We evaluated 35 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. Out of those 35 companies, only 18 were found to be undervalued or fairly valued and suitable for either Defensive or Enterprising Investors.

The Elite

The following companies were found to be suitable for either the Defensive Investor or Enterprising Investor and undervalued:

Capital One Financial Corp (COF)

Capital One Financial Corp qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability over the last ten years along with the inconsistent dividend record.  The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $5.15 in 2012 to an estimated $7.17 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.28% annual earnings loss over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Cognizant Technology Solutions Corp (CTSH)

Cognizant Technology Solutions Corp qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends along with the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.10 in 2011 to an estimated $2.25 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.39% annual earnings loss over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Dow Chemical Co (DOW)

Dow Chemical Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor is only initially concerned by the level of debt relative to the net current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.49 in 2011 to an estimated $3.01 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.65% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

D.R. Horton Inc (DHI)

D.R. Horton Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years.  The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.35 in 2012 to an estimated $1.94 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.65% annual earnings loss over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Eastman Chemical Co (EMN)

Eastman Chemical Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor is only initially concerned by the level of debt relative to the net current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.88 in 2011 to an estimated $5.57 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.41% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

FMC Corporation (FMC)

FMC Corporation qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor has no initial concerns, and the Enterprising Investor is only concerned by the level of debt relative to the net current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.80 in 2011 to an estimated $3.53 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.74% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Franklin Resources Inc (BEN)

Franklin Resources Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  In fact, the company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial condition.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.50 in 2012 to an estimated $3.17 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.00% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Invesco Ltd (IVZ)

Invesco Ltd qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only initially concerned by the low current ratio while the Enterprising Investor is willing to overlook concerns regarding the level of debt relative to the current assets because the company passes the more stringent Defensive Investor requirements.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.22 in 2011 to an estimated $2.12 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.52% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

JP Morgan Chase (JPM)

JP Morgan Chase qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The company passes all of the requirements of both investor types, an indication of the strong financial position.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $4.11 in 2012 to an estimated $5.48 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.83% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Paccar Inc (PCAR)

Paccar Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the insufficient 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 comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.94 in 2011 to an estimated $3.76 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.98% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Seagate Technology PLC (STX)

Seagate Technology PLC qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years, the low current ratio, and the inconsistent dividend record.  The Enterprising Investor is only initially concerned by the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.39 in 2012 to an estimated $4.14 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.9% annual earnings loss over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

WestRock Co (WRK)

WestRock Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor’s only initial concern is the level of debt relative to the net current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.97 in 2012 to an estimated $3.28 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.64% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Xylem Inc (XYL)

Xylem Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, the short dividend record, and the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.97 in 2011 to an estimated $1.65 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.22% annual earnings loss over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The Good

The following companies were found to be suitable for the Defensive Investor or Enterprising Investor and Fairly Valued:

Akamai Technologies Inc (AKAM)

Akamai Technologies Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends along with the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.90 in 2011 to an estimated $1.66 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 9.14% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

CA Inc (CA)

CA Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the low current ratio, and the Enterprising Investor is willing to overlook concerns regarding the level of debt relative to the current assets because the company meets the more stringent Defensive Investor requirements.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.60 in 2012 to an estimated $1.97 for 2016.  This level of demonstrated earnings growth supports the market’s implied estimate of 3.00% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

Northern Trust Corp (NTRS)

Northern Trust Corp qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth over the last ten years.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.80 in 2012 to an estimated $3.63 for 2016.  This level of demonstrated earnings growth supports the market’s implied estimate of 3.84% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

Quest Diagnostics Inc (DGX)

Quest Diagnostics Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor’s only concern is the low current ratio while the Enterprising Investor is willing to overlook concerns regarding the level of debt relative to the current assets because the company meets the more stringent Defensive Investor requirements.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.34 in 2011 to an estimated $4.36 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 3.35% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within the margin of safety relative to the price.

Roper Technologies Inc (ROP)

Roper Technologies Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned 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, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.43 in 2011 to an estimated $5.93 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 10.01% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

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 that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.