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Summary

  • All of these companies are rated as undervalued by ModernGraham.
  • BBBY, AFL, WFC, INTC, and BEN pass the most conservative requirements of the Defensive Investor.
  • COF, DHI, AAPL, VIAB, and ORCL qualify for the slightly less conservative requirements of Enterprising Investors.

There are a great number of companies in the market today from which investors must select, but it can sometimes be difficult to find valuable opportunities. By scouring the ModernGraham Valuation Index, a listing of over 300 regularly covered companies, I have selected ten outstanding companies that are worthy of further research.

All of these companies have passed the rigorous and conservative requirements taught by Benjamin Graham as modernized by ModernGraham. The Defensive Investor is defined as one who is unwilling to devote substantial time and effort to research. The Enterprising Investor is willing to do such research, but would still be considered risk-averse by many speculators.

For definitions of "EPSmg" and "PEmg" as well as information about the ModernGraham valuation model, please visit ModernGraham.

1. Capital One Financial (NYSE:COF)

Capital One Financial is a great company for Enterprising Investors to look at in more detail, but it does not quite qualify for the Defensive Investor because it has not shown sufficient growth in its earnings over the ten year historical period. That said, the company passes all of the requirements of the Enterprising Investor. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel very comfortable proceeding with further research into the company and comparing it to competitors. From a valuation side of things, the company appears to be significantly undervalued after growing its EPSmg (normalized earnings) from $3.14 in 2009 to $6.56 for 2013. This solid level of demonstrated growth surpasses the market's implied estimate of 1.39% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

Recent Price$74.01
MG Value$252.41
MG OpinionUndervalued
Value Based on 3% Growth$95.06
Value Based on 0% Growth$55.73
Market Implied Growth Rate1.39%
PEmg11.29
PB Ratio1.06

COF Chart

COF data by YCharts

2. Bed Bath & Beyond (NASDAQ:BBBY)

Bed Bath & Beyond is a great company for Defensive Investors and Enterprising Investors to consider. The only concern for either investor type is the lack of dividend payments. As a result, value investors following the ModernGraham approach based on Benjamin Graham's methods should feel very comfortable proceeding with further research into the company and comparing it to other opportunities. From a valuation perspective, the company appears to be significantly undervalued after growing its EPSmg (normalized earnings) from $2.38 in 2010 to an estimated $4.60 for 2014. This demonstrated level of growth surpasses the market's implied estimate of 2.47% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the price.

Recent Price$61.82
MG Value$167.56
MG OpinionUndervalued
Value Based on 3% Growth$66.73
Value Based on 0% Growth$39.12
Market Implied Growth Rate2.47%
Net Current Asset Value (NCAV)$6.57
PEmg13.44
Current Ratio2.07
PB Ratio3.13

BBBY Chart

BBBY data by YCharts

3. Aflac Inc. (NYSE:AFL)

Aflac accomplishes a rare feat by passing all of the requirements of both the Defensive Investor and the Enterprising Investor. Neither investor type has any major concerns with the company, and all value 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 competitors. From a valuation side of things, Aflac looks significantly undervalued after growing its EPSmg (normalized earnings) from $3.66 in 2010 to an estimated $5.96 in 2014. This strong level of demonstrated growth outpaces the market's implied estimate of only 0.98% earnings growth and leads the ModernGraham valuation model, which is based on one of Benjamin Graham's formulas, to return an estimate of intrinsic value well above the market price.

Recent Price$62.30
MG Value$162.91
MG OpinionUndervalued
Value Based on 3% Growth$86.45
Value Based on 0% Growth$50.68
Market Implied Growth Rate0.98%
PEmg10.45
PB Ratio1.79

AFL Chart

AFL data by YCharts

4. Wells Fargo Corp (NYSE:WFC)

Wells Fargo Corp is a company that is intriguing to all value investors as it passes all of the requirements of both the Defensive Investor and the Enterprising Investor. As a result, value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and comparing the company to other opportunities. As for the valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.83 in 2010 to an estimated $3.48 for 2014. This solid level of demonstrated growth more than supports the market's implied estimate of 3.20% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

Recent Price$51.88
MG Value$124.32
MG OpinionUndervalued
Value Based on 3% Growth$50.50
Value Based on 0% Growth$29.60
Market Implied Growth Rate3.20%
PEmg14.91
PB Ratio1.69

WFC Chart

WFC data by YCharts

5. D.R. Horton (NYSE:DHI)

D.R. Horton is an interesting company for the Enterprising Investor, but is not suitable for the Defensive Investor. The company has shown insufficient earnings stability or growth over the ten year historical period for the Defensive Investor. The company does pass all of the Enterprising Investor's requirements. As a result, Enterprising Investors should feel very comfortable proceeding with further research into the company as well as other opportunities. From a valuation side of things, the company appears to be significantly undervalued after growing its EPSmg (normalized earnings) from -$1.91 in 2010 to an estimated $1.47 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 4.05% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

