EC The 10 Best Stocks For Value Investors This Week – 6/20/15

We evaluated 25 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 25 companies, only 10 were found to be undervalued or fairly valued and suitable for either Defensive or Enterprising Investors. Here’s a summary of those 10 best stocks for value investors this week.

The Elite

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

Amgen Inc. (AMGN)

Amgen performs well in the ModernGraham model and is suitable for Enterprising Investors. The Defensive Investor is concerned with the low current ratio, along with the poor 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 valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $4.22 in 2011 to an estimated $7.20 for 2015. This is a strong level of growth and is well above the market’s implied estimate of 6.79% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged nearly 14.1% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (See the full valuation)

Pfizer Inc. (PFE)

500px-Pfizer_logo_(modern).svgPfizer performs well in the ModernGraham model and is suitable for Enterprising Investors. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, along with the poor PB ratio, 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 valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.18 in 2011 to an estimated $2.03 for 2015. This is a strong level of growth and is well above the market’s implied estimate of only 4.25% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged nearly 14.4% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (See the full valuation)

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Disclaimer: The author did not hold a position in any of the companies listed in this article ...

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Investment Hunting 4 years ago Contributor's comment

Fantastic list of companies here. I am happy to say I won a few :-)