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After a challenging period in Week 11, the Australian market is poised for a rebound, fueled by Wall Street's significant rally and China's new stimulus measures aimed at boosting consumption. In this environment, identifying undervalued stocks can be particularly rewarding as investors seek opportunities that may benefit from improving market conditions and economic stimuli.
Top 10 Undervalued Stocks Based On Cash Flows In Australia
| Name | Current Price | Fair Value (Est) | Discount (Est) |
| Acrow (ASX:ACF) | A$1.03 | A$2.00 | 48.5% |
| Domino's Pizza Enterprises (ASX:DMP) | A$26.81 | A$52.27 | 48.7% |
| Nido Education (ASX:NDO) | A$0.88 | A$1.62 | 45.8% |
| Capricorn Metals (ASX:CMM) | A$8.22 | A$15.00 | 45.2% |
| Charter Hall Group (ASX:CHC) | A$16.34 | A$31.91 | 48.8% |
| SciDev (ASX:SDV) | A$0.445 | A$0.82 | 45.4% |
| Polymetals Resources (ASX:POL) | A$0.84 | A$1.68 | 49.9% |
| ReadyTech Holdings (ASX:RDY) | A$2.68 | A$5.13 | 47.8% |
| Superloop (ASX:SLC) | A$2.09 | A$3.74 | 44.1% |
| Adriatic Metals (ASX:ADT) | A$4.46 | A$8.11 | 45% |
Let's take a closer look at a couple of our picks from the screened companies.
Domino's Pizza Enterprises
Overview: Domino's Pizza Enterprises Limited operates retail food outlets and has a market cap of A$2.48 billion.
Operations: The company generates revenue primarily through its restaurant operations, amounting to A$2.30 billion.
Estimated Discount To Fair Value: 48.7%
Domino's Pizza Enterprises is trading at A$26.81, significantly below its estimated fair value of A$52.27, suggesting potential undervaluation based on cash flows. Despite recent challenges with a net loss of A$22.17 million for the half-year ended December 2024 and high debt levels, earnings are forecast to grow significantly at 43.3% annually over the next three years, outpacing the broader Australian market growth rate of 12.2%.
Nick Scali
Overview: Nick Scali Limited, with a market cap of A$1.34 billion, is involved in sourcing and retailing household furniture and related accessories across Australia, the United Kingdom, and New Zealand.
Operations: The company's revenue comes primarily from the retailing of furniture, amounting to A$492.63 million.
Estimated Discount To Fair Value: 43.5%
Nick Scali is trading at A$15.69, significantly below its estimated fair value of A$27.77, highlighting potential undervaluation based on cash flows. Earnings are forecast to grow 12.3% annually, outpacing the Australian market's growth rate of 12.2%. Recent earnings show sales increased to A$251.07 million from A$226.63 million year-over-year, though net income decreased to A$30.04 million from A$43.01 million, and dividends were reduced from last year’s payout.