Deluxe and Navient may be trading at prices below their likely values. This suggests that these stocks are undervalued, meaning we can benefit when the stock price moves to its true valuation. There’s a few ways you can measure the value of a company – you can forecast how much money it will make in the future and base your valuation off of this, or you can look around at its peers of similar size and industry to roughly estimate what it should be worth. Below, I’ve created a list of companies that compare favourably in all criteria based on their most recent financial data, making them potentially good investments.
Deluxe Corporation (NYSE:DLX)
Deluxe Corporation provides checks, forms, marketing solutions, accessories, and other products and services for small businesses and financial institutions. Formed in 1915, and run by CEO Lee Schram, the company provides employment to 5,886 people and with the stock’s market cap sitting at USD $3.21B, it comes under the mid-cap group.
DLX’s shares are now floating at around -55% below its intrinsic value of $149.73, at a price tag of US$67.02, according to my discounted cash flow model. The difference between value and price signals a potential opportunity to buy DLX shares at a discount. In terms of relative valuation, DLX’s PE ratio is currently around 13.68x compared to its Commercial Services peer level of, 18.24x meaning that relative to its comparable company group, we can invest in DLX at a lower price. DLX is also robust in terms of financial health, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. Finally, its debt relative to equity is 70.60%, which has been falling over the past couple of years demonstrating its capacity to pay down its debt. Interested in Deluxe? Find out more here.
Navient Corporation (NASDAQ:NAVI)
Navient Corporation provides asset management and business processing services to education, health care, and government clients at the federal, state, and local levels in the United States. Founded in 1973, and now led by CEO John Remondi, the company now has 6,700 employees and has a market cap of USD $3.75B, putting it in the mid-cap stocks category.
NAVI’s shares are currently trading at -26% under its intrinsic value of $19.05, at a price of US$14.17, based on my discounted cash flow model. The mismatch signals a potential chance to invest in NAVI at a discounted price. Additionally, NAVI’s PE ratio is trading at around 11.54x relative to its Consumer Finance peer level of, 15.09x indicating that relative to its comparable set of companies, you can buy NAVI for a cheaper price. NAVI is also strong financially, as current assets can cover liabilities in the near term and over the long run.
More detail on Navient here.
Lennar Corporation (NYSE:LEN)
Lennar Corporation, together with its subsidiaries, operates as a homebuilder primarily under the Lennar brand in the United States. Established in 1954, and run by CEO Richard Beckwitt, the company size now stands at 9,111 people and with the stock’s market cap sitting at USD $16.90B, it comes under the large-cap category.
LEN’s stock is now trading at -15% less than its actual value of $61.99, at a price tag of US$52.50, according to my discounted cash flow model. This price and value mismatch indicates a potential opportunity to buy the stock at a low price. Furthermore, LEN’s PE ratio is around 14.08x while its Consumer Durables peer level trades at, 15.07x meaning that relative to its comparable set of companies, you can purchase LEN’s stock for a lower price right now. LEN also has a healthy balance sheet, with short-term assets covering liabilities in the near future as well as in the long run. Finally, its debt relative to equity is 88.00%, which has been falling over the past couple of years signifying LEN’s capacity to pay down its debt. Interested in Lennar? Find out more 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.