5 Undervalued Midcap Stocks For Value Investors

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Includes: FL, LIMAF, NAVI, SIG, TFIFF
by: Benjamin Clark

Summary

These five companies are all rated as suitable for the Defensive Investor and/or the Enterprising Investor following the ModernGraham approach.

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

The five companies all have a market cap between $2-10 billion.

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I've screened the 650+ companies reviewed by ModernGraham to select five mid cap undervalued companies for value investors.

Each company has been determined to be suitable for either the Defensive Investor or 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.

Navient Corp. (NAVI)

Navient Corp. 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 $0.63 in 2012 to an estimated $2.39 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.25% 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.

At the time of valuation, further research into Navient Corp. revealed the company was trading below its Graham Number of $21.98. The company pays a dividend of $0.64 per share, for a yield of 4.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share - ModernGraham) was 6.01, which was below the industry average of 19.87, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Foot Locker, Inc. (FL)

Foot Locker, 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 high PB ratio. 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 $2.16 in 2014 to an estimated $4.47 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 4.23% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Foot Locker, Inc. revealed the company was trading above its Graham Number of $48.72. The company pays a dividend of $1.1 per share, for a yield of 1.5% Its PEmg (price over earnings per share - ModernGraham) was 16.96, which was below the industry average of 50.09, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $11.28.

Signet Jewelers Ltd. (SIG)

Signet Jewelers Ltd. 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, 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 $2.84 in 2013 to an estimated $5.77 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 3.39% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Signet Jewelers Ltd. revealed the company was trading above its Graham Number of $71.41. The company pays a dividend of $1 per share, for a yield of 1.1% Its PEmg (price over earnings per share - ModernGraham) was 15.29, which was below the industry average of 26.36, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $4.06.

Linamar Corporation (OTCPK:LIMAF)

Linamar Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years. 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 $2.22 in 2013 to an estimated $6.93 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.1% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Linamar Corporation revealed the company was trading below its Graham Number of $83.15. The company pays a dividend of $0.4 per share, for a yield of 0.7% Its PEmg (price over earnings per share - ModernGraham) was 8.7, which was below the industry average of 18.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.49.

TFI International Inc. (OTCQX:TFIFF)

TFI International Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. 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 $1 in 2013 to an estimated $3 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.38% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into TFI International Inc revealed the company was trading above its Graham Number of $26.97. The company pays a dividend of $0.7 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share - ModernGraham) was 9.26, which was below the industry average of 31.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.36.

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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: See a list of my current holdings on ModernGraham.com. This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions. ModernGraham is not affiliated with the company in any manner. Please be sure to review our detailed disclaimer on ModernGraham.com.

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