There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I've selected the five undervalued companies reviewed by ModernGraham trading closest to their 52 week low. Each of these companies has been determined to be suitable for the Defensive 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.
Be sure to check out the history of this screen to see which companies have been selected in the past.
Fossil Group Inc. (FOSL)
Fossil Group performs well in the ModernGraham model and is suitable for both Defensive and Enterprising Investors. Both investor types are only initially concerned by the lack of dividend payments. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company's intrinsic value.
When it comes to valuation, it is critical to consider the company's earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.68 in 2011 to an estimated $6.01 for 2015. This is a strong level of growth and is well above the market's implied estimate of only 1.68% annual earnings growth over the next 7-10 years.
Here, actual growth in EPSmg over the last several years has averaged nearly 16% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market's implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time. (See the full valuation)
