Companies, such as China MeiDong Auto Holdings, trading at a market price below their true values are considered to be undervalued. There’s a few ways you can measure the value of a 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.
China MeiDong Auto Holdings Limited (SEHK:1268)
China MeiDong Auto Holdings Limited, an investment holding company, operates as an automobile dealer in Mainland China. Founded in 2003, and now run by Tao Ye, the company employs 3,030 people and has a market cap of HKD HK$3.00B, putting it in the mid-cap category.
1268’s shares are currently trading at -58% below its true value of ¥6.28, at a price tag of ¥2.65, according to my discounted cash flow model. The discrepancy signals an opportunity to buy low. In addition to this, 1268’s PE ratio is trading at 12x while its specialty retail peer level trades at 16.2x, implying that relative to its competitors, you can buy 1268 for a cheaper price. 1268 is also in great financial shape, as short-term assets amply cover upcoming and long-term liabilities. Finally, its debt relative to equity is 89%, which has been declining for the past few years demonstrating its capacity to reduce its debt obligations year on year. Dig deeper into China MeiDong Auto Holdings here.
Great Eagle Holdings Limited (SEHK:41)
Great Eagle Holdings Limited, an investment holding company, develops, invests in, and manages residential, office, retail, and hotel properties in Asia, North America, Australasia, and Europe. Founded in 1963, and currently headed by CEO Ka Shui Lo, the company employs 6,540 people and with the company’s market capitalisation at HKD HK$28.92B, we can put it in the large-cap group.
41’s stock is now trading at -69% less than its intrinsic value of $134.9, at a price tag of $42, according to my discounted cash flow model. This mismatch signals an opportunity to buy 41 shares at a discount. In terms of relative valuation, 41’s PE ratio stands at around 5.8x relative to its real estate peer level of 9.1x, implying that relative to other stocks in the industry, 41’s shares can be purchased for a lower price. 41 is also a financially healthy company, with near-term assets able to cover upcoming and long-term liabilities.