Recent Price$24.40
MG Value$56.57
MG OpinionUndervalued
Value Based on 3% Growth$21.31
Value Based on 0% Growth$12.49
Market Implied Growth Rate4.05%
Net Current Asset Value (NCAV)$10.03
PEmg16.6
Current Ratio6.50
PB Ratio1.79

DHI Chart

DHI data by YCharts

6. Apple Inc. (NASDAQ:AAPL)

Apple Inc. is an excellent company for Enterprising Investors, having failed only the investor type's current ratio requirement. The company does not qualify for the Defensive Investor due to its low current ratio, lack of a long enough dividend record, and high PB ratio. As a result, Enterprising Investors should feel very comfortable proceeding with further research into the company and its competitors, including a review of ModernGraham's valuation of Microsoft (NASDAQ:MSFT) and ModernGraham's valuation of Google (NASDAQ:GOOG) (NASDAQ:GOOGL). As for a valuation, the company appears to be significantly undervalued. Apple has grown its EPSmg (normalized earnings) from $9.22 to an estimated $37.86 for 2014, a growth rate that far outpaces the market's implied estimate of only 4.29% earnings growth. The ModernGraham valuation model has accordingly returned an estimate of intrinsic value that is much higher than the market price.

Recent Price$646.94
MG Value$1,457.64
MG OpinionUndervalued
Value Based on 3% Growth$548.98
Value Based on 0% Growth$321.82
Market Implied Growth Rate4.29%
Net Current Asset Value (NCAV)-$16.98
PEmg17.09
Current Ratio1.49
PB Ratio4.64

AAPL Chart

AAPL data by YCharts

7. Viacom Inc. (NASDAQ:VIAB)

Viacom is an intriguing company for the Enterprising Investor, having passed all but one of the investor type's requirements. The company does not qualify for the Defensive Investor, though, due to the low current ratio, lack of long enough dividend history, and high PB ratio. As a result, Enterprising Investors should feel comfortable conducting further research into the company and its competitors. From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.29 in 2010 to an estimated $4.62 for 2014. This solid level of demonstrated growth outpaces the market's implied estimate of 5.22% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

Recent Price$87.60
MG Value$178.02
MG OpinionUndervalued
Value Based on 3% Growth$67.05
Value Based on 0% Growth$39.30
Market Implied Growth Rate5.22%
Net Current Asset Value (NCAV)-$28.51
PEmg18.96
Current Ratio1.69
PB Ratio8.53

VIAB Chart

VIAB data by YCharts

8. Oracle Corp (NYSE:ORCL)

Oracle Corp is a great looking company, especially for the Enterprising Investor, as the company passes all of the requirements of that investor type. The Defensive Investor is not as interested presently due to the lack of a long enough dividend history and the high PB ratio. As a result, Enterprising Investors seeking to follow the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company as well as other opportunities. From a valuation standpoint, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.06 in 2010 to an estimated $2.22 for 2014. This demonstrated level of growth outpaces the market's implied estimate of 5.31% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the price.

Recent Price$42.46
MG Value$85.39
MG OpinionUndervalued
Value Based on 3% Growth$32.16
Value Based on 0% Growth$18.85
Market Implied Growth Rate5.31%
Net Current Asset Value (NCAV)$0.57
PEmg19.13
Current Ratio3.39
PB Ratio4.22

ORCL Chart

ORCL data by YCharts

9. Intel Corp (NASDAQ:INTC)

Intel Corp is an outstanding company for both Defensive Investors and Enterprising Investors to consider. The company passes all of the requirements of both investor types. As a result, all value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and its competitors by exploring the ModernGraham Valuation Index. From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.27 in 2010 to an estimated $1.96 for 2014. This level of demonstrated growth outpaces the market's implied estimate of only 2.89% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

Recent Price$27.97
MG Value$48.51
MG OpinionUndervalued
Value Based on 3% Growth$28.46
Value Based on 0% Growth$16.68
Market Implied Growth Rate2.89%
NCAV-$0.67
PEmg14.27
Current Ratio2.25
PB Ratio2.37

INTC Chart

INTC data by YCharts

10. Franklin Resources (NYSE:BEN)

Franklin Resources qualifies for both Defensive Investors and Enterprising Investors. The Defensive Investor is only concerned with the high PB ratio, while the company passes all of the requirements of the Enterprising Investor. As a result, value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and its competitors. From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.91 in 2010 to an estimated $3.26 in 2014. This level of demonstrated growth outpaces the market's implied estimate of 4.46% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the price.

Recent Price$56.81
MG Value$96.48
MG OpinionUndervalued
Value Based on 3% Growth$47.28
Value Based on 0% Growth$27.72
Market Implied Growth Rate4.46%
Net Current Asset Value (NCAV)$10.09
PEmg17.43
Current Ratio6.77
PB Ratio3.24

BEN Chart

BEN data by YCharts

Source: 10 Great Undervalued Companies To Research Today