5 Undervalued Companies With Low Betas

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 |  Includes: BGS, CI, MAT, PBCT, ROST
by: Benjamin Clark

Summary

CI, ROST, BGS, MAT, and PBCT all have relatively low betas of less than 1, indicating they are less volatile than the market.

CI and MAT are both rated as suitable for Defensive Investors by the ModernGraham approach.

ROST, BGS, and PBCT qualify for the less conservative Enterprising Investor by the ModernGraham approach.

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 with low betas. Each company has been determined to be suitable for the 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.

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

1. Cigna Corporation (NYSE:CI)

Cigna is an intriguing company for either Defensive Investors or Enterprising Investors. The company passes all of the requirements of each investor type, an impressive accomplishment. As a result, value investors following the ModernGraham approach based on Benjamin Graham's methods should explore other opportunities. From a valuation side of things, the company appears to be significantly undervalued after growing its EPSmg (normalized earnings) from $3.85 in 2010 to an estimated $5.86 for 2014. This strong level of demonstrated growth outpaces the market's implied estimate of 3.72% 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.

CI Chart

CI data by YCharts

2. Ross Stores Inc. (NASDAQ:ROST)

Ross Stores qualifies for the Enterprising Investor, but not the Defensive Investor. The Defensive Investor has concerns with the low current ratio and the high PB ratio, but the Enterprising Investor's only concern is with the low current ratio. 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 $1.66 in 2010 to an estimated $3.66 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 4.58% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value above the price.

ROST Chart

ROST data by YCharts

3. B&G Foods Inc. (NYSE:BGS)

B&G Foods is intriguing to Enterprising Investors, but does not qualify for the Defensive Investor. The Defensive Investor has some major concerns, and in fact, the only requirements of the investor type which the company passes are earnings stability and earnings growth. The Enterprising Investor, on the other hand, only has an issue with 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. As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.49 in 2010 to an estimated $1.22 for 2014. This strong level of demonstrated growth outpaces the market's implied estimate of 9.57% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham's formula, to return an estimate of intrinsic value exceeding the market price.

BGS Chart

BGS data by YCharts

4. 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

5. People's United Financial Inc. (NASDAQ:PBCT)

People's United Financial is suitable for Enterprising Investors, but not for Defensive Investors. The Defensive Investor is concerned with the high PEmg ratio (price over EPSmg), but the company passes all of the requirements for 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 the company to other opportunities. As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from a $0.34 in 2010 to an estimated $0.71 for 2014. This level of demonstrated growth surpasses the market's implied estimate of 5.81% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the price at this time.

PBCT Chart

PBCT 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.