10 Low P/E Stocks For The Defensive Investor - July 2016

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Includes: AFL, BBBY, BEN, DFS, FOXA, GPS, JPM, PNC, UNM, WDC
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.

There 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 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.

Bed Bath & Beyond Inc. (NASDAQ:BBBY)

Bed Bath & Beyond Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. As a result, all value 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 $3.63 in 2013 to an estimated $4.91 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.18% 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.

Western Digital Corporation (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 a result, all value 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 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. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The Gap, Inc. (NYSE:GPS)

Gap qualifies for both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor is only initially concerned by the low current ratio while the Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.59 in 2012 to an estimated $2.44 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.66% 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.

Unum Group (NYSE:UNM)

Unum Group qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. The Enterprising Investor has no initial concerns. As a result, all value 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 $2.3 in 2012 to an estimated $3.13 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.91% 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.

Franklin Resources Inc. (NYSE:BEN)

Franklin Resources 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 its strong financial condition. As a result, all value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.50 in 2012 to an estimated $3.17 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.00% 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.

Discover Financial Services (NYSE:DFS)

Discover Financial Services 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 a result, all value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.26 in 2012 to an estimated $5.01 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.25% 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.

Twenty-First Century Fox, Inc. (NASDAQ:FOXA)

Twenty-First Century Fox 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 a result, all value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research.

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. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

JPMorgan Chase & Co. (NYSE:JPM)

JPMorgan Chase qualifies for both the Enterprising Investor and the more conservative Defensive Investor. The company passes all of the requirements of both investor types, an indication of the strong financial position. As a result, all value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $4.11 in 2012 to an estimated $5.48 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.83% 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.

PNC Financial Services Group, Inc. (NYSE:PNC)

PNC Financial Services Group qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. The Enterprising Investor has no initial concerns. As a result, all value 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 $5.16 in 2012 to an estimated $7.04 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.57% 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.

Aflac Incorporated (NYSE:AFL)

Aflac 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 a result, all value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research.

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. 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 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.