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Value Investing Research Since 2006

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Thursday, May 24, 2018

10 Low PE Stock Picks for the Enterprising Investor – May 2018


enterprising low PE

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected 10 low PE stocks for the Enterprising Investor.  Each company has been determined to be suitable for the Enterprising Investor and undervalued according to the ModernGraham approach.

Defensive Investors are defined as investors who are seeking to minimize risk to the fullest extent. 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.  Learn more about the difference between Defensive Investors and Enterprising Investors.

Bed Bath & Beyond Inc. (BBBY)

Bed Bath & Beyond 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. 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 $4.19 in 2014 to an estimated $4.19 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.57% annual earnings loss 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 Bed Bath & Beyond Inc. revealed the company was trading below its Graham Number of $34.59. The company pays a dividend of $0.38 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 5.36, which was below the industry average of 35.42, 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 $-3.6.  (See the full valuation)

Signet Jewelers Ltd. (SIG)

Signet Jewelers Ltd. is suitable 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, and the poor dividend history. 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 $3.86 in 2014 to an estimated $6.07 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.22% annual earnings loss 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 Signet Jewelers Ltd. revealed the company was trading below its Graham Number of $61.99. The company pays a dividend of $1.04 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.06, which was below the industry average of 30.22, 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 $-3.32.  (See the full valuation)

Lucara Diamond Corp (TSE:LUC)

Lucara Diamond Corp 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 or growth over the last ten years, and the poor dividend history. 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 $0.08 in 2014 to an estimated $0.22 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.98% 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 Lucara Diamond Corp revealed the company was trading above its Graham Number of $1.96. The company pays a dividend of $0.1 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.45, which was below the industry average of 42.77, 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 $-0.03.  (See the full valuation)

Newell Brands Inc (NWL)

Newell Brands Inc 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 $1.28 in 2014 to an estimated $2.89 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.48% 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 Newell Brands Inc revealed the company was trading below its Graham Number of $41.25. The company pays a dividend of $0.88 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.46, which was below the industry average of 20.37, 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 $-26.44.  (See the full valuation)

Lincoln National Corporation (LNC)

Lincoln National Corporation 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. 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 $4.25 in 2014 to an estimated $7.21 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.03% 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 Lincoln National Corporation revealed the company was trading below its Graham Number of $121.79. The company pays a dividend of $0.87 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 10.56, which was below the industry average of 20.16, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Gilead Sciences, Inc. (GILD)

Gilead Sciences, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PB 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 $3.61 in 2014 to an estimated $7.05 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.33% 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 Gilead Sciences, Inc. revealed the company was trading above its Graham Number of $46.47. The company pays a dividend of $2.08 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.16, which was below the industry average of 28.67, 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 $-13.66.  (See the full valuation)

AT&T Inc. (T)

AT&T Inc. 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 $1.89 in 2014 to an estimated $3.17 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.36% 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 AT&T Inc. revealed the company was trading below its Graham Number of $41.02. The company pays a dividend of $1.97 per share, for a yield of 5.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.23, which was below the industry average of 41.47, 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 $-36.26.  (See the full valuation)

Principal Financial Group Inc (PFG)

Principal Financial Group 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 $2.9 in 2014 to an estimated $5.62 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.21% 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 Principal Financial Group Inc revealed the company was trading below its Graham Number of $74.18. The company pays a dividend of $1.87 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.92, which was below the industry average of 20.16, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Verizon Communications Inc. (VZ)

Verizon Communications Inc. 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 $2.11 in 2014 to an estimated $4.58 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.11% 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 Verizon Communications Inc. revealed the company was trading above its Graham Number of $29.66. The company pays a dividend of $2.34 per share, for a yield of 4.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.71, which was below the industry average of 37.96, 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.  (See the full valuation)

LyondellBasell Industries NV (LYB)

LyondellBasell Industries NV is suitable 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, and the poor dividend history, and the high PB 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 $6.13 in 2014 to an estimated $9.75 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.3% 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 LyondellBasell Industries NV revealed the company was trading above its Graham Number of $66.06. The company pays a dividend of $3.55 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.1, which was below the industry average of 30.04, 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 $-13.94.  (See the full valuation)

Disclaimer:

The author held a long position in Starwood Property Trust Inc (STWD) but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing those holdings within the next 72 hours.  This article is not investment advice and all readers are encouraged to speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not related to the companies mentioned in any capacity.  Please take a moment to read our detailed disclaimer.

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