Feature Value Investing Weekly

34 Companies in the Spotlight This Week – 2/7/15

image (7)We evaluated 34 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)

Allstate Corporation (ALL)

500px-Allstate.svgAllstate Corporation passes the initial requirements of the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned by 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 $1.97 in 2010 to an estimated $4.26 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 3.94% over the next 7-10 years. In fact, the historical growth is around 24% 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)

American Express Company (AXP)

200px-American_Express_logo.svgAmerican Express Company passes the initial requirements of the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned by the high PB ratio 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 $2.64 in 2010 to $4.71 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 4.75% over the next 7-10 years. In fact, the historical growth is around 15.66% 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)

Dollar Tree Inc. (DLTR)

220px-Dollar_Tree_logoDollar Tree Inc. 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.  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.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.14 in 2011 to an estimated $2.66 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 9.1% 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)

Helmerich & Payne Inc. (HP)

logo_HPIHelmerich & Payne Inc. is suitable for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is only concerned by the low level of earnings growth over the last ten years, while the Enterprising Investor has no initial concerns.  As a result, all value 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 undervalued after growing its EPSmg (normalized earnings) from $3.24 in 2011 to an estimated $4.63 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 3.11% 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)

Joy Global Inc. (JOY)

2012_JGI_logo_wikipediaJoy Global Inc. is suitable for both the Defensive Investor and the Enterprising Investor.  In fact, the company passes all of the requirements of both investor types, which is a rare accomplishment.  As a result, all value 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 undervalued after growing its EPSmg (normalized earnings) from $3.89 in 2010 to $4.91 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 0.17% 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)

MetLife Inc. (MET)

220px-MetLife_Logo.svgMetLife 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 $2.27 in 2010 to an estimated $3.84 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 1.8% annual 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)

SLM Corporation (SLM)

Sallie_Mae_logo_2009SLM Corporation qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability 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 $0.15 in 2010 to $1.57 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 1.35% annual earnings loss 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)

Torchmark Corporation (TMK)

Torchmark_LogoTorchmark Corporation is suitable for both the Defensive Investor and the Enterprising Investor.  In fact, the company passes all of the requirements of both investor types, an impressive accomplishment.  As a result, value 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 $2.41 in 2010 to an estimated $3.65 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 2.61% annual 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)

The Good (Defensive or Enterprising and Fairly Valued)

Fluor Corporation (FLR)

Fluor Corporation should attract both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor is only concerned with the low current ratio, while the Enterprising Investor has no initial concerns. Therefore, 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 $2.94 in 2010 to an estimated $3.58 for 2014. 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 3.51% 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)

Kohl’s Corporation (KSS)

Kohl’s Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio along with the short dividend history.  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 fairly valued after growing its EPSmg (normalized earnings) from $3.32 in 2011 to an estimated $4.06 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 4.08% 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)

Mosaic Company (MOS)

Mosaic Company qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only concern is the short dividend history while the Enterprising Investor has no initial issues as the company passes all of the investor type’s requirements.  As a result, value 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 fairly valued after growing its EPSmg (normalized earnings) from $2.78 in 2010 to an estimated $3.44 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 2.84% 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)

Nordstrom Inc. (JWN)

Nordstrom Inc. should satisfy 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, 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 $2.37 in 2011 to an estimated $3.54 for 2015. This is a strong and impressive level of demonstrated growth, which is in line with the market’s implied estimate for earnings growth of 6.77% 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)

Roper Industries Inc. (ROP)

Roper Industries Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios, while the Enterprising Investor’s only concern is the level of debt relative to the company’s net current assets.  As a result, value 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 fairly valued after growing its EPSmg (normalized earnings) from $2.90 in 2010 to an estimated $5.34 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 10.2% 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)

Whole Foods Market Inc. (WFM)

Whole Foods Market should satisfy the Enterprising Investor, but not the Defensive Investor. The Defensive Investor is concerned with the low current ratio, inconsistent dividend history, and the high PEmg and PB ratios, while the Enterprising Investor’s only concern is the low current ratio. 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 $0.57 in 2010 to $1.34 for 2014. 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 15.76% 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)

Xilinx Inc. (XLNX)

Xilinx should attract both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor is only concerned with the high PB ratio, while the Enterprising Investor has no initial concerns. Therefore, 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 $1.64 in 2011 to an estimated $2.14 for 2014. This is a strong level of demonstrated growth, and is in line with the market’s implied estimate for earnings growth of 4.85% 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)

The Mediocre (Defensive or Enterprising and Overvalued)

3M Company (MMM)

3M Company is suitable for the Enterprising Investor, but not the more conservative Defensive Investor, who is concerned with the low current ratio, as well as the high PEmg and PB ratios. The Enterprising Investor, on the other hand, is only concerned by the level of debt relative to the net current assets. 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 $5.14 in 2010 to only $6.72 for 2014. This demonstrated growth does not support the market’s implied estimate of 8.01%. 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)

Abbvie Inc. (ABBV)

