I evaluated 44 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 44 companies, only 6 were found to be undervalued or fairly valued and suitable for Defensive and/or Enterprising Investors.  Therefore, these 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:

Canadian Tire Corp Limited (TSE:CTC.A)

Canadian Tire Corporation Limited 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 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 $6.07 in 2013 to an estimated $9.02 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.21% 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 Canadian Tire Corporation Limited revealed the company was trading above its Graham Number of $125.89. The company pays a dividend of $2.3 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 16.93, which was below the industry average of 18.47, 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 $-23.8.  (See the full valuation)

CTS Corporation (CTS)

CTS Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, and the high PEmg ratio. The Enterprising Investor is only concerned with the lack of earnings stability over the last five years. 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 $0.25 in 2013 to an estimated $0.8 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.32% 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 CTS Corporation revealed the company was trading above its Graham Number of $15.85. The company pays a dividend of $0.16 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 27.14, which was below the industry average of 28.12, 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 $0.48.  (See the full valuation)

Foot Locker Inc (FL)

Foot Locker, Inc. is suitable 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, and the high PB ratio. The Enterprising Investor has no initial concerns. 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 $2.16 in 2014 to an estimated $4.47 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.23% 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 Foot Locker, Inc. revealed the company was trading above its Graham Number of $48.72. The company pays a dividend of $1.1 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 16.96, which was below the industry average of 50.09, 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 $11.28.  (See the full valuation)

Fortune Brands Home & Security Inc (FBHS)

Fortune Brands Home & Security Inc 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 over the last ten years, the 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 Undervalued after growing its EPSmg (normalized earnings) from $0.64 in 2013 to an estimated $2.29 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.57% 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 Fortune Brands Home & Security Inc revealed the company was trading above its Graham Number of $31.98. The company pays a dividend of $0.64 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 25.63, which was below the industry average of 28.49, 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 $-8.38.  (See the full valuation)

The Good

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

Fortive Corp (FTV)

Fortive 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 over the last ten years, the 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 $0 in 2013 to an estimated $2.01 for 2017. 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 Fortive Corp revealed the company was trading above its Graham Number of $21.48. The company pays a dividend of $0.14 per share, for a yield of 0.2% Its PEmg (price over earnings per share – ModernGraham) was 29.03, which was above the industry average of 28.12. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-8.68.  (See the full valuation)

Hormel Foods Corp (HRL)

Hormel Foods Corp is suitable 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 has no initial concerns. 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 $0.89 in 2013 to an estimated $1.46 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 7.65% 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 Hormel Foods Corp revealed the company was trading above its Graham Number of $17.73. The company pays a dividend of $0.61 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 23.8, which was below the industry average of 24.74, 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 $0.61.  (See the full valuation)

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.