6 Elite Companies In The Spotlight This Week

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 |  Includes: AMGN, DE, DVMT, FITB, GWW, HOG
by: Benjamin Clark

Summary

AMGN, DE, EMC, FITB, GWW, and HOG are all rated as undervalued by the ModernGraham valuation model, based on Benjamin Graham's formula.

All six are suitable for the Enterprising Investor following the ModernGraham approach.

DE is also suitable for the even more conservative Defensive Investor under the ModernGraham approach.

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

Amgen Inc. (NASDAQ:AMGN)

Amgen Inc. is suitable for Enterprising Investors but not for Defensive Investors. The Defensive Investor has concerns with the lack of a long enough dividend record and the high PB ratio. The Enterprising Investor's only concern is with the high level of debt relative to the net current assets. 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 to be undervalued after growing its EPSmg (normalized earnings) from $4.12 in 2010 to an estimated $6.40 for 2014. This level of demonstrated growth more than supports the market's implied estimate of 4.82% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's value investing formula, to return an estimate of intrinsic value above the price. (See the full valuation)

AMGN Chart

AMGN data by YCharts

Deere & Co. (NYSE:DE)

Deere & Co. is suitable for either the Defensive Investor or the Enterprising Investor. The Defensive Investor's only concern is with the high PB ratio while the Enterprising Investor has no significant concerns. 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 side of things, the company appears to be significantly undervalued after growing its EPSmg (normalized earnings) from $3.68 in 2010 to an estimated $7.77. This strong level of demonstrated growth is greater than the market's implied estimate of 1.57% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham's methods, to return an estimate of intrinsic value that is well above the market price at this time. (See the full valuation)

DE Chart

DE data by YCharts

EMC Corp (EMC)

EMC Corp qualifies for the Enterprising Investor but not the Defensive Investor, who is concerned with the company's low current ratio and the short dividend history. The Enterprising Investor does not have many initial concerns with the company, though, as it passes all of the investor type's 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 $0.70 in 2010 to an estimated $1.33 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 5.72% 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)

EMC Chart

EMC data by YCharts

Fifth Third Bancorp (NASDAQ:FITB)

Fifth Third Bancorp is suitable for Enterprising Investors but not for Defensive Investors, who are concerned with the lack of earnings stability over the last ten years and the lack of earnings growth over the same period. The company passes all of the Enterprising Investor's requirements. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should explore other opportunities. As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.02 in 2010 to an estimated $1.59 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 2.43% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham's formula, to return an estimate of intrinsic value well above the market price. (See the full valuation)

FITB Chart

FITB data by YCharts

Harley-Davidson (NYSE:HOG)

Harley-Davidson is suitable for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the company's low current ratio, insufficient earnings growth over the last ten years, and high PEmg and PB ratios. The Enterprising Investor's only initial concern is the level of debt relative to the net current assets. 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 $1.77 in 2010 to an estimated $3.09 for 2014. This low level of demonstrated growth does not support the market's implied estimate of 7.07% 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 below the current price. (See the full valuation)

HOG Chart

HOG data by YCharts

W.W. Grainger Inc. (NYSE:GWW)

W.W. Grainger qualifies for Enterprising Investors but not for Defensive Investors. The Defensive Investor is concerned with the high PEmg and PB ratios, but the company passes all of the Enterprising Investor's 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. As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $6.04 in 2010 to an estimated $10.77 for 2014. This strong level of demonstrated growth outpaces the market's implied estimate of 7.64% 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 market price. (See the full valuation)

GWW Chart

GWW data by YCharts

Disclosure: The author is long DE. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.