6 Elite Companies To Research This Week

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 |  Includes: AIZ, BBBY, DFS, ROST, SNA, TEL
by: Benjamin Clark

Summary

AIZ, BBBY, DFS, ROST, SNA, and TEL are all rated as undervalued by the ModernGraham valuation model.

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

BBBY also qualifies for the more conservative Defensive Investor.

ModernGraham currently covers over 370 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 formulas to 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:

Assurant Inc. (NYSE:AIZ)

Assurant Inc. 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 due to the lack of earnings growth 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 $3.64 in 2010 to an estimated $5.68 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 1.33% 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.

AIZ Chart

AIZ data by YCharts

Bed Bath & Beyond Inc. (NASDAQ:BBBY)

Bed Bath & Beyond qualifies for either the Defensive Investor or the Enterprising Investor. The only issue for either investor type is the lack of dividend payments. 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 undervalued after growing its EPSmg (normalized earnings) from $2.38 in 2011 to an estimated $4.55 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 2.52% 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.

BBBY Chart

BBBY data by YCharts

Discover Financial Services (NYSE:DFS)

Discover Financial Services 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 its dividend history is too short. 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 $1.78 in 2010 to an estimated $4.56 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 2.34% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham's formula, to return an estimate of intrinsic value above the market price.

DFS Chart

DFS data by YCharts

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

Snap-on Incorporated (NYSE:SNA)

Snap-on Incorporated qualifies for Enterprising Investors but not for Defensive Investors. The Defensive Investor is concerned by the high PEmg (price over normalized earnings) and PB ratios. The Enterprising Investor has no initial concerns. 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 $3.04 in 2010 to an estimated $5.71 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 6.24% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value above the price.

SNA Chart

SNA data by YCharts

TE Connectivity (NYSE:TEL)

TE Connectivity qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has numerous concerns and in fact the only things the investor type likes are the market cap and the PEmg ratio. Meanwhile, 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. As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $0.41 in 2010 to an estimated gain of $3.13 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 5.59% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value above the price.

TEL Chart

TEL 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.