5 Stocks that are currently undervalued

 

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A cheeky word from our legal guy. The information in this article is for entertainment and education purposes only. There is no explicit or implied endorsement of any particular companies. The author owns zero shares in the companies mentioned. We do not recommend  purchasing any of the stocks we have listed. Please consult with your financial planner before making any investment decisions. 

 

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Warren Buffet is perhaps the most famous investor in the world. He has made the term ‘value investing’ an iconic phrase with it appearing across news sites throughout the world. But it is the discounted cash-flow analysis that he employs to identify companies that are trading under value that has been the corner stone to his success.

What is a Discounted Cash Flow (DCF)?

A DCF is a method used to value a company and predict its investment opportunity. It requires projecting the future cash-flow of a company and discounts it to today’s dollars. If the value that is calculated through this method turns out to be higher then what the current price is for that stock, then this may be a great investment opportunity.

Below are five stocks that are currently undervalued when applying the discounted cash flow method.

 

 

jbhifi

JB HI FI seems to be going from strength to strength. Recently they acquired a major competitor in The Good Guys and are well on their way to absolutely dominating the retail sector in Australia. As at the date of writing (23/11) the stock is currently trading at $26.61 but when applying the discounted cash flow analysis the stock is valued at $32.76. This means that the stock is trading at 19% below its intrinsic value!

 

apa

APA Group has over 15,000 kms of natural gas pipelines across mainland Australia. This is an interesting stock because like JB HI FI it is currently trading about 19% below its intrinsic value. It currently trades at $7.52 and has a value of $9.23. Whilst earnings and dividends are expected to grow in the near future, the company does carry a large amount of debt.

 

 

trs

 

Ah the ever reliable Reject Shop. Let me tell you that on paper this looks like a superstar stock. It’s currently trading at $7.86 per share but has an intrinsic value of a massive $18.67! That is a huge difference. Add in that the earnings are expected to grow over the next three years and the company has little debt, this looks like an amazing opportunity.

 

pas

 

You may not be familiar with the name The PAS Group but you would definitely know the brands they sell. Does Black Pepper, Yellow Trail, Everlast, Marvel and Marie Claire all ring a bell. These are the fashion labels that all come under the PAS Group. Think that’s impressive? Wait until you read the numbers. The stock currently trades around $0.72 per share but analysis give it a fair value of $1.80. Add to this that the company carriers NO DEBT. Zero, zilch! The one catch is because the company isn’t huge there are not a lot of analysts predicting the future growth. This means that the expected value of $1.80 can be just the interpretation of one analyst. But you know the old saying right? ‘If you read about it in the paper, it is too late.’

 

rfg3

 

Have enjoyed eating Pizza Capers? A coffee from Gloria Jeans? Or A pastry from Michele’s Patisserie? If you answered yes then you have enjoyed a product from the Retail Food Group. They have a number of household brands that don’t appear to be going anywhere any time soon. They are currently trading at $6.14 which is a 21% discount on its intrinsic value of $7.78. The stock is currently up 43% from this time last year.

 

 

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