14 Best Undervalued Stocks of the Week
I evaluated 36 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 36 companies, only 14 were found to be undervalued or fairly valued and suitable for either Defensive or Enterprising Investors. Therefore, these 14 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:
Aetna
Aetna Inc. (NYSE:AET) 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 $ 4.4 in 2012 to an estimated $ 6.61 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.47% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on Graham’s formula, returns an estimate of intrinsic value above the price. (Read the full valuation)
Dollar General
Dollar General Corp. (NYSE:DG) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last 10 years, the poor dividend history and the high PEmg and price-book (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 from $ 2.07 in 2013 to an estimated $ 3.9 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.7% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Dollar General revealed the company was trading above its Graham Number of $ 44.12. The company pays a dividend of 91 cents per share for a yield of 1%. Its PEmg was 23.89, below the industry average of 49.91, 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 $ -8.54. (Read the full valuation)
Hanesbrands
Hanesbrands Inc. (NYSE:HBI) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history and the 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 from 46 cents in 2012 to an estimated $ 1.16 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.71% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Hanesbrands revealed the company was trading above its Graham Number of $ 10.1. The company pays a dividend of 42 cents per share for a yield of 1.7%. Its PEmg was 21.93, below the industry average of 26.26, 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 $ -5.05. (Read the full valuation)
MetLife
MetLife Inc. (NYSE:MET) 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 10 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 from $ 2.54 in 2012 to an estimated $ 4.31 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.53% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on Graham’s formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Metlife revealed the company was trading below its Graham Number of $ 86.55. The company pays a dividend of $ 1.53 per share for a yield of 3.7%, putting it among the best dividend-paying stocks today. Its PEmg was 9.56, below the industry average of 16.56, which by some methods of valuation makes it one of the most undervalued stocks in its industry. (Read the full valuation)
Scripps Networks
Scripps Networks (NASDAQ:SNI) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last 10 years, the poor dividend history and the high PB ratio. 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 from $ 2.88 in 2012 to an estimated $ 4.41 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.23% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on Graham’s formula, returns an estimate of intrinsic value above the price. (Read the full valuation)
Seagate Technology
Seagate Technology PLC (NASDAQ:STX) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last 10 years and the poor dividend history. 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 from $ 2.39 in 2012 to an estimated $ 3.74 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.03% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on Graham’s formula, returns an estimate of intrinsic value above the price. (Read the full valuation)
Twenty-First Century Fox
Twenty-First Century Fox Inc. (NASDAQ:FOXA) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and insufficient earnings stability over the last 10 years. 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 from 58 cents in 2012 to an estimated $ 2.37 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.14% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the 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 revealed the company was trading above its Graham Number of $ 15.97. The company pays a dividend of 30 cents per share for a yield of 1.2%. Its PEmg was 10.78, 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. (Read the full valuation)
WestRock
WestRock Co. (WRK) 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 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 from $ 1.97 in 2012 to an estimated $ 3.02 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.98% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into WestRock revealed the company was trading below its Graham Number of $ 48.57. The company pays a dividend of $ 1.45 per share for a yield of 3.3%, putting it among the best dividend-paying stocks today. Its PEmg was 14.46, below the industry average of 53.08, 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 $ -38.4. (Read the full valuation)
XL Group
XL Group Ltd. (XL) 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 10 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 from -1 cent in 2012 to an estimated $ 2.21 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.6% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on Graham’s formula, returns an estimate of intrinsic value above the price. (Read the full valuation)
The good
The following companies were found to be suitable for the Defensive Investor or Enterprising Investor and fairly valued:
Cerner Corporation
Cerner Corporation (NASDAQ:CERN) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with 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 fairly valued after growing its EPSmg from 87 cents in 2012 to an estimated $ 1.71 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 13.86% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the 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 Cerner Corporation revealed the company was trading above its Graham Number of $ 24.52. The company does not pay a dividend. Its PEmg was 36.23, below the industry average of 40.07, 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 15 cents. (Read the full valuation)
CSX Corporation
CSX Corporation (NASDAQ:CSX) 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 fairly valued after growing its EPSmg from $ 1.52 in 2012 to an estimated $ 1.84 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 3.35% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the 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 CSX Corporation revealed the company was trading above its Graham Number of $ 21.49. The company pays a dividend of 72 cents per share for a yield of 2.6%, putting it among the best dividend-paying stocks today. Its PEmg was 15.2, below the industry average of 18.13, 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 $ -21.75. (Read the full valuation)
Rockwell Automation
Rockwell Automation Inc. (NYSE:ROK) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last 10 years 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 from $ 4.1 in 2012 to an estimated $ 5.71 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 5.77% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (Read the full valuation)
Roper Technologies
Roper Technologies Inc. (NYSE:ROP) 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 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 fairly valued after growing its EPSmg from $ 3.99 in 2012 to an estimated $ 6.31 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 9.25% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (Read the full valuation)
VF Corp.
VF Corp. (NYSE:VFC) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and 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 from $ 1.83 in 2012 to an estimated $ 2.72 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 7.2% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (Read the full valuation)
