Stocks, such as Smiths City Group, trading at a market price below their true values are considered to be undervalued. Investors can determine how much a company is worth based on how much money they are expected to make in the future, or compared to the value of their peers. The list I’ve put together below are of stocks that compare favourably on all criteria, which potentially makes them good investments if you believe the price should eventually reflect the stock’s actual value.
Smiths City Group Limited (NZSE:SCY)
Smiths City Group Limited engages in retail trading and finance businesses in New Zealand. Formed in 1918, and currently lead by Roy Campbell, the company employs 683 people and has a market cap of NZD NZ$29.51M, putting it in the small-cap group.
SCY’s stock is currently hovering at around -73% lower than its actual worth of $2.1, at a price of $0.56, based on my discounted cash flow model. The mismatch signals a potential chance to invest in SCY at a discounted price. In terms of relative valuation, SCY’s PE ratio is trading at 12.3x compared to its specialty retail peer level of 11.9x, meaning that relative to its comparable company group, you can buy SCY’s shares at a cheaper price. SCY is also a financially healthy company, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. Finally, its debt relative to equity is 100%, which has been diminishing over the past couple of years revealing SCY’s capability to pay down its debt. NZSE:SCY PE PEG Gauge Nov 14th 17
CDL Investments New Zealand Limited (NZSE:CDI)
CDL Investments New Zealand Limited, together with its subsidiary, CDL Land New Zealand Limited engages in the investment, development, management, and sale of residential land properties in New Zealand. CDL Investments New Zealand is currently run by B. Chiu. With the stock’s market cap sitting at NZD NZ$235.89M, it comes under the small-cap stocks category
CDI’s shares are now trading at -79% below its real value of $4.11, at the market price of $0.85, according to my discounted cash flow model. This discrepancy signals a potential opportunity to buy CDI shares at a low price. Furthermore, CDI’s PE ratio is trading at around 7.5x against its its real estate management and development peer level of 14.8x, meaning that relative to its peers, CDI can be bought at a cheaper price right now. CDI is also a financially robust company, as short-term assets amply cover upcoming and long-term liabilities. CDI has zero debt on its books as well, meaning it has no long term debt obligations to worry about. NZSE:CDI PE PEG Gauge Nov 14th 17
Hallenstein Glasson Holdings Limited (NZSE:HLG)
Hallenstein Glasson Holdings Limited, together with its subsidiaries, retails men’s and women’s clothing in New Zealand and Australia. The company was established in 1873 and with the market cap of NZD NZ$194.53M, it falls under the small-cap category.
HLG’s shares are now hovering at around -42% beneath its value of $5.67, at the market price of $3.3, according to my discounted cash flow model. This mismatch indicates a chance to invest in HLG at a discounted price. What’s even more appeal is that HLG’s PE ratio is currently around 11.4x while its specialty retail peer level trades at 11.9x, indicating that relative to its peers, HLG can be bought at a cheaper price right now. HLG is also strong in terms of its financial health, with short-term assets covering liabilities in the near future as well as in the long run. HLG has zero debt on its books as well, meaning it has no long term debt obligations to worry about. NZSE:HLG PE PEG Gauge Nov 14th 17
For more financially sound, undervalued companies to add to your portfolio, you can use our free platform to explore our interactive list of undervalued stocks.
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