We evaluated 35 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 35 companies, only 18 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:

Capital One Financial Corp (COF)

Capital One Financial Corp 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 along with the inconsistent dividend record.  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 $5.15 in 2012 to an estimated $7.17 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.28% 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.

Cognizant Technology Solutions Corp (CTSH)

Cognizant Technology Solutions Corp qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends along with the high PEmg and PB ratios.  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 $1.10 in 2011 to an estimated $2.25 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.39% 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.

Dow Chemical Co (DOW)

Dow Chemical Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor is only initially concerned by 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 $1.49 in 2011 to an estimated $3.01 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.65% 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.

D.R. Horton Inc (DHI)

D.R. Horton Inc qualifies 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.  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 $0.35 in 2012 to an estimated $1.94 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.65% 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.

Eastman Chemical Co (EMN)

Eastman Chemical Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor is only initially concerned by 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.