Undervalued companies, such as Warehouse Group and SKY Network Television, are those that trade at a price below their actual values. 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.
The Warehouse Group Limited (NZSE:WHS)
The Warehouse Group Limited, together with its subsidiaries, engages in the retail of general merchandise and apparel in New Zealand. Founded in 1982, and now led by CEO Nick Grayston, the company employs 12,000 people and with the market cap of NZD NZ$695.88M, it falls under the small-cap group.
WHS’s shares are now trading at -21% below its real value of $2.54, at a price tag of NZ$2.02, according to my discounted cash flow model. This mismatch indicates a chance to invest in WHS at a discounted price. Furthermore, WHS’s PE ratio stands at 10.78x compared to its Multiline Retail peer level of, 17.06x meaning that relative to its competitors, we can purchase WHS’s shares for cheaper. WHS is also a financially robust company, as short-term assets amply cover upcoming and long-term liabilities. Finally, its debt relative to equity is 43.09%, which has been diminishing for the last couple of years signalling WHS’s capability to reduce its debt obligations year on year. More detail on Warehouse Group here.
SKY Network Television Limited (NZSE:SKT)
SKY Network Television Limited provides multi-channel, pay television, and free-to-air television services in New Zealand. Started in 2005, and run by CEO John Fellet, the company size now stands at 1,192 people and with the company’s market capitalisation at NZD NZ$910.59M, we can put it in the small-cap stocks category.
SKT’s stock is currently floating at around -26% beneath its true value of $3.16, at the market price of NZ$2.34, based on its expected future cash flows. The divergence signals an opportunity to buy SKT shares at a low price. What’s even more appeal is that SKT’s PE ratio stands at around 7.39x while its Media peer level trades at, 16.48x meaning that relative to other stocks in the industry, we can invest in SKT at a lower price. SKT is also a financially healthy company, as short-term assets amply cover upcoming and long-term liabilities. It’s debt-to-equity ratio of 21.38% has been diminishing for the past few years showing its capability to reduce its debt obligations year on year. Interested in SKY Network Television? Find out more here.
Geneva Finance Limited (NZSE:GFL)
Geneva Finance Limited provides finance and financial services to the consumer credit and small to medium business markets in New Zealand. Formed in 2002, and run by CEO David O’Connell, the company provides employment to 34 people and with the company’s market capitalisation at NZD NZ$42.97M, we can put it in the small-cap stocks category.
GFL’s shares are now hovering at around -40% beneath its intrinsic level of $1.02, at the market price of NZ$0.61, based on its expected future cash flows. The divergence signals an opportunity to buy GFL shares at a low price. What’s even more appeal is that GFL’s PE ratio is trading at around 7.25x against its its Consumer Finance peer level of, 18.71x suggesting that relative to its peers, we can buy GFL’s stock at a cheaper price today. GFL is also in great financial shape, 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 207.95%, which has been declining over the past couple of years revealing GFL’s capability to reduce its debt obligations year on year. Dig deeper into Geneva Finance here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks.