Businesses that fall into this category range from consumer electronics to gambling, which tend to be considered as luxury items rather than necessities. Pendragon and Lookers are cyclical companies that are currently trading below what they’re 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 cyclical stocks.
Pendragon PLC (LSE:PDG)
Pendragon PLC, together with its subsidiaries, operates as an automotive retailer company in the United Kingdom and California. Established in 1988, and currently run by Trevor Finn, the company now has 9,352 employees and with the company’s market cap sitting at GBP £385.98M, it falls under the small-cap stocks category.
PDG’s shares are currently trading at -36% lower than its true value of £0.43, at a price tag of UK£0.28, based on its expected future cash flows. signalling an opportunity to buy the stock at a low price. Additionally, PDG’s PE ratio stands at 7.37x compared to its Specialty Retail peer level of, 13.54x suggesting that relative to its comparable company group, you can buy PDG’s shares at a cheaper price. PDG is also robust in terms of financial health, as current assets can cover liabilities in the near term and over the long run. Finally, its debt relative to equity is 41.70%, which has been diminishing for the last couple of years indicating its ability to pay down its debt. More detail on Pendragon here.
Lookers plc (LSE:LOOK)
Lookers plc engages in the sale, hire, and maintenance of motor vehicles and motorcycles in the United Kingdom and Ireland. Formed in 1908, and now led by CEO Andrew Bruce, the company now has 8,599 employees and with the stock’s market cap sitting at GBP £391.40M, it comes under the small-cap group.
LOOK’s shares are now hovering at around -60% beneath its actual level of £2.76, at a price tag of UK£1.12, based on its expected future cash flows. The mismatch signals a potential chance to invest in LOOK at a discounted price. Additionally, LOOK’s PE ratio is around 9.26x compared to its Specialty Retail peer level of, 13.54x suggesting that relative to other stocks in the industry, LOOK can be bought at a cheaper price right now. LOOK also has a healthy balance sheet, with near-term assets able to cover upcoming and long-term liabilities.
More on Lookers here.
Pets at Home Group Plc (LSE:PETS)
Pets at Home Group Plc, through its subsidiaries, operates as a specialist retailer of pet food, pet related products, and pet accessories in the United Kingdom. Formed in 1991, and currently run by Peter Pritchard, the company employs 6,811 people and with the company’s market capitalisation at GBP £771.00M, we can put it in the small-cap category.