Companies in the industrials sector operate in areas ranging from aerospace and defence to building products and construction. Most industrial names tend to suffer from relatively high cyclicality. Currently, MS INTERNATIONAL and North Midland Construction are industrial 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 value a industrial company. 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. Analysing the most recent financial data, I’ve created a list of companies that compare favourably in all criteria, making them potentially good investments.
MS INTERNATIONAL plc (AIM:MSI)
MS INTERNATIONAL plc designs, manufactures, sells, and services engineering products in Europe, North America, and internationally. Formed in 1960, and now led by CEO , the company size now stands at 409 people and has a market cap of GBP £29.63M, putting it in the small-cap category.
MSI’s stock is currently trading at -65% under its true value of £5.08, at the market price of UK£1.80, according to my discounted cash flow model. This discrepancy signals a potential opportunity to buy MSI shares at a low price. In addition to this, MSI’s PE ratio is currently around 13.21x against its its Aerospace & Defense peer level of, 20.8x implying that relative to its comparable company group, you can buy MSI’s shares at a cheaper price. MSI is also a financially robust company, with short-term assets covering liabilities in the near future as well as in the long run. MSI also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. Dig deeper into MS INTERNATIONAL here.
North Midland Construction PLC (LSE:NMD)
North Midland Construction PLC engages in the civil, building and mechanical, and electrical engineering businesses in the United Kingdom. Started in 1946, and currently run by John Homer, the company currently employs 1,280 people and has a market cap of GBP £30.45M, putting it in the small-cap category.
NMD’s shares are now trading at -80% beneath its true level of £14.75, at a price tag of UK£3.00, based on my discounted cash flow model. This discrepancy signals a potential opportunity to buy NMD shares at a low price. In terms of relative valuation, NMD’s PE ratio is trading at 9.7x while its Construction peer level trades at, 13.22x indicating that relative to other stocks in the industry, we can buy NMD’s stock at a cheaper price today. NMD is also strong financially, with near-term assets able to cover upcoming and long-term liabilities.
More detail on North Midland Construction here.
Billington Holdings Plc (AIM:BILN)
Billington Holdings Plc, through its subsidiaries, designs, manufactures, and installs structural steelworks in the United Kingdom and rest of Europe. Founded in 1989, and now run by Mark Smith, the company employs 361 people and with the stock’s market cap sitting at GBP £31.21M, it comes under the small-cap stocks category.
BILN’s shares are now hovering at around -57% lower than its actual value of £6.05, at the market price of UK£2.59, according to my discounted cash flow model. The mismatch signals a potential chance to invest in BILN at a discounted price. Additionally, BILN’s PE ratio is trading at 9.07x against its its Construction peer level of, 13.22x meaning that relative to its comparable set of companies, we can purchase BILN’s shares for cheaper. BILN is also in great financial shape, as short-term assets amply cover upcoming and long-term liabilities.
More detail on Billington Holdings here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks. Or create your own list by filtering AIM and LSE companies based on fundamentals such as intrinsic discount, health score and future outlook using this free stock screener.
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.