The fortunes of financial services companies often follow that of the broader economy, since these businesses offer services ranging from investment banking to consumer financing, which are in demand during prosperous economic times. Currently, Hennessy Advisors and Cherry Hill Mortgage Investment are financial companies I’ve identified as potentially undervalued, meaning their share price is below what these companies are actually worth. Investors can benefit from buying these financial companies while they are discounted, because they gain when the market prices move towards the stocks’ true values. Below is a list of stocks I’ve compiled that are deemed undervalued based on the latest financial data.
Hennessy Advisors, Inc. (NASDAQ:HNNA)
Hennessy Advisors, Inc. is publicly owned investment manager. Established in 1989, and now run by Neil Hennessy, the company provides employment to 22 people and with the company’s market capitalisation at USD $152.56M, we can put it in the small-cap group.
HNNA’s shares are now floating at around -54% beneath its intrinsic level of $41.62, at a price of US$19.03, based on my discounted cash flow model. This mismatch signals an opportunity to buy HNNA shares at a discount. Furthermore, HNNA’s PE ratio stands at around 7.35x relative to its Capital Markets peer level of, 16.24x meaning that relative to its comparable company group, we can purchase HNNA’s shares for cheaper. HNNA is also strong in terms of its financial health, with current assets covering liabilities in the near term and over the long run. The stock’s debt-to-equity ratio of 37.24% has been declining for the last couple of years showing its capacity to pay down its debt. Dig deeper into Hennessy Advisors here.
Cherry Hill Mortgage Investment Corporation (NYSE:CHMI)
Cherry Hill Mortgage Investment Corporation, a residential real estate finance company, acquires, invests in, and manages residential mortgage assets in the United States. Cherry Hill Mortgage Investment was established in 2012 and with the market cap of USD $230.92M, it falls under the small-cap group.
CHMI’s stock is now hovering at around -70% less than its actual worth of $60.19, at a price of US$17.96, according to my discounted cash flow model. This mismatch indicates a potential opportunity to buy low. In terms of relative valuation, CHMI’s PE ratio is currently around 4.51x against its its Mortgage REITs peer level of, 9.64x suggesting that relative to other stocks in the industry, CHMI can be bought at a cheaper price right now. CHMI is also robust in terms of financial health, with near-term assets able to cover upcoming and long-term liabilities.
Continue research on Cherry Hill Mortgage Investment here.
Manning & Napier, Inc. (NYSE:MN)
Manning & Napier, Inc. is publicly owned investment manager. Founded in 1970, and currently lead by Jeffrey Coons, the company size now stands at 433 people and with the market cap of USD $257.36M, it falls under the small-cap group.
MN’s shares are now trading at -94% lower than its real value of $58.56, at the market price of US$3.25, based on my discounted cash flow model. This discrepancy gives us a chance to invest in MN at a discount. In terms of relative valuation, MN’s PE ratio is trading at 16.32x compared to its index peer level of, 18.3x suggesting that relative to its competitors, MN’s shares can be purchased for a lower price. MN is also a financially robust company, as current assets can cover liabilities in the near term and over the long run. MN also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. More on Manning & Napier 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.