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Feature Value Investing Weekly

8 Best Stocks for Value Investors of the Week – 12/10/16

I evaluated 42 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. I 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 42 companies, only 8 were found to be undervalued or fairly valued and suitable for either Defensive or Enterprising Investors.  Therefore, these 8 companies are the best undervalued stocks of the week.

The Elite

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

Canfor Corporation (TSE:CFP)

Canfor Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.16 in 2012 to an estimated $0.81 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.09% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Canfor Corporation revealed the company was trading above its Graham Number of $14.31. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 20.68, which was below the industry average of 24.45, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-6.5.  (See the full valuation)

Sabra Health Care REIT Inc (SBRA)

Sabra Health Care REIT Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, poor dividend history, and the high PEmg ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.29 in 2012 to an estimated $0.88 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.6% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Sabra Health Care REIT Inc revealed the company was trading above its Graham Number of $17.74. The company pays a dividend of $1.66 per share, for a yield of 6.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 27.71, which was below the industry average of 34.03, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.03.  (See the full valuation)

Sanmina Corp (SANM)

Sanmina Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.14 in 2013 to an estimated $2.75 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.82% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Sanmina Corp revealed the company was trading below its Graham Number of $36.05. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 12.14, which was below the industry average of 22.64, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $4.57.  (See the full valuation)

Travelers Companies Inc (TRV)

Travelers Companies Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.48 in 2012 to an estimated $9.87 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.49% 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.

At the time of valuation, further research into Travelers Companies Inc revealed the company was trading below its Graham Number of $134.38. The company pays a dividend of $1.95 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 11.48, which was below the industry average of 16.56, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Twenty-First Century Fox Inc (FOXA)

Twenty-First Century Fox Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.39 in 2013 to an estimated $2.23 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.9% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Twenty-First Century Fox Inc revealed the company was trading above its Graham Number of $17.36. The company pays a dividend of $0.33 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 12.31, which was below the industry average of 40.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.68.  (See the full valuation)

Whirlpool Corporation (WHR)

Whirlpool Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.56 in 2012 to an estimated $10.43 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.01% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Whirlpool Corporation revealed the company was trading above its Graham Number of $141.94. The company pays a dividend of $1 per share, for a yield of 0.6% Its PEmg (price over earnings per share – ModernGraham) was 16.52, which was below the industry average of 27.31, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-86.15.  (See the full valuation)

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The Good

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

Boston Beer Company Inc (SAM)

Boston Beer Company Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.78 in 2012 to an estimated $6.32 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 9.43% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Boston Beer Company Inc revealed the company was trading above its Graham Number of $70.97. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 27.35, which was below the industry average of 32.42, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $2.16.  (See the full valuation)

Thermo Fisher Scientific Inc (TMO)

Thermo Fisher Scientific Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.92 in 2012 to an estimated $4.89 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 10.26% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Thermo Fisher Scientific Inc. revealed the company was trading above its Graham Number of $85.1. The company pays a dividend of $0.6 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 29.02, which was below the industry average of 40.07, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-45.67.  (See the full valuation)

Disclaimer:

The author held a long position in 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.

3 thoughts on “8 Best Stocks for Value Investors of the Week – 12/10/16

  1. Hey Ben, thanks as always. Just FYI, WHR has a 2.30% div yield. Te dividend is $1 a quarter = 4.00 a year. I believe you are calculating at the div is a $1 a year.
    CFR which you wrote is Cantor Corporation, but I believe you are referring to Cullen Frost/Bankers does have a dividend. Thanks.

    Matt

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