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A favourable economic condition has been a large driver of growth for companies in the materials industry. Therefore, this industry is a macroeconomic play with the opportunity of riding the wave in times of robust demand for commodities. Polyplex and NMDC are materials industry 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.
Polyplex Corporation Limited (BSE:524051)
Polyplex Corporation Limited manufactures and sells thin and thick polyester (PET) films primarily for flexible packaging in India and internationally. Formed in 1984, and currently lead by Pranay Kothari, the company now has 1,830 employees and with the company’s market cap sitting at INR ₹15.24B, it falls under the large-cap group.
524051’s stock is currently trading at -59% below its intrinsic value of INR1171.26, at the market price of ₹476.35, based on my discounted cash flow model. The difference between value and price signals a potential opportunity to buy 524051 shares at a discount. In terms of relative valuation, 524051’s PE ratio stands at around 11.14x compared to its Chemicals peer level of, 22.78x suggesting that relative to its comparable company group, 524051’s stock can be bought at a cheaper price. 524051 also has a healthy balance sheet, with short-term assets covering liabilities in the near future as well as in the long run. It’s debt-to-equity ratio of 19.49% has been falling for the past few years signalling 524051’s capacity to pay down its debt. Interested in Polyplex? Find out more here.
NMDC Limited (BSE:526371)
NMDC Limited engages in the exploration and production of iron ore in India. Formed in 1958, and currently run by N. Kumar, the company employs 5,572 people and with the company’s market cap sitting at INR ₹367.64B, it falls under the large-cap group.
526371’s stock is currently floating at around 257% lower than its value of INR32.51, at the market price of ₹116.20, based on my discounted cash flow model. The divergence signals an opportunity to buy 526371 shares at a low price. What’s even more appeal is that 526371’s PE ratio is around 14.45x while its Metals and Mining peer level trades at, 19.11x indicating that relative to its peers, 526371’s stock can be bought at a cheaper price. 526371 is also a financially healthy company, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. 526371 has zero debt on its books as well, meaning it has no long term debt obligations to worry about. Dig deeper into NMDC here.