Stock Analysis

Three Undiscovered Gems in Australia with Strong Fundamentals

ASX:PL8
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The Australian market has shown resilience, with the ASX200 closing up 1.25% at 7777.7 points, buoyed by positive sentiment following China's latest inflation data and a strong performance across various sectors. Amid this backdrop of volatility and recovery, identifying stocks with solid fundamentals becomes crucial for investors looking to capitalize on opportunities in the small-cap space. In this article, we explore three undiscovered gems in Australia that exhibit strong fundamentals and potential for growth despite recent market fluctuations.

Top 10 Undiscovered Gems With Strong Fundamentals In Australia

NameDebt To EquityRevenue GrowthEarnings GrowthHealth Rating
Fiducian GroupNA9.94%6.00%★★★★★★
LycopodiumNA15.62%29.55%★★★★★★
Sugar TerminalsNA2.34%2.64%★★★★★★
Hearts and Minds InvestmentsNA18.39%-3.93%★★★★★★
SKS Technologies GroupNA31.29%43.27%★★★★★★
BSP Financial Group4.92%6.74%5.29%★★★★★☆
AMCILNA5.16%5.31%★★★★★☆
A2B Australia15.83%-7.78%25.44%★★★★☆☆
Paragon Care340.88%28.05%68.37%★★★★☆☆
Boart Longyear Group71.20%9.71%39.19%★★★★☆☆

Click here to see the full list of 55 stocks from our ASX Undiscovered Gems With Strong Fundamentals screener.

Let's explore several standout options from the results in the screener.

Australian Ethical Investment (ASX:AEF)

Simply Wall St Value Rating: ★★★★★★

Overview: Australian Ethical Investment Ltd (ASX:AEF) is a publicly owned investment manager with a market cap of A$445.49 million.

Operations: The company generates revenue primarily from its funds management segment, which brought in A$93.03 million.

Australian Ethical Investment has shown impressive earnings growth of 137.8% over the past year, significantly outperforming the Capital Markets industry average of -0.1%. Despite a one-off loss of A$4.7M impacting its last 12 months to December 2023, it remains debt-free and has been for five years. Additionally, the company is free cash flow positive and does not face any concerns regarding interest coverage due to its lack of debt.

ASX:AEF Earnings and Revenue Growth as at Aug 2024
ASX:AEF Earnings and Revenue Growth as at Aug 2024

K&S (ASX:KSC)

Simply Wall St Value Rating: ★★★★★★

Overview: K&S Corporation Limited operates in transportation and logistics, contract management, warehousing and distribution, and fuel distribution across Australia and New Zealand with a market cap of A$458.44 million.

Operations: K&S Corporation Limited generates revenue primarily from its Australian Transport (A$600.34 million), Fuel (A$228.78 million), and New Zealand Transport (A$71.16 million) segments.

K&S has shown impressive earnings growth of 22.9% over the past year, outpacing the logistics industry's -26.2%. The company's debt to equity ratio has improved from 16.1% to 15.2% in five years, indicating prudent financial management. With interest payments well covered by EBIT at 10.7x and trading at a significant discount of 36.5% below its estimated fair value, K&S appears poised for continued strength in its sector.

ASX:KSC Earnings and Revenue Growth as at Aug 2024
ASX:KSC Earnings and Revenue Growth as at Aug 2024

Plato Income Maximiser (ASX:PL8)

Simply Wall St Value Rating: ★★★★★★

Overview: Plato Income Maximiser Limited is a privately owned investment manager with a market cap of A$917.08 million.

Operations: The company generates revenue primarily through investment activities, totaling A$64.98 million.

Plato Income Maximiser has shown remarkable performance with a 255% earnings growth over the past year, significantly outpacing the Capital Markets industry. The company is debt-free and boasts a price-to-earnings ratio of 17.1x, which is below the Australian market average of 18.9x. Despite an improved profit margin at 82.5%, it remains lower than last year's figures, and shareholders have experienced dilution recently. Additionally, three fully franked dividends of A$0.0055 per share are scheduled for July to September 2024.

ASX:PL8 Debt to Equity as at Aug 2024
ASX:PL8 Debt to Equity as at Aug 2024

Key Takeaways

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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