Actavis is not suitable for the Enterprising Investor or for the Defensive Investor. In fact, the company only passes the Defensive Investor’s requirement regarding size, a result which is extremely rare and would seem to indicate a very poor financial position.
Zoetis Inc. (ZTS) is suitable for the Enterprising Investor but not for the Defensive Investor. The Defensive Investor is concerned by the short operating history as a publicly traded company, along with the high PEmg and PB ratios. The Enterprising Investor is only initially concerned by the level of debt relative to the net current assets.
XL Group does not qualify for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is concerned with the company’s lack of earnings stability over the last ten years along with the high PEmg ratio. Similarly, the less conservative Enterprising Investor is concerned by the lack of earnings stability over the last five years.
Linear Technology is suitable for the Enterprising Investor, but not for the more conservative Defensive Investor, who is concerned about the insufficient earnings growth over the last ten years, along with the high PEmg and PB ratios. The Enterprising Investor, on the other hand, has no initial concerns as the company passes all of the investor type’s requirements.
By using the ModernGraham Valuation Model, I’ve selected the five lowest PEmg (price / normalized earnings) companies reviewed by ModernGraham. Each company has been determined to be suitable for the Enterprising Investor and undervalued according to the ModernGraham approach. Here is a summary of each company’s valuation.
National Presto Industries Inc. (NPK) is suitable for the Enterprising Investor but not for the Defensive Investor. The Defensive Investor is concerned by the inconsistend dividend record over the last ten years, along with the insufficient earnings growth over the last ten years.
Altera Corporation is suitable for the Enterprising Investor, but not for the more conservative Defensive Investor, who is concerned about the short dividend history, along with the high PEmg and PB ratios. The Enterprising Investor, on the other hand, has no initial concerns.
Charles Schwab Corporation is not suitable for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is concerned by the insufficient earnings growth over the last ten years and the high PEmg and PB ratios, while the Enterprising Investor is concerned by the lack of earnings growth over the last five years.
