I evaluated 39 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 companies, the following were found to be suitable for Defensive and/or Enterprising Investors. I’ve selected five that were either undervalued or fairly valued based on the ModernGraham value formula. Therefore, these companies are some of the best stocks of the week.
FMC Corp (FMC)
FMC Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, 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 (defined here) from $2.36 in 2014 to an estimated $3.78 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.63% 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 FMC Corp revealed the company was trading above its Graham Number of $48.75. The company pays a dividend of $0.66 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 21.76, which was below the industry average of 31.55, 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 $-21.36. (See the full valuation)
