HML Holdings and BT Group may be trading at prices below their likely values. This suggests that these stocks are undervalued, meaning we can benefit when the stock price moves to its true valuation. There’s a few ways you can determine how much a company is actually worth. The most popular methods include discounting the company’s cash flows it is expected to create in the future, or comparing its price to its peers or the value of its assets. The discrepancy between the price and value means investors have an opportunity to buy shares at a discount. Below are the stocks I believe are undervalued on all criteria, based on their latest financial data.
HML Holdings plc (AIM:HMLH)
HML Holdings plc, together with its subsidiaries, provides residential property management services in the United Kingdom. Formed in 1991, and currently run by Robert Plumb, the company size now stands at 500 people and with the company’s market capitalisation at GBP £14.52M, we can put it in the small-cap stocks category.
HMLH’s stock is currently floating at around -56% lower than its intrinsic value of £0.73, at a price tag of £0.32, according to my discounted cash flow model. This discrepancy gives us a chance to invest in HMLH at a discount. In addition to this, HMLH’s PE ratio stands at around 13.3x relative to its real estate peer level of 7.2x, meaning that relative to other stocks in the industry, you can buy HMLH for a cheaper price. HMLH is also a financially robust company, as short-term assets amply cover upcoming and long-term liabilities. Finally, its debt relative to equity is 16%, which has over the past couple of years indicating HMLH’s capability
BT Group plc (LSE:BT.A)
BT Group plc provides communications services worldwide. Established in 2001, and now led by CEO Gavin Patterson, the company provides employment to 106,400 people and with the market cap of GBP £25.84B, it falls under the large-cap stocks category.
BT.A’s shares are currently floating at around -39% below its real value of £4.37, at a price of £2.68, based on my discounted cash flow model. This mismatch indicates a chance to invest in BT.A at a discounted price. Also, BT.A’s PE ratio stands at around 17x relative to its telcos peer level of 21.1x, implying that relative to its comparable company group, BT.A can be bought at a cheaper price right now. BT.A 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 178%, which has been diminishing for the past few years revealing BT.A’s capacity to reduce its debt obligations year on year.