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Summary

  • All five of these companies are rated as undervalued by the ModernGraham valuation model based on Benjamin Graham's formula.
  • Each company is also suitable for the Enterprising Investor following the ModernGraham approach.
  • Out of 360-plus companies reviewed by ModernGraham, these five are among the few currently trading near 52-week lows.

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I've selected five companies rated as undervalued by ModernGraham which are trading near their 52-week low. 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. Harley-Davidson Inc. (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 (price over normalized earnings) 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.

HOG Chart

HOG data by YCharts

2. Eaton Corporation (NYSE:ETN)

Eaton Corporation is suitable for Enterprising Investors but not for Defensive Investors. The Defensive Investor is concerned with the low current ratio and the lack of sufficient earnings growth over the last ten years. The Enterprising Investor is only concerned with the high level of debt relative to the current assets. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with 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 $2.49 in 2010 to an estimated $3.88 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 4.47% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value above the price.

ETN Chart

ETN data by YCharts

3. The TJX Companies (NYSE:TJX)

The TJX Companies qualify for the Enterprising Investor but not the Defensive Investor. The Defensive Investor is concerned with the low current ratio and the high PB ratio, 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 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 $1.30 in 2011 to an estimated $2.69 for 2015. This strong level of demonstrated growth outpaces the market's implied estimate of 5.55% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value above the price.

TJX Chart

TJX data by YCharts

4. SLM Corp (NASDAQ:SLM)

SLM Corporation is suitable for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the lack of stable earnings over the last ten years and the lack of consistent dividend payments over the last ten years. However, the company passes all of the Enterprising Investor's requirements and the investor type thus has no significant 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. From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.28 in 2010 to an estimated $1.53 for 2014. This level of demonstrated growth supports the market's implied estimate of negative 1.52% 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.

SLM Chart

SLM data by YCharts

5. Motorola Solutions Inc. (NYSE:MSI)

Motorola Solutions qualifies for the Enterprising Investor but not the Defensive Investor. The only requirements of the Defensive Investor which the company passes are the size and the current ratio requirements. 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 to be undervalued after growing its EPSmg (normalized earnings) from a loss of $1.92 in 2010 to an estimated $2.98 in 2014. This strong level of demonstrated growth outpaces the market's implied estimate of 6.94% 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.

MSI Chart

MSI 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.