Codan And Two More ASX Listed Firms That May Be Priced Below Estimated True Value

The Australian stock market has shown a steady rise over the past year, increasing by 9.1%, despite remaining flat in the last 7 days. In this context of expected earnings growth of 14% per annum in the coming years, identifying stocks that may be undervalued could present opportunities for investors looking for potential gains in a growing market.

Top 10 Undervalued Stocks Based On Cash Flows In Australia

Name	Current Price	Fair Value (Est)	Discount (Est)
Fenix Resources (ASX:FEX)	A$0.385	A$0.77	49.9%
MaxiPARTS (ASX:MXI)	A$2.00	A$3.95	49.4%
Ansell (ASX:ANN)	A$26.64	A$50.12	46.9%
Strike Energy (ASX:STX)	A$0.205	A$0.41	49.8%
hipages Group Holdings (ASX:HPG)	A$1.065	A$2.06	48.3%
IPH (ASX:IPH)	A$6.13	A$11.83	48.2%
Australian Clinical Labs (ASX:ACL)	A$2.46	A$4.70	47.6%
Millennium Services Group (ASX:MIL)	A$1.145	A$2.24	48.9%
Lotus Resources (ASX:LOT)	A$0.295	A$0.56	47.2%
MedAdvisor (ASX:MDR)	A$0.55	A$1.07	48.7%

Click here to see the full list of 43 stocks from our Undervalued ASX Stocks Based On Cash Flows screener.

We'll examine a selection from our screener results.

Codan (ASX:CDA)

Overview: Codan Limited specializes in developing technology solutions for a diverse range of sectors including United Nations organizations, mining companies, and security groups, with a market capitalization of A$2.18 billion.

Operations: The company generates revenue primarily through its Communications and Metal Detection segments, totaling A$291.50 million and A$212.20 million respectively.

Estimated Discount To Fair Value: 27.2%

Codan, an Australian company, is trading at A$12, which is 27.2% below the estimated fair value of A$16.49, indicating it's undervalued based on discounted cash flows. Its revenue and earnings are expected to grow at 9.1% and 16.2% per year respectively, outpacing the Australian market averages of 5.6% for revenue and 13.5% for earnings growth. Additionally, Codan's Return on Equity is forecast to be a robust 21.5% in three years, further highlighting its financial health and potential for growth.

• According our earnings growth report, there's an indication that Codan might be ready to expand.
• Dive into the specifics of Codan here with our thorough financial health report.

Nickel Industries (ASX:NIC)

Overview: Nickel Industries Limited is an Australian company focused on nickel ore mining and the production of nickel pig iron and nickel matte, with a market capitalization of approximately A$3.45 billion.

Operations: The company generates revenue through three primary activities: nickel ore mining in Indonesia contributing A$36.81 million, HPAL projects across Indonesia and Hong Kong totaling A$32.58 million, and RKEF projects in Indonesia and Singapore amounting to A$1.81 billion.

Estimated Discount To Fair Value: 18.3%

Nickel Industries, priced at A$0.81, is below the calculated fair value of A$0.99, reflecting a modest undervaluation. Despite a profit margin decline to 6.5% from last year's 13.1%, its earnings are expected to surge by 34.89% annually, outperforming the broader Australian market's growth forecast of 13.5%. However, its dividend sustainability is questionable as payouts are not well covered by free cash flows. Recent strategic moves include securing a new US$250 million loan to support acquisitions and extending their buyback plan until mid-2025.

• Upon reviewing our latest growth report, Nickel Industries' projected financial performance appears quite optimistic.
• Click here and access our complete balance sheet health report to understand the dynamics of Nickel Industries.

Sandfire Resources (ASX:SFR)

Overview: Sandfire Resources Limited is a mining company that focuses on the exploration, evaluation, and development of mineral tenements and projects, with a market capitalization of approximately A$3.82 billion.

Operations: The company generates revenue primarily from its MATSA Copper Operations, which brought in A$581.75 million, and its Degrussa Copper Operations, contributing A$94.49 million.

Estimated Discount To Fair Value: 42.2%

Sandfire Resources, trading at A$8.35, is significantly undervalued with a fair value estimate of A$14.46, marking a 42.2% discrepancy. The company's revenue growth is anticipated to surpass the Australian market average significantly at 16.8% annually compared to 5.6%. While earnings are expected to increase by 52.81% per year, Sandfire is projected to achieve profitability within three years, outpacing typical market growth rates. However, its forecasted Return on Equity in three years stands low at 10.8%.

• Our earnings growth report unveils the potential for significant increases in Sandfire Resources' future results.
• Get an in-depth perspective on Sandfire Resources' balance sheet by reading our health report here.

Seize The Opportunity

• Click here to access our complete index of 43 Undervalued ASX Stocks Based On Cash Flows.
• Are these companies part of your investment strategy? Use Simply Wall St to consolidate your holdings into a portfolio and gain insights with our comprehensive analysis tools.
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Searching for a Fresh Perspective?

• Explore high-performing small cap companies that haven't yet garnered significant analyst attention.
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• Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management.

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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