 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 3.59% 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.  (Read the full valuation)

Dow Chemical Company (DOW)

Dow Chemical Company passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The only issue the Defensive Investor has with the company is the insufficient earnings growth over the last ten years, while the Enterprising Investor is concerned with the net current assets. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.44 in 2010 to an estimated $2.47 for 2014. This is a very strong level of demonstrated growth which is well above the market’s implied estimate for earnings growth of only 4.46% over the next 7-10 years. In fact, the historical growth is around 14.39% per year, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, and therefore returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.  (Read the full valuation on Seeking Alpha)

D.R. Horton Inc. (DHI)

D.R. Horton does fairly well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years, while the Enterprising Investor has no initial concerns. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from a loss of $1.92 in 2010 to an estimated gain of $1.49 for 2014. This is a strong level of demonstrated growth which is well above the market’s implied estimate of 3.93% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 36% per year, which is clearly unsustainable over the long term. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (Read the full valuation on Seeking Alpha)

Estee-Lauder Companies (EL)

Estee-Lauder Companies is suitable for the Enterprising Investor but not the more conservative 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 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 $1.36 in 2011 to an estimated $2.69 for 2015.  This level of demonstrated growth is greater than the market’s implied estimate of 8.85% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (Read the full valuation)

International Paper Company (IP)

International Paper does fairly well in the ModernGraham model and is suitable for Enterprising Investors. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, along with the high PEmg and PB ratios, while the Enterprising Investor is only concerned by the level of debt relative to the net current assets. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $0.80 in 2010 to an estimated $2.12 for 2014. This is a strong level of demonstrated growth which is well above the market’s implied estimate of 8.36% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 33% per year, which is clearly unsustainable over the long term. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (Read the full valuation on Seeking Alpha)

KLA-Tencor Corporation (KLAC)

KLA-Tencor Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of earnings stability over the last ten years along with the high PB ratio 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 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 $1.70 in 2011 to an estimated $3.39 for 2015.  This level of demonstrated growth is greater than the market’s implied estimate of 5.02% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (Read the full valuation)

Lennar Corporation (LEN)

Lennar Corporation is suitable for Enterprising Investors but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years, while the Enterprising Investor has no initial concerns. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from a loss of $3.28 in 2010 to a gain of $2.23 for 2014. This is a strong level of demonstrated growth which is well above the market’s implied estimate of 5.75% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 34% per year, which is clearly unsustainable over the long term. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (Read the full valuation on Seeking Alpha)

Leucadia National Corporation (LUK)

Leucadia National Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, lack of sufficient earnings stability or growth over the last ten years, and the inconsistent dividend history. The Enterprising Investor is only concerned by the low current ratio.  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 $1.35 in 2010 to an estimated $1.86 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 1.94% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (Read the full valuation)

Motorola Solutions Inc. (MSI)

Motorola Solutions Inc. does fairly well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the lack of earnings stability or sufficient growth over the last ten years, inconsistent dividend history and the high PEmg and PB ratios, while the less conservative Enterprising Investor has no initial concerns. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from a loss of $1.37 in 2010 to an estimated gain of $2.99 for 2014. This is a strong level of demonstrated growth which is well above the market’s implied estimate of 6.7% annual earnings growth over the next 7-10 years. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (Read the full valuation on Seeking Alpha)

Nvidia Corporation (NVDA)

Nvidia should attract all Enterprising Investors with its strong financial condition as it passes all of the investor type’s requirements. The Defensive Investor should not be so keen on the company due to its insufficient level of earnings growth or stability over the last ten years, short dividend history, and high PEmg and PB ratios. As a result, only Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

The company has grown its EPSmg (normalized earnings) from $0.33 in 2011 to an estimated $0.87 for 2015. This level of demonstrated growth is fairly strong, and outpaces the market’s implied estimate of 6.79%. Based on the demonstrated growth, and lessened by a margin of safety, the ModernGraham valuation model estimates growth over the next 7-10 years to be very high. As a result, the company appears to be significantly undervalued at the present time.  (Read the full valuation on Seeking Alpha)

Petsmart Inc. (PETM)

Petsmart Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, 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 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 $1.75 in 2011 to an estimated $3.71 for 2015.  This level of demonstrated growth is greater than the market’s implied estimate of 6.75% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (Read the full valuation)

Qualcomm Inc. (QCOM)

Qualcomm passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The only issue the Defensive Investor has with the company is the high PB ratio, while the Enterprising Investor has no initial concerns. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.64 in 2010 to $3.76 for 2014. This is a very strong level of demonstrated growth which is well above the market’s implied estimate for earnings growth of only 5.35% over the next 7-10 years. In fact, the historical growth is around 25.8% per year, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, and therefore returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.  (Read the full valuation on Seeking Alpha)

