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In the past year, the Australian market has seen a modest rise of 7.0%, maintaining a steady pace in just the last week. In this context of promising forecasted annual earnings growth of 13%, stocks that appear to be trading below their intrinsic value could present appealing opportunities for investors seeking potential growth.
Top 10 Undervalued Stocks Based On Cash Flows In Australia
| Name | Current Price | Fair Value (Est) | Discount (Est) |
| Ansell (ASX:ANN) | A$27.17 | A$51.46 | 47.2% |
| Count (ASX:CUP) | A$0.635 | A$1.17 | 45.9% |
| IPH (ASX:IPH) | A$6.00 | A$11.73 | 48.8% |
| VEEM (ASX:VEE) | A$1.84 | A$3.54 | 48.1% |
| ReadyTech Holdings (ASX:RDY) | A$3.23 | A$6.19 | 47.8% |
| hipages Group Holdings (ASX:HPG) | A$1.08 | A$2.06 | 47.6% |
| Atturra (ASX:ATA) | A$0.805 | A$1.50 | 46.5% |
| Red 5 (ASX:RED) | A$0.38 | A$0.74 | 49% |
| Millennium Services Group (ASX:MIL) | A$1.145 | A$2.24 | 48.9% |
| EVT (ASX:EVT) | A$11.37 | A$21.39 | 46.8% |
Here's a peek at a few of the choices from the screener.
HMC Capital
Overview: HMC Capital Limited operates in Australia, where it owns and manages real estate-focused funds, with a market capitalization of approximately A$2.96 billion.
Operations: The company generates revenue primarily through the ownership and management of real estate-focused funds, totaling approximately A$80.29 million.
Estimated Discount To Fair Value: 36.3%
HMC Capital, priced at A$7.84, trades significantly below its estimated fair value of A$12.31, indicating a potential undervaluation based on cash flows. Despite recent equity offerings totaling over A$188 million to fund expansion, shareholder dilution has occurred. HMC's revenue and earnings growth forecasts outpace the market at 20.1% and 16.7% per year respectively, yet its projected return on equity remains modest at 10.6%. This mixed financial outlook suggests careful consideration for investors seeking value based on robust future cash flows.
Megaport
Overview: Megaport Limited offers elastic interconnection services across Australia, New Zealand, Hong Kong, Singapore, Japan, North America, and Europe with a market capitalization of A$1.74 billion.
Operations: The company generates revenue through its operations in North America (A$99.78 million), Asia-Pacific (A$48.84 million), and Europe (A$28.88 million).
Estimated Discount To Fair Value: 44.4%
Megaport, currently priced at A$10.91, appears undervalued with its market price significantly below the estimated fair value of A$19.62. The company has recently become profitable and is expected to see earnings grow by 35.55% annually over the next three years, outpacing the Australian market's growth rate of 13.2%. Despite slower revenue growth projections at 16.3% per year compared to some peers, Megaport's strategic expansions and partnerships in cloud connectivity solutions underscore its potential for operational efficiency and market penetration.