Undervalued companies are those that trade at a price lower than their actual values, such as J Sainsbury and Bonmarché Holdings. Investors can benefit from buying these companies while they are discounted, because they gain when the market prices move towards the stocks’ true values. Below is a list of stocks I’ve compiled that are deemed undervalued based on the latest financial data.
J Sainsbury plc (LSE:SBRY)
J Sainsbury plc, together with its subsidiaries, engages in the food, general merchandise and clothing retailing, and financial services activities in the United Kingdom. Established in 1869, and headed by CEO Michael Coupe, the company now has 118,700 employees and with the company’s market capitalisation at GBP £5.18B, we can put it in the mid-cap stocks category.
SBRY’s stock is now hovering at around -40% under its intrinsic level of £3.94, at a price of £2.35, based on my discounted cash flow model. The divergence signals an opportunity to buy SBRY shares at a low price. Furthermore, SBRY’s PE ratio is currently around 13.4x against its its food and staples retailing peer level of 24.3x, indicating that relative to its competitors, we can invest in SBRY at a lower price. SBRY also has a healthy balance sheet, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. Finally, its debt relative to equity is 38%, which has been reducing over the past couple of years revealing its ability to pay down its debt.
Bonmarché Holdings plc (LSE:BON)
Bonmarché Holdings plc, together with its subsidiaries, operates as a multi-channel retailer of womenswear and accessories in the United Kingdom. Started in 1982, and run by CEO Helen Connolly, the company size now stands at 1,957 people and with the stock’s market cap sitting at GBP £44.96M, it comes under the small-cap group.
BON’s shares are now hovering at around -47% lower than its actual worth of £1.78, at the market price of £0.95, based on my discounted cash flow model. This mismatch indicates a chance to invest in BON at a discounted price. In terms of relative valuation, BON’s PE ratio is trading at around 10.3x against its its specialty retail peer level of 12.5x, indicating that relative to its comparable set of companies, you can buy BON for a cheaper price. BON is also strong financially, as short-term assets amply cover upcoming and long-term liabilities. The stock’s debt-to equity ratio of 4% has been declining over time, showing its ability to reduce its debt obligations year on year.