Financial service stocks generally perform in-line with the economy, mainly because these businesses offer services ranging from investment banking to consumer financing, which are in demand during prosperous economic times. Currently, Sachem Capital and Hunt Companies Finance Trust are financial companies I’ve identified as potentially undervalued, meaning their share price is below what these companies are actually worth. Smart investors can make money from this discrepancy by buying these shares, because they believe the current market prices will eventually move towards their true value. And those that want more exposure to the economic cycle should consider the following list of potentially undervalued financial stocks.
Sachem Capital Corp. (AMEX:SACH)
Sachem Capital Corp. operates as a real estate finance company. Sachem Capital was established in 2010 and with the company’s market cap sitting at USD $58.73M, it falls under the small-cap category.
SACH’s stock is currently hovering at around -28% less than its real value of $5.24, at a price of US$3.79, based on my discounted cash flow model. The discrepancy signals an opportunity to buy low. In addition to this, SACH’s PE ratio stands at around 8.74x compared to its Mortgage peer level of, 21.92x indicating that relative to its peers, you can buy SACH for a cheaper price. SACH is also in good financial health, with current assets covering liabilities in the near term and over the long run. More on Sachem Capital here.
Hunt Companies Finance Trust, Inc. (NYSE:HCFT)
Hunt Companies Finance Trust, Inc., a real estate specialty finance company, focuses on investing in portfolio mortgage-backed securities (MBS), mortgages, and other real estate related assets. Hunt Companies Finance Trust was established in 2012 and with the company’s market capitalisation at USD $82.42M, we can put it in the small-cap group.
HCFT’s shares are currently floating at around -37% lower than its intrinsic level of $5.34, at the market price of US$3.34, based on its expected future cash flows. This discrepancy signals a potential opportunity to buy HCFT shares at a low price. Additionally, HCFT’s PE ratio stands at 7.09x while its Mortgage REITs peer level trades at, 9.93x indicating that relative to other stocks in the industry, we can invest in HCFT at a lower price. HCFT also has a healthy balance sheet, with current assets covering liabilities in the near term and over the long run. Continue research on Hunt Companies Finance Trust here.
LCNB Corp. (NASDAQ:LCNB)
LCNB Corp., a financial holding company, provides commercial and personal banking services in Ohio. Formed in 1877, and run by CEO Steve Foster, the company provides employment to 297 people and with the stock’s market cap sitting at USD $190.79M, it comes under the small-cap stocks category.
LCNB’s shares are now floating at around 67% beneath its actual value of $11.81, at a price tag of US$19.75, according to my discounted cash flow model. This difference in price and value gives us a chance to buy low. In terms of relative valuation, LCNB’s PE ratio is trading at around 15.91x compared to its Banks peer level of, 16.83x suggesting that relative to other stocks in the industry, LCNB can be bought at a cheaper price right now. LCNB also has a healthy balance sheet, as current assets can cover liabilities in the near term and over the long run. More on LCNB here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks.