5 More Undervalued Companies For Enterprising Investors

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 |  Includes: AAPL, ALL, COF, DHI, GCI
by: Benjamin Clark

Summary

COF, ALL, GCI, DHI, and AAPL are all rated as suitable for the Enterprising Investor following the ModernGraham approach.

All five are found to be significantly undervalued according to the ModernGraham valuation model.

The market is implying a low growth rate, despite the demonstrated growth each company has achieved.

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I've selected five companies reviewed by ModernGraham with low PE mg ratios (price-to-earnings ratio, based on normalized earnings). Each company has been determined to be suitable for the enterprising 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.

To see the full valuations of each of the following companies, please visit the ModernGraham Valuation Index.

1. Capital One Financial (NYSE:COF)

Capital One is suitable for enterprising investors but not for defensive investors. The defensive investor is concerned by the lack of sufficient earnings growth over the last ten years, but 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 explore other opportunities. As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $3.90 in 2010 to an estimated $6.96 for 2014. This strong level of demonstrated growth outpaces the market's implied estimate of 1.78% 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.

COF Chart

COF data by YCharts

2. The Allstate Corporation (NYSE:ALL)

Allstate Corp 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 $1.95 in 2010 to an estimated $3.98 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 3.15% 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.

ALL Chart

ALL data by YCharts

3. Gannett Co., Inc. (NYSE:GCI)

Gannett Co. is suitable for the enterprising investor but not the defensive investor. The defensive investor is concerned with the low current ratio and the lack of earnings stability or growth over the last ten years. The enterprising investor has a shorter time horizon, though, and only finds a concern with regard to 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 very 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 -$3.75 in 2010 to an estimated $2.06 for 2014. This solid level of demonstrated growth leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

GCI Chart

GCI data by YCharts

4. D.R. Horton Inc. (NYSE:DHI)

D&R Horton is suitable for the enterprising investor but not the defensive investor. The defensive investor has concerns with the insufficient earnings growth or stability over the last ten years. The enterprising investor has no major concerns at this time. 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 a loss of $1.91 in 2010 to an estimated gain of $1.51 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 3.74% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value above the price.

DHI Chart

DHI data by YCharts

5. Apple Inc. (NASDAQ:AAPL)

Apple is a very strong company for enterprising investors to explore, but the defensive investor has concerns with the low current ratio, lack of a long enough dividend record, and the high PB ratio. 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. From a valuation side of things, the company appears significantly undervalued after growing its EPSmg (normalized earnings) from $1.32 in 2010 to an estimated $5.47 for 2014. This strong level of demonstrated growth outpaces the market's implied estimate of 4.32% 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.

AAPL Chart

AAPL data by YCharts

What do you think? Are these companies good opportunities for investors? Which companies would you put on this list?

Disclosure: The author is long AAPL. 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.