7 Elite Companies To Research This Week

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 |  Includes: HP, IP, MAT, NOC, USB, WFC, WFM
by: Benjamin Clark

Summary

HP, IP, MAT, NOC, USB WFC, and WFM are all rated as undervalued by the ModernGraham valuation model.

All seven qualify for the Enterprising Investor under the ModernGraham approach.

MAT and WFC also qualify for the more conservative Defensive Investor.

ModernGraham currently covers over 350 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.

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

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

Helmerich & Payne (NYSE:HP)

Helmerich & Payne qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor is concerned with the high PEmg (price over normalized earnings) and PB ratios while 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 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 $3.39 in 2010 to an estimated $5.65 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 6.08% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value above the price.

HP Chart

HP data by YCharts

International Paper Co. (NYSE:IP)

International Paper is suitable for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the low current ratio, lack of earnings stability or sufficient growth over the last ten years, and the high PB ratio. 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 $0.85 in 2010 to an estimated $2.78 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 4.74% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value above the price.

IP Chart

IP data by YCharts

Mattel Inc. ((NASDAQ:MAT))

Mattel qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor's only initial concern is the high PB ratio, while the Enterprising Investor has no concerns. Therefore, 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. As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.53 in 2010 to an estimated $2.21 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 3.72% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value above the price.

MAT Chart

MAT data by YCharts

Northrop Grumman Corp (NYSE:NOC)

Northrop Grumman qualifies for Enterprising Investors but not for Defensive Investors. The Defensive Investor has concerns regarding the low current ratio and the lack of earnings stability over the last ten years, but the Enterprising Investor's only concern is 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 $3.77 in 2010 to an estimated $8.08 for 2014. This low level of demonstrated growth outpaces the market's implied estimate of 3.39% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value well above the price.

NOC Chart

NOC data by YCharts

U.S. Bancorp (NYSE:USB)

U.S. Bancorp is suitable for the Enterprising Investor as the company passes all of the investor type's requirements, but is not suitable for the Defensive Investor as it has shown insufficient growth in earnings over the last ten years. 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 undervalued after growing its EPSmg (normalized earnings) from $1.66 in 2010 to an estimated $2.82 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 3.33% 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.

USB Chart

USB data by YCharts

Wells Fargo & Company (NYSE:WFC)

Wells Fargo qualifies for either Defensive Investors or for Enterprising Investors. In fact, 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 it to other opportunities. From a valuation perspective, the company appears significantly undervalued after growing its EPSmg (normalized earnings) from $1.83 in 2010 to an estimated $3.56 for 2014. This strong level of demonstrated growth outpaces the market's implied estimate of 3.00% 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.

WFC Chart

WFC data by YCharts

Whole Foods Market Inc. (NASDAQ:WFM)

Whole Foods Market is suitable for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the low current ratio, lack of a stable dividend record, and high PEmg and PB ratios. The Enterprising Investor has no initial concerns as the company 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 $0.56 in 2010 to an estimated $1.31 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 9.83% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value above the price.

WFM Chart

WFM data by YCharts

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.