We evaluated 18 different companies this week to determine whether they are suitable for Defensive Investors, those unwilling to do substantial research, or Enterprising Investors, those who are willing to do such research. We also put each company through the ModernGraham valuation model based on Benjamin Graham’s value investing formulas in order to determine an intrinsic value for each. Out of those 18 companies, only 9 were found to be undervalued or fairly valued and suitable for either Defensive or Enterprising Investors.

The Elite

The following companies were found to be suitable for either the Defensive Investor or Enterprising Investor and undervalued:

Bed Bath & Beyond Inc. (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 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 $2.99 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.As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. 

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

LyondellBasell Industries (LYB)

LyondellBasell Industries qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short history and the high PB ratio.  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 a loss of $1,419.05 in 2011 to an estimated gain of $7.62 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.09% 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.  

State Street Corp (STT)

State Street Corp 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 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 $2.03 in 2011 to an estimated $4.38 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.04% 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.  

The Good

The following companies were found to be suitable for the Defensive Investor or Enterprising Investor and Fairly Valued:

Boeing Company (BA)

Boeing Company qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio as well as the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the low current ratio.  As a result, all Enterprising 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 fairly valued after growing its EPSmg (normalized earnings) from $4.18 in 2011 to an estimated $6.84 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 6.64% 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.  

Fastenal Co (FAST)

Fastenal Co qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the high PEmg and PB ratios.  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.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.94 in 2011 to an estimated $1.60 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 8.28% 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.  

FedEx Corp (FDX)

FedEx Corp qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio as well as the high PEmg and PB ratios.  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.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $4.39 in 2012 to an estimated $6.98 for 2016.  This level of demonstrated earnings growth supports the market’s implied estimate of 7.47% 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.  

SanDisk Corp (SNDK)

SanDisk Corp 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 short dividend history, as well as the high PEmg and PB ratios.  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.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.04 in 2011 to an estimated $3.17 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 7.54% 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.  

Visa Inc (V)

Visa Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the short history as a publicly traded company.  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.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.92 in 2012 to an estimated $2.34 for 2016.  This level of demonstrated earnings growth supports the market’s implied estimate of 12.79% 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.