Undervalued companies, such as Daqo New Energy and Sandridge Mississippian Trust II, trade at a price less than their true values. 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. If you’re looking for capital gains in your next investment, I suggest you take a look at my list of potentially undervalued stocks.
Daqo New Energy Corp. (NYSE:DQ)
Daqo New Energy Corp., together with its subsidiaries, manufactures and sells polysilicon and wafers in the People’s Republic of China. Formed in 2006, and currently run by Gongda Yao, the company employs 1,813 people and with the company’s market capitalisation at USD $520.17M, we can put it in the small-cap category.
DQ’s shares are now trading at -59% beneath its value of $129.23, at a price tag of $53.35, based on my discounted cash flow model. This difference in price and value gives us a chance to buy low. In terms of relative valuation, DQ’s PE ratio is trading at around 8.9x against its its semiconductors and semiconductor equipment peer level of 25.2x, suggesting that relative to its comparable company group, we can invest in DQ at a lower price. DQ is also strong in terms of its financial health, with current assets covering liabilities in the near term and over the long run. Finally, its debt relative to equity is 62%, which has been falling over time, revealing its ability to reduce its debt obligations year on year.
Sandridge Mississippian Trust II (NYSE:SDR)
SandRidge Mississippian Trust II, a statutory trust, holds royalty interests in specified oil and natural gas properties. Sandridge Mississippian Trust II was formed in 2011 and with the company’s market cap sitting at USD $60.17M, it falls under the small-cap group.
SDR’s stock is now trading at -57% below its real value of $2.79, at a price tag of $1.2, according to my discounted cash flow model. This discrepancy signals a potential opportunity to buy SDR shares at a low price. Also, SDR’s PE ratio is currently around 5.8x against its its oil, gas and consumable fuels peer level of 20x, meaning that relative to its comparable company group, we can buy SDR’s stock at a cheaper price today. SDR is also strong financially, as current assets can cover liabilities in the near term and over the long run. SDR also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility.
Natural Alternatives International, Inc. (NASDAQ:NAII)
Natural Alternatives International, Inc. engages in formulating, manufacturing, and marketing nutritional supplements in the United States and internationally. Started in 1980, and currently run by Mark LeDoux, the company size now stands at 212 people and with the market cap of USD $75.03M, it falls under the small-cap stocks category.
NAII’s stock is currently trading at -79% below its real value of $49.04, at a price of $10.15, according to my discounted cash flow model. The divergence signals an opportunity to buy NAII shares at a low price. Moreover, NAII’s PE ratio is trading at around 10.8x against its its personal products peer level of 22.5x, implying that relative to its peers, NAII’s shares can be purchased for a lower price. NAII is also in good financial health, with current assets covering liabilities in the near term and over the long run. NAII has zero debt on its books as well, meaning it has no long term debt obligations to worry about.
For more financially sound, undervalued companies to add to your portfolio, you can use our free platform to explore our interactive list of undervalued stocks.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.