5 Undervalued Companies For Enterprising Investors Near 52 Week Lows - January 2016

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Includes: AXP, BBBY, DFS, KEY, WFM
by: Benjamin Clark

Summary

AXP, BBBY, DFS, KEY, and WFM are all rated as suitable for the Enterprising Investor following the ModernGraham approach.

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

The five companies are trading the closest to their 52-week lows out of all undervalued companies for the Enterprising Investor.

There are a number of great companies in the market today. By using our valuation model, I've selected the five undervalued companies trading closest to their 52 week low.

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.

Discover Financial Services (NYSE:DFS)

Discover Financial Services Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the short dividend record. The Enterprising Investor has no initial concerns.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.49 in 2011 to an estimated $4.89 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.53% annual earnings growth over the next 7-10 years.

American Express Company (NYSE:AXP)

American Express Company qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PB ratio. The Enterprising Investor has no initial concerns.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.11 in 2011 to an estimated $4.57 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 3.89% annual earnings growth over the next 7-10 years.

Bed Bath & Beyond Inc. (NASDAQ:BBBY)

Bed Bath & Beyond Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and lack of dividends. The Enterprising Investor is only initially concerned by the lack of dividends.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.99 in 2012 to an estimated $4.88 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.29% annual earnings growth over the next 7-10 years.

KeyCorp (NYSE:KEY)

KeyCorp 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. The Enterprising Investor has no initial concerns.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $0.35 in 2011 to an estimated gain of $0.98 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.43% annual earnings growth over the next 7-10 years.

Whole Foods Market, Inc. (NASDAQ:WFM)

Whole Foods Market Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, inconsistent dividend record and the high PEmg and PB ratios. The Enterprising Investor is only initially concerned by the low current ratio.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.70 in 2011 to an estimated $1.49 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 5.88% annual earnings growth over the next 7-10 years.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.

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