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The Australian market has shown resilience, with the XJO closing above 7,900 points recently, indicating a positive trend despite mixed performances across various sectors. In such an environment, identifying undervalued stocks like Codan can offer potential opportunities for investors looking to capitalize on discrepancies between market prices and intrinsic value.
Top 10 Undervalued Stocks Based On Cash Flows In Australia
| Name | Current Price | Fair Value (Est) | Discount (Est) |
| Acrow (ASX:ACF) | A$1.06 | A$2.00 | 47.1% |
| Domino's Pizza Enterprises (ASX:DMP) | A$26.69 | A$52.03 | 48.7% |
| Nido Education (ASX:NDO) | A$0.845 | A$1.60 | 47.2% |
| Capricorn Metals (ASX:CMM) | A$8.21 | A$14.99 | 45.2% |
| Kinatico (ASX:KYP) | A$0.175 | A$0.35 | 49.4% |
| Lotus Resources (ASX:LOT) | A$0.20 | A$0.39 | 48.6% |
| Charter Hall Group (ASX:CHC) | A$16.78 | A$31.92 | 47.4% |
| SciDev (ASX:SDV) | A$0.45 | A$0.82 | 44.8% |
| ReadyTech Holdings (ASX:RDY) | A$2.60 | A$5.12 | 49.2% |
| Adriatic Metals (ASX:ADT) | A$4.52 | A$8.17 | 44.7% |
Let's dive into some prime choices out of the screener.
Codan
Overview: Codan Limited develops technology solutions for United Nations organizations, security and military groups, government departments, individuals, and small-scale miners with a market cap of A$2.84 billion.
Operations: The company's revenue is derived from its Communications segment, which generated A$360.27 million, and its Metal Detection segment, contributing A$224.90 million.
Estimated Discount To Fair Value: 10.9%
Codan is trading at A$15.63, below its estimated fair value of A$17.54, suggesting it may be undervalued based on cash flows. The company's earnings are forecast to grow 19.4% annually, outpacing the Australian market's 12.1%. Recent half-year results showed sales of A$305.62 million and net income of A$46.04 million, both up from the previous year, with basic earnings per share rising to A$0.254 from A$0.21.
Lotus Resources
Overview: Lotus Resources Limited focuses on the exploration, evaluation, and development of uranium properties in Africa with a market cap of A$472.53 million.
Operations: Lotus Resources Limited does not currently report any revenue segments.
Estimated Discount To Fair Value: 48.6%
Lotus Resources is trading at A$0.20, significantly below its estimated fair value of A$0.39, indicating potential undervaluation based on cash flows. Despite a net loss of A$9.84 million for the half-year ending December 2024, revenue is forecast to grow substantially at 78% annually, surpassing market averages. The company anticipates profitability within three years with a high return on equity projected at 51.7%. Recent executive changes and project developments may impact future performance.