The Good (Defensive or Enterprising and Fairly Valued)

CareFusion Corporation (CFN)

CareFusion Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short operating history, lack of dividends, and the high PEmg ratio. The Enterprising Investor’s only concern is 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 fairly valued after growing its EPSmg (normalized earnings) from $1.11 in 2011 to an estimated $2.05 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 10.35% 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.  (Read the full valuation)

Eli Lilly & Company (LLY)

Eli Lilly & Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the 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 very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.72 in 2010 to an estimated $3.62 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 5.71% 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.  (Read the full valuation)

Honeywell International Inc. (HON)

Honeywell is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, and the high PEmg and PB ratios. The Enterprising Investor, on the other hand, has no initial concerns.  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 fairly valued after growing its EPSmg (normalized earnings) from $2.75 in 2010 to $4.35 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 7.4% 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.  (Read the full valuation)

Humana Inc. (HUM)

Humana Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the 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 $5.41 in 2010 to an estimated $7.61 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 5.7% 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.  (Read the full valuation)

J.M. Smucker Company (SJM)

J.M. Smucker should satisfy the Enterprising Investor, but not the Defensive Investor. The Defensive Investor is concerned with the low current ratio and the high PEmg ratio, while the Enterprising Investor’s only concern is the level of debt relative to the net current assets. Therefore, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $3.66 in 2011 to an estimated $5.06 for 2015. This is a very strong and impressive level of demonstrated growth, which is in line with the market’s implied estimate for earnings growth of 6.04% over the next 7-10 years. The ModernGraham valuation model, therefore, returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating the company is fairly valued at the present time.  (Read the full valuation on Seeking Alpha)

Raytheon Company (RTN)

Raytheon Company is suitable for both the Defensive Investor and the Enterprising Investor. The Defensive Investor’s only concern is the low current ratio while the Enterprising Investor has no initial concerns. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $4.68 in 2010 to an estimated $6.08 for 2014. This demonstrated growth supports the market’s implied estimate of 4.53%, as the actual growth over the last several years has averaged about 6% annually. As a result, the ModernGraham valuation model returns an estimate of intrinsic value within a margin of safety relative to the market price at this time, and the company appears to be fairly valued by the market.  (Read the full valuation on Seeking Alpha)

The Mediocre (Defensive or Enterprising and Overvalued)

Alexion Pharmaceuticals Inc. (ALXN)

Alexion Pharmaceuticals Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the insufficient earnings growth or stability over the last ten years, the lack of dividends and the high PEmg and PB ratios.  The Enterprising Investor is only concerned by 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 very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.49 in 2010 to an estimated $2.47 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 32.85% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (Read the full valuation)

Applied Materials Inc. (AMAT)

Applied Materials is suitable for the Enterprising Investor, but not the more conservative Defensive Investor, who is concerned with the insufficient earnings growth and stability over the last ten years, as well as the high PEmg and PB ratios. The Enterprising Investor, on the other hand, has no initial concerns. As a result, the Enterprising Investor should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $0.54 in 2010 to only $0.60 for 2014. This demonstrated growth does not support the market’s implied estimate of 15.22%. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.  (Read the full valuation on Seeking Alpha)

Coach Inc. (COH)

Coach Inc. is suitable for the Enterprising Investor, but not the Defensive Investor, who is concerned with the lack of dividends and the high PB ratio. The Enterprising Investor, on the other hand, has no initial concerns. As a result, the Enterprising Investor should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $2.38 in 2011 to only an estimated $2.68 for 2015. This demonstrated growth does not support the market’s implied estimate of 2.76%. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.  (Read the full valuation on Seeking Alpha)

EQT Corporation (EQT)

EQT Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the insufficient earnings growth over the last ten years,  and the high PEmg and PB ratios.  The Enterprising Investor is only concerned by 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 very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.64 in 2010 to an estimated $2.46 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 11.03% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (Read the full valuation)

Family Dollar Stores Inc. (FDO)

Family Dollar Stores Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio,  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 very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.48 in 2011 to only an estimated $2.95 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 8.78% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (Read the full valuation)

FLIR Systems Inc. (FLIR)

FLIR Systems Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by 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 very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.32 in 2010 to only an estimated $1.35 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 7.06% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (Read the full valuation)

Intuit Inc. (INTU)

Intuit Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, 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 very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.68 in 2011 to an estimated $2.69 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 12.33% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (Read the full valuation)

