I evaluated 49 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 49 companies, only 11 were found to be undervalued or fairly valued and suitable for Defensive and/or Enterprising Investors. Therefore, these 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:
Equity Residential (NYSE: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 $3.25 in 2013 to an estimated $4.49 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.74% 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 above its Graham Number of $24.78. The company pays a dividend of $2.02 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 13.99, which was below the industry average of 31.91, 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 $-27.02. (See the full valuation)
Lydall Inc (NYSE:LDL)
Lydall, Inc. 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 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 $0.77 in 2013 to an estimated $2.25 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.41% 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 Lydall, Inc. revealed the company was trading above its Graham Number of $30.88. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 23.32, which was above the industry average of 22.25. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.12. (See the full valuation)
Multi-Color Corporation (NASDAQ:LABL)
Multi-Color Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, 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 $1.47 in 2013 to an estimated $2.79 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.71% 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 Multi-Color Corporation revealed the company was trading above its Graham Number of $39.96. The company pays a dividend of $0.2 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 25.91, which was above the industry average of 21.9. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.47. (See the full valuation)
Robert Half International Inc (NYSE:RHI)
Robert Half International Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, 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 $1.29 in 2013 to an estimated $2.52 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.27% 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 Robert Half International Inc. revealed the company was trading above its Graham Number of $21.95. The company pays a dividend of $0.88 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 19.03, which was below the industry average of 21.9, 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 $4.6. (See the full valuation)
Synchrony Financial (NYSE: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 $1.74 in 2013 to an estimated $2.8 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.2% 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 above its Graham Number of $34.07. The company pays a dividend of $0.26 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 12.91, which was below the industry average of 21.33, which by some methods of valuation makes it one of the most undervalued stocks in its industry. (See the full valuation).
Valero Energy Corporation (NYSE:VLO)
Valero Energy Corporation (NYSE:VLO) 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 $3.22 in 2013 to an estimated $5.54 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.88% 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 Valero Energy Corporation revealed the company was trading above its Graham Number of $64.46. The company pays a dividend of $2.4 per share, for a yield of 3.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.26, which was below the industry average of 69.19, 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 $-20.15. (See the full valuation)
The Good
The following companies were found to be suitable for the Defensive Investor or Enterprising Investor and Fairly Valued:
Acuity Brands Inc (NYSE:AYI)
Acuity Brands, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.57 in 2013 to an estimated $6.22 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 12.97% 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 Acuity Brands, Inc. revealed the company was trading above its Graham Number of $84.83. The company pays a dividend of $0.52 per share, for a yield of 0.2% Its PEmg (price over earnings per share – ModernGraham) was 34.45, which was above the industry average of 28.49. Finally, the company was trading above its Net Current Asset Value (NCAV) of $2.79. (See the full valuation)
Carlisle Companies Incorporated (NYSE:CSL)
Carlisle Companies, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $3.24 in 2013 to an estimated $4.64 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 7.07% 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 within a margin of safety relative to the price.
At the time of valuation, further research into Carlisle Companies, Inc. revealed the company was trading above its Graham Number of $70.65. The company pays a dividend of $1.3 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 22.65, which was below the industry average of 27.42, 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 $-2.21. (See the full valuation)
Comerica Incorporated (NYSE:CMA)
Comerica Incorporated (NYSE:CMA) 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 high PEmg 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.14 in 2013 to an estimated $3.14 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 7.62% 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 within a margin of safety relative to the price.
At the time of valuation, further research into Comerica Incorporated revealed the company was trading above its Graham Number of $61.17. The company pays a dividend of $0.89 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 23.75, which was above the industry average of 21.43. (See the full valuation)
CSG Systems International Inc (NASDAQ:CSGS)
CSG Systems International, 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 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.29 in 2013 to an estimated $1.91 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 6.23% 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 CSG Systems International, Inc. revealed the company was trading above its Graham Number of $20.47. The company pays a dividend of $0.74 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 20.95, which was below the industry average of 38.13, 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 $-2.45. (See the full valuation)
Sterling Bancorp (NYSE:STL)
Sterling Bancorp is suitable for the Enterprising Investor but not the more conservative Defensive
Investor. The Defensive Investor is concerned with the high PEmg 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.51 in 2013 to an estimated $0.93 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 9.09% 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 within a margin of safety relative to the price.
At the time of valuation, further research into Sterling Bancorp revealed the company was trading above its Graham Number of $20.19. The company pays a dividend of $0.28 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 26.69, which was above the industry average of 21.43. (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; 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.