10 Most Undervalued Companies For The Enterprising Investor - June 2016

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Includes: FOSL, GHC, KKR, LNC, LYB, PHM, STWD, STX, VLO, WNR
by: Benjamin Clark

Summary

All of these companies are rated as suitable for the Enterprising 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 be the most undervalued out of all companies which qualify for the Enterprising 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 most undervalued companies reviewed by ModernGraham. Each company has been determined to be suitable for the Enterprising Investor according to the ModernGraham 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. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

Western Refining, Inc. (NYSE:WNR)

Western Refining, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.03 in 2012 to an estimated $3.13 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.97% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price. (See the full valuation)

Fossil Group Inc (NASDAQ:FOSL)

Fossil Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, and the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.34 in 2011 to an estimated $5.66 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.21% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

Seagate Technology PLC (NASDAQ:STX)

Seagate Technology PLC qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years, the low current ratio, and the inconsistent dividend record. The Enterprising Investor is only initially concerned by the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.39 in 2012 to an estimated $4.14 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.9% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

Lincoln National Corporation (NYSE:LNC)

Lincoln National Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.04 in 2012 to an estimated $5.16 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.12% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

Valero Energy Corporation (NYSE:VLO)

Valero Energy Corp qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years along with the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.71 in 2012 to an estimated $6.51 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of negative 0.04% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

LyondellBasell Industries NV (NYSE:LYB)

LyondellBasell Industries NV is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, the poor dividend history, and the high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-944.17 in 2012 to an estimated $8.48 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.4% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

PulteGroup, Inc. (NYSE:PHM)

PulteGroup Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years along with the inconsistent dividend history. The Enterprising Investor is only concerned by the insufficient earnings stability over the last five years. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $3.12 in 2011 to an estimated gain of $2.10 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.21% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

KKR & Co. L.P. (NYSE:KKR)

KKR & Co. L.P. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.44 in 2011 to an estimated $1.23 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.58% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

Starwood Property Trust, Inc. (NYSE:STWD)

Starwood Property Trust, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.76 in 2011 to an estimated $2.01 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.2% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

Graham Holdings Co (NYSE:GHC)

Graham Holdings Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the lack of earnings stability over the last five years. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $17.69 in 2012 to an estimated $47.86 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.77% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

Disclosure: I am/we are long WNR.

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.