Cheap Industrials Stocks To Invest In
Industrial names generally suffer from deep cyclicality which can affect companies operating in areas ranging from machinery to aerospace to construction. In Construction Holdings and Thelloy Development Group are industrial stocks on my list that are potentially undervalued, which means their current share prices are trading well-below what the companies are actually worth. There’s a few ways you can determine how much a industrial 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.
In Construction Holdings Limited (SEHK:1500)
In Construction Holdings Limited, an investment holding company, engages in construction and engineering activities in Hong Kong. Established in 1996, and currently headed by CEO Pak Man Lau, the company now has 43 employees and has a market cap of HKD HK$456.50M, putting it in the small-cap stocks category.
1500’s shares are now trading at -72% less than its actual level of $1.99, at the market price of HK$0.55, based on its expected future cash flows. signalling an opportunity to buy the stock at a low price. Also, 1500’s PE ratio is trading at 6.6x against its its Construction peer level of, 13.94x meaning that relative to other stocks in the industry, we can invest in 1500 at a lower price. 1500 is also strong financially, with current assets covering liabilities in the near term and over the long run. 1500 also has a miniscule amount of debt on its balance sheet, which gives it headroom to grow and financial flexibility. More detail on In Construction Holdings here.
Thelloy Development Group Limited (SEHK:1546)
Thelloy Development Group Limited, an investment holding company, provides building construction services primarily in Hong Kong. Started in 1982, and run by CEO Kin Wing Lam, the company size now stands at 206 people and with the market cap of HKD HK$528.00M, it falls under the small-cap stocks category.
1546’s stock is now trading at -78% less than its intrinsic level of $3, at the market price of HK$0.66, 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 addition to this, 1546’s PE ratio is trading at around 11.3x while its Construction peer level trades at, 13.94x suggesting that relative to its comparable set of companies, 1546’s shares can be purchased for a lower price. 1546 is also strong in terms of its financial health, as short-term assets amply cover upcoming and long-term liabilities. 1546 has zero debt on its books as well, meaning it has no long term debt obligations to worry about. More detail on Thelloy Development Group here.
Build King Holdings Limited (SEHK:240)
Build King Holdings Limited, an investment holding company, engages in the construction and civil engineering business in the People’s Republic of China and the Middle East. The company employs 2075 people and with the company’s market cap sitting at HKD HK$732.71M, it falls under the small-cap category.
240’s stock is currently trading at -75% under its true level of $2.34, at the market price of HK$0.59, based on my discounted cash flow model. signalling an opportunity to buy the stock at a low price. What’s even more appeal is that 240’s PE ratio stands at 3.98x compared to its Construction peer level of, 13.94x indicating that relative to other stocks in the industry, 240’s shares can be purchased for a lower price. 240 is also in good financial health, as near-term assets sufficiently cover liabilities in the near future as well as in the long run.
More on Build King Holdings 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.
