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Undervalued companies are those that trade at a price lower than their actual values, such as Transtech Optelecom Science Holdings and Sihuan Pharmaceutical Holdings Group. There’s a few ways you can value a company. 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. Analysing the most recent financial data, I’ve created a list of companies that compare favourably in all criteria, making them potentially good investments.
Transtech Optelecom Science Holdings Limited (SEHK:8465)
Transtech Optelecom Science Holdings Limited designs, produces, and sells optical fiber cables for use in the telecommunications industry. Founded in 2003, and headed by CEO Xingfu He, the company currently employs 263 people and with the company’s market capitalisation at HKD HK$715.00M, we can put it in the small-cap group.
8465’s shares are now trading at -78% beneath its intrinsic level of $12.46, at a price tag of HK$2.75, according to my discounted cash flow model. The difference between value and price signals a potential opportunity to buy 8465 shares at a discount. In terms of relative valuation, 8465’s PE ratio is currently around 5.91x against its its Communications peer level of, 15.89x indicating that relative to its comparable set of companies, we can buy 8465’s stock at a cheaper price today. 8465 also has a healthy balance sheet, with near-term assets able to cover upcoming and long-term liabilities. 8465 also has a miniscule amount of debt on its balance sheet, which gives it headroom to grow and financial flexibility. Dig deeper into Transtech Optelecom Science Holdings here.
Sihuan Pharmaceutical Holdings Group Ltd. (SEHK:460)
Sihuan Pharmaceutical Holdings Group Ltd., an investment holding company, engages in the research and development, manufacture, and sale of pharmaceutical products in the People’s Republic of China. Formed in 2001, and currently lead by Weicheng Guo, the company size now stands at 3,445 people and with the market cap of HKD HK$21.97B, it falls under the large-cap group.
460’s stock is now hovering at around -22% lower than its actual value of ¥2.98, at a price of HK$2.32, according to my discounted cash flow model. This discrepancy gives us a chance to invest in 460 at a discount. Additionally, 460’s PE ratio stands at around 12.18x compared to its Pharmaceuticals peer level of, 19.5x indicating that relative to its peers, we can invest in 460 at a lower price. 460 is also strong financially, with near-term assets able to cover upcoming and long-term liabilities. 460 also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. Dig deeper into Sihuan Pharmaceutical Holdings Group here.