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10 Most Undervalued Companies For The Defensive Investor – February 2016

10 Most Undervalued Companies For The Defensive Investor – February 2016 by Benjamin Clark, ModernGraham

There 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.

Undervalued companies for the defensive investor – CF Industries Holdings, Inc. (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)

Undervalued Companies For The Defensive Investor

Graham Holdings Co (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)

Undervalued Companies For The Defensive Investor

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)

Undervalued Companies For The Defensive Investor

Yahoo! Inc. (YHOO)

Yahoo! Inc. qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  Both investor types are only initially concerned with the lack of dividends.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.67 in 2011 to an estimated $2.78 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.69% 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)

Undervalued Companies For The Defensive Investor

FMC Corp (FMC)

FMC Corporation qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor has no initial concerns, and 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.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.80 in 2011 to an estimated $3.53 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.74% 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)

Undervalued Companies For The Defensive Investor

Twenty-First Century Fox Inc (FOXA)

Twenty-First Century Fox Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the insufficient earnings stability over the last ten years, and 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.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.58 in 2012 to an estimated $2.43 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.09% 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)

Undervalued Companies For The Defensive Investor

Eastman Chemical Company (EMN)

Eastman Chemical Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor is only initially 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.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.88 in 2011 to an estimated $5.57 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.41% 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)

Undervalued Companies For The Defensive Investor

WestRock Co (WRK)

WestRock Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor’s only initial 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.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.97 in 2012 to an estimated $3.28 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.64% 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)

Undervalued Companies For The Defensive Investor

PACCAR Inc (PCAR)

Paccar Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the insufficient earnings growth over the last ten years while 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.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.94 in 2011 to an estimated $3.76 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.98% 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)

Undervalued Companies For The Defensive Investor

Travelers Companies Inc (TRV)

Travelers Companies Inc. qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  In fact, the company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial condition.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $5.25 in 2011 to an estimated $9.33 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.77% 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)

Undervalued Companies For The Defensive Investor

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.

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