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Feature Screens

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

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

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

Michael Kors Holdings (KORS)

MK_COOL_GRAY_7CMichael Kors performs well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the short earnings history as a publicly traded company, 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 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 $0.19 in 2011 to an estimated $2.81 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 7.81% 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.  (See the full valuation on Seeking Alpha)

KLA-Tencor Corporation (KLAC)

KLA_logolockup_RGBKLA-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.  (See the full valuation)

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.  (See the full valuation on Seeking Alpha)

Assurant Inc. (AIZ)

220px-Assurant_LogoAssurant Inc. is suitable for the Enterprising Investor, but not the Defensive Investor, who is concerned by the low level of earnings growth over the last ten years.  The less conservative Enterprising Investor looks at a shorter horizon and has no initial concerns.  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 $3.64 in 2010 to $5.86 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 0.99% 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.  (See the full valuation)

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.  (See the full valuation on Seeking Alpha)

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

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

 

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