I evaluated 30 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 30 companies, only 5 were found to be undervalued or fairly valued and suitable for either Defensive 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:
Charles River Laboratories Intl Inc
Charles River Laboratories Intl. Inc  (CRL) 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 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 $1.07 in 2013 to an estimated $3.63 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.93% 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 Charles River Laboratories Intl. Inc revealed the company was trading above its Graham Number of $44.36. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 24.36, which was below the industry average of 32.29, 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 $-25.4.  (See the full valuation)
