Monday , 20 August 2018

5 Undervalued Stocks For the Defensive Or Enterprising Investor

I evaluated a lot of different companies this week to determine whether theyinvesting-7were suitable for Defensive Investors…or Enterprising Investors…[and] 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. [I came up with the following 5 companies that warrant your attention.]

The original article has been edited here for length (…) and clarity ([ ]) by munKNEE.com – A Site For Sore Eyes & Inquisitive Minds – to provide a fast & easy read.

1. Signet Jewelers Ltd. (SIG)

Signet Jewelers Ltd. 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, 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 $3.86 in 2014 to an estimated $6.07 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.22% annual earnings loss 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 Signet Jewelers Ltd. revealed that:

  • the company was trading below its Graham Number of $61.99,
  • the company pays a dividend of $1.04 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today,
  • its PEmg (price over earnings per share – ModernGraham) was 8.06, which was below the industry average of 30.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry,
  • the company was trading above its Net Current Asset Value (NCAV) of $-3.32. (See the full valuation)

2. Newell Brands Inc. (NWL)

Newell Brands Inc. 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 $1.28 in 2014 to an estimated $2.89 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.48% 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 Newell Brands Inc. revealed that:

  • the company was trading below its Graham Number of $41.25,
  • the company pays a dividend of $0.88 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 9.46, which was below the industry average of 20.37, which by some methods of valuation makes it one of the most undervalued stocks in its industry,
  • the company was trading above its Net Current Asset Value (NCAV) of $-26.44. (See the full valuation)

3. Lucara Diamond Corp (TSE:LUC) (LUCRF)

Lucara Diamond Corp 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, 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 $0.08 in 2014 to an estimated $0.22 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.98% 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 Lucara Diamond Corp revealed that:

  • the company was trading above its Graham Number of $1.96,
  • the company pays a dividend of $0.1 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today,
  • its PEmg (price over earnings per share – ModernGraham) was 10.45, which was below the industry average of 42.77, which by some methods of valuation makes it one of the most undervalued stocks in its industry,
  • the company was trading above its Net Current Asset Value (NCAV) of $-0.03. (See the full valuation)

4. Comcast Corporation (CMCSA)

Comcast Corporation 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 $1.25 in 2014 to an estimated $2.67 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.58% 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 Comcast Corporation revealed that:

  • the company was trading above its Graham Number of $26.79,
  • the company pays a dividend of $0.63 per share, for a yield of 1.7%,
  • its PEmg (price over earnings per share – ModernGraham) was 13.67, which was below the industry average of 35.9, which by some methods of valuation makes it one of the most undervalued stocks in its industry,
  • the company was trading above its Net Current Asset Value (NCAV) of $-21.64. (See the full valuation)

(Click on image to enlarge)

5. Molson Coors Brewing Co. (TAP)

Molson Coors Brewing Co 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 $2.97 in 2014 to an estimated $5.76 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.78% 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 Molson Coors Brewing Co. revealed that:

  • the company was trading below its Graham Number of $83.53,
  • the company pays a dividend of $1.64 per share, for a yield of 2%,
  • its PEmg (price over earnings per share – ModernGraham) was 14.06, which was below the industry average of 25.91, which by some methods of valuation makes it one of the most undervalued stocks in its industry,
  • the company was trading above its Net Current Asset Value (NCAV) of $-68.5. (See the full valuation)

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