DLH Holdings and Alliance Data Systems are companies that are currently trading below what they’re actually worth. There’s a few ways you can determine how much a company is actually worth. The most popular methods include discounting the company’s cash flows it is expected to create in the future, or comparing its price to its peers or the value of its assets. The discrepancy between the price and value means investors have an opportunity to buy shares at a discount. Below are the stocks I believe are undervalued on all criteria, based on their latest financial data.
DLH Holdings Corp. (NASDAQ:DLHC)
DLH Holdings Corp. provides healthcare and social services in the United States. Started in 1969, and now run by Zachary Parker, the company employs 1,400 people and with the company’s market cap sitting at USD $63.78M, it falls under the small-cap stocks category.
DLHC’s shares are currently floating at around -73% less than its intrinsic value of $20.27, at the market price of US$5.43, based on my discounted cash flow model. The difference between value and price signals a potential opportunity to buy DLHC shares at a discount.
DLHC is also a financially healthy company, with current assets covering liabilities in the near term and over the long run.
Interested in DLH Holdings? Find out more here.
Alliance Data Systems Corporation (NYSE:ADS)
Alliance Data Systems Corporation provides data-driven marketing and loyalty solutions worldwide. Founded in 1996, and currently headed by CEO Edward Heffernan, the company provides employment to 20,000 people and with the company’s market capitalisation at USD $12.32B, we can put it in the large-cap group.
ADS’s stock is now trading at -53% beneath its actual level of $464.46, at a price tag of US$220.57, based on my discounted cash flow model. This mismatch indicates a chance to invest in ADS at a discounted price. What’s even more appeal is that ADS’s PE ratio is around 15.17x compared to its IT peer level of, 24.53x indicating that relative to its peers, ADS’s shares can be purchased for a lower price. ADS also has a healthy balance sheet, as near-term assets sufficiently cover liabilities in the near future as well as in the long run.
Dig deeper into Alliance Data Systems here.
NACCO Industries, Inc. (NYSE:NC)
NACCO Industries, Inc. operates primarily in the mining industry. Formed in 1913, and currently headed by CEO John Butler, the company now has 400 employees and with the company’s market capitalisation at USD $250.44M, we can put it in the small-cap stocks category.
NC’s shares are now hovering at around -35% under its actual worth of $55.68, at a price of US$35.95, based on my discounted cash flow model. This difference in price and value gives us a chance to buy low. Moreover, NC’s PE ratio is trading at around 8.67x compared to its Oil and Gas peer level of, 13.93x indicating that relative to its comparable set of companies, NC’s stock can be bought at a cheaper price. NC is also a financially robust company, as short-term assets amply cover upcoming and long-term liabilities. Finally, its debt relative to equity is 22.58%, which has been dropping for the last couple of years indicating NC’s capacity to pay down its debt. More detail on NACCO Industries here.
For more financially sound, undervalued companies to add to your portfolio, explore this 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.