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Companies that trade at market prices below their actual values, such as Cowell e Holdings and China MeiDong Auto Holdings, are perceived to be undervalued. Investors can determine how much a company is worth based on how much money they are expected to make in the future, or compared to the value of their peers. The list I’ve put together below are of stocks that compare favourably on all criteria, which potentially makes them good investments if you believe the price should eventually reflect the stock’s actual value.
Cowell e Holdings Inc. (SEHK:1415)
Cowell e Holdings Inc. designs, develops, manufactures, and sells camera modules for use in smartphones, multimedia tablets, and other mobile devices with camera functions in Hong Kong and South Korea. Established in 1992, and headed by CEO Seokhoon Seong, the company now has 4,267 employees and with the company’s market capitalisation at HKD HK$1.57B, we can put it in the small-cap category.
1415’s shares are currently trading at -54% less than its value of $4.11, at the market price of HK$1.89, according to my discounted cash flow model. This mismatch indicates a chance to invest in 1415 at a discounted price. In terms of relative valuation, 1415’s PE ratio is trading at around 7.25x compared to its Electronic peer level of, 10.97x indicating that relative to other stocks in the industry, 1415’s shares can be purchased for a lower price. 1415 is also strong financially, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. It’s debt-to-equity ratio of 14.13% has been falling for the last couple of years demonstrating 1415’s capability to pay down its debt. More detail on Cowell e Holdings here.
China MeiDong Auto Holdings Limited (SEHK:1268)
China MeiDong Auto Holdings Limited, an investment holding company, operates as an automobile dealer in Mainland China. Formed in 2003, and now run by Tao Ye, the company currently employs 3,489 people and with the stock’s market cap sitting at HKD HK$4.04B, it comes under the mid-cap category.
1268’s stock is now trading at -45% less than its true value of ¥6.42, at a price of HK$3.51, based on my discounted cash flow model. This price and value mismatch indicates a potential opportunity to buy the stock at a low price. Furthermore, 1268’s PE ratio is trading at 11.23x compared to its Specialty Retail peer level of, 14.07x suggesting that relative to its competitors, we can invest in 1268 at a lower price. 1268 is also strong in terms of its financial health, with short-term assets covering liabilities in the near future as well as in the long run. Finally, its debt relative to equity is 75.16%, which has been dropping over the past couple of years signifying its capability to reduce its debt obligations year on year. More on China MeiDong Auto Holdings here.