Cyclical businesses are those that offer products considered as luxury items, rather than those of absolute necessity, for example gambling and day spas. United Carpets Group and Tandem Group are cyclical companies that are currently trading below what they’re actually worth. Investors can profit from the difference by investing in these cyclical stocks as the current market prices should eventually move towards their true values. If capital gains are what you’re after in your next investment, I’ve put together a list of undervalued stocks you may be interested in, based on the latest financial data from each company.
United Carpets Group PLC (AIM:UCG)
United Carpets Group plc, through its subsidiaries, engages in the carpet and bed retailing business in the United Kingdom. Started in 2004, and currently run by Paul Eyre, the company employs 85 people and with the market cap of GBP £6.31M, it falls under the small-cap group.
UCG’s stock is now floating at around -58% under its true level of £0.18, at a price of UK£0.077, according to my discounted cash flow model. The divergence signals an opportunity to buy UCG shares at a low price. Moreover, UCG’s PE ratio is currently around 5.19x against its its Specialty Retail peer level of, 12.81x meaning that relative to other stocks in the industry, you can buy UCG for a cheaper price. UCG also has a healthy balance sheet, with current assets covering liabilities in the near term and over the long run. UCG also has a miniscule amount of debt on its balance sheet, which gives it headroom to grow and financial flexibility. Interested in United Carpets Group? Find out more here.
Tandem Group plc (AIM:TND)
Tandem Group plc designs, develops, distributes, and retails sports, leisure, and mobility equipment in the United Kingdom and internationally. Started in 1958, and run by CEO Stephen Grant, the company provides employment to 91 people and with the company’s market capitalisation at GBP £7.29M, we can put it in the small-cap category.
TND’s stock is now trading at -85% below its actual value of £9.85, at a price tag of UK£1.45, according to my discounted cash flow model. The divergence signals an opportunity to buy TND shares at a low price. In addition to this, TND’s PE ratio is currently around 4.14x against its its Leisure peer level of, 26.77x meaning that relative to its peers, you can buy TND’s shares at a cheaper price. TND is also in good financial health, as short-term assets amply cover upcoming and long-term liabilities. Finally, its debt relative to equity is 44.02%, which has been falling over time, showing its capability to pay down its debt. More on Tandem Group here.
UP Global Sourcing Holdings plc (LSE:UPGS)
UP Global Sourcing Holdings plc, through its subsidiaries, supplies branded household products worldwide. Started in 1997, and run by CEO Simon Showman, the company now has 200 employees and with the market cap of GBP £36.11M, it falls under the small-cap stocks category.
UPGS’s shares are now trading at -80% less than its intrinsic level of £2.17, at a price of UK£0.44, based on its expected future cash flows. The divergence signals an opportunity to buy UPGS shares at a low price. What’s even more appeal is that UPGS’s PE ratio is trading at around 10.56x against its its Retail Distributors peer level of, 11.7x meaning that relative to its comparable set of companies, we can buy UPGS’s stock at a cheaper price today. UPGS also has a healthy balance sheet, with near-term assets able to cover upcoming and long-term liabilities. Finally, its debt relative to equity is 100.58%, which has been dropping over time, demonstrating UPGS’s ability to pay down its debt. More on UP Global Sourcing Holdings here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks.