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Canfor Corp Valuation – July 2018 $TSE:CFP

Company Profile (excerpt from Reuters): Canfor Corporation is an integrated forest products company. The Company produces softwood lumber, pulp and paper products, remanufactured lumber products, engineered wood products, wood pellets and energy. Its segments include lumber, and pulp and paper. Its lumber segment includes logging operations, and manufacturing and sale of various grades, widths and lengths of lumber, engineered wood products, wood chips and wood pellets. Its lumber operations also include a finger-joint plant, two glulam plants, a whole-log chipping plant and a trucking division. The Pulp and Paper segment consists of three northern softwood market Kraft pulp mills and the Taylor pulp mill, all of which are owned and operated by Canfor Pulp Products Inc. (CPPI) in British Columbia. Its pulp and paper segment includes purchase of residual fiber, and production and sale of pulp and paper products, including Northern Bleached Softwood Kraft and Bleached Chemi-Thermo Mechanical Pulp, as well as energy revenues.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-CFP – July 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,789,572,834 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.46 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -2278.79% Fail
6. Moderate PEmg Ratio PEmg < 20 13.18 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.70 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.46 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.46 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.18
MG Growth Estimate 15.00%
MG Value $83.88
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $31.59
MG Value based on 0% Growth $18.52
Market Implied Growth Rate 2.34%
Current Price $28.72
% of Intrinsic Value 34.24%

Canfor Corporation 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 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 $0.88 in 2014 to an estimated $2.18 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.34% 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 below its Graham Number of $32.18. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 13.17, which was below the industry average of 20.82, 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 $-0.99.

Canfor Corporation performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.99
Graham Number $32.18
PEmg 13.17
Current Ratio 2.46
PB Ratio 1.70
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,429,500,000
Total Current Liabilities $582,000,000
Long-Term Debt $392,600,000
Total Assets $3,725,100,000
Intangible Assets $752,300,000
Total Liabilities $1,556,400,000
Shares Outstanding (Diluted Average) 128,626,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.42
Dec2017 $2.63
Dec2016 $1.14
Dec2015 $0.18
Dec2014 $1.28
Dec2013 $1.61
Dec2012 $0.18
Dec2011 -$0.40
Dec2010 $0.57
Dec2009 -$0.50
Dec2008 -$2.42
Dec2007 -$2.53
Dec2006 $3.31
Dec2005 $0.67
Dec2004 $3.22
Dec2003 $1.65
Dec2002 $0.07
Dec2001 $0.19
Dec2000 $1.28
Dec1999 $1.66
Dec1998 -$3.49

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.18
Dec2017 $1.49
Dec2016 $0.91
Dec2015 $0.72
Dec2014 $0.88
Dec2013 $0.55
Dec2012 -$0.16
Dec2011 -$0.57
Dec2010 -$0.54
Dec2009 -$0.83
Dec2008 -$0.52
Dec2007 $0.71
Dec2006 $2.15
Dec2005 $1.43
Dec2004 $1.64
Dec2003 $0.89
Dec2002 $0.32

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Canadian Stocks for Intelligent Investors – February 2017
Canfor Corporation Valuation – Initial Coverage $TSE:CFP

Other ModernGraham posts about related companies

Deltic Timber Corp Valuation – Initial Coverage $DEL
First Solar Inc Valuation – February 2017 $FSLR
Innergex Renewable Energy Inc Valuation – Initial Coverage $TSE:INE
Canfor Corporation Valuation – Initial Coverage $TSE:CFP
First Solar Inc. Valuation – November 2015 Update $FSLR
First Solar Inc. Annual Valuation – 2014 $FSLR

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.

Canfor Corporation Valuation – Initial Coverage $TSE:CFP

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Canfor Corporation (TSE:CFP) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Canfor Corporation is a Canada-based integrated forest products company. The Company is engaged in the production of softwood lumber, pulp and paper products, remanufactured lumber products, engineered wood products, wood pellets and energy. The Company operates through two segments: Lumber, and Pulp and Paper. Its Lumber segment includes logging operations, and manufacture and sale of various grades, widths and lengths of lumber, engineered wood products, wood chips and wood pellets. The Company’s Pulp and Paper segment includes purchase of residual fiber, and production and sale of pulp and paper products, including Northern Bleached Softwood Kraft (NBSK) and Bleached Chemi-Thermo Mechanical Pulp (BCTMP), as well as energy production. The Pulp and Paper segment includes its interest of Canfor Pulp Products Inc. (CPPI). The Company’s subsidiaries include Canadian Forest Products Ltd, New South Companies, Inc and Anthony Forest Products Co.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-CFP – December 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $278,791,507 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.71 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -142.39% Fail
6. Moderate PEmg Ratio PEmg < 20 20.68 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.57 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.71 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.04 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $0.81
MG Growth Estimate 15.00%
MG Value $31.34
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $11.80
MG Value based on 0% Growth $6.92
Market Implied Growth Rate 6.09%
Current Price $16.83
% of Intrinsic Value 53.70%

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.

Cornerstone Progressive Return Fund performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$6.50
Graham Number $14.31
PEmg 20.68
Current Ratio 1.71
PB Ratio 1.57
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

 

 

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/16/2016
Total Current Assets $1,019,200,000
Total Current Liabilities $594,900,000
Long-Term Debt $441,600,000
Total Assets $3,304,400,000
Intangible Assets $767,900,000
Total Liabilities $1,882,800,000
Shares Outstanding (Diluted Average) 132,805,000

Earnings Per Share History

Next Fiscal Year Estimate $0.85
Dec2015 $0.18
Dec2014 $1.28
Dec2013 $1.61
Dec2012 $0.18
Dec2011 -$0.40
Dec2010 $0.57
Dec2009 -$0.50
Dec2008 -$2.42
Dec2007 -$2.53
Dec2006 $3.31
Dec2005 $0.67
Dec2004 $3.22
Dec2003 $1.65
Dec2002 $0.07
Dec2001 $0.19
Dec2000 $1.28
Dec1999 $1.66
Dec1998 -$3.49
Dec1997 -$0.56
Dec1996 -$0.97

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.81
Dec2015 $0.72
Dec2014 $0.88
Dec2013 $0.55
Dec2012 -$0.16
Dec2011 -$0.57
Dec2010 -$0.54
Dec2009 -$0.83
Dec2008 -$0.52
Dec2007 $0.71
Dec2006 $2.15
Dec2005 $1.43
Dec2004 $1.64
Dec2003 $0.89
Dec2002 $0.32
Dec2001 $0.23
Dec2000 $0.03

Recommended Reading:

Other ModernGraham posts about the company

None.  This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

First Solar Inc. Valuation – November 2015 Update $FSLR
First Solar Inc. Annual Valuation – 2014 $FSLR

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.

Best Stocks Below Their Graham Number – February 2019

One popular approach to investing based on Benjamin Graham’s methods is to use the so-called “Graham Number.”  There are some important differences between the Graham Number and the Graham Formula, but using the Graham Number is definitely useful even if the investor only uses it as a screening tactic.

I’ve selected the best companies reviewed by ModernGraham which trade below their Graham Number.  The companies selected all are found suitable for the Defensive Investor and/or the Enterprising Investor, and have been valued as undervalued based on the ModernGraham valuation model.  The full list can be found in the latest issue of my monthly Stocks & Screens report; however, to cut down on the length of the post, I’ve selected the ten which trade furthest below their Graham Number.

Defensive Investors are defined as investors who 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. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

These companies have demonstrated strong financial positions through passing the rigorous requirements of the ModernGraham Investor and show potential for capital growth based on their current price in relation to intrinsic value.  As such, these graham number stocks may be a great investment if they prove to be suitable for your portfolio after your own additional research.

GameStop Corp. (GME)

GameStop Corp. 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. 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 $2.03 in 2015 to an estimated $2.45 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.3% 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 GameStop Corp. revealed the company was trading below its Graham Number of $37.34. The company pays a dividend of $1.52 per share, for a yield of 10.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 5.91, which was below the industry average of 37.1, 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 $-2.68.

GameStop Corp. fares extremely well in the ModernGraham grading system, scoring an A-.  (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.

Signet Jewelers Ltd. fares extremely well in the ModernGraham grading system, scoring an A-.  (See the full valuation)

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 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 $0.88 in 2014 to an estimated $2.18 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.34% 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 below its Graham Number of $32.18. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 13.17, which was below the industry average of 20.82, 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 $-0.99.

Canfor Corporation performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

CNO Financial Group Inc (CNO)

CNO Financial Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with 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 $1.01 in 2014 to an estimated $1.56 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.89% 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 CNO Financial Group Inc revealed the company was trading below its Graham Number of $36.61. The company pays a dividend of $0.35 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 14.28, which was below the industry average of 36.08, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

CNO Financial Group Inc performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

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.

Bed Bath & Beyond Inc. performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Prudential Financial Inc (PRU)

Prudential Financial 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. 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 $2.17 in 2014 to an estimated $12.54 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.45% 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.

