Stocks, such as Meet Group and Changyou.com, are trading at a value below what they may actually be worth. 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.
The Meet Group, Inc. (NASDAQ:MEET)
The Meet Group, Inc. owns and operates a social network for meeting new people on the Web and on mobile platforms in the United States. Founded in 1997, and currently lead by Geoffrey Cook, the company now has 128 employees and with the company’s market capitalisation at USD $164.44M, we can put it in the small-cap group.
MEET’s shares are now trading at -65% less than its real value of $6.59, at the market price of $2.29, according to my discounted cash flow model. signalling an opportunity to buy the stock at a low price. Also, MEET’s PE ratio is around 11.2x while its internet software and services peer level trades at 36.7x, suggesting that relative to its comparable company group, we can purchase MEET’s shares for cheaper. MEET is also in great financial shape, as short-term assets amply cover upcoming and long-term liabilities. MEET also has a miniscule amount of debt on its balance sheet, which gives it headroom to grow and financial flexibility.
Changyou.com Limited (NASDAQ:CYOU)
Changyou.com Limited develops and operates online games in the People’s Republic of China. Established in 2003, and currently run by Dewen Chen, the company currently employs 2,838 people and with the company’s market cap sitting at USD $1.90B, it falls under the small-cap category.
CYOU’s shares are currently trading at -49% below its value of $73.36, at the market price of $37.33, according to my discounted cash flow model. This mismatch indicates a potential opportunity to buy low. Additionally, CYOU’s PE ratio is currently around 16.9x compared to its software peer level of 42.9x, implying that relative to its competitors, we can invest in CYOU at a lower price. CYOU is also strong financially, as short-term assets amply cover upcoming and long-term liabilities. CYOU has zero debt on its books as well, meaning it has no long term debt obligations to worry about.
Pier 1 Imports, Inc. (NYSE:PIR)
Pier 1 Imports, Inc. engages in the retail sale of decorative accessories, furniture, candles, housewares, gifts, and seasonal products. Founded in 1970, and currently run by Alasdair James, the company currently employs 12,500 people and with the market cap of USD $367.84M, it falls under the small-cap stocks category.
PIR’s stock is currently trading at -42% less than its value of $7.51, at a price tag of $4.39, based on its expected future cash flows. This discrepancy gives us a chance to invest in PIR at a discount. Additionally, PIR’s PE ratio is around 12.1x while its specialty retail peer level trades at 16.3x, implying that relative to its peers, we can purchase PIR’s shares for cheaper. PIR is also in great financial shape, as current assets can cover liabilities in the near term and over the long run. Finally, its debt relative to equity is 76%, which has over the past couple of years revealing its ability
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.