Companies that trade at market prices below their actual values, such as Quad/Graphics and Fabrinet, are perceived to be undervalued. 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.
Quad/Graphics, Inc. (NYSE:QUAD)
Quad/Graphics, Inc. provides print and other media services in the United States, Europe, Latin America, and internationally. Formed in 1971, and currently lead by J. Quadracci, the company now has 22,600 employees and with the company’s market cap sitting at USD $1.19B, it falls under the small-cap stocks category.
QUAD’s stock is currently hovering at around -51% lower than its intrinsic level of $46.92, at a price of $22.96, according to my discounted cash flow model. The divergence signals an opportunity to buy QUAD shares at a low price. Furthermore, QUAD’s PE ratio stands at 12.6x against its its commercial services and supplies peer level of 24.3x, meaning that relative to other stocks in the industry, you can buy QUAD’s shares at a cheaper price. QUAD is also strong financially, as short-term assets amply cover upcoming and long-term liabilities. It’s debt-to-equity ratio of 226% has for the last couple of years revealing its capability
Fabrinet provides optical packaging and precision optical, electro-mechanical, and electronic manufacturing services to original equipment manufacturers of optical communication components, modules and sub-systems, industrial lasers, medical devices, and sensors. Formed in 1999, and currently lead by Seamus Grady, the company employs 10,541 people and with the market cap of USD $1.21B, it falls under the small-cap group.
FN’s shares are now floating at around -21% less than its true level of $40.87, at the market price of $32.25, according to my discounted cash flow model. The discrepancy signals an opportunity to buy low. Furthermore, FN’s PE ratio stands at around 12.3x while its electronic equipment, instruments and components peer level trades at 25.8x, indicating that relative to other stocks in the industry, we can invest in FN at a lower price. FN also has a healthy balance sheet, with near-term assets able to cover upcoming and long-term liabilities. It’s debt-to-equity ratio of 11% has been diminishing for the past few years showing FN’s capability to reduce its debt obligations year on year.
Magellan Health, Inc. (NASDAQ:MGLN)
Magellan Health, Inc. engages in the healthcare management business in the United States. Founded in 1969, and headed by CEO Barry Smith, the company now has 9,700 employees and with the stock’s market cap sitting at USD $2.05B, it comes under the mid-cap stocks category.
MGLN’s shares are currently floating at around -44% beneath its actual worth of $153.84, at a price of $85.4, according to my discounted cash flow model. The discrepancy signals an opportunity to buy low. In addition to this, MGLN’s PE ratio stands at 21.6x relative to its healthcare providers and services peer level of 22x, indicating that relative to its comparable set of companies, we can invest in MGLN at a lower price. MGLN is also in great financial shape, 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 63% has for the last couple of years demonstrating MGLN’s capacity
For more financially sound, undervalued companies to add to your portfolio, you can use our free platform to explore our 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.