10 Low PE Stocks For The Defensive Investor - February 2016

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Includes: AFL, CF, FMC, FOSL, FOXA, GHC, UNM, WDC, WRK, YHOO
by: Benjamin Clark

Summary

These ten companies are all rated as suitable for the Defensive Investor following the ModernGraham approach.

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

The ten companies are found to have the lowest PEmg ratios out of all companies which qualify for the Defensive Investor.

Click to enlargeThere are a number of great companies in the market today. By using the ModernGraham Valuation Model, I've selected the ten lowest PEmg (price / normalized earnings) companies reviewed by ModernGraham. Each company has been determined to be undervalued and suitable for the Defensive Investor according to our approach.

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.

Fossil Group Inc (NASDAQ:FOSL)

Fossil Group Inc. qualifies for both the Defensive Investor and for the Enterprising Investor. Both investor types are only concerned by the lack of dividend.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.34 in 2011 to an estimated $5.86 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.71% annual earnings loss over the next 7-10 years.

CF Industries Holdings, Inc. (NYSE:CF)

CF Industries Holdings Inc. qualifies for both the Defensive Investor and for the Enterprising Investor. The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor's only concern is the level of debt relative to the net current assets.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.46 in 2011 to an estimated $4.75 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.62% annual earnings growth over the next 7-10 years.

Graham Holdings Co (NYSE:GHC)

Graham Holdings Company qualifies for both the Defensive Investor and for the Enterprising Investor. The Defensive Investor is only concerned with the inconsistent dividend history. The Enterprising Investor has no initial concerns.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $18.06 in 2011 to an estimated $70.23 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.06% annual earnings loss over the next 7-10 years.

Western Digital Corp (NYSE:WDC)

Western Digital Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only concerned with the short dividend history. The Enterprising Investor has no initial concerns.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $4.74 in 2012 to an estimated $5.98 for 2016. This level of demonstrated earnings growth supports the market's implied estimate of 1.98% annual earnings growth over the next 7-10 years.

AFLAC Incorporated (NYSE:AFL)

Aflac Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor. In fact, the company passes all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $4.72 in 2012 to an estimated $6.24 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.40% annual earnings growth over the next 7-10 years.

Yahoo! Inc. (NASDAQ:YHOO)

Yahoo! Inc. qualifies for both the Enterprising Investor and the more conservative Defensive Investor. Both investor types are only initially concerned with the lack of dividends.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.67 in 2011 to an estimated $2.78 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.69% annual earnings growth over the next 7-10 years.

Unum Group (NYSE:UNM)

Unum Group qualifies for either the Enterprising Investor or the more conservative Defensive Investor. In fact, the company passes all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial condition.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.89 in 2011 to an estimated $2.72 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.47% annual earnings growth over the next 7-10 years.

WestRock Co (NYSE:WRK)

WestRock Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor's only initial concern is the level of debt relative to the net current assets.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.97 in 2012 to an estimated $3.28 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.64% annual earnings growth over the next 7-10 years.

Twenty-First Century Fox Inc (NASDAQ:FOXA)

Twenty-First Century Fox Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor is only concerned by the insufficient earnings stability over the last ten years, and the Enterprising Investor is only concerned with the level of debt relative to the net current assets.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.58 in 2012 to an estimated $2.43 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.09% annual earnings growth over the next 7-10 years.

FMC Corp (NYSE:FMC)

FMC Corporation qualifies for both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor has no initial concerns, and the Enterprising Investor is only concerned by the level of debt relative to the net current assets.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.80 in 2011 to an estimated $3.53 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.74% annual earnings growth over the next 7-10 years.

Disclosure: I am/we are long WDC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.