We evaluated 32 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. We 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 32 companies, only 16 were found to be undervalued or fairly valued and suitable for either Defensive or Enterprising Investors. Here’s a summary of those 16 best stocks for value investors this week. To see a listing and screenings of all the valuations, be sure to sign up to be a premium subscriber!
The Elite
The following companies were found to be suitable for either the Defensive Investor or Enterprising Investor and undervalued:
Allstate Corporation (ALL)
Allstate passes the initial requirements of the Enterprising Investor but not the Defensive Investor. In fact, the company passes every requirement of the Enterprising Investor types, but the Defensive Investor is concerned by the lack of earnings stability and insufficient earnings growth over the last ten years. As a result, all Enterprising 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 $1.38 in 2011 to an estimated $4.97 for 2015. This is a fairly strong level of demonstrated growth, and outpaces the market’s implied estimate for annual earnings growth of only 2.69% over the next 7-10 years.
In recent years, the company’s actual growth in EPSmg has averaged around 52% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that Allstate is significantly undervalued at the present time. (See the full valuation)
BlackRock Inc. (BLK)
BlackRock Inc. passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The Defensive Investor has no initial concerns, while the Enterprising Investor is only concerned by the level of debt relative to the net current assets. 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 $9.43 in 2011 to an estimated $17.67 for 2015. This is a fairly strong level of demonstrated growth and outpaces the market’s implied estimate for annual earnings growth of 5.38% over the next 7-10 years.
In recent years, the company’s actual growth in EPSmg has averaged around 17.5% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that BlackRock Inc. is significantly undervalued at the present time. (See the full valuation)
BorgWarner Inc. (BWA)
BorgWarner is not suitable for Defensive Investors but it does pass the initial requirements of the Enterprising Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, the inconsistent dividend history, and the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns. As a result, all Enterprising 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 $1.24 in 2011 to an estimated $2.76 for 2015. This is a fairly strong level of demonstrated growth, and outpaces the market’s implied estimate for annual earnings growth of 4.91% over the next 7-10 years.
In recent years, the company’s actual growth in EPSmg has averaged nearly 25% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that BorgWarner is significantly undervalued at the present time. (See the full valuation)
Comerica Inc. (CMA)
Comerica Inc. qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor is concerned by the insufficient earnings growth or stability over the last ten years, while the company passes all of the Enterprising Investor’s requirements. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities. As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.24 in 2011 to an estimated $2.81 for 2015. This level of demonstrated growth is greater than the market’s implied estimate of 4.25% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price. (See the full valuation)
