Companies, such as Pendrell, are deemed to be undervalued because their shares are currently trading below 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.
Pendrell Corporation (NASDAQ:PCO)
Pendrell Corporation invests in, acquires, and develops businesses with unique technologies that are protected by intellectual property (IP) rights in the United States. Established in 1995, and headed by CEO Lee Mikles, the company currently employs 14 people and with the market cap of USD $165.20M, it falls under the small-cap stocks category.
PCO’s stock is now hovering at around -70% beneath its true value of $22.21, at a price of $6.75, based on my discounted cash flow model. This discrepancy signals a potential opportunity to buy PCO shares at a low price. Furthermore, PCO’s PE ratio is around 13.1x while its professional services peer level trades at 25x, implying that relative to its competitors, you can buy PCO for a cheaper price. PCO is also a financially healthy company, as current assets can cover liabilities in the near term and over the long run. PCO also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility.
SandRidge Permian Trust (NYSE:PER)
SandRidge Permian Trust holds royalty interests in specified oil and natural gas properties in the Permian Basin located in Andrews County, Texas. SandRidge Permian Trust was founded in 2011 and with the company’s market capitalisation at USD $141.75M, we can put it in the small-cap stocks category.
PER’s shares are now hovering at around -51% under its actual value of $5.55, at a price tag of $2.7, based on its expected future cash flows. signalling an opportunity to buy the stock at a low price. In terms of relative valuation, PER’s PE ratio is trading at around 5.9x compared to its oil, gas and consumable fuels peer level of 20x, suggesting that relative to its competitors, you can buy PER’s shares at a cheaper price. PER is also robust in terms of financial health, as short-term assets amply cover upcoming and long-term liabilities. PER also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility.
Owens Realty Mortgage, Inc. (AMEX:ORM)
Owens Realty Mortgage, Inc., a real estate investment trust, focuses on the origination, investment, and management of small balance and middle-market commercial real estate loans primarily in the Western United States. Owens Realty Mortgage was formed in 1983 and with the company’s market cap sitting at USD $163.88M, it falls under the small-cap stocks category.
ORM’s shares are currently floating at around -50% under its intrinsic value of $32.56, at a price tag of $16.32, based on its expected future cash flows. This price and value mismatch indicates a potential opportunity to buy the stock at a low price. Furthermore, ORM’s PE ratio stands at around 14x against its its mortgage real estate investment trusts (reits) peer level of 8.4x, implying that relative to its competitors, ORM’s shares can be purchased for a lower price. ORM is also in great financial shape, with short-term assets covering liabilities in the near future as well as in the long run. Finally, its debt relative to equity is 13%, which has over time, signalling ORM’s capability
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.