The fortunes of financial services companies often follow that of the broader economy, mainly because these businesses offer services ranging from investment banking to consumer financing, which are in demand during prosperous economic times. Lakshmi Vilas Bank and Vijaya Bank are two financial stocks I have identified as undervalued. This means their current share prices are trading at levels less than what the companies are actually worth. Investors can profit from the difference by investing in these financial 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.
The Lakshmi Vilas Bank Limited (BSE:534690)
The Lakshmi Vilas Bank Limited provides various banking products and services in India. Formed in 1926, and currently lead by Parthasarathi Mukherjee, the company size now stands at 4,043 people and has a market cap of INR ₹24.26B, putting it in the large-cap stocks category.
534690’s stock is now floating at around 78% less than its value of INR53.29, at the market price of ₹94.75, based on my discounted cash flow model. This price and value mismatch indicates a potential opportunity to buy the stock at a low price. In terms of relative valuation, 534690’s PE ratio is trading at 20.23x against its its index peer level of, 23.81x implying that relative to its comparable set of companies, 534690’s stock can be bought at a cheaper price. 534690 is also strong financially, as current assets can cover liabilities in the near term and over the long run.
More on Lakshmi Vilas Bank here.
Vijaya Bank (BSE:532401)
Vijaya Bank provides various banking products and services primarily in India. Established in 1931, and headed by CEO Radhamangalam A. Sankara Narayanan, the company now has 15,679 employees and with the company’s market capitalisation at INR ₹76.29B, we can put it in the large-cap stocks category.
532401’s shares are now trading at 473% lower than its intrinsic value of INR10.22, at the market price of ₹58.50, based on its expected future cash flows. This mismatch indicates a chance to invest in 532401 at a discounted price. In addition to this, 532401’s PE ratio is trading at 8.57x against its its Banks peer level of, 20.23x implying that relative to its competitors, we can invest in 532401 at a lower price. 532401 is also strong in terms of its financial health, with short-term assets covering liabilities in the near future as well as in the long run.
More on Vijaya Bank here.
Power Finance Corporation Limited (NSEI:PFC)
Power Finance Corporation Limited provides financial products and related advisory, and other services to the power sector in India. Established in 1986, and currently run by Rajeev Sharma, the company now has 427 employees and with the stock’s market cap sitting at INR ₹202.10B, it comes under the large-cap stocks category.
PFC’s shares are currently trading at -60% less than its intrinsic level of INR191.25, at a price of ₹76.55, based on its expected future cash flows. This difference in price and value gives us a chance to buy low. Furthermore, PFC’s PE ratio is trading at 9.04x relative to its Diversified Financial peer level of, 16.67x indicating that relative to its comparable set of companies, PFC’s stock can be bought at a cheaper price. PFC is also in good financial health, as short-term assets amply cover upcoming and long-term liabilities.
More detail on Power Finance 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.