Undervalued companies, such as STAR Pharmaceutical and First Sponsor Group, trade at a price less than their true values. There’s a few ways you can measure the value of a company – you can forecast how much money it will make in the future and base your valuation off of this, or you can look around at its peers of similar size and industry to roughly estimate what it should be worth. Below, I’ve created a list of companies that compare favourably in all criteria based on their most recent financial data, making them potentially good investments.
STAR Pharmaceutical Limited (SGX:AYL)
STAR Pharmaceutical Limited, an investment holding company, develops, manufactures, and trades pharmaceutical products for hospitals, clinics, and pharmacies in the People’s Republic of China. STAR Pharmaceutical was founded in 1993 and with the market cap of SGD SGD13.95M, it falls under the small-cap stocks category.
AYL’s stock is currently trading at -35% lower than its value of ¥0.46, at a price tag of ¥0.3, based on my discounted cash flow model. This discrepancy gives us a chance to invest in AYL at a discount. Moreover, AYL’s PE ratio is currently around 7.7x while its pharmaceuticals peer level trades at 26.2x, meaning that relative to its competitors, we can buy AYL’s stock at a cheaper price today. AYL is also in great financial shape, with near-term assets able to cover upcoming and long-term liabilities. AYL also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. Dig deeper into STAR Pharmaceutical here.
First Sponsor Group Limited (SGX:ADN)
First Sponsor Group Limited, an investment holding company, invests in, develops, and sells residential and commercial properties in the People’s Republic of China and the Netherlands. Founded in 2007, and now run by Teck Pheng Neo, the company provides employment to 248 people and has a market cap of SGD SGD837.54M, putting it in the small-cap stocks category.
ADN’s shares are now hovering at around -85% beneath its intrinsic level of $9.66, at a price of $1.42, based on my discounted cash flow model. The difference between value and price signals a potential opportunity to buy ADN shares at a discount. In terms of relative valuation, ADN’s PE ratio is trading at around 7.1x while its real estate peer level trades at 10.6x, implying that relative to its comparable company group, ADN’s shares can be purchased for a lower price. ADN is also a financially healthy company, as short-term assets amply cover upcoming and long-term liabilities. It’s debt-to-equity ratio of 49% has been dropping over the past couple of years showing its capability to pay down its debt. Interested in First Sponsor Group? Find out more here.