Companies that trade at market prices below their actual values, such as Universal Health Services and Daqo New Energy, are perceived to be undervalued. Investors can determine how much a company is worth based on how much money they are expected to make in the future, or compared to the value of their peers. The list I’ve put together below are of stocks that compare favourably on all criteria, which potentially makes them good investments if you believe the price should eventually reflect the stock’s actual value.
Universal Health Services, Inc. (NYSE:UHS)
Universal Health Services, Inc., through its subsidiaries, owns and operates acute care hospitals, outpatient facilities, and behavioral health care facilities. Formed in 1978, and headed by CEO Alan Miller, the company employs 72,300 people and with the market cap of USD $11.94B, it falls under the large-cap stocks category.
UHS’s shares are currently trading at -29% under its intrinsic level of $178.06, at a price of US$126.66, according to my discounted cash flow model. The divergence signals an opportunity to buy UHS shares at a low price. What’s even more appeal is that UHS’s PE ratio is trading at around 16.11x relative to its Healthcare peer level of, 20.46x suggesting that relative to its comparable company group, we can buy UHS’s stock at a cheaper price today. UHS is also in great financial shape, 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 79.87% has been diminishing over time, indicating its ability to reduce its debt obligations year on year. Interested in Universal Health Services? Find out more here.
Daqo New Energy Corp. (NYSE:DQ)
Daqo New Energy Corp., together with its subsidiaries, manufactures and sells polysilicon and wafers in the People’s Republic of China. Started in 2006, and currently lead by Longgen Zhang, the company provides employment to 1,813 people and with the stock’s market cap sitting at USD $468.62M, it comes under the small-cap category.
DQ’s shares are now hovering at around -31% below its value of $64.89, at a price tag of US$44.55, based on its expected future cash flows. The difference between value and price signals a potential opportunity to buy DQ shares at a discount. In terms of relative valuation, DQ’s PE ratio is trading at around 5.09x relative to its Semiconductor peer level of, 27.02x meaning that relative to its peers, you can buy DQ’s shares at a cheaper price. DQ is also in great financial shape, as current assets can cover liabilities in the near term and over the long run. It’s debt-to-equity ratio of 53.96% has been declining over the past couple of years signifying its capacity to reduce its debt obligations year on year. More on Daqo New Energy here.
Chico’s FAS, Inc. (NYSE:CHS)
Chico’s FAS, Inc. operates as an omni-channel specialty retailer of women’s private branded, casual-to-dressy clothing, intimates, and complementary accessories. Formed in 1983, and now run by Shelley Broader, the company now has 13,650 employees and with the market cap of USD $1.11B, it falls under the small-cap category.
CHS’s shares are now trading at -49% lower than its actual value of $16.98, at the market price of US$8.66, according to my discounted cash flow model. This discrepancy gives us a chance to invest in CHS at a discount. Moreover, CHS’s PE ratio is trading at around 11x while its Specialty Retail peer level trades at, 18.87x meaning that relative to its competitors, you can purchase CHS’s stock for a lower price right now. CHS is also a financially healthy company, with near-term assets able to cover upcoming and long-term liabilities.
More detail on Chico’s FAS here.
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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.