5 Value Stocks With Low Price-to-Earnings Ratios: Chevron, Unum, Aflac, More

NEW YORK (TheStreet) -- How should investors pick among the great companies in the market today?

By using the ModernGraham Valuation Model, I've selected the five lowest PEmg (price per our measure of normalized earnings) companies that we review. Each company is suitable for the defensive investor -- someone not able or willing to do substantial research into individual investments, and therefore someone who needs to select only companies that present the least 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.

Here are our picks to consider.

1. National Presto Industries (NPK)

National Presto Industries is a strong company that fares well in our metrics. The company only fails the market cap requirement of the defensive investor.  All value investors should feel comfortable proceeding with further research into the company.

There's one hitch: the company appears to be overvalued at the current time. National Presto has grown EPSmg (our measure of normalized earnings) from $6.60 in 2009 to $6.73 in 2013, a very low level of growth that does not support the market's current implied estimate of 0.83% earnings growth.  

The ModernGraham valuation model has accordingly estimated an intrinsic value that falls below a margin of safety in relation to the price.


NPK Chart

NPK data by YCharts

2. Ensco (ESV)

Ensco is suitable for either the defensive investor or the enterprising investor. The defensive investor's only concern is the low current ratio, but the company passes all of the other requirements. The enterprising investor has some concerns, but since the company is suitable for defensive investors it is by default also suitable for enterprising investors. Value investors should feel very comfortable proceeding with further research into the company.  

From a valuation perspective, the company does not fare very well after seeing a drop in EPSmg (our measure of normalized earnings) from $6.13 in 2009 to $4.91 for 2013. This lack of demonstrated earnings growth does not support the market's implied estimate of 1.0% earnings growth and leads our valuation model to return an estimate of intrinsic value that is well below the market price.

ESV Chart

ESV data by YCharts

Up next: Chevron.

3. Chevron (CVX)

Chevron remains suitable for either the defensive investor or the enterprising investor. The defensive investor's only issue with the company is the low current ratio, and the enterprising investor's only issue is the high level of debt relative to the company's current assets. The company passes every other requirement.

Value investors should feel comfortable proceeding with further research, including a review of Exxon-Mobil (XOM) and Conoco Phillips (COP).  

From the valuation side of things, the company has grown its EPSmg (our measure of normalized earnings) from $8.09 in 2009 to $11.58 for 2013. This is a solid level of growth that outpaces the market's implied estimate of earnings growth of 1.09%, and our valuation model accordingly returns an estimate of intrinsic value that surpasses the market price by more than our margin of safety.

Therefore, the company appears to be undervalued presently.

CVX Chart

CVX data by YCharts

4. Aflac (AFL)

Aflac is suitable for either the defensive investor or the enterprising investor, having passed all of the requirements of each investor type. Value investors should feel very comfortable proceeding with further research into the company.

From a valuation perspective, the company appears strong, having grown its EPSmg (our measure of normalized earnings) from $3.01 in 2009 to $5.59 for 2013. This is a level of demonstrated historical growth that significantly outpaces the market's current implied estimate of only 1.28% earnings growth.

The ModernGraham valuation model accordingly returns an estimate of intrinsic value that is well above a margin of safety when compared to the market price.


AFL Chart

AFL data by YCharts

5. Unum (UNM)

Unum is suitable for either the defensive investor or the enterprising investor, since it passes all of the requirements of both investor types -- a rare accomplishment. Value investors should feel comfortable proceeding with further research into Unum and comparing the company to other opportunities such as Aflac (AFL), Chubb (CB) and Travelers (TRV).

The company appears undervalued after growing its EPSmg (our measure of normalized earnings) from $2.25 in 2010 to an estimated $2.97 for 2014. This level of demonstrated growth is stronger than the market's implied estimate of 1.35% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

UNM Chart

UNM data by YCharts

What do you think? Are these companies a good value for defensive investors? Is there a company you like better? Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

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At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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