Feature Value Investing Weekly

27 Companies in the Spotlight This Week – 4/4/15

image (7)We evaluated 27 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)

Comerica Inc. (CMA)

ComericaComerica Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability or growth over the last ten years, while the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.30 in 2010 to $2.68 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.06% 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)

National Oilwell Varco (NOV)

National_Oilwell_Varco_Logo.svgNational Oilwell Varco passes the initial requirements of 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 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, NOV has grown its EPSmg (normalized earnings) from $3.88 in 2010 to $5.45 for 2014. This is a strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of only 0.34% annually over the next 7-10 years. In fact, the historical growth is around 8.11% 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, but still 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)

Paccar Inc. (PCAR)

500px-Paccar_Inc_logo.svgPaccar 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 and 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.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.76 in 2010 to $3.24 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 5.34% 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)

Quanta Services Inc. (PWR)

220px-QScolorjpgQuanta Services performs well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the lack of dividend payments along with the high PEmg ratio, while the Enterprising Investor is only concerned with the lack of dividend payments. 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 $0.76 in 2010 to $1.37 for 2014. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 6.15% annual earnings growth over the next 7-10 years. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. 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)

TJX Companies (TJX)

tjx_logoTJX Companies performs well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the low current ratio as well as the high PEmg and PB ratios, 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 $1.29 in 2011 to $2.71 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 8.67% annual earnings growth over the next 7-10 years. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. 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)

Tyson Foods Inc. (TSN)

220px-Tyson_Foods_logo.svgTyson Foods 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 insufficient earnings stability over the last ten years, while 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 undervalued after growing its EPSmg (normalized earnings) from $0.99 in 2011 to an estimated $2.52 for 2015.  This level of demonstrated growth is greater than the market’s implied estimate of 3.33% 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)

Western Digital Corporation (WDC)

500px-WesternDigitalLogo.svgWestern Digital passes the initial requirements of 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 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, WDC has grown its EPSmg (normalized earnings) from $3.71 in 2011 to an estimated $6.08 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of only 3.24% annually over the next 7-10 years. In fact, the historical growth is around 12.83% 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, but still 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)

W.W. Grainger Inc. (GWW)

Grainger_logoW.W. Grainger performs well in the ModernGraham model, and is suitable for Enterprising Investors. 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 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 $5.94 in 2010 to $10.36 for 2014. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 7.07% annual earnings growth over the next 7-10 years. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. 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)

The Good (Defensive or Enterprising and Fairly Valued)

Cognizant Technology Solutions Corp (CTSH)

Cognizant Technology Solutions Corp is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of dividends and the high PEmg and PB ratios, while 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 fairly valued after growing its EPSmg (normalized earnings) from $0.88 in 2010 to $1.94 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 12.02% 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)

The Mediocre (Defensive or Enterprising and Overvalued)

Agilent Technologies Inc. (A)

Agilent Technologies is suitable for the Enterprising Investor, but not for the more conservative Defensive Investor, who is concerned about the insufficient earnings growth or stability over the last ten years, the short dividend history, and 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. As a result, all 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, Agilent Technologies has grown its EPSmg (normalized earnings) from $1.80 in 2011 to only an estimated $2.00 for 2015. This lack of demonstrated growth does not support the market’s implied estimate for earnings growth of 6.28% over the next 7-10 years. Therefore, the model returns an estimate of intrinsic value falling below the current price, indicating the company is overvalued at the present time.  (Read the full valuation)

Altera Corporation (ALTR)

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. As a result, all 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, Altera has grown its EPSmg (normalized earnings) from $1.46 in 2010 to only $1.69 for 2014. This level of demonstrated growth does not support the market’s implied estimate for earnings growth of 8.86% over the next 7-10 years. Therefore, the model returns an estimate of intrinsic value falling below the current price, indicating the company is overvalued at the present time.  (Read the full valuation on Seeking Alpha)

Linear Technology Corporation (LLTC)

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. As a result, all 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, Linear Technology has grown its EPSmg (normalized earnings) from $1.83 in 2011 to only an estimated $1.91 for 2015. This lack of demonstrated growth does not support the market’s implied estimate for earnings growth of 7.98% over the next 7-10 years. Therefore, the model returns an estimate of intrinsic value falling below the current price, indicating the company is overvalued at the present time.  (Read the full valuation on Seeking Alpha)

Medtronic plc (MDT)

Medtronic plc (MDT) is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by 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.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.49 in 2011 to only an estimated $3.38 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 7.2% 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)

National Presto Industries Inc. (NPK)

