Companies that trade at market prices below their actual values, such as SandRidge Permian Trust and Cardinal Health, are perceived to be undervalued. 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.
SandRidge Permian Trust (NYSE:PER)
SandRidge Permian Trust holds royalty interests in specified oil and natural gas properties in the Permian Basin located in Andrews County, Texas. The company was established in 2011 and with the stock’s market cap sitting at USD $105.00M, it comes under the small-cap category.
PER’s shares are now hovering at around -66% beneath its true value of $5.86, at a price tag of US$2.00, based on its expected future cash flows. The mismatch signals a potential chance to invest in PER at a discounted price. Furthermore, PER’s PE ratio stands at 4.31x compared to its Oil and Gas peer level of, 12.73x implying that relative to its competitors, PER’s shares can be purchased for a lower price. PER is also strong in terms of its financial health, as short-term assets amply cover upcoming and long-term liabilities. PER has zero debt on its books as well, meaning it has no long term debt obligations to worry about. More on SandRidge Permian Trust here.
Cardinal Health, Inc. (NYSE:CAH)
Cardinal Health, Inc. operates as an integrated healthcare services and products company worldwide. Formed in 1979, and currently headed by CEO Michael Kaufmann, the company currently employs 40,400 people and with the company’s market cap sitting at USD $19.53B, it falls under the large-cap group.
CAH’s shares are now floating at around -44% under its real value of $111.6, at a price of US$62.07, according to my discounted cash flow model. This mismatch indicates a potential opportunity to buy low. Moreover, CAH’s PE ratio stands at around 10.73x against its its Healthcare peer level of, 21.01x suggesting that relative to its comparable set of companies, you can purchase CAH’s stock for a lower price right now. CAH is also a financially healthy company, as current assets can cover liabilities in the near term and over the long run.
Interested in Cardinal Health? Find out more here.
Signet Jewelers Limited (NYSE:SIG)
Signet Jewelers Limited engages in the retail sale of diamond jewelry, watches, and other products in the United States, Canada, the United Kingdom, the Republic of Ireland, and the Channel Islands. Established in 1950, and run by CEO Virginia Drosos, the company currently employs 24,888 people and with the stock’s market cap sitting at USD $2.28B, it comes under the mid-cap category.
SIG’s shares are currently floating at around -54% lower than its actual level of $84.64, at the market price of US$38.65, based on my discounted cash flow model. This discrepancy gives us a chance to invest in SIG at a discount. In terms of relative valuation, SIG’s PE ratio is around 5.01x compared to its Specialty Retail peer level of, 18.21x indicating that relative to its peers, you can buy SIG for a cheaper price. SIG is also in good financial health, as current assets can cover liabilities in the near term and over the long run.
Continue research on Signet Jewelers 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.