The technology sector is generally characterised as full of innovation, competition and growth. It is also known to be highly cyclical and volatile since companies tend to find it difficult to create sustainable competitive advantage and generally rely on discretionary income from consumers. Cowell e Holdings and PC Partner Group are tech stocks on my list that are potentially undervalued, which means their current share prices are trading well-below what the companies are actually worth. 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. And those that want more exposure to the economic cycle should consider the following list of potentially undervalued cyclical stocks.
Cowell e Holdings Inc. (SEHK:1415)
Cowell e Holdings Inc. designs, develops, manufactures, and sells camera modules for use in smartphones, multimedia tablets, and other mobile devices with camera functions in Hong Kong and South Korea. Formed in 1992, and run by CEO Seokhoon Seong, the company size now stands at 4,267 people and with the company’s market capitalisation at HKD HK$1.55B, we can put it in the small-cap category.
1415’s shares are currently trading at -55% beneath its actual value of $4.11, at a price tag of HK$1.86, according to my discounted cash flow model. The mismatch signals a potential chance to invest in 1415 at a discounted price. What’s even more appeal is that 1415’s PE ratio is trading at 7.13x relative to its Electronic peer level of, 10.78x implying that relative to other stocks in the industry, 1415’s shares can be purchased for a lower price. 1415 is also a financially robust company, with short-term assets covering liabilities in the near future as well as in the long run. The stock’s debt-to-equity ratio of 14.13% has been reducing over the past couple of years signalling 1415’s capacity to pay down its debt. More detail on Cowell e Holdings here.
PC Partner Group Limited (SEHK:1263)
PC Partner Group Limited, an investment holding company, designs, develops, manufactures, and sells computer electronics. Founded in 1997, and headed by CEO Shik Ho Wong, the company now has 3,539 employees and with the company’s market capitalisation at HKD HK$2.65B, we can put it in the mid-cap category.
1263’s stock is currently trading at -60% beneath its intrinsic level of $14.83, at a price of HK$5.92, based on its expected future cash flows. The divergence signals an opportunity to buy 1263 shares at a low price. Additionally, 1263’s PE ratio is trading at 7.79x against its its Tech peer level of, 9.69x indicating that relative to its comparable company group, 1263’s shares can be purchased for a lower price. 1263 is also strong financially, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. The stock’s debt-to-equity ratio of 111.84% has been dropping for the last couple of years indicating its ability to reduce its debt obligations year on year. More detail on PC Partner Group here.
PAX Global Technology Limited (SEHK:327)
PAX Global Technology Limited, an investment holding company, engages in the development and sale of electronic funds transfer point-of-sale products worldwide. Established in 2000, and headed by CEO Jie Lu, the company size now stands at 1,514 people and has a market cap of HKD HK$3.95B, putting it in the mid-cap stocks category.
327’s shares are now hovering at around -45% lower than its intrinsic value of $6.58, at the market price of HK$3.59, based on its expected future cash flows. The discrepancy signals an opportunity to buy low. Moreover, 327’s PE ratio stands at 9.77x while its Electronic peer level trades at, 10.78x indicating that relative to other stocks in the industry, you can buy 327 for a cheaper price. 327 is also in good financial health, with near-term assets able to cover upcoming and long-term liabilities. 327 also has a miniscule amount of debt on its balance sheet, which gives it headroom to grow and financial flexibility. More on PAX Global Technology 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.