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Summary

  • JPM, CA, INTC, BEN, and MAT are all significantly undervalued according to the ModernGraham valuation model.
  • All five companies pass the rigorous requirements for Defensive Investors following the ModernGraham approach.
  • The market is implying a growth rate under 4% for each of them.

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I've selected five of the most undervalued companies reviewed by ModernGraham. Each company has been determined to be suitable for Defensive Investor according to the ModernGraham approach, which is a modernized version of legendary value investor Benjamin Graham's requirements for Intelligent Investing.

Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

1. JP Morgan Chase (NYSE:JPM)

JP Morgan Chase is suitable for either Defensive Investors or Enterprising Investors. The company passes all of the requirements of both investor types, which is a rare accomplishment. 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. From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.92 in 2010 to an estimated $4.75 for 2014. This strong level of demonstrated growth outpaces the market's implied estimate of only 1.75% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price at this time. (See the full valuation)

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JPM Chart

JPM data by YCharts

2. CA, Inc. (NASDAQ:CA)

CA Inc. qualifies for Defensive Investors and thus also qualifies for Enterprising Investors. The Defensive Investor's only concern is the low current ratio, and even though the Enterprising Investor has concerns with the level of debt relative to the current assets, the Enterprising Investor is satisfied because the company is suitable for Defensive Investors. 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 perspective, the company appears to be undervalued, after growing its EPSmg (normalized earnings) from $1.06 in 2010 to $1.91 for 2014. This demonstrated level of growth is greater than the market's implied estimate of 3.19% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is above the market price at this time. (See the full valuation)

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CA Chart

CA data by YCharts

3. Intel Corporation (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. 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 2.88% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price. (See the full valuation)

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INTC Chart

INTC data by YCharts

4. Franklin Resources, Inc. (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 4.34% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the price. (See the full valuation)

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BEN Chart

BEN data by YCharts

5. Mattel, Inc. (NASDAQ:MAT)

Mattel Inc. is suitable for either the Defensive Investor or the Enterprising Investor. For the Defensive Investor, the only concern is the high PB ratio, while the company passes all of the requirements of the Enterprising Investor. As a result, value investors seeking to follow the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company. From a valuation side of things, Hasbro appears significantly undervalued after growing its EPSmg (normalized earnings) from $1.35 in 2009 to $2.25 for 2013. This demonstrated level of growth is greater than the market's implied estimate of 4.31% and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price. (See the full valuation)

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MAT Chart

MAT data by YCharts

Source: 5 More Undervalued Companies For Defensive Investors