Benjamin Clark

About the Author Benjamin Clark

Benjamin is the founder of ModernGraham.com, a website devoted to the study and modernization of the teachings of Benjamin Graham. Benjamin graduated cum laude with a J.D. and Certificate in Taxation from DePaul University College of Law, and a B.S. in Finance (Honors) from DePaul University College of Commerce.

The 10 Best Stocks For Value Investors This Week

We evaluated 25 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. We 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 25 companies, only 10 were found to be undervalued or fairly valued and suitable for either Defensive or Enterprising Investors.  Here’s a summary of those 10 best stocks for value investors this week. To see a listing and screenings of all the valuations, be sure to sign up to be a premium subscriber!

The Elite

The following companies were found to be suitable for either the Defensive Investor or Enterprising Investor and undervalued:

Amgen

Amgen, Inc. (NASDAQ:AMGN) performs well in the ModernGraham model and is suitable for Enterprising Investors. The Defensive Investor is concerned with the low current ratio, along with the poor PEmg and PB ratios, while the Enterprising Investor has no initial concerns. As a result, all Enterprising 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 valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $4.22 in 2011 to an estimated $7.20 for 2015. This is a strong level of growth and is well above the market’s implied estimate of 6.79% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged nearly 14.1% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (See the full valuation)

Pfizer 

Pfizer Inc. (NYSE:PFE) performs well in the ModernGraham model and is suitable for Enterprising Investors. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, along with the poor PB ratio, while the Enterprising Investor has no initial concerns. As a result, all Enterprising 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 valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.18 in 2011 to an estimated $2.03 for 2015. This is a strong level of growth and is well above the market’s implied estimate of only 4.25% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged nearly 14.4% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (See the full valuation)

Ralph Lauren

Ralph Lauren Corp (NYSE:RL) performs well in the ModernGraham model and is suitable for both Defensive and Enterprising Investors. The Defensive Investor is only concerned with the poor PB ratio, while the Enterprising Investor has no initial concerns. As a result, all Enterprising 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 valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $4.76 in 2011 to an estimated $7.81 for 2015. This is a strong level of growth and is well above the market’s implied estimate of only 4.33% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged nearly 9.6% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (See the full valuation)

T. Rowe Price

T. Rowe Price Group Inc (NASDSAQ:TROW) performs well in the ModernGraham model and is suitable for both Defensive Investors and Enterprising Investors. The Defensive Investor is only concerned with the high PB ratio, while the Enterprising Investor has no initial concerns. 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 valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $2.38 in 2011 to an estimated $4.22 for 2015. This is a strong level of growth and is well above the market’s implied estimate of only 4.99% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged nearly 15.5% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (See the full valuation)

The Good

The following companies were found to be suitable for the Defensive Investor or Enterprising Investor and Fairly Valued:

Accenture

Accenture Plc (NYSE:ACN) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned by the low current ratio, and the high PEmg and PB ratios, while the Enterprising Investor is only concerned with the low current ratio. Therefore, all Enterprising Investors should feel very comfortable proceeding with the next stage of the analysis, which is a determination of an estimate of intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $2.81 in 2011 to an estimated $4.49 for 2015. This level of demonstrated growth is in line with the market’s implied estimate for earnings growth of 6.56% over the next 7-10 years.

The company’s recent earnings history shows an average annual growth in EPSmg of around 7.5%. The ModernGraham valuation model reduces such a rate to a more conservative figure, assuming some slowdown will occur, but still returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating Accenture is fairly valued at the present time. (See the full valuation)

Chubb

Chubb Corp (NYSE:CB) passes the initial requirements of both the Defensive Investor and the Enterprising Investor. In fact, the company passes every requirement of both investor types, which is a rare accomplishment 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 $6.08 in 2011 to an estimated $7.63 for 2015. This is a fairly strong level of demonstrated growth, and supports the market’s implied estimate for annual earnings growth of 2.07% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 5.1% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value within a margin of safety in relation to the current price, indicating that Chubb is fairly valued at the present time. (See the full valuation)

Hormel 

Hormel Foods Corp (NYSE:HRL) qualifies 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, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.43 in 2011 to an estimated $2.16 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 8.7% 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 within a margin of safety relative to the price. (See the full valuation)

Moody’s Corporation

Moody’s Corporation (NYSE:MCO) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned by the high PEmg and PB ratios, while the Enterprising Investor is only concerned with the level of debt relative to the net current assets. Therefore, all Enterprising Investors should feel very comfortable proceeding with the next stage of the analysis, which is a determination of an estimate of intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $2.16 in 2011 to an estimated $4.04 for 2015. This level of demonstrated growth is in line with the market’s implied estimate for earnings growth of 9.07% over the next 7-10 years.

The company’s recent earnings history shows an average annual growth in EPSmg of around 17.38%. The ModernGraham valuation model reduces such a rate to a more conservative figure, assuming some slowdown will occur, but still returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating Moody’s Corporation is fairly valued at the present time. (See the full valuation)

NetApp 

NetApp Inc. (NASDAQ:NTAP) qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short dividend history, and the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.09 in 2011 to an estimated $1.67 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 5.86% 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 below the price.  (See the full valuation)

Xcel Energy 

Xcel Energy Inc (NYSE:XEL) qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is only concerned with the low current ratio, and the Enterprising Investor is willing to overlook concerns about the level of debt because the company passed the more conservative Defensive Investor requirements.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.59 in 2011 to an estimated $1.95 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 4.06% 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)

Don’t be too late to the party – Click Here to see what 4500 Wall Street Analysts say about your stocks.