Companies that trade at market prices below their actual values, such as E-L Financial and Air Canada, are perceived to be undervalued. Smart investors can make money from this discrepancy by buying these shares, because they believe the current market prices will eventually move towards their true value. If you’re looking for capital gains in your next investment, I suggest you take a look at my list of potentially undervalued stocks.
E-L Financial Corporation Limited (TSX:ELF)
E-L Financial Corporation Limited operates as an investment and insurance holding company in Canada. E-L Financial was founded in 1968 and with the company’s market cap sitting at CAD CA$3.16B, it falls under the mid-cap group.
ELF’s shares are currently trading at -40% lower than its value of $1332.85, at a price of CA$805.00, according to my discounted cash flow model. signalling an opportunity to buy the stock at a low price. Additionally, ELF’s PE ratio stands at around 7.02x against its its Insurance peer level of, 14.37x indicating that relative to other stocks in the industry, we can invest in ELF at a lower price. ELF is also a financially robust company, as current assets can cover liabilities in the near term and over the long run.
Dig deeper into E-L Financial here.
Air Canada (TSX:AC)
Air Canada provides domestic, U.S. transborder, and international airline services. Established in 1937, and currently headed by CEO Calin Rovinescu, the company now has 28,900 employees and with the stock’s market cap sitting at CAD CA$6.44B, it comes under the mid-cap group.
AC’s stock is now trading at -76% lower than its value of $102.26, at the market price of CA$24.65, according to my discounted cash flow model. The divergence signals an opportunity to buy AC shares at a low price. Also, AC’s PE ratio is trading at around 3.58x relative to its Airlines peer level of, 5.98x indicating that relative to its comparable company group, we can invest in AC at a lower price. AC is also a financially healthy company, with short-term assets covering liabilities in the near future as well as in the long run. It’s debt-to-equity ratio of 203.72% has been dropping over time, revealing AC’s capability to reduce its debt obligations year on year. Continue research on Air Canada here.
Laurentian Bank of Canada (TSX:LB)
Laurentian Bank of Canada, together with its subsidiaries, provides banking services to individuals, small and medium-sized enterprises, and independent advisors in Canada and the United States. Established in 1846, and currently run by François Desjardins, the company size now stands at 3,771 people and with the market cap of CAD CA$2.05B, it falls under the mid-cap group.
LB’s stock is now hovering at around -28% lower than its actual level of $68.81, at a price tag of CA$49.36, based on its expected future cash flows. This mismatch indicates a potential opportunity to buy low. Additionally, LB’s PE ratio is trading at 8.97x relative to its Banks peer level of, 13.26x indicating that relative to other stocks in the industry, we can invest in LB at a lower price. LB is also a financially healthy company, as short-term assets amply cover upcoming and long-term liabilities.
More detail on Laurentian Bank of Canada 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.