6 Best Stocks For Value Investors This Week – March 11, 2017

Fortune Brands Home & Security Inc (FBHS) 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 over the last ten years, the poor dividend history, and the 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 Undervalued after growing its EPSmg (normalized earnings) from $0.64 in 2013 to an estimated $2.29 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.57% 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 Fortune Brands Home & Security Inc revealed the company was trading above its Graham Number of $31.98. The company pays a dividend of $0.64 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 25.63, which was below the industry average of 28.49, 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 $-8.38.  (See the full valuation)

The Good

The following companies were found to be suitable for the Defensive Investor or Enterprising Investor and Fairly Valued:

Fortive Corp

Fortive Corp (FTV) 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 over the last ten years, the poor dividend history, and the 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 (normalized earnings) from $0 in 2013 to an estimated $2.01 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 10.26% 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.

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Disclaimer: The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 ...

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