Undervalued companies are those that trade at a price lower than their actual values, such as Cerecor and China Yuchai International. There’s a few ways you can determine how much a 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.
Cerecor Inc. (NASDAQ:CERC)
Cerecor Inc., a pharmaceutical company, focuses on pediatric health care. Started in 2011, and currently lead by Peter Greenleaf, the company provides employment to 38 people and with the stock’s market cap sitting at USD $120.81M, it comes under the small-cap stocks category.
CERC’s shares are currently floating at around -68% below its actual level of $12.14, at the market price of US$3.91, based on its expected future cash flows. This mismatch signals an opportunity to buy CERC shares at a discount. In terms of relative valuation, CERC’s PE ratio is trading at around 9.26x compared to its Pharmaceuticals peer level of, 23.5x implying that relative to other stocks in the industry, CERC’s shares can be purchased for a lower price. CERC also has a healthy balance sheet, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. CERC has zero debt on its books as well, meaning it has no long term debt obligations to worry about. Interested in Cerecor? Find out more here.
China Yuchai International Limited (NYSE:CYD)
China Yuchai International Limited, through its subsidiaries, manufactures and sells diesel and natural gas engines in the People’s Republic of China and internationally. Formed in 1951, and now led by CEO , the company size now stands at 8,678 people and with the company’s market cap sitting at USD $844.54M, it falls under the small-cap stocks category.
CYD’s shares are now hovering at around -42% under its intrinsic value of ¥35.33, at a price tag of US$20.66, based on my discounted cash flow model. The divergence signals an opportunity to buy CYD shares at a low price. Also, CYD’s PE ratio stands at 5.67x compared to its Machinery peer level of, 24.23x implying that relative to its peers, we can invest in CYD at a lower price. CYD is also in good financial health, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. It’s debt-to-equity ratio of 14.81% has been reducing over the past couple of years signifying CYD’s capacity to pay down its debt. More on China Yuchai International here.
ATA Inc. (NASDAQ:ATAI)
ATA Inc., through its subsidiaries, provides computer-based testing services in the People’s Republic of China. Founded in 1999, and now run by Xiaofeng Ma, the company size now stands at 551 people and with the company’s market capitalisation at USD $116.78M, we can put it in the small-cap stocks category.
ATAI’s shares are currently hovering at around -55% lower than its intrinsic level of ¥11.43, at a price tag of US$5.14, based on my discounted cash flow model. This mismatch indicates a chance to invest in ATAI at a discounted price. What’s even more appeal is that ATAI’s PE ratio is around 13.77x relative to its Consumer Services peer level of, 24.53x implying that relative to its competitors, you can purchase ATAI’s stock for a lower price right now. ATAI is also a financially healthy company, with current assets covering liabilities in the near term and over the long run. ATAI also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. More detail on ATA 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.