10 Most Undervalued Companies for the Defensive Investor – October 2015

Updated on

10 most undervalued defensiveThere 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 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. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

Be sure to check out the history of this screen to find out which companies have been selected in the past!

5 Most Undervalued Companies for the Defensive Investor

Graham Holdings Company (GHC)

Graham Holdings Company qualifies for both the Defensive Investor and for the Enterprising Investor. The Defensive Investor is only concerned with the inconsistent dividend history. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $18.06 in 2011 to an estimated $70.23 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.06% 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. (See the full valuation)
clost

FMC Corporation (FMC)

FMC Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor’s only initial concern is the low current ratio while 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 based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.80 in 2011 to an estimated $3.85 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.14% 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)
clost

Yahoo! Inc. (YHOO)

Yahoo! Inc. qualifies for the more conservative Defensive Investor or the Enterprising Investor. Both investor types are only concerned by the lack of dividend payments. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.67 in 2011 to an estimated $2.92 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.96% 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)
clost

Fossil Group Inc. (FOSL)

Fossil Group Inc. qualifies for both the Defensive Investor and for the Enterprising Investor. Both investor types are only concerned by the lack of dividend. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.34 in 2011 to an estimated $5.86 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.71% 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. (See the full valuation)
clost

CF Industries Holdings (CF)

CF Industries Holdings Inc. qualifies for both the Defensive Investor and for the Enterprising Investor. The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor’s only concern is the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.46 in 2011 to an estimated $4.75 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.62% 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)

clost

Twenty-First Century Fox Inc (FOXA)

Twenty-First Century Fox Inc. qualifies for the both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor is only concerned by the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.58 in 2012 to an estimated $2.44 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.68% 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)
clost

Eastman Chemical Company (EMN)

Eastman Chemical Company qualifies for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio, while 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 based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.88 in 2011 to an estimated $5.62 for 2015. 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 well above the price. (See the full valuation)
clost

PACCAR Inc (PCAR)

Paccar Inc. qualifies for the both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only concerned with the insufficient earnings growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.94 in 2011 to an estimated $3.80 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.93% 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)
clost

Qualcomm Inc. (QCOM)

Qualcomm Inc. passes the initial requirements of both the Defensive Investor and the Enterprising Investor. In fact, neither investor type has any initial concerns, which is indicative of the company’s strong financial position. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $1.94 in 2011 to an estimated $3.87 for 2015. This level of demonstrated growth outpaces the market’s implied estimate for annual earnings growth of 3.69% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 20% annually. The ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, but still returns an estimate of intrinsic value well above the current price, indicating that Qualcomm Inc. is undervalued at the present time.(See the full valuation on GuruFocus)
clost

Aflac Inc. (AFL)

Aflac Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong fundamentals. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.92 in 2011 to an estimated $6.07 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.51% 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)
clost

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.

Related posts:

  1. 10 Most Undervalued Companies for the Defensive Investor – September 2015
  2. 10 Most Undervalued Companies for the Defensive Investor – August 2015
  3. 5 Most Undervalued Companies for the Defensive Investor – May 2015

Leave a Comment