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5 Undervalued Companies for Enterprising Investors

3. Capital One Financial

Capital One Financial (COF - Get Report) is a great company, but it has not shown big growth in its earnings over the 10-year historical period. But enterprising investors should feel very comfortable proceeding with further research into the company and comparing it to competitors like JPMorgan Chase (JPM).  

From the valuation side of things, the company appears to be significantly undervalued after growing its EPSmg (normalized earnings) from $3.14 in 2009 to $6.56 for 2013. This solid level of demonstrated growth surpasses the market's implied estimate of 1.67% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

COF Chart

COF data by YCharts

4. Discover Financial Services

Discover Financial Services (DFS) is a company that is intriguing. The company has a short history as a publicly traded company and has yet to establish much dividend history. But enterprising investors following the Benjamin Graham approach should feel comfortable proceeding with further research into the company. Compare Discover, for example, to other opportunities such as Wells Fargo (WFC).

As for the valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.78 in 2010 to an estimated $4.51 for 2014.  This solid level of demonstrated growth more than supports the market's implied estimate of 2.21% earnings growth and leads our valuation model to return an estimate of intrinsic value that is well above the market price.

DFS Chart

DFS data by YCharts

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