Companies with shares trading at a market price below what they are actually worth, such as Evergreen Gaming and George Weston, are deemed undervalued. There’s a few ways you can measure the value of a company – you can forecast how much money it will make in the future and base your valuation off of this, or you can look around at its peers of similar size and industry to roughly estimate what it should be worth. Below, I’ve created a list of companies that compare favourably in all criteria based on their most recent financial data, making them potentially good investments.
Evergreen Gaming Corporation (TSXV:TNA)
Evergreen Gaming Corporation engages in the gaming operations in the United States. Evergreen Gaming is run by CEO Dawn Mangano. With the company’s market capitalisation at CAD CA$17.95M, we can put it in the small-cap group
TNA’s shares are currently trading at -22% beneath its true level of $0.17, at a price tag of $0.14, based on my discounted cash flow model. This mismatch signals an opportunity to buy TNA shares at a discount. In addition to this, TNA’s PE ratio stands at 7.2x compared to its hotels, restaurants and leisure peer level of 19.4x, indicating that relative to its comparable company group, we can invest in TNA at a lower price. TNA is also in good financial health, with short-term assets covering liabilities in the near future as well as in the long run. It’s debt-to-equity ratio of 52% has been diminishing for the past few years demonstrating TNA’s ability to pay down its debt.
George Weston Limited (TSX:WN)
George Weston Limited engages in food processing and distribution business in Canada and internationally. Established in 1882, and currently headed by CEO Galen Weston, the company size now stands at 195,000 people and with the market cap of CAD CA$14.03B, it falls under the large-cap group.
WN’s shares are currently hovering at around -55% below its value of $242.59, at a price of $109.09, based on my discounted cash flow model. The difference between value and price signals a potential opportunity to buy WN shares at a discount. Furthermore, WN’s PE ratio stands at 23.1x while its food and staples retailing peer level trades at 23.2x, implying that relative to its competitors, WN can be bought at a cheaper price right now. WN is also a financially robust company, as current assets can cover liabilities in the near term and over the long run. It’s debt-to-equity ratio of 91% has been dropping over the past couple of years demonstrating WN’s ability to pay down its debt.
The Caldwell Partners International Inc. (TSX:CWL)
The Caldwell Partners International Inc. provides executive search consulting services in Canada, the United States, and Europe. Established in 1962, and run by CEO John Wallace, the company size now stands at 113 people and has a market cap of CAD CA$21.02M, putting it in the small-cap group.
CWL’s shares are now trading at -50% less than its intrinsic value of $2.05, at the market price of $1.03, according to my discounted cash flow model. The divergence signals an opportunity to buy CWL shares at a low price. Also, CWL’s PE ratio is trading at 17.4x while its professional services peer level trades at 34.1x, suggesting that relative to other stocks in the industry, CWL’s shares can be purchased for a lower price. CWL also has a healthy balance sheet, with short-term assets covering liabilities in the near future as well as in the long run. CWL has zero debt on its books as well, meaning it has no long term debt obligations to worry about.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.