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Summary

  • AFL, ISRG, NSC, RL, TDC and VFC are all undervalued according to ModernGraham's valuation model.
  • AFL and NSC qualify for the ModernGraham Defensive Investor.
  • ISRG, RL, TDC, and VFC qualify for the ModernGraham Enterprising Investor.

ModernGraham currently covers over 300 companies in its Valuation Index, analyzing each in detail to determine whether they fit a modernized version of Benjamin Graham's conservative metrics from his classic The Intelligent Investor.

The site then proceeds to give each company a rating as suitable for Defensive Investors, those unwilling to conduct substantial research, Enterprising Investors, those happy to spend the time researching, or Speculators. Which type of investor are you?

Each company is further analyzed using one of Graham's valuation formulas to determine whether it is undervalued, fairly valued, or overvalued by Mr. Market today.

The following six companies were found this week to be suitable for either Defensive Investors or Enterprising Investors (or both) and undervalued:

  • 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 0.94% 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. (See the full valuation)

AFL Chart

AFL data by YCharts

  • Intuitive Surgical (NASDAQ:ISRG) - Intuitive Surgical qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the lack of dividend payments and the high PEmg (Price-to-EPSmg) and PB ratios. The Enterprising Investor's only concern is the lack of dividend payments. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable conducting 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 $6.38 in 2010 to an estimated $12.97 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 10% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value above the market price. (See the full valuation)

ISRG Chart

ISRG data by YCharts

  • Norfolk Southern Corp. (NYSE:NSC) - Norfolk Southern is a great opportunity for both the Defensive Investor and the Enterprising Investor. The Defensive Investor's only concern is the low current ratio, and because the company satisfies the Defensive Investor, the Enterprising Investor is also satisfied by default. 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 it to other opportunities. From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.74 in 2010 to an estimated $5.74 for 2014. This level of demonstrated growth supports the market's implied estimate of 4.58% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham's formula, to return an estimate of intrinsic value falling within a margin of safety relative to the price. (See the full valuation)

NSC Chart

NSC data by YCharts

  • Ralph Lauren (NYSE:RL) - Ralph Lauren is suitable for Enterprising Investors, having passed all of the investor type's requirements, but the company is not suitable for Defensive Investors. The Defensive Investor is concerned with the high price-to-earnings and price-to-book ratios. 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 significantly undervalued after growing its EPSmg (normalized earnings) from $4.13 in 2010 to $7.45 for 2014. This high level of demonstrated growth outpaces the market's implied estimate of 6.03% and leads the ModernGraham valuation model, which is based on a Benjamin Graham formula, to return an estimate of intrinsic value well above the market price. (See the full valuation)

RL Chart

RL data by YCharts

  • Teradata Corporation (NYSE:TDC) - Teradata Corporation is suitable for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the low current ratio, the lack of dividend payments, and the high price-to-book ratio. The Enterprising Investor's only concern is the lack of dividend payments. 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 its competitors. As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.47 in 2010 to an estimated $2.35 for 2014. This demonstrated growth is greater than the market's implied estimated 4.66% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value above the market price. (See the full valuation)

TDC Chart

TDC data by YCharts

  • VF Corp (NYSE:VFC) - VF Corp qualifies for the Enterprising Investor but not the Defensive Investor, who is concerned with the high price-to-earnings ratio and the high price-to-book ratio. The company passes all of the Enterprising Investors 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. From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.24 in 2010 to an estimated $2.58 for 2014. This level of demonstrated growth more than supports the market's implied estimate of 8.05% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham's formula, to return an estimate of intrinsic value that is well above the current price. (See the full valuation)

VFC Chart

VFC data by YCharts

Source: 6 Elite Companies In The Spotlight This Week