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.  The Enterprising Investor is only initially 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 $7.84 in 2010 to only $5.54 for 2014.  This lack of demonstrated growth does not support the market’s implied estimate of 1.44% 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)

Tiffany & Company (TIF)

Tiffany & Company (TIF) is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by 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.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.30 in 2011 to only $2.91 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 10.59% 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)

Urban Outfitters Inc. (URBN)

Urban Outfitters Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of dividends and the high PEmg and PB ratios, while 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 overvalued after growing its EPSmg (normalized earnings) from $1.28 in 2011 to only $1.65 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 9.5% 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)

Zoetis Inc. (ZTS)

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.  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 despite growing its EPSmg (normalized earnings) from $0.02 in 2010 to $0.91 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 21.46% 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)

Dollar General Corporation (DG)

Dollar General 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 stability over the last ten years, lack of dividends, and the high PEmg and PB ratios.  The Enterprising Investor is concerned by the level of debt relative to the net current assets, and the lack of dividends.  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 $0.98 in 2011 to $3.00 for 2015.  This level of demonstrated growth is greater than the market’s implied estimate of 8.17% annual earnings growth over the next 7-10 years, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (Read the full valuation)

PVH Corporation (PVH)

PVH Corporation does not qualify for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is concerned with the low current ratio along with the high PEmg ratio. Similarly, the less conservative Enterprising Investor is concerned by the level of debt relative to the current assets. As a result, all value investors should be very cautious when 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 $2.05 in 2011 to $3.95 for 2015. This level of demonstrated growth is within a margin of safety relative to the market’s implied estimate for earnings growth of 9.47% over the next 7-10 years. As a result, the ModernGraham valuation model returns an estimate of intrinsic value within a margin of safety relative to the price, indicating the company is fairly valued at the present time.  (Read the full valuation on Seeking Alpha)

XL Group (XL)

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. As a result, all value investors should be very cautious when 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 $0.66 in 2010 to a gain of $1.67 for 2014. This is a strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of only 6.8% over the next 7-10 years. As a result, the ModernGraham valuation model returns an estimate of intrinsic value well above the current price, indicating the company is undervalued at the present time.  (Read the full valuation on Seeking Alpha)

The Ugly (Speculative and Overvalued)

Mr. Market

Actavis plc (ACT)

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.  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 seeing its EPSmg (normalized earnings) drop from $1.31 in 2010 to a loss of $3.35 for 2014.  This significant lack of demonstrated growth does not support a positive valuation, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (Read the full valuation)

AmerisourceBergen Corporation (ABC)

AmerisourceBergen does not qualify 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 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 the intrinsic value, the company has grown its EPSmg (normalized earnings) from $2.05 in 2011 to an estimated $2.73 for 2015. This level of demonstrated growth does not support the market’s implied estimate for earnings growth of 16.57% annually over the next 7-10 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)

Charles Schwab Corporation (SCHW)

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.  As a result, 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 $0.84 in 2010 to 0.78 for 2014.  This lack of demonstrated growth does not support the market’s implied estimate of 15.1% 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)

Equifax Inc. (EFX)

Equifax Inc. is not suitable for the Enterprising Investor or for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, and 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 $2.02 in 2010 to only $2.58 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 13.85% annual earnings growth over the next 7-10 years, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (Read the full valuation)

General Mills Inc. (GIS)

General Mills does not qualify 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 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 the intrinsic value, the company has grown its EPSmg (normalized earnings) from $2.23 in 2011 to only an estimated $2.59 for 2015. This level of demonstrated growth does not support the market’s implied estimate for earnings growth of 6.67% annually over the next 7-10 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)

Rowan Companies plc (RDC)

Rowan Companies plc is not suitable for the Enterprising Investor or for the Defensive Investor.  The Defensive Investor is concerned by the the lack of earnings stability or growth over the last ten years, and the inconsistent dividend history.  The Enterprising Investor is concerned by the level of debt relative to the net current assets, and the lack of earnings stability or 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 at this time.  From a valuation side of things, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $3.17 in 2010 to $1.46 for 2014.  This lack of demonstrated growth does not support the market’s implied estimate of 1.72% annual earnings growth over the next 7-10 years, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.  (Read the full valuation)

TECO Energy Inc. (TE)

TECO Energy Inc. 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, and the high PEmg ratio.  The Enterprising Investor is concerned by the level of debt relative to the current assets, and 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 at this time.  From a valuation side of things, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $1.13 in 2010 to $0.88 for 2014.  This lack of demonstrated growth does not support the market’s implied estimate of 6.67% annual earnings growth over the next 7-10 years, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value 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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