NEW YORK (TheStreet) -- There are a number of great companies in the market today. Each month we screen for stocks with low price-to-earnings ratios, by using the ModernGraham Valuation Model.
In March, we found Ford (F), Freeport-McMoRan (FCX), Capital One (CO), Unum (UNM) and Gannett (GHI). We found the same results in April. However, in May, we dropped two and added two to round out the five-lowest PEmg (price/normalized earnings) companies.
Each company has been determined to be suitable for the "Enterprising (or active, or aggressive) Investors". We also have tips for "Defensive (or passive) Investors." We define both types of investors here.
Discover Financial Services (New Find)
Discover Financial (DFS) is a company that is intriguing to enterprising investors but does not quite qualify for the Defensive Investor. It has a short history as a publicly traded company and has yet to establish the dividend history the defensive investor requires.
Enterprising investors, however, should feel comfortable proceeding with further research into the company and comparing it with peers such as Capital One and Wells Fargo (WFC).
As for the valuation, Discover appears to be undervalued as its EPSmg (normalized earnings) is expected to increase to $4.51 this year from $1.78 in 2010. This growth more than supports the market's implied estimate of 1.96% earnings growth and leads our valuation model to return an estimate of intrinsic value that is well above the market price. (See the full valuation.)