Network-1 Technologies and Goodrich Petroleum are two of the stocks I have identified as undervalued. This means their current share prices are trading at levels less than what the companies are actually worth. There’s a few ways you can value a company. The most popular methods include discounting the company’s cash flows it is expected to create in the future, or comparing its price to its peers or the value of its assets. Analysing the most recent financial data, I’ve created a list of companies that compare favourably in all criteria, making them potentially good investments.
Network-1 Technologies, Inc. (AMEX:NTIP)
Network-1 Technologies, Inc. develops, licenses, and protects intellectual property assets. Network-1 Technologies was formed in 1990 and with the company’s market capitalisation at USD $60.33M, we can put it in the small-cap group.
NTIP’s stock is currently trading at -66% less than its real value of $7.38, at a price tag of $2.5, based on my discounted cash flow model. This discrepancy signals a potential opportunity to buy NTIP shares at a low price. Also, NTIP’s PE ratio is around 12.5x compared to its communications equipment peer level of 24.9x, implying that relative to its peers, we can invest in NTIP at a lower price. NTIP is also strong financially, with current assets covering liabilities in the near term and over the long run. NTIP has zero debt on its books as well, meaning it has no long term debt obligations to worry about.
Goodrich Petroleum Corporation (AMEX:GDP)
Goodrich Petroleum Corporation, an independent oil and natural gas company, engages in the exploration, development, and production of oil and natural gas. Established in 1995, and currently headed by CEO Walter Goodrich, the company currently employs 47 people and with the market cap of USD $111.39M, it falls under the small-cap group.
GDP’s shares are now trading at -80% under its actual worth of $52.64, at the market price of $10.57, based on my discounted cash flow model. This price and value mismatch indicates a potential opportunity to buy the stock at a low price. Furthermore, GDP’s PE ratio stands at 2.9x against its its oil, gas and consumable fuels peer level of 20x, indicating that relative to its comparable set of companies, you can buy GDP for a cheaper price. GDP also has a healthy balance sheet, with short-term assets covering liabilities in the near future as well as in the long run. It’s debt-to-equity ratio of 93% has been falling for the last couple of years indicating its ability to reduce its debt obligations year on year.