High Value Financial Stocks To Buy
Financial service companies’ profitability tends to be tied to the economic cycle, mainly because these businesses provide services such as consumer financing and investment banking, which tend to do well when times are good. Currently, Hong Kong Finance Group and SHK Hong Kong Industries are financial companies I’ve identified as potentially undervalued, meaning their share price is below what these companies are actually worth. There’s a few ways you can determine how much a financial 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.
Hong Kong Finance Group Limited (SEHK:1273)
Hong Kong Finance Group Limited, an investment holding company, provides various money lending services to customers in Hong Kong. Started in 1996, and now run by Pui To Tse, the company provides employment to 43 people and with the company’s market capitalisation at HKD HK$315.40M, we can put it in the small-cap stocks category.
1273’s stock is now floating at around -40% beneath its intrinsic value of $1.26, at a price of HK$0.76, according to my discounted cash flow model. This mismatch indicates a chance to invest in 1273 at a discounted price. Additionally, 1273’s PE ratio stands at around 7.41x against its its Mortgage peer level of, 18.82x suggesting that relative to its competitors, we can invest in 1273 at a lower price. 1273 is also a financially healthy company, as current assets can cover liabilities in the near term and over the long run.
Interested in Hong Kong Finance Group? Find out more here.
SHK Hong Kong Industries Limited (SEHK:666)
SHK Hong Kong Industries Limited is a venture capital firm specializing in early venture, mid venture, emerging growth, and growth capital investments. SHK Hong Kong Industries was formed in 1990 and with the company’s market cap sitting at HKD HK$1.07B, it falls under the small-cap group.
666’s stock is currently floating at around -55% less than its intrinsic value of $0.58, at a price of HK$0.26, based on my discounted cash flow model. The difference between value and price signals a potential opportunity to buy 666 shares at a discount. In addition to this, 666’s PE ratio stands at around 6.41x relative to its Capital Markets peer level of, 14.16x indicating that relative to other stocks in the industry, 666 can be bought at a cheaper price right now. 666 is also a financially robust company, with near-term assets able to cover upcoming and long-term liabilities. 666 also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. Dig deeper into SHK Hong Kong Industries here.
China Art Financial Holdings Limited (SEHK:1572)
China Art Financial Holdings Limited operates as an art finance service provider in the People’s Republic of China. Founded in 2004, and currently headed by CEO Li Simo, the company employs 72 people and has a market cap of HKD HK$1.44B, putting it in the small-cap category.
1572’s shares are now floating at around -53% lower than its actual value of ¥1.91, at the market price of HK$0.90, according to my discounted cash flow model. This mismatch signals an opportunity to buy 1572 shares at a discount. Additionally, 1572’s PE ratio is around 7.19x while its Consumer Finance peer level trades at, 8.89x indicating that relative to its competitors, you can buy 1572’s shares at a cheaper price. 1572 is also strong in terms of its financial health, with near-term assets able to cover upcoming and long-term liabilities. 1572 also has a miniscule amount of debt on its balance sheet, which gives it headroom to grow and financial flexibility. Dig deeper into China Art Financial 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.