Abbvie Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability over the last ten years, short operating and dividend history as a stand alone company, along with the high PEmg and PB ratios.  The Enterprising Investor’s only initial concern is the level of debt relative to 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 $2.18 in 2010 to an estimated $2.19 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 8.76% 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)

Allergan Inc. (AGN)

Allergan Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the insufficient earnings stability over the last ten years as well as the high PEmg and PB ratios.  The Enterprising Investor is only concerned by the lack of earnings stability over the last five years.  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 $1.10 in 2010 to $3.66 for 2014.  While strong, this level of demonstrated growth does not support the market’s implied estimate of 26.47% 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)

Becton Dickinson & Company (BDX)

Becton Dickinson & Company is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns as the company passes all of the investor type’s requirements.  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 $5.16 in 2011 to an estimated $6.18 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 7.34% 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)

Boston Properties Inc. (BXP)

Boston Properties Inc. 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 as well as the high PEmg and PB ratios.  The Enterprising Investor is only concerned by 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 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 $2.98 in 2010 to an estimated $3.76 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 14.2% 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)

Corning Inc. (GLW)

Corning Inc. qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only initial concern is the short dividend history.  The Enterprising Investor is only concerned by 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 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 seeing its EPSmg (normalized earnings) drop from $2.01 in 2010 to only an estimated $1.54 for 2014.  This lack of demonstrated growth does not support the market’s implied estimate of 3.68% 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)

L-3 Communications Holdings Inc. (LLL)

L-3 Communications Holdings Inc. 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 is concerned by the level of debt relative to 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.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $7.38 in 2010 to only $8.08 for 2014. This demonstrated growth does not support the market’s implied estimate of 3.45% earnings growth. 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)

Legg Mason Inc. (LM)

Legg Mason Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability or sufficient growth over the last ten years, along with the high PEmg ratio.  The Enterprising Investor’s only initial concern is the lack of earnings stability over the last five years.  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 a loss of $1.36 in 2011 to an estimated gain of $1.04 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 23.66% 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)

Microchip Technology Inc. (MCHP)

Microchip Technology Inc. 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 as well as the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns as the company passes all of the investor type’s requirements.  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 $1.58 in 2011 to only an estimated $1.84 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 8.01% 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)

Total System Services Inc. (TSS)

Total System Services Inc. 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 as well as 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 $1.12 in 2010 to only $1.39 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 8.76% 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)

Weyerhaeuser Company (WY)

Weyerhaeuser Company 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 as well as 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 $0.88 in 2010 to only an estimated $1.16 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 10.95% 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)

The Bad (Speculative and Undervalued or Fairly Valued)

Goodyear Tire & Rubber Company (GT)

Goodyear Tire & Rubber Company is not suitable for the Enterprising Investor or for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, insufficient earnings stability over the last ten years, short dividend history, as well as the high PB ratio.  The Enterprising Investor is concerned by 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 at this time.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $0.54 in 2010 to an estimated gain of $1.79 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 2.7% 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)

Ingersoll-Rand Inc. (IR)

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, insufficient earnings stability or 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 a loss of $0.04 in 2010 to an estimated gain of $2.68 for 2014. This level of demonstrated growth is fairly strong, and significantly higher than the market’s implied estimate of only 8.14%. As a result, the company appears to be significantly undervalued at the present time.  (Read the full valuation on Seeking Alpha)

Time Warner Inc. (TWX)

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, insufficient earnings stability or 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 a loss of $0.17 in 2010 to an estimated gain of $3.51 for 2014. This level of demonstrated growth is fairly strong, and significantly higher than the market’s implied estimate of only 7.1%. As a result, the company appears to be significantly undervalued at the present time.  (Read the full valuation on Seeking Alpha)

The Ugly (Speculative and Overvalued)

Mr. Market

Juniper Networks Inc. (JNPR)

Juniper Networks Inc. 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, 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 seeing its EPSmg (normalized earnings) drop from $0.59 in 2010 to only an estimated $0.24 for 2014.  This level of growth does not support the market’s implied estimate of 43.5% 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)

Kimberly Clark Corporation (KMB)

Kimberly Clark Corporation is not suitable for the Enterprising Investor or for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, insufficient earnings growth over the last ten years, as well as the high PEmg and PB ratios.  The Enterprising Investor is concerned by 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 at this time.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $4.26 in 2010 to only $4.53 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 7.88% 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)

Lockheed Martin Corporation (LMT)

Lockheed Martin Corporation (LMT) 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 $7.55 in 2010 to only an estimated $9.41 for 2014.  This level of growth does not support the market’s implied estimate of 5.76% 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)

Morgan Stanley (MS)

Morgan Stanley is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned by the lack of earnings stability or growth over the last ten years along with the high PEmg ratio.  The Enterprising Investor is concerned by the lack of earnings growth over the last five years  As a result, all 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 overvalued after seeing its EPSmg (normalized earnings) drop from $1.83 in 2010 to $1.69 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 5.92% 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)

Williams Companies (WMB)

Williams Companies (WMB) 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, 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 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 $0.24 in 2010 to only an estimated $0.65 for 2014.  This level of growth does not support the market’s implied estimate of 30.34% 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 did not hold a position in any of the 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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