Copy of defensive low PEThere are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the ten lowest PEmg (price / normalized earnings) companies reviewed by ModernGraham. Each company has been determined to be undervalued and suitable for the Defensive 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.

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Bed Bath & Beyond Inc. (BBBY)

Bed Bath & Beyond Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. 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 $3.63 in 2013 to an estimated $4.91 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.18% 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)

TFI International Inc (TSE:TFII)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1 in 2013 to an estimated $3 for 2017.  This level of demonstrated earnings growth outpaces the market's implied estimate of 0.38% 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 TFI International Inc revealed the company was trading above its Graham Number of $26.97.  The company pays a dividend of $0.7 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share - ModernGraham) was 9.26, which was below the industry average of 31.63, 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 $-20.36.  (See the full valuation)

Gap Inc (GPS)

Gap Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has 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 $1.87 in 2013 to an estimated $2.21 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.94% 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 Gap Inc revealed the company was trading above its Graham Number of $15.43. The company pays a dividend of $0.92 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share - ModernGraham) was 10.37, which was below the industry average of 22.16, 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 $-1.53.  (See the full valuation)

Canadian Western Bank (TSE:CWB)

Canadian Western Bank 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 $2.14 in 2013 to an estimated $2.69 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.1% 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 Western Bank revealed the company was trading below its Graham Number of $36.05. The company pays a dividend of $0.92 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 10.7, 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)

Discover Financial Services (DFS)

Discover Financial Services 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 $3.98 in 2013 to an estimated $5.5 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.03% 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 Discover Financial Services revealed the company was trading above its Graham Number of $62.08. The company pays a dividend of $1.16 per share, for a yield of 1.7% Its PEmg (price over earnings per share - ModernGraham) was 12.56, which was below the industry average of 23.3, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

Urban Outfitters, Inc. (URBN)

Urban Outfitters, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.43 in 2013 to an estimated $1.77 for 2017. This level of demonstrated earnings growth supports 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 Benjamin Graham's formula, returns an estimate of intrinsic value within a margin of safety relative to the price.  (See the full valuation)

URBN charts July 2016

Kroger Co (KR)

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

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.07 in 2014 to an estimated $1.96 for 2018.  This level of demonstrated earnings growth outpaces the market's implied estimate of 1.51% 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 Kroger Co revealed the company was trading above its Graham Number of $18.2.  The company pays a dividend of $0.45 per share, for a yield of 2%  Its PEmg (price over earnings per share - ModernGraham) was 11.52, which was below the industry average of 36.19, 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 $-21.75.  (See the full valuation)

Baxter International Inc (BAX)

Baxter International 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 $3.6 in 2012 to an estimated $5.16 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.31% 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 Baxter International Inc revealed the company was trading below its Graham Number of $56.96. The company pays a dividend of $0.49 per share, for a yield of 1% Its PEmg (price over earnings per share - ModernGraham) was 9.12, which was below the industry average of 32.29, 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 $-0.96.  (See the full valuation)

Twenty-First Century Fox Inc (FOX)

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)

foxa-charts-november-2016

AFLAC Incorporated (AFL)

 

 

AFLAC Incorporated 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 $4.72 in 2012 to an estimated $6.22 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.36% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into AFLAC Incorporated revealed the company was trading below its Graham Number of $87.98. The company pays a dividend of $1.64 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share - ModernGraham) was 11.22, 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)

 

 

 

 

 

 

 

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.