A favourable economic condition has been a large driver of growth for companies in the materials industry. Thus, there is ample opportunity to take advantage of improving economic conditions which has led to strong demand for commodities. Southern Gold and Mineral Commodities are materials industry companies that are currently trading below what they’re actually worth. Smart investors can make money from this discrepancy by buying these shares, because they believe the current market prices will eventually move towards their true value. And those that want more exposure to the economic cycle should consider the following list of potentially undervalued cyclical stocks.

Southern Gold Limited (ASX:SAU)

Southern Gold Limited engages in the exploration and production of various mineral properties in Australia and South Korea. The company was established in 2004 and has a market cap of AUD A$12.29M, putting it in the small-cap group.

SAU’s shares are currently floating at around -92% beneath its intrinsic level of $2.97, at a price tag of AU$0.25, based on its expected future cash flows. This difference in price and value gives us a chance to buy low. Also, SAU’s PE ratio is trading at 4.54x compared to its Metals and Mining peer level of, 12.76x suggesting that relative to its comparable company group, we can buy SAU’s stock at a cheaper price today. SAU is also robust in terms of financial health, as current assets can cover liabilities in the near term and over the long run. SAU also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. Continue research on Southern Gold here.

Mineral Commodities Ltd (ASX:MRC)

Mineral Commodities Ltd explores and develops mineral sand resources in South Africa. Mineral Commodities is currently run by Mark Caruso. It currently has a market cap of AUD A$60.17M placing it in the small-cap group

MRC’s shares are now hovering at around -77% less than its intrinsic value of $0.63, at a price of AU$0.14, according to my discounted cash flow model. The difference between value and price signals a potential opportunity to buy MRC shares at a discount. In addition to this, MRC’s PE ratio stands at 4.64x relative to its Metals and Mining peer level of, 12.76x suggesting that relative to its peers, MRC’s shares can be purchased for a lower price. MRC is also a financially healthy company, with near-term assets able to cover upcoming and long-term liabilities.

Continue research on Mineral Commodities here.

Capral Limited (ASX:CAA)

Capral Limited manufactures, markets, and distributes fabricated and semi-fabricated aluminum related products in Australia. Founded in 1936, and currently lead by Anthony Dragicevich, the company provides employment to 900 people and with the stock’s market cap sitting at AUD A$76.85M, it comes under the small-cap group.