The highly cyclical materials industry has benefited producers in times of economic growth and seen many players out of business during a downturn. Thus, there is ample opportunity to take advantage of improving economic conditions which has led to strong demand for commodities. Currently, Manaksia and Cosmo Films are materials industry companies I’ve identified as potentially undervalued, meaning their share price is below what these companies are 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.

Manaksia Limited (BSE:532932)

Manaksia Limited manufactures and sells packaging, metal, and other products in India and internationally. The company was established in 1984 and with the company’s market cap sitting at INR ₹3.49B, it falls under the mid-cap stocks category.

532932’s stock is currently trading at -82% lower than its actual worth of INR296.05, at a price tag of ₹53.30, based on my discounted cash flow model. This difference in price and value gives us a chance to buy low. Additionally, 532932’s PE ratio stands at 3.91x compared to its Metals and Mining peer level of, 20.21x suggesting that relative to its competitors, you can purchase 532932’s stock for a lower price right now. 532932 is also in good financial health, as current assets can cover liabilities in the near term and over the long run. The stock’s debt-to-equity ratio of 11.18% has been diminishing over the past couple of years showing its capability to pay down its debt. More on Manaksia here.

Cosmo Films Limited (BSE:508814)

Cosmo Films Limited engages in the manufacture and sale of bi-axially oriented polypropylene (BOPP), thermal and coated films in India and internationally. Cosmo Films was started in 1981 and with the stock’s market cap sitting at INR ₹5.31B, it comes under the mid-cap group.

508814’s stock is now trading at -15% below its intrinsic level of INR322.66, at the market price of ₹273.40, based on its expected future cash flows. This mismatch indicates a potential opportunity to buy low. Also, 508814’s PE ratio is currently around 7.55x relative to its Packaging peer level of, 18.76x suggesting that relative to its competitors, 508814 can be bought at a cheaper price right now. 508814 is also in great financial shape, with current assets covering liabilities in the near term and over the long run. Finally, its debt relative to equity is 119.99%, which has been diminishing for the past few years indicating 508814’s capacity to reduce its debt obligations year on year. Continue research on Cosmo Films here.