Best Discounted Cylical Stocks in April
Industrial names generally suffer from deep cyclicality which can affect companies operating in areas ranging from machinery to aerospace to construction. Currently, Stuart Olson and Cervus Equipment are industrial companies I’ve identified as potentially undervalued, meaning their share price is below what these companies are actually worth. Investors can profit from the difference by investing in these industrial stocks as the current market prices should eventually move towards their true values. If capital gains are what you’re after in your next investment, I’ve put together a list of undervalued stocks you may be interested in, based on the latest financial data from each company.
Stuart Olson Inc. (TSX:SOX)
Stuart Olson Inc. provides general contracting and electrical building systems contracting to the institutional and commercial construction markets in Canada. Started in 1981, and run by CEO David LeMay, the company now has 3,015 employees and with the company’s market cap sitting at CAD CA$203.46M, it falls under the small-cap stocks category.
SOX’s stock is now hovering at around -36% less than its value of $11.25, at a price of CA$7.24, according to my discounted cash flow model. The divergence signals an opportunity to buy SOX shares at a low price. In terms of relative valuation, SOX’s PE ratio stands at around 20.49x relative to its Construction peer level of, 27.19x indicating that relative to its comparable set of companies, we can invest in SOX at a lower price. SOX is also in good financial health, as short-term assets amply cover upcoming and long-term liabilities. It’s debt-to-equity ratio of 40.99% has been falling for the past few years signalling its capability to reduce its debt obligations year on year. Interested in Stuart Olson? Find out more here.
Cervus Equipment Corporation (TSX:CERV)
Cervus Equipment Corporation primarily engages in the sale, after-sale service, and maintenance of agricultural, transportation, construction, and industrial equipment. Started in 2003, and currently run by Graham Drake, the company employs 1,794 people and with the company’s market cap sitting at CAD CA$216.49M, it falls under the small-cap category.
CERV’s stock is currently floating at around -18% under its intrinsic level of $17.2, at a price of CA$14.09, based on my discounted cash flow model. This discrepancy gives us a chance to invest in CERV at a discount. Also, CERV’s PE ratio stands at 11.14x compared to its Trade Distributors peer level of, 15.08x meaning that relative to its peers, CERV’s stock can be bought at a cheaper price. CERV is also in great financial shape, as near-term assets sufficiently cover liabilities in the near future as well as in the long run.
Dig deeper into Cervus Equipment here.
Rocky Mountain Dealerships Inc. (TSX:RME)
Rocky Mountain Dealerships Inc., through its subsidiaries, sells, leases, and provides support services for new and used agriculture and industrial equipment primarily in Canada and the United States. Formed in 1949, and run by CEO Garrett Andrew Ganden, the company now has 840 employees and with the company’s market capitalisation at CAD CA$248.15M, we can put it in the small-cap group.
RME’s stock is now hovering at around 28% less than its true level of $9.7, at a price of CA$12.42, according to my discounted cash flow model. The mismatch signals a potential chance to invest in RME at a discounted price. Moreover, RME’s PE ratio is trading at around 10.53x compared to its Trade Distributors peer level of, 15.08x meaning that relative to its comparable set of companies, we can invest in RME at a lower price. RME is also a financially healthy company, with current assets covering liabilities in the near term and over the long run. Finally, its debt relative to equity is 171.85%, which has been diminishing for the last couple of years signalling RME’s ability to pay down its debt. Continue research on Rocky Mountain Dealerships 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.
