10 Low PE Stock Picks For The Enterprising Investor – May 2018

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected 10 low PE stocks for the Enterprising Investor. Each company has been determined to be suitable for the Enterprising Investor and undervalued according to the ModernGraham approach.

Defensive Investors are defined as investors who are seeking to minimize risk to the fullest extent. 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.  Learn more about the difference between Defensive Investors and Enterprising Investors.

Bed Bath & Beyond Inc. 

Bed Bath & Beyond Inc. (BBBY) is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and 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 $4.19 in 2014 to an estimated $4.19 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.57% annual earnings loss 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 Bed Bath & Beyond Inc. revealed the company was trading below its Graham Number of $34.59. The company pays a dividend of $0.38 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 5.36, which was below the industry average of 35.42, 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 $-3.6. (See the full valuation)

Signet Jewelers Ltd. 

Signet Jewelers Ltd. (SIG) 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 $3.86 in 2014 to an estimated $6.07 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.22% annual earnings loss 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 below its Graham Number of $61.99. The company pays a dividend of $1.04 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.06, which was below the industry average of 30.22, 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 $-3.32. (See the full valuation)

Lucara Diamond Corp

Lucara Diamond Corp (TSE:LUCis suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, 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.

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Disclaimer: The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing those holdings within the next ...

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Larry Ramer 4 months ago Contributor's comment

It seems like nearly all brick and mortar retailers are in a very tough spot these days. But I think Trump is going to try to help them. Still, it takes a lot of guts to buy their shares now. I prefer ones with a monopoly or near monopoly (BBY) or ones that can provide expertise and have some clear moats and drivers (HD, LOW) or at least a very high degree of customer loyalty (Macy's).