The Australian market has shown mixed performance recently, with the ASX200 closing up 0.3% at 8,099.9 points, driven by gains in the Materials and Real Estate sectors while Financials lagged behind. In this environment of fluctuating sector performance and economic indicators, identifying undervalued small-cap stocks with recent insider buying can offer unique investment opportunities. For investors looking to navigate these dynamic conditions, focusing on companies where insiders are purchasing shares may signal confidence in their long-term prospects. Here are three such small-cap stocks in Australia that have caught our attention due to recent insider activity.
Top 10 Undervalued Small Caps With Insider Buying In Australia
Overview: Deterra Royalties is a company focused on managing and acquiring royalty arrangements, with a market cap of approximately A$2.02 billion.
Operations: Deterra Royalties generates revenue primarily through royalty arrangements, with recent figures showing A$240.51 million. The company's cost of goods sold (COGS) was A$9.08 million, resulting in a gross profit margin of 96.22%. Operating expenses were A$3.98 million and non-operating expenses totaled A$72.56 million, contributing to a net income margin of 64.40%.
PE: 12.6x
Deterra Royalties, a small-cap stock in Australia, reported A$154.89 million net income for the year ending June 30, 2024, slightly up from A$152.46 million the previous year. Basic earnings per share increased to A$0.293 from A$0.2885. The company announced a dividend decrease to A$0.144 per share for the six months ending June 30, 2024, with an ex-dividend date of August 27, 2024. Insider confidence is evident with recent purchases over the past three months by key executives.
Overview: Elders operates a diverse agribusiness network, providing products and services including branch networks, wholesale products, and feed and processing services, with a market cap of A$1.78 billion.
Operations: The company's revenue streams include A$2.54 billion from its Branch Network, A$341.19 million from Wholesale Products, and A$120.14 million from Feed and Processing Services. Over recent periods, net income margins have shown variability with a peak of 7.08% in September 2017 and a decline to 2.12% by March 2024. Operating expenses have consistently impacted profitability, with sales and marketing being the largest component within these costs.
PE: 23.8x
Elders, a small Australian agribusiness, has seen insider confidence with recent share purchases by executives in the past six months. Despite a dip in profit margins from 3.4% to 2.1%, earnings are projected to grow by 22.8% annually. The company recently appointed Glenn Davis as a non-executive director, bringing extensive board experience and legal expertise. However, Elders carries significant debt and relies entirely on external borrowing for funding, indicating higher financial risk.
Overview: Tabcorp Holdings operates in the gaming services and wagering and media sectors, with a market cap of approximately A$5.40 billion.
Operations: Tabcorp Holdings generates revenue primarily from its Wagering and Media segment, which contributes A$2.16 billion, and its Gaming Services segment, which adds A$176.1 million. The company has experienced fluctuations in net income margin, with a notable decline to -0.5763% as of September 2024. Operating expenses have consistently been a significant portion of the costs, with sales and marketing expenses being particularly high at A$1.21 billion for the same period.
PE: -0.8x
Tabcorp Holdings, a notable player among Australia's smaller stocks, recently reported a net loss of A$1.36 billion for the fiscal year ending June 30, 2024, compared to a net income of A$66.5 million the previous year. Despite this downturn, insider confidence is evident with significant share purchases over the past six months. The company’s sales dipped slightly to A$2.34 billion from A$2.43 billion last year and announced a reduced dividend of A$0.003 per share payable on September 20, 2024.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include ASX:DRR ASX:ELD and ASX:TAH.