Quest Diagnostics Inc. (DGX)

Quest Diagnostics Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is only concerned by the low current ratio.  The Enterprising Investor is concerned by the level of debt relative to the current assets but overlooks those concerns since the company qualifies for the more conservative Defensive Investor.  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.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.40 in 2010 to an estimated $4.18 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 4.32% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (Read the full valuation)

Sysco Corporation (SYY)

Sysco Corporation is suitable for the Enterprising Investor, but not the Defensive Investor, who is concerned with the low current ratio, lack of sufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor, on the other hand, is only concerned with the lack of earnings growth over the last five years. As a result, the Enterprising Investor should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has seen its EPSmg (normalized earnings) drop from $1.89 in 2011 to only an estimated $1.74 for 2015. This demonstrated growth does not support the market’s implied estimate of 7.28%. The company would have to see a significant change in its level of growth in order to meet the market’s estimated growth level. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.  (Read the full valuation on Seeking Alpha)

The Bad (Speculative and Undervalued or Fairly Valued)

Cablevision Systems Corporation (CVC)

Cablevision Systems Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, lack of earnings stability over the last ten years, as well as the short dividend history.  The Enterprising Investor is concerned with the 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.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.57 in 2010 to an estimated $1.18 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.07% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (Read the full valuation)

CBRE Group Inc. (CBG)

CBRE Group Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, lack of earnings stability or growth over the last ten years, lack of dividends, as well as the poor PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the net current assets along with the lack of dividends.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  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 $1.15 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 10.06% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (Read the full valuation)

Chesapeake Energy Corporation (CHK)

Chesapeake Energy Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, lack of earnings stability or growth over the last ten years, as well as the poor PEmg ratio.  The Enterprising Investor is concerned with the level of debt relative to the net current assets and the lack of earnings stability over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $0.89 in 2010 to an estimated gain of $0.88 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 6.89% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (Read the full valuation)

Comcast Corporation (CMCSA)

Comcast Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, short dividend history, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the 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.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.10 in 2010 to an estimated $2.41 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 7.44% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (Read the full valuation)

Conoco Phillips (COP)

Conoco Phillips is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio and the insufficient earnings stability or growth over the last ten years.  The Enterprising Investor is concerned with the 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.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.70 in 2010 to an estimated $6.75 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 0.54% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (Read the full valuation)

Devon Energy Corporation (DVN)

Devon Energy Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio and the insufficient earnings stability or growth over the last ten years.  The Enterprising Investor is concerned with the level of debt relative to the current assets along with the lack of earnings stability over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.47 in 2010 to an estimated $3.65 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.  (Read the full valuation)

E*Trade Financial Corporation (ETFC)

E*Trade Financial Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the, insufficient earnings stability or growth over the last ten years, short dividend history, and the high PEmg ratio.  The Enterprising Investor is concerned with the lack of earnings growth or stability over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from a loss of $8.78 in 2010 to an estimated $0.40 for 2014.  This level of growth does not support the market’s implied estimate of 26.29% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

Gilead Sciences Inc. (GILD)

Gilead Sciences Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the lack of earnings stability over the last ten years, lack of dividend payments, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the net current assets along with the lack of dividends.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.20 in 2010 to an estimated $3.64 for 2014.  This level of growth supports the market’s implied estimate of 10.46% growth, leading 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.  (Read the full valuation)

Hershey Company (HSY)

Hershey Company is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the 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.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.80 in 2010 to an estimated $3.39 for 2014.  This level of growth supports the market’s implied estimate of 11.77% growth, leading 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.  (Read the full valuation)

Kraft Foods Group Inc. (KRFT)

Kraft Foods Group Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, short history as a standalone company, and the high PB ratio.  The Enterprising Investor is concerned with the level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.99 in 2010 to an estimated $3.57 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 4.9% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the price.  (Read the full valuation)

Regions Financial Corporation (RF)

Regions Financial Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years.  The Enterprising Investor is concerned with the lack of earnings stability over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $1.75 in 2010 to a gain of  $0.53 for 2014.  This level of growth outpaces the market’s implied estimate of 4.29% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the price.  (Read the full valuation)

Xerox Corporation (XRX)

After reviewing 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, short dividend history, insufficient earnings growth over the last ten years, and high PEmg and PB ratios, while the Enterprising Investor has concerns with the high level of debt relative to the current assets. As a result, both investor types would find the company to be too risky to proceed. That said, any investor willing to speculate about the future of the company may go ahead with the next step of the analysis, which is a determination of the company’s intrinsic value.

