There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected 5 low PE stocks for the Enterprising Investor. These companies have the five lowest PEmg (price / normalized earnings) out of all companies reviewed by ModernGraham. Each company has been determined to be suitable for the Enterprising Investor and undervalued according to the ModernGraham approach. This is a sample of one screen that is included in ModernGraham Stocks & Screens.
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. Enterprising Investors may also be interested in reviewing 5 Undervalued Companies for the Enterprising Investor while also conducting further research into the following companies.
Check out the history of this screen to find which companies have qualified in the past.
SLM Corp (SLM)
SLM Corporation passes the initial requirements of the Enterprising Investor, but not the more conservative Defensive Investor. The Defensive Investor has issues with the company’s inconsistent dividend history, and the lack of earnings stability or sufficient growth over the last ten years. 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 that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $0.48 in 2011 to an estimated $1.26 for 2015. This is a very strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of an annual earnings loss of 0.14% over the next 7-10 years. The ModernGraham valuation model returns an estimate of intrinsic value falling above the current price, indicating that the company is undervalued at the present time. (See the full valuation)
