Financial service companies’ profitability tends to be tied to the economic cycle, since these businesses provide services such as consumer financing and investment banking, which tend to do well when times are good. Blue Sky Alternative Investments and Mortgage Choice are two financial stocks I have identified as undervalued. This means their current share prices are trading at levels less than what the companies are actually worth. Investors can benefit from buying these financial companies while they are discounted, because they gain when the market prices move towards the stocks’ true values. Below is a list of stocks I’ve compiled that are deemed undervalued based on the latest financial data.
Blue Sky Alternative Investments Limited (ASX:BLA)
Blue Sky Alternative Investments Limited is a private equity firm. Started in 2006, and now run by Kim Morison, the company now has 116 employees and with the stock’s market cap sitting at AUD A$173.66M, it comes under the small-cap stocks category.
BLA’s stock is currently hovering at around -58% beneath its intrinsic value of $5.35, at the market price of AU$2.24, based on my discounted cash flow model. This mismatch indicates a potential opportunity to buy low. What’s even more appeal is that BLA’s PE ratio stands at around 7.55x against its its Capital Markets peer level of, 17.58x indicating that relative to its peers, you can buy BLA’s shares at a cheaper price. BLA is also strong financially, with short-term assets covering liabilities in the near future as well as in the long run.
More on Blue Sky Alternative Investments here.
Mortgage Choice Limited (ASX:MOC)
Mortgage Choice Limited provides mortgage broking services in Australia. Mortgage Choice was founded in 1992 and with the company’s market cap sitting at AUD A$197.39M, it falls under the small-cap category.
MOC’s shares are now trading at -41% lower than its true value of $2.7, at a price of AU$1.60, according to my discounted cash flow model. This mismatch indicates a potential opportunity to buy low. In terms of relative valuation, MOC’s PE ratio is around 8.97x relative to its Mortgage peer level of, 18.29x indicating that relative to its peers, we can buy MOC’s stock at a cheaper price today. MOC is also a financially robust company, with short-term assets covering liabilities in the near future as well as in the long run. MOC also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. Interested in Mortgage Choice? Find out more here.
Pioneer Credit Limited (ASX:PNC)
Pioneer Credit Limited provides financial services in Australia. The company currently employs 500 people and with the company’s market cap sitting at AUD A$202.59M, it falls under the small-cap group.