When calculating an estimate of intrinsic value, it is important to consider the historical earnings results, along with the market’s implied estimate for future growth. Here, the company has grown its EPSmg (normalized earnings) from $0.58 in 2010 to an estimated $0.93 for 2014. This level of demonstrated growth is fairly strong, and significantly higher than the market’s implied estimate of only 3.06%. As a result, Xerox Corporation appears to be significantly undervalued at the present time.  (Read the full valuation on Seeking Alpha)

The Ugly (Speculative and Overvalued)

Alcoa Inc. (AA)

Alcoa Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the insufficient earnings growth or stability over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the current assets, and the lack of earnings growth or stability over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $0.30 in 2010 to an estimated loss of $0.19 for 2014.  Due to the negative EPSmg, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value well below the price.  (Read the full valuation)

Amazon.com Inc. (AMZN)

Amazon.com Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the insufficient earnings growth or stability over the last ten years, the lack of dividends and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the current assets, and the lack of earnings growth or stability over the last five years, and the lack of dividends.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $1.86 in 2010 to an estimated $0.02 for 2014.  This level of growth does not support the market’s implied estimate of growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

Avon Products Inc. (AVP)

Avon Products Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the insufficient earnings growth or stability over the last ten years, and the high PB ratio.  The Enterprising Investor is concerned with the level of debt relative to the current assets, and the lack of earnings growth or stability over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $1.49 in 2010 to an estimated $0.45 for 2014.  This level of growth does not support the market’s implied estimate of 4.71% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

Bank of America Corporation (BAC)

Bank of America 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 high PEmg ratio, while the Enterprising Investor is concerned by the lack of earnings stability or 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 further research into the company and comparing it to other opportunities.  As for a valuation, the company appears overvalued after seeing its EPSmg (normalized earnings) drop from $0.66 in 2010 to an estimated $0.39 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 16.09% 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.  (Read the full valuation)

Campbell Soup Company (CPB)

Campbell Soup Company is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the current assets along 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.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $2.41 in 2011 to an estimated $2.27 for 2015.  This level of growth does not support the market’s implied estimate of 6.06% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

Cardinal Health Inc. (CAH)

Cardinal Health does not qualify for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and high PEmg and PB ratios. The Enterprising Investor takes issue with the level of debt relative to the current assets. As a result, any purchase of the company is made with a speculative nature behind it. That said, any speculator interested in pursuing the company should still proceed to the next part of the analysis, which is a determination of the company’s intrinsic value.

With regard to that intrinsic value, the company has grown its EPSmg (normalized earnings) from $2.81 in 2011 to only an estimated $3.08 for 2015. This level of demonstrated growth does not support the market’s implied estimate for earnings growth of 9.01% over the next 7-10 years. In fact, actual growth has been closer to 1.94% in recent years. The ModernGraham valuation model therefore returns an estimate of intrinsic value below the current price, indicating the company is overvalued at the present time.  (Read the full valuation on Seeking Alpha)

Computer Sciences Corporation (CSC)

Computer Sciences Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, short dividend history, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the lack of earnings growth or stability over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $5.02 in 2011 to an estimated $0.58 for 2015.  This level of growth does not support the market’s implied estimate of 50.28% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

Costco Wholesale Corporation (COST)

Costco Wholesale Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the 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.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.92 in 2011 to an estimated $4.56 for 2015.  This level of growth does not support the market’s implied estimate of 11.31% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

DTE Energy Holding Company (DTE)

DTE Energy Holding Company is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the insufficient earnings growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor is concerned with the level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.70 in 2010 to an estimated $3.96 for 2014.  This level of growth does not support the market’s implied estimate of 7.27% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

Electronic Arts Inc. (EA)

Electronic Arts is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, lack of dividends, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the current ratio, lack of dividends, and the lack of earnings stability over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from a loss of $1.69 in 2011 to an estimated gain of $0.83 for 2015.  While very strong, this level of growth does not support the market’s implied estimate of 28.75% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

Hewlett-Packard Corporation (HPQ)

Hewlett-Packard Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the current assets along with the lack of earnings growth or stability over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $3.22 in 2011 to only an estimated $0.98 for 2015.  This level of growth does not support the market’s implied estimate of 14.74% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

Pepsico Inc. (PEP)

Pepsico Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the 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.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.63 in 2010 to an estimated $4.25 for 2014.  This level of growth does not support the market’s implied estimate of 7.35% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

Southern Company (SO)

Southern Company is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor is concerned with the 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.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.23 in 2010 to only an estimated $2.45 for 2014.  This level of growth does not support the market’s implied estimate of 6.4% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.  (Read the full valuation)

Disclaimer: The author held a long position in Coach Inc. (COH) 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.