The industrials sector tends to be highly cyclical, impacting companies operating in an array of areas such as building products, aerospace and defence. FSE Engineering Holdings and Ten Pao Group Holdings are industrial stocks on my list that are potentially undervalued, which means their current share prices are trading well-below what the companies are actually worth. There’s a few ways you can measure the value of a industrial company – you can forecast how much money it will make in the future and base your valuation off of this, or you can look around at its peers of similar size and industry to roughly estimate what it should be worth. Below, I’ve created a list of companies that compare favourably in all criteria based on their most recent financial data, making them potentially good investments.

FSE Engineering Holdings Limited (SEHK:331)

FSE Engineering Holdings Limited, an investment holding company, provides mechanical and electrical engineering services in Hong Kong, Mainland China, and Macau. Started in 2015, and currently run by Lock Kee Poon, the company employs 1,655 people and with the stock’s market cap sitting at HKD HK$1.13B, it comes under the small-cap category.

331’s stock is currently trading at -42% less than its true value of $4.35, at a price tag of HK$2.50, based on its expected future cash flows. signalling an opportunity to buy the stock at a low price. What’s even more appeal is that 331’s PE ratio is trading at around 6.31x against its its Construction peer level of, 11.09x suggesting that relative to its comparable set of companies, we can purchase 331’s shares for cheaper. 331 is also strong financially, with current assets covering liabilities in the near term and over the long run. 331 has zero debt on its books as well, meaning it has no long term debt obligations to worry about. Dig deeper into FSE Engineering Holdings here.

Ten Pao Group Holdings Limited (SEHK:1979)

Ten Pao Group Holdings Limited, an investment holding company, develops, manufactures, and sells electric charging products in the People’s Republic of China, rest of Asia, the Americas, Europe, South Africa, and internationally. Founded in 1979, and now led by CEO Kwong Yee Hung, the company size now stands at 6,000 people and with the stock’s market cap sitting at HKD HK$1.30B, it comes under the small-cap group.

1979’s shares are now trading at -67% less than its intrinsic level of $3.98, at the market price of HK$1.30, based on its expected future cash flows. The discrepancy signals an opportunity to buy low. Moreover, 1979’s PE ratio is trading at 6.16x against its its Electrical peer level of, 13.61x meaning that relative to other stocks in the industry, we can invest in 1979 at a lower price. 1979 is also in great financial shape, as current assets can cover liabilities in the near term and over the long run.