At the time of valuation, further research into Prudential Financial Inc revealed the company was trading below its Graham Number of $185.87. The company pays a dividend of $3 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.6, which was below the industry average of 30.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Prudential Financial Inc fares extremely well in the ModernGraham grading system, scoring an A-.  (See the full valuation)

Linamar Corporation (TSE:LNR)

Linamar Corporation 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 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 $3.32 in 2014 to an estimated $8.11 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.63% 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 Linamar Corporation revealed the company was trading below its Graham Number of $99.21. The company pays a dividend of $0.48 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 7.25, which was below the industry average of 26.58, 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 $-18.85.

Linamar Corporation performs fairly well in the ModernGraham grading system, scoring a B+.  (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 $7.01 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.58% 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.

At the time of valuation, further research into Lincoln National Corporation revealed the company was trading below its Graham Number of $117.31. The company pays a dividend of $0.87 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 7.33, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Lincoln National Corporation performs fairly well in the ModernGraham grading system, scoring a B+.  (See the full valuation)

Unum Group (UNM)

Unum Group 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 $2.71 in 2015 to an estimated $4.02 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.17% 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 Unum Group revealed the company was trading below its Graham Number of $68.83. The company pays a dividend of $0.98 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.85, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Unum Group fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

Invesco Ltd. (IVZ)

Invesco Ltd. 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 $1.89 in 2014 to an estimated $2.39 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.65% 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.

At the time of valuation, further research into Invesco Ltd. revealed the company was trading below its Graham Number of $33.89. The company pays a dividend of $1.15 per share, for a yield of 6.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.21, which was below the industry average of 18, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Invesco Ltd. fares extremely well in the ModernGraham grading system, scoring an A.  (See the full valuation)

Disclaimer: 

The author held a long position in IVZ but did not hold a position in any other company mentioned in this article at the time of publication and had no specific intention of changing that position within the next 72 hours; however, the author does intend to make some trades in the next 72 hours and may select a company from this list.  See my current holdings here.  This article is not investment advice and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions.  Please also read our full disclaimer.

First Solar Inc Valuation – August 2018 $FSLR

Company Profile (excerpt from Reuters): First Solar, Inc., incorporated on May 15, 2003, is a provider of photovoltaic (PV) solar energy solutions. The Company designs, manufactures and sells PV solar modules with a thin-film semiconductor technology. The Company also develops, designs, constructs and sells PV solar power systems that primarily use the modules it manufactures. It operates through two segments: components and systems. The components segment is engaged in the design, manufacture and sale of cadmium telluride (CdTe) solar modules, which convert sunlight into electricity. The systems segment includes the development, construction, operation and maintenance of PV solar power systems, which primarily use its solar modules. In addition, the Company provides operations and maintenance (O&M) services to system owners that use solar modules manufactured by it or by third-party manufacturers.

Downloadable PDF version of this valuation:

ModernGraham Valuation of FSLR – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,423,736,443 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.89 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -130.85% Fail
6. Moderate PEmg Ratio PEmg < 20 316.74 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.08 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.89 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.14 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.17
MG Growth Estimate -4.25%
MG Value $19.77
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $2.42
MG Value based on 0% Growth $1.42
Market Implied Growth Rate 154.12%
Current Price $52.79
% of Intrinsic Value 267.05%

First Solar, Inc. does not satisfy the requirements of either the Enterprising Investor or 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 PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.51 in 2014 to an estimated $0.17 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 154.12% 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 below the price.

At the time of valuation, further research into First Solar, Inc. revealed the company was trading above its Graham Number of $34.6. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 316.74, which was above the industry average of 177.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $19.77.

First Solar, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $19.77
Graham Number $34.60
PEmg 316.74
Current Ratio 4.89
PB Ratio 1.08
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $3,986,040,000
Total Current Liabilities $815,412,000
Long-Term Debt $448,554,000
Total Assets $7,025,692,000
Intangible Assets $91,557,000
Total Liabilities $1,914,864,000
Shares Outstanding (Diluted Average) 104,776,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.09
Dec2017 -$1.59
Dec2016 -$4.05
Dec2015 $5.83
Dec2014 $3.90
Dec2013 $3.67
Dec2012 -$1.11
Dec2011 -$0.46
Dec2010 $7.68
Dec2009 $7.53
Dec2008 $4.24
Dec2007 $2.03
Dec2006 $0.07
Dec2005 -$0.13
Dec2004 -$0.39
Dec2003 -$0.78

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.17
Dec2017 $0.32
Dec2016 $1.40
Dec2015 $3.54
Dec2014 $2.51
Dec2013 $2.36
Dec2012 $2.33
Dec2011 $4.10
Dec2010 $5.69
Dec2009 $4.05
Dec2008 $1.93
Dec2007 $0.57
Dec2006 -$0.19
Dec2005 -$0.30
Dec2004 -$0.34
Dec2003 -$0.26

Recommended Reading:

Other ModernGraham posts about the company

First Solar Inc Valuation – February 2017 $FSLR
First Solar Inc. Valuation – November 2015 Update $FSLR
28 Companies in the Spotlight This Week – 11/1/14
First Solar Inc. Annual Valuation – 2014 $FSLR

Other ModernGraham posts about related companies

Canfor Corp Valuation – July 2018 $TSE:CFP
Deltic Timber Corp Valuation – Initial Coverage $DEL
First Solar Inc Valuation – February 2017 $FSLR
Innergex Renewable Energy Inc Valuation – Initial Coverage $TSE:INE
Canfor Corporation Valuation – Initial Coverage $TSE:CFP
First Solar Inc. Valuation – November 2015 Update $FSLR
First Solar Inc. Annual Valuation – 2014 $FSLR

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.

10 Undervalued Stocks for the Enterprising Investor – August 2018

Copy of 10 most undervalued enterprisingThere are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the ten most undervalued companies reviewed by ModernGraham. Each company has been determined to be suitable for the Enterprising Investor according to the ModernGraham approach.

Defensive Investors are defined as investors who 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. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

Prudential Financial Inc (PRU)

Prudential Financial 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. 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 $2.17 in 2014 to an estimated $12.54 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.45% 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.

At the time of valuation, further research into Prudential Financial Inc revealed the company was trading below its Graham Number of $185.87. The company pays a dividend of $3 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.6, which was below the industry average of 30.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (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)

Synchrony Financial (SYF)

Synchrony Financial 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 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 $0.93 in 2014 to an estimated $2.8 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2% 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 Synchrony Financial revealed the company was trading below its Graham Number of $36.58. The company pays a dividend of $0.56 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 12.5, which was below the industry average of 22.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Tyson Foods, Inc. (TSN)

Tyson Foods, 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 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 $2.13 in 2014 to an estimated $5.52 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.07% 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 Tyson Foods, Inc. revealed the company was trading below its Graham Number of $73.4. The company pays a dividend of $0.9 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 12.65, which was below the industry average of 24.35, 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 $-26.88.  (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)

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)

Sun Life Financial Inc (TSE:SLF)

Sun Life Financial 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. 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 $1.96 in 2014 to an estimated $3.98 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.43% 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 Sun Life Financial Inc revealed the company was trading below its Graham Number of $62.47. The company pays a dividend of $1.75 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 13.35, which was below the industry average of 36.08, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

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 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 $0.88 in 2014 to an estimated $2.18 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.34% 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 below its Graham Number of $32.18. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 13.17, which was below the industry average of 20.82, 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 $-0.99.  (See the full valuation)

Intertape Polymer Group (TSE:ITP)

Intertape Polymer Group 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 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 $0.56 in 2014 to an estimated $1.27 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.53% 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 Intertape Polymer Group revealed the company was trading above its Graham Number of $12.89. The company pays a dividend of $0.72 per share, for a yield of 4.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.56, which was below the industry average of 21.34, 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 $-4.04.  (See the full valuation)

Kelly Services, Inc. Class A (KELYA)

Kelly Services, Inc. Class A 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. The Enterprising Investor is only concerned with the low current ratio. 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 $1.15 in 2014 to an estimated $2.06 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.66% 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 Kelly Services, Inc. Class A revealed the company was trading below its Graham Number of $38.61. The company pays a dividend of $0.3 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 11.83, which was below the industry average of 33.97, 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 $3.92.  (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 and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions.  Please also read our full disclaimer.

5 Undervalued Stocks for Value Investors with a High Beta – July 2018

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the five undervalued companies for value investors reviewed by ModernGraham with the highest beta.

A company’s beta indicates the correlation at which its price moves in relation to the market.  A beta greater than 1 indicates a company is more volatile than the market.

Each company has been determined to be suitable for either the Defensive Investor or the Enterprising Investor according to the ModernGraham approach. Defensive Investors are defined as investors who 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.

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)

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 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 $0.88 in 2014 to an estimated $2.18 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.34% 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 below its Graham Number of $32.18. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 13.17, which was below the industry average of 20.82, 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 $-0.99.  (See the full valuation)

Ameriprise Financial, Inc. (AMP)

Ameriprise Financial, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with 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 $6.29 in 2014 to an estimated $10.48 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.33% 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 Ameriprise Financial, Inc. revealed the company was trading above its Graham Number of $114.12. The company pays a dividend of $3.24 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 15.16, which was below the industry average of 25.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Packaging Corp Of America (PKG)

Packaging Corp Of America qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with 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 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 $3.21 in 2014 to an estimated $6.11 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.98% 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 Packaging Corp Of America revealed the company was trading above its Graham Number of $61.36. The company pays a dividend of $2.52 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.45, which was below the industry average of 24.6, 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 $-22.41.  (See the full valuation)

Alliance Data Systems Corporation (ADS)

Alliance Data Systems Corporation 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 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 $6.88 in 2014 to an estimated $14.23 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.11% 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 Alliance Data Systems Corporation revealed the company was trading above its Graham Number of $128.46. The company pays a dividend of $2.08 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 14.72, which was below the industry average of 33.86, 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 $-70.39.  (See the full valuation)

What do you think?  Are these companies a good value for Defensive Investors and 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 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.

Deltic Timber Corp Valuation – Initial Coverage $DEL

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Deltic Timber Corp (DEL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Deltic Timber Corporation is a vertically integrated natural resources company. The Company is engaged in the growing and harvesting of timber and the manufacturing and marketing of lumber and medium density fiberboard (MDF). It operates through four segments: Woodlands, which manages all aspects of the Company’s timberlands; Manufacturing, which consists of its approximately two sawmills that manufacture a range of softwood lumber products and the Del-Tin Fiber plant that produces MDF; Real Estate, which includes the Company’s four real estate developments and a related country club operation, and Corporate. It is also engaged in real estate development in central Arkansas. As of December 31, 2016, it developed and operated its own seed orchard. Its sawmills are located at Ola in central Arkansas and at Waldo in south Arkansas. It is engaged in developing the Chenal Valley, which is an upscale planned community, with approximately 4,300 acres of residential and commercial properties.

DEL Chart

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of DEL – August 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $844,434,262 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.48 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 1.22% Fail
6. Moderate PEmg Ratio PEmg < 20 84.71 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.33 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 23.92 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg $0.82
MG Growth Estimate -3.55%
MG Value $1.14
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $11.86
MG Value based on 0% Growth $6.95
Market Implied Growth Rate 38.10%
Current Price $69.29
% of Intrinsic Value 6086.16%

Deltic Timber Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the  small size, low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years.  As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.07 in 2013 to an estimated $0.82 for 2017.  This level of demonstrated earnings growth does not support the market’s implied estimate of 38.1% 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 below the price.

At the time of valuation, further research into Deltic Timber Corp revealed the company was trading above its Graham Number of $17.89.  The company pays a dividend of $0.4 per share, for a yield of 0.6%  Its PEmg (price over earnings per share – ModernGraham) was 84.71, which was above the industry average of 14.59.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-22.53.

Deltic Timber Corp scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$22.53
Graham Number $17.89
PEmg 84.71
Current Ratio 1.48
PB Ratio 3.33
Current Dividend $0.40
Dividend Yield 0.58%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $31,092,000
Total Current Liabilities $21,022,000
Long-Term Debt $240,846,000
Total Assets $556,147,000
Intangible Assets $0
Total Liabilities $303,980,000
Shares Outstanding (Diluted Average) 12,111,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.69
Dec2016 $0.76
Dec2015 $0.21
Dec2014 $1.55
Dec2013 $2.05
Dec2012 $0.73
Dec2011 $0.21
Dec2010 $0.99
Dec2009 $0.30
Dec2008 $0.35
Dec2007 $0.89
Dec2006 $0.89
Dec2005 $1.17
Dec2004 $0.91
Dec2003 $0.69
Dec2002 -$1.33
Dec2001 $0.65
Dec2000 $0.93
Dec1999 $0.69
Dec1998 $0.48
Dec1997 $1.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.82
Dec2016 $0.94
Dec2015 $1.00
Dec2014 $1.30
Dec2013 $1.07
Dec2012 $0.56
Dec2011 $0.50
Dec2010 $0.66
Dec2009 $0.57
Dec2008 $0.75
Dec2007 $0.94
Dec2006 $0.79
Dec2005 $0.64
Dec2004 $0.37
Dec2003 $0.18
Dec2002 $0.04
Dec2001 $0.75

Recommended Reading:

Other ModernGraham posts about the company

None.  This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

First Solar Inc Valuation – February 2017 $FSLR
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First Solar Inc. Valuation – November 2015 Update $FSLR
First Solar Inc. Annual Valuation – 2014 $FSLR

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.

5 Undervalued Canadian Stocks for Intelligent Investors – February 2017

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the most undervalued Canadian companies reviewed by ModernGraham. Each company has been determined to be suitable for the Defensive Investor and/or the Enterprising Investor according to the ModernGraham approach.

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. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

Celestica Inc (TSE:CLS)

Celestica Inc 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. 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 $0.29 in 2012 to an estimated $0.98 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4% 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 Celestica Inc revealed the company was trading below its Graham Number of $20.71. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 16.51, 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 $6.81.  (See the full valuation)

Intertape Polymer Group (TSE:ITP)

Intertape Polymer Group 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, 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 $-0.18 in 2012 to an estimated $1.17 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.91% 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 Intertape Polymer Group revealed the company was trading above its Graham Number of $13.53. The company pays a dividend of $0.7 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.32, which was below the industry average of 28.3, 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 $-1.93.  (See the full valuation)

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)

Stella-Jones Inc (TSE:SJ)

Stella-Jones Inc 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 Undervalued after growing its EPSmg (normalized earnings) from $0.84 in 2012 to an estimated $1.9 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.88% 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 Stella-Jones Inc revealed the company was trading above its Graham Number of $27.89. The company pays a dividend of $0.38 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 22.26, 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 $2.03.  (See the full valuation)

Canadian Imperial Bank of Commerce (TSE:CM)

Canadian Imperial Bank of Commerce 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 $7.07 in 2013 to an estimated $9.62 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.5% 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 Canadian Imperial Bank of Commerce revealed the company was trading below its Graham Number of $114.08. The company pays a dividend of $4.75 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 11.5, which was below the industry average of 21.43, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

What do you think?  Are these companies a good value for Defensive 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 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.  This article first appeared on ModernGraham.

Best Stocks Below Their Graham Number – January 2017

Graham Number Stocks

One popular approach to investing based on Benjamin Graham’s methods is to use the so-called “Graham Number.”  There are some important differences between the Graham Number and the Graham Formula, but using the Graham Number is definitely useful even if the investor only uses it as a screening tactic.

I’ve selected the best companies reviewed by ModernGraham which trade below their Graham Number.  The companies selected all are found suitable for the Defensive Investor and/or the Enterprising Investor, and have been valued as undervalued based on the ModernGraham valuation model.  Further, the overall screen found 30 companies meeting these criteria (out of the 660+ companies covered by ModernGraham), and the full list can be found near the end of this article; however, to cut down on the length of the post, I’ve selected the ten which trade furthest below their Graham Number.

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. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

These companies have demonstrated strong financial positions through passing the rigorous requirements of the ModernGraham Investor and show potential for capital growth based on their current price in relation to intrinsic value.  As such, these graham number stocks may be a great investment if they prove to be suitable for your portfolio after your own additional research.

Seneca Foods Corp (SENEA)

Seneca Foods Corp 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. 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 $1.73 in 2012 to an estimated $2.72 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.19% 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 Seneca Foods Corp revealed the company was trading below its Graham Number of $69.2. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 14.87, 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 $16.89.  (See the full valuation)

Citigroup Inc (C)

Citigroup Inc 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 $-2.31 in 2012 to an estimated $4.1 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.16% 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.  (See the full valuation)

C charts July 2016

Equity Residential (EQR)

Equity Residential 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 $2.15 in 2012 to an estimated $5.79 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.39% 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 Equity Residential revealed the company was trading below its Graham Number of $90.07. The company pays a dividend of $2.11 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 11.29, 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 $-24.85.  (See the full valuation)

Aspen Insurance Holdings Limited (AHL)

Aspen Insurance Holdings Limited 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. 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 $2.19 in 2012 to an estimated $4.51 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.7% 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 Aspen Insurance Holdings Limited revealed the company was trading below its Graham Number of $82.44. The company pays a dividend of $0.86 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 11.91, 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)

Navient Corp (NAVI)

Navient Corp 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 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 $0.63 in 2012 to an estimated $2.39 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.25% 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.

At the time of valuation, further research into Navient Corp revealed the company was trading below its Graham Number of $21.98. The company pays a dividend of $0.64 per share, for a yield of 4.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 6.01, which was below the industry average of 19.87, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

NAVI charts August 2016

Metlife Inc (MET)

Metlife 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. 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 $2.37 in 2012 to an estimated $4.04 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.75% 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 Metlife Inc revealed the company was trading below its Graham Number of $78.35. The company pays a dividend of $1.55 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.01, 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)

Capital One Financial Corp. (COF)

Capital One Financial Corp. 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 $5.15 in 2012 to an estimated $7.13 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.05% 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.  (See the full valuation)

COF charts July 2016

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 $2.04 in 2012 to an estimated $5.16 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.12% 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.  (See the full valuation)

LNC charts May 2016

CNO Financial Group Inc (CNO)

CNO Financial Group Inc 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 $0.43 in 2012 to an estimated $1.1 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.55% 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 CNO Financial Group Inc revealed the company was trading below its Graham Number of $24.73. The company pays a dividend of $0.3 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 17.6, which was below the industry average of 18.78, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

American International Group Inc (AIG)

American International Group Inc 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 $-56.58 in 2012 to an estimated $3.64 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.83% 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.

At the time of valuation, further research into American International Group Inc revealed the company was trading below its Graham Number of $82.15. The company pays a dividend of $1.2 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 16.16, 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)

AIG charts August 2016

The Full List

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Clicking on the company name will take you to the company’s latest valuation.  For the investor type, a “D” indicates the company is suitable for the Defensive Investor, an “E” indicates the company is suitable for the Enterprising Investor, and an “S” indicates the company is considered speculative at this time.

Ticker Name with Link Investor Type Latest Valuation Date MG Value Recent Price Price as a percent of Value PEmg Ratio Div. Yield Graham Number
AFL AFLAC Incorporated D 12/19/2016 $112.32 $70.35 62.63% 11.31 2.33% $87.98
AHL Aspen Insurance Holdings Limited E 12/13/2016 $173.48 $56.35 32.48% 12.49 1.53% $82.44
AIG American International Group Inc E 8/25/2016 $140.01 $64.89 46.35% 17.83 1.85% $82.15
ARW Arrow Electronics, Inc. E 7/3/2016 $124.11 $72.88 58.72% 13.86 0.00% $81.27
BAC Bank of America Corp E 7/14/2016 $35.60 $22.95 64.47% 24.95 0.87% $23.92
BAX Baxter International Inc D 1/28/2017 $111.31 $46.90 42.13% 9.09 1.04% $56.96
BBBY Bed Bath & Beyond Inc. D 6/14/2016 $93.73 $40.00 42.68% 8.15 0.00% $41.96
BK Bank of New York Mellon Corp E 1/7/2017 $77.99 $44.67 57.28% 17.59 1.57% $48.91
C Citigroup Inc E 7/19/2016 $157.95 $56.61 35.84% 13.81 0.35% $85.07
CNO CNO Financial Group Inc E 1/28/2017 $42.30 $19.26 45.53% 17.51 1.56% $24.73
COF Capital One Financial Corp. E 7/6/2016 $142.36 $88.81 62.38% 12.46 1.80% $122.14
DHI D.R. Horton, Inc. E 1/11/2017 $70.21 $30.71 43.74% 14.09 1.04% $32.39
EQR Equity Residential D 8/21/2016 $223.04 $60.70 27.21% 10.48 3.48% $90.07
FOSL Fossil Group Inc E 8/25/2016 $40.21 $24.90 61.92% 5.71 0.00% $25.49
IVZ Invesco Ltd. D 7/24/2016 $60.45 $29.22 48.34% 13.59 3.70% $30.20
LEN Lennar Corporation E 11/19/2016 $125.38 $45.46 36.26% 13.94 0.35% $49.83
LNC Lincoln National Corporation E 5/20/2016 $198.66 $68.49 34.48% 13.27 1.61% $89.07
MET Metlife Inc E 12/13/2016 $119.73 $54.90 45.85% 13.59 2.82% $78.35
MNST Monster Beverage Corporation E 7/27/2016 $112.75 $42.43 37.63% 14.48 0.00% $45.24
NAVI Navient Corp E 8/31/2016 $92.14 $15.11 16.40% 6.32 4.24% $21.98
PHM PulteGroup, Inc. E 7/18/2016 $79.18 $21.39 27.01% 10.38 1.59% $21.69
PVH PVH Corp D 1/13/2017 $146.17 $92.28 63.13% 16.10 0.16% $95.06
RF Regions Financial Corp E 6/27/2016 $29.52 $14.45 48.95% 18.77 1.66% $14.93
SENEA Seneca Foods Corp E 12/22/2016 $69.62 $35.50 50.99% 13.05 0.00% $69.20
STI SunTrust Banks, Inc. E 8/25/2016 $126.84 $57.27 45.15% 17.41 1.68% $59.54
STWD Starwood Property Trust, Inc. E 8/25/2016 $57.61 $22.29 38.69% 11.26 8.61% $27.64
TRV Travelers Companies Inc D 12/1/2016 $320.65 $117.51 36.65% 11.91 1.66% $134.38
TSE:CFP Canfor Corporation E 12/7/2016 $31.34 $14.25 45.47% 17.59 0.00% $14.31
TSE:CLS Celestica Inc E 1/11/2017 $37.85 $17.88 47.24% 18.24 0.00% $20.71
TSE:CM Canadian Imperial Bank of Commerce E 1/12/2017 $185.80 $112.25 60.41% 11.67 4.23% $114.08

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To view the MG Value and PEmg information,  you must be logged in as a premium member.  Clicking on the company name will take you to the company’s latest valuation.

For the investor type, a “D” indicates the company is suitable for the Defensive Investor, an “E” indicates the company is suitable for the Enterprising Investor, and an “S” indicates the company is considered speculative at this time.

Ticker Name with Link Investor Type Latest Valuation Date MG Value Recent Price Price as a percent of Value PEmg Ratio Div. Yield Graham Number
AFL AFLAC Incorporated D 12/19/2016 $70.35 2.33% $87.98
AHL Aspen Insurance Holdings Limited E 12/13/2016 $56.35 1.53% $82.44
AIG American International Group Inc E 8/25/2016 $64.89 1.85% $82.15
ARW Arrow Electronics, Inc. E 7/3/2016 $72.88 0.00% $81.27
BAC Bank of America Corp E 7/14/2016 $22.95 0.87% $23.92
BAX Baxter International Inc D 1/28/2017 $46.90 1.04% $56.96
BBBY Bed Bath & Beyond Inc. D 6/14/2016 $40.00 0.00% $41.96
BK Bank of New York Mellon Corp E 1/7/2017 $44.67 1.57% $48.91
C Citigroup Inc E 7/19/2016 $56.61 0.35% $85.07
CNO CNO Financial Group Inc E 1/28/2017 $19.26 1.56% $24.73
COF Capital One Financial Corp. E 7/6/2016 $88.81 1.80% $122.14
DHI D.R. Horton, Inc. E 1/11/2017 $30.71 1.04% $32.39
EQR Equity Residential D 8/21/2016 $60.70 3.48% $90.07
FOSL Fossil Group Inc E 8/25/2016 $24.90 0.00% $25.49
IVZ Invesco Ltd. D 7/24/2016 $29.22 3.70% $30.20
LEN Lennar Corporation E 11/19/2016 $45.46 0.35% $49.83
LNC Lincoln National Corporation E 5/20/2016 $68.49 1.61% $89.07
MET Metlife Inc E 12/13/2016 $54.90 2.82% $78.35
MNST Monster Beverage Corporation E 7/27/2016 $42.43 0.00% $45.24
NAVI Navient Corp E 8/31/2016 $15.11 4.24% $21.98
PHM PulteGroup, Inc. E 7/18/2016 $21.39 1.59% $21.69
PVH PVH Corp D 1/13/2017 $92.28 0.16% $95.06
RF Regions Financial Corp E 6/27/2016 $14.45 1.66% $14.93
SENEA Seneca Foods Corp E 12/22/2016 $35.50 0.00% $69.20
STI SunTrust Banks, Inc. E 8/25/2016 $57.27 1.68% $59.54
STWD Starwood Property Trust, Inc. E 8/25/2016 $22.29 8.61% $27.64
TRV Travelers Companies Inc D 12/1/2016 $117.51 1.66% $134.38
TSE:CFP Canfor Corporation E 12/7/2016 $14.25 0.00% $14.31
TSE:CLS Celestica Inc E 1/11/2017 $17.88 0.00% $20.71
TSE:CM Canadian Imperial Bank of Commerce E 1/12/2017 $112.25 4.23% $114.08

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Disclaimer: 

The author held a long position in Invesco Ltd (IVZ) and Starwood Property Trust (STWD) but did not hold a position in any other company mentioned in this article at the time of publication and had no specific intention of changing that position within the next 72 hours; however, the author does intend to make some trades in the next 72 hours and may select a company from this list.  See my current holdings here.  This article is not investment advice and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions.  Please also read our full disclaimer.